Exxon Mobil’s $105 Million MTBE Defeat Upheld on Appeal

A U.S. jury’s $104.7 million damage award against Exxon Mobil Corp. (XOM) for contaminating New York City wells with the gasoline additive MTBE was upheld by a federal appeals court.

The award for compensatory damages to clean up contaminated wells was proper, the U.S. Court of Appeals in Manhattan said in a ruling today, denying Exxon Mobil’s challenge to the 2009 verdict. The Irving, Texas-based company said it plans to appeal the ruling to the U.S. Supreme Court.

“We reject Exxon’s argument that the jury’s verdict conflicts with and is therefore pre-empted by the Clean Air Act Amendments of 1990,” the appeals panel said, adding that the jury properly offset the award by amounts attributed to cleanup of other contaminants.

New York sued Exxon Mobil and other oil companies in 2003, alleging that they knew the gasoline additive methyl tertiary butyl ether, or MTBE, would pollute groundwater. Exxon Mobil argued that state laws are pre-empted by the Clean Air Act, which required oil companies to reformulate gasoline to reduce air pollution from vehicle emissions. Oil companies added MTBE to make it burn more thoroughly.

“MTBE has not been used for seven years, cleanup successfully continues and the myriad of data shows MTBE detections decreasing,” Todd Spitler, a spokesman for Exxon Mobil, said in an e-mail. The company “will be filing an appeal to the United States Supreme Court,” he said.

Consolidated Cases

This case is one of scores around the country by municipalities, states and individuals against oil refiners, distributors and retailers over MTBE. Many, including New York City’s, were consolidated in New York federal court for evidence-gathering.

A state appeals court in Maryland in February reversed two jury awards totaling $1.65 billion against Exxon Mobil over MTBE contamination, ruling that the company hadn’t made fraudulent statements and the property owners who sued hadn’t demonstrated physical harm.

A jury in New Hampshire state court in April ordered Exxon Mobil to pay $236 million in damages for contaminating groundwater with MTBE. The company has appealed that verdict.

The New York jury determined that it would cost $250.5 million to treat the water and remove MTBE, which can give water a bad odor and taste and cause cancer in rodents.

No Punitives

U.S. District Judge Shira Scheindlin ruled that Exxon Mobil shouldn’t be liable for the entire cleanup cost because the wells contained pollutants not from gasoline. She also denied punitive damages because the company hadn’t recklessly disregarded risks. The wells hadn’t been used for drinking water.

The appeals court today rejected cross-appeals by the city. It said the lower court was correct both in ordering that the damage award take into account pollution from other sources and in denying punitive damages.

The appeals court rejected Exxon Mobil’s request for a retrial on the ground of juror misconduct. The company argued Scheindlin should have declared a mistrial after one juror complained that she was threatened by another. The threatened juror was released while the one who allegedly made the threat was not. Exxon Mobil claimed the dismissed juror was harassed because her opinion differed from fellow jurors’.

The trial lasted 11 weeks and the jury deliberated for 11 days. It focused on a representative sample of five wells in the New York City neighborhood of Jamaica, Queens. All other defendants had settled with the city.

The appeal is In re Methyl Tertiary Butyl Ether Products Liability Litigation, 10-4329, U.S. Court of Appeals for the Second Circuit (Manhattan).

To contact the reporter on this story: Don Jeffrey in New York at djeffrey1@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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