In re Methyl Tertiary Butyl Ether Products

• Decision Date: 16 March 2004
• Docket Number: No. M21-88, MDL NO. 1358(SAS).,M21-88, MDL NO. 1358(SAS).
• Citation: 342 F.Supp.2d 147
• Parties: In re: METHYL TERTIARY BUTYL ETHER ("MTBE") PRODUCTS LIABILITY LITIGATION This Document Relates To: All Cases
• Court: U.S. District Court — Southern District of New York

342 F.Supp.2d 147

In re: METHYL TERTIARY BUTYL ETHER ("MTBE") PRODUCTS LIABILITY LITIGATION This Document Relates To: All Cases

No. M21-88, MDL NO. 1358(SAS).

United States District Court, S.D. New York.

March 16, 2004.

Robert Gordon, C. Sanders McNew, Stanley N. Alpert, Weitz & Luxenberg, P.C., New York, NY, Liaison Counsel for Plaintiffs.

Peter John Sacripanti, James A. Pardo, Stephen J. Riccardulli, McDermott, Will & Emery, New York, NY, Liaison Counsel for Defendants.

OPINION AND ORDER

SCHEINDLIN, District Judge.

This consolidated multi-district litigation ("MDL") initially involved several putative class actions brought on behalf of private well-owners seeking relief from contamination of their wells. By opinion and order dated July 16, 2002, I denied plaintiffs' motion for class certification, see In re: Methyl Tertiary Butyl Ether ("MTBE") Products Liability Litigation, 209 F.R.D. 323 (S.D.N.Y.2002), and the putative class actions subsequently settled.

In 2003, dozens of new MTBE products liability cases were filed in state courts around the country. The new actions are brought by numerous plaintiffs, including states, cities, municipalities and entities, seeking relief from contamination or threatened contamination of groundwater. Defendants removed many of the actions to federal court. Many of the cases removed to the Southern District of New York were assigned to me as the presiding judge over MDL 1358; others removed to this district were transferred to me as related cases. Defendants asked that cases removed to other federal district courts be transferred to this Court, pursuant to Rule 7.4 of the Rules of the Judicial Panel on Multidistrict Litigation ("JPML") and 28 U.S.C. § 1407. On February 6, 2004, the JPML transferred thirteen cases to this Court,¹ and an additional thirty cases were conditionally transferred on February 25, 2004.

Plaintiffs now move to remand all of these actions to the state courts, arguing that the federal court lacks subject matter jurisdiction.

I. BACKGROUND

A. The Allegations

The complaints, though not identical, allege essentially the same facts.² MTBE is a chemical compound that is a by-product of the gasoline refining process. It has enhanced solubility in water, and is chemically attracted to water molecules. Sometime after 1979, in an effort to boost the octane level in higher grades of gasoline, defendants began manufacturing, distributing and/or selling gasoline containing MTBE in concentrations averaging approximately two to four percent by weight. Since 1990, defendants have added MTBE to gasoline in concentrations of up to fifteen percent. The publicly articulated justification for adding MTBE to gasoline is that it helps fuel burn more efficiently, thereby reducing air pollution. See Complaint ¶¶ 68-70, 72, 74, 155, 158.

Whenever gasoline containing MTBE leaks, spills or is otherwise released into the environment, it travels rapidly and contaminates groundwater. This contamination causes water to have a foul smell, and renders it unusable and unfit for human consumption. Moreover, MTBE is a known animal carcinogen, and is linked to many potential human health problems. Water contamination occurs from normal, everyday use of gasoline containing MTBE — e.g. gasoline drips from gas station pumps — and when MTBE is stored in leaking underground tanks. MTBE is also discharged into the air as exhaust as a bi-product of car engine combustion of gasoline containing MTBE. As a result, groundwater is further contaminated because rain returns the discharged MTBE to the soil. See id. ¶¶ 78, 80-84, 121.

Plaintiffs allege that as early as 1980, defendants were aware of the risk that MTBE posed to groundwater because of well contamination in Rockaway, New Jersey. Throughout the 1980s and 90s, subsequent contamination of other wells and aquifers, as well as scientific studies and reports, confirmed the risks posed by MTBE. Although defendants publicly denied the risks, their own documents confirm that they were aware of the harm posed by their use of MTBE. See id. ¶¶ 97-106, 113-120.

Because adding MTBE to gasoline allowed defendants to cheaply increase the octane levels in gasoline, and provided a use for the refining process by-product, defendants conspired to convince the public and the Environmental Protection Agency ("EPA") that adding MTBE to gasoline is safe and desirable. Defendants thereafter failed to provide EPA with information it sought regarding MTBE's safety, and persuaded EPA not to undertake additional testing of MTBE See id. ¶¶ 122-136, 147-149. These actions constitute "Defendants' pattern of exaggerating the environmental benefits of MTBE while understating or concealing MTBE's real environmental hazards, all of which Defendants knew or should have known ...". Id. ¶ 137.

Despite their knowledge of the threat posed by MTBE, defendants have continued to use MTBE as an oxygenate in gasoline and have even increased the concentrations, although safer alternatives are available. Moreover, plaintiffs claim that defendants had a duty to disclose the risk of MTBE, but failed to do so. See id. ¶¶ 96, 144, 145, 158, 161.

As a result of defendants' actions and their failure to warn, MTBE is the second most frequently detected chemical in groundwater in the United States, and wells throughout the country are contaminated. The nation's drinking water is threatened by the contamination. See id. ¶¶ 163-168.

Based on these facts, plaintiffs assert causes of action for (1) public nuisance, (2) strict liability for design defective and/or defective product, (3) failure to warn, (4) negligence, (5) private nuisance, (6) deceptive business acts and practices in violation of New York's General Business Law, and (7) violation of the New York Oil Spill Prevention, Control and Compensation Act. See id. ¶¶ 184-233. Plaintiffs also allege that defendants conspired to conceal the dangers of MTBE and mislead the public and the EPA. Because MTBE released into the environment lacks identifying characteristics, it is impossible to identify the manufacturer responsible for specific groundwater contamination. Plaintiffs therefore allege market share, concert of action and enterprise liability. See id. ¶¶ 170, 174, 176, 178, 180-183.

B. Grounds for Removal

Defendants removed the actions to federal court, asserting four grounds for federal subject matter jurisdiction: (1) federal agent jurisdiction pursuant to section 1442(a)(1) of Title 28; (2) preemption; (3) bankruptcy jurisdiction, pursuant to section 1334(b) of Title 28;³ and (4) substantial federal question.

In support of removal, defendants allege that in 1977, Congress amended the Clean Air Act to federalize fuel content requirements. See 42 U.S.C. § 7545. Pursuant to the amendment, EPA has express and exclusive authority to determine what fuels and fuel additives are sold nationwide. See Defendants' Notice of Removal ¶¶ 13, 14. By Federal Regulations issued in 1979 and 1981, EPA allowed MTBE to be added to gasoline in amounts of up to fifteen percent by weight.⁴ See 44 Fed. Reg. 12,242, 12,243 (Mar. 6, 1979); 46 Fed. Reg. 38,582 (July 28, 1981); Defendants' Notice of Removal ¶ 15.

In 1990, Congress further amended the Clean Air Act. Among other things, the amendments created two programs that require petroleum refiners to blend oxygenates into gasoline sold throughout much of the country. These programs — the Oxygenated Fuel Program ("OFP") and the Reformulated Gasoline ("RFG") Program — were designed to reduce emission of toxic air pollutants. According to defendants, at the time the amendments were enacted, Congress was aware that only a limited number of oxygenates could be blended with gasoline to meet the requirements, and MTBE would have to be used for at least some of the gasoline sold in areas affected by the programs. Defendants' Notice of Removal ¶¶ 16-20. Moreover, "Congress and [the] EPA fully understood that MTBE would be used in the vast majority of oxygenated gasoline sold in the United States," id. ¶ 19 (citing 136 Cong. Rec. S6383 (daily ed. May 16, 1990) (statement of Sen. Daschle)), and "intended that petroleum refiners use MTBE in gasoline," id. ¶ 23.

In 1991, pursuant to the 1990 amendment to the Clean Air Act, the EPA approved the use of seven compounds to achieve the requirements set forth in the OFP.⁵ These additives are: (1) MTBE, (2) ethanol, (3) methanol, (4) tertiary amyl methyl ether, (5) ethyl tertiary butyl ether, (6) tertiary butyl alcohol, and (7) diisoproyl ether. See id. ¶ 26 (citing Proposed Guidelines for Oxygenated Gasoline Credit Programs Under Section 211(m) of the Clean Air Act as Amended, 56 Fed. Reg. 31,151, 31,154 (July 9, 1991)). According to defendants, "[l]ike Congress, the EPA understood that MTBE would be `the most common oxygenating compound' used by refiners to comply with the CAA's new air emissions standards." Id. ¶¶ 28 (quoting Approval and Promulgation of Implementation Plan, 56 Fed. Reg. 5,458, 5,465 (Feb. 11, 1991)), 29, 31.

Finally, defendants claim that when the EPA approved MTBE for use in compliance with the OFP and RFG Program, it knew of the risk that MTBE posed to groundwater, and further knew that there was not a sufficient nationwide supply of ethanol, or even an infrastructure to create ethanol, to satisfy the program requirements. Accordingly, EPA knew that the only way refining companies could meet the requirements promulgated in the OFP and RFG Programs, and thereby comply with the Clean Air Act, was to use MTBE as a gasoline additive. Congress and the EPA therefore effectively directed defendants to use, manufacture and/or sell gasoline that contains MTBE. See id. ¶¶ 19, 23, 34.

II. APPLICABLE LAW

A. General Principles

A defendant seeking removal bears the burden of establishing federal subject matter jurisdiction. See Carson v. Dunham, 121 U.S. 421, 425-26, 7 S.Ct. 1030, 30 L.Ed. 992 (1887); Wilson v. Republic Iron & Steel Co., ...