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IN RE

United States District Court, S.D. New York


August 11, 2005.

IN RE: METHYL TERTIARY BUTYL ETHER ("MTBE") PRODUCTS LIABILITY LITIGATION. This document relates to: American Distilling & Manufacturing Co.
v.
Amerada Hess Corp., et al., No. 04 Civ. 1719. Columbia Board of Education v. Amerada Hess Corp., et al., No. 04 Civ. 1716. Our Lady of the Rosary Chapel v. Amerada Hess Corp., et al., No. 04 Civ. 1718. Town of East Hampton v. Amerada Hess Corp., et al., No. 04 Civ. 1720. United Water of Connecticut v. Amerada Hess Corp., et al., No. 04 Civ. 1721. Escambia County Utilities Authority v. Amerada Hess Corp., et al., No. 04 Civ. 1722 Village of Island Lake v. Amerada Hess Corp., et al., No. 04 Civ. 2053. City of Mishawaka v. Amerada Hess Corp., et al., No. 04 Civ. 2055. North Newton School Corp. v. Amerada Hess Corp., et al., No. 04 Civ. 2057. City of Rockport v. Amerada Hess Corp., et al., No. 04 Civ. 1724. Town of Campbellsburg, Ind. v. Amerada Hess Corp., et al., No. 04 Civ. 4990. City of South Bend v. Amerada Hess Corp., et al., No. 04 Civ. 2056. City of Galva v. Amerada Hess Corp., et al., No. 04 Civ. 1723. City of Dodge City v. Amerada Hess Corp., et al., No. 04 Civ. 2060. City of Bel Aire, et al. v. Amerada Hess Corp., et al., No. 04 Civ. 2062. City of Park City v. Amerada Hess Corp., et al., No. 04 Civ. 2059. Chisholm Creek Utilities Authority v. Amerada Hess Corp., et al., No. 04 Civ. 2061. Town of Rayville v. Amerada Hess Corp., et al., No. 04 Civ. 3413. Town of Marksville v. Amerada Hess Corp., et al., No. 04 Civ. 3412. Town of Duxbury v. Amerada Hess Corp., et al., No. 04 Civ. 1725. City of Portsmouth v. Amerada Hess Corp., et al., No. 04 Civ. 2066. City of Dover v. Amerada Hess Corp., et al., No. 04 Civ. 2067. New Jersey American Water Co. v. Amerada Hess Corp., et al., No. 04 Civ. 1726. Town of Wappinger v. Amerada Hess Corp., et al., No. 04 Civ. 2388 United Water New York, Inc. v. Amerada Hess Corp., et al., No. 04 Civ. 2389. Village of Pawling v. Amerada Hess Corp., et al., No. 04 Civ. 2390. Roslyn Water District v. Amerada Hess Corp., et al., No. 04 Civ. 5422. Port Washington Water District v. Amerada Hess Corp., et al., No. 04 Civ. 3415. Long Island Water Corp. v. Amerada Hess Corp., et al., No. 04 Civ. 2068. Incorporated Village of Sands Point v. Amerada Hess Corp., et al., No. 04 Civ. 3416. Hicksville Water District v. Amerada Hess Corp., et al., No. 04 Civ. 5421. Franklin Square Water District v. Amerada Hess Corp., et al., No. 04 Civ. 5423. City of New York v. Amerada Hess Corp., et al., No. 04 Civ. 3417 County of Suffolk, et al. v. Amerada Hess Corp., et al., No. 04 Civ. 5424. County of Nassau v. Amerada Hess Corp., et al., No. 04 Civ. 9543. Water Authority of Great Neck North v. Amerada Hess Corp., et al., No. 04 Civ. 1727. Water Authority of Western Nassau v. Amerada Hess Corp., et al., No. 04 Civ. 9544. Northampton Bucks County Municipal Authority v. Amerada Hess Corp., et al., No. 04 Civ. 6993. Town of Hartland v. Amerada Hess Corp., et al., No. 04 Civ. 2072. Craftsbury Fire District # 2 v. Amerada Hess Corp., et al., No. 04 Civ. 3419. Buchanan County School Board v. Amerada Hess Corp., et al., No. 04 Civ. 3418 Patrick County School Board v. Amerada Hess Corp., et al., No. 04 Civ. 2070. Town of Matoaka v. Amerada Hess Corp., et al., No. 04 Civ. 3420.

The opinion of the court was delivered by: SHIRA SCHEINDLIN, District Judge

OPINION AND ORDER

I. INTRODUCTION

Plaintiffs bring these actions seeking relief from the actual or threatened contamination of their groundwater with methyl tertiary butyl ether ("MTBE"), a chemical added to gasoline. Defendant Lyondell-Citgo Refining LP ("LCR") moves, pursuant to Rule 12(b)(2) of the Federal Rules of Civil Procedure, to dismiss the complaints filed against it in fifteen states: Connecticut, Florida, Illinois, Indiana, Iowa, Kansas, Louisiana, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Vermont, Virginia, and West Virginia (collectively, "forum states"). Defendant Equistar Chemicals, LP ("Equistar") also moves to dismiss for lack of personal jurisdiction in cases filed in nine states: Connecticut, Indiana, Kansas, Massachusetts, New Hampshire, New York, Vermont, Virginia, and West Virginia.*fn1 For the reasons stated below, both defendants' motions are denied.*fn2

  II. BACKGROUND

  A. LCR

  LCR is a major producer of petroleum products in the United States, earning revenues of $4.2 billion in 2003.*fn3 MTBE-containing gasoline is among the products manufactured at LCR's refinery in Houston, Texas.*fn4 In addition to gasoline, LCR derives substantial revenue from selling chemical products, such as benzene, toluene, orthoxylene, and paraxylene.*fn5 These chemicals are used to manufacture consumer goods, ranging from clothing, plastics, drinking cups and soft drink bottles to upholstery, videotapes, paints, and resins.*fn6

  LCR is a joint venture between Lyondell Chemical Company ("Lyondell"), which owns 58.75% of the company, and Citgo Petroleum Corporation ("Citgo"), which owns the remaining 41.25%.*fn7 LCR is part of the Lyondell "enterprise," which includes Lyondell's own chemicals business, and the Equistar, Millennium Chemicals, Inc., and LCR businesses.*fn8 Lyondell, Citgo, and Equistar are parties to a number of agreements with LCR with respect to product sales, raw materials, and administrative services.*fn9 These agreements specifically provide for cooperation among them to produce MTBE and MTBE-containing gasoline.*fn10 Each year LCR purchases forty-four million gallons of MTBE from Equistar for blending into gasoline.*fn11

  LCR sells approximately 120,000 gallons of MTBE-containing gasoline per day (or 48.3 million gallons per year).*fn12 "Substantially all" of its gasoline is sold to Citgo, which then distributes the gasoline via its nationwide network of branded retail locations, 7-Eleven convenience stores, and independent branded marketers throughout the country.*fn13 Citgo's nationwide distribution network reaches nearly every state (including all of the states where LCR contests jurisdiction) through a network of over 13,500 locations, five refineries, and fifty-six refined product terminals throughout the United States.*fn14

  B. Equistar

  Equistar is a wholly-owned subsidiary of Lyondell.*fn15 It is one of the world's largest chemical producers, generating revenues of $6.5 billion and amassing assets of $5 billion in 2003.*fn16 Equistar has sixteen manufacturing facilities that produce various chemicals "used in countless items that make everyday living safer, healthier and more convenient."*fn17 It is North America's second largest producer of ethylene, the world's most widely used petrochemical, and the third largest producer of polyethylene in North America.*fn18 In addition, Equistar produces 284 million gallons of MTBE per year (or approximately 18,500 barrels each day).*fn19 Plaintiffs estimate that from 1998 to 2003, Equistar generated revenue amounting to approximately $124,000,000 in Connecticut; $513,000,000 in Indiana; $311,000,000 in Kansas; $205,000,000 in Massachusetts; $65,000,000 in New Hampshire, $346,320,000 in New York; $28,000,000 in Vermont; $451,000,000 in Virginia; and $92,000,000 in West Virginia*fn20 — an aggregate of approximately $2.1 billion from direct sales of various products to the nine states where it now contests jurisdiction.*fn21

  Pursuant to a "Shared Services Agreement," Equistar shares many business services with the other members of the Lyondell enterprise, such as engineering, research and development, information technology, human resources, sales and marketing, raw material supplies, physical office space, and facility services.*fn22 In addition, the companies are also managed by a single team in which all of Equistar's executive officers are also officers of Lyondell, and Equistar's chief executive officer is designated by Lyondell.*fn23

  As noted above, the companies comprising Lyondell's enterprise also cooperate to produce and market MTBE and MTBE-containing gasoline. Using technology licensed from Lyondell, Equistar produces MTBE at two facilities located in Texas: Channelview and Chocolate Bayou.*fn24 Output from these facilities, other than one Channelview facility, is sold to Lyondell for resale.*fn25 Lyondell supplies MTBE to refiners, such as ExxonMobil, that operate on a nationwide level.*fn26 The remaining facility produces approximately one-third of Equistar's MTBE, and is sold to LCR for blending into gasoline that is then distributed through Citgo's nationwide distribution network.*fn27 Equistar's MTBE also reaches the national market through sales to other refiners with broad distribution.*fn28

  III. LEGAL STANDARD

  A court must dismiss an action against any defendant over whom it lacks personal jurisdiction.*fn29 On a Rule 12(b)(2) motion to dismiss for lack of personal jurisdiction, the plaintiff bears the burden of establishing, by a preponderance of the evidence, that the court has jurisdiction over the defendant.*fn30 "Where, as here, a court relies on pleadings and affidavits, rather than a full blown evidentiary hearing, the plaintiff need only make a prima facie showing that the court possesses personal jurisdiction over the defendant."*fn31 "A plaintiff can make this showing through [its] own affidavits and supporting materials, containing [a] [good faith] averment of facts that, if credited . . ., would suffice to establish jurisdiction over the defendant."*fn32 When the issue is addressed on affidavits, a court must construe all allegations in the light most favorable to the plaintiff and resolve all doubts in the plaintiff's favor.*fn33 Thus, a court accepts as true all of the plaintiff's averments of jurisdictional facts.*fn34

  The determination of whether a federal court has personal jurisdiction over a defendant is a two-part inquiry. First, a court must evaluate whether jurisdiction is proper under the state's long-arm statute. Second, it must determine whether the exercise of personal jurisdiction comports with the requirements of due process.*fn35 Because several of the forum states permit the exercise of personal jurisdiction to the full extent of the Due Process Clause,*fn36 I address the constitutional question first.

  IV. DISCUSSION

  A. The Assertion of Jurisdiction over Both Defendants in Each Forum State Comports with the Requirements of Due Process

  The Due Process Clause of the Fourteenth Amendment requires that the exercise of personal jurisdiction over a nonresident defendant comports with "traditional notions of fair play and substantial justice."*fn37 "Thus, at the most general level, the due process nexus analysis requires that we ask whether an individual's connections with a State are substantial enough to legitimate the State's exercise of power over him."*fn38 In the Second Circuit, the due process analysis consists of two components: the "minimum contacts" test and the "reasonableness" inquiry.*fn39

  "In determining whether minimum contacts exist, the court considers `the relationship among the defendant, the forum, and the litigation.'"*fn40 The minimum contacts between the defendant and the forum state may give rise to either specific or general jurisdiction. In order to justify specific jurisdiction, the plaintiff must show that the claim arises from, or relates to, the defendant's contacts with the forum state.*fn41 As I explained in my January 18 Opinion and Order ("Jan. 18 Opinion"), a corporation can establish minimum contacts with every state by deliberately "priming" and "pumping" the nationwide market with its products.*fn42 "A state may assert general jurisdiction — i.e., jurisdiction irrespective of whether the claim arises from or relates to the defendant's forum contacts — only where these contacts are `continuous and systematic.'"*fn43

  The second part of the jurisdictional analysis inquires whether it is reasonable under the circumstances of the particular case for a state to assert jurisdiction over the defendant.*fn44 In evaluating reasonableness, courts are to consider five factors:

  (1) the burden that the exercise of jurisdiction will impose on the defendant; (2) the interests of the forum state in adjudicating the case; (3) the plaintiff's interest in obtaining convenient and effective relief; (4) the interstate judicial system's interest in obtaining the most efficient resolution of the controversy; and (5) the shared interest of the states in furthering substantive social policies.*fn45 "Where a plaintiff makes the threshold showing of the minimum contacts required for the first test, a defendant must present `a compelling case that the presence of some other considerations would render jurisdiction unreasonable.'"*fn46

  1. Minimum Contacts

  a. LCR

  LCR is subject to personal jurisdiction in each of the forum states because it supplies MTBE-containing gasoline to the national market. LCR argues that the forum states lack jurisdiction because LCR sells its gasoline to only one buyer. However, that buyer is Citgo, whose nationwide distribution network reaches every one of the relevant states. By selling large volumes of MTBE-containing gasoline to a nationwide distributor, LCR expected, or reasonably should have expected, its product to reach all of the states in the nation. Thus, LCR purposefully availed itself of the privilege of doing business in the forum states, such that it could reasonably foresee being haled into court in those states.*fn47 LCR also maintains "continuous and systematic" contacts with the forum states sufficient to support the exercise of general jurisdiction. As noted above, LCR derives substantial revenue from the production and sale of other chemicals throughout the country in addition to MTBE-containing gasoline. The production, sale, and marketing of these chemicals is accomplished through a collaboration of members of the Lyondell enterprise.*fn48 In my Jan. 18 Opinion, I noted that the sale of chemicals nationwide provided "continuous and systematic" contact with the forum states, which would permit general jurisdiction over Lyondell.*fn49 Similarly, the same "continuous and systematic" contact between LCR and the forum states is established by its efforts to sell its products in a national stream of commerce. Thus, LCR is subject to general jurisdiction in each of the forum states.*fn50

  b. Equistar

  By the same reasoning, Equistar has sufficient minimum contacts with the nine forum states where it contests jurisdiction.*fn51 As discussed above, plaintiffs in the forum states allege that Equistar is a significant participant in the MTBE market. Equistar's MTBE is produced in Texas and then reaches the forum states through arrangements with members of the Lyondell enterprise and through sales to other refiners with nationwide distribution. For instance, Equistar sells MTBE to LCR and Lyondell, who in turn supply MTBE and MTBE-containing gasoline to Citgo and ExxonMobil, respectively. Additionally, Equistar must have been aware of the nationwide distribution scheme used by Lyondell and LCR, given its close corporate relationship with these members of the Lyondell enterprise.*fn52 Equistar's deliberate participation in the national market for MTBE shows its intent to serve the markets of all the forum states.*fn53

  Plaintiffs have also made the required prima facie showing to support a finding of general jurisdiction over Equistar in each of the forum states. From 1998 to 2003, Equistar earned approximately $2.1 billion from direct sales to the relevant forum states.*fn54 Even if the revenue from each state comprises only a small fraction of Equistar's total revenue, that is not dispositive.*fn55 The regular sale of its products to customers in each forum state is the type of "continuous and systematic" contact sufficient for general jurisdiction.*fn56 In addition, Equistar maintains a constant sales presence in Connecticut, Indiana, and Kansas by employing at least one sales representative based in each of those states.*fn57

  2. Reasonableness

  An assessment of the Second Circuit's five reasonableness factors favors the exercise of personal jurisdiction. LCR and Equistar have not shown, nor have they asserted, that they will bear any unique burden litigating in any of the states where either contests jurisdiction.*fn58

 

Even if forcing the defendant to litigate in a forum relatively distant from its home base were found to be a burden, the argument would provide defendant only weak support, if any, because the conveniences of modern communication and transportation ease what would have been a serious burden only a few decades ago.*fn59
  On the other hand, the interests of both plaintiffs and the forum states make jurisdiction over LCR and Equistar reasonable. Because "this litigation implicates each of the states' most precious natural resource — water, . . . each of the states has an unquestionable interest in adjudicating the claims."*fn60 Plaintiffs in this case have the same interest as that of the forum states because they are cities, municipalities, and other entities that provide citizens of those states with water. In addition, each state has an interest in providing citizens redress for injuries caused within its borders by an allegedly defective product — in this case MTBE-containing gasoline.*fn61 In evaluating the factor concerning the efficient administration of justice, courts generally consider the location of witnesses and evidence.*fn62 The witnesses and evidence concerning groundwater contamination will be located in the forum states where water has been contaminated.*fn63 Lastly, there is no indication that any substantive social policy will be advanced or impeded by the exercise of jurisdiction over LCR or Equistar by the forum states.

  In sum, this is not the "exceptional situation" where the exercise of personal jurisdiction would be unreasonable.*fn64 The first four factors tip in plaintiffs' favor while the fifth factor is neutral. Therefore, the forum states may exercise jurisdiction over LCR and Equistar consistent with due process.

  B. State Law Permits the Exercise of Personal Jurisdiction over LCR and Equistar

  1. Long Arm Statutes Coextensive with Due Process Clause

  The second part of the jurisdictional inquiry requires the Court to determine whether the exercise of personal jurisdiction accords with state law. The long-arm statutes in several forum states extend personal jurisdiction to the limits of the federal Due Process Clause. These include: Illinois,*fn65 Indiana,*fn66 Iowa,*fn67 Louisiana,*fn68 New Hampshire,*fn69 New Jersey,*fn70 Pennsylvania,*fn71 and Vermont.*fn72 Because the exercise of personal jurisdiction over LCR and Equistar in these states comports with the requirements of due process, it also falls within the scope of each of these states' laws.*fn73 For the reasons discussed below, LCR and Equistar are also subject to personal jurisdiction in the remaining forum states.*fn74

  2. Causing Tortious Injury Within the State by Acts or Omissions Outside the State

  The long-arm statutes of Florida, Kansas, Massachusetts, New York, Virginia, and West Virginia each permit the exercise of jurisdiction over a non-resident defendant if the defendant caused tortious injury within the state by acts or omissions outside the state, provided that one or more additional conditions are met.*fn75 Plaintiffs allege that defendants, including LCR and Equistar, committed tortious acts by intentionally or negligently manufacturing, marketing, distributing, and/or selling MTBE throughout the United States, without warning of its harmful environmental and health effects.*fn76 These acts and omissions by defendants allegedly caused injury in the relevant forum states — namely, the contamination of groundwater with MTBE — which gives rise to plaintiffs' causes of action.*fn77 Plaintiffs' allegations therefore satisfy the "causing tortious injury" element of the six long-arm statutes. However, other statutory conditions must still be met for the Court to exercise jurisdiction over both defendants. a. Florida and Kansas

  In addition to causing tortious injury, Florida and Kansas require that at or about the time of injury, "[p]roducts, materials, or things processed, serviced, or manufactured by the defendant anywhere were used or consumed within [Florida and Kansas] in the ordinary course of commerce, trade, or use."*fn78

  LCR and Equistar are subject to personal jurisdiction because at the time of injury, their products were being used or consumed in Florida and Kansas. It is reasonable to assume that LCR's gasoline reached the Florida and Kansas markets because LCR sells "substantially all" of its gasoline to Citgo, which then distributes the product through its nationwide network. Equistar also sells its product to intermediaries — LCR and Lyondell — which supply the Kansas market. For instance, Lyondell supplies Exxon Mobil with MTBE-containing gasoline and admits selling MTBE directly to customers in Kansas.*fn79 That other entities marketed and distributed defendants' products is not determinative because both defendants could reasonably expect their MTBE and MTBE-containing gasoline to be used in any state in which Citgo or Lyondell operate.*fn80 Furthermore, plaintiffs estimate that from 1998 to 2003, Equistar generated approximately $311,000,000 in revenue from direct sales of its other products in Kansas.*fn81 Therefore, the exercise of personal jurisdiction over LCR and Equistar in the Florida and Kansas cases comports with state law.*fn82

  b. Massachusetts, Virginia, and West Virginia

  The long-arm statutes of Massachusetts, Virginia, and West Virginia all confer jurisdiction over a foreign defendant causing injury in the state by tortious acts or omissions outside the state "if [it] [1] regularly does or solicits business, or [2] engages in any other persistent course of conduct, or [3] derives substantial revenue from goods used or consumed or services rendered" in the state.*fn83

  Jurisdiction over LCR and Equistar is permitted under these long-arm statutes because they both satisfy the "substantial revenue" prong. In determining whether a defendant derived substantial revenue from the sale of its products in a state, courts generally do not set a minimum dollar amount of revenue. Instead, the substantial revenue prong is satisfied by showing that the defendant derived some financial benefit, such as the sale of its products on a regular basis.*fn84 Clearly, LCR has benefitted financially from Citgo's sale of gasoline across the country on a regular basis. In addition, Plaintiffs estimate that from 1998 to 2003, Equistar generated revenues of $205,000,000 in Massachusetts, $451,000,000 in Virginia, and $92,000,000 in West Virginia from sales of its products.*fn85 These amounts are substantial and are sufficient to confer jurisdiction over Equistar. Thus, LCR and Equistar are subject to jurisdiction in Massachusetts, Virginia, and West Virginia.

  c. New York

  New York's long-arm statute allows the assertion of jurisdiction over a foreign defendant who causes injury in the state by tortious acts outside the state "if [it] . . . expects or should reasonably expect the act to have consequences in the state and derives substantial revenue from interstate or international commerce."*fn86 The foreseeability test is objective and relates to "forum consequences generally, and not to the specific event which produced the injury within the state."*fn87 A determination of what is "substantial" may be based on either the absolute amount or the percentage of a defendant's income derived from interstate commerce.*fn88 This requirement ensures that the defendant is not a purely local business unable to defend a suit brought against it in New York.*fn89

  Equistar produces 18,500 million gallons of MTBE per day, while LCR sells 120,000 gallons of MTBE-containing gasoline per day.*fn90 Because Equistar sells to Lyondell and LCR, and LCR sells "substantially all" of its gasoline to Citgo, both defendants expected or should have reasonably expected their products to reach and have consequences in New York.*fn91 This is especially so given that LCR, Equistar, Lyondell, and Citgo are all part of the same corporate enterprise. Furthermore, both defendants derived "substantial revenue" from interstate and international sales. In 2003, LCR and Equistar generated revenue of approximately $4.2 billion and $6.5 billion, respectively.*fn92 Accordingly, New York may exercise personal jurisdiction over LCR and Equistar.

  3. Reasonable Expectation

  Connecticut's long-arm statute permits personal jurisdiction over a foreign corporation for any cause of action arising

 

out of the production, manufacture or distribution of goods by such corporation with the reasonable expectation that such goods are to be used or consumed in th[e] state and are so used or consumed, regardless of how or where the goods were produced, manufactured, marketed or sold or whether or not through the medium of independent contractors or dealers. . . .*fn93
The plaintiff does not need to show that the offending goods were sold in Connecticut.*fn94 Instead, jurisdiction over a nonresident manufacturer is proper if it could have reasonably anticipated facing litigation in Connecticut resulting from its product distribution.*fn95 A "reasonable expectation" may even arise through indirect marketing and distribution channels.*fn96

  Jurisdiction over LCR and Equistar is proper under Connecticut's long-arm statute. Equistar makes MTBE at its sixteen manufacturing facilities, while LCR blends MTBE into gasoline at its refinery in Houston, Texas. As previously discussed, Equistar sells its products to Lyondell and LCR, which then distribute the products nationwide through companies, such as Exxon Mobil and Citgo. Having contracted with Citgo and knowing of Lyondell's distribution scheme, both defendants had a reasonable expectation that their products would be consumed in every state where Exxon Mobil and Citgo do business, including Connecticut.*fn97 Plaintiffs' causes of action arise out of defendants' manufacture and distribution of products because MTBE allegedly contaminated the groundwater in Connecticut.*fn98 Thus, Connecticut may exercise personal jurisdiction over LCR and Equistar based on this "reasonable expectation" ground.

  V. CONCLUSION

  In conclusion, the exercise of personal jurisdiction over LCR and Equistar accords with both state and federal law. For the reasons set forth above, LCR and Equistar's Rule 12(b)(2) motions to dismiss are denied. The Clerk of the Court is directed to close these motions. A conference is scheduled for September 9, 2005, at 10:00 a.m. in Courtroom 15C.

  SO ORDERED.


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