Legal Watch: Volume 21

Prepared by William H. Bode
Bode & Grenier, LLP
1150 Connecticut Ave., NW
Washington, D.C. 20036
Telephone: 202-862-4300 | Email: wbode@bode.com

ATTEMPTS TO STOP MTBE LITIGATION DENIED BY COURT

Case Summary: The MTBE class action litigation pending before the U.S. District Court the Southern District of New York continues to spew out decisions (over forty to date) in a case that could find refiners, blenders, distributors, and retailers liable for damages into the billions of dollars. The consolidated multi-district (MDL) litigation pits thousands of property owners, including cities, counties, and states, against virtually the entire oil industry. (Any of the hundred plus defendants could, if found liable, file suits for contribution against all entities in the distribution chain, including terminal operators). The Court has found that MTBE is highly soluble in water and does not readily biodegrade. Because of its high solubility, MTBE races through the underground water supply, eventually contaminating wells and underground aquifers. The Court has found that MTBE imparts a foul taste and odor to water and renders it unusable and unfit for human consumption. MTBE is carcinogenic in animals and may carcinogenic in humans. The Plaintiffs allege that the defendants began selling MTBE containing gasoline in 1979 and by the 1990s, MTBE concentrations between eleven and fifteen percent. The plaintiffs have alleged a litany of claims including that MTBE is an inherently dangerous product –- a claim that blocks most defenses. The Court has previously denied motions to strike the “inherently dangerous product” claims. In two recent decisions, the Court denied two motions to derail the litigation. In the first, Defendants moved for summary judgment on the grounds that plaintiffs claims are preempted by the Clear Air Act (CAA) because “compliance with both federal and state law is a physical impossibility;” or the claims stand as an obstacle to the accomplishment of the objectives of Congress. In the second motion for summary judgment, other Defendants contend that the plaintiffs may not use theories based on “Market Share” or joint and several liability. In denying the first motion, the Court found that CAA did not mandate the use of MTBE as an oxygenate, despite plaintiffs’ argument that it would have been impossible to satisfy the oxygenate requirements imposed by the CAA using only ethanol. In denying the second motion, the Court held that the plaintiffs may proceed using different theories of liability. In so holding the Court ruled, however, that it would be unfair to hold all industry participants – “manufacturers, refines, distributors, suppliers, and/or marketers of MTBE” jointly and severally liable. Rather, the Court ruled, each party’s contribution should be assessed at trial.

LESSON: This litigation demonstrates that even following government mandates may not shield a terminal operator from liability. At this juncture, it would be imprudent for a terminal operator to handle MTBE-containing gasoline without first obtaining indemnification from the supplier/provider. The MPL Panel’s refusal to dismiss the claim that MTBE is an inherently dangerous product makes handling MTBE-containing gasoline a high risk business endeavor. In Re: Methyl Tertiary Butyl Ether (“MTBE”) Products Liability Litigation: (A) Relating to All Cases and (B) Relating to County of Suffolk and Suffolk County Water Authority v. Amerada Hess

Please address any comments or questions to Mr. Bode at 202-862-4300 or wbode@bode.com.

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