$296 Million Verdict Against Koch Industries for Butane Pipeline Deaths in Kaufman County

On the night of August 24, 1996, a leak from an 8-inch Koch Industries butane pipeline spread gas across a low-lying area near Lively, Texas. Two teenagers, 17-year-old Danielle Smalley and her friend Jason Stone, noticed the smell and got into a pickup truck to drive away and report the leak. When the truck stalled and Stone restarted it, a spark ignited the accumulated gas. The resulting fireball burned for 38 hours.

Danielle's father, Danny Smalley, brought a wrongful-death action against Koch Industries and its pipeline subsidiary. Ted Lyon of Ted B. Lyon and Associates took the case. The investigation uncovered what Lyon later described as a pipeline that 'looked like Swiss cheese' from severe corrosion: the company had failed to apply required protective coating and to maintain the electrical current that slows pipeline corrosion. Federal investigators confirmed the infrastructure had not been adequately protected against the corrosion that caused it to fail.

Koch acknowledged the fire was caused by the leaking pipe but contested liability, claiming the corrosion occurred at an 'unprecedented rate' beyond anything the company could have anticipated. Lyon argued the evidence showed a systematic pattern of deferred maintenance and concealment regarding the pipeline, known internally as Sterling One.

On October 22, 1999, the Kaufman County jury found Koch Industries liable for both negligence and malice. It awarded Danny Smalley $296 million in compensatory damages, at the time the largest wrongful-death compensatory verdict in U.S. history. Before the punitive-damages phase could begin, Koch paid a separate $35 million. The $296 million compensatory award was on appeal when the parties reached an undisclosed settlement. The Stone family also settled separately for an undisclosed amount.

The case drew national attention, including coverage on CBS News. Danny Smalley went on to found the Danielle Dawn Smalley Foundation for Pipeline Safety. According to Ted Lyon, the litigation contributed directly to congressional action tightening federal pipeline safety standards.