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In re Methyl Tertiary Butyl Ether (" Mtbe") Products Liability Litigation

United States District Court, Second Circuit

July 31, 2013


Robin Greenwald, Esq., Robert Gordon, Esq., Weitz & Luxenberg, P.C., New York, New York, Counsel for Plaintiffs.

Duane C. Miller, Esq., Michael Axline, Esq., Miller, Axline, & Sawyer, Sacramento, CA, Counsel for RDA.

Peter John Sacripanti, Esq., James A. Pardo, Esq., McDermott Will & Emery LLP, New York, New York, Liaison Counsel for Defendants.

Jeffrey J. Parker, Esq., Whitney Jones Roy, Esq., Sheppard, Mullin, Richter & Hampton LLP, Los Angeles, CA, Counsel for Exxon Mobil Corp. on behalf of Chevron U.S.A. Inc., Shell Oil Co., Equilon Enterprises LLC, Tesoro Corp., and Tesoro Refining and Marketing Co.


SHIRA A. SCHEINDLIN, District Judge.


This is a consolidated multi-district litigation ("MDL") relating to contamination - actual or threatened - from various defendants' use of the gasoline additive methyl tertiary butyl ether ("MTBE") and/or tertiary butyl alcohol, a product formed by the breakdown of MTBE in water. The City of Merced Redevelopment Agency and the Merced Designated Local Authority[1] (collectively, the "RDA") filed the initial complaint in this case in Merced County Superior Court on April 7, 2008.[2] The case was subsequently removed to federal court and transferred to this MDL Court.[3]

The RDA alleges that Exxon Mobil Corporation, Chevron U.S.A. Inc., Shell Oil Company, Equilon Enterprises LLC, Tesoro Corporation, and Tesoro Refining and Marketing Company[4] (collectively, "Defendants") sold gasoline containing MTBE to Merced gasoline stations - identified in this litigation as the 1415 R Street Station and 1455 R Street Station (collectively, the "R Street Stations") - and that MTBE was released into the Merced Redevelopment Project Area to the North of the R Street Stations, causing damage. Based on these allegations, the RDA asserts five claims for: (1) cost recovery under California's Polanco Act;[5] (2) products liability; (3) negligence; (4) trespass; and, (5) nuisance.[6]

Presently before this Court are two motions for partial summary judgment brought by Defendants, seeking to dismiss: (1) the RDA's claims of products liability, negligence, nuisance, and trespass on the grounds that they are time-barred; and (2) the RDA's claims of nuisance and trespass, which cannot be supported by the "mere supply" of gasoline. For the reasons stated below, Defendants' statute of limitations motion is GRANTED. Because the limitations issue also precludes the RDA's claims of nuisance and trespass, Defendants' motion on those grounds is MOOT.


A. The Allegations

The RDA is an agency charged under the California Health and Safety Code with the power to "alter, improve, reconstruct, rehabilitate, modernize and clean up property in the blighted Merced Redevelopment Project Area ("[P]roject [A]rea")."[7] The RDA contends that Defendants are "legally responsible for the costs and damages relating to the presence and abatement of gasoline, hydrocarbons, and MTBE located in or around the Project Area which blight the Project Area, adversely impact the use of the Project Area, depreciate or stagnate property values, and adversely affect the interests of health, safety, and welfare of the people."[8] The RDA alleges that Defendants sold gasoline containing MTBE to Merced gasoline stations, which released it into the environment and "contaminated, polluted, and threatened, and continue[] to contaminate, pollute, and threaten, [the RDA's] Project Area."[9]

The RDA alleges that:

Gasoline containing MTBE [] was released from gasoline delivery systems in Merced until at least 1997 from gasoline retail stations... Over time, MTBE [] migrated down to groundwater and, after several years elapsed, traveled to the Project Area causing pollution, contamination, and interference with [RDA's] Project Area. This appreciable injury and damage occurred for the first time in July 2006, when... the [RDA] was asked to manage [the cleanup project].[10]

The RDA seeks "compensatory damages needed to investigate, remediate, and remove gasoline, hydrocarbons, and MTBE [] contamination, and for past, present, and future remediation and/or investigation costs incurred in or after August 2006."[11]

B. Undisputed Facts Relating to the Statute of Limitations[12]

Between 1991 and 1992, William Cahill, the director of the RDA, negotiated with Costco to build a new store in the City of Merced at a location just North and West of the R Street Stations.[13] During these negotiations, Cahill and the RDA learned of a contamination problem within the vicinity of the R Street Stations caused by a gasoline release.[14] On October 15, 1992, the RDA received a report from Krazan & Associates[15] that confirmed the presence of gasoline contamination in the property area being considered by Costco.[16] The reports indicated that the groundwater in the contaminated area flowed from the R Street Stations to the RDA's property.[17] In 1993, the negotiations between Costco and the RDA to build a new store fell through, but the RDA contracted to lease its property to Costco for use as a parking lot.[18] As part of the lease agreement, the RDA was obligated to perform "all required remediation of environmental hazards on the [p]roperty"[19] and "to make its best efforts... to prevent [the contamination] from migrating onto the rest of [Costco's property]."[20] In 1994, the RDA engaged the owners of the 1415 R Street station - the Shackelfords - to clean up the gasoline contamination at that property.[21]

In 1996, the RDA received a directive from the Department of Public Health for Merced County, the regulator of the cleanup site, to "include MTBE in the chemicals tested for in the next groundwater monitoring event."[22] Tests following this directive detected MTBE at the site, [23] and the RDA knew that MTBE was concentrated in a plume near the R Street Stations that was traveling North along R Street in the groundwater towards the Project Area.[24] By the time MTBE was discovered at the R Street Stations, the RDA was authorized to proceed with remediation and was incurring costs and expenses supervising the cleanup.[25]

In January 2002, the California Regional Water Quality Control Board (the "RWQCB")-the local regulatory agency for the R Street Stations- informed the City of Merced and the RDA that the 1415 R Street Station was a "high priority site because of extremely high concentrations of petroleum hydrocarbons, "[26] including MTBE.[27] A March follow up letter from the RWQCB to the RDA summarized the extensive contamination history of the site and concluded:

The magnitude of the pollution [including MTBE] presently identified in groundwater, the rate of spreading of the pollution, and the threat this poses to the public water supply necessitates the rapid implementation of remedial measures more aggressive and comprehensive than the existing remediation system.[28]

By March 2002, the director of the RDA admitted that he was concerned about the contamination threat, which included MTBE.[29] In August, the RWQCB informed the RDA that there was a release of hydrocarbons from the 1455 R Street Station, and that the plume of polluted groundwater had commingled.[30]

In May 2006, the RWQCB notified the RDA and the R Street Stations that remediation of the plume was not progressing satisfactorily, and that the RWQCB intended to issue a Clean-up and Abatement Order ("CAO").[31] In July, the RWQCB determined that the RDA would manage and lead remediation of the R Street Station properties, [32] and the CAO was issued in October.[33]

In July 2008, the RDA executed a MTBE Remediation Coordination Agreement with the R Street Station owners. The agreement stated:

[The RDA], City, and the Responsible Parties agree that while neither the [RDA] nor the City is a Responsible Party for the storage tank releases at 1415 R Street and 1455 R Street in Merced; the [RDA] shall be the lead in the overall underground MTBE contamination remediation efforts with an immediate focus on preventing MTBE contamination and protecting water quality in and around City Well No. 5.[34]


Summary judgment is appropriate only if the moving party shows "that there is no genuine dispute as to any material fact and [that the party is] entitled to judgment as a matter of law."[35] "A genuine dispute exists if the evidence is such that a reasonable jury could return a verdict for the nonmoving party. A fact is material if it might affect the outcome of the suit."[36]

"The moving party bears the burden of establishing the absence of any genuine issue of material fact."[37] To defeat a motion for summary judgment, the non-moving party must do more than simply show that there is some metaphysical doubt as to the material facts, '"[38] and may not rely on conclusory allegations or unsubstantiated speculation.'"[39]

In deciding a motion for summary judgment, I must "construe the facts in the light most favorable to the non-moving party and must resolve all ambiguities and draw all reasonable inferences against the movant."[40] However, "[c]redibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts are jury functions, not those of a judge.'"[41] "The role of the court is not to resolve disputed issues of fact but to assess whether there are any factual issues to be tried."[42]


A. California Statute of Limitations

Under section 338 of California's Civil Code of Procedure, a three-year statute of limitations applies to all of the claims in this case.[43] Like most jurisdictions, California applies the common law "last element accrual rule: ordinarily, the statute of limitations runs from the occurrence of the last element essential to the cause of action."[44] For claims predicated upon tortious injury to property, such as the RDA's, the element of harm is met upon "harm to the property itself[, ]" as opposed to harm to its owner.[45]

As the Supreme Court of California has observed,

Application of the accrual rule becomes rather complex when... a plaintiff is aware of both an injury and its wrongful cause but is uncertain as to how serious the resulting damages will be or whether additional injuries will later become manifest. Generally, ... even when the extent of damages remains speculative[, ]... we have held that "the infliction of appreciable and actual harm, however uncertain in amount, will commence the statutory period.[46]

California courts recognize a number of exceptions to the last element accrual rule, the most important' of which is the discovery rule.... [which] postpones accrual of a cause of action until the plaintiff discovers, or has reason to discover, the cause of action.[47] In determining whether a plaintiff has or should have discovered its injury, California courts consider both the plaintiff's "actual knowledge as well as knowledge that could reasonably be discovered through the investigation of sources open to [the plaintiff]."[48] Generally, a plaintiff "need not be aware of the specific facts necessary to establish the claim[;]"[49] rather, once it "has a suspicion of wrongdoing[, ]" it will be charged with knowledge of its injury.[50] The law of the case establishes that a claim for MTBE injury begins to run when: (1) MTBE is present in the groundwater and "results in a contamination of the groundwater"; or, (2) "the presence of MTBE in the groundwater caused or should have caused [a water district] to take some action."[51]


A. The RDA's Claims of Products Liability, Negligence, Nuisance, and Trespass Are Barred by California's Statute of Limitations

Because the RDA had knowledge of MTBE contamination and began incurring costs actively remediating such contamination long before April 7, 2005, California's statute of limitations bars its claims for products liability, negligence, nuisance, and trespass. It is undisputed that the RDA began incurring costs for MTBE clean-up as early as 1996, [52] and was actively remediating MTBE contamination at the R Street Stations by and before 2002.[53] Indeed, it is these precise remediation costs that form the basis for the RDA's claims.[54] Thus, the conclusion that the RDA's claims accrued outside of the limitations period is inescapable.

The RDA's position that the appreciable injury and damage to the Project Area first occurred in July 2006, when the RDA executed the CAO, is untenable.[55] It is undoubtedly the case that neither the mere presence of MTBE, [56] nor an "investigation which discloses no contamination" constitutes appreciable harm giving rise to a cause of action under California law.[57] However, as stated above, the RDA was actively remediating MTBE contamination by 2002 at the R Street Stations, [58] and incurred costs for MTBE clean up as early as 1996.[59] It is therefore plain that the RDA suffered "appreciable and actual harm, however uncertain in amount' well outside the limitations period.[60]

Finally, the RDA's argument that, in order to prevail, Defendants must show that its properties, not the R Street Stations, were harmed outside of the statute of limitations is self-defeating.[61] Even if they were so inclined, Defendants cannot show harm to the RDA's properties because no evidence of such harm exists. In other words, no claim has accrued as to those properties; and if the RDA intends to assert such a claim without presenting any evidence of harm, then it would be summarily dismissed as unripe.

Of course, the claims that the RDA is actually asserting allege contamination stemming from the R Street Stations, not direct injury to the RDA's property.[62] And because the RDA suffered the harm giving rise to these claims well outside the limitations period, these claims must be dismissed. As a result of this conclusion, Defendants' second motion for summary judgment on nuisance and trespass is moot, and I do not reach it.


For the foregoing reasons Defendants' Motion for Summary Judgment Re: Statute of Limitations is GRANTED, and Defendants' Motion for Summary Judgment Re: Nuisance and Trespass is MOOT. The Clerk of the Court is directed to close these motions (Doc. Nos. 147 and 151).


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