Daily Development for Tuesday, July 1, 2008
by: Patrick A. Randolph, Jr.
Elmer F. Pierson Professor of Law
UMKC School of Law
Of Counsel: Husch Blackwell Sanders
Kansas City, Missouri
NUISANCE; “STIGMA:” The escape of natural gas from a facility, and a resulting explosion, although actionable by parties in fact injured through damage or interference with use, cannot sustain a judgment of liability to property of nearby residents who sustained no such injury, simply because of the perceived stigma among the land-buying public.
Smith v. Kansas Gas Service Co., 169 P.3d 1052 (Kan. 2007)
After explosions and geysers of gas and brine occurred at various locations in the city of Hutchinson, Kansas, experts determined that the source of the problem was natural gas escaping from the well casing that was part of a natural gas storage facility located near the city. The escaped gas had purportedly migrated through a porous geologic formation and had risen to the surface in the city through abandoned brine wells that were not properly plugged. After the incidents, deep well vents were installed to allow the gas to escape into the atmosphere.
Various property and business owners settled their damage claims against the storage facility, but a class of property owners whose property had not suffered physical damage brought action claiming loss of the quiet enjoyment of their property. Eventually it was determined that no actual physical intrusion, interference or injury had occurred on any of the plaintiff properties. Witnesses at trial testified as to difficulty in selling their properties. The plaintiffs obtained a jury verdict for nearly $8 million dollars of damages, but this was all reversed by the state supreme court on appeal.
The Kansas Supreme Court noted that no evidence established loss of market value based on any physical injury to the real property or on any interference with the use and enjoyment of the property. Instead, the testimony as to loss of market value was based on a perceived stigma or fear among the buying public, whether or not the fear was factually or scientifically justified. Although stigma damages are recognized in Kansas, it is only in cases where the property has sustained physical injury as a result of the defendant’s conduct. Thus, in Kansas a property owner cannot collect damages, under either a negligence or nuisance theory, for diminution in property value caused by stigma or market fear relating to accidental contamination when neither injury to nor interference with the property has occurred.
Comment 1: The case is significant because Kansas has precedent awarding “stigma” damages for perceived danger of electromagnetic interference as part of an eminent domain claim. This is the minority rule nationwide, and indicates that Kansas is somewhat more receptive to the notion of “stigma” claims. But the claim didn’t work here.
Comment 2: The court cites decisions from a number of other jurisdictions that also have denied stigma claims. Interestingly, it cites no authority for the contrary position, although plaintiffs were represented by competent counsel and one assumes would have brought such authority to the court’s attention if it existed. Cases cited in agreement with the principle case include authority from Arkansas, California, Kentucky, Michigan, Mississippi, Pennsylvania, North Carolina and Utah.
The reporter for this item was Professor David Thomas of the BYU Law School. The comments are the editor’s.
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