Ashland Oil Inc

Ashland Oil Inc
Legal Analysis Model

1.   Relevant Facts:
On Saturday, January 2, 1988 at 5:02 p.m., a 4 million gallon storage tank at the Floreffe Terminal outside of Pittsburgh, Pennsylvania, collapsed while being filled, releasing a 3.9 million gallon wave of diesel fuel.   As the fuel gushed, it slammed into an empty tank nearby and surged over containment dikes onto the surrounding properties creating the first major oil pollution accident for Ashland Oil, Inc., (AOI) in its 64 year history.   By nightfall, nearly three quarters of a million gallons of oil had spilled into the Monongehla River, threatening the drinking water supply of communities in Pennsylvania, Ohio and West Virginia, as well as the safety of nearby residents.   Over the next three days nearly 200 people participated in the clean up including AOI employees.   Initial reports, which indicated no oil had entered the river, had soon proved false, and a number of discrepancies concerning the construction of the tank were making headlines in the local and national press.

2. Key Issues and Legal Rules:
Is it legal to give bad facts?
As John Hall the CEO of Ashland Oil came into deep criticism, he requested a thorough   investigation and found out that there were bad facts communicated to management regarding the building of the tank.   A “bad fact” is one which may not support, or even suggest, a finding of liability, but makes the circumstances at issue “smell bad.”1   After the investigation it was concluded that the steel used in the construction of the tank was used steel.   Although, the application for permit was made verbally, the permit did not mention that the tank was made from used steel.   “An agent is liable for the knowledge of the principal only if that knowledge or information is communicated.   There is never an imputation of knowledge or notice from the principal to the agent.   Only actual communication can create liability for an agent based on knowledge or notice given to the... [continues]

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