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

United States District Court, S.D. New York

July 30, 2014


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

Zachary W. Carter, Corporation Counsel of the City of New York, Susan E. Amron, Elizabeth Harris, Assistant Corporation Counsel, New York, NY,

Victor M. Sher, Esq., Sher Leff LLP, San Francisco, CA,

Robert Chapman, Esq., Eisner Jaffe Gorry Chapman & Ross, P.C., Beverly Hills, CA, Counsel for Plaintiff City of New York.

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

James W. Quinn, Esq., David J. Lender, Esq., Theodore E. Tsekerides, Esq., Weil, Gotshal & Manges LLP, New York, NY, Counsel for Exxon Mobil Corporation.


SHIRA A. SCHEINDLIN, District Judge.

This is a consolidated multi-district litigation ("MDL") relating to contamination - actual or threatened - of groundwater 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. In this case, the City of New York, the New York City Water Board, and the New York City Municipal Water Finance Authority (collectively, "the City") alleged that Defendants' use and handling of MTBE has contaminated, or threatened to contaminate groundwater at service stations, refineries, and terminals throughout New York City. Familiarity with the facts of this case is presumed for the purposes of this Order.

ExxonMobil Corporation, ExxonMobil Oil Corporation and Mobil Corporation (collectively, "Exxon") bring this motion asking the Court to establish a court-supervised trust for the funds that Exxon must pay to satisfy the $104.69 million judgment[1] rendered in favor of the City after an eleven week jury trial. The City objects on the grounds that Exxon's motion (1) is untimely; (2) violates the parties' tolling agreement; and (3) is unsupported by case law. The City also contends that Exxon lacks standing to request a trust. For the following reasons, Exxon's motion is DENIED.


On August 3, 2009, the City commenced a jury trial against Exxon on the claims alleged in their Fourth Amended Complaint ("FAC").[2] Those claims relate to past and future MTBE detections in five public water supply wells, located in Queens, New York, and owned and operated by the City.[3] During the trial, the City told the jury that it would build a water treatment facility within the next fifteen years to remove MTBE from groundwater in Queens.[4]

On October 19, 2009, the jury found Exxon liable on the City's claims of public nuisance, negligence, trespass, and product liability for failure to warn.[5] However, the jury found Exxon not liable on the City's claims of private nuisance and product liability for design defect.[6] The jury then awarded the City $104, 690, 000 in damages.[7] On September 17, 2010, the parties filed an Amended Judgment, stating:

ORDERED, ADJUDGED AND DECREED: that [the City] recover from [Exxon]... for product liability (failure to warn or insufficient warning), trespass, public nuisance, and negligence... in the amount of $104, 690, 000; plus prejudgment interest... plus post-judgment interest....[8]

The parties also entered a Tolling Agreement that required Exxon to "pay the judgment in full, including applicable accrued pre- and post-judgment interest, if any, within 60 days of the conclusion of all appeals."[9]

On October 13, 2010, Exxon filed its notice of appeal.[10] On July 26, 2014, the Second Circuit affirmed the judgment.[11] Exxon then filed a petition for certiorari with the Supreme Court. On April 21, 2014, the Supreme Court denied the petition.[12] On May 16, Exxon filed its motion to establish a court-supervised trust, which would ensure that the City uses the funds to construct and maintain the water treatment facility.[13] Because Exxon requests a reversionary interest in the trust, which would return any funds not used for that purpose to Exxon.[14] On June 20, 2014, in accordance with the Amended Judgment and Tolling Agreement, Exxon paid the judgment in full.[15]


At the outset, Exxon argues that it has "genuine concerns that the City will divert the judgment amount for [] purposes" other than the construction of a water treatment facility.[16] Despite its purported "concerns, " Exxon lacks standing to request a reversionary trust. To have standing, a party must "demonstrate an imminent, concrete and particularized injury."[17] "[T]he injury in fact' test requires... that the party seeking review be [it]self among the injured."[18] Exxon has already paid the judgment amount to the City.[19] Because Exxon will never be able to obtain the return of its money regardless of how the City spends the funds, Exxon cannot show how it would be injured.[20] A simple analogy may be helpful. A plaintiff in a personal injury case may call an expert to testify that the plaintiff's injuries require surgery, totaling ten thousand dollars. If the jury awards the plaintiff ten thousand dollars but the plaintiff declines the surgery or dies before undergoing the surgery, the defendant is not entitled to a refund from the plaintiff or the plaintiff's estate. The defendant is still liable for the injury it caused. Thus, Exxon lacks standing to request a reversionary trust.[21]

Even if Exxon had standing, a trust would be inappropriate in this case because the remedy for a "traditional tort law cause of action [is] lump-sum damages."[22] Exxon asks the Court to depart from this general rule, but provides no basis for doing so.

First, Exxon argues that court-supervised trusts are "often required" in the environmental remediation context because "an unrestricted award of money damages does not restore or replace contaminated natural resources."[23] However, the cases cited by Exxon all involve trustee plaintiffs. In New Mexico v. General Electric Co., the court noted that the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA") provides that "[ s]urns recovered by a State as trustee ... shall be available for use only to restore, replace, or acquire the equivalent of such natural resources by the State."[24] Next, in Puerto Rico v. SS Zoe Colocotroni , the Commonwealth sued under CERCLA to recover natural resource damages after an oil spill contaminated the Commonwealth's beaches and mangrove forests.[25] The district court awarded natural resource damages based on the replacement value of over ninety-two million "destroyed organisms."[26] The First Circuit acknowledged that CERCLA, like the Clean Water Act, provides that "the [Commonwealth], acting as public trustee, could recover for the costs of replacing or restoring (natural) resources.'"[27] However, the First Circuit vacated the award because the Commonwealth had no intention of purchasing such "organisms" to restore the area, which was now contaminated with oil.[28] Both cases are inapplicable because the City's claims are based on New York common law, not a federal statute. Moreover, while CERCLA and the Clean Water Act limit how a state may spend its damages award, neither mandates the imposition of a court-supervised trust. [29]

Second, Exxon relies on several medical monitoring cases, where courts imposed trusts to cover future costs.[30] These cases are inapposite. Courts that have established medical monitoring trusts have done so in the "absence of physical injury."[31] In this case, the City has suffered an actual injury.[32] As the Second Circuit held, "[t]he City's suit was ripe because the City demonstrated a present injury."[33] Exxon has failed to prove that this Court should establish a trust for the City's lump-sum damages award, which Exxon has already paid.


For the foregoing reasons, Exxon's motion is DENIED. The Clerk of the Court is directed to close this motion (Doc. No. 697).


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