Second Circuit's OK of NYC's $104 Million Judgment Against ExxonMobil Opens Door To Future Lawsuits

COMMACK, N.Y. - Aug. 26, 2013 - PRLog -- United States Court of Appeals for the Second Circuit Affirms $104.69 Million Judgment in Favor of New York City Against Exxon Mobil for MTBE Contamination Based on Common Law Claims, Opening the Door to Future Litigation That Will Include Companies and Individuals That Likely Never Would Have Been Named in the Past.

Following an eleven week trial presided over by Judge Sheira Scheindlin in the Southern District of New York, the jury awarded New York City judgment in the amount of $104.69 million against Exxon Mobil for Exxon Mobil’s alleged contribution to the contamination of Station Six wells in Jamaica, Queens.  The trial proceeded in three phases.  In Phase I, the City established that it had good faith intent to begin construction of the Station Six facility within the next fifteen years and that it intends to use the Station Six wells within the next fifteen to twenty years as a back-up source of drinking water.  In Phase II, the jury found that MTBE would be in the “capture zone” of the wells when they began operating, and that the concentration of MTBE would peak at a concentration of 10 ppb by 2033.  In Phase III, the City proved by a fair preponderance of the credible evidence that a reasonable water provider in the City’s position would treat the water to reduce the levels or minimize the effect of the MTBE on the combined outflow of the wells in order to use the water as a back-up source of drinking water.   The jury found Exxon Mobil liable to the City based on State tort theories: negligence, trespass, public nuisance and failure to warn.  Finally, the jury found that the City’s total damages arising from the contamination of the Station Six facility was $250.5 million, that this must be reduced by $70 million, reflecting the anticipated cost of remediating pre-existing PCE contamination, and that 42 percent of the remainder of the injury to the City should be attributed to companies other than Exxon Mobil, leaving $104.6 million as Exxon Mobil’s share of the City’s damages.  The jury took into account testimony that, because of mixing of brands prior to distribution, the gasoline sold by every station in Queens likely contained some of Exxon’s gasoline, and that Exxon was responsible for approximately 25 percent of gasoline sold in Queens during the relevant period.  In addition, the jury found that leaks of gasoline occurred regularly at gas stations.

The United States Court of Appeals for the Second Circuit affirmed the verdict in a lengthy decision on July 26, 2013, which provides fodder for numerous law school final exam questions in Civil Procedure and Torts.  The decision, however, may go far beyond its pedagogical implications.  Without resort to strict liability statutes like the Navigation Law, and a damage claim that seemed speculative at best, the Second Circuit Court of Appeals has set out a road map for the State of New York and water purveyors to seek substantial damages against any company that has contributed to groundwater contamination within the area from which groundwater can be expected to eventually migrate to the wells, even if the contaminants are not expected to reach the wells in significant concentrations for many years.

The City purchased the Station Six Wells in 1996 with the goal of using the wells in the future as a back-up for the City’s water supply.  In April 2000, MTBE was first detected in Station Six Wells at readings between 0.73 ppb and 1.5 ppb.  By January, 2003, MTBE levels reached 350 ppb in one of the wells.  However, none of the wells had been used for the drinking water distribution system and construction of the planned treatment system had not yet begun.  In October 2003, the City sued Exxon and twenty-six other petroleum companies, complaining of injuries to the City’s water supply from gasoline containing MTBE.  All defendants settled except Exxon Mobil.

Exxon Mobil argued that the case was not “ripe” for adjudication, because it was speculative whether the City would ever use the Station Six Wells, but, if the City’s claims were ripe, they were barred by the applicable statute of limitations.   The Second Circuit held that the City’s claims were ripe because the City did not bring suit until testing showed the presence of MTBE in the wells, “and the question whether the injury was significant enough for the City to prevail on its claims under New York law was a question for the jury.”   That the City might not use the wells for fifteen years did not preclude the finding that the claims are ripe.  The Court further noted that New York’s statute of limitations applicable to toxic torts does not apply to the continuing wrong doctrine.  When an injury to person or property is from exposure to a toxic substance, the person injured must commence suit within three years of when he or she knew or should have known of the injury.  Thus even though the presence of MTBE in the groundwater is continuous, the statute of limitations runs from the first discovery of injury.  For this reason, the Court reasoned, dismissing the City’s claims on ripeness grounds would foreclose the possibility of relief because of the statute of limitations, creating “a hardship and inequity of the highest order.”

Certain holdings of the Second Circuit will be cited frequently in future litigation. For example, in its discussion of negligence, the Court found “Exxon’s timely knowledge of the particular dangers of MTBE, combined with evidence about remedial measures available as early as the 1980’s, was sufficient to allow the jury to determine that Exxon breached the standard of ordinary care.”  Remarkably, the Court then gave as an example of how Exxon could be found to have breached that standard by observing that “Exxon could have installed remediation systems at its stations, which would have permitted station operators to begin the clean-up process as soon [as] they detected a gasoline leak.”

With regard to trespass, the Court rejected Exxon’s argument that the City failed to establish an interference with its water rights because there was no proof that MTBE would exceed the Maximum Contaminant Level (“MCL”) established for MTBE.  Noting that New York courts “have held that a plaintiff may suffer injury from contamination at levels below an applicable regulatory threshold”, the Court agreed with the City that the jury could find that a reasonable water provider would have treated the MTBE contaminated water at Station Six.

 
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