In Re: Methyl Tertiary Butyl Ether ("MTBE") Products Liability Litigation

Filing 3784

DECLARATION of M. Coy Connelly in Support re: #3781 MOTION for Settlement Notice of Motion and Motion for Good Faith Settlement Determination.. Document filed by Ultramar, Inc., Valero Marketing and Supply Company, Valero Refining Company-California. (Attachments: #1 Exhibit Part 1, #2 Exhibit Part 2, #3 Exhibit Part 3)(Connelly, Michael)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
__________________________________________
In Re: Methyl Tertiary Butyl Ether (“MTBE”)
Products Liability Litigation

Master File C.A. No.
1:00-1898 (SAS)
MDL 1358

This Document Relates To:
City of Fresno v. Chevron U.S.A., Inc., et al.,
Case No. 04-cv-04973
__________________________________________
INDEX OF EXHIBITS TO DECLARATION OF M. COY CONNELLY
IN SUPPORT OF ULTRAMAR DEFENDANTS’
MOTION FOR GOOD FAITH SETTLEMENT DETERMINATION
Exhibit 1

Settlement Agreement and Release between Plaintiff City of Fresno and
Ultramar Defendants

Exhibit 2

Excerpts of Plaintiff City of Fresno’s First Amended Complaint

Exhibit 3

Order dated February 4, 2013 dismissing the Plaintiff City of Fresno’s
trespass claims

Exhibit 4

Case Management Order # 108 (Trial Sites and Dismissed Sites)

Exhibit 5

March 6, 2013 letter from M. Axline to C. Connelly regarding Plaintiff City
of Fresno’s claims against Ultramar Defendants

Exhibit 6

Excerpts of the January 11, 2013 Status Conference transcript

Exhibit 7

Excerpts of the deposition of Plaintiff City of Fresno’s expert Marcel
Moreau, taken April 4-5 and 10-11, 2012

Exhibit 8

Excerpts of Marcel Moreau’s site-specific Expert Report on the Beacon 3519
station, dated November 2, 2011

Exhibit 9

Excerpts of Marcel Moreau’s site-specific Expert Report on the Valley Gas
station, dated November 2, 2011

Exhibit 10

Excerpts of the deposition of Shirley McMurphy Ahmad, taken February 16,
2011

Exhibit 11

Excerpts of the Amended Report of Defendants’ expert John O’Brien, dated
November 21, 2011

Exhibit 12

Excerpts of the Report of Defendants’ expert Christine Wood, dated
November 18, 2011

EXHIBIT 1

EXHIBIT 2

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

In re: Methyl Tertiary Butyl Ether ("MTBE")
Products Liability Litigation

Master File C.A. No. 1:00-Civ.
1898
MDL No 1358 (SAS)

This Document Relates To:
CITY OF FRESNO
Plaintiff,
VS.
CHEVRON U.S.A. INC.; CHEVRON
ENVIRONMENTAL SERVICES COMPANY;
SHELL OIL COMPANY; EXXON CORPORATION;
TOSCO CORPORATION; UNOCAL
CORPORATION; UNION OIL COMPANY OF
CALIFORNIA; KERN OIL & REFINING
COMPANY; VALERO REFINING COMPANYCALIFORNIA; VALERO MARKETING AND
SUPPLY COMPANY [DOE 11; TESORO
PETROLEUM CORPORATION [DOE 21; TESORO
REFINING AND MARKETING COMPANY, TNC.
[DOE 31; TEXACO REFINING AND MARKETING
INC. ; ULTRAMAR, INC .; ARC0
CHEMICAL COMPANY; LYONDELL
CHEMICAL COMPANY; COASTAL CHEM, INC.;
EXXON MOBIL CORPORATION;
CONOCOPHILLIPS CORPORATION; ATLANTIC
RICHFIELD COMPANY; EQUIVA
SERVICES LLC; TEXACO, INC.; EQUILON
ENTERPRISES LLC; CHEVRONTEXACO
CORPORATION; NEW WEST PETROLEUM;
DUKE ENERGY MERCHANTS, LLC; DUKE
ENERGY TRADING AND MARKETING, LLC;
PACIFIC SOUTHWEST TRADING; NORTHRIDGE
PETROLEUM MARKETING U. S., INC. ; DLKE
ENERGY MERCHANTS CALIFORNIA, ZNC.; NEW
WEST PETROLEUM, LLC;
WESTPORT PETROLEUM INC.; NELLA
OIL COMPANY LLC; CITGO PETROLEUM
CORPORATION [DOE 2011; AND DOES 4
THROUGH 200,202 THROUGH 400, and
401 THROUGH 600, inclusive,
Defendants.

Case No. 04 CV-04973 (SAS)
Transferred from:
United States District Court for
the Northern District of California
Case No. C 03-5378 JSW
(Honorable Jeffrey S. White)
Removed from:
Superior Court of California,
County of San Francisco,
Case No. CGC-03-425649
FIRST AMENDED
COMPLAINT
JURY TRIAL DEMANDED

Plaintiff City of Fresno hereby alleges as follows:
I. SUMMARY OF THE CASE

1. The City of Fresno is responsible for purveying clean, safe drinlung water to
approximately 450,000 people in the County of Fresno, California. Expanding plumes o f methyl
tertiary butyl ether ("MTBE") and tertiary butyl alcohol ("TBA") contaminate and threaten the
water system and drinking water on which Fresno's schools, hospitals, businesses, residents and
visitors depend.
2. The defendants in this action are the refiners who manufacture gasoline containing
MTBE and TBA, manufacturers of MTBE, and the designers, promoters, marketers, formulators,
distributors, suppliers, and retailers of gasoline containing MTBE and TBA, which contaminate
and threaten Fresno's water system and public water supply. Among other things, the defendants
knowingly and willfully promoted and marketed MTBE and TBA and/or gasoline containing
MTBE and/or TBA, when they knew or reasonably should have known that these compounds
would reach groundwater, pollute public water supplies, render drinking water unusable and
unsafe, and threaten the public health and welfare, as they have in Fresno.
3. Fresno filed this lawsuit to recover compensatory and all other damages, including all

necessary funds to remove MTBE and TBA pollution from public drinlung water supplies, to
restore the reliability of Fresno's water system and drinking water supply, to abate MTBE and
TBA plumes, and to assure that the responsible parties -- and not the City of Fresno nor the
public -- bear the expense.
11. PLAINTIFF

4. Plaintiff City of Fresno ("Fresno") provides water to the residents of Fresno. The City
of Fresno bears the responsibility of owning and operating a water system which serves the
public, including drinking water wells with related and ancillary equipment, pumps, pipes, water
treatment equipment, delivery systems and infrastructure which will be referred to collectively in
this complaint as the "water system." The drinking water sources for the Fresno water system
include more than two hundred and fifty (250) wells owned and operated by Fresno within or
near city limits. Among other things, the water system includes Fresno's right to appropriate and
use groundwater for water supplies.
2

1 1 DEFENDANTS
1.

5. Most of the defendants in this action are corporate members of the gasoline industry.
As described below, the defendants include manufacturers and promoters of gasoline containing
MTBE andor TBA, distributors of gasoline containing MTBE and/or TBA, inanufacturers and
promoters of MTBE andor TBA, and owners and operators of facilities that released MTBE
and/or TBA and/or gasoline containing MTBE and/or TBA into the environment. MTBE, TBA,
and gasoline containing MTBE and/or TBA have contaminated, polluted and threatened, and
continue to contaminate, pollute and threaten, Fresno's water system.

6. When this complaint refers to any act or omission of the defendants, such reference
shall be deemed to mean that the officers, directors, agents, employees, or representatives of the
defendants committed or authorized such act or omission, or failed to adequately supervise or
properly control or direct their employees while engaged in the management, direction, operation
or control of the affairs of defendants, and did so while acting within the scope of their
employment or agency.
A. Refiner Defendants
7. These defendants owned and operated refineries in California and/or designed,
formulated, refined, manufactured, promoted, marketed, supplied and provided gasoline
containing MTBE and/or TBA which, at all times relevant to this complaint, was distributed and
sold in areas affecting Fresno's water system:
8. Defendant Chevron U.S.A. Inc. ("Chevron USA") is a Pennsylvania corporation with

its principal place of business in San Ramon, California.
9. Defendant Shell Oil Company, individually and doing business as Shell Oil Products

US ("Shell") is a Delaware corporation doing business in California.
10. Defendant Exxon Corporation ("Exxon") is a New Jersey corporation with its

principal place of business located in Texas.
11. Defendant Tosco Corporation ("Tosco") is a Nevada corporation with its principal
place of business in Stamford, Connecticut.
12. Defendant Unocal Corporation ("Unocal") is a Delaware corporation doing business

in California.
3

ChevronTexaco Corporation is a successor in interest to certain Chevron-related and Texacorelated entities.
24. Defendant Equilon Enterprises LLC ("Equilon") is a Delaware Limited Liability
Company. Plaintiff is informed and believes that Equilon Enterprises LLC is a successor in
interest to certain Shell-related and Texaco-related entities.
25. Defendants Chevron USA, Shell, Exxon, Tosco, Unocal, Union Oil, Kern Oil, Valero
Refining, Valero Marketing, Tesoro, Tesoro Refining, TRMI, Ultramar, ExxonMobil, Conoco,
ChevronTexaco, Equilon and DOES 4 through 100, will be collectively referred to hereafter as
the "Refiner Defendants." The Refiner Defendants, and each of them, owned and/or operated
gasoline refineries that manufactured and supplied gasoline containing MTBE and/or TBA to
locations in the vicinity of Fresno's water system, such that releases of such products to the
subsurface contaminated and polluted the water system. Among other thmgs, these defendants
(1) designed, formulated, refined, manufactured, promoted, marketed, distributed, transported,
packaged, exchanged and/or sold gasoline containing MTBE and/or TBA, which is
contaminating, polluting and threatening Fresno's public water supplies; (2) owned, operated,
and/or controlled gasoline delivery systems including, but not limited to, gasoline stations,
gasoline storage, transfer, delivery, and dispensing systems (collectively herein "gasoline delivery
systems") in areas affecting Fresno's water system; (3) were legally responsible for and
committed each of the multiple tortious and ongoing wrongful acts alleged in this complaint; (4)
participated in one or more enterprises to promote MTBE and/or TBA and/or gasoline containing
MTBE and/or TBA; (5) negligently designed, constructed, installed, fabricated, owned,
operated, controlled, inspected and/or repaired gasoline delivery systems from which MTBE
and/or TBA is contaminating, polluting, and threatening the water system; (6) negligently and/or
intentionally failed and refused to take appropriate remediation action to abate MTBE and/or
TBA plumes when MTBE and/or TBA escaped from the gasoline delivery systems; and (7) in
doing the tortious and wrongful acts alleged in this complaint, acted in the capacity of aider,
abettor, joint-venturer, partner, agent, principal, successor-in-interest, surviving corporation,
fraudulent transferee, fraudulent transferor, controller, alter-ego, co-conspirator, licensee,
licensor, patent holder and/or indemnitor of each of the remaining DOE and named defendants.
5

26. Plaintiff is ignorant of the true names and/or capacities of the defendants sued herein
under the fictitious names DOES 4 through 100, inclusive.
B. MTBEITBA ManufacturerISupplier Defendants

27. These defendants manufactured, promoted, marketed, sold, supplied and provided
MTBE andor TBA which, at all times relevant to this complaint, was added to gasoline which
was distributed and sold in areas affecting Fresno's water system:
28. Defendant ARCO Chemical Company ("ARCO Chemical") is a corporation with its
principal place of business in Los Angeles, California.
29. Defendant Lyondell Chemical Company ("Lyondell"), as successor-in-interestto

ARCO Chemical Company, is a corporation with its headquarters in Houston, Texas, and doing
business in California.
30. Defendant Coastal Chem, Inc. ("Coastal") is a Delaware corporation.
3 1. Defendant Chevron Environmental Services Company is a Delaware corporation
with its principal place of business in San Francisco, California.
32. Defendants ARCO Chemical, Lyondell, Coastal, Chevron Environmental Services
Company, and also defendants Chevron USA, Shell, Exxon, Tosco, Valero Refining, Valero
Marketing, Tesoro, Tesoro Refining, Ultramar, ExxonMobil, Conoco, ChevronTexaco, Equilon
and DOES 101 through 200, will be collectively referred to hereafter as the "MTBEITBA
Manufacturer/SupplierDefendants." The MTBEITBA ManufacturerISupplier Defendants, and
each of them, manufactured and/or supplied MTBE and/or TBA for use in gasoline which was
distributed to and sold in locations in the vicinity of Fresno's water system, such that releases of
that gasoline to the subsurface contaminated, polluted, and threaten the water system. Among
other things, these defendants (1) negligently designed, manufactured, formulated, refined,
promoted, marketed, distributed, failed to adequately warn about, transported, packaged,
exchanged andor sold MTBE andor TBA, which is contaminating, polluting, and threatening
Fresno's public water supplies; (2) owned, operated, and controlled gasoline delivery systems in
areas affecting Fresno's water system; (3) were legally responsible for and committed each of the
multiple tortious and ongoing wrongful acts alleged in this complaint; (4) participated in one or
more enterprises to promote MTBE andor TBA andor gasoline containing MTBE andor TBA;
6

42. Defendant Duke Energy Merchants California, Inc., ("Duke Energy California")
formerly known as Northridge Petroleum Marketing U.S., Inc., is a Colorado corporation doing
business in California.
43. Defendant Westport Petroleum Inc. ("Westport") is a California corporation with its
principal place of business in Pasadena, California.
44. Defendant Nella Oil Company LLC ("Nella") is a California limited liability company
with its principle place of business in Auburn, California.
45. Defendant Citgo Petroleum Corporation ("Citgo") is a Delaware corporation with its
principal place of business in Tulsa, Oklahoma, and doing business in California. Citgo is
named in place of DOE 20 1.
46. Plaintiff is ignorant of the true names and/or capacities of the defendants sued herein
under the fictitious names DOES 202 through 400, inclusive.
47. Defendants Arco, Equiva, New West, Duke Energy, Duke Marketing, PS Trading,
New West LLC, Northridge, Duke Energy California, Westport, Nella and also defendants
Chevron USA, Shell, Exxon, Tosco, Unocal, Union Oil, Kern Oil, Valero Refining, Valero
Marketing, TRMI, Ultramar, ExxonMobil, Conoco, ChevronTexaco, Equilon and DOES 202
through 400, will be collectively referred to herein as the "Distributor Defendants." The
Distributor Defendants, and each of them: (1) designed, manufactured, formulated, pronioted,
marketed, distributed, transported, packaged, and sold gasoline containing MTBE and/or TBA
which is contaminating and threatening Fresno's public water supplies; (2) were legally
responsible for and committed each of the tortious and wrongful acts alleged in t h s complaint;

(3) participated in one or more enterprises to promote MTBE and/or TBA and/or gasoline
containing MTBE and/or TBA; and (4) in doing the tortious and wrongful acts alleged in this
complaint, acted in the capacity of aider, abettor, joint-venturer, partner, agent, principal,
successor-in-interest,surviving corporation, fraudulent transferee, fraudulent transferor,
controller, alter-ego, co-conspirator, licensee, licensor, patent holder and/or indernnitor of each of
the remaining DOE and named defendants.
D. OwnerIOperator Defendants

48. These defendants own and/or operate gasoline delivery facilities, including, but not
8

limited to, pipelines, gasoline stations, gasoline storage, transfer, delivery, and dispensing
systems (collectively herein "gasoline delivery systems") in areas affecting Fresno's water
system:
49. Plaintiff is ignorant of the true names and/or capacities of the defendants sued herein
under the fictitious names DOES 401 through 600, inclusive.
50. DOES 401 through 600, shall be referred to collectively herein as the
"OwnerlOperator Defendants." The OwnerIOperator Defendants, and each of them: (1)
designed, constructed, installed, fabricated, owned, operated, controlled, inspected and/or
repaired gasoline delivery systems from which gasoline containing MTBE and/or TBA is
contaminating, polluting, and threatening Fresno's water system; (2) were legally responsible for
and committed each of the multiple tortious and ongoing wrongful acts alleged in this complaint;
(3) participated in one or more enterprise(s) to promote, market, distribute, and sell gasoline
containing MTBE and/or TBA; and (4) in doing the tortious and wrongful acts alleged in this
complaint, acted in the capacity of aider, abettor, joint-venturer, partner, agent, principal,
successor-in-interest, surviving corporation, fraudulent transferee, fraudulent transferor,
controller, alter-ego, co-conspirator, licensee, licensor, patent holder and/or indenmitor of each of
the remaining DOE and named defendants.

IV. ALLEGATIONS APPLICABLE TO ALL CAUSES OF ACTION

A. The Contaminants: MTBE and TBA
5 1. MTBE is an additive to gasoline. Wherever referred to in t h ~ complaint, MTBE
s
means not only methyl tertiary butyl ether, but also the contaminants in comrnercial grade
MTBE, as well as other oxygenates and ethers, including, but not limited to, TAME, DIPE, and
ETBE.
52. TBA is present in some gasoline. TBA is variously a gasoline constituent, an
impurity in conmercial grade MTBE, and a degradation or breakdown product of MTBE.
53. MTBE and TBA contaminate the environment through leaks and spills from gasoline
delivery systems. Once released to the environment from gasoline delivery systems, MTBE and
TBA each have unique characteristics that cause extensive environmental contanlination and a
corresponding threat to the public health and welfare. In particular, the fate and transport of
9

MTBE and TBA in the subsurface differs significantly from that of gasoline constituents that
have historically been of environmental and/or toxicological concern, specifically the "BTEX
con~pounds"
(benzene, toluene, ethylbenzene, and xylene).
54. Once released into the subsurface, MTBE and TBA separate from other gasoline
constituents in the presence of moisture. In contrast to the BTEX compounds, MTBE and TBA
have a strong affinity for water. If MTBE and/or TBA are released into the environment in
sufficient quantities, MTBE and/or TBA have the capacity to migrate through the soil, the
groundwater, penetrate deeper within the aquifer, and cause persistent contamination that can
threaten the potability of drinking water wells. There is a potentially lengthy delay, based on site
specific factors, between the time MTBE and/or TBA are released and the time they accumulate
in potentially usable ground water in sufficient quantities to contaminate public drinking water
resources.
55. MTBE and TBA spread farther and faster than other components of gasoline, resist
biodegradation, and are difficult and costly to remove from groundwater and drinking water
supplies.

B. Regulatory Standards Applicable to MTBE and TBA
56. No federal or state agency has approved either MTBE or TBA as an additive to
drinking water. No federal or state agency has approved releasing MTBE or TBA into
groundwater. No federal or state agency has ever required that gasoline contain MTBE and/or
TBA.

57. Along with its other properties, MTBE can render water supplies undrinkable by
changing the taste and odor of water into a foul smelling liquid with a turpentine odor and
chemical taste unfit for human consunlption. The State of California established a Secondary
Maximum Contaminant Level ("MCL") for MTBE of 5 parts per billion ("ppb"). This means
that the law prohibits using water containing MTBE at or above this level in public drinking
water because of MTBE's aesthetic properties. Individuals, however, can smell and taste MTBE
in water at even lower levels.

58. MTBE also presents a significant public health threat. Because of MTBE's potential
for causing cancer, the State of California has established a Primary (health) MCL for MTBE of
10

13 ppb. This means that the law prohibits using water containing MTBE at or above this level in
public drinking water because of MTBE's threat to public health.
59. TBA also presents a significant:threat to public health. The State of California has
set an Action Level for TBA of 12 parts per billion in water, based on an interim assessment
performed by the California Office of Environmental Health Hazard Assessment. The interim
assessment concluded that exposure to TBA at levels above 12 ppb in water creates an
unacceptable public health risk of cancer.
60. California Governor Gray Davis ordered state agencies to phase out MTBE use in
motor fuel in California, to achieve 100% removal no later than December 3 1, 2003. Because of
MTBE's threat to drinking water, the federal government has also announced its intent to
"significantly reduce or eliminate" MTBE from gasoline in an Advance Notice of Proposed
Ruleiliaking published in the Federal Register. Eighteen states, including California, have either
banned or are phasing out the use of MTBE in gasoline.

C. Defendants' Promotion of MTBE and TBA
6 1. The Refiner Defendants and MTBEiTBA ManufactureriSupplier Defendants, all of
whom have promoted the use of MTBE andlor TBA, andlor gasoline containing MTBE andlor
TBA, for its purported enviroilmental benefits, knew or should have known of the grave harm
and threat to the public health and welfare represented by the proliferating use of these
compounds, including (among other thmgs): widespread pollution of groundwater with MTBE
and TBA, contamination of public drinking water by these compounds, drinking water supplies
rendered unfit and unusable for consumption, public health threatened, and increased costs to
public water suppliers and their ratepayers. Plaintiff is informed and believes, however, and
based thereon alleges, that defendants Tosco and Ultramar did not gain this knowledge until
1996, due to concealment of information by another defendant or defendants, including but not
limited to ARC0 Chemical.
62. Despite knowing that MTBE and TBA pollution was inevitable, and despite the
availability of reasonable alternatives, (including, but not limited to, adequate warnings),
defendants chose not to warn customers, retailers, regulators or public officials, including the
City of Fresno. As production and sales of these compounds and gasoline containing them
11

Fresno seeks punitive damages to punish certain defendants and deter future wrongful and
harmful conduct, and other relief as described in the Prayer below.

FIRST CAUSE OF ACTION
(Strict Liability Against All Defendants)
70. Fresno refers to paragraphs 1 through 69 above, and by this reference incorporates
them into this cause of action as though fully set forth herein.

7 1. The Refiner Defendants, Distributor Defendants, and OwnerlOperator Defendants,
and each of them, designed, formulated, compounded, refined, manufactured, packaged,
distributed, recommended, merchandised, advertised, promoted, and/or sold gasoline containing
MTBE and/or TBA.
72. The MTBEITBA ManufacturerISupplier Defendants, and each of them, designed,
formulated, compounded, manufactured, packaged, distributed, supplied, recomended,
merchandised, advertised, promoted, and/or sold MTBE and/or TBA and their constituents,
which were intended by defendants, and each of them, to be used as gasoline additive(s).

73. Defendants' design and manufacture of these products was defective, and defendants
failed to adequately warn against the dangers of these products.
74. Defendants, and each of them, falsely represented, asserted, claimed and warranted
that gasoline containing MTBE andlor TBA could be used in the same manner as gasoline not
containing these compounds, and did not require any different or special handling or precautions.

75. Defendants, and each of them, knew that said product(s) were to be purchased and
used without inspection for defects.
76. Gasoline containing MTBE and/or TBA, and MTBE and TBA themselves, are
defective products because, among other things:
(a)

The benefits of using MTBE and/or TBA in gasoline, if any, are greatly
outweighed by the associated costs and negative impacts imposed on
society, consunlers, and the environment, and on the City of Fresno's
water system, and those who rely on it;

(b)

MTBE and TBA cause extensive groundwater contamination, even when
used in their foreseeable and intended manner;
15