State v. Atlantic Richfield Co.

• Decision Date: 27 May 2016
• Docket Number: No. 15–201.,15–201.
• Court: Vermont Supreme Court
• Parties: STATE of Vermont v. ATLANTIC RICHFIELD COMPANY, et al.

148 A.3d 559

2016 VT 61

STATE of Vermont

v.ATLANTIC RICHFIELD COMPANY, et al.

No. 15–201.

Supreme Court of Vermont.

May 27, 2016.

William H. Sorrell, Attorney General, Scot L. Kline, Gavin J. Boyles, and Robert F. McDougall, Assistant Attorneys General, Montpelier, Matthew F. Pawa, Benjamin A. Krass and Wesley Kelman of Pawa Law Group, P.C., Newton Centre, Massachusetts, Robert J. Gordon, Robin Greenwald and William A. Walsh of Weitz & Luxenberg, P.C., New York, New York, and Scott Summy, Celeste Evangelisti and Carla Burke of Baron & Budd, P.C., Dallas, Texas, for Plaintiff–Appellant.

Ritchie E. Berger of Dinse, Knapp & McAndrew, P.C., Burlington, David J. Lender and Theodore E. Tsekerides of Weil, Gotshal & Manges LLP, New York, New York, and Deborah E. Barnard and Michael T. Maroney of Holland & Knight LLP, Boston, Massachusetts, for Defendants–Appellees Exxon Mobil Corporation, ExxonMobil Oil Corporation and Mobil Corporation.

Present: REIBER, C.J., DOOLEY, SKOGLUND, ROBINSON and EATON, JJ.

ROBINSON, J.

¶ 1. This interlocutory appeal calls upon us to decide whether 12 V.S.A. § 462 creates an exemption from the general six-year limitation for the State of Vermont's claims against a host of defendants for generalized injury to state waters as a whole due to groundwater contamination from gasoline additives. On the basis of the statute of limitations, the trial court dismissed the State's claims insofar as they are predicated on generalized injury to state waters as a whole. On appeal, the State argues that § 462 exempts the State's claims from the statute of limitations, and, alternatively, that the State's claims arising under 10 V.S.A. § 1390, a statute that establishes a state policy that the groundwater resources of the state are held in trust for the public, are not time barred because that statute became effective less than six years before the State filed its complaint. We affirm.

¶ 2. For purposes of a motion to dismiss, we assume all factual allegations in the complaint are true. Amiot v. Ames, 166 Vt. 288, 291, 693 A.2d 675, 677 (1997). Those allegations include the following.

¶ 3. Methyl tertiary butyl ether (MTBE) is a synthetic chemical that some refiners have blended into gasoline at times since 1979. Tert-butyl alcohol (TBA) is a degradation product of MTBE and for purposes of the complaint is included within the scope of “MTBE.” Studies link MTBE to a variety of adverse health effects, and it is a known animal carcinogen and possible human carcinogen. The chemical can render water undrinkable even in low concentrations.

¶ 4. MTBE contaminates the environment through releases, leaks, overfills, and spills from gasoline delivery facilities, as well as through releases associated with certain consumer activities such as using snowmobiles, motorized watercraft, or lawnmowers; operating junkyards; conducting vehicle maintenance; and operating repair facilities. Once released into the environment, MTBE migrates farther and faster through soil and groundwater, penetrates deeply into aquifers, resists biodegradation, and results in persistent contamination that is very costly to address.

¶ 5. Defendants are petroleum industry corporations including manufacturers, promoters, refiners, and marketers of MTBE and/or gasoline containing MTBE.¹ In the 1970s, oil companies began blending MTBE, which was a waste product of the refining process, into gasoline. The chemical was initially used as an octane enhancer.

¶ 6. In 1990, after tremendous lobbying efforts by the petroleum industry, Congress mandated the use of reformulated gasoline (RFG) containing at least 2% oxygen by weight in areas with the worst ozone or smog problems. In 1992, the Environmental Protection Agency (EPA) created the Oxygenated Fuel Program, which required at least 2.7% oxygen by weight in gasoline in certain metropolitan areas to reduce carbon monoxide emissions during the fall and winter months. While the RFG program required the use of an oxygenate, it did not require that the oxygenate be MTBE.

¶ 7. The oil industry chose MTBE as the “oxygenate of choice” because it was the most inexpensive oxygenate to produce and offered defendants the highest profit margin of available oxygenates. As a result, MTBE production increased from 1.5 million barrels in 1980 to 75 million barrels in 1998. Much of the gasoline sold in areas under the RFG program exceeded the 2% or 2.7% oxygenate requirements, and MTBE composed up to 15% of every gallon of gasoline used in those areas.

¶ 8. Throughout this period, defendants were aware that on a nationwide level gasoline was leaking from multiple sources, including underground storage tanks and the systems used for shipping, storing, pumping, and using gasoline throughout the distribution chain. Defendants were or should have been aware that thousands of gallons of gasoline entered the soil annually due to underground storage tank release and leaks, overfills, mishandling, and vaporization from underground storage tanks. Defendants knew or should have known that releases associated with certain consumer activities such as operating motorized watercraft, snowmobiles, and lawnmowers would result in release of MTBE into the waters of the state. And, defendants were or should have been aware that MTBE contamination of groundwater was inevitable given MTBE's water-seeking properties, recalcitrance to biodegradation and bioremediation, and the long and ongoing history of releases of MTBE-containing gasoline into the environment.

¶ 9. Defendants did not perform toxicological tests before introducing MTBE into the stream of commerce, and instead attempted to convince the EPA that health testing was not needed. Despite their superior knowledge of the groundwater threat MTBE posed, certain defendants, beginning in the early 1980s, formed various task forces and committees for the purpose of concealing MTBE's actual threat, facilitating their MTBE use, and convincing the public and regulators that increasing concentrations of MTBE in gasoline was desirable. Certain defendants manufactured and distributed MTBE with actual knowledge that MTBE would cause harm in groundwater and production wells, and took affirmative steps to conceal these effects. At all times, defendants knew there were other more environmentally sound alternatives.

¶ 10. As a result of this concealment and widespread use, MTBE has contaminated wide swaths of groundwater across the United States, including Vermont. A September 1999 report by a special EPA Blue Ribbon Panel stated that MTBE is a “threat to the nation's drinking water resources,” “has caused widespread and serious contamination,” and is found in 21% of ambient groundwater tested in areas where MTBE is used.

¶ 11. MTBE has contaminated public drinking water supplies in Vermont, threatening Vermonters' health, safety, and welfare. Despite Vermont's MTBE ban,² contamination continues to be found in new locations in Vermont. Over the past six years, testing and monitoring has revealed for the first time MTBE contamination in groundwater that was not reasonably discoverable prior to then. In some instances, the State has traced these detections to newly discovered leaks or other faults; in other cases MTBE's presence in the groundwater and/or soil was unknown and not reasonably discoverable until soil testing was prompted by some event; in other instances only the appearance of a petroleum odor in a well enabled the location of an underlying contaminant plume; and in some cases past releases only recently contaminated test and production wells.

¶ 12. To this day, MTBE plumes, which were released years ago, continue to migrate throughout the state, contaminating new locations and adversely impacting public and private drinking wells. Absent large-scale and expensive remediation, MTBE plumes will continue to migrate further contaminating new water sources and posing a public health risk.

¶ 13. On the basis of these allegations, the State sued defendants on June 5, 2014, advancing claims based on 10 V.S.A. §§ 1390 and 1410, public nuisance, private nuisance, trespass, negligence, strict liability for design defect and defective product, strict liability for failure to warn, and civil conspiracy. In its complaint, the State described various categories of contaminated sites, but did not expressly identify any specific contaminated sites. At least some of its claims were based on widespread and “indivisible” injury to Vermont's groundwaters as a whole, held in public trust by the state.

¶ 14. Defendants moved to dismiss the complaint as time-barred under the general six-year statute of limitations for civil actions. See 12 V.S.A. § 511. Defendants noted that the Legislature's ban on MTBE in Vermont was enacted in May 2005 and became effective January 1, 2007.2005, No. 26, § 2, codified at 10 V.S.A. § 577(a). For this reason, defendants argued, the State was indisputably aware of the alleged injury to Vermont's waters due to MTBE more than six years prior to its June 5, 2014 complaint.

¶ 15. In opposition, the State argued that: (1) its claims, which arise from injury to state lands and public trust resources, are exempt from any limitations period, see 12 V.S.A. § 462 ; (2) even if a limitations period did apply, the State's cause of action based on 10 V.S.A. § 1390 accrued on June 9, 2008, when that statute became effective, and the State filed suit within six years of the Legislature's creation of that new cause of action; (3) each of its individual claims accrued when the State knew of the particular injury and its specific cause—factual issues that cannot be resolved on a motion to dismiss; and (4) because MTBE plumes continue to migrate and spread across the state, each new contamination creates a new cause of action under the continuing tort doctrine thus preventing the limitations period from running.

¶ 16. In January 2015, the superior court dismissed the State's claims insofar as the State alleged a...