First Circuit Court of Appeal in Baton Rouge

BATON ROUGE — If Anadarko Petroleum Corp. allowed certain employees to over-bill on environmental remediation projects, could the company or its stock prices have benefited from knocking off millions of dollars in false remediation costs?

That was the question, or allegation, that cropped up a handful of times during a hearing last week at the First Circuit Court of Appeal.

The Jan. 9 hearing before a three-judge panel was held to consider an appeal by Monroe businessman Stanley Palowsky III, who sought the appeal court’s leave to sue Anadarko for damages in an ongoing racketeering lawsuit. Joe Ward of Covington and Sedric Banks of Monroe represented Palowsky at last week’s hearing.

Palowsky’s appeal stemmed from a June 2018 ruling by an ad hoc judge, who dismissed the businessman’s claims for damages against Anadarko. Retired Judge Dee Ann Hawthorne, of Natchitoches Parish, dismissed Anadarko from Palowsky’s lawsuit after he asked to file an amended petition claiming Anadarko blackballed his environmental remediation company for exposing the oil and gas company’s alleged scheme to artificially inflate its stock prices.

“He finds Anadarko wasn’t just turning a blind eye,” said Ward, of his client, Palowsky.

Anadarko encouraged some of the other defendants in the lawsuit to lower the cost of remediation by millions of dollars, according to Ward.

Among other claims, Palowsky alleged Anadarko paid kickbacks to environmental consultants and contractors who manipulated cost estimates for the remediation of the company’s oil and gas project sites. The lower environmental liabilities were part of the scheme to inflate Anadarko’s stock prices, his lawsuit alleged.

Hawthorne suggested Palowsky had invented many of his allegations, though Ward and Banks claimed to have obtained numerous documents through discovery to support each allegation. Palowsky appealed her ruling to the Second Circuit Court of Appeal. All nine judges at the Second Circuit recused from the case, which was then assigned to the First Circuit.

The three-judge panel at the First Circuit included Chief Judge Vanessa Whipple, John Michael Guidry, and retired Judge William Burris, who served pro tempore.

Palowsky first filed his lawsuit, Stanley R. Palowsky III and others v. W. Brandon Cork and others, at Fourth Judicial District Court in July 2013. The original lawsuit centered on Palowsky’s claims that his former business partner, Brandon Cork, and others cheated him and his company, Alternative Environmental Solutions Inc. (AESI), out of millions of dollars in a racketeering and money laundering scheme. AESI provided environmental consulting services to oil and gas exploration companies.

Besides Anadarko, other defendants in Palowsky’s lawsuit are Anthony White and his company OHC Services LLC of Webster Parish; Michael L. Holder and his company TP Environmental and Pipeline Services of Oklahoma; and Anadarko employee Dana E. Howard of Texas.

According to Palowsky’s lawsuit, White and his company, OHC, as well as Holder and his company, TP, acted with Cork to overbill Anadarko for certain work, including work performed at an environmental remediation site in Wyoming, also referred to as the Carpenter project. According to Palowsky’s lawsuit, Anadarko allowed overbilling on some projects in exchange for downgrading the company’s environmental remediation costs on other projects, sometimes dropping remediation costs from $1.4 million to some $386,000 on a single project site.

Many of Palowsky’s allegations — and part of the basis for Hawthorne’s dismissal of claims against Anadarko — relied on the involvement of Howard, the Anadarko employee.

“It was Dana Howard’s job to set the remediation rate,” Ward said. “It’s all employment. It’s so employment related it doesn’t matter.”

In her ruling, Hawthorne said she did not believe it could be implied that Howard was acting on behalf of Anadarko by stealing from the company.

Keith Jarrett, an attorney with the New Orleans law firm Liskow & Lewis, represents Anadarko. During last week’s hearing, Jarrett echoed Hawthorne’s point.

“She was acting for her own benefit,” Jarrett said. “It is not in the furtherance of Anadarko’s objectives to be stolen from. The objective was to steal.”

Whipple and Guidry questioned Jarrett’s claim that Howard was able to benefit personally. If she did, how so? Jarrett did not identify how Howard may have benefited. His client, he argued, did not belong in the lawsuit because there were no specific allegations against the company.

“What were the allegations against Anadarko?” Jarrett said. “There’s only one. The allegation that Anadarko is responsible for the tortious act of Dana Howard.”

Guidry acknowledged that overbilling could benefit Howard, but if Anadarko’s remediation costs were lowered, that also could benefit Anadarko or even help the sale of the company. (Occidental Petroleum acquired Anadarko in August 2019 in a transaction valued at some $38 billion.)

Many of the allegations outlining further causes of action against Anadarko were contained in Palowsky’s fourth amended petition, which was barred from being filed into the record by Hawthorne.

What was the prejudice against Anadarko that justified Hawthorne’s dismissal of the fourth amended petition, Guidry asked.

Jarrett argued that Hawthorne could deny Palowsky the right to amend his petition simply because a district court judge had the discretion to control her docket.

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