MD CT of Appeals, Exxon Jacksonville Gasoline Spill
Decisions – Lessons Learned: (or how to avoid or
secure $1.65 billion in verdicts)
Timothy R. Henderson
Rich and Henderson, P. C, and
Alan Garten
Fedder and Garten Professional Association
.
Al
Two Decisions:
1.
Exxon Mobil Corp. v. Ford, 433 Md. 426, as
supplemented on denial of reconsideration, 433 Md. 493
(2013)
2.
Exxon Mobil Corp. v. Albright, 433 Md. 303, on
reconsideration in part, 433 Md. 502 (2013) and cert.
denied, 134 S. Ct. 648 (U.S. 2013)
Two Key Issues
i) Diminution of Real Property Value from
Contamination ; and
ii) Recoverable Damages for Environmental Torts (or
how to avoid or secure $1.65 billion in verdicts)
Exxon Reports A Leak…
• On February 17, 2006
• Approximately 26,000 gallons of gasoline
leaked
• Jacksonville, Baltimore County, MD
• 317 wells and 466 residents and businesses
filed suit
Here’s The History…
Albright
April 5, 2007
Albright is lead
Plaintiff in class action
suit filed in the Circuit
Court for Baltimore
County
June 25, 2013
Court of Appeals, on
Motion for
Reconsideration,
granted in part and
denied in part
October 1, 2013
Albright filed Motion
to Recall Mandate in
Court of Appeals
(Granted in part,
denied in part).
March 12, 2009
Circuit Court entered
judgment in favor of
Albright class
awarding over $1.5
Billion in damages
Albright class filed
Motion for
Reconsideration in
Court of Appeals
May 9, 2012
Court of Appeals
granted Exxon’s petition
for Writ of Cert.
bypassing Court of
Special Appeals
February 26, 2013
Court of Appeals
reversed in part,
affirmed in part and
remanded case to
Circuit Court
September 20, 2013
November 18, 2013
Albright filed
Petition for Writ of
Cert. in U.S.
Supreme Court
U.S. Supreme Court
denied Writ of Cert.
How Does It End?
• January 5, 2014, The Daily Record reported
Exxon has reached settlement agreement with
multiple households
• Other Plaintiffs prepare for retrial
• In 2008, Exxon entered into $4 Million
settlement with Maryland
• Exxon claims massive spending in clean-up
efforts
More Detailed Facts
Gasoline release over 34 days in 2006 – 26,000 gals.
• How? Punctured supply/ fill line, 3/16 in. hole
• Why so long? Exxon claimed series of unavoidable accidents/ circumstances;
plaintiffs claimed neglect, fraud and mismanagement
History of spills – 1981 Exxon station release 1700 gals.
•
•
•
•
•
•
•
Water supply to houses and business? From groundwater
1983, Baltimore County denied building permit for new station.
Exxon appeal to Board of Appeals granted with conditions
Tank field liner promised; not installed. Double walled tanks instead.
Station began operating in 1984.
1992 some tank protection upgrades.
No releases/ incidents for over 20 years.
Exxon Actions during the 34 days
1/13/06 Exxon contractor drilled hole; station leak detection system
triggered alarm at central monitoring service, showing line failure, shut off
the line
Another Exxon contractor sent to investigate, incorrectly, concluded
that a pump had failed; recalibrated alarm to show no leak
Station operator (not Exxon employee) began noticing daily inventory
discrepancies; but not until Exxon was notified on 2/16 was station
shut down.
Exxon put up sign “Please excuse our appearance, we are working to
serve you better. Fueling facilities are temporarily closed for upgrade.”
Also notified MDE 2/17.
Exxon’s Post Notice Actions
Multiple Meetings with Public – from 2/21/06 to 4/2007 when lawsuits filed
• MDE and Exxon projected the gasoline plume would migrate through the
underground aquifer in a ½ mile radius along a line running northeast and
southwest from the station, the “strike line.”
• In March 2006, Exxon began posting progress reports for the public.
MDE Ordered Investigation and Remediation
• MDE directed Exxon to investigate the severity and scope of the leak, and to
drill and sample monitoring and recovery wells .
• In March 2006, Exxon began sampling drinking wells and provided bottled
water to residents whose wells MDE ordered them to test; and where tests
found gasoline, installed water treatment systems.
• 9/07 - MDE and Exxon entered into a Consent Decree. Pursuant to the Decree,
Exxon has installed over 227 monitoring and recovery wells in the Jacksonville
area, and, as of the time of the Albright trial in 2011, had spent over $46
million on remediation.
Two Lawsuits: Ford & Albright – claiming fraud, and toxic
torts seeking both punitive and compensatory damages
Fraudulent
Concealment- sign
fraud; remediation
fraud. Only basis
for punitive
damages.
Toxic Torts – strict
liability, trespass,
nuisance, and
negligence
Ford by Snyder:
88 residents
Albright by
Angelos - 466
residents (mostly
residential but a
few businesses)
Diminution in the fair market value of real
property
Three Types of
Compensatory
Damages Sought
Non-economic damages for emotional
distress, including loss of property &
fear of contracting cancer.
Costs of future medical monitoring.
Ford Trial Results
• Jury trial started October of 2008 and lasted for five months
• Awarded $147,000,000 in compensatory damages to all 88 plaintiffs for
diminution in value (assumed 0 value after exposure), emotional distress, fear
of cancer, and the cost of medical monitoring.
• No punitive damages for fraudulent concealment.
Albright Trial Results
• Jury trial started January 2011 and lasted six months
• Awarded $496,210,570 in compensatory damages to all 466 for diminution in value,
emotional distress, fear of cancer, and the cost of medical monitoring
• 195 plaintiffs awarded emotional distress damages for fear of loss of property
value and fear of loss of use and enjoyment
• Awarded $1,045,550,000 in punitive damages to all 466 plaintiffs for fraud.
Albright Ct. of Appeals Results
• Punitive damages - $0, no evidence of fraud
• Emotional distress for fear of loss, and loss of use and enjoyment of property- $0, not
compensable as a matter of law absent showing of fraud
• Diminution in property value – $0 for the 60 or so non-detect properties, for detect
properties rejected expert opinion and remanded for new trial
• Loss of use and enjoyment of property - $0 for 462, upheld $270 K for 1 and $350 K
to 2; remand for new trial on $1.6 mil award to nail and hair salon, too speculative
• Emotional distress, fear of cancer - $0 for 465, and remand allowing the 2 plaintiffs which
had introduced expert testimony, to prove in trial
• Cost of medical monitoring - $0
• Bottom line – relatively little of the original damage award left to recover on remand
Ford Ct. of Appeals Results
• Ct of Special Appeals reduced $147 million in damages by more than half.
• Ct. of Appeals • 1. diminution in property value (zero value wrong) – non-detect properties, $0, others
remanded for calculation of reduction in market value
• 2. emotional distress for fear of lost property value - $0
• 3. fear of cancer - $0, allows for future claims if disease manifests
• 4. cost of medical monitoring - $0
•
Bottom line - Remanded count 1 creates possibility for recovery, just much less than
jury award.
Court of Appeals Rulings in Albright and Ford Set
Significant Precedents for Future Environmental Cases
Note: Both issued February 2013, Ford refers to Albright
• Right to sue for nuisance, negligence, strict liability, and trespass, where
MDE has entered an enforcement order, and where contamination levels
are below MDE's action levels, but sets high burden of proof on plaintiffs.
• Right to damages for emotional distress for fear of cancer resulting from tortious
conduct, but requires physical manifestation of the injury.
• Right to medical monitoring costs for the first time – but ‘limited to enhanced risk
from sufficient exposure to toxic substances resulting from tortious conduct’; requires
evidence to show certain and significant increased risk of developing the latent disease;
exposure to levels below action levels not enough.
• Expert testimony is required to establish diminution in property value (or
loss of use or enjoyment) resulting from environmental contamination.
• To recover damages for fraud, must prove direct, indirect, or personal reliance on
the alleged fraudulent statement or action;
• a third party cannot recover damages for a false statement made by a defendant to a
governmental entity
Given these Findings, Why the Reduction in the
Jury Award ?
Basically, due to the lack of evidence/ or proof
–
•
The contaminants of concern, MTBE & benzene were found in
only a few drinking water wells serving the 500 plaintiffs, and
at levels exceeding state/ federal standards for even fewer.
•
The inhabitants of the affected properties drank the water for
too little time to support a claim of dangerous exposure.
•
Only a few of the plaintiffs had experts testify about the specific
harm or threat of harm to their health posed by the specific
exposure they suffered.
•
The real estate experts attempted to use novel theories to
support the award to the plaintiffs of the full value of their
property unrelated to the actual reduction in market value each
suffered; even for those owners that sold their property for
more than the value at the time of the release.
Lessons re Real Estate Values: i) Diminution in Property
Value; and ii) Loss of Use and Enjoyment.
–
Both required expert testimony “…to establish diminution in
property value resulting from environmental
contamination.”
–
Damages for diminution in value in MD - the difference
between the fair market value of the property immediately
preceding the harm and the fair market value of the property
immediately following the harm.
–
•
Fair market value - the “price as of the valuation date for the highest
and best use of the property which a [seller], willing but not obligated
to sell, would accept for the property, and which a purchaser, willing
but not obligated to buy, would pay....”
•
Generally available only for permanent injury to real property
Methodology used by expert must include ‘comparable sales
data’; Dr. Kilpatrick in Albright did not; Kenneth Acks in Ford
did.
Lessons re Real Estate Values: Dr. Kilpatrick Out; Kenneth
Acks In
–
Dr. Kilpatrick in Albright used three methods for “impaired”
valuation analysis of residential properties:
•
(1) meta-analysis derived from a study by Dr. Robert Simons;
•
•
–
–
–
(2) case studies, including jury verdicts and settlements from
around the country (including Ford ); and
(3) a contingent valuation telephone survey asking what
persons would be willing to pay for a hypothetical house with
MTBE well water contamination.
Dr. Kilpatrick did not use comparable sales data, despite
numerous sales of residential properties in the relevant
Jacksonville area following the announcement of the leak,
Why? the market was unreliable and the buyers were
uninformed.
Court of Appeals would not consider other methods because Dr.
Kilpatrick ignored comparable sales data.
Lessons re Real Estate Values: i) Diminution in
Property Value; and ii) Loss of Use and Enjoyment.
–
–
–
–
Mr. Acks opinion based on: (1) the stipulated pre-leak appraised
values of the Respondents' homes; (2) the presence of actual
potable well contamination; (3) another expert's
determinations of the risk of future contamination; (4) whether
people have been able to sell homes within a one mile radius of
the Exxon station; and (5) peer-reviewed articles discussing
diminution in property value in other contamination events.
Mr. Acks opinion: properties with evidence of contamination
decreased in value by 60%; properties with a high probability of
future contamination decreased in value by 50%; properties with
a medium probability of future contamination decreased in value
by 45%; and properties with a low probability of future
contamination decreased in value by 30%. Ford Jury Ignored &
gave 100%
Ct. of Appeals found no competent evidence to support “zero
value” and remanded to trial court to consider Mr. Acks expert
testimony.
LESSON? Need an expert and expert must incorporate
comparable sales data into opinion.
Lessons re State/ Federal Action Levels
–
Mere exposure to a toxic substance is insufficient;
circumstances of actual exposure to a toxic substance must lead
a reasonable person to believe that contracting a disease is a
real consequence of the defendant's tortious conduct.
–
Physical injury, e.g. symptons of a disease or actual impairment
required.
–
Exposure to MTBE or benzene (as determined by tests of their
potable wells), at levels below the relevant EPA and MDE
action levels, (5 ppb benzene or 20 ppb MTBE) does not
support an objective, reasonable fear of developing cancer.
–
Similarly, exposure to less than the governmental action levels,
cannot support a claim of significantly increased risk of
developing a latent disease required to support an award of
damages for medical monitoring.
–
LESSON? Uphill fight to obtain damages if exposed to less than
government action levels/ cleanup standards.
Summary of Lessons Learned
Three simple basic lessons:
–
Claims for reduction in property values, require expert
testimony which incorporates comparable sales data
into opinion.
–
Uphill fight to obtain damages if exposed to less than
government action levels/ cleanup standards.
–
To recover for fear of contracting cancer, recovery for
medical monitoring or even loss of use and enjoyment of
property requires expert testimony specific to each
person or property.