Pennsylvania v. Exxon Mobil Corp. (In re Methyl Tertiary Butyl Ether ("mtbe") Prods. Liab. Litig.)

IN RE: METHYL TERTIARY BUTYL ETHER ("MTBE") PRODUCTS LIABILITY LITIGATION

This document relates to:

Commonwealth of Pennsylvania v. Exxon Mobil Corporation, et al.

Master File No. 1:00-1898

MDL 1358 (SAS)

M21-88

14 Civ. 6228

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

July 2, 2015

OPINION AND ORDER

SHIRA A. SCHEINDLIN, U.S.D.J.:

I. INTRODUCTION

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. On December 23, 2014, certain defendants (collectively, "defendants") moved pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure to dismiss Counts V and VI of the Commonwealth of Pennsylvania's (the "Commonwealth") Amended Complaint, as well as Count III to the extent it seeks to hold defendants liable based on their alleged manufacture and/or distribution of MTBE or MTBEgasoline.¹ For the reasons stated below, defendants' motion to dismiss is GRANTED.

II. BACKGROUND

The Commonwealth seeks to recover for alleged injury and threat of future injury to the waters of the Commonwealth caused by MTBE.² At issue in this motion are claims of public nuisance (Count III), trespass (Count V), and violations of the Pennsylvania Unfair Trade Practice and Consumer Protection Law ("UTPCPL") (Count VI).

A. Count III: Public Nuisance

The Commonwealth alleges that defendants, who did not own or operate MTBE release sites, nevertheless participated and assisted in the creation of a nuisance by "intentionally and fraudulently promot[ing] MTBE for use as an additive in gasoline despite their knowledge it had latent and far-reaching adverse environmental consequences."³ The Commonwealth further alleges that defendants "knew, or reasonably should have known, that (i) gasoline containing MTBE would be placed into leaking gasoline storage and delivery systems; and (ii)when released into the subsurface . . . [would] be difficult and costly to remove from the water."⁴ Critical to this motion, the Commonwealth seeks to hold defendants liable based on "refin[ing], compound[ing], formulat[ing], market[ing], and/or otherwise supply[ing]" MTBE or MTBE gasoline.⁵ These defendants are not owners of stations or sites where MTBE was released, but are instead refiners, manufacturers, marketers, distributors, or suppliers of the released product.⁶

B. Count V: Trespass

The Commonwealth also alleges that defendants are liable for trespass to the "waters of the Commonwealth."⁷ In bringing this claim, the Commonwealth asserts that it is "the possessor and owner of rights and interests in the waters of the Commonwealth . . . which [it] holds in trust for the benefit of its citizens."⁸ The Amended Complaint does not allege that the Commonwealth "exclusively possess[es] the water at issue in this case."⁹

C. Count VI: UTPCPL Claim

The Commonwealth contends that defendants violated the UTPCPL because they allegedly engaged in "unfair and deceptive actions" in their sale and marketing of MTBE gasoline.¹⁰ In support of this claim, the Commonwealth alleges generally that defendants "disseminated, marketed, advertised and otherwise distributed information to gasoline refiners, distributors, jobbers, retailers and consumers that MTBE was a safe . . . gasoline additive when in factits environmental risks and hazards outweighed any benefits . . . ."¹¹ In addition, the Amended Complaint states that defendants' use of MTBE did not have the "characteristics, benefits or qualities it was represented to possess in that when released into the environment it caused far reaching damage to air, property, water supplies and other natural resources of the Commonwealth . . . ."¹²

Despite accusing defendants of false advertising, the Amended Complaint references only one specific advertisement - a 1999 advertisement that Getty placed in the New York Times - which the Commonwealth acknowledges was true.¹³ The Amended Complaint identifies the following allegedly false statements: (1) comments about an MTBE study made by the American Petroleum Institute ("API") (of which some, but not all, defendants belonged);¹⁴ (2) comments made by ARCO, Exxon, and a multi-company committee including certain defendants (the "MTBE Committee") in lobbying and regulatory proceedings;¹⁵ (3) comments made by the MTBE Committee at an oil industryevent;¹⁶ (4) a product bulletin issued by ARCO;¹⁷ and (5) a pamphlet issued by the Oxygenated Fuels Association ("OFA"), a "captive entity" of defendants.¹⁸

Finally, the Commonwealth seeks an order from the Court pursuant to Section 4.1 of the UTPCPL requiring defendants "to restore to the Commonwealth and other persons in interest any moneys or property, real or personal, lost as a result of defendants' violations of the UTPCPL."¹⁹

III. LEGAL STANDARD

A. Motion to Dismiss Under Rule 12(b)(6)

In deciding a motion to dismiss pursuant to Rule 12(b)(6), the court must "accept[] all factual allegations in the complaint as true and draw[] all reasonable inferences in the plaintiff's favor."²⁰ The court evaluates the sufficiency of the complaint under the "two-pronged approach" set forth by the Supreme Court in Ashcroft v. Iqbal.²¹ Under the first prong, a court may "begin by identifying pleadings that, because they are no more than conclusions, are notentitled to the assumption of truth."²² For example, "[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice."²³ Under the second prong of Iqbal, "[w]hen there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement for relief."²⁴ A claim is plausible "when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged."²⁵ Plausibility requires "more than a sheer possibility that a defendant has acted unlawfully."²⁶ Additionally, "[w]here a complaint names multiple defendants, that complaint must provide a plausible factual basis to distinguish the conduct of each of the defendants."²⁷

B. Leave to Amend

Federal Rule of Civil Procedure 15(a)(2) provides that, other thanamendments as a matter of course, "a party may amend [its pleading] only by leave of court or by written consent of the adverse party."²⁸ Although "[t]he Court should freely give leave when justice so requires,"²⁹ it is "within the sound discretion of the district court to grant or deny leave to amend."³⁰ When a motion to dismiss is granted, "'[i]t is the usual practice . . . to allow leave to replead.'"³¹ Where a plaintiff inadequately pleads a claim and cannot offer additional substantive information to cure the deficient pleading, granting leave to replead is futile.³²

IV. APPLICABLE LAW

A. Public Nuisance

Pennsylvania law provides for both statutory and common law causes of action for public nuisance.³³ Pennsylvania courts generally apply Section 821Bof the Restatement (Second) of Torts to "guide [their] determinations as to whether a use of property constitutes a public nuisance."³⁴ The Restatement defines a public nuisance as "an unreasonable interference with a right common to the general public."³⁵

Pennsylvania law does not explicitly limit public nuisance liability to property owners or users, but the PSTSPA and the PCSL evince such an intent. For instance, Section 6021.1303(b) of the PSTPSA provides that "[a]ny owner or operator of a storage tank who affects or diminishes a water supply as a result of a release shall restore or replace the affected supply."³⁶ Similarly, Section 691.401 of the PCSL states that "[i]t shall be unlawful for any person . . . [to] allow or permit [a] discharge[] from property owned or operated by such person."³⁷

Pennsylvania courts have repeatedly constrained liability for public nuisance specifically to an owner or operator of a nuisance source.³⁸ In City of Philadelphia v. Beretta, the court declined to hold gun manufacturers liable in public nuisance based on their product distribution practices.³⁹ This principle has been upheld in the environmental context, as well.⁴⁰ In Diess v. Pennsylvania Department of Transportation, the court agreed with defendant that plaintiff must "establish that the party charged with creating a public nuisance had possession or control over the site from which the nuisance [(here, an environmental contaminant)] originates."⁴¹

B. Trespass

Under Pennsylvania law, trespass - exclusively a common law cause of action - "is defined as an 'unprivileged, intentional intrusion upon land inpossession of another.'"⁴² "In order to maintain an action in trespass, 'a plaintiff must have had exclusive use and possession of the property at issue.'"⁴³ Pennsylvania courts have clearly conferred on private litigants the right to bring trespass claims for damage to groundwater under their land.⁴⁴ But neither the parties nor the Court can identify any reported cases granting the Commonwealth the right to sue for trespass to groundwater, or stating that the Commonwealth has "exclusive possession" of such water as a trustee. In another case in this MDL, the Court rejected a similar argument raised by New Jersey as a state trustee, holding that the state's lack of exclusive possession of groundwater foreclosed its claim for trespass.⁴⁵

C. UTPCPL

At issue in this motion are four alleged violations of the UTPCPL. Specifically, the UTPCPL proscribes the following "[u]nfair methods of competition" and "unfair or deceptive acts or practices":

(v) Representing that goods or services have sponsorship, approval, characteristics, ingredients, uses, benefits or quantities that they do not have or that a person has a sponsorship, approval, status, affiliation or connection that he does not have;

. . .

(vii) Representing that goods or

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