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Court Upholds $104.69 Million Damage Award Against Exxon Mobil for MTBE Contamination of New York City Groundwater

By: Willis Hon

On July 26, 2013, the U.S. Court of Appeals for the Second Circuit upheld a 2009 lower court jury’s $104.69 million damage award against Exxon Mobil Corp. for contaminating New York City’s groundwater with the gasoline additive methyl tertiary butyl ether (“MTBE”).

New York City initially sued Exxon Mobil and other petroleum companies in 2003, alleging that they knew that MTBE would pollute groundwater and ignored warnings from their own scientists and engineers not to use the additive in areas where groundwater has been proposed as a drinking water supply. Exxon Mobil responded that the City’s common law claims were preempted by the federal Clean Air Act, which from the mid-1990s through 2004 required use of gasoline oxygenates, such as MTBE, in New York City.

The lower court proceedings involve an 11-day trial; the jury deliberated for an additional 11 days before reaching its verdict in 2009. The court held that Exxon Mobil was liable for the contamination and the jury found a damage award of $104.69 million attributable to Exxon Mobil of the total $250.5 million New York City claimed it would cost to remediate the contamination (42 percent of the fault was attributed to other petroleum companies).

U.S. District Judge Shira Scheindlin, who authored the lower court opinion, ruled that the company would not be liable for punitive damages because they hadn’t recklessly disregarded risks posed by MTBE. The appeals court agreed with Judge Scheindlin and denied cross-appeals by the City on the question of punitive damages.

The appeals court also rejected Exxon Mobil’s request for a retrial on the ground of juror misconduct. The company alleged that Judge Scheindlin should have declared a mistrial after one juror complained that she was threatened by another. Exxon Mobil claimed that the threatened juror, who was ultimately released, was harassed because her opinion differed from her fellow jurors’.

Several other similar complaints have been brought in courts around the country against Exxon Mobil and other oil companies. In April, a New Hampshire jury ruled that Exxon Mobil would have to pay $236 million for MTBE contamination of drinking water in the state, a verdict that the company is currently appealing.

MTBE has been used in U.S. gasoline at low levels since 1972 to replace lead as an octane enhancer. Its use in gasoline increased between 1992 and 2005 in order to fulfill oxygenate requirements set by Congress in the 1990 Clean Air Act Amendments. However, increasing numbers of studies have detected MTBE in groundwater throughout the country, in some instances contaminating sources of drinking water. Several states have enacted legislation banning MTBE use in gasoline – New York has banned MTBE since January 1, 2004.

Exxon Mobil has indicated through their spokesperson that the company intends to file an appeal to the United States Supreme Court.

For further information, please contact Devin McDougall.

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