State v. Exxon Mobil Corp.

• Decision Date: 02 October 2015
• Docket Number: 2013–0668,Nos. 2013–0591,s. 2013–0591
• Citation: 126 A.3d 266,168 N.H. 211
• Parties: The STATE of New Hampshire v. EXXON MOBIL CORPORATION & a.
• Court: New Hampshire Supreme Court

168 N.H. 211

126 A.3d 266

The STATE of New Hampshire

v.EXXON MOBIL CORPORATION & a.

Nos. 2013–0591

2013–0668

Supreme Court of New Hampshire.

Argued: May 21, 2015

Opinion Issued: October 2, 2015

Joseph A. Foster, attorney general (K. Allen Brooks, senior assistant attorney general, on the brief and orally), Kellogg, Huber, Hansen, Todd, Evans & Figel, P.L.L.C., of Washington, D.C. (David C. Frederick and Brendan J. Crimmins on the brief, and Mr. Frederick orally), and Pawa Law Group, P.C., of Newton Centre, Massachusetts (Matthew F. Pawa and Benjamin A. Krass on the brief), and Sher Leff, P.C., of San Francisco, California (Esther L. Klisura on the brief), for the State.

McLane, Graf, Raulerson & Middleton, Professional Association, of Manchester (Bruce W. Felmly and Patrick H. Taylor on the brief), Bancroft PLLC, of Washington, D.C. (Paul D. Clement on the brief and orally), and Weil, Gotshal & Manges LLP, of New York, New York (Theodore E. Tsekerides on the brief), for the defendants.

Skadden, Arps, Slate, Meagher & Flom LLP, of Boston, Massachusetts and Washington, D.C. (Matthew J. Matule, John H. Beisner, and Geoffrey M. Wyatt on the brief), for the Chamber of Commerce of the United States of America, as amicus curiae.

DALIANIS, C.J.

The defendants, Exxon Mobil Corporation and ExxonMobil Oil Corporation (collectively, either Exxon or ExxonMobil), appeal from a jury verdict awarding approximately $236 million in damages due to groundwater contamination to the plaintiff, the State of New Hampshire, after a trial in Superior Court (Fauver , J.). The State cross-appeals from the trial court's order imposing a trust upon approximately $195 million of the damages award. We affirm the trial court's rulings on the merits and reverse its imposition of a trust.

I. Background

In 1990, Congress amended the Federal Clean Air Act to require the use of an "oxygenate" in gasoline in areas not meeting certain national air quality standards. See 42 U.S.C. § 7545(k) (Supp. 1991) (amended 2005, 2007). An oxygenate is a substance used to reduce gasoline emissions. See Oxygenated Fuels Ass'n Inc. v. Davis, 331 F.3d 665, 666 (9th Cir. 2003).

The amendment did not mandate the use of any particular oxygenate; it simply required that "[t]he oxygen content of the gasoline shall equal or exceed 2.0 percent by weight." 42 U.S.C. § 7545(k)(2)(B). To implement the requirement, the Environmental Protection Agency (EPA) launched the Reformulated Gasoline Program (RFG Program), which required gasoline containing an oxygenate of the manufacturer's choice. See 40 C.F.R. § 80.46(g)(9)(i) (2000). Methyl tertiary butyl ether (MTBE) was one among several possible oxygenates. Id. MTBE is a gasoline additive that increases the octane levels of fuels. Metropolitan areas with significant concentrations of ambient ozone were required to use reformulated gasoline. See 42 U.S.C. § 7545(k). Other areas, like New Hampshire, could opt in to the program to receive credit toward mandatory emissions reduction requirements. See 42 U.S.C. § 7545(k)(6)(A).

New Hampshire joined the RFG Program in 1991, with respect to the State's four southern-most counties, effective January 1, 1995. Between 1995 and 2006, gasoline with MTBE was sold throughout the State. In 1997, employees at the New Hampshire Department of Environmental Services (DES) became aware that MTBE could pose increased risks to groundwater. In 1998, studies from Maine and California raised concerns about MTBE. In 1999, DES adopted regulations setting a maximum contaminant level for MTBE in drinking water and groundwater at 13 parts per billion (ppb).

In 2000, the EPA advised:

MTBE is capable of traveling through soil rapidly, is very soluble in water ... and is highly resistant to biodegradation.... MTBE that enters groundwater moves at nearly the same velocity as the groundwater itself. As a result, it often travels farther than other gasoline constituents, making it more likely to impact public and private drinking water wells. Due to its affinity for water and its tendency to form large contamination plumes in groundwater, and because MTBE is highly resistant to biodegradation and remediation, gasoline releases with MTBE can be substantially more difficult and costly to remediate than gasoline releases that do not contain MTBE.

Advance Notice of Intent to Initiate Rulemaking under the Toxic Substance Control Act to Eliminate or Limit the Use of MTBE as a Fuel Additive in Gasoline, 65 Fed.Reg. 16094, 16097 (Mar. 24, 2000).

In 2001, the Governor petitioned the EPA to allow the State to opt out of the RFG Program, but did not receive a reply until 2004. See Removal of the Reformulated Gasoline Program From Four Counties in New Hampshire, 69 Fed.Reg. 4903 (Feb. 2, 2004). In 2004, the legislature enacted legislation banning MTBE gasoline effective in 2007. See RSA 146–G:12 (2005) (repealed 2015). In 2005, Congress eliminated the oxygenate requirement and enacted a renewable fuels mandate to increase ethanol usage. See Energy Policy Act of 2005, Pub.L. No. 109–58, §§ 1501, 1504, 119 Stat. 594, 1067, 1076 (2005).

In 2003, New Hampshire sued several gasoline suppliers, refiners, and chemical manufacturers seeking damages for groundwater contamination allegedly caused by MTBE. Before trial, all defendants except Exxon settled with the State. After almost ten years of litigation, the case went to trial in 2013 on three causes of action: negligence; strict liability—design defect; and strict liability—failure to warn. After an approximately three-month trial, the jury found in favor of the State on all of its claims. The jury rejected Exxon's defenses that "in designing its MTBE gasoline, it complied with the state of the art"; that "the hazards posed by the use of MTBE in gasoline were obvious, or were known and recognized by the State"; and that Exxon "provided distributors with adequate warnings of the hazards of MTBE gasoline." The jury also found that Exxon failed to prove that "the actions of someone other than the State or ExxonMobil (which were not reasonably foreseeable to ExxonMobil) were the sole cause of the State's harm," that "the State committed misconduct that contributed to its harm," or that some or all of Exxon's fault should be allocated to certain nonparties.

The jury awarded total damages in the amount of $816,768,018. These damages included: (a) $142,120,005 for past cleanup costs; (b) $218,219,948 to assess and clean up 228 high-risk sites; (c) $305,821,030 for sampling drinking water wells; and (d) $150,607,035 for treating drinking water wells contaminated with MTBE at or above the maximum contaminant level. The jury found that Exxon's market share for gasoline in New Hampshire during the applicable time period was 28.94%. Accordingly, the trial court entered an amended verdict of $236,372,644 against Exxon. The trial court subsequently awarded the State prejudgment interest in accordance with RSA 524:1–b (2007).

On appeal, Exxon contends that: (1) the State's suit should have been dismissed on the grounds of separation of powers and due process; (2) the suit should have been dismissed due to waiver; (3) the State's claims are preempted by the 1990 amendments to the Federal Clean Air Act; (4) the State failed to establish that Exxon departed from the applicable standard of care; (5) Exxon did not have a duty to warn the State; (6) market share liability is not an acceptable theory of recovery; (7) the State should not have been permitted to rely upon aggregate statistical evidence; (8) Exxon was unfairly prejudiced in its ability to present evidence of fault on the part of other nonparties; (9) the trial court erred in deciding the State had parens patriae standing; (10) the State's damages claims for future well impacts are not ripe; and (11) the trial court erred in awarding prejudgment interest on future costs.

II. Separation of Powers and Due Process

Exxon argues that the State's suit should have been dismissed on the grounds of separation of powers and due process. Exxon asserts that based upon the State's decision to participate in the RFG Program beginning in 1991, and the legislature's failure to ban MTBE before 2007, "[t]he retroactive no-MTBE duty" imposed upon it "conflicts with bedrock principles of the separation of powers" and "due process." Exxon also argues that the suit conflicts with the Oil Discharge and Disposal Cleanup Fund (ODD Fund), RSA ch. 146–D (Supp. 2014); see Laws 2014, 177:1 (repealing RSA chapter 146–D, eff. July 1,2025), and the Gasoline Remediation and Elimination of Ethers Fund (GREE Fund), RSA ch. 146–G (Supp. 2014); see Laws 2014, 177:3, I (repealing RSA chapter 146–G, excluding RSA 146–G:9, eff. July 1, 2025), Laws 2014, 177:3, II (repealing RSA 146–G:9, eff. October 1, 2025). The State asserts that Exxon failed to preserve its separation of powers argument because the arguments it raises on appeal were not made to the trial court, and that Exxon fails to identify where it preserved its due process argument.

The appealing party bears the burden of demonstrating that it "specifically raised the arguments articulated in [its appellate] brief before the trial court." Dukette v. Brazas, 166 N.H. 252, 255, 93 A.3d 734 (2014). Generally, the failure to do so bars a party from raising such claims on appeal. N. Country Envtl. Servs. v. Town of Bethlehem, 150 N.H. 606, 619, 843 A.2d 949 (2004). But see Sup. Ct. R. 16–A (plain error rule). We have reviewed the record and agree with the State that Exxon failed to preserve its separation of powers argument concerning the State's purported public policy decisions, as well as its due process argument. However, we address, as properly preserved, Exxon's separation of powers argument based upon the ODD and GREE Funds.

Before trial, Exxon moved for summary judgment on separation of powers grounds, arguing that the State's suit threatened to usurp the legislature's appropriations power because the ODD and GREE Funds "embody...