2nd Circuit Affirms $104 Million MTBE Contamination Verdict Against Exxon

NEW YORK — (Mealey’s) The Second Circuit U.S. Court of Appeals on July 26 affirmed a $104.6 million methyl tertiary butyl ether (MTBE) contamination verdict for New York City against Exxon Mobil Corp., finding in part that the state tort verdict is not preempted by the Clean Air Act (In Re:  Methyl Tertiary Butyl Ether [MTBE] Products Liability Litigation, Nos. 10-4135 and 10-4329, 2nd Cir.). 

(Opinion available.  Document #08-130816-005Z.

In 2010, a jury in the U.S. District Court for the Southern District of New York found Exxon Mobil liable under New York tort law for contaminating New York City-owned wells in Queens Borough through the release of MTBE, a gasoline additive used from the mid-1980s through the mid-2000s that was banned by New York in 2004.  Exxon was sued by the city, its Water Board and its Municipal Water Finance Authority. 

Exxon appealed, arguing that the city’s tort claims are preempted by the Clean Air Act, which required the use of fuel oxygenates, such as MTBE.  It also argued that the city’s injury was not legally cognizable or ripe for adjudication and barred by the statutes of limitations.  

The city cross-appealed, arguing that the trial court erred in instructing jurors to offset the damages award by the cost of remediating pre-existing contamination and for excluding punitive damages. 

No Preemption 

The Second Circuit panel said the verdict is not preempted by the Clean Air Act.  It also concluded that the jury’s findings about the peak level of contamination in some city water wells are not inconsistent with its conclusion that the city was injured. 

The panel said the lawsuit was ripe because the city demonstrated a present injury.  It also said the city’s claims were not barred by the statute of limitations. 

Also, the panel said the jury’s finding that Exxon was liable under state tort law theories is not precluded by the jury’s concurrent conclusion that the city had not carried its burden, regarding design defect, of demonstrating a feasible, “cost-reasonable” alternative to MTBE that would satisfy the standards of the since-repealed Reformulated Gasoline Program.

The panel rejected Exxon’s claim of juror misconduct. 

Damages Offset OK 

The jury properly offset the gross damages, and the city was not entitled to punitive damages, the panel concluded. 

Circuit Judge Susan L. Carney wrote the opinion.  The other panel members were Circuit Judges Barrington D. Parker and Peter W. Hall. 

Exxon is represented by Paul D. Clement of Bancroft in Washington, D.C., Traci L. Lovitt and Nicholas W. Haddad of Jones Day in New York and Peter John Sacripanti, James A. Pardo and Lauren E. Handel of McDermott Will & Emery in New York. 

New York is represented by Paul M. Smith of Jenner & Block in Washington, Susan E. Amron of the New York City Law Department in New York and Victor M. Sher of  Sher Leff in San Francisco. 

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