A federal appeals court has affirmed a $105 million judgment for New York City against Exxon Mobil Corp. over the petroleum giant's contamination of groundwater with the gasoline additive methyl tertiary butyl ether, or MTBE, used until the mid-2000s to reduce emissions.

On Friday, in In re: MTBE Products Liability Litigation, 10-4135, a three-judge panel of the U.S. Court of Appeals for the Second Circuit rejected Exxon's arguments that the city's claims were preempted by the federal Clean Air Act and that the trial was tainted by juror misconduct. Judge Susan Carney (See Profile) wrote the opinion, joined by Judges Barrington Parker Jr. (See Profile) and Peter Hall (See Profile).

New York City's case against Exxon is one of a slew of similar cases over MTBE contamination filed by cities, states and individuals around the country. Those cases were consolidated in the Southern District of New York in a multidistrict litigation. The city's case was chosen as a so-called bellwether trial, to give parties in the multidistrict litigation an idea of the likely outcome of trials.

The judgment, plus pre- and post-judgment interest, was entered after an 11-week jury trial in October 2009 before Judge Shira Scheindlin (NYLJ, Oct. 20, 2009).

Exxon spokesman Todd Spitler said the company would appeal to the U.S. Supreme Court.

"MTBE was added to gasoline to meet regulatory requirements to solve U.S. air pollution," Spitler said in an email. "MTBE has not been used for seven years, clean-up successfully continues and the myriad of data shows MTBE detections decreasing."

Attorneys for the city praised the ruling.

"We knew that the city's legal case was very strong from the beginning and that ExxonMobil should be made to pay for the high clean-up cost its actions imposed on the city," said Michael Cardozo, Corporation Counsel for New York City, in a press release.

Susan Amron, head of the city law department's environmental division, oversaw the case for the city.

"We are pleased that we were able to assist the city in upholding its landmark verdict against a company that committed a series of tortious acts in manufacturing and distributing gasoline containing an ingredient that it knew could cause widespread pollution of groundwater," said Paul Smith, a partner at Jenner & Block who argued the appeal for the city, in the press release.

The release also included a statement from Mayor Michael Bloomberg, who called the ruling "a warning to any company whose actions threaten New Yorkers' health and quality of life."

Exxon and other gas companies used MTBE as an additive in gasoline in the New York area beginning in the 1980s. MTBE increased the oxygen content of gasoline, allowing it to burn more cleanly and reduce emissions. Congress identified MTBE as a possible way for gasoline companies to comply with the Clean Air Act in 1990.

However, MTBE-treated gasoline sometimes leaked from underground tanks into groundwater, giving it an unpleasant taste, even in very low concentrations. MTBE has also been found to cause cancer in animals, and may also cause cancer in humans. In 2004, New York banned the use of MTBE in gasoline. The most commonly used oxygenating agent in gasoline is now ethanol.

The city sued Exxon and other defendants in 2003 over the contamination of a system of wells in Jamaica, Queens known as the Station Six Wells. The wells are not currently being used for drinking water, but the city has expressed plans to remove MTBE from the contaminated water so that they could be used in the future. The city sought compensatory damages for all the costs it has occurred and will incur for monitoring and cleaning up MTBE at the site.

Other defendants sued by the city over MTBE, including Shell, BP, Chevron, Citgo, Hess and Sunoco, settled before trial.

The city sought $300 million in compensatory damages from Exxon. It also sought punitive damages, arguing that Exxon had recklessly disregarded evidence of the dangers of MTBE and concealed it from gas station owners.

The jury ultimately found that Exxon was only liable for $104.69 million. Exxon moved to bar the jury from considering punitive damages on the grounds that the city had not shown the requisite malice, recklessness or wantonness, and Scheindlin granted that motion.

On appeal, Exxon argued that the verdict must be overturned because the Clean Air Act preempted the city's claims. It said that the Clean Air Act required it to add oxygenating agents to its gasoline, and MTBE was the only feasible agent available.

The Second Circuit panel rejected that argument. Carney wrote that even if using MTBE was the only way to comply with the Clean Air Act, the jury's verdict included "additional tortious conduct, such as failing to exercise ordinary care in preventing and cleaning up gasoline spills."

Exxon also argued that the verdict should be thrown out because Scheindlin improperly handled a dispute between jurors. One juror, Juror Number 2, complained that Juror Number 1 insulted her and threatened to "cut" her. After interviewing the jurors, Scheindlin determined that Juror Number 2 was the only juror who felt threatened by Juror Number 1, and dismissed Juror Number 2. Exxon said that she should have dismissed Juror Number 1 instead. Carney, however, wrote that there was no reason to "second-guess" the way Scheindlin handled the situation.

The city also cross-appealed Scheindlin's decision not to allow punitive damages. The Second Circuit affirmed Scheindlin as well, writing that the city had not shown that Exxon acted recklessly because "there is no evidence demonstrating that Exxon understood precisely how MTBE contamination at spill sites…would affect groundwater located some distance away from those sites."