Opposition Brief — Richard v. Hoechst Celanese Chemical Group, Inc.

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——

No. 03-1543

Jn The

Supreme Court of the Anited States

RICHARD R. RICHARD, JR.

on behalf of himself and all others similarly situated,

Petitioners,

HOECHST CELANESE CHEMICAL GROUP, INC.,

SHELL OIL COMPANY d/b/a SHELL CHEMICAL

COMPANY, HOECHST CELANESE CORPORATION,

and E.1. DuPONT de NEMOURS AND COMPANY,

Respondents.

On Petition For Writ Of Certiorari

To The United States Court Of Appeals

For The Fifth Circuit

SHELL OIL COMPANY’S BRIEF IN OPPOSITION

DavID T. HARVIN

Counsel of Record

ERICA L. KRENNERICH

VINSON & ELKINS L.L.P.

2300 First City Tower

1001 Fannin Street

Houston, Texas 77002

(713) 758-2368

Attorneys for Respondent

Shell Oil Company d/b/a

Shell Chemical Company

COCKLE LAW BRIEF PRINTING CO (800) 225-6964

OR CALL COLLECT (402) 342-2831

QUESTIONS PRESENTED

Whether the Fifth Circuit properly affirmed the

dismissal of Petitioner’s due process claim for lack of

subject matter jurisdiction when ruling in his favor

would have required the district court to review the

final decisions of two state courts and determine their

judgments were wrong in violation of the Rooker-

Feldman doctrine.

Whether the Fifth Circuit properly affirmed the

dismissal of Petitioner’s civil RICO action for failure

to state a claim upon which relief can be granted.

PARTIES TO THE PROCEEDING

AND RULE 29.6 STATEMENT

Petitioners have identified all parties in this proceed-

ing.

Pursuant to Supreme Court Rule 29.6, Respondent

Shell Oil Company advises the Court that Shell Oil Com-

pany is a wholly-owned subsidiary of Shell Petroleum,

Inc., a Delaware corporation. Shell Petroleum, Inc. is

directly or indirectly owned 60% by Royal Dutch Petro-

leum Company and 40% by The “Shell” Transport and

Trading Company, p.1.c.

TABLE OF CONTENTS

Page

QUESTIONS PRESENTED ........... cecseseesseeserseeneeeeeeees i

PARTIES TO THE PROCEEDING AND RULE 29.6

I oc con isin snencépsesoosiincsvghennvevestensiieseveent ii

TE OOF AUT Tee Ee vcccccesessovcccnonessvscessssecesesovones Vv

EXPLANATION OF RECORD CITES .............::::eeeeeees ix

SHELL OIL COMPANY’S BRIEF IN OPPOSITION. ... 1

STATEMENT OF THE CASE.........c::::scsssesesssesseeesseeen 83

A. Factual Background ..................cssecccreceeersees 3

B. Procedural Backgroung ................:ccceeeseeeeeeeeeeees 4

REASONS THE PETITION SHOULD BE DENIED... 8

I. The Fifth Circuit Correctly Held That Under

the Rooker-Feldman Doctrine the District

Court Lacked Subject Matter Jurisdiction

Over Petitioner’s Due Process Claim ...... Co asend ; 8

A. The Rooker-Feldman Doctrine Prohibited

the District Court From Reviewing the

Cox and Spencer Final Judgments.............. 8

B. There Is No Exception to the Rooker-

Feldman Doctrine For Absent Class Mem-

bers Who Collaterally Attack State Court

Class Action Judgments ...........:::sssceeeeeeeeees 12

1. There Is No Procedural Due Process

Exception to the Rooker-Feldman Doc-

ln Las cad siasinitiebbonensabeeeens 12

2. There Is No Exception to the Rooker-

Feldman Doctrine For Absent Class

Members Who Were Not Named Par-

ties to a State Court Judgment............. 15

TABLE OF CONTENTS - Continued

Page

3. The Theory of Injury By an Adverse

Party Does Not Apply Here................... 17

II. The Fifth Circuit Correctly Affirmed the

Dismissal of Petitioner’s RICO Claim For Fail-

ure To State a Claim on Which Relief Can Be

IIIT ius snccdsnesanxsnscelcantsacvesmaiasaanenaiebaaaacmanes 19

A. The Equitable Remedy of Disgorgement Is

Not Available to Petitioner .....................04. 21

B. Petitioner’s Inability To Satisfy the Proxi-

mate Cause Requirement of Holmes

Dooms His RICO Claim No Matter What

Form of Relief He Seeks ................:ccceeeeeeeee 23

C. RICO Does Not Authorize Private Plain-

tiffs To Seek Equitable Relief ..............0...... 25

D. Petitioner Sued for Damages and Not for

PN SIE sevicnssvevcaccoensticaasatosuvoncdeossin 29

CDE U TARP EIEG xncteevssntsncevsnncsbincinvtanesiesinenpalnnstnanierseinnets 30

TABLE OF AUTHORITIES

Page

CASES

Ace Const. v. City of St. Louis, 263 F.3d 831 (8th

Cee IND os svccvscenesevcovenintnavsennunnipesesuvenseeutinventionientannne 12

Allen v. Allen, 48 F.3d 259 (7th Cir. 1995) .........ccceeeeeeseees 16

Bennett v. Spear, 520 U.S. 154 (1997).......ccccceceereeeeeeeens 20

Bolin v. Sears, Roebuck & Co., 231 F.3d 970 (5th

Ch DOD oc vccscocsvacesscenssinnconsensunecenvacseaverrsansnencnsvecessannnenll 28

Catz v. Chalker, 142 F.3d 279 (6th Cir. 1998)............. 13, 14

Chevron, U.S.A., Inc. v. Natural Resources Defense

Council, Inc., 467 U.S. 837 (1984)........::ccceeeeeseeerreeees 20

Conkling v. Turner, 18 F.3d 1285 (5th Cir. 1994) ............. 28

Cox v. Shell Oil Co., Case No. 18,844 (Chancery Ct.,

Obion Cty., Tenn. Nov. 17, 1995) ........cseseseeeeeeeees passim

Doe & Assoc. Law Offices v. Napolitano, 252 F.3d

1026 (Oth Cir. 2001)............ssccsccccccrccsrrrrrccsesssssssoscosees 12

District of Columbia Court of Appeals v. Feldman,

A460 U.S. 462 (19838) .........ccccccccssscrrrreressssssscesssscsevens passim

Franchise Tax Bd. v. Construction Laborers Vaca-

tion Trust, 463 U.S. 1 (1983) ........cccceceeeeeeeeeeeeeeeeeeeeeeeeens 19

Granfinanciera, S.A. v. Nordberg, 492 USS. 33

(2ODB) ...cccvercessssscscsvccessnssesconevtcessesounssetacrssbenneenesconnensaenne 20

Great Plains Trust Co. v. Morgan Stanley Dean

Witter & Co., 313 F.3d 305 (5th Cir. 2002).......... sees 30

Hansberry v. Lee, 311 U.S. 32 (1940) .....ceceseeeeseereerenens 16

Holmes v. Securities Investor Protection Corp., 503

CFB, SEB (IGOR). ccccceccrssvicssesscesrnesssessessepsatenevensnssteenes 23, 24

In re F redeman Litig., 843 F.2d 821 (5th Cir. 1988)... 27, 28

TABLE OF AUTHORITIES — Continued

Page

In re General Motors Corp. Pick-Up Truck Fuel

Tank Prods. Liab. Litig., 134 F.3d 133 (3rd Cir.

DID ivcncsvsststsnatnertinceedsiiensapteserdisiesineaeeae 16

Johnson v. Collins Entm’t Co., Inc., 199 F.3d 710

CORR Ce, Sy iccstinnseritusicdsinevisscnietans aes 28

Kamilewicz v. Bank of Boston Corp., 92 F.3d 506 (7th

Cir. 1996), cert. denied, 520 U.S. 1204 (1997).......... 14, 16

Liedtke v. State Bar of Texas, 18 F.3d 315 (5th Cir.),

cert. denied, 513 U.S. 906 (1994)..........ccrcccccccccscsccccevsees 14

Lincoln House, Inc. v. Dupre, 903 F.2d 845 (1st Cir.

GOGO) cccoscvcicsscctstenssstetssaoundseisissuseanaaameaeee 29

National Org. For Women, Inc. v. Scheidler, 510

C.D. BOD CEO kciscasvessesssssssistscstasseereennen 25

National Org. for Women, Inc. v. Scheidler, 267 F.3d

687 (7th Cir. 2001), rev'd on other grounds, 537

CF, BO ee ccssssssssserestsnscinecnneae 7, 24, 25, 29

Noel v. Hall, 341 F.3d 1148 (9th Cir. 2003)................. 17, 18

Pennzoil Co. v. Texaco, Inc., 481 U.S. 1 (1987) ............0666 12

Peterson Novelties, Inc. v. City of Berkley, 305 F.3d

SHB (Ghia Cle, BI vtccsssccesevicccassessiccjeamecaeanaan 12

Phillips Petroleum v. Shutts, 472 U.S. 797

(SGD no covesrcseocsscsctsensnionsieanaeeanel 9, 11, 13, 16, 17

Price v. Pinnacle Brands, Inc., 138 F.3d 602 (5th

Cle, 26GB? vccssiskisissssonensvcaenraaaeeee 28

Proctor & Gamble Co. v. Amway, 242 F.3d 539 (5th

Cir.), cert. denied, 584 U.S. 945 (2001).............cccccceeseeeees 6

Religious Tech. Ctr. v. Wollersheim, 796 F.2d 1076

(9th Cir. 1986), cert. denied, 479 U.S. 1103

(GBF) sissscccssechsandcnseeaeeneeee 25, 26, 27, 28

Vil

TABLE OF AUTHORITIES -— Continued

Richard v. Hoechst Celanese Chem. Group, Inc., 355

F.3d 345 (Sth Cir. 20038)............ccssccsccessessesssnensssesesssesssees 7

Rooker v. Fidelity Trust Co., 263 U.S. 413 (1923)......passim

Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479 (1985) ... 23, 24

Seven-Up Co. v. Coca-Cola Co., 86 F.3d 1379 (5th

Chee BID a orcxcconsrovsreccenssscensescoceseoscononsonepeconoqnosasensoonesesanees 5

Simes v. Huckabee, 354 F.3d 823 (8th Cir. 2003)........ 14, 15

Spencer v. Shell Oil Co., Case No. CV-94-047

(Circuit Ct., Greene Cty., Ala. Nov. 17, 1995)........ passim

Snider v. City of Excelsior Springs, 154 F.3d 809

(Sth Cir, 1998).......cccccccccceccrcccccrccrrereseressssesssevees 14, 15, 16

Summit Properties, Inc. v. Hoechst Celanese Corp.,

214 F.3d 556 (5th Cir. 2000), cert. denied, 531

U.S. 1132 (2001) .......cccccrressccccvecereveccseesessssesceeeeeecees passim

Switzer v. Coan, 261 F.3d 985 (10th Cir. 2001)...........:006 28

Trane Co. v. O’Connor Sec., 718 F.2d 26 (2d Cir.

SEIU). .ccnvsscoscescosessrvsensnecoveoceseoesescososeneonsnssseteassonsessseconens 29

United States v. Carson, 52 F.3d 1173 (2d Cir.

1995), cert. denied, 516 U.S. 1122 (1996).......ccceeeeeee 22

United States v. Sasso, 215 F.3d 283 (2d Cir. 2000) ......... 22

United States v. Totten, 286 F.3d 542 (D.C. Cir.

OGY .. . ccccorcncscesceeoneverasussnecessensesesesssonsessenssscousnenepnessetens 30

Washington v. Yakima Indian Nation, 439 U.S. 463

(1079) ...ccescccrcoscccrscccsrcvssovesescoscavosssosssensesossoonnssccssocssoossees 20

Whitley v. Albers, 475 U.S. 312 (1986).....:.cccesereeererens 20

Vili

TABLE OF AUTHORITIES — Continued

p Page

STATUTES

Or passim

OTHER AUTHORITIES

Smith and Reed, Civil RICO, § 10.02 (Matthew

SEIN IIIIIIIEY sicnisinssisaueiednuennesemvanavesasdexansedushooribiddebtnaenans 21

7B Wright, Miller, & Kane, Federal Practice and

EXPLANATION OF RECORD CITES

“Pet.” refers to the Petition for Writ of Certiorari.

“Pet. App. ” refers to the Appendix attached to

the Petition for Writ of Certiorari.

“Shell App. ” refers to the Appendix attached

to Respondent Shell Oil Company’s Brief in Op-

position to Writ of Certiorari.

* R. ” refers to the Record on Appeal filed

with the United States Court of Appeals for the

Fifth Circuit cited by specific volume and page

number.

“Supp. R. ___” refers to the Supplemental Record

on Appeal filed with the United States Court of

Appeals for the Fifth Circuit cited by specific

docket and exhibit number.

ee Se ee ee

SHELL OIL COMPANY’S BRIEF IN OPPOSITION

This case represents yet another failed attempt to

make a federal case out of leaking plumbing. In Summit

Properties, Inc. v. Hoechst Celanese Corp., 214 F.3d 556

(5th Cir. 2000), cert. denied, 581 U.S. 1132 (2001), the

Fifth Circuit rejected an effort to turn “garden variety”

state law products liability claims into a federal racketeer-

ing case, and this Court denied the petition for writ of

certiorari. The Fifth Circuit held that a plaintiff similarly

situated to Petitioner could not meet RICO’s proximate

cause requirement because he did not personally receive or

rely upon the alleged misrepresentations made the basis of

his mail and wire fraud claims.

Petitioner argues that a different result should obtain

here because he says he sought equitable relief under

RICO in the form of disgorgement of profits rather than

damages. He did not. Petitioner also claims that he was

entitled to seek equitable disgorgement in a RICO civil

action even thougt: he too could not meet the detrimental

reliance requirement for a damage claim. He cannot. The

district court rejected Petitioner’s RICO contentions, and

the Fifth Circuit affirmed. They were correct.

However, Petitioner’s case was in fact different from

Summit in one significant way: regardless of the merits of

his RICO arguments, Petitioner’s claims were precluded

by the 1995 final judgments of Tennessee (Cox) and Ala-

bama (Spencer) courts approving two nationwide class

action settlements.’ Anticipating this, Petitioner also

! Final Judgment in Cox v. Shell Oil Co., Case No. 18,844 (Chan-

cery Ct., Obion Cty., Tenn. Nov. 17, 1995) (Shell App. 39-34) and Final

Order Approving the Class Action Settlement, Attorneys’ Fees and

(Continued on following page)

sought to set aside the Cox and Spencer settlements on the

ground that absent class members were not afforded

adequate notice or adequate representation. However,

Petitioner’s efforts to have the federal district court void

the final judgments of the Tennessee and Alabama courts

ran afoul of the Rooker-Feldman doctrine.”

Contrary to Petitioner’s contentions, the courts below

followed well-established precedents in dismissing Peti-

tioner’s RICO claims for failure to state a claim upon

which relief could be granted and dismissing Petitioner’s

collateral attacks on the Cox and Spencer judgments for

lack of subject matter jurisdiction under the Rooker-

Feldman doctrine. As a result, this case does not require

this Court’s review.

Expenses, and Awards to Representative Plaintiffs in Cox (filed Nov. 17,

1995) (Shell App. 1-29) (collectively “Cox”); Spencer v. Shell Oil C».,

Case No. CV-94-047 (Circuit Ct., Greene Cty., Ala. Nov. 17, 1995) (3 R.

852-857) (“Spencer”). Contrary to Petitioner’s claim, Respondents did

not cause these cases to be brought. (Pet. 5-6).

? Under the Rooker-Feldman doctrine, a federal district court lacks

jurisdiction to review, modify, nullify, or otherwise engage in appellate-

style review of a state court’s judgment. Rather, review of any constitu-

tional challenges to a state court’s judgment must be through the state’s

appellate system and ultimately in the United States Supreme Court.

See §1.A. infra. The doctrine derives from the Supreme Court’s

decisions in Rooker v. Fidelity Trust Co., 263 U.S. 413, 416 (1923), and

District of Columbia Court of Appeals v. Feldman, 460 U.S. 462, 476-82

(1983).

STATEMENT OF THE CASE

A. Factual Background

Petitioner’ is the owner of a used mobile home with

polybutylene (“PB”) plumbing. PB plumbing systems are

comprised of PB pipe and various “fittings” that join

sections of the pipe. These fittings are made from different

raw materials and different designs. Respondents did not

manufacture or sell PB plumbing systems or the compo-

nent parts of those systems. Rather, Shell manufactured

PB resin that was sold to third parties who extruded it

into PB plumbing pipes, and Celanese and DuPont manu-

factured and sold acetal resins named Celcon and Delrin,

respectively, which were molded into the plastic fittings

used to join the pipes together.

In 1995 Shell and Celanese entered into a settlement

with a nationwide class of owners of structures with PB

plumbing. The Cox settlement, approved by a state court

in Tennessee, obligates Shell and Celanese to provide $950

million to pay for replumbs’ for claimants with a qualify-

ing plumbing leak and for the repair of physical damage to

property resulting from a leak. (Supp. R. Docket No. 185,

Ex. 84 at 10, § 4.5, and Third Amendment at 3, § 2.2).

DuPont entered into a separate settlement with a similar

> Because Petitioner’s Statement of the Case is simply a self-

serving recitation of his allegations, replete with misstatements and

mischaracterizations of fact and law, Shell respectfully presents its owa

Statement of the Case.

‘ Petitioner did not sue any of the manufacturers of the pipe and

fittings installed in his mobile home, the manufacturer of his mobile

home, or the previous owner who Petitioner claims misrepresented to

him the condition and quality of the plumbing in his mobile home.

* A “replumb” is the replacement of a class member’s leaking PB

plumbing system with a new copper or CPVC plumbing system.

nationwide class of homeowners with PB plumbing. Its

Spencer settlement, approved by a court in Alabama,

obligates DuPont to contribute further sums toward the

replacement of PB plumbing systems and the repair of

associated property damage.

By purchasing a mobile home containing PB plumb-

ing, Petitioner became a member of the Cox and Spencer

nationwide settiement classes. He did not timely exercise

his right to opt out. Assuming he otherwise met the

_ eligibility requirements of the settiement, he was entitled

to have the PB plumbing in his mobile home replaced free

of charge with a copper or CPVC plumbing system and any

water damage to his home repaired. Petitioner does not

allege any circumstances peculiar to him that would make

this anything less than a complete remedy for the harm he

claims to have sustained. Nevertheless, Petitioner chose to

forego that full and effective relief. Instead he sought to

set aside the final judgments of the Tennessee and Ala-

bama courts approving the Cox and Spencer settlements

and litigate on behalf of a new putative class the product

liability claims settled in those prior class actions.

B. Procedural Background

In his Origina! Class Action Complaint filed in Janu-

ary 2000, Petitioner alleged that Respondents were liable

for the damages he and the class sustained as a result of

leaks in their PB plumbing systems on theories of conspir-

acy, strict liability, negligence, and breach of implied

warranties. In addition, he alleged that the Tennessee and

Alabama judgments approving the Cox and Spencer

nationwide class action settlements should not be given

full faith and credit and thereby preclude his lawsuit

~ because those courts allegedly failed to provide absent

class members with due process. (1 R. 1-25).

Petitioner’s Original Class Action Complaint was

insufficient to invoke the district court’s subject matter

jurisdiction. His claims for relief arose strictly under state

law, and there was no diversity of citizenship. His due

process attack on the Cox and Spencer settlements did not

create federal subject matter jurisdiction because of the

well-pleaded complaint rule’ and the Rooker-Feldman

doctrine. In response to Respondents’ motions to dismiss,

Petitioner tried to manufacture federal subject matter

jurisdiction by amending his complaint to add Lanham Act

and RICO claims. (Shell App. 52-66). He also transformed

his due process challenge to the Cox and Spencer judg-

ments into a “claim for relief” and sought an injunction

barring Respondents’ use of the Cox and Spencer judg-

ments to prevent his recovering damages attributable to

his leaking plumbing. (Shell App. 66-74).

Petitioner’s Lanham Act claim was patently frivolous.

Section 43(a) of the Lanham Act addresses only competi-

tive injuries and a consumer such as Petitioner lacks

standing to assert a claim. E.g., Seven-Up Co. v. Coca-Cola

Co., 86 F.3d 1379, 1383 (5th Cir. 1996). Petitioner eventu-

ally recognized the futility of his Lanham Act claim and

“withdrew” it. (3 R. 979).

Petitioner’s RICO claim was foreclosed by the Fifth

Circuit’s decision in Summit, in which the Fifth Circuit

‘ Under the well-pleaded complaint rule, a plaintiff cannot

establish federal question jurisdiction by pleading a federal ground in

avoidance of an anticipated defense. See footnote 12 infra. Although not

relied on by the Fifth Circuit, the well-pleaded complaint rule provided

an alternative basis for affirming the dismissal of Petitioner’s due

process claim.

held that the owner of a structure with PB plumbing couid

not maintain a RICO claim against these same Respon-

dents unless he could show he personally received and

relied upon the alleged misrepresentations made the basis

of his RICO mail and wire fraud claims. To avoid the

conclusive effect of Summit, Petitioner first argued that

his case was different because, unlike the Summit plain-

tiffs, he had pled reliance. (3 R. 990). However, when the

district court ordered him to file a RICO Case Statement

detailing the factual bases for his RICO claim, he was

forced to admit that he too never personally received,

heard, saw, or relied on any alleged misrepresentation by

any of the Respondents, which brought his case squarely

within the rule of Summit. (2 R. 664-65).

Faced with this dilemma, Petitioner then sought

refuge in the narrow “target exception” to the civil RICO

requirement of detrimental reliance. (3 R. 991). However,

this argument was foreclosed noi only by Summit, but also

by the Fifth Circuit’s subsequent decision in Proctor &

Gamble Co. v. Amway, 242 F.3d 539 (5th Cir.), cert. denied,

534 U.S. 945 (2001). In both Summit «nd Proctor &

Gamble the Fifth Circuit made clear that FICO’s “narrow

target exception” applies only to injured competitors who

can establish that their customers were lured away

because they relied on a defendant’s fraudulent misrepre-

sentations. See Proctor & Gamble, 242 F.3d at 564-65.

Consequently, the district court rejected Petitioner’s |

“target exception” argument. (Pet. App. 46-48). In his Fifth |

Circuit brief Petitioner finally admitted that Summit |

prevented him from obtaining a RICO damage recevery.

In a last-ditch effort to salvage a RICO claim, Peti-

tioner raised orally at a hearing in the district court a new

argument — that under the Seventh Circuit’s decision in

National Org. for Women, Inc. v. Scheidler (“NOW”), 267

F.3d 687 (7th Cir. 2001), rev’d on other grounds, 537 U.S.

393 (2003), he could maintain a RICO claim for equitable

relief in the form of disgorgement of profits. (6 R. 16-18).

After receiving briefs on Petitioner’s new argument, the

district court rejected it for two reasons. First, the district

court held that “Plaintiff’s foundational claim that equita-

ble relief is permissible under RICO is tenuous at best,”

since “[t]o the extent that courts in the Fifth Circuit have

considered equitable remedies under RICO, the idea has

been dismissed.” (Pet. App. 51-52). Second, the district

court held that the NOW case did not change Summit's

requirement that a civil RICO plaintiff must demonstrate

direct reliance on a fraudulent misrepresentation, which

Petitioner could not do. (Pet. App. 52). As a result, the

district court held that Petitioner’s RICO allegations failed

to state a claim upon which relief could be granted. (Pet.

App. 52).

In addition, the district court held that under the

Rooker-Feldman doctrine it lacked jurisdiction over

Petitioner’s due process challenge to the Cox and Spencer

judgments. (Pet. App. 33-35). Having dismissed Peti-

tioner’s purported federal law claims, the district court

then dismissed without prejudice his pending state law

claims. (4 R. 1312).

In December 2003, the Fifth Circuit affirmed the

district court’s dismissal of Petitioner’s claims. Richard v.

Hoechst Celanese Chem. Group, Inc., 355 F.3d 345 (5th Cir.

2003) (Pet. App. 1-18). Although the Fifth Circuit could

have reached that result on any number of grounds,

ultimately it chose two. First, the court affirmed the

dismissal of Petitioner’s due process challenge to the Cox

and Spencer judgments based on the district court’s lack of

subject matter jurisdiction under Rooker-Feldman. Sec-

ond, the Fifth Circuit held that the district court had

properly dismissed Petitioner’s RICO claim for failure to

state a claim because it found the remedy Petitioner

claimed to be seeking — equitable disgorgement — was not

available under the circumstances of this case. (Pet. App.

18).

REASONS THE PETITION SHOULD BE DENIED

I. The Fifth Circuit Correctly Held That Under

the Rooker-Feldman Doctrine the District

Court Lacked Subject Matter Jurisdiction

Over Petitioner’s Due Process Claim

The Fifth Circuit correctly found that the Rooker-

Feldman doctrine deprived the district court of subject

matter jurisdiction over Petitioner’s due process claim.

A. The Rooker-Feldman Doctrine Prohibited

the District Court From Reviewing the

Cox and Spencer Final Judgments

The Rooker-Fe.dman doctrine derives from this

Court’s holdings in Rooker v. Fidelity Trust Co., 263 U.S.

413 (1923), and District of Columbia Court of Appeals v.

Feldman, 460 U.S. 462 (1983). In Rooker, this Court held

that federal district courts cannot exercise “appellate

jurisdiction” over constitutional questions decided by state

courts, even if the state court judgment was in error.

Rooker, 263 U.S. at 415. In such instances, the appropriate

remedy is through the state appellate system. Jd. Recourse

in the federal courts is limited strictly to seeking review in

the United States Supreme Court since all lower federal

courts lack subject matter jurisdiction to review or modify

state court judgments. Jd. at 416. In Feldman, this Court

—— SSS Ewen aaa

explained that the lower federal courts also lack jurisdic-

tion to review final judgments of state courts when consti-

tutional claims are “inextricably intertwined” with the

challenged state court judgment. Feldman, 460 U.S. at 483

n.16.

Here Petitioner sought to have the federal district

court decide issues “inextricably intertwined” with the

final judgment of the Tennessee court approving the Cox

settlement. He argued that the Tennessee judgment was

not entitled to full faith and credit because absent class

members were not afforded the due process — adequate

notice and adequate representation — that Phillips Petro-

leum v. Shutts, 472 U.S. 797, 811-12 (1985), requires. (Pet.

11-12).

However, in approving the Cox settlement, the Ten-

nessee court expressly addressed the Shutts due process

requirements — and, indeed, many of Petitioner’s specific

complaints. For example, in his Second Amended Com-

plaint Petitioner complained about the adequacy of class

counsel’s representation. (Shell App. 71-74, 1] 123-128).

The Cox court, however, found that “[t]here is no factual

basis for the asserted objection that there is any conflict of

interest with respect to the Cox Class Counsel.” (Shell

App. 23, J 64). The Cox court further found that “[t]he Cox

Class Counsel maintained the highest standards of profes-

sionalism and advocacy in protecting and promoting the

interests of the Class throughout the prosecution and

settlement of this case.” (Shell App. 23, § 65). Finally, the

Cox court found that the settlement was “in all respects

fair, reasonable, and adequate and in the best interests of

the Settlement Class.” (Shell App. 18, { 38; Shell App. 27,

{ 7).

In addition, Petitioner alleged that the notice provided

to absent class members in Cox was constitutionally

inadequate. (Shell App. 68, 7 113; Shell App. 69, 9 117;

Shell App. 74, 7 129). However, the Cox court’s Final Order

also reveals the careful attention it paid to the issue of

notice to absent class members. After reviewing the details

of the multi-faceted, multi-media notice campaign and

considering the testimony of experienced class notice

experts, the Cox court ruled that the notice campaign “as

designed and implemented, met and exceeded the re-

quirements of the United States Supreme Court, Tennes-

see’s Rule 23, due process and the Constitution, as

construed in [Shutts].” (Shell App. 17, J 32). The Cox court

further found that “the notice program is one of the most

comprehensive class notice campaigns ever undertaken,”

that “all reasonable efforts have been made to reach

affected consumers,” and that “the best notice practicable

under the circumstances has been provided to the settle-

ment class.” (Shell App. 6; Shell App. 17, 7 33).

Moreover, the Cox court found that “[t]he notice

provided to the Settlement Class was neither misleading

nor defective.” (Shell App. 21, 7 50). Rather, the Cox court

found that the notice “fully and accurately informed

Settlement Class members of all material elements of the

proposed Settlement” and complied with all applicable

legal standards. (Shell App. 3; Shell App. 17, {] 32, 33).

"In reaching its conclusion the Cox court noted that the Cox

settlement provided for not only an initial notice campaign, but also re-

noticing the class every three years thereafter until 2009. (Shell App.

11, 9 12(e)). The Cox settlement further provided an opportunity for

subsequent purchasers of homes with PB plumbing - such as Petitioner

— to opt out of the settlement in response to the subsequent notice.

(Supp. R. Docket No. 185, Ex. 84 at § 10.2).

Petitioner disputes all of these material findings of

the Tennessee court and sought to have the federal district

court declare that the Cox court was wrong in its conclu-

sion that the due process requirements of Shutts were

met. However, as the Fifth Circuit held, Petitioner’s claims

collided head-first with the Rooker-Feldman doctrine,

which bars exactly this type of appellate review of state

court judgments:

([Petitioner’s] allegations indisputably denounce

the express findings of the Cox state court....

The Feldman holding appears to squarely fit [Pe-

titioner’s] situation. The Cox court’s findings that

allow for certification are “inextricably inter-

twined” with [Petitioner’s] constitutional chal-

lenge to the state’s compliance with due process

requirements. A federal court cannot examine the

due process deficiencies in Cox without disturb-

ing the underlying judgment.

(Pet. App. 10-11). In short, the Fifth Circuit’s holding that

the federal district court lacked subject matter jurisdiction

over Petitioner’s due process challenge to the Cox final

judgment is an unexceptional application of Rooker-

Feldman.' Accepting the formulation of Justice Marshall

* Although it could have stopped there, the Fifth Circuit went on to

find that Petitioner had failed to state a claim under § 1983. (Pet. App.

11-15). Respondents Hoechst Celanese and DuPont have fully ad-

dressed this issue in their Briefs in Opposition. Shell would add only

that Petitioner never pleaded the § 1983 claim he hypothesizes. (Pet. 7).

Plaintiff’s Second Amended Complaint does not reference § 1983 at all.

It contains no allegations of any facts supporting state action under

either the “innocent agent” or “judicial malfeasance (bribery)” theory. To

the contrary, Petitioner based his due process claim on, first, an obscure

“door closing” theory applicable only to South Carolina state courts,

and, second, supposed deficiencies in the Cox court’s findings with

respect to due process. (Shell App. 66-74, 7/1 105-129).

in Pennzoil Co. v. Texaco, Inc., 481 U.S. 1, 25 (1987), the

circuit courts universally hold that when the federal

district court can provide relief only by determining that

the state court was wrong, then plaintiff’s case is; in

effect, an appeal of the state court decision prohibited by

the Rooker-Feldman doctrine. See, e.g., Peterson Novelties,

Inc. v. City of Berkley, 305 F.3d 386, 393 (6th Cir. 2002);

Ace Const. v. City of St. Louis, 263 F.3d 831, 833 (8th Cir.

2001); Doe & Assoc. Law Offices v. Napolitano, 252 F.3d

1026, 1030 (9th Cir. 2001).

B. There Is No Exception to the Rooker-

Feldman Doctrine For Absent Class Mem-

bers Who Collaterally Attack State Court

Class Action Judgments

Petitioner offers a grab bag of arguments about how

the Fifth Circuit’s application of Rooker-Feldman suppos-

edly conflicts with other circuits. Taken together, these

arguments amount to a claim that there is an exception to

Rooker-Feldman for absent class members who collaterally

attack state court class judgments. In fact, there is no such

exception, and no circuit court has so held. As Shell will

demonstrate below, Petitioner’s claim of a circuit conflict is

based not on class action cases, but solely on a motley

collection of divorce cases — and a misreading of those

cases to boot.

1. There Is Nao Procedurs' Due Process

Exception to the Rook+e,-feldman Doc-

trine

Petitioner argues for a procedural due process excep-

tion to the Rooker-Feldman doctrine in which every absent

class member is entitled to endlessly relitigate in federal

district court the rendering state court’s findings with

respect to the Shutts due process requirements. (Pet. 11-

13). Notably, Petitioner cannot — and does not — cite any

authority endorsing such an extreme proposition. Rooker-

Feldman applies with equal force to both the procedural

and substantive findings of state courts. The fact that a

plaintiff affirmatively alleges he was not afforded proce-

dural due process in a state court class action makes no

difference in the Rooker-Feldman analysis.

The authority Petitioner cites for this argument is the

decision in Catz v. Chalker, 142 F.3d 279 (6th Cir. 1998),

one of at least five different lawsuits between parties to a

divorce. Petitioner claims that in Catz, the “Ninth Circuit”

distinguished between “plaintiffs seeking to set aside state

judgments because of their substance from those challeng-

ing the state court’s procedure.” (Pet. 15). According to

Petitioner, “when a plaintiff challenges procedure rather

than merits, his claim is ... not precluded by Rooker-

Feldman.” (Pet. 15-16). Petitioner’s reliance on Catz,

however, is utterly misguided.

In Catz the Sixth Circuit held simply that certain

due process allegations were not “inextricably inter-

-wined” with the merits of a state court divorce decree

such that Rooker-Feldman did not apply. 142 F.3d at 294-

95. Catz bears no resemblance to the situation here. In

Cox the Tennessee court made specific findings pertain-

ing to the adequacy of notice and the adequacy of repre-

sentation. Indeed, Tennessee Rule of Civil Procedure 23

required that it do so before approving the class settle-

ment. Petitioner seeks to relitigate those same findings.

Here then is the classic situation where “federal relief

* Catz is actually a Sixth Circuit decision.

can only be predicated upon a conviction that the state

court was wrong,” which even Catz recognized would be

barred by the Rooker-Feldman doctrine. Id.

In fact, contrary to Petitioner’s claim, the circuits

uniformly reject the notion of a procedural due process

exception to Rooke’-Feldman in a class action context. For

example, in Kamilewicz v. Bank of Boston Corp., 92 F.3d

506 (7th Cir. 1996), cert. denied, 520 U.S. 1204 (1997), the

Seventh Circuit rejected plaintiffs’ “far-reaching proposed

exception to the Rooker-Feldman doctrine” when urged to

conclude that it could “overturn the decision of the Ala-

bama court insofar as it involved a determination that

procedural due process was complied with.” Kamilewicz,

92 F.3d at 510. Similarly, in Snider v. City of Excelsior

Springs, 154 F.3d 809, 812 (8th Cir. 1998), the Eighth

Circuit reiterated: “As we have held before in a case in

~ which the plaintiffs alleged insufficient notice in a state

court action, there is no procedural due process exception

to the Rooker-Feldman rule.”

The Fifth Circuit has similarly refused to recognize an

exception to Rooker-Feldman for procedural due process

claims. In Liedtke v. State Bar of Texas, 18 F.3d 315 (5th

Cir.), cert. denied, 513 U.S. 906 (1994), an attorney sued in

federal court to prevent the enforcement of a state court

judgment disbarring him, claiming he had not been

afforded due process or a full and fair opportunity to be

heard. The court, however, applied Rooker-Feldman and

affirmed dismissal of the attorney’s action, noting that

“the casting of a complaint in the form of a civil rights

action cannot circumvent this rule.” Jd. at 317-18."°

” Petitioner also claims the Fifth Circuit’s decision below conflicts

with cases like Simes v. Huckabee, 354 F.3d 823 (8th Cir. 2003), that

(Continued on following page)

2. There Is No Exception to the Rooker-

Feldman Doctrine For Absent Class

Members Who Were Not Named Parties

to a State Court Judgment

Petitioner also contends that Rooker-Feldman cannot

bar his due process attack on the Cox and Spencer judg-

ments because he was not a “party” to those cases. (Pet.

15-17). In effect, he argues there is an exception to Rooker-

Feldman for absent class members who are not named

parties to the lawsuit. Under this theory absent class

members would always litigate anew their various due

process challenges to state court class action judgments.

Petitioner’s argument is wrong both legally and conceptu-

ally because it ignores the fundamental notion that a class

action is a representative lawsuit.

For example, in Snider, the Eighth Circuit specifically

rejected the argument that Rooker-Feldman did not apply

to absent members of a state court-approved class because

they were not “parties.” The court stated that “to deter-

mine that the plaintiffs here were not ‘parties’ in the state

court action would require us to hold that the state court

wrongly certified the class,” which is not an issue a federal

refuse to apply Rooker-Feldman where the plaintiff has not had a

“reasonable opportunity” to raise his federal claims in state court. (Pet.

16). For example, in Simes plaintiff attempted to raise his federal

claims in state court, but the state court declined to consider them. Jd.

at 828-30. In other of the “reasonable opportunity” cases cited in Simes,

the state court procedures themselves did not allow the plaintiffs to

present their federal claims. All of these cases are inapposite here. In

Cox. the Tennessee state court afforded absent class members the

opportunity to object to the settlement and specifically considered

objections to the adequacy of the notive and adequacy of representation

similar to those that Petitioner urges. (Shell App. 19-23, q] 41, 42, 46,

47, 64, 66). Thus in Cox there was no lack of “reasonable opportunity” to

contest these due process issues.

district court has jurisdiction to decide under the Rooker-

Feldman doctrine. Snider, 154 F.3d at 812.

Other courts have also ruled that Rooker-Feldman

precludes absent class inembers from obtaining review of

final state court judgments in federal district court. In

Kamilewicz, absent class members sued the parties to a

nationwide class settlement and class counsel alleging,

like Petitioner here, that the state court judgment approv-

ing the settlement was null and void because of lack of due

process. Kamilewicz, 92 F.3d at 509. Notwithstanding that

the plaintiff'class members were not named parties to the

original state court case, the Seventh Circuit held Rooker-

Feldman barred the district court from hearing their due

process claims. Jd. at 509-12. Similarly, in In re General

Motors Corp. Pick-Up Truck Fuel Tank Prods. Liab. Litig.,

134 F.3d 133 (8rd Cir. 1998), the Third Circuit held that

under Rooker-Feldman absent class members could not

sue in federal court to enjoin a Louisiana state court

judgment approving a nationwide class settlement. GMC,

134 F.3d at 143.”

In fact, Petitioner’s entire argument runs counter to

the very representational nature of a class action. The

Supreme Court long ago noted that a class action, or a

“representative” suit, is an exception to the rule that one

cannot be bound by a judgment in personam unless one

was made fully a party in the traditional sense. Shutts,

472 U.S. at 808 (citing Hansberry v. Lee, 311 U.S. 32, 40-

41 (1940)); see also 7B Wright, Miller, & Kane, Federal

" Petitioner’s citation to Allen v. Allen, 48 F.3d 259 (7th Cir. 1995),

a child custody case, is irrelevant because Allen does not involve or

address a court’s ability to bind absent class members to a class action

judgment.

NE ROE CAIDA Bei RLS tO BN Oat ice Ah ve Vln Soi wowed

—_—

Vike:

eee ee

——_

Practice and Procedure § 1789 at 238 (2d ed. 1986). There

is no requirement that a class member must be a named

party in a class action to be bound by the resulting judg-

ment. The whole point of the Shutts minimum due process

requirements — as set forth by this Court — is to establish

when a class member will be bound even though he does

not appear and is not a named party.

3. The Theory of Injury By an Adverse

Party Does Not Apply Here

In a final twist, Petitioner argues that Rooker-

Feldman does not apply when a plaintiff alleges his injury

was caused by an adverse party. (Pet. 13-14). Petitioner

contends that because he alleges damage to his mobile

home caused by PB plumbing, “Rooker-Feldman does not

bar jurisdiction, as it would if the legai injury were caused

by the state judgment itself.” (Pet. 14). Petitioner’s charac-

terization of his claim, however, is demonstrably false, and

his reliance on Noel v. Hall, 341 F.3d 1148 (9th Cir. 2003),

is misplaced.

First. Petitioner’s claim that he is “not seeking to

invalidate the state court judgment” (Pet. 15) is disin-

genuous at best. Petitioner’s Second Amended Complaint

alleged that the Cox and Spencer judgments were void and

sought an injunction barring the use of the Cox and

Spencer judgments to preclude the product liability claims

of Petitioner and the nationwide class he purported to

represent. (Shell App. 69, {| 118; Shell App. 74, q 129). His

pleading included an eight-page attack on the validity of

the Cox and Spencer judgments. (Shell App. 66-74). As the

Fifth Circuit found, his “allegations indisputably denounce

the express findings uf the Cox state court.” (Pet. App. 10).

Even the Noel court would regard such claims as

barred by Rooker-Feldman. In that case the Ninth Circuit

summarized this Court’s decisions in Rooker and Feldman

and its own precedents as follows:

It is a forbidden de facto appeal under Rocker-

Feldman when the plaintiff in federal district

court complains of a legal wrong allegedly com-

mitted by the state court, and seeks relief from

the judgment of that court.

341 F.3d at 1163. The Noel court subsequently reiterated,

If a federal plaintiff asserts as a legal wrong an

allegedly erroneous decision by a state court, and

seeks relief from a state court judgment based on

that decision, Rooker-Feldman bars subject mat-

ter jurisdiction in federal] district court.

Id. at 1164. That is of course precisely the situation here.

Second, when the Noel court contrasted the situation

where the plaintiff complains of an injury caused by an

adverse party, it was addressing an entirely different

circumstance. In Noel, the federal district court mistak-

enly invoked ?tooker-Feldman to dismiss a fiduciary duty

claim simply because an identical claim was pending

between the same parties in a simultanevus state court

action. Noel, 341 F.3d at 1165. On appeal, the Ninth

Circuit found that the district court had erred and Rooker-

Feldman could not apply because there was no state court

judgment whatsoever relating to the fiduciary duty claim —

in fact, the state court litigation was still pending:

We rave never held that when there are simul-

taneous suits in state and federal court, in

which related ... claims are being litigated, the

federal suit must be dismissed under Rooker

Feldman.... The Supreme Court has repeat-

edly stated that simultaneous state and federal

£ ad eR AL Lo let ew

RA RF ET Se Om oS

ita a

litigation of overlapping, and even identical, is-

sues is an important feature of our federai sys-

tem.... The pending suit in [state court]

therefore dees not prevent [plaintiff] from pursu-

ing his fiduciary duty claim simultaneously in

his federal court suit, and we reverse the district

court’s dismissal of that claim.

Id.

In summary, Petitioner has failed to identify any

exception to the Rooker-Feldman doctrine that would alter

the Fifth Circuit’s conclusion that the federal district court

lacked subject matter jurisdiction over Petitioner’s due

process claim.”

Il. The Fifth Circuit Correctly Affirmed the

Dismissal of Petitioner’s RICO Claim For

Failure To State a Claim on Which Relief Can

Be Granted

Petitioner also seeks review of the Fifth Circuit’s

decision upholding the dismissal of his RICO claim.

Petitioner claims this issue is worthy of this Court’s review

because, in his view, the Fifth Circuit construed too

narrowly the disgorgement remedy of 18 U.S.C. § 1964(a).

Moreover, even if Rooker-Feldman were not dispositive of

Petitioner’s due process claim, the well-pleaded complaint rule provided

an independent basis for the district court to find that the claim was

barred. As Shell demonstrated in the courts below, Petitioner’s due

orocess attack on the judgment of the Tennessee court — asserting that

the Cox judgment should not be enforced for due process reasons —

merely anticipaved the full faith and credit defense that Respondents

were likely to raise. Under the well-pleaded complaint rule, matters

raised in avoidance or anticipation of a defense do not present a federal

question and cannot establish federal subject matter jurisdiction. E£.g.,

Franchise Tax Bd. v. Construction Laborers Vacation Trust, 463 U.S. 1,

10 (1983).

However, granting certiorari to decide this issue would be

largely futile, as there were numerous other grounds on

which Petitioner’s RICO claim should have been dis-

missed. Thus this Court would likely never even reach the

issue of the proper scope of the disgorgement remedy.”

Among the numerous flaws in Petitioner’s RICO

claims were the following:

e = As the Fifth Circuit previously held in Summit,

Petitioner could not sue for damages for mail or

wire fraud because, by his own admission, he did

not directly receive or rely upon Respondents’ al-

legedly fraudulent statements;

e While Petitioner claimed he cou!d nevertheless

sue for equitable relief, he never sought to amend

his complaint to allege a RICO claim for equita-

ble relief;

e Even if he had pleaded a claim for equitable re-

lief, that claim would still be barred by his ad-

mitted inability to meet the detrimental reliance

requirement for a civil RICO fraud action;

'* It is well established that this Court “reviews judgments, not

opinions.” Chevron, U.S.A., Inc. v. Natural Resources Defense Council,

Inc., 467 U.S. 837, 842 (1984). The Court has repeatedly stated that the

prevailing party may “defend its judgment on any ground properly

raised below whether or not that ground was relied upon, rejected, or

even considered by the District Court or the Court of Appeals.” Granfi-

nanciera, S.A. v. Nordberg, 492 U.S. 33, 38 (1989) (quoting Washington

v. Yakima Indian Nation, 439 US. 463, 479 n.20 (1979)); Benne’t v.

Spear, 520 U.S. 154, 166 (1997) (“a Respondent is entitled, however, to

defend the judgment on any ground supported by the record”); Whitley

v. Albers, 475 U.S. 312, 326 (1986, (any ground properly raised below

may be urged as a basis for £uyreme Court’s affirmance of Court of

Appeals’ decision). Therefore, even if this Court had some question

about the Fifth Circuit’s reaso” ig, it could not reverse the judgment of

the Court of Appeals until it cosidered all of the grounds urged below

and found that the judgment was not sustainable on any basis.

e In any event, the weight of authority holds that

RICO does not authorize private plaintiffs to sue

for equitable relief;

e The equitable relief Petitioner suggests but never

pleaded — disgorgement —- is a remedy available

only to the Government;

e And, finally, the point on which the Fifth Circuit

chose to rest its decision: disgorgement is avail-

able only to “prevent and restrain” ongoing or fu-

ture violations and not, as here, to compensate

for past injuries. (Pet. App. 16-17).

Any of the foregoing would provide an independent basis

for affirming the dismissal of Petitioner’s RICO claims.

A. The Equitable Remedy of Disgorgement Is

Not Available to Petitioner

As discussed infra (§§ II. C. and D), equitable reme-

dies are not available to private RICO plaintiffs, and

Petitioner did not sue for equitable relief. But even if he

had, disgorgement is a remedy that courts have allowed

under RICO only in favor of the Government and, even in

the case of the Government, it is allowed only under very

limited circumstances not applicable here.

Both courts and commentators have uniformly recog-

nized that “disgorgement is an equitable remedy available

to the government in a civil RICO action” in appropriate

cases. Smith and Reed, Civil RICO, § 10.02 (Matthew

Bender 2000) (emphasis added). No case has ever held

that disgorgement is available to a private civil RICO

plaintiff and, noticeably, Petitioner cites none.

In fact, the Second Circuit — the only court of appeals

to consider whether disgorgement is an appropriate civil

RICO remedy — has restricted even the Government’s use

of the remedy solely + situations aimed at preventing

future RICO violatic is. In the seminal case of United

States v. Carson, 52 #3d 1173 (2d Cir. 1995), cert. denied,

516 U.S. 1122 (1996), the court rejected the idea that

§ 1964(a) authorized “disgorgement of gains ill-gotten long

in the past.” 52 F.3d at 1181. The court reasoned that

§ 1964(a) is “forward looking, and calculated to prevent

RICO violations in the future.” Jd. Therefore, the court

held, the only disgorgements available to the Government

were those “designed to ‘prevent and restrain’ future

conduct rather then to punish past conduct.” Jd. at 1182

(emphasis in original).

As Petitioner conceded in his Second Amended Com-

plaint, PB plumbing systems are no longer being sold.

(Shell App. 39, 9 14). Thus, the Fifth Circuit reasoned,

consistent with Carson, that even if disgorgement were a

remedy available to Petitioner, disgorgement would not be

available to Petitioner because he did iiot seek disgorge-

ment to prevent or restrain ongoing or future injury, but

rather solely for the purpose of compensation for past

injuries:

Even if equitable relief were available to a pri-

vate party, disgorgement is not a proper remedy

given the circumstances of this case.... We

agree with the Second Circuit’s reasoning in Car-

son. Section 1964(a) establishes that equitable

remedies are available only to prevent ongoing

and future conduct. Here, [Petitioner] does not

seek disgorgement to “prevent and restrain” the

[Respondents] from producing PB plumbing sys-

tems. In fact, in his Second Amended Complaint,

“The Second Circuit has repeatedly reaffirmed its holding in

Carson. See United States v. Sasso, 215 F.3d 283, 290-91 (2d Cir. 2000).

[he] concedes that the [Respondents] no longer

market the plumbing systems.

(Pet. App. 17).

Consequently, the Fifth Circuit properly affirmed the

dismissal of Petitioner’s RICO claim. However, even if the

Fifth Circuit too narrowly construed the disgorgement

remedy, Petitioner’s RICO claim would fail for several

other reasons.

B. Petitioner’s Inability To Satisfy the

Proximate Cause Requirement of Holmes

Dooms His RICO Claim No Matter What

Form of Relief He Seeks

As discussed infra (§§ II. C. and D), equitable reme-

dies are not available to private RICO plaintiffs, and

Petitioner did not sue for equitable relief. Nevertheless,

even if he had sued for equitable relief, and even if it were

a remedy available to him, Petitioner’s RICO claim fails —

as the district court held — because he cannot satisfy the

proximate cause requirement this Court mandated in

Holmes, which precludes him from establishing RICO

standing. Thus, even if equitable relief were potentially

available to him, Petitioner still would have to meet the

standing requirement of 18 U.S.C. § 1964(c) for maintain-

ing a civil RICO action.

The analysis is straightforward. A private plaintiff’s

standing to bring a RICO action derives from § 1964(c),

which authorizes a private suit under RICO by “any

person injured in his business or property by reason of a

violation of section 1962.” (Pet. 2; 18 U.S.C. § 1964(c)). In

Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 496 (1985),

this Court explained that a private RICO plaintiff “only

has standing if, and can only recover to the extent that, he

has been injured in his business or property by the con-

duct constituting the violation.” Then, in Holmes v. Securi-

ties Investor Protection Corp., 503 U.S. 258, 268 (1992),

this Court held that the “by reason of” component of

§ 1964(c) imposes a proximate cause requirement on the

plaintiff, i.e., a civil RICO plaintiff must show the alleged

predicate acts were the proximate cause of injury to his

business or property. In Summit the Fifth Circuit held

that for mail or wire fraud the proximate cause require-

ment of Holmes can be met only by an allegation that the

private plaintiff personally received and relied on the

alleged misrepresentation. Summit, 214 F.3d at 560-62.

Taken together, these cases mean that a private plaintiff

who cannot allege that he relied on the defendants’ mis-

representations cannot establish the proximate cause

required under Holmes (and also by Summit in the Fifth

Circuit). Consequently, under Sedima such a plaintiff has

no standing to bring a RICO claim based on mail or wire

fraud.

Here Petitioner admitted that he did not rely on any

alleged misrepresentations by any Respondent and there-

fore could not satisfy the detrimental reliance requirement

of Summit. As a result, he could not meet the require-

ments of § 1964(c) and has no standing to assert a civil

RICO claim regardless of what form of relief he seeks.

Thus, whether or not equitable relief is available to pri-

vate RICO plaintiffs, the district court correctly held his

RICO claim failed as a matter of law.”

'* No case — not even NOW — would allow a private plaintiff who

lacks standing under § 1964(c) to maintain a RICO action for equitable

relief. Even that court believed a private RICO plaintiff must meet the

standing requirements of § 1964(c) to be able to maintain an action for

equitable (or any other form of) relief under § 1964(a). The NOW court’s

(Continued on following page)

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C. RICO Does Not Authorize Private Plain-

tiffs To Seek Equitable Relief

Even if Petitioner could meet RICO’s standing re-

quirements, no federal court of appeals other than the

Seventh Circuit in NOW has held that private plaintiffs

can seek injunctive or other equitable relief under RICO.

Indeed, the great weight of authority holds that RICO does

not authorize equitable relief for private parties.

For example, in Religious Tech. Ctr. v. Wollersheim,

796 F.2d 1076 (9th Cir. 1986), cert. denied, 479 U.S. 1103

(1987), the Ninth Circuit rejected the availability of

injunctive relief for private RICO plaintiffs based on a

thorough analysis of both the statute’s language and its

legislative history. The court reversed a district court’s

order granting an injunction against the use or dissemina-

tion of materials allegedly stolen from the Church of

Scientology because “injunctive relief is not available to a

private plaintiff in a civil RICO action.” Wollersheim, 796

theory was that private parties could sue for injunctive relief by virtue

of “the combination of grants in §§ 1964(a) and (c).” NOW, 267 F.3d at

697. In other words, the NOW court believed that § 1964(c) grants

private parties a right of action under the terms specified, and § 1964(a)

grants district courts the authority to render injunctive relief in such

actions. Therefore, even under the NOW theory Petitioner could not

obtain equitable relief because he cannot meet the proximate cause

requirement of § 1964(c) and hence lacks standing to bring a private

RICO action. In fact, the prior opinions in the case establish that the

NOW courts clearly regarded standing under § 1964(c) as an indispen-

sable element of the plaintiffs’ case. On appeal from an initial dismissal

of plaintiffs’ RICO claims, this Court said “the threshold question” was

“whether petitioners have standing to bring their claim.” National Org.

For Women, Inc. v. Scheidler, 510 U.S. 249, 255 (1994). The Court

proceeded only after satisfying itself that plaintiffs had adequately

alleged injury to their business or property by reason of the defendants’

alleged conspiracy. Jd. at 255-56.

F.2d at 1077. In reaching its decision, the court first

analyzed the language of the statute itself:

Part (a) is a broad grant of equitable jurisdiction

to the federal courts. Part (b) permits the gov-

ernment to bring actions for equitable relief... .

Part (c), the private civil RICO provision, states

that a private plaintiff may recover treble dam-

ages, costs and attorney’s fees. In contrast to part

(b), there is no express authority to private plain-

tiffs to seek the equitable relief available under

part (a)....

[T]he inclusion of a single statutory reference to

private plaintiffs, and the identification of a

damages and fees remedy for such plaintiffs in

part (c), legically carries the negative implication

that no other remedy was intended to be con-

ferred on private plaintiffs.

Id. at 1082-83 (emphasis in original).

Next, the court confirmed that RICO’s “legislative

history mandates us to hold that injunctive relief is not

available to a private party in a civil RICO action.” Jd. at

1084. The court stressed that proposed language expressly

authorizing private plaintiffs to sue for injunctive relief as

well as treble damages had been rejected by a Congres-

sional subcommittee, which instead adopted a bill that

“explicitly created only the private action for treble dam-

ages which was eventually enacted as section 1964(c).” Id.

(emphasis in original). Moreover, the Ninth Circuit also

found it significant that Congress had subsequently

rejected a proposed amendment to § 1964 that would have

expressly permitted private parties to sue for injunctive

relief. Jd. at 1085-86. For these reasons, the court con-

cluded that the statute’s legislative history also did not

support a claim for equitable remedies for private plain-

tiffs:

The clear message from the legislative history is

that, in considering civil RICO, Congress was re-

peatedly presented with the opportunity ex-

pressly to include a provision permitting private

plaintiffs to secure injunctive relief. On each oc-

casion, Congress rejected the addition of any such

provision.

Id. at 1086 (emphasis in original).

Finally, the Ninth Circuit noted that analogy to the

antitrust laws also supported its decision. The court

observed that “civil RICO was intended to provide a

private cause of action modeled on the analogous provision

of the antitrust laws.” Jd. at 1086. The court stressed that

the Supreme Court had already held § 4 of the Clayton Act

— the provision of the antitrust laws analogous to RICO’s

§ 1964(c) — did not permit a private plaintiff to sue for

injunctive relief. Jd. at 1087. Rather, private antitrust

plaintiffs could obtain injunctive relief only because

another section of the antitrust laws — for which there is

no analogous RICO provision — expressly authorized such

relief. Jd. Summarizing its findings, the Ninth Circuit

concluded that “taken together, the legislative history and

statutory language suggest overwhelmingly that no

private equitable action should be implied under civil

RICO.” Id. at 1088.

Although the Fifth Circuit did not deem it necessary

to decide the issue (Pet. App. 16), it, and virtually every

other court of appeals that has commented on the issue,

has also expressed serious doubt that injunctive or equita-

ble relief is available to private plaintiffs under RICO. In

In re Fredeman Litig., 843 F.2d 821 (5th Cir. 1988), the

Fifth Circuit reviewed the Ninth Circuit’s Wollersheim

decision at length, id. at 828-30, and found “the analysis

contained in the Wollersheim opinion persuasive”:

Congress indeed had several opportunities to

give express authorization to private injunctive

actions but chose not to do so, apparently be-

cause it hesitated in the face of the ramifications

of that remedy.

Id. at 830. While the court acknowledged that RICO

should be “liberally construed to effectuate its remedial

purposes,” id. at 830, it concluded that “liberal construc-

tion” did not allow it to disregard convincing evidence that

Congress had not authorized private injunctive remedies.

In re Fredeman, 843 F.2d at 830."

In light of the strong and persuasive statements by

both the Ninth and Fifth Circuits, it is not surprising that

the majority of other federal courts of appeals have also

expressed substantial doubt that injunctive or other

equitable relief is available to private RICO plaintiffs.”

E.g., Switzer v. Coan, 261 F.3d 985, 992 n.14 (10th Cir.

2001) (“there is considerable doubt that equitable relief is

available to private RICO litigants under any circum-

stances”); Johnson v. Collins Entm’t Co., Inc., 199 F.3d

710, 726 (4th Cir. 1999) (noting “substantial doubt

whether RICO grants private parties ... a cause of action

for equitable relief” and “this doubt is especially acute in

‘* Subsequent to its In re Fredeman decision, the Fifth Circuit has

continued to (1) reiterate substantial doubt that injunctive relief is

authorized under RICO for private plaintiffs, and (2) emphasize

agreement with the Ninth Circuit’s holding in Wollersheim. See Bolin v.

Sears, Roebuck & Co., 231 F.3d 970, 977 n.42 (5th Cir. 2000); Price v.

Pinnacle Brands, Inc., 138 F.3d 602, 605 n.5 (5th Cir. 1998); Conkling v.

Turner, 18 F.3d 1285, 1296-97 nn.7 & 8 (5th Cir. 1994).

’ Most courts have found it unnecessary to decide the issue

directly because a civil RICO plaintiff normally has pendent state law

claims that will support an award of injunctive relief and obviate the

need to decide the RICO issue.

ORAL Re ew

Bea tee ee a

light of the fact that Congress has declined to authorize

injunctive remedies for private parties”); Lincoln House,

Inc. v. Dupre, 903 F.2d 845, 848 (1st Cir. 1990) (“it is not

clear whether injunctive or other equitable relief is avail-

able at all in private civil RICO actions”); Trane Co. uv.

O’Connor Sec., 718 F.2d 26, 28 (2d Cir. 1983) (expressing

“serious doubt” about “the propriety of private party

injunctive relief” under RICO).

In contrast, the Seventh Circuit in NOW is the only

federal court of appeals that has allowed injunctive relief

to a private litigant under RICO.

D. Petitioner Sued for Damages and Not for

Equitable Relief

Finally, while Petitioner hypothesizes that he could

sue for equitable disgorgement, in fact he did not. In

Petitioner’s Second Amended Complaint, Petitioner

repeatedly emphasized that the relief he sought on behalf

of the class was damages. (Shell App. 35-80, J 32(d), 34-

36, 50, 73, 79, 86, 92, 141, 151, 160, 161(1)). His only

request for equitable relief was for an injunction to bar the

use of the Cox and Spencer judgments to preclude the class

“from asserting their rights to recover damages.” (Shell

App. 74, § 129 (emphasis added)). Moreover, contrary to

Petitioner’s representation (Pet. 20), the class Petitioner

sought to certify was a damages class. (3 R. 795-806).

In short, Petitioner’s argument for equitable dis-

gorgement was purely hypothetical — conjured up only as a

last-ditch effort to try and avoid having to show the direct

reliance necessary to establish RICO damages under

Summit.”

CONCLUSION

The petition for writ of certiorari should be denied.

The judgment of the Fifth Circuit was surely correct. The

district court properly dismissed Richard’s due process

attack on the Cox and Spencer judgments for lack of

subject matter jmiisciction under the Rooker-Feldman

doctrine. In addivivn, the district court properly dismissed

Richard’s RICO claim for faiiure to state a claim.

Respectfully submitted,

DAVID T. HARVIN

Coussel of Record

ERICA L. KRENNERICH

VINSON & ELKINS L.L.P.

2300 First City Tower

1001 Fannin Street

Houston, Texas 77002

(713) 758-2368

* Petitioner argues that he “should have been allowed to amend

[his] complainv.” (Pet. 23). However, Petitioner never sought leave of

the district court eo amend his complaint. It is well established that a

party does not preserve error by merely alleging he should have been

given an opportunity to amend his complaint or that he stood ready to

amend his complaint. Great Plains Trust Co. v. Morgan Stanley Dean

Witter & Co., 313 F.3d 305, 330 (5th Cir. 2002); United States v. Totten,

286 F.3d 542, 552 (D.C. Cir. 2002) (plaintiffs whose complaint was

dismissed for lack of subject matter jurisdiction waived right to amend

by failing to make a motion either before or after the district court

granted their opponent’s dismissal motion). Instead, a party must move

to amend his complaint and claim as error on appeal the district court’s

failure to allow him to amend. See id. Petitioner did neither. Accord-

ingly, he has waived the alleged error.

APPENDIX

Shell App. 1

IN THE CHANCERY COURT

FOR OBION COUNTY, TENNESSEE

AT UNION CITY, TENNESSEE

TINA COX, CHARLES HOMER ) Civil Action No. 18,844

CLOAR, MARY H. CLOAR, )

MELODY ALFORD, COUNTRY ) CLASS ACTION

VILLAGE MOBILE HOME )

PARK, and PHYLLIS BIR- ) OBION COUNTY

MING" AM, individually and on )

behalf of al! other individuals )

and entities similarly situated,

Plaintiffs,

Vv.

)

SHELL OIL COMPANY, d/b/a?

SHELL CHEMICAL COMPANY, )

and HOECHST CELANESE _ ?

CORPORATION, ;

)

Defendants.

FINAL ORDER APPROVING THE CLASS

ACTION SETTLEMENT, ATTORNEYS’ FEES

AND EXPENSES, AND AWARDS TO

REPRESENTATIVE PLAINTIFFS

(Filed Nov. 17, 1995)

This matter is before the Court on motion by the

parties’ for final approval of their proposed settlement

" The parties are the named individual and representative Cox

plaintiffs, on behalf of the certified Settlement Class, and defendants

(Continued on following page)

Shell App. 2

(the “Settlement”) as set forth in the Settlement Agree-

ment filed July 31, 1995, as amended by an Amendment

dated October 6, 1995, a Second Amendment dated

October 24, 1995, and a Third Amendment dated No-

vember 9, 1995 (the “Agreement”). Also before the Court

is the Application of Class Counsel for Award of Attor-

neys’ Fees and Expenses, and Awards to the Represen-

tative Plaintiffs (the “Application”). A duly noticed

hearing on the motion and Application was held on

November 8 and 9, 1995, (the “Fairness Hearing”)

pursuant to the Court’s Order of July 31, 1995, granting

preliminary approval of the Settlement and the August

7, 1995, order conforming the class definition (collec-

tively the “Preliminary Approval Order”), under proce-

dures set forth in the August 24, 1995, Order Approving

Forms of Notice, Scheduling Fairness Hearing and

Setting Opt-out and Objection Dates.

Notice of the Fairness Hearing was given to poten-

tial class members nationwide in accordance with the

Preliminary Approval Order and the Court approved

notice program. Voluminous pleadings and briefs were

submitted by the settling parties in support of the

Settlement and in response to all objections and motions

filed regarding the Settlement, including the various

objections and related papers filed by objector Tony

Martin, et al., and affiliated objectors through their

attorneys (the “Martin Objectors”). The parties, numerous

interested members of the Settlement Class, and others

appeared at the Fairness Hearing, either individually or

by their respective attorneys. The Court heard and

Shell Oil Company d/b/a Shell Chemical Company and Hoechst

Celanese Corporation.

LA PPA I SER AS A CE Att

Shell App. 3

considered evidence in support of the proposed Settle-

ment. This evidence included live testimony, effidavits,

documentary and video presentations, as well as oral

representations by various attorneys. The attorneys for

the parties and others were heard. An opportunity to be

heard was given to all other persons requesting to be

heard in accordance with the Preliminary Approval

Order. This included a significant number of members of

the Settlement Class who, in some instances, had

traveled great distances from other states to appear and

participate in the Fairness Hearing, who were invited to

and did make statements and ask questions regarding

the terms of the Settlement and the relief it provides.

As more fully set forth below, the Court has deter-

mined that the notice given to members of the Settle-

raent Class certified in the Preliminary Approval Order

fully and accurately informed the Settlement Class

members of all material elements of the proposed Set-

tlement; was the best notice practicable under the

circumstances; was valid, due, and sufficient notice to

all Settlement Class members; and complied fully with

Rule 23 of the Tennessee Rules of Civil Procedure, the

United States Constitution, and any other applicable

law.

OPINION

The Court has greatly benefited from the fine briefs

and oral arguments of the attorneys in this case, all of

whom are worthy adversaries, and appreciates the

manner in which they have conducted themselves in this

most difficult, complex, and hotly contested litigation.

Great credit must be given to Judge Richard Silver of

Shell App. 4

Monterey County, California for his initiative to coordi-

nate a settlement conference with the Cox and Spencer’

parties. The revised Cox Settlement is due, in no small

part, to his efforts. The Court also commends Judge

Hardaway of Greene County, Alabama, for his willing-

ness to join in this unprecedented effort by three state

courts to coordinate and settle competing national class

actions. As to the settling parties, the plaintiffs, the

plaintiff class, Shell Oil Co., and Hoechst Celanese

Corp., the Court acknowledges that if it were not for

your recognition of this opportunity to reach a global

settlement of these issues, all of these efforts would

have been in vain. You have put aside your armor and

your hardened positions from years of battle and have

finally made peace.

Compromises are favored in the law. Neither this

Court, nor any court, has the resources to fully litigate

all issues, nor is it always fair to the parties to do so.

The time, cost, and lack of finality of protracted litiga-

tion require certain matters to be settled. The polybuty-

lene plumbing litigation’s time has come. Closure is not

only appropriate, but timely. The parties to this and to

the many other individual and- group cases that have

comprised the polybutylene plumbing litigation have

fought long and hard with varying degrees of success

and defeat; however, the affected party, the consumer,

has seen very little benefit from these efforts. The Cox

settlement agreement is a compromise. In every com-

promise, each side must abandon or set aside its ideal

? Spencer, et al. v. Shell Oil, et al., Case No. CV 94-074, Circuit

Court of Greene County Alabama, Honorable Eddie Hardaway, Jr.,

presiding.

Shell App. 5

position and reach an agreement that is fair and rea-

sonable to all concerned under the circumstances, and

not insist on terms only beneficial to one party. The Cox

settlement is not perfect. I would have preferred that

the Agreement include no leak requirements and a

larger claims “window” for class members. The Court

has some concern the $75 million cap on past damages

may not adequately pay all past damages in full; how-

ever, these concerns must be weighed in light of the

numerous unique advantages to the consumer that the

Cox settlement does provide.

The Court finds the Settlement is fair, adequate and

reasonable. The $950 million dollars is a minimum

contribution of the defendants to those who are affected

by polybutylene plumbing. When the court initially gave

preliminary approval to the proposed Settlement, this

factor was the leading factor in granting that approval.

As counsel for the parties have confirmed at various

times in open court as the hearings have progressed in

this matter, the initial funding commitment (now

increased to $950 million) may ultimately be more if

funds are expended and provided by the defendants and

if other responsible parties contribute to the fund in the

future. Due to the uncertainty of the size of the class

and how many claims will ultimately be filed, this Court

would not have approved a “limited fund” which pro-

vided less than full relief while demanding full release.

If the worst case does present itself, that is, if the class

is as large as six million people, all claims are pre-

sented, and the fund is totally expended; the only

prejudice to the consumer will be the delay caused by

the filing of claims and payment of funds. The Agree-

ment tolls statutes of limitations for class members. The

Shell App. 6

Agreement provides that any consumers not fully

reimbursed or compensated under the terms of the

Agreement would be able to pursue all legal and equita-

ble claims and remedies (including punitive damages)

individually and as a class.

The Court finds the notice program is excellent. As

specified in the findings below, the evidence supports

the conclusion that the notice program is one of the most

comprehensive class notice campaigns ever undertaken.

The Court is satisfied that all reasonable efforts have

been made to reach affected consumers.

The Court must also consider the complexity, the

expense, and the likely duration of these proceedings if

settlement were not reached and approved. The Court

must weigh the benefits of settlement against the likely

outcome of litigation. As the Court has already stated,

much has been spent and much has been done over the

past years in group and individual polybutylene pipe

litigation across the country, but not much has been

accomplished for the benefit of the consumer. The claims

in Cox and Spencer each have their own legal problems,

which, if fully litigated, would delay the ultimate resolu-

tion of these cases for many years to come. If litigated,

complex legal issues would be presented, such as stat-

utes of limitations and repose, choice of appropriate

state laws, liability, and measure of damages. All of

these issues, if litigated and appealed, could clog the

courts across the country for years to come. There is a

question as to whether some state courts would give full

faith and credit to another state court’s determination of

these issues.

Shell App. 7

It is an important aspect of the Settlement that the

plaintiffs’ attorney’s fees and costs are paid by the

defendants in addition to the settlement fund, and are

not deducted from the settlement fund. In the absence of

a comprehensive Class Settlement now, as presented

here in Cox, after the resolution of the contentious

issues described above, any ultimate recovery available

for consumers would be reduced by attorney’s fees.

These normally range from a third to forty percent.

None of this delay, risk, mounting transaction costs and

reduction of recovery by individual fees would be in the

long-term interest of the consumer. In Cox, the attor-

ney’s fees requested are much less; approximately five

percent of the settlement fund; moreover, unlike a

typical contingent fee, they are not paid from the fund.

The request for fees in the case is approved. The Court

finds that they are reasonable under the circumstances,

and the Court is pleased to approve them.

The Court is pleased with the reaction of the class

members to the proposed Settlement. The Court is

-greatly comforted by the small number of individual opt-

outs, the removal of objections by Spencer class counsel

and by Tony Martin, who is represented by the Fleming

group, and the support expressed by the consumers who

testified at the Fairness Hearing. The Court finds that

the Consumer Plumbing Recovery Center (“CPRC”)

claims facility procedures which have been outlined to

the Court and which are provided for in the Agreement,

appear to constitute a simple, consumer-friendly and

efficient method of adjusting the claims in this case.

The discussions and negotiations that ultimately

lead to the settlement presented for Court approval were,

from all reports and from the Court’s own observation,

Shell App. 8

intensive, exhaustive, and often heated. The Court finds

the Agreement is the result of good faith, arms-length,

and non-collusive negotiations. The Agreement is fair,

adequate, and reasonable under the circumstances, and

it is approved.

ADDITIONAL FINDINGS AND CONCLUSIONS

The entire matter of the proposed Settlement and

the Application having been fully heard and duly con-

sidered by the Court, the Court further FINDS and

CONCLUDES, in addition to the i:ndings and conclu-

sions in the foregoing Opinion, as follows:

1. The polybutylene plumbing litigation has been

pending, in various forms and in various courts around

the country, for more than a decade. It has included

individual cases, cases with large numbers of individual

plaintiffs, and putative nationwide or statewide class

actions brought in federal court and in many state

courts.

2. The first nationwide polybutylene plumbing

class action was filed in September 1993 by lawyers who

are now members of the team of Cox Class Counsel. The

action, Robert Beeman, et al. v. Shell Oil Company, et

al., No. 93-047363, was filed in a state district court in

Harris County, Texas.

3. Over the course of many months of intensive

negotiations, involving a neutral mediator at many

critical junctures, a tentative settlement of the Beeman

case was achieved in October 1994. In February 1995,

however, the Texas state court denied preliminary

approval of that settlement without comment.

Shell App. 9

4. After the Court in this case certified the na-

tionwide class on June 13, 1995, Cox Class Counsel

joined with the plaintiffs’ attorneys in the Beeman

action to prosecute this case for the benefit of mobile

and site-built homes with polybutylene plumbing across

the country.

5. Collectively, this combined team of Class Coun-

sel included highly qualified and well-regarded lawyers

with extensive class action and complex litigation

experience, as well as lawyers with vast experience in

polybutylene plumbing litigation.

6. Class Counsel then were able to negotiate a

settlement generally patterned after that originally

arrived in Beeman, although the minimum funding

commitment was $100 million greater, other features

were added, and only two of the three Beeman defen-

dants, Shell and Celanese, were involved.

7. Because of the pendency of a nationwide class

action in Greene County, Alabama, and of other polybu-

tylene actions around the country, with many brought

as class actions, including an uncertified case for a

putative statewide mobile homeowner class in the

Superior Court of Monterey County, California,’ Judge

Hardaway and this Court agreed that Judge Silver in

Monterey would further the cause of final resolution of

polybutylene plumbing litigation if he was appointed to

serve as a settlement judge for all three courts.

* Meers, et al vs. Shell Oil, et al, Case No. M 30590, Superior Court

of the State of California, County of Monterey, Honorable Richard M.

Silver, presiding.

Shell App. 10

8. Judge Silver issued an October.12, 1995 Order

Setting Settlement Conference with the endorsement of

this Court and Judge Hardaway, to convene the coordi-

nated settlement process. Other state courts with

proposed class actions were asked, by the parties and/or

by Judge Silver, to dismiss or stay their proceedings in

deference to the coordinated settlement effort in order to

give it an opportunity to succeed, undistracted by

collateral litigation.

9. Accordingly, from October 23, 1995, through

November 7, 1995, the day before the rairness Hearing

in this Court, intensive and continuous global settle-

ment negotiations were conducted among Cox Class

Counsel, the Spencer counsel, and defendants’ counsel

and representatives through the mediation and supervi-

sion of Judge Silver.

10. As a result of these concentrated efforts, a

comprehensive settlement was reached, resulting in

significant enhancements to the Settlement as it was

originally presented to the Court and preliminarily

approved on July 31, 1995.

11. The resulting Settlement, documented and as

presented for final approval at the Fairness Hearing,

provides consumers with a recovery program consisting

of reimbursement of otherwise unreimbursed expenses

for repairs to and replacement of leaking polybutylene

plumbing systems and property damage caused by such

leaks, as well as an extensive program for replacement

of such leaking plumbing systems.

12. Some of the features of this Settlement are

these:

Shell App. 11

a. Free replacement of polybutylene plumbing

systems installed since January 1, 1978, if two or more

qualifying leaks occurred before August 21, 1995, or if

only one such leak occurs either in the two years follow-

ing that date or during a period (of from 10 to 16 years,

depending on the type of structure) following installa-

tion of the system;

b. Reimbursement of the unreimbursed ex-

penses of plumbing repairs, replacements, and property

damage from January 1, 1978, to August 21, 1995, up to

$75 million will be distributed, pro rata if necessary, for

these expenses; and property damage after August 21,

1995, at 100 cents on the dollar;

c. An unlimited funding potential, with the

defendants committed to to [sic] initially provide up to

$950 million for the relief: if additional funds are re-

quired, the defendants will either provide them, or

litigation will be resumed with all applicable statutes of

limitations and repose tolled in the interim;

d. Provision for additional relief to eligible

members of the Settlement Class who experience special

needs in connection with qualifying leaks;

e. A comprehensive notice program, including

notice every three years through the life of the program,

which ends in 2009; and

f. The payment of class counsel’s attorneys’

fees and expenses in addition to the $950 million re-

served for relief for the Settlement Class.

13. The Court is not aware of any other class

action settlement with successive notice as provided in

the Cox Settlement.

Shell App. 12

14. In reaching this Settlement, the defendants

have foregone very significant defenses and issues which

could have precluded or limited liability as to some or

many class members’ claims. These include the statutes

of limitations and repose, selection of the appropriate

states’ laws applicable to various issues, the “economic

loss” limitation on recoveries of the type sought here,

the lack of privity between the members of the Settle-

ment Class and the defendants, the fact that many of

the members of the Settlement Class purchased their

structures “as is,” and, of course, the risk that plaintiffs

would not be successful in proving their allegations. In

agreeing to this Settlement, the defendants have dis-

played commendable corporate responsibility, respon-

siveness, and good will toward consumers.

15. The Court appointed Rust Consulting, Inc. and

Kinsella Communications Ltd. as class notice providers

in this case. Richard Redfern, president of Rust Consult-

ing, and Katherine Kinsella, president of the communi-

cations firm bearing her name, testified at the Fairness

Hearing. The Court also considered Ms. Kinsella’s

affidavit and the affidavit of Jeffrey Dahl, Executive

Vice President of Rust Consulting, in connection with

their activities as notice providers.

16. Cox Class Counsel and the notice providers

worked with Todd B. Hilsee, an experienced class action

notice consultant, to design a class ncetice program of

unprecedented reach, scope, and effectiveness. Mr.

Hilsee was accepted by the Court as a qualified class

notice expert at an earlier hearing to approve the com-

mencement of the notice program. He testified at the

Fairness Hearing, and his affidavit was also considered

Shell App. 13

by the Court, as to the operation and outcome of this

program.

17. The above-mentioned individuals provided

documents, information, and affidavits at the outset of

the notice period that assisted the parties in designing,

and the court preliminarily approving for implementa-

tion, a singularly comprehensive and creative notice

program.

18. Beginning in August, 1995, and extending into

October, 1995, an extensive notice effort was under-

taken in this case to implement the Court approved

notice program specified in the Preliminary Approval

Order.

19. Since not all Settlement Class members were

known or readily identifiable, the notice program im-

plemented in this case combined multimedia publication

(newspapers, magazines, radio and television), individ-

ual mailed notice, ongoing press and media outreach,

and a toll-free telephone information service. The

purpose of the program was to make potential Settle-

ment Class members aware of the Action and the Set-

tlement, and to encourage them to identify themselves

to the notice providers, as they could receive further

written notices and information, and be placed on the

notice providers’ Settlement Class member database.

20. Commencing on or before August 21, 1995,

which is the Initial Notice Date as specified in the

Agreement, more than 5.6 million copies of the Court

approved Notice of Class Action and Proposed Settle-

ment were mailed, by first class mail or overnight

service, to Settlement Class members in accordance

with the Preliminary Approval Order.

Shell App. 14

21. During September, 1995, the Court approved

summary notice was published in Parade Magazine,

USA Weekend, People Magazine, and TV Guide in

accordance with the Preliminary Approval Order. The

combined circulation of these consumer publications and

national magazines is over 73 million. During August

and September, 1995, Court approved notice appeared

twice in Friday editions of USA Today, with combined

circulation of over 4.7 million.

22. Also during September, 1995, the Court ap-

proved summary notice appeered in 201 daily and

weekly newspapers in 13 targeted states (Alabama,

Arizona, California, Colorado, Florida, Georgia, Louisi-

ana, Maryland, Nevada, North Carolina, South Caro-

lina, Texas, and Virginia) and the District cf Columbia.

The combined circulation of these newspapers exceeds

23.6 million. In addition, the notice appeared in Spanish

in 38 Hispanic newspapers, with a combined circulation

over 3 million, in 29 media markets during September,

1995. Moreover, the notice appeared in 247 daily,

weekly, bi-monthly, and monthly African-American

newspapers with a combined circulation of nearly 6

million.

23. Notices were also published in the October,

1995, editions of various trade publications, comprising

a total circulation of 244,000.

24. A 30-second spot television notice was pro-

duced and appeared 213 times from August 21, 1995,

through September 3, 1995, on national and cable

television, including on such networks as ABC, NBC,

CBS, TNN, CNN, and TNT. During the same period, a

30-second Spanish language television notice appeared

Shell App. 15

18 times on the Univision arin, a popular Spanish

language network.

25. A press release, a media advisory, a public

service announcement, a video news release, a radio

news release, and a press kit were all prepared and

disseminated as part of the notice program in this case.

The press release went to 2,000 newspapers, wire

services, magazines, and broadcast points across the

United States through PR Newswire. The press release

and media advisory were also disseminated to 469

media outlets, specifically targeting consumer reporters

and media in the top 250 media markets and 84 local

daily newspapers in the 13 targeted states and the

District of Columbia. 142 outlets, with a combined

circulation of more than 14.5 million, have confirmed

using the press materials tc publish articles. It is esti-

mated that the public service announcement was broad-

cast by radio stations yielding nearly 2.9 million gross

impressions; an additional 5.5 million impressions are

estimated from the broad¢ast of the radio news release.

The video news release was used by at least 21 outlets

with combined viewership of more t} n 1.7 million.

Finally, a two-column article was provided to 10,000

daily and weekly newspapers.

26. Court approved notice forms were dissemi-

nated through various online computer services, includ-

ing CompuServe, Prodigy, and America Online, and with

Legal Link on the Internet.

27. The various forms of published notice provided

recipients with a toll free “800” telephone number to

which potential Settlement Class members could call to

obtain further information and to request the full notice

Shell App. 16

packet to be mailed to them. The telephone message was

updated as the notice program progressed, and com-

monly raised questions were answered by live operators,

in English or Spanish as required by the caller. The

parties prepared and updated scripts and information by

which the operators were able to provide the general

information commonly requested by callers.

28. The toll-free telephone facility established for

notice purposes in this case received more than one

million telephone calls in response to the published

notice program.

29. Over 195,000 requests for a claim form have

been received by the notice providers.

30. Mr. Hilsee demonstrated, by affidavit and in

live testimony at the Fairness Hearing, a number of

significant facts regarding the reach and effectiveness of

the notice. The national media campaign reached an

extraordinarily high percentage of United States adults

aged 35 years and over: approximately 114 million

individuals, or 92.11% of this population. Each of these

adults was exposed to the national media notice an

average of 4.01 times. The national media campaign also

reached approximately 151 million persons in the

United States aged 25 years and over, representing

90.88% of this population. Each of the individuals in

this larger, secondary target group was reached an

average of 3.76 times by the national media notice, a

frequency that also exceed [sic] the primary target reach

in other class actions. These are higher reach and

frequency statistics than have been found adequate by

courts in other class actions. These data do not include

the reach of the notice campaign through means other

Shell App. 17

than the national paid notice campaign, such as the

television and print notices targeted to Hispanic and

African-American media, the local newspaper notices,

the non-paid media and direct mail notices to millions of

Settlement Class members.

31. Multifaceted notice programs like that imple-

mented in this case have been approved by other courts

and utilized successfully for similar purposes in large

consumer or product class acticas such as this one,

where most class members are not individually identi-

fied at the outset. See, e.g., In re Domestic Air Transpor-

tation Antitrust Litigation, 141 F.R.D. 534 (E.D. Pa.

1992); 148 F.R.D. 297 (E.D. Pa. 1992); In re Silicone Gel

Breast Implant Products Liability Litigation, MDL 926

(N.D. Ala. 1994); Roberts v. Bausch & Lomb, Inc., 94-C-

1144-W (N.D. Ala. 1995).

32. As other courts have done with respect to the

less comprehensive notice programs they approved, this

Court finds that the notice program described above, as

designed and implemented, met and exceeded the

requirements of the United States Supreme Court,

Tennessee’s Rule 23, due process and the Constitution,

as construed in Phillips Petroleum Co. v. Shutts, 472

U.S. 797 (1985) and its progeny.

33. Thus, the best notice practicable under the

circumstances has been provided to members of the

Settlement Class. That notice accurately and adequately

advised them of this action; the proposed Settlement

and its terms, features, and benefits; their rights and

options; and the applicable procedures and deadlines for

exercising them.

Shell App. 18

34. A full opportunity has been provided to the

members of the Settlement Class to participate in the

Fairness Hearing, both orally and by way of written

submission to the Court.

35. The Court previously found the requirements

of Rule 23 of the Tennessee Rules of Civil Procedure

were met and certified a nationwide class for litigation

and trial purposes in the Order of National Class Certi-

fication. While such certification was and is contested by

the defendants, they have agreed to class certification

for settlement purposes, to promote a comprehensive,

classwide resolution of polybutylene pipe litigation.

36. The numerosity, typicality, commonality, and

adequacy requirements of Rule 23.01 of the Tennessee

Rules of Civil Procedure are satisfied as to the Settle-

ment Class in connection with the Settlement in this

case.

37. In accordance with Rule 23.02(3), common

issues of fact and law predominate and make certifica-

tion of the Settlement Class for settlement purposes

efficient and appropriate. The members of the Settle-

ment Class have been afforded the right and opportu-

nity to exclude themselves from the Settlement Class.

38. The settlement encompassed within the

Agreement is in ali respects fair, reasonable, and ade-

quate and in the best interests of the Settlement Class.

39. The Court-approved notice program provided

clear and simple procedures and instructions for the

submission of objections by or on behalf of Settlement

Class members. For example, paragraph 10 of the

Court-approved Notice of Class Action and Proposed

Shell App. 19

Settlement required objections to be submitted, in

writing, postmarked not later than October 20, 1995,

and further stated, “if you do not comply with the

procedure and the deadline stated herein, you may not

be entitled to be heard at the Fairness Hearing or to

otherwise contest the approval of the Settlement, or to

appeal from any orders or judgments of the Court

entered thereon.” All objections, however styled, that

failed to comply with the procedures and deadlines set

forth in the notice program, are hereby found to be

procedurally deficient and are disqualified in accordance

with the foregoing statement.

40. The Court has also reviewed the Principles of

Agreement dated November 7, 1995, executed by the

parties, including the terms applicable to U.S. Brass

Corp., Eljer Manufacturing, Inc., and Eljer Industries,

Inc. The terms of the Principles of Agreement appear to

be reasonable and in accordance with the efforts being

made to seek a global resolution of all litigation pertain-

ing to the issues among the parties. The prior Cox

settlement was unclear as to the effect of funds received

from U.S. Brass Corp., Eljer Manufacturing, Inc., and

Eljer Industries, Inc. The revised settlement makes

clear that amounts received from U.S. Brass and/or

Eljers will add to the minimum fund of $950 million. If

that settlement is perfected and approved by the United

States Bankruptcy Court, the minimum fund would

substantially increase.

41. In independently determining to approve the

Settlement and the Application, the Court has consid-

ered the substance of all objections to the Settlement,

whether timely, qualified or not, including those by the

Shell App. 20

Martin Objectors and others that have since been

withdrawn or stricken.

42. Certain objectors have asserted that the

proposed Settlement must be reduced by a proposed

settlement of claims against du Pont in the Spencer case

pending in the Circuit Court of Greene County, Alabama,

which the objectors characterized as a $120 million set-

tlement.

43. The proposed du Pont settlement has not been

approved by the Spencer court, and this Court may not

speculate whether it will be approved by the Spencer

court.

44. The proposed du Pont settlement in Spencer

purports to entitle a claimant to a rebate of 8% of monies

the claimant pays for replumbing his or her structure.

45. The Settlement before this Court, in the mini-

mum amount of $950 million, provides for the assignment

of Settlement Class members’ claims against du Pont and

others to defendants Shell and Celanese.

46. Objectors are incorrect in asserting that the

“credit” arising from the assignment reduces the Defen-

dants’ contribution to the Settlement. The original Cox

settlement was $850 million to be paid by the Defendants.

The revised Cox settlement requires the Defendants to pay

a minimum of $950 million to consumers with assignment

of rights, against du Pont, regardless of whether du Pont

ultimately participates in the settlement. The revised Cox

settlement substantially increases benefits to consumers.

47. Contrary to objectors’ assertions, all interest

earned on funds held by the CPRC will be for the benefit of

Shell App. 21

the Settlement Class and will not be credited against the

Defendants’ obligations under the Agreement.

48. Because of the structure of the Settlement, the

Defendants’ obligation to fund the CPRC on an ongoing,

as-needed basis, and the Defendants’ obligation to pay

reimbursement for Past Expenses in a reasonable time

after the close of the one year claim filing period on Au-

gust 21, 1996, and any related opt out period that may be

necessary under § 4.5.1 of the Agreement, there is no

significant ability by the Defendants to delay payments

due under the Settlement.

49. Objectors are incorrect in asserting that, even

before the Defendants’ initial funding commitment was

increased from $850 million to $950 million, the “net

funding by Shell and Celanese under ... the agreement

[was] only $547 million.”

50. The notice provided to the Settlement Class was

neither misleading nor defective.

51. The defendants are each responsible for one-half

of the settlement obligations as specified in the Settlement

Agreement unless and until the respective liabilities are

established by arbitration under the Funding Agreement.

02. The Cox Class Counsel have undertaken a

reasonable risk that each of the defendant companies will

be solvent and capable of fulfilling its obligations under

this agreement.

53. Had the plaintiffs settled at separate times with

Shell and Celanese, it is highly unlikely that there would

ever have been joint and several liability between them.

Shell App. 22

54. The Settlement is more favorable to the Settle-

ment Class than litigation if it is assumed that one of the

defendants will, some years from now, become unable to

pay all claims, since the class will receive payment under

the Settlement promptly, thereby reducing the number of

claimants who would be subjected to proving claims in a

bankruptcy.

55. The Agreement provides broad ranging powers

for the enforcement of a defaulting defendant’s obligations,

including the full panoply of equitabie powers this Court

possesses.

56. The Agreement expressly provides that the

default of one defendant does not exonerate the other

defendant of its obligations under the Agreement.

57. Past expenses will be compensated after expira-

tion of one year from August 21, 1995, the Initial Notice

Date under the Agreement.

58. Claimants will not, contrary to an objection, be

required to wait 14 years to receive their entitled reim-

bursements or distributions under the Agreement.

59. The so-called exclusion of a “hot water heater

leak” — a leak occurring within six feet of piping measured

from the take-off at the unit’s hot water heater — does not

apply to any claim for reimbursement of repair costs and

property damage. Thus, the only exclusion is for eligibility

for a replumb, and even there, the exclusion applies only if

(1) it is the first leak in the unit and (2) it can be repaired

without cutting into the unit’s walls, ceilings, or floors.

60. Therefore, a replumb will be provided under the

Agreement even if the hot water heater leak is the first

leak, if to repair the leak would require cutting into the

Shell App. 23

walls, ceilings, or floors of the unit. Similarly, there will be

a replumb if the hot water heater leak is the second leak

in the system.

61. The claimant has the right to select the contrac-

tor to do the replumbing and property damage repair

work.

62. Nothing in the Agreement abrogates the war-

ranty of work done by the contractors and suppliers of pipe

and other components in the replumb.

63. The Agreement permits special relief involving

unusual hardship, so long as the CPRC Ombudsman and

President concur that such relief should be provided. This

provision allows the CPRC to provide relief from a breach

of warranty arising out of replumbing work, where the

warrantor fails to provide or cannot provide corrective

relief. CPRC § VI, E.

64. There is no factual basis for the asserted objec-

tion that there is any conflict of interest with respect to

the Cox Class Counsel.

65. The Cox Class Counsel maintained the highest

standards of professionalism and advocacy in protecting

and promoting the interests of the Class throughout the

prosecution and settlement of this case.

66. There is no factual basis for the asserted objec-

tion that settlements in individual cases are improperly

disparate from the Cox Settlement.

67. There is no need to provide additional notice to

the entire Settlement Class by reason of the revised terms

of the Settlement since the Court approved the notices

disseminated to the Settlement Class. All changes have

Shell! App. 24

been to improve the Settlement over that described in the

notices, and none of the changes has an adverse impact on

any Class member.

68. As class action jurisprudence has accumulated,

various federal and state courts, in Ternessee and else-

where, have articulated criteria and factors that courts

may consider in evaluating proposed settlements for final

approval. See, e.g., Third Natl Bank v. Scribner, 212 Tenn.

400, 410, 370 S.W.2d 482 (1963); Clark Equip. Co. v.

International Union, Allied Indus. Workers, 803 F.2d 878,

880 (6th Cir. 1986), cert. denied sub nom. Jones v. Clark

Equip. Co., 480 U.S. 934 (1987); Williams v. Vukovich, 720

F.2d 909, 922 (6th Cir. 1983); Bailey v. Great Lakes Can-

ning, Inc., 908 F.2d 38, 42 (6th Cir. 1990); In re Warner

Communications Sec. Litig., 618 F. Supp. 735 (S.D.N.Y.

1985) affd, 798 F.2d 35 (2d Cir. 1986); Girsh v. Jepson,

521 F.2d 153, 157 (3d Cir. 1975). This Court has been

guided, generally, by the procedures and criteria recom-

mended in the Manual for Complex Litigation, 3d ed.

(Federal Judicial Center 1995), §§ 30.4 et seq., since the

federal and Tennessee class action provisions and criteria

are consistent.

69. Factors that may be considered in assessing the

fairness, adequacy, and reasonableness of the proposed

settlement include: the plaintiffs’ likelihood of ultimate

success on the merits balanced against the amount and

fe - of relief offered in the settlement; the stage of the

proceedings at which the settlement is reached; the extent

of cumulative discovery or investigation; the nature of the

settlement negotiations; the costs, risks, and delays of

establishing liability and damages; the views of experi-

enced counsel; the reaction of the class members them-

selves; the comparison of the settlement’s benefits with

ae ae

Shell App. 25

other settlements or with the alternative of continuing

litigation; and whether approval of the settlement is in the

class members’ and the public interest. As the above

opinion and findings demonstrate, consideration of these

and other recognized factors, such as the participation and

recommendations of an experienced and able settlement

judge and the testing of the settlement’s merits in the

class of adversary proceedings, demonstrate the Settle-

‘ment’s entitlement to approval.

70. “xpert opinions have been submitted in support

of the proposed Settlement. (See Opinion of Professor

David Rosenberg, Affidavit of Professor Paul H. Rubin). In

approving the Settlement, the Court has considered these

opinions.

71. The Court will retain jurisdiction and address a

supplemental notice program, on a joint motion of the

settling parties, to advise all members of the Settlement

Class on whose behalf a purported or actual request for

exclusion was received of the enhanced Settlement, provid-

ing those individuals with a new opportunity to request

exclusion from the Settlement Class in light of the en-

hanced Settlement.

72. There is no just reason for delay in the entry of a

fina: judgment and decree by reason of such supplemental

notice and related proceedings or of the retention by the

Court of continuing jurisdiction to oversee the implemen-

tation and enforcement of the Agreement and Settlement.

73. The Application is fair and should be granted.

Based upon the foregoing, it is hereby ORDERED,

ADJUDGED, and DECREED:

Shell App. 26

1. The Court has jurisdiction over all claims asserted

in the Action on behalf of all Settlement Class members

and over all parties to the Action, including all members of

the Settlement Class.

2. The Settlement Class is defined as follows:

All persons and entities that (1) own real prop-

erty or structures in the United States in which

there was installed between January 1, 1978 and

July 31, 1995, polybutylene plumbing with acetal

insert or metal insert fittings or a polybutylene

yard service line; (2) own or previously owned

such real property or structures and have al-

ready incurred any cost or expense, by reason of

leakage from, or from failure, repair, or removal

of, all or any portion of such polybutylene plumb-

ing or yard service line which was installed be-

tween January 1. 1978 and July 31, 1995; or (3)

will own such real property or structures during

the term of entitlement to relief under the Set-

tlement Agreement.

The definition of the Settlement Class excludes:

(1) All persons who, in accordance with the terms

of the Settlement Agreement, execute a timely

request for exclusion from the Settlement Class;

(2) the Defendants; the Released Manufacturers;

the parent and any subsidiary, affiliate and con-

trolled entity of any of them; and the officers and

directors of each of them; and (3) all parties to

Geno Cioe, et al. v. Shell Oil Company, et al.,

Case No. 662214, and Robert L. Williams, et al. v.

Shell Oil Company, et al., Case No. 658403, and

related combined actions (Case Nos. 640245,

654709, 656787, 661372, 665521 and 665527) in

the Superior Court of the State of California in

Shell App. 27

and for the County of San Diego, and all mem-

bers of the certified classes in those lawsuits.

3. All members of the Settlement Class who have not

timely elected to be excluded from the Settlement Class

are members thereof and are bound by this Order and the

Final Judgment being entered herewith.

4. Pursuant to Rule 23.01, Rule 23.02, and Rule

23.03 of the Tennessee Rules of Civil Procedure, the Court

confirms the certification of the Settlement Class provided

in the Preliminary Approval Order and maintains such

certification for purposes of final approval of the settle-

ment.

5. The Class Representatives and Plaintiffs’ Class

Counsel designated in paragraph 8 of the Court-approved

Notice of Class Action and Proposed Settlement to repre-

sent the Settlement Class are hereby confirmed.

6. The Agreement and the Funding Agreement

entered into by the Defendants pursuant to the Agreement

are hereby made part of the record in this case and as such

sha!l have the full force and effect of an order of the Court.

7. Pursuant to Rule 23.05 of the Tennessee Rules of

Civil Procedure, the Court hereby grants final approval of

the Agreement and the Settlement set forth in the Agree-

ment and finds that it is fair, adequate, and reasonable to

the members of the Settlement Class.

8. The objections that were filed, whether timely or

not, have been considered and are all overruled.

9. Accordingly, the Court directs that the Settlement

be consummated in accordance with the terms and condi- -

tions of the Agreement.

Shell App. 28

10. Plaintiffs and all members of the Settlement

Class are barred and permanently enjoined from prosecut-

ing (in any forum) against Shell Oil Company and/or

Hoechst Celanese Corporation any and all claims, de-

mands, causes of action of every kind and nature, obliga-

tions, damages, losses, and costs, whether known or

unknown, actual or potential, suspected or unsuspected,

contingent or fixed, either arising out of or relating to any

of the facts, transactions, actions, or conduct alleged in

this action, or that were or could have been asserted or

sought in the action, other than any past, present, or

future claim for bodily injury (including wrongful death)

and associated einotional distress anc mental anguish.

11. The Complaint as amended, and all claims and

causes of action asserted therein are dismissed with

prejudice and costs, as provided in the Agreement, to be

paid from the settlement fund.

12. The Application is hereby granted. In accordance

with the Funding Agreement referred to in the Agreement,

the defendants shall pay Plaintiffs’ Class Counsel, as

attorneys’ fees and expenses, the sum of $45 million plus

interest at the rate applicable to federal court judgments

entered on July 31, 1995, for the period from July 31,

1995, until the earlier of July 31, 1996, or when paid. In

addition, in accordance with Section 25.1 of the Agreement

and with the Funding Agreement referred to in the

Agreement, the defendants shall pay the sum of $3,000.00

to each single Representative Plaintiff or Representative

Plaintiff married couple.

13. In the event that the Settlement does not become

Final (as more fully defined in the Agreement) in accor-

dance with the terms of the Agreement, then this Order

Shell App. 29

and the Final Judgment and Decree being entered here-

with shall be rendered null and void and be vacated and

the Agreement shall be rendered null and void in accor-

dance with the provisions thereof.

14. Without affecting the finality of this Order or of

the Final Judgment being entered herewith, the Court

shall retain continuing jurisdiction over the Action and the

settling Parties (as more fully defined in the Agreement),

including all members of the Settlement Class; the ad-

ministration and enforcement of the Settlement; and the

benefits to the Settlement Class, including for such pur-

poses as supervising the implementation, enforcement,

construction, and interpretation of the Agreement.

15. Any disputes or controversies arising with

respect to the interpretation, enforcement, or implementa-

tion of the Agreement shall be presented by motion to the

Court.

16. Pursuant to Rule 54.02 of the Tennessee Rules of

Civil Procedure, the Court hereby directs the entry of this

judgment based upon the Court’s finding that there is no

just reason for delay notwithstanding the Court’s reten-

tion of jurisdiction to oversee implementation and en-

forcement of the Agreement and its continuing jurisdiction

to provide for supplemental notice (and related proceed-

ings) to potential members of the Settlement Class as to

whom the Court previously received requests for exclusion

from the Settlement Class.

/s/ W. Maloan

CHANCELLOR

ENTERED: November 17, 1995

Shell App. 30

IN THE CHANCERY COURT FOR OBION COUNTY,

TENNESSEE AT UNION CITY, TENNESSEE

TINA COX, CHARLES

HOMER CLOAR, MARY H.

CLOAR, MELODY ALFORD,

COUNTRY VILLAGE

MOBILE HOME PARK, and

PHYLLIS BIRMINGHAM,

individually and on behalf of

all other individuals and

entities similarly situated,

Plaintiffs,

Civil Action No. 18,844

CLASS ACTION

OBION COUNTY

Vv.

SHELL OIL COMPANY,

d/b/a SHELL CHEMICAL

COMPANY, and HOECHST

CELANESE CORPORATION,

)

Defendants.

FINAL JUDGMENT

(Filed Nov. 17, 1995)

This matter is before the Court on motion by the

parties for final approval of their proposed settlement as

set forth in the Settlement Agreement filed July 31, 1995,

as amended by an Amendment dated October 6, 1995, a

Second Amendment dated October 24, 1995, and a Third

Amendment dated November 9, 1995 (the “Agreement”).

Also before the Court is the Application of Class Counsel

for Award of Attorneys’ Fees and Expenses, and Awards to

the Representative Plaintiffs (the “Application”).

A hearing on the motion and Application was held on

November 8 and 9, 1995, pursuant to the Court’s Order of

Shell App. 31

July 31, 1995, granting preliminary approval of the

settlement and the August 7, 1995, order conforming the

class definition, under procedures set forth in the August

24, 1995, Order Approving Forms of Notice, Scheduling

Fairness Hearing and Setting Opt-outs and Objection

Dates.

This Final Judgment is entered pursuant to a Final

Order Approving the Class Action Settlement, Attorneys’

Fees and Expenses, and Awards to Representative Plain-

tiffs (the “Final Order”) which is entered together here-

with. The Court has determined that the Class Action

Settlement, as encompassed within the Agreement, should

be approved as fair, adequate, and reasonable to the

Settlement Class under Rule 23.05 of the Tennessee Rules

of Civil Procedure, and that the Application should be

granted.

The Court has further determined that there is no just

reason for delay in the catry of final judgment in accor-

dance with the Final Order pursuant to Rule 54.02 of the

Tennessee Rules of Civil Procedure.

Accordingly, it is ORDERED that judgment is hereby

entered in accordance with the Final Order.

It is further ORDERED that the Settlement Class is

defined as follows:

All persons and entities that (1) own real prop-

erty or structures in the United States in which

there was installed between J anuary 1, 1978 and

July 31, 1995, polybutylene plumbing with acetal

insert or metal insert fittings or a polybutylene

yard service line; (2) own or previously owned

such real property or structures and have al-

ready incurred any cost or expense, by reason of

Shell App. 32

lea_.age from, or from failure, repair, or removal

of, all or any portion of such polybutylene plumb-

ing or yard service line which was installed be-

tween January 1, 1978 and July 31, 1995; or (3)

will own such real property or structures during

the term of entitlement to relief under the Set-

tlement Agreement.

The definition of the Settlement Class excludes:

(1) All persons who, in accordance with the terms

of the Settlement Agreement, execute a timely

request for exclusion from the Settlement Class;

(2) the Defendants; the Released Manufacturers;

the parent and any subsidiary, affiliate and con-

trolled entity of any of them; and the officers and

directors of each of them; and (3) all parties to

Geno Cioe, et al. v. Shell Oil Company, et al.,

Case No. 662214, and Robert L. Williams, et al. v.

Shell Oil Company, et al., Case No. 658403, and

related combined actions (Case Nos. 640245,

654709, 656787, 661372, 665521 and 665527) in

the Superior Court of the State of California in

and for the County of San Diego, and all mem-

bers of the certified classes in those lawsuits.

It is further ORDERED that the Court directs that

the settlement be consummated in accordance with the

terms and conditions of the Agreement.

It is further ORDERED that the Amended Complaint

and all claims and causes of action asserted therein are

dismissed with prejudice with costs to be paid from the

settlement fund in accordance with the terms of the

Settlement Agreement.

It is further ORDERED that, in the event that the

settlement does not become final (as more fully defined in

Shell App. 33

the Agreement) in accordance with the terms of the

Agreement, then this Final J udgment and the Final Order

shall be rendered null and void and be vacated, and the

Agreement shall be rendered null and void in accordance

with the provisioz.: thereof.

It is further ORDERED that, without affecting the

finality of the Final Order and this Final Judgment, the

Court shall retain continuing jurisdiction over this action

and the settling Parties (as more fully defined in the

Agreement), including all members of the Settlement

Class; the administration and enforcement of the settle-

ment; and the benefits to the Settlement Class, including

for such purposes as supervising the implementation,

enforcement, construction, and interpretation of the

Settlement Agreement.

It is further ORDERED that, subject and pursuant to

the terms and conditions of the Agreement, Plaintiffs and

all members of the Settlement Class are barred and

permanently enjoined from prosecuting (in any forum)

against Shell Oil Company and/or Hoechst Celanese

Corporation any and all claims, demands, causes of action

of every kind and nature, obligations, damages, losses, and

costs, whether known or unknown, actual or potential,

Suspected or unsuspected, contingent or fixed, either

arising out of or relating to any of the facts, transactions,

actions, or conduct alleged in this action, or that were or

could have been asserted or sought in the action, other

than any past, present, or future claim for bodily injury

(including wrongful death) and associated emotional

distress and mental anguish.

It is further ORDERED that, in accordance with the

above-described Application and the Funding Agreement

Shell App. 34

: erred to in the Agreement, the defendants shall pay

Plaintilfs Class Counsel, as attorneys’ fees and expenses,

the sum of $45 million, plus interest at the rate applicable

to federal court judgments entered on July 31, 1995, for

the period from July 31, 1995, until the earlier of July 31,

1996, or when paid.

It is further ORDERED that, in accordance with

Section 25.1 of the Agreement and with the Funding

Agreement referred to in the Agreement, the defendants

shall pay the sum of $3,000.00 to each single Representa-

tive Plaintiff or Representative Plaintiff married couple.

It is further ORDERED, pursuant to Rule 54.02 of the

Tennessee Rules of Civil Procedure, that the Court hereby

DIRECTS the entry of this judgment as a final judgment

based upon the Court’s finding that there is no just reason

for delay, notwithstanding the Court’s retention of juris-

diction to oversee implementation and enforcement of the

Agreement as set forth above, and the Court’s continuing

jurisdiction to provide for supplemental notice (anu related

proceedings) to potential members of the Settlement Class

as to whom the Court previously received requests for

exclusion from the Settlement Class.

Dated at Union City, Tennessee, this 17 day of No-

vember, 1995.

/s/ W. Michael Maloan

W. MICHAEL MALOAN,

CHANCELLOR

Shell App. 35

IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF TEXAS

TEXARKANA DIVISION

RICHARD R. RICHARD, JR.,

on behalf of himself and

all others similarly situated,

Plaintiffs, CASE NO. 500 CV 008

VS.

HOECHST CELANESE

CHEMICAL GROUP, INC.;

SHELL OIL COMPANY D/B/A

SHELL CHEMICAL COMPANY;

HOECHST CELANESE

CORPORATION; and

E.I. DUPONT DE NEMOURS

& COMPANY,

Defendants.

PPMP LP LP LP LP LP LP LO Lr Lr LO Cr Lr Or

S D LAINT

Plaintiff Richard R. Richard, Jr., on behalf of himself

and all others similarly situated, submits this Second

Amended Complaint against Defendants Hoechst Cela-

nese Chemical Group, Inc., Shell Oil Company d/b/a Shell

Chemical Company, Hoechst Celanese Corporation and

E.I. DuPont de Nemours & Company (collectively “the

Polybutylene Group”):

INTRODUCTION

1. This class action lawsuit is brought to recover

damages for injury caused by the Polybutylene Group’s

Shell App. 36

manufacture, promotion and sale of polybutylene for use

in residential and commercial plumbing systems for

potable water. Not only was polybutylene unsuitable for

such use, but the Polybutylene Group knew their product

was defective for this purpose. Nevertheless, the Polybuty-

lene Group promulgated fraudulent misrepresentations in

order to continue to produce and sell polybutylene systems

without regard to the damage such systems would impose

on unknowing purchasers. Plaintiffs bring the First

through Fourth Causes of Action under the Racketeer

Influenced and Corrupt Organization (RICO) statute, 18

U.S.C. §§ 1961 et seq.. The Fifth Cause of Action arises

under Section 42(a) of the Lanham Act, 15 U.S.C. § 1125 to

recover damages arising from the Polybutylene Group’s

misrepresentations in commercial advertising and promo-

tion. The Sixth Cause of Action alleges violation of the Due

Process Clause of the U.S. Constitution. The Seventh

through Tenth Causes of Action sound respectively in

conspiracy, strict liability, negligence and breach of implied

warranties under Texas law.

JURISDICTION

2. The Court has subject matter jurisdiction pursu-

ant to 18 U.S.C. § 1964(c) (RICO); 28 U.S.C. Section 1338

(Trademark Jurisdiction) in that this action arises, in part,

under 15 U.S.C. § 1125(a) (Lanham Act); 28 U.S.C. § 1331

(Federal Question Jurisdiction) and 28 U.S.C. § 1367

(Supplemental Jurisdiction).

VENUE

3. Venue is proper in this district pursuant to 28

U.S.C. § 1391(b), because Plaintiff resides in this district

Shell App. 37

and a substantial portion of the events giving rise to the

claims set forth in this action took place herein.

THE PARTIES

4. Plaintiff Richard R. Richard, Jr., (Richard), is an

individual residing in the Eastern District of Texas who

owns structures equipped with polybutylene plumbing.

Richard has never participated in a polybutylene class

action lawsuit in a court with competent personal and

subject matter jurisdiction over him.

5. Defendant Hoechst Celanese Chemical Group,

Inc., now known as Celanese, Ltd., (Celanese) is a limited

partnership with its office in Dallas, Texas. At all material

times, Celanese was authorized to conduct and did conduct

business in Texas. Celanese’s registered agent in Texas is

CT Corporation System, 350 North St. Paul Street, Dallas,

Texas 75291.

6. Defendant Shell Oil Company d/b/a Shell Chemi-

cal Company (Shell) is a Delaware corporation. At all

material times, Shell was authorized to conduct and did

conduct business in Texas. Shell’s registered agent in

Texas is CT Corporation System, 350 North St. Paul

Street, Dallas, Texas 75201.

7. Defendant Hoechst Celanese Corporation, now

known as HNA Holdings, Inc. (HNA) is a Delaware corpo-

ration. At all material times, HNA was authorized to

conduct and did conduct business in Texas. HNA’s regis-

tered agent in Texas is CT Corporation System, 811 Dallas

Avenue, Houston, Texas 77002.

8. Defendant E.I. DuPont de Nemours & Company

(DuPont) is a Delaware corporation. At all material times,

Shell App. 38

DuPont was authorized to conduct and did conduct busi-

ness in Texas. DuPont does not maintain a registered

agent or office for service of process in Texas and may be

served through the Secretary of State, Statutory Docu-

ments Section, P.O. Box 12887, Austin, Texas 78711.

FACTS APPLICABLE TO ALL COUNTS

9. Polybutylene resin (polybutylene) is a type of

plastic that is produced as a by-product of oil refining. In

the late 1970’s, Shell developed flexible pipes made of

polybutylene which were promoted and marketed for

residential and commercial potable water plumbing

systems.

10. Joint fittings for polybutylene plumbing systems

were made from resins developed by Celanese and DuPont.

The resin developed by Celanese was marketed under the

name “Celcon.” DuPont’s resin was sold as “Delrin.”

11. The Polybutylene Group produced the materials

used in the pipes, joints, fittings and resins that comprised

polybutylene plumbing systems. In some instances, the

Polybutylene Group promoted and/or marketed the com-

ponents or systems themselves.

12. Polybutylene systems were sold to the mobile

home industry, recreational vehicle industry, residential

developers, plumbing contractors and individuals. Promot-

ers of polybutylene systems claimed their product was

superior to existing plumbing systems because it was

lightweight, inexpensive, better able to withstand freezing

temperatures, easier to install and purportedly would last

fifty years.

Shell App. 39

13. However, despite such representations, hundreds

of thousands of polybutylene systems developed leaks

when, inter alia, they were exposed to chlorinated water

such as most municipalities use.

14. In 1988, the plastic plumbing industry estimated

that six million polybutylene systems had been installed in

the United States. Such systems continued to be sold until

approximately 1996.

15. By the early 1980s, the Polybutylene Group

knew the polybutylene systems were failing and would

continue to fail. Nevertheless, the Polybutylene Group

continued to promote and sell its defective products.

PREVIOUS POLYBUTYLENE LITIGATION

16. Not surprisingly, the defective polybutylene

systems spawned considerable litigation. Defendants

fought class certification in polybutylene class action

litigation for over a decade.

17. Then, in 1994, a sweetheart class action settle-

ment was reached [in] a Texas state court action, Beeman

v. Shell Oil, No. 93-47363, D.Ct., 16th Cir., Harris County,

TX. The proposed settlement would have amply compen-

sated plaintiffs’ attorneys but sharply limited defendants’

damages to a token amount for each unit of repair fund-

ing. When the state court rejected the settlement, the

parties tried unsuccessfully to remove the case to Texas

federal court.

18. While this wes happening, another class action,

Spenser v. Shell Oil, No. CV94-074, Greene Cty., (Ala. Cir.

Ct.) was filed in Alabama. Several months later, the

Spenser plaintiffs moved for class certification and approval

Shell App. 40

of a partial settlement with DuPont. Their motion was set

for hearing on June 28, 1995.

19. On June 13, 1995, the Beeman counsel went to

rural Tennessee and filed a new state court class action

against the Beeman defendants. The new case was styled

Cox v. Shell Oil, No. 18,844 (Tenn. Chanc. Ct., Obion Cty.).

The same day Cox was filed, the Tennessee court certified

Cox as a national polybutylene class action, ex parte, with

Defendants’ acquiescence. No hearing on class certification

was ever conducted by the Tennessee chancery court.

20. As competing national class actions, Spenser and

Cox engaged in an opt-out war and race to the courthouse.

Spenser was set for trial on November 27, 1995.

21. In July 1995, a mere forty-five days after Cox

was filed, the parties formalized an amicable settlement.

22. After reaching accord, the Cox litigants hurried

preliminary court approval of the settlement, notice

program, opt-out period and fairness hearing.

23. Only weeks before the fairness hearing, the Cox

settlement was jeopardized by several hundred thousand

opt-outs.

24. Just before the fairness hearing, the competing

Spenser and Cox class actions met for mediation in Cali-

fornia and reached a putative joint national settlement.

25. At about the same time, the Defendants settled

the opt-out individual claims for amounts that did not

reflect the amounts agreed to in the proposed settlement.

Shell App. 41

CLASS ALLEGATIONS

26. Plaintiff brings this action on behalf of himself as

well as a class of similarly situated persons pursuant to

Fed. R. Civ. P. 23. The Class is defined as follows:

All Texas citizens, residents and entities author-

ized to do business in Texas that own plumbing

systems in structures in Texas and elsewhere, in

which there is polybutylene plumbing and over

which Tennessee and Alabama courts lacked sub-

ject matter jurisdiction.

All U.S. citizens and entities that were excluded

from the settlement classes of Cox v. Shell Oil

Co., No. 18,844 (Tenn. Chanc. Ct., Obion Cty.)

and Spencer v. Shell Oil Co., No. CV94-074

(Greene Cty., Ala.) because defects in their poly-

butylene plumbing systems were defined as non-

qualifying.

All U.S. citizens and entities that own structures

containing polybutylene plumbing systems and

have never participated in a polybutylene class

action in a Court of competent personal and sub-

ject matter jurisdiction.

Excluded from the Class are: (1) All persons and

entities that retained counsel to assert claims

arising out of defects in polybutylene plumbing

systems before this Complaint was filed; (2) All

persons asserting claims for personal injury; (3)

the Defendants, their parent, subsidiary, or af-

filiate organizations and all of their officers, di-

rectors, agents, servants and employees; (4) All

persons and entities that timely opt out of this

proceeding; and (5) the judge and his family.

27. This action is brought and may properly be

maintained as a class action since the requirements of

Shell App. 42

numerosity, typicality, adequacy, predominance and

superiority are satisfied.

28. Members of the Class and subclasses as defined

herein in paragraph 26 are so numerous that joinder of all

claims is impracticabl2.

29. The exact number and identities of all Class and

subclass members is not known to Plaintiff and can only

be ascertained through discovery. Nevertheless, Plaintiff is

informed and believes that the Class includes millions of

individuals.

30. There are numerous questions of law and fact

common to the Class. Such common questions include, but

are not Limited to:

The acts and practices of the Polybutylene Group in

the practices described in paragraphs 1 through 29 above;

Whether the Polybutylene Group made misrepresen-

tations in commercial advertising and the extent to which

such misrepresentations were likely to influence purchas-

ing decisions;

The extent to which the Polybutylene Group’s misrep-

resentations in commercial advertising, if any, deceived or

tended to deceive recipients;

The extent to which the Polybutylene Group’s misrep-

resentations in commercial advertising, if any, were likely

to injure plaintiffs;

Whether the Polybutylene Group engaged in fraudu-

lent and illegal practices;

‘

The extent to which 18 U.S.C. § 1964(c) is applicable to

the activities of the Polybutylene Group and the existence of

Shell App. 43

an “enterprise” and a pattern of unlawful activity with

respect to conspirators under that law;

Whether Polybutylene Group members committed

numerous acts of mail fraud in furtherance of their

scheme;

Whether Polybutylene Group members violated Texas

common law and statutory provisions in a uniform and

fraudulent scheme;

Whether the Cox (Tennessee) and Spenser (Alabama)

state courts had proper personal and subject matter

jurisdiction over members of the Class;

Whether putative class members were deprived of a

meaningful opportunity to participate or opt-out of the Cox

(Tennessee) and Spenser (Alabama) polybutylene class

action litigation;

31. Common questions of law and fact exist as to all

subclass members, and such common questions predomi-

nate over any questions affecting only individual subclass

members. The questions of law and fact common to the

subclass are, without limitation:

(a) Whether the Polybutylene Group marketed

the PB system for potable water supply applications even

though they knew or should have known that the system

would deteriorate when exposed to chlorine commonly

found in potable water;

(b) Whether the Polybutylene Group omitted

material facts in the distribution and sale of the PB

system about the defective performance and short life

expectancy of the PB system;

Shell App. 44

the PB system into the stream of commerce and misrepre-

sented its fitness for a particular purpose and suitability

for its foreseeable use;

(d) Whether the’ Polybutylene Group knew or

should have known that the PB system was fundamentally

and chemically defective and would eventually cause

damage to the Plaintiffs and other consumers, including

subclass members;

(e) Whether the Polybutylene Group intention-

ally or negligently omitted material information concern-

ing the PB system that was known at the time of the

transactions, and that such omissions were intended to

induce the Plaintiffs to act which, but for the omissions,

the Plaintiffs would not have acted;

(f) Whether the Polybutylene Group intention-

ally or negligently represented that the PB system had

sponsorship, approval, characteristics, uses, and benefits

that it did not have;

(zg) Whether the Polybutylene Group was negli-

gent in ascertaining the truth or falsity of their statements

concerning the quality and characteristics of their prod-

ucts; and

(h) Whether the Polybutylene Group conspired

to promote the PB system even though they knew it was

defective and unsuitable for use with potable water, and

whether one or more of the Polybutylene Group members

commenced a tort in furtherance of the conspiracy.

32. The representative Plaintiffs will fairly and

adequately protect the interests of the members of the

lass. The Plaintiffs’ claims are coextensive with, and not

Shell App. 45

antagonistic to, the claims of the Class members. The

Plaintiffs have retained counsel who are competent and

experienced in class and complex litigation. No conflict

exists between the Plaintiffs and the Class members

because:

(a) The claims advanced by the Plaintiffs are

typical of the claims of each member of the subclass they

represent;

(b) The Plaintiffs’ claims arise from the same

course of conduct, and they are based upon the same legal

theories, as the claims of all other Class members;

have a common interest in prevailing on the same legal

claims;

(d) The types of damages incurred by the Plain-

tiffs are similar to those incurred by the members of the

Class they represent;

(e) The claims of the Class are coextensive and

may materially vary only in the degree of damages;

(f) The Plaintiffs and their counsel have the

necessary financial resources to adequately and vigorously

litigate this class action, are aware of their fiduciary

responsibilities to the Class members, and are determined

to diligently discharge those duties by vigorously seeking

the maximum possible recovery for the Class.

In addition, Plaintiffs urge that:

(a) The prosecution of separate actions by or

against individual members of the class would create a

risk of

Shell App. 46

(i) Inconsistent or varying adjudications

with respect to individual members of the class which

would establish incompatible standards of conduct for the

party opposing the class, or

(ii) Adjudications with respect to individual

members of the class which would as a practical matter be

dispositive of the interests of the other members not

parties to the adjudications or substantially impair or

impede their ability to protect their interests; or

(b) The party opposing the class has acted or

refused to act on grounds generally applicable to the class,

thereby making appropriate final injunctive relief or

corresponding declaratory relief with respect to the class

as a whole; or

cation of claims which do or may affect specific property

involved in the action; or

(d) The questions of law or fact common to the

members of the class predominate over any questions

affecting only individual members, and a class action is

superior to the available methods for the fair and efficient

adjudication of the controversy. The matters pertinent to

the findings include:

(i) The interest of members of the class in

individually controlling the prosecution or defense of

separate actions;

(ii) The extent and nature of any litigation

concerning the controversy already commenced by or

against members of the class;

Shell App. 47

(iii) The desirability or undesirability of

concentrating the litigation of the claims in the particular

forum;

(iv) The difficulties likely to be encountered

in the management of class action.

33. A class action is an appropriate method for the

fair and efficient adjudication of this controversy. Class

treatment can best secure the economies of time, effort

and expense for all interested parties and the court sys-

tem, promote uniformity, and accomplish the ends of

equity and justice for the various subclass members with

relatively small claims that might otherwise go unreme-

died.

34. The damages suffered by individual Class

members may be relatively small, and the expense and

burden of individual litigation makes it impossible for

those Class members individually to redress the wrongs

done to them.

35. The Plaintiffs’ attorneys have already obtained

extensive discovery from similar cases in other jurisdic-

tions concerning liability and damages. Such discovery

includes: (a) depositions from almost all of the Polybuty-

lene Group’s officers and employees involved with polybu-

tylene research, development, promotion and management

decisions; and (b) detailed investigations by a number of

experts and the expert analysis of damages to thousands

of structures.

36. The liability and damages issues may be tried at

a near date in that these issues have been previously

adjudicated on identical facts in foreign jurisdictions.

Shell App. 48

GENERAL ALLEGATIONS

37. Defendants, and others acted together in the

development, promotion and marketing of the PB system.

38. The Polybutylene Group made material factual

misrepresentations and omissions which constituted a

producing cause of damages sustained by the Plaintiffs

and the class members, in that:

(a) The Polybutylene Group marketed the PB

system for potable water supply applications even though

they knew or should have known the system would dete-

riorate when exposed to chlorine which is commonly found

and in potable water;

(b) The Polybutylene Group omitted material

facts about the defective performance and short life

expectancy of the PB system;

system into the stream of commerce in Texas and else-

where by materially misrepresenting that it was suitable

for its foreseeable use;

(d) The Polybutylene Group intentionally or

negligently concealed material negative information

concerning the PB system that was known at the time of

the transactions;

(e) The Polybutylene Group intentionally or

negligently misrepresented that the PB system was of a

particular standard, quality or grade when in fact, it was

of another; and

(f) The Polybutylene Group intentionally or

negligently misrepresented that the PB system had

Shell App. 49

sponsorship, approval, characteristics, uses, or benefits

that it did not have.

39. Such misrepresentations and omissions were

false in that:

(a) Polybutylene, in an application that allowed

exposure to chlorine normally found in potable water

systems, was fundamentally, chemically, and irreversibly

defective in that it deteriorated and failed when exposed to

chlorine;

(b) The Polybutylene Group knew that polybut,-

lene was unsuited to applications involving exposure 19

chlorine which is normally formed [sic] in potable water

systems;

unsuitab'lity to potable water System applications, the

Polybutylene Group represented that it was safe and

suitable for such applications; and

(d) The Polybutylene Group willfully, knowingly,

and intentionally or negligently placed an inherently

defective product into the stream of commerce in Texas

and elsewhere for pecuniary gain and in flagrant or

negligent disregard of the Plaintiffs’ and Class members’

rights.

40. Further, Defendants took advantage of the lack

of knowledge, ability, experience, or capacity of the Plain-

tiffs to know of the substantial, latent defects in the

plumbing system or components thereof, and as such, took

advantage of their lack of knowledge, ability, experience

and capacity to a grossly unfair degree.

Shell App. 50

41. As adirect and proximate result of the misrepre-

sentations and material omissions alleged above, the

Polybutylene Group induced the Plaintiffs to purchase

structures that contained inherently defective polybuty-

lene plumbing systems.

42. Had the Polybutylene Group truthfully repre-

sented the nature of polybutylene to the Plaintiffs, the

Plaintiffs would not have purchased structures containing

polybutylene plumbing systems.

43. The PB system cracks, corrodes and leaks, and is

not suitable for use as a potable water system because:

(a) Polybutylene pipe deteriorates when exposed

to chlorine commonly found in potable water;

(b) The resin Celcon, and all fittings made from

Celcon, corrode and fail when exposed to chlorine com-

monly found in potable water;

water commonly found in potable water systems acceler-

ates fatigue and causes failure of the PB system fittings;

(d) The heat in the hot water supply found in

potable water systems accelerates the deterioration of the

PB system; and

(e) Polybutylene pipe cracks from crimp rings

that are used to join the pipe because the crimp ring

system renders it almost impossible for workmen to crimp

the fittings with adequate but not excessive pressure.

44. The Polybutylene Group also made material

omissions to code bodies, trade associations, governmental

Shell App. 51

entities, and Class members regarding problems with the

polybutylene system.

45. The Polybutylene Group aggravated the effect of

their omissions by making claims that the PB system was

suitable for potable water plumbing when it was not, and

that the PB system had a long service life, which it does

not.

46. The Polybutylene Group intentionally omitted

information they possessed concerning the inherent

chemical defects of the PB system and of its short service

life.

47. Manufacturers, code bodies, trade associations,

governmental entities, builders and Class members were

misled by these misrepresentations and Omissions, with

the result that the PB system has been widely used in

residential plumbing and was used in the structures

owned by the Plaintiffs and the class.

48. The misrepresentations and omissions were

intended to induce manufacturers, code bodies, trade

associations, governmental entities, builders and Class

members to approve, promote or use the PB system.

49. As a direct and proximate result of the Polybuty-

lene Group’s conduct, the Plaintiffs and the Class mem-

bers have suffered damages through the use of the PB

system in their structures.

50. The Plaintiffs and the Class have suffered, and

will continue to suffer, damages to their structures and

improvements, as well as damage to the personal property

contained therein. The Plaintiffs and the Class have

incurred, and will continue to incur, expenses in repairing

and/or replacing the PB system and the damage to their

Shell App. 52

structures, improvements, and personal property. The

Plaintiffs and the Class also have incurred, and will

continue to incur, expenses from loss of use of their prop-

erty, such as for temporary lodging and meals, and have

suffered and will continue to suffer loss of the use, benefit

and enjoyment of their structures, and a reduction in the

value of same.

51. The Piaintiffs have retained the undersigned

counsel to represent them in this lawsuit and are obligated

to pay reasonable attorneys’ fees.

52. Questions of law and fact common to the Class, |

including the legal and factual issues relating to operation

of the scheme described herein, and the liability and the

nature of the relationships among the Polybutylene Group,

predominate over any questions affecting only individual

members.

53. A class action is superior to other available

methods for the fair and efficient adjudication of this

controversy: the Class is readily definable, and can be

identified to a significant extent by discovery; prosecution

of this case as a class action will eliminate the possibility

of repetitious litigation and will provide redress for claims

which otherwise raay be too small to support the expense

of individual, complex litigation against the defendant;

there are no problems which would make this case difficult

to manage as a class action.

CIVIL RICO SUMMARY

54. In connection with the activities giving rise to

this action, the defendant acted with malice, intent, and

Shell App. 53

knowledge, and with a wanton disregard of the rights of

named plaintiffs and the Class herein.

05. During relevant times herein, the “enterprise”

described below was engaged in interstate commerce in

that, inter alia, the polybutylene systems and components

thereof which are the subject of the Polybutylene Group’s

scheme to defraud were used and transported in interstate

commerce.

56. During relevant times herein, in connection with

the activities giving rise to this action, each member of the

Polybutylene Group conspired with each of the other

conspirators to engage in the various activities set forth

herein, agreed to participate in the operation of the con-

spiracy to defraud the named plaintiffs and Class mem-

bers herein, and aided and abetted one another in these

activities, all as proscribed as set forth further herein

below.

07. As set forth herein, during the relevant times,

and in furtherance of and for the purpose of executing the

scheme and artifice to defraud, the members of the Poly-

butylene Group on numerous occasions used and caused to

be used mail depositories of the United States Postal

Service by both placing and causing to be placed mailable

matters in said depositories and by removing and causing

to be removed mailable matter from said depositories.

Each such use of the U.S. mails in connection with the

scheme and artifice to defraud constituted the offense of

mail fraud as proscribed and prohibited by 18 U.S.C. §§ 2,

1341. These instances of mail fraud were a substantial

factor in the sequence of responsible causation; and the

injuries to plaintiffs and the class were reasonably fore-

seeable or anticipated as a natural consequence of the mail

Shell App. 54

fraud; and plaintiffs and the class suffered damages by

reason of the mail fraud.

FIRST CLAIM FOR RELIEF -

VIOLATION OF FEDERAL LAW - 18 U.S.C. § 1962(a)

58. The allegations of paragraphs 1 through 57 are

incorporated herein by reference as if fully set forth.

59. The Plaintiff and each class member is a “per-

son” within the meaning of 18 U.S.C. § 1961(3) and

1964(c).

60. The members of the Polybutylene Group are

“persons” within the meaning of 18 U.S.C. §§ 1961(3) and

1962(a).

61. Through agreements to provide polybutylene

systems and the components thereof to purchasers and

through contractual arrangements and joint promotional

activity for marketing the polybutylene systems, each

member of the Polybutylene Group formed an association-

in-fact with the other conspirators which constitutes an

“enterprise” engaged in illegal activities affecting inter-

state commerce pursuant to 18 U.S.C. §§ 1961(4) and

1962(a).

62. Each of the conspirators was associated with this

“enterprise” and did use or invest income derived from a

pattern of unlawful activity under 18 U.S.C. §§ 1961(1)

and (5) to operate, maintain control of, and maintain an

interest in the enterprise.

63. These unlawful activities included multiple

instances of mail fraud in the issuance of false and decep-

tive commercial advertising and promotion, multiple

Shell App. 55

instances of mail fraud in the issuance of false and decep-

tive product description to consumers and multiple in-

stances of mail fraud in the receipt of sums representing

payment received for polybutylene systems and compo-

nents thereof, all in violation of 18 U.S.C. §§ 2, 1341.

(a) Defendants perpetrated specific acts of mail and

wire fraud including, without limitation, the following:

(1) Shell mailed a letter, dated August 6, 1987,

on Shell letterhead, from Scott J. Elstad, Manager Market

Development, Polybutylene Business Center, to Richard

Church, Executive Director, PPFA, enclosing a draft of a

manual on polybutylene pipe which contains fraudulent

misrepresentations concerning polybutylene systems and

fittings. The letter instructs Mr. Church to “forward [the

section on limitations on fittings] to DuPont and Celanese

for their review and written approval ... ” (Emphasis

added.) By faxed communication, DuPont reviewed and

approved of the letter in furtherance of the fraud and

conspiracy. Shell brought DuPont into the conspiracy

during the final two years it was promoting polybutylene

systems because of DuPont’s chemica! expertise and the

large profits to be made from false and misleading promo-

tion of polybutylene systems;

(ii) Shell mailed letters with attachments on

November 5, 1986, on Shell letterhead, from M.J. O’Brien,

Sales Manager, Polybutylene Business Center. An at-

tached memo states that “the following letter was sent to

U.S. Brass, Bow, Vanguard, EPC and Wesflex.” The letter

and attached study of sales potential for polybutylene

plumbing pipe in manufactured housing contains blatant

misrepresentations and fraudulent statements about

polybutylene systems;

Shell Apo. 56

(iii) Celanese mailed a note in May 1978 on

Celanese letterhead to M. Scott Elstad (Shell’s Manager of

Market Development), enclosing an April 1978 bulletin on

the properties of Celcon, the registered trademark of the

Celanese Corporation’s polybutylene. The bulletin contains

numerous fraudulent statements and misrepresentations

concerning polybutylene;

(iv) Celanese mailed a letter in April 1981 on

Celanese letterhead from John Pope, Celcon Market

Development Supervisor, to a customer, W.J. McGlinchy,

Western Products Company, apparently in response to Mr.

McGlinchy’s concerns about polybutylene systems. The

letter contains several false and misleading statements

about polybutylene systems, including “there is no evi-

dence available which suggest that chlorinated water has

resulted in premature part failure;”

(v) Celanese mailed a computer form-letter

dated July 26, 2985 [sic], on Celanese letterhead, signed

“Regards, Celanese Engineering Resins, S.J. Iannelli,

Industry Manager, Fluid/Material Handling to a merge list

of 17 individuals and businesses. The letter contains false

and misleading information and material omissions about

the use of polybutylene in plumbing applications (see

Exhibit “E” attached hereto);

(vi) Shell mailed a letter on May 16, 1980, to Keith

Swinehart of Vanguard Plastics enclosing the completed

artwork for “downsized versions of our ‘Polybutylene

Plumbing Pipe Runs Circles Around the Competition’

advertisements.” The advertisements contain false and

misleading representations;

(vii) Celanese mailed a letter on January 6, 1987,

signed by Chuck A. Calhoun, Senior Sales Representative,

Shell App. 57

to Bill Brennan of Plastamatic Corporation which said,

among other false and misleading statements that “we

ere aware of no serious problems” in connection with

polybutylene insert fittings for the mobile home and RV

markets;

(viii) Shell’s employee, A.H. Schroer, used the tele-

phone on October 21, 1982, to tell Celanese’s employee

Diane Datson, that he had tried to check on the status of

research work on the use of Celcon (Celanese’s polybuty-

lene product), but “they just want to duck that whole

issue;”

(ix) Shell sent a letter via certified mail (return

receipt requested) on May 14, 1987, to a distribution list of

more than a dozen plumbers and wholesalers that con-

tained false and misleading statements and omissions.

The letter was signed by L.A. Petershagen, Manager,

Polybutylene Business Center, and represented that there

had been “a few isolated instances ... [of] ... premature

oxidation failure in polybutylene pipe.” (Emphasis added.)

The letter further asserted that recent laboratory data

“did not change the outlook for continuing satisfactory

service under normal conditions.” These statements are

false and misleading. DuPont approved the contents of

this letter and was informed of numerous similar letters to

small businessmen whose purpose was to deceive whole-

salers and plumbers about the defects of polybutylene

systems by omissions and false or misleading representa-

tions;

(x) The CBS News Documentary “60 Minutes”

covered the widespread failure of polybutylene systems

in an episode sardonically entitled, “The Best Thirg

Since Sliced Bread.” The title derives from Defendanis’

Shell App. 58

wide-spread promotional campaign advertising polybuty-

lene systems as “the best thing since sliced bread.” A

significant portion of the 60 Minutes expose focused on

debilitating problems that the failure of its polybutylene

systems caused the City of San Antonio, Texas. The video

of the 60 Minutes broadcast illustrates what the docu-

ments referred to herein establish — that Defendants

engaged in specific unlawful acts as part of a deliberate

conspiracy to defraud the public. (A copy of the 60 Minutes

broadcast is provided herewith as Exhibit “A”.)

64. The purpose of the Polybutylene Group’s and

conspirators’ association-in-fact was to fraudulently

advertise and sell polybutylene systems that they knew to

be unsuitable for potable water. This association-in-fact by

the Polybutylene Group and other conspirators enabled

them to sell millions of defective polybutylene systems

that directly caused injury to Plaintiff and other members

of the Class.

65. The association-in-fact had a common or shared

purpose; that is, to sell polybutylene systems and thereby

defraud members of the public. The scheme had a distinct

division of labor and continued as a unit, with a core

membership, over a substantial period of time and was an

ongoing organization established for an economic motive.

66. Each member of the Class owns one or more

structures containing a polybutylene system.

67. The Polybutylene Group’s promotion and sale of

polybutylene systems, including fraudulent and false

statements relied on by plaintiff and other members of the

- Class, were intended to and did assure the plaintiff and

Class members that the polybutylene systems were

suitable for potable water plumbing systems.

Shell App. 59

68. The Polybutylene Group’s false and fraudulent

promotion of polybutylene systems furthered the purposes

of the enterprise described herein, that is, to generate

additional sales of the defective polybutylene systems and

permit the Polybutylene Group members to reinvest

profits from defrauded Class members in perpetuating the

enterprise. The Polybutylene Group members participated

in a massive fraud, an illegal and profitable scam, which

took advantage of the plaintiffs’ and the Class’ reasonable

reliance on the apparent legitimacy of the product.

69. These activities of the association-in-fact form a

pattern, continuous in nature, which consists of multiple

unlawful acts directed to the named Plaintiff and to each

Class member. The illegal activities of the Polybutylene

Group persisted over an extended period of time. Each

fraudulent promotional activity and each act of mail fraud

was an act ‘n-furtherance of the conspiracy for which the

Polybutylene Group members are liable. The reliance of

the plaintiff and the members of the class on falsehoods

and omission of accurate information concerning the

polybutylene system’s defects in the promotional material

was reasonable and justified.

70. These activities of the Polybutylene Group and

other conspirators entailed multiple instances of mail

fraud consisting of intentional mail fraud intended to

induce, and inducing, plaintiffs and the class to purchase

defective products in violation of 18 U.S.C. §§ 2, 1341.

71. Through the use of this illegal and fraudulent

scheme, and through its efforts to operate and maintain

the enterprise described herein and to maintain the

conspiracy to sell defective products and create illegal

profits, the defendant and other conspirators caused

Shell App. 60

Plaintiff and Class members to provide them with consid-

erable funds to purchase polybutylene systems.

72. Members of the Polybutylene Group retained

these unlawfully gained funds and reinvested and used

those funds in their operations in violation of 18 U.S.C.

§§ 2, 1962(a).

73. Plaintiffs and all class members have been

injured in their property by reason of the operation of the

enterprise in this unlawful manner.

WHEREFORE, Plaintiffs seek judgment against the

Polybutylene Group, on behalf of themselves and the Class

herein, consisting of their actual damages suffered as a

result of the illegal acts set forth herein, plus treble

damages, plus reasonable costs and attorneys’ fees, plus

pre and post judgment interest, plus such further relief as

this Court deems appropriate.

SECOND CLAIM FOR RELIEF -

VIOLATION OF FEDERAL LAW - 18 U.S.C. § 1962(c)

74. The allegations of paragraphs 1-73 are incorpo-

rated herein by reference as if fully set forth.

75. The Plaintiff and each Class member is a “per-

son” within the meaning of 18 U.S.C. §§ 1961(3) and

1964(c).

76. The Polybutylene Group and each of the cocon-

spirators are “persons” within the meaning of 18 U.S.C.

§§ 1961(3) and 1962(c).

77. The association-in-fact described in the “First

Claim fer Relief” above was an “enterprise” within the

meaning of 18 U.S.C. §§1961(4) and 1962(c), which

Shell App. 61

enterprise was engaged in, and the activities of which

affect, interstate commerce.

78. Members of the Polybutylene Group were associ-

ated with the enterprise and participated in its manage-

ment and operation by directing its affairs and by

formulating and promulgating intentional or negligent

misrepresentations in an effort to boost sales. They par-

ticipated, directly and indirectly, in the conduct of the

enterprise's affairs through a pattern of unlawful activity

under 18 U.S.C. § 1961(1), consisting of multiple acts of

mail fraud, in violation of 18 U.S.C. §§ 3, 1341.

79. The unlawful activity described in the foregoing

paragraphs consists of multiple instances of mail fraud in

violation of 18 U.S.C. §§ 2, 1341, including, inter alia,

issuance of illegal, deceptive and fraudulent commercial

advertising and promotion.

WHEREFORE, plaintiffs seek judgment against the

Polybutylene Group on behalf of themselves and the Class

herein, consisting of their actual damages suffered as a

result of the illegal acts set forth herein, plus treble

damages, plus reasonable costs and attorneys’ fees, plus

pre and post judgment interest, plus such further relief as

this Court deems appropriate.

THIRD CLAIM FOR RELIEF -

VIOLATION OF FEDERAL LAW - 18 U.S.C. § 1962(d)

80. The allegations of paragraphs 1-79 are incorpo-

rated herein by reference as if fully set forth.

81. The Plaintiff and each member of the Class are

“persons” within the meaning of 18 U.S.C. §§ 1961(3) and

1964(c).

Shell App. 62

82. The Polybutylene Group and each of the other

conspirators are “persons” within the meaning of 18 U.S.C.

§§ 1961(3) and 1962(d).

83. The association-in-fact described in the “First

Claim for Relief” above was an “enterprise” within the

meaning of 18 U.S.C. §§1961(4) and 1962(a), which

enterprise was engaged in, and the activities of which

affect interstate commerce.

84. The Polybutylene Group and each of the other

cons

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