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Motions to dismiss massive multidistrict litigation over the alleged contamination of groundwater by the major oil companies have been rejected by federal Judge Shira A. Scheindlin of the U.S. District Court for the Southern District of New York. In a 95-page decision that involved rulings on cases from New York to California to Florida, Scheindlin found that plaintiffs in the putative class actions have presented enough evidence to continue their pursuit of injunctive relief and the cleanup of groundwater contaminated by the gasoline additive known as MTBE. However, Scheindlin also found that some of the plaintiffs failed to show that their well water had been contaminated, or that there is an imminent threat of contamination, and she dismissed them for lack of standing in the suit, In re Methyl Tertiary Butyl Ether Products Liability Litigation, MDL 1358 Master File No. 00 Civ. 1898. “The judge didn’t go our way on every issue,” said Morris A. Ratner, of San Francisco-based Lieff, Cabraser, Heimann & Bernstein, who is liaison counsel for the 12 plaintiffs’ firms involved in the case. “But she leaves the most significant and substantial issues not only alive, but alive in a court that has deflected some of the defendants’ biggest arrows. They hoped to kill this case at the outset.” MTBE, or methyl tertiary butyl ether, is a chemical compound used to increase the amount of oxygen in gasoline and make the fuel burn cleaner. In the early 1990s, Exxon-Mobil, Shell and other oil companies began increasing the levels of the oxygenate in their gasoline in response to a Congressional program to reduce ozone-forming volatile compounds and the emissions of toxic air pollutants. The Reformulated Gasoline Program, enacted as part of the Clean Air Act, required the use of reformulated gasoline in the nine largest metropolitan areas with the worst summertime ozone levels, as well as other smaller areas. At present, up to 15 percent of every gallon of gas sold in those nine areas, including New York, is composed of MTBE. The lawsuits are based on the allegation that MTBE, classified by the Environmental Protection Agency as a possible human carcinogen, escapes into the environment at a rate of more than nine million gallons a year, with much of the spillage occurring at gas stations. A special EPA Blue Ribbon Panel called MTBE a “threat to the nation’s drinking water resources” that has caused “widespread and serious contamination … “ Plaintiffs charge that the oil companies knew long ago about the dangerous properties of MTBE and the threat to groundwater supplies. They contend that the oil companies engaged in a conspiracy to mislead the public and the EPA in an effort to increase concentrations of MTBE in their gasoline and fend off demands for additional testing and safety measures to stem the threat to groundwater supplies. Their lawsuits allege several causes of action grounded in state law, including strict liability for defective design, failure to warn, negligence, public nuisance and conspiracy to market an unsafe product. They also alleged a breach of notification duty under the Toxic Substances Control Act, 15 U.S.C. ��2601 and following. Nationwide, Ratner said, there are state and federal actions for damages and injunctive relief that, if successful, would cost the oil industry hundreds of billions of dollars. Only those cases that have similar allegations and fact patterns have been transferred to Judge Scheindlin by the federal judiciary’s panel on multidistrict litigation. In the cases now before Scheindlin, plaintiffs are not seeking damages. Instead, they ask for relief such as court-ordered well testing, public education and, most significantly, groundwater cleanup that could, in the end, cost billions of dollars. LACK OF STANDING Judge Scheindlin first dismissed the claims of three groups of plaintiffs for lack of standing, including a putative class led by Ron La Susa of Wappingers Falls, N.Y. La Susa’s well and the wells of other residents in the group for which he is lead plaintiff, Scheindlin said, had not been tested, and his claim that their properties were allegedly at risk of contamination was not enough to bring an action in federal court. La Susa, Scheindlin said, “asks this court … to find that every well owner in New York is under a present threat of imminent harm. To do so, however, would violate the case and controversy requirement” of Article III of the U.S. Constitution. The two other actions, brought by Illinois residents, were dismissed for lack of standing because, Scheindlin said, they had not demonstrated a “clearly impending” harm toward the drinking water. Scheindlin then turned to the defendants’ arguments that the plaintiffs’ state law claims are explicitly and implicitly pre-empted by Congress. The defendants also said that there was “conflict pre-emption” — that state law claims should give way because it was impossible for them to comply with both state and federal requirements. And defendants claimed that the state law is an “obstacle to the achievement of federal objectives.” The judge rejected the pre-emption argument on all three grounds. As to explicit pre-emption, Scheindlin said the plaintiff’s claims are “not motivated by air pollution concerns” that inspired the Reformulate Gasoline Program,” but by concerns over groundwater contamination. “Reading �7545(c)(4) [of the Clean Air Act] to preempt state law claims concerning the contamination of groundwater caused by the use of the MTBE would be contrary to the well-established precedent requiring courts to construe preemption provisions narrowly,” she said. The defendants have said they have not decided whether to ask the judge to reconsider her decision on pre-emption or to certify an appeal on the issue. “We are pleased about her decision with respect to the standing,” said Peter Sacripanti of McDermott, Will & Emery in New York, liaison counsel for the defendants. “We are disappointed that she did not find that there was pre-emption, but, of course, we are at a very preliminary stage of this issue, and we haven’t made any decisions as to whether we will ask the court to reconsider or certify an appeal.” The oil companies then asked Judge Scheindlin to dismiss the suits or abstain based on the doctrine of “primary jurisdiction,” which allows a federal court to stay an action and refer a matter to an administrative agency if it falls outside the expertise of the court or within the discretion of the agency. Judge Scheindlin declined. “The resolution of the questions presented by the plaintiffs’ common law claims does not require the specialized technical or policy expertise of any governmental agency,” she said. “Plaintiffs’ claims are, for the most part, grounded in state tort law.” MARKET-SHARE THEORY The next line of attack for the oil industry was to argue that the plaintiffs could not specify which company was responsible for the alleged contamination in any one area — and that the complaints merely named the industry as a whole. Plaintiffs responded that is was impossible to make such specific identification because MTBE is a fungible product that lacks a “chemical signature” that would enable the identification of the refinery or company responsible. Instead, the plaintiffs sought to invoke collective theories of liability such as market-share liability or conspiracy theory. Judge Scheindlin found that further discovery may support application of market-share liability, which assigns fault based on a company’s share of the relevant market, on the New York and California claims. And while she said that Illinois does not recognize market-share theory and Florida law does not allow it in this context, she nonetheless found that the plaintiffs could proceed on their claims from those states under conspiracy theory or “concerted action” theory. Scheindlin then rejected the defendants’ motions to dismiss claims for strict liability for design defect and negligence. While the oil industry had argued that the Reformulated Gasoline Program authorized the EPA to issue regulations to reduce air emissions and take into account the cost of reducing emissions and other environmental impacts, Scheindlin said, “Congress did not mandate the use of MTBE … “ Moreover, she said, “while the EPA could consider the non-air-quality impact of the use of MTBE, any such consideration was secondary to the goal of reducing air pollution and not commensurate with a risk-utility analysis.” She then denied the motion to dismiss the claims based on failure to warn, noting that “while plaintiffs have an uphill battle, their theories of proximate causation are not so speculative as to warrant dismissal at this time.” Scheindlin also ruled against the oil companies on their motion to dismiss the claim of public nuisance, an unreasonable interference with a right common to the general public. “According to the plaintiffs, defendants marketed and promoted the use of MTBE by misrepresenting its chemical properties … and actively conspired to conceal the threat posed by MTBE,” she said. “These allegations are sufficient to demonstrate defendants’ participation in the creation of a nuisance.” Judge Scheindlin has established a Web site, located at www.mdl1358.com, for attorneys and parties in the litigation.

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