NYC Wins First Phase In MTBE Trial Against Exxon

By Mike Cherney

Law360, New York (August 12, 2009) -- A federal jury found in favor of New York City on Wednesday in the first phase of a trial against Exxon Mobil Corp., which the city alleges poisoned groundwater wells in Queens with a gasoline additive.

The city initially sued about 30 oil companies several years ago, saying their use of methyl tertiary-butyl ether, or MTBE, as an octane-increasing agent in gasoline poisoned wells that were to be used as backup water supply. All the firms have settled out of court except ExxonMobil.

In the first phase of the trial, held in the U.S. District Court for the Southern District of New York, jurors debated whether the city intended to build a water treatment facility at the site and whether the wells would be used as a primary or backup water supply. Jurors agreed the city intended to build the facility and to use the wells as a backup water supply.

In the second phase of the trial, the jury will decide whether there is potential for MTBE to contaminate the wells. The jury will then decide whether ExxonMobil is liable for the contamination in phase three, how much they are liable for in phase four and whether punitive damages are appropriate in phase five.

Kevin Allexson, a spokesman for ExxonMobil, noted that Wednesday's verdict had nothing to do with water quality. He said even the city's principal expert does not contend that MTBE found in the wells came from any ExxonMobil stations.

“We take our environmental responsibilities very seriously,” he said. “We also believe that those who are responsible for causing environmental contamination should bear responsibility for addressing it. That said, we're not responsible for the contamination of these wells.”

An attorney for the city was not immediately available for comment on Wednesday.

Unlike other gasoline additives, MTBE can contaminate groundwater if there is a fuel leak, and it is slow to biodegrade. Water that is contaminated with MTBE can taste like turpentine, and the substance has caused cancer in animals, though whether it poses a danger to humans in drinking water is unclear.

Companies that have already settled the case with New York City include BP Amoco Chemical Co., Chevron USA Inc., ConocoPhillips Co., Shell Oil Co., Marathon Oil Co., Valero Energy Corp., Citgo Petroleum Corp., Sunoco Inc., Hess Corp., Flint Hills Resources LP and Tesoro Petroleum Corp.

The case had been consolidated as multidistrict legislation with other cases alleging that oil companies contaminated water with MTBE. In May, many of the oil companies settled with 153 plaintiffs, which included municipalities, water agencies and private water companies, according to Baron & Budd PC, which represented many of the plaintiffs.

The companies agreed to pay the plaintiffs $422 million to address public drinking wells that were contaminated with MTBE, according to court documents. Baron & Budd said many of the companies were aware of the problems posed by MTBE before they began adding them to gasoline.

The additive has been banned in more than 20 states, including California and New York, which had 40 percent of total MTBE consumption in the U.S. Today, it has largely been replaced by ethanol.

ExxonMobil is being represented in the New York City case by McDermott Will & Emery LLP.

The city is being represented by Sher Leff LLP, which specializes in water contamination cases, and the city's law department.

The case is City of New York v. Amerada Hess Corp. et al., case number 04-3417, in the U.S. District Court for the Southern District of New York.

The multidistrict legislation is In re: Methyl Tertiary Butyl Ether Products Liability Litigation, case number 00-1898, in the U.S. District Court for the Southern District of New York.