Methyl Tertiary Butyl Ether ("MTBE") has been used as a gasoline additive in the United States since the late 1970's. MTBE initially was used as an octane enhancer and later as an oxygenate blend with reformulated gasoline for use in ozone non-attainment areas designated by EPA under the Clear Air Act. As its use became widespread, so did industry knowledge of some of the problems associated with it. In an industry where spills and leaks from underground storage tanks are not uncommon, it became apparent that MTBE because of its solubility would travel further and faster than other constituents of gasoline (e.g., benzene). In addition, it turned out that MTBE was much harder to clean up. As a result, over time MTBE became the second most ubiquitous contaminant found in United States groundwater according to the USGS.
Although there is much debate concerning whether MTBE presents a human health risk, there is no dispute that at very low concentrations it has an objectionable taste and odor (which some describe as similar to turpentine). Early attempts by the plaintiffs' bar to bring claims against refiners and marketers on behalf of residential and commercial drinking water well owners failed when courts denied class action status. The rationale given by the courts was that due to the differences from one water well to another the plaintiffs could not establish the necessary elements to certify a class.
Later, the plaintiffs' bar determined that it could achieve the scope of a class action by bringing cases on behalf of public drinking water suppliers such as municipalities. Actions were commenced across the country claiming that MTBE manufacturers and gasoline refiners, wholesalers, distributors and retailers were liable for contamination of public water systems based on several theories of law including product liability, nuisance and trespass. Many of these actions were aggregated in In re: Methyl Tertiary Butyl Ether (MTBE) Products Liability Litigation, 00 MDL 1898 in the United States District Court for the Southern District of New York before the Honorable Shira Scheindlin, United States District Judge.
One of the cases in the multi-district litigation was the City of New York v. ExxonMobil Corp. The City had sued ExxonMobil and a number of others involved in the manufacture and sale of MTBE and gasoline blends containing MTBE for the prospective contamination of a public water facility, Station Six, to be constructed within the next 15 years. The jury concluded that the wells comprising this facility would be contaminated by 10 parts per billion of MTBE in the year 2033. For this prospective contamination, the jury awarded the City $105 million from ExxonMobil. Prior to the ExxonMobil trial, 22 other defendants had settled with the City.
Despite losing the case for compensatory damages, ExxonMobil was able to prevail on the issue of punitive damages, the court holding as a matter of law that ExxonMobil could not be liable under the standard applied in the State of New York. This standard required that the City either show that ExxonMobil had malicious intent to cause harm or that it acted with a high degree of moral culpability manifested by wanton and reckless disregard of the City's rights. In order to prove its case, the City presented evidence that ExxonMobil was aware of MTBE's adverse effect on the taste and odor of water and that it could render water undrinkable. The City was also able to show that ExxonMobil was aware of an issue regarding MTBE's potential impact on human health. Studies tended to show that MTBE was known as an animal carcinogen and potential human carcinogen. Next, the City was able to prove that ExxonMobil was aware of the probability that MTBE would escape into the environment either from product spills or leaking underground storage tanks or lines. Finally, the City presented evidence that MTBE was different than other gasoline compounds in that it migrates further and faster and may affect greater areas; has a low taste and odor threshold; and is more difficult to remediate.
Despite this, the court concluded as a matter of law that ExxonMobil could not be found liable for punitive damages. Although the court conceded that ExxonMobil had a general awareness of the dangers of MTBE while it continued to produce, distribute and store it, the City offered little evidence with respect to ExxonMobil's conduct with respect to Station Six that manifested a wanton, reckless and highly immoral disregard for the rights of others. The court noted that the jury found that MTBE concentrations at Station Six would reach a peak of 10 ppm (the maximum contaminate limit (MCL) for MTBE in New York) in 2033. Therefore, the court concluded that there was no evidence that punishing ExxonMobil would advance a strong public policy or that its conduct presented a severe risk to the public. In addition, the court noted that most of the conduct of which the City complained occurred while the MCL for MTBE in New York was 50 ppm. The court also noted that the contamination predicted for the Station Six wells was not the result of ExxonMobil's conduct alone, but included contributions from other refiners, distributors and retailers. Finally, the court concluded that the risk of harm to the City resulting from ExxonMobil's conduct could not be found to have outstripped the actual harm caused by that conduct.
This article was authored by James R. Snyder, Jackson Kelly PLLC. For more information on the author see here.