On June 27, 2013, the U.S. Court of Appeals for the Second Circuit upheld a lower court decision in Sahu v. Union Carbide Corporation, denying relief to a group of Indian citizens who had sued Union Carbide over water pollution allegedly stemming from operations at the infamous Bhopal plant. In 1984, the Bhopal plant was the site of a disastrous gas leak that killed thousands of local residents and led to the plant’s closure. The Sahu plaintiffs claimed that the Bhopal plant’s operations had also contaminated soil and groundwater, causing a variety of ailments in local residents.
A key issue in the case was the relationship between the Union Carbide Corporation (“UCC”) and Union Carbide India Limited (“UCIL”), an Indian subsidiary of UCC which operated the plant. The Bhopal plant was originally used only to mix certain chemical components into a pesticide. In the 1970s, UCIL, with the approval and assistance of UCC, retrofitted, or “back-integrated,” the Bhopal plant in order to manufacture the pesticide components, not just mix them. Union Carbide sold its stake in UCIL in 1994; the Sahu case was filed in 2004, although several of the Sahu plaintiffs were also plaintiffs in an earlier class action filed in 1999 and dismissed in 2004 pursuant to the statute of limitations.
The Bhopal plant’s operations generated hazardous waste, including solid waste disposed of in pits and storage tanks and wastewater pumped into lined evaporation ponds. According to the Sahu plaintiffs, the Bhopal plant’s waste seeped into the groundwater, where it contaminated local residents’ drinking water wells. The Sahu plaintiffs sought monetary damages and an injunction requiring both remediation and medical monitoring expenses from UCC.
The Sahu plaintiffs’ claim was based on New York state law, which allows suit against entities that participated in the creation or maintenance of a “nuisance,” defined as conduct or omissions that endangering the health and safety of a considerable number of people. There appeared to be little dispute that the contamination at the Bhopal plant, itself, constituted a public nuisance under New York law. Nevertheless, the Second Circuit concluded that none of the actions taken by UCC – approving the plan to back-integrate the Bhopal plant, transferring the technology used to manufacture the pesticide, providing a basic design for waste treatment at the plant, and some limited involvement in remediation of the pollution – legally amounted to creation or maintenance of the nuisance itself. The Second Circuit also upheld the lower court’s rejection of veil-piercing and agency-based arguments by the plaintiffs that UCC should be held liable for UCIL’s actions. Interestingly, both the parties to the case and the court agreed that New York law, rather than Indian law, should be applied to the case, despite the fact that the contamination in question occurred overseas.