By ERIC FREEDMAN
Capital News Service
LANSING — Three small retailers in Southwest Detroit have lost their federal lawsuit that blames an oil refinery for killing their businesses and creating environmental hazards.
U.S. District Judge Patrick Duggan found no legal basis for claims against the refinery operator, Marathon Petroleum Co.
At the center of the conflict is the impact on the Oakwood Heights neighborhood of Marathon’s Detroit Heavy Oil Upgrade Project that began operations in November 2012. The affected area is south of Fort Street, the River Rouge, South Dix Street and Schaefer Highway near Interstate-75.
The refinery is the only one in Michigan and has about 525 employees.
Marathon launched a residential buyout program in the run-up to the project that expanded the refinery’s crude oil capacity. The company purchased at least 277 of the 294 homes in the heavily industrialized neighborhood, most of them built in the 1920s for workers and their families.
The result: financial losses for businesses whose customers moved away, the suit claimed. Meanwhile, business and commercial property owners weren’t offered buyouts through that program.
Marathon communications manager Jamal Kheiry said, “From time to time we will purchase — or explore the possibility of purchasing — properties that may be available. We don’t discuss specifics of these opportunities.”
“If there is no business, what’s the good of having a business here if you’re not making any money?” said Dave Singh, the owner of Universal Lock & Security Service Inc., one of the retailers that filed the suit.
Singh, whose locksmith shop has been in the same location since 1932, said he’s laid off all his employees. “We are small businessmen and they are closing so many businesses. We have nothing more.”
The other two plaintiffs are House of Hardtops Inc., a used car dealership, and Moss & Associates Inc.
Marathon hasn’t offered to buy him out, Singh said, adding, “If they come I will sell it today. If they give me a good price, I’ll retire.”
In court papers, Marathon said it had a “legitimate business reason for the program—creating green space for its expanded refinery.”
But James Giddings, a lawyer for the businesses, said, “It’s been depopulated basically. There are a few hangouts there.
“That area has been extremely degraded by Marathon and others. Our legal theory is this wasn’t some noble effort to save green space,” but rather to get rid of potential environmental claims,” said Giddings, of Williamston.
In the court decision, Duggan said, “While parts of Oakwood Heights are zoned residential, one need not strain the imagination to envision the environmental impact an oil refinery would have on nearby properties.”
The suit sought damages for intentionally interfering with business relationships and for creating a nuisance from air pollution.
First, the businesses asserted that Marathon’s property purchase program was a ruse to reduce its potential liability for environmental contamination and to cause their property values “to plummet so it can acquire the properties in the future” to expand the refinery “for less than the market value.” As they contended in a court filing, Marathon “knew that the residential property purchase program would drive the plaintiffs out of business so their lands could be acquired cheaply.”
Duggan rejected that argument, finding no evidence that Marathon acted maliciously to interfere with the businesses or that the company deliberately concealed information from Oakwood Heights residents.
“There is nothing inherently wrong or improper about Marathon’s desire to expand the Detroit Refinery’s operations and to purchase surrounding property to facilitate this expansion,” Duggan said. “Nor is there anything improper about offering neighborhood residents a buyout, even if the buyouts were motivated by a desire to stem further liability.”
That’s true even if the company knew that buying the homes would “depopulate” the neighborhood and hurt the remaining local stores,” he said.
For their second claim, the businesses accused Marathon of creating a nuisance by increasing the emission of contaminants carried by the air onto their properties. According to the suit, “During the last 42 years, the owners of the refinery have been sued at least four times by nearby residents alleging the refinery caused a nuisance as to them by polluting their air.”
However, Duggan said the businesses failed to offer enough evidence to proceed and “do not endeavor to explain how the emissions interfered with their use and enjoyment of their properties, let alone how the interference was unreasonable in light of the Detroit Refinery’s utility.”
Marathon’s Kheiry said Department of Environmental Quality (DEQ) data shows that pollutant emissions from the refinery account for about 3 percent of industrial emissions within a 4-mile radius of the facility.
He also said emissions are below the level allowed by its DEQ permit and that “the refinery has reduced its emission by more than 70 percent over the past 15 years” despite increased output.
Giddings, who represents the businesses, said his clients haven’t decided whether to appeal.
By ERIC FREEDMAN