Products Liability Law Daily Wrap Up, SUPPLY CHAIN LIABILITY ISSUES—CHEMICAL PRODUCTS—S.D.N.Y: Puerto Rico cannot bring groundwater contamination claims for de minimis MTBE levels, (Apr 29, 2015)

By John W. Scanlan, J.D.

Defendants in multidistrict litigation over contamination of groundwater in Puerto Rico which supplied and distributed gasoline containing only de minimis amounts of the additive MTBE cannot be held liable to the Commonwealth on its tort claims against them, the U.S. District Court for the Southern District of New York ruled. However, while granting summary judgment to Shell Oil Company and Shell International Petroleum Company Limited on nuisance, trespass, and Environmental Public Policy Act claims, the court determined that such claims against Shell Western Supply and Trading Limited could go forward (In re: Methyl Tertiary Butyl Ether (“MTBE”) Products Liability Litigation (Commonwealth of Puerto Rico, et al. v. Shell Oil Co.)), April 28, 2015, Scheindlin, S.).

Background. This case is part of an ongoing multi-district litigation relating to contamination of groundwater from the use of the gasoline additive methyl tertiary butyl ether (MTBE). The Commonwealth of Puerto Rico brought suit against various defendants for injuries to waters of the Commonwealth, alleging that their use and handling of MTBE has contaminated or threatened to contaminate groundwater there. Before the court in this proceeding was a motion for summary judgment brought by a group that the court referred to as the “Shell Defendants,” which include Shell Chemical Yabucoa, Inc. (SCYI), Shell Oil Company (SOC), Motiva Enterprises LLC (Motiva), Equilon Enterprises LLC (Equilon), TMR Company (TMR), Shell Trading (U.S.) Company (STUS), Shell International Petroleum Company Limited (SIPC), and Shell Western Supply and Trading Limited (Shell West).

The Shell Defendants asserted that the Commonwealth could not show that they were responsible for any site at issue in Phase I of the litigation or that they had manufactured, supplied, or discharged any allegedly defective gasoline containing MTBE that could have been a substantial factor in causing damage at any site in Puerto Rico. At issue, according to the court, was whether supplying gasoline containing concentrations of MTBE under 0.50 percent by volume was permissible under Puerto Rico law. It was undisputed that SCYI, Motiva, Equilon, TMR, and STUS never manufactured, sold, distributed, or imported shipments of gasoline with MTBE concentrations exceeding this threshold (the “de minimis threshold”).

De minimis MTBE threshold. Tort claims based solely on shipment of gasoline with MTBE concentrations under the 0.50 percent de minimis threshold failed as a matter of law. The Puerto Rico Code prohibits importing, selling, dispensing, or offering for sale gasoline containing MTBE, and delegates to the Department of Consumer Affairs the responsibility for enforcing this ban. DACO issued a regulation permitting gasoline containing less than 0.50 percent MTBE concentrations to enter Puerto Rico.

The Commonwealth’s expert declared that there was no acceptable level of MTBE under the statutory laws of Puerto Rico, and while DACO recognized that residual levels of MTBE might be present due to commingling in barges, its policy of non-enforcement regarding concentrations under 0.50 percent did not change the fact that manufacturers of gasoline containing MTBE were still in violation of the statute. However, the Code also provides that conduct having only an “infinitesimal or theoretical part” in bringing about an injury is not sufficient to sustain a tort claim, and the Commonwealth did not show that the discharge of gasoline containing minimal amounts of MTBE had played more than a minimal role in injuring the Commonwealth. The court found that the establishment of a de minimis threshold was designed to ensure the continued importation of gasoline into Puerto Rico, which would be discouraged by a total ban on MTBE because it is inevitable that MTBE-free gasoline will commingle with MTBE particles during the process of production, importation, and distribution. MTBE loses its ability to enhance octane at concentrations under 1 percent; the 0.50 percent threshold distinguishes gasoline that was blended intentionally with MTBE from gasoline that was commingled accidentally with MTBE and provides notice to parties in the chain of distribution as to the acceptable level of quality under Puerto Rico law.

Other claims. The court granted summary judgment to SOC and SIPC on nuisance, trespass, and Environmental Public Policy Act (EPPA) claims. There was little evidence supporting the Commonwealth’s assertion that SOC shipped gasoline containing substantial amounts of MTBE to Puerto Rico, and Shell Atlantic’s role as a mere broker was insufficient to place it in the chain of distribution. There was no evidence that SIPC’s subsidiary SITC was a party to shipments of MTBE gasoline to Puerto Rico from St. Croix or that gasoline it shipped from Curaçao contained MTBE. However, the Commonwealth could maintain nuisance, trespass, and EPPA claims against Shell West. Although the court found the chain of causation to be “rather tenuous,” the amount of MTBE gasoline Shell West supplied to Puerto Rico was large enough that a reasonable jury could conclude that it was more likely than not that the company’s gasoline was a substantial factor in bringing about injury to the Commonwealth.

The case is No. 07 Civ. 10470, Master File No. 1:00-1898, MDL 1358 (SAS), M21-88.

Attorneys: David T. Ritter (Baron & Budd, PC), Duane C. Miller (Miller, Axline & Sawyer), and John K. Dema (Law Offices of John K. Dema, PC) for Commonwealth of Puerto Rico, Commonwealth of Puerto Rico Environmental Quality Board, and Commonwealth of Puerto Rico Through The Environmental Quality Board. Alec C. Zacaroli (Wallace King Domike & Reiskin, PLLC), Alejandro J. Cepeda-Diaz (McConnell Valdes LLC), and Alejandro J. Diaz (Paul Hastings LLP) for Shell Oil Co., Shell Company Puerto Rico Ltd., Shell Trading (US) Co., and Motiva Enterprises, LLC. Peter John Sacripanti (McDermott Will & Emery LLP) for ExxonMobil Corp. David A. Grenardo (King & Spalding LLP) for Chevron U.S.A., Inc.

Companies: Shell Oil Co.; Shell Company Puerto Rico Ltd.; Shell Trading (US) Co.; Motiva Enterprises, LLC; ExxonMobil Corp.; Chevron U.S.A., Inc.

Cases: CourtDecisions SCLIssuesNews ChemicalNews NewYorkNews PuertoRicoNews