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From Products Liability Law Daily, October 27, 2014

Puerto Rico Supreme Court asked to weigh in on whether MTBE claims are time-barred

By Eric Larsen

The U.S. District Court for the Southern District of New York has agreed to ask the Puerto Rico Supreme Court whether provisions enacted by Puerto Rico legislature in 2014 mean that certain of the Commonwealth of Puerto Rico’s claims related to methyl tertiary butyl ether (MTBE) contamination are not time-barred (In re: Methyl Tertiary Butyl Ether (“MTBE”) Products Liability Litigation (Commonwealth of Puerto Rico v. Shell Oil Co.), Oct. 23, 2014, Scheindlin, S.). The district court previously held that groundwater and surface waters in Puerto Rico are subject to commerce and, therefore, not exempted from prescription by Puerto Rico Law No. 53-2014. The court has now agreed to refer to the Puerto Rico Supreme Court the question of whether claims concerning contamination of in situ groundwater and surface waters are exempted from prescription.

Background. This case is part of ongoing multi-district litigation relating to contamination of groundwater from the use of the gasoline additive MTBE and tertiary butyl alcohol, which is formed by the breakdown of MTBE in water. After 1979, oil companies began adding the oxygenate MTBE to gasoline to boost octane levels in higher grades of gasoline and to reduce air pollution. Gasoline oxygenates are intended to help the fuel burn more efficiently, thus reducing emissions.

MTBE is a chemical produced from methanol and isobutylene (a by-product of the gasoline refining process). It is very soluble in water and does not readily biodegrade. As such, if MTBE enters the ground, it migrates quickly through the groundwater, contaminating aquifers and wells. In addition, MTBE is much more persistent than other components in gasoline and may remain in groundwater for decades. MTBE gives water a foul taste and odor, making it unusable and unfit for human consumption.

On May 12, 2014, the Puerto Rico legislature enacted Law No. 53-2014, which indicates that statutes of limitations do not apply to actions of the Commonwealth of Puerto Rico relating to the protection and defense of public goods. Law No. 53-2014 provides that “non-patrimonial public goods which the Commonwealth has and maintains in the name and for the benefit of [the people] are not subject to prescription.” The law defines “non-patrimonial goods” as goods that are “beyond human commerce.” Prescription is a bar to action if the action is not brought within a specified time.

On August 29, 2014, the district court held that groundwater and surface waters in Puerto Rico are subject to commerce and, therefore, not exempted from prescription by Law No. 53-2014. The court also held that Law No. 53-2014 violates the separation of powers under Puerto Rico law. The court found that the law impermissibly sought to interpret Puerto Rico law and affect the outcome of specific litigation (see the Products Liability Law Daily analysis from September 4, 2014).

Question referred to Puerto Rico Supreme Court. In the October 23, 2014 decision, the district court has agreed to refer to the Puerto Rico Supreme Court the following question: “Are the Commonwealth of Puerto Rico’s claims concerning contamination to the in situ groundwater and surface water of the Commonwealth subject to the defense of prescription?”

In prior arguments in district court, the Commonwealth has asserted that groundwater and surface water are non-patrimonial until extracted for commercial purposes. In its August 29, 2014 decision, the district court specifically rejected this line of reasoning. Nevertheless, the district court has decided to refer the question to the Puerto Rico Supreme Court.

The district court’s decision to certify to the Puerto Rico Supreme Court the question of whether Law No. 53-2014 exempts in situ groundwater and surface waters from prescription is based largely on practical considerations. According to the court, referring the question to the Puerto Rico Supreme Court at this time will promote a speedier resolution of the case. If the Commonwealth has to wait until after trial to appeal, that appeal would be to the First Circuit Court, which would probably certify the question of applicability of Law No. 53-2014 back to the Puerto Rico Supreme Court. If the Puerto Rico Supreme Court then decides that Law No. 53-2014 effectively reinstates the dismissed defendants, the Commonwealth would have to start anew with a case against those defendants. On the other hand, asking the Puerto Rico Supreme Court to address the question now will determine which defendants are included as the trial moves forward, the court said.

Separation of powers still a concern. In the August 29, 2014 decision, the district court held that Law No. 53-2014 violated the separation of powers doctrine under Puerto Rico law. The court found that Law No. 53-2014 was an attempt to interpret the law, and intended to affect the outcome of specific litigation.

In the October 23, 2014 decision, the district court indicated that while the Puerto Rico separation of powers doctrine is derived directly from that of the U.S. constitution, it is not clear that the constitutional provisions are completely equivalent. In addition, the district court found that the question referred to the Puerto Rico Supreme Court does not necessarily implicate a challenge to Law No. 53-2014 on constitutional separation of powers grounds. According to the court, if the Puerto Rico Supreme Court decides that the question presents a constitutional challenge based on separation of powers, the Puerto Rico Supreme Court may decline to accept the question. If so, the district court’s prior decisions would stand. In any event, the court determined that asking that the Puerto Rico Supreme Court take up the question at this point in the litigation means that the parties in the case will benefit from improved efficiency.

The case number is MDL 1358 (SAS).

Attorneys: David T. Ritter (Baron & Budd, PC), Duane C. Miller (Miller, Axline & Sawyer), and John K. Dema (Law Offices of John K. Dema, PC) for Commonwealth of Puerto Rico, Commonwealth of Puerto Rico Environmental Quality Board, and Commonwealth of Puerto Rico Through The Environmental Quality Board. Alec C. Zacaroli (Wallace King Domike & Reiskin, PLLC), Alejandro J. Cepeda-Diaz (McConnell Valdes LLC), and Alejandro J. Diaz (Paul Hastings LLP) for Shell Oil Co., Shell Company Puerto Rico Ltd., and Motiva Enterprises, LLC. Peter John Sacripanti (McDermott Will & Emery LLP) for Exxon Mobil Corp. David A. Grenardo (King & Spalding LLP) for Chevron U.S.A., Inc.

Companies: Commonwealth of Puerto Rico; Commonwealth of Puerto Rico Environmental Quality Board; Commonwealth of Puerto Rico Through The Environmental Quality Board; Shell Oil Co.; Exxon Mobil Corp.; Shell Company Puerto Rico Ltd.; Motiva Enterprises, LLC; Chevron U.S.A., Inc.

MainStory: TopStory CourtDecisions SofLReposeNews ChemicalNews NewYorkNews PuertoRicoNews

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