In re Methyl Tertiary Butyl Ether ("MTBE") Prods. Liab. Litig.
| Decision Date | 28 April 2015 |
| Docket Number | No. M21–88.,MDL No. 1358(SAS).,Master File No. 1:00–1898.,M21–88. |
| Citation | 117 F.Supp.3d 276 |
| Parties | In re METHYL TERTIARY BUTYL ETHER ("MTBE") PRODUCTS LIABILITY LITIGATION. |
| Court | U.S. District Court — Southern District of New York |
Robert J. Gordon, Esq., Robin L. Greenwald, Esq., William A. Walsh, Esq., Weitz & Luxenberg, P.C., New York, NY, for Plaintiffs.
Tracey Zimmerman, Esq., Miller & Axline, Sacramento, CA, for the Commonwealth.
Peter J. Sacripanti, Esq., James A. Pardo, Esq., Lisa A. Gerson, Esq., McDermott Will & Emery LLP, New York, NY, for Defendants.
Richard E. Wallace, Jr., Esq., Ruben F. Reyna, Esq., Sedgwick LLP, Washington, DC, for Shell Defendants.
This is a consolidated multi-district litigation ("MDL") relating to contamination—actual or threatened—of groundwater from various defendants' use of the gasoline additive methyl tertiary butyl ether ("MTBE") and/or tertiary butyl alcohol, a product formed by the breakdown of MTBE in water. In this case, the Commonwealth of Puerto Rico ("Commonwealth") alleges that defendants' use and handling of MTBE has contaminated, or threatened to contaminate, groundwater within its jurisdiction. Familiarity with the underlying facts is presumed for purposes of this Opinion.
Currently before this Court is a motion for summary judgment brought by defendants 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"), pursuant to Rule 56 of the Federal Rules of Civil Procedure. Defendants (collectively, the "Shell Defendants") move on the grounds that the Commonwealth cannot show that the "Shell Defendants were responsible for any site at issue in this case," including Phase I Trial Site No. 3 ("Shell Site"), or "that [Shell Defendants] manufactured, supplied, or discharged any allegedly defective gasoline with MTBE that could have been a substantial factor in causing damages at ... any site in Puerto Rico."1 For the reasons stated below, the Shell Defendants' motion is GRANTED in part and DENIED in part with respect to the Commonwealth's Phase I claims.
While the instant motion argues that the Commonwealth cannot prove that the Shell Defendants caused the Commonwealth's injuries, the central issue here, which also bears on causation, is whether the Commonwealth has produced evidence that the Shell Defendants manufactured, supplied, or distributed gasoline containing MTBE. This question turns largely on whether supplying gasoline with MTBE concentrations below 0.50% by volume ("the de minimis threshold") is permissible as a matter of Puerto Rico law.3 As a matter of undisputed fact, SCYI, Motiva, Equilon, TMR, and STUS never manufactured, distributed, sold, or imported shipments of gasoline containing concentrations of MTBE greater than the de minimis threshold.4
MTBE is an oxygenate—an octane enhancing substance—that gasoline manufacturers began using as an additive to replace lead.5 Manufacturers typically blended MTBE into their product at concentrations between 1% and 7% by volume, but some refineries used MTBE at concentrations as high as 10% to 12% by volume.6 Because MTBE loses its octane enhancing qualities at concentrations lower than 1% by volume, the Shell Defendants claim that it would "never make sense for a refiner to blend" MTBE into gasoline at concentrations below 0.50% by volume.7
Pursuant to Section 4172 of Title 10 of the Puerto Rico Code ("Section 4172"), "[n]o natural or legal person shall import, sell, dispense or offer for sale gasoline containing [MTBE]."8 Through Section 4175 of Title 10 of the Puerto Rico Code ("Section 4175"), the Puerto Rico Legislature delegated the task of enforcing this "statutory ban on MTBE" to the Department of Consumer Affairs ("DACO").9 "Correspondingly, DACO implemented Regulation No. 8198 ("DACO regulation") to further illustrate [section 4172]."10 By implementing the DACO regulation, and issuing Administrative Order No. 2012–020 ("DACO order") to supplement it, "DACO takes the position that gasoline coming into Puerto Rico is allowed to [contain] MTBE ..., but [only] at levels below 0.5[0] percent by volume."11
The Shell Defendants argue that Puerto Rico law "expressly permit[s] de minimis levels of MTBE up to 0.5[0]% by volume."12 Such levels of MTBE in gasoline, the Shell Defendants claim, are "inevitable," and "most likely result[ ] from the presence of MTBE in some components of the refining or distribution systems ... which inadvertently mixes with [MTBE-free] gasoline."13 Accordingly, the Shell Defendants ask this Court to grant summary judgment on all claims based on the presence of "mere de minimis levels of MTBE in gasoline."14
The Commonwealth counters that the Shell Defendants "confuse the law banning MTBE with [the] DACO regulation implementing the law."15 "DACO did not purport to change the ban [articulated by section 4172] or permit de minimis levels of MTBE," the Commonwealth argues.16 Rather, DACO passed a regulation and order in its exercise of "prosecutorial discretion in carrying out laws and determining when and whether to enforce and impose fines and penalties."17 The Commonwealth relies on the declaration of its expert, Luis Pagan Rodriguez—the Special Assistant to the Secretary of DACO—to support its ultimate conclusion that "there is no acceptable level of MTBE" permissible in gasoline "[u]nder the statutory laws of Puerto Rico"—section 4172 "bans MTBE[,] period."18 In his declaration, Pagan stated that the DACO regulation and order were promulgated because "DACO recognized that residual levels of MTBE might be present due to the commingling of product in barges."19 However, he stated that DACO's policy of non-enforcement with respect to gasoline with MTBE concentrations below 0.50% does not change the fact that manufacturers of such gasoline still violate the plain language of section 4172, and therefore Puerto Rico law.20
The Shell Defendants move to strike Pagan's declaration pursuant to the "sham issue of fact" doctrine on the ground that Pagan's declaration "flatly contradicts prior deposition testimony."21 At this deposition, Pagan was asked why DACO decided to implement a "level of tolerance to MTBE in gasoline coming into Puerto Rico" and why that level was set at 0.50% MTBE by volume?22 His answers to both questions were, "I do not know."23 He stated that he is "not an expert" with respect to why DACO implemented a level of tolerance of MTBE.24
From 1947 until June 2006, the Shell Company (P.R.) Limited ("Shell PR") was "part of the international web of Shell owned and operated companies."25 By 2006, Shell PR owned and operated seventy-two "Shell-branded service stations in Puerto Rico, including the underground storage tanks ("USTs") and dispensing equipment located at the stations."26 Shell PR also "leased bulk storage tanks at Cataño Terminal ("Cataño"), located just outside of San Juan."27 Cataño was used as a facility where Shell PR received shipments of gasoline, at least some of which was Shell-branded.28
On June 13, 2006, Sol Investments Limited "acquired all of the stock of [Shell PR] ... and subsequently changed [its] name to Sol Puerto Rico Limited ("Sol")."29 Upon acquisition, Sol assumed ownership, operation, or leasing obligations for all seventy-two Shell-branded gasoline stations.30 Sol also acquired Cataño, where it continued to receive shipments of gasoline from several Shell Defendants.31 The shipments of gasoline received at and distributed from Cataño, by both Shell PR and Sol, contained varied levels of MTBE— including several shipments of gasoline containing MTBE at levels above the de minimis threshold.32
The parties dispute whether "liability and responsibility ... for the operations of [Shell PR]," if proven, may be allocated to Sol via a contractual agreement between those entities.33 The Shell Defendants claim that "Sol is responsible for any liability that is attributable to Shell PR."34 The Shell Defendants point to the acknowledgment by both Sol and the Commonwealth that Sol "bears liability for claims associated with ownership or operation of Shellbranded stations in Puerto Rico."35 However, the Commonwealth claims that "the contractual agreement among the Shell Defendants and Sol as to the allocation of liability arising from MTBE contamination does not shield the Shell Defendants from liability to the Commonwealth for [Shell PR]'s own torts."36 Rather, the Commonwealth argues that the Shell Defendants are "directly liable for their own conduct in supplying MTBE gasoline to Shell PR, failing to warn Shell PR about the environmental risks of MTBE, and failing to ensure ... [Shell PR] undertook appropriate precautions to prevent releases from USTs."37
The Commonwealth asserts six claims in its Complaint against certain Shell Defendants.38 These claims include: strict products liability under a theory of defective design and failure to warn (Count I) asserted against SOC, SCYI, SIPC, and Shell West;39 negligence (Count IV) asserted against SOC, SCYI, SIPC, and Shell West;40 Environmental Public Policy Act ("EPPA") violations (Count V) asserted against SOC, SCYI, SIPC, and Shell West;41 public nuisance claim (Count II) asserted against SIPC;42 trespass claim (Count III) asserted against SIPC;43 and Toxic Substance Control Act ("TSCA") violations (Count VII) asserted against SOC.44
SCYI is a Puerto Rico corporation, "formed in 2001 to acquire and operate" the Yabucoa Facility ("Yabucoa")—"an existing petrochemical plant and refinery" located in Puerto Rico.45 SCYI also imported gasoline shipments to Cataño.46...
To continue reading
Request your trial