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From Products Liability Law Daily, January 22, 2014

Exxon seeks review of $104.69 million jury award to NYC for MTBE contamination of well water

By Susan Lasser, J.D.

An oil and gas corporation has petitioned the U.S. Supreme Court to overturn a jury verdict finding it liable for contaminating New York City water wells with methyl tertiary butyl ether (MTBE) and awarding the City $104.69 million in compensatory damages. Exxon Mobil Corporation asked the High Court to review an opinion by the U.S. Court of Appeals for the Second Circuit upholding the verdict (In re: Methyl Tertiary Butyl Ether (MTBE) Products Liability Litigation (Exxon Mobil Corp. v. City of New York), Docket No. 13-842, filed January 13, 2014). The case was selected to serve as a bellwether trial for the MTBE multi-district litigation.

Background. In 1990, the Clean Air Act (CAA) was amended to establish the Reformulated Gasoline Program (RFG Program), which required that gasoline contain at least two percent oxygen by weight in order to reduce tailpipe emissions by increasing octane. The Environmental Protection Agency (EPA) identified several additives that could be blended into reformulated gasoline to satisfy the oxygenate requirement, including MTBE. Exxon and other companies used MTBE in the New York area beginning in the 1980s until its use was banned by the state in 2004. Congress ended the RFG Program when it passed the Energy Policy Act of 2005.

MTBE causes water to have a foul smell and taste, and it also has been identified as an animal carcinogen and a possible human carcinogen. During the time MTBE was in use in gasoline in New York, gasoline leaks from underground storage tanks contaminated groundwater supplies, including those supplying the City-owned “Station Six” wells in Queens, New York (Station Six Wells), which the City asserted would be a significant part of its plan to deliver drinkable water to its residents in the future. The City of New York, the New York City Water Board, and the New York City Municipal Water Finance Authority brought suit against Exxon Mobil Corp., Exxon Mobil Oil Corp., and Mobil Corp. (Exxon), along with a number of other companies (all of which settled prior to trial except Exxon). Although the jury found Exxon not liable on the strict liability claim for defective design, it found Exxon liable under New York law for failure to warn and negligence, along with other claims, and awarded $104.69 million in damages.

On appeal, the Second Circuit found that the failure-to-warn, negligence, and other state tort claims were not preempted by the Clean Air Act Amendments of the 1990s’ RFG Program because the statute did not require that Exxon use MTBE in its gasoline—the law provided that the use of other oxygenates was permissible. Therefore, the appellate court held, a jury verdict would not subject Exxon to requirements with which it would be impossible to comply and, thus, preemption was not warranted. In addition, the Second Circuit ruled that the jury’s rejection of the City’s design-defect claim did not amount to a finding that there was no safer, feasible alternative to the use of MTBE as a method of complying with the RFG Program. The court also held that the jury’s finding that the MTBE levels in Station Six Wells will peak at 10 ppb in 2033 was not inconsistent with a conclusion that the City had been injured, and that the City’s suit was ripe because the City demonstrated a present injury.

The petition. Exxon argued in its petition to the Supreme Court that the Second Circuit’s opinion should be reviewed because it forces the corporation to pay over $100 million to remedy an injury that has not yet occurred and, if the injury ever did occur, it would have been caused, according to Exxon, by the corporation’s “using the safest, feasible means of complying with a federal mandate.” Exxon asserted that such a result conflicted with Supreme Court precedents, was “wrong and unfair, and warrant[ed]” the Supreme Court’s review. Exxon complained that it used the oxygenate MTBE to comply with the oxygenate requirement because it had no safer, feasible alternative at the time; and that the decision below imposed a $104 million award based on possible future injuries flowing from Exxon’s compliance with that federal mandate.

First, Exxon argued that the Second Circuit’s ripeness holding conflicted with Supreme Court precedents, as well as basic principles of the Article III ripeness doctrine. According to the petition, the High Court’s rulings barred lawsuits based on predictions about a “speculative chain of possibilities” at least partially under a plaintiff’s control that might culminate in an injury in the indefinite future. These precedents, Exxon contended, foreclosed the City’s suit. Moreover, the corporation pointed out that the City recovered $104 million for predicted future injuries that depended on a chain of speculative possibilities to overcome the reality that the City could not currently use the wells at issue because of preexisting contamination that had nothing to do with Exxon. Exxon noted that the ripeness problem was highlighted by the jury’s prediction that the contamination would peak in the year 2033.

Second, Exxon, citing Williamson v. Mazda Motor of America, Inc., 131 S. Ct. 1131 (2011), and Geier v. American Honda Motor Co., 529 U.S. 861 (2000), contended that the Second Circuit’s preemption ruling warranted review. Exxon asserted that preemption followed from the Clean Air Act requirement that manufacturers add an oxygenate to all gasoline sold in New York City and that MTBE was the safest practical option for being that oxygenate. A state-law penalty for using the safest, feasible means of complying with a federal mandate, the petition claimed, was at least an obstacle to the full execution and fulfillment of the federal mandate. Although Congress mandated the use of an oxygenate, it did not specify a particular oxygenate; but that “theoretical flexibility” was limited in practice. The EPA had approved MTBE and ethanol for use under the program and recognized that they would be the “two major oxygenates.” The petition stated that the EPA expected that MTBE would be the “most heavily used oxygenate” and that the agency stated that MTBE reduced harmful emissions more effectively than ethanol.

Questions presented. Exxon posed the following questions in its petition:

  1. Whether a claim is ripe when it is predicated on a plaintiff’s potential future injury and mere good faith intent to take steps in 15 to 20 years that could, depending on a chain of uncertain events, cause the plaintiff to suffer an actual injury some day in the future.
  2. Whether the federal oxygenate mandate in the Clean Air Act Amendments of 1990, 42 U.S.C. § 7545 (2000), preempts a state-law tort award that imposes retroactive liability on a manufacturer for using the safest, feasible means available at the time for complying with that mandate.

The case number is 13-842.

Attorneys: Paul D. Clement (Bancroft PLLC) for Exxon Mobil Corp.

Companies: Exxon Mobil Corp.

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