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)

Even at extremely low levels, MTBE renders drinking water putrid, foul,
and unfit for purveying to consumers, and TBA also renders drinking
water unfit for purveying as drinking water to the pubic;
MTBE and TBA and gasoline containing MTBE and/or TBA pose
significant threats to public health;
Defendants failed to provide adequate warnings of the known and
foreseeable risks of MTBE and TBA and gasoline containing MTBE
and/or TBA, including but not limited to groundwater contanlination with
both MTBE and TBA;
Defendants failed to conduct reasonable, appropriate or adequate scientific
studies to evaluate the environmental fate and transport and potential
hunlan health effects of MTBE and/or TBA and gasoline containing
MTBE and/or TBA; and
Commercial grade MTBE is defectively designed and manufactured when
it contains unnecessary but environmentally harmful impurities such as
TBA.

77. MTBE, and/or TBA, and/or gasoline containing MTBE and/or TBA, were used in a
manner in which they were forseeably intended to be used, and as a proximate result of the
defects previously described, MTBE and/or TBA and gasoline containing MTBE and/or TBA
proximately caused the City of Fresno to sustain the injuries and damages set forth in this
complaint.

78. As a direct and proximate result of the acts and omissions of the defendants alleged
herein, the City of Fresno must assess, evaluate, investigate, monitor, abate, clean-up, correct,
contain, and remove MTBE and/or TBA from Fresno's water system, and secure alternative
water supplies (with related operational impacts), all at significant expense, loss, and damage.

79. As a further direct and proximate result of the acts and omissions of the defendants
alleged herein, Fresno will sustain substantially increased expenses, loss of the use of water and a
threat to its appropriative water rights, all to Fresno's damage in an amount within the

jurisdction of this court. Fresno is also entitled to recover costs incurred in prosecuting tlis
action and prejudgment interest to the full extent permitted by law.
80. Defendants ARCO, Chevron USA, Chevron Environmental Services Company,
Shell, Exxon, Tosco (after 1996), Unocal, Union Oil, Kern Oil, TFWI, Ultramar (after 1996),
Conoco, Equilon, ARCO Chemical, Lyondell, Valero Refining, Valero Marketing, and DOES
100-200 knew that it was substantially certain that their acts and omissions described above
would threaten public health and cause extensive contamination of public drinking water supplies
and property damage. These defendants committed each of the above described acts and
omissions knowingly, willfully, and with oppression, fiaud, and/or malice and with conscious
disregard of the health and safety of others, and of plaintiffs water rights.
8 1. T h s conduct is reprehensible, despicable, and was performed to promote sales of
MTBE and/or TBA and/or gasoline containing MTBE and/or TBA in conscious disregard of the
known risks of injury to health and property. These defendants acted with willful and conscious
disregard of the probable dangerous consequences of that conduct and its foreseeable impact
upon Fresno. Therefore, Fresno requests an award of exemplary damages in an amount sufficient
to punish ARCO, Chevron USA, Shell, Exxon, Tosco (after 1996), Unocal, Union Oil, Kern Oil,

TRMI, Ultramar (after 1996), Conoco, Equilon, ARCO Chemical, Lyondell, Valero Refining,
Valero Marketing, and DOES 100-200. After the completion of additional investigation and
discovery, Fresno may seek leave of court to amend this complaint to allege a claim for
exemplary damages against additional defendants if warranted by the facts.
SECOND CAUSE OF ACTION
(Negligence Against All Defendants)
82. Fresno refers to paragraphs 1 through 8 1 above, and by this reference incorporates

them into this cause of action as though fully set forth herein.
83. Defendants had a duty to use due care in the design, manufacture, formulation,

handling, control, disposal, sale, testing, labeling, warnings, use, and instructions for use of
MTBE and TBA, and gasoline containing MTBE and/or TBA, and gasoline delivery systems.
84. Defendants so negligently, carelessly, and/or recklessly designed, manufactured,
formulated, handled, labeled, instructed, controlled (or the lack thereof), tested (or the lack
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thereof), released, spilled, failed to warn, and/or sold MTBE and/or TBA, and/or so negligently,
carelessly and recklessly designed, manufactured, formulated, handled, labeled, instructed,
entrusted, controlled (or the lack thereof), tested (or the lack thereof), released, spilled, failed to
warn, dispensed and/or sold gasoline containing MTBE and/or TBA, and/or so negligently,
carelessly, and recklessly dispensed MTBE and/or TBA and/or gasoline containing MTBE and/or
TBA into gasoline delivery systems, and/or so negligently, carelessly and/or recklessly designed,
installed, failed to warn, operated and/or maintained gasoline delivery systems for use with
gasoline containing MTBE and/or TBA, that they breached their duties to plaintiff and directly
and proximately caused MTBE and/or TBA to contaminate, pollute and threaten Fresno's water
system, resulting in the harm which warrants the award of compensatory and punitive damages as
prayed for in this complaint.
85. Defendants, and each of them, among other things, negligently, carelessly, and/or
recklessly failed to: (1) use appropriate technology to prevent leaks of gasoline containing MTBE
and/or TBA; (2) install and maintain gasoline delivery systems that prevented leaks and
facilitated prompt detection and containment of any leaks; (3) monitor and discover leaks as
soon as possible; (4) warn those who may be injured as a result of the leaks; (5) wan1 those who
handled MTBE of its properties; and (6) clean up and abate spills of gasoline containing MTBE
and/or TBA as thoroughly and as soon as reasonably possible and in a manner necessary to
prevent ham1 and injury.
86. The Refiner Defendants and Distributor Defendants had actual control over the
OwnerIOperator Defendants through a variety of means, including but not limited to written
agreements, inspection rights, prescribing certain procedures and operating practices, training,
sale of branded goods, and agreements obligating the respective OwnerIOperator Defendants to
acquire, store and sell gasoline containing MTBE and/or TBA. Therefore, the Refiner and
Distributor Defendants had actual control over the OwnerIOperator Defendants with leaking
gasoline delivery systems and/or were vicariously liable for the acts and conduct of the
OwnerIOperator Defendants.

87. The Refiner Defendants, Distributor Defendants, and OwnerIOperator Defendants
also undertook tank system testing, tank integrity testing, inventory reconciliation and testing,
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thereby causing and permitting MTBE and/or TBA to contaminate and threaten
Fresno's water system, and defendants failed to warn the appropriate entities and
individuals, including Fresno, of known risks, spills, releases and/or leaks, and/or
failed to undertake reasonable, appropriate, or necessary action to reduce,
remediate, or abate MTBE and/or TBA groundwater contamination.
Defendants negligently overfilled gasoline delivery systems with gasoline
containing MTBE and/or TBA, andlor spilled or released it at gasoline facilities
near Fresno's water system.
When defendants learned, or reasonably should have learned, that MTBE and/or
TBA were persistent, significant and/or widespread sources of groundwater
contamination, or threatened to be so, defendants failed to warn the appropriate
entities and individuals, including Fresno, of known risks, spills, releases and/or
leaks, and/or failed to undertake reasonable, appropriate or necessary action to
reduce, remediate, or abate MTBE and/or TBA groundwater contamination.

97. The Refiner and Distributor Defendants had actual control over the OwnerIOperator
Defendants through a variety of means, including but not limited to written agreements,
inspection rights, prescribing certain procedures and operating practices, sale of branded goods,
agreements obligating the respective OwnerIOperator Defendants to acquire, store and sell
gasoline containing MTBE and/or TBA, and training. Therefore, the Refiner and Distributor
Defendants had actual control over the OwnerIOperator Defendants with leaking gasoline
delivery systems and/or were vicariously liable for the acts and conduct of the Owner/Operator
Defendants.

98. The MTBE and TBA contamination of Fresno's water system has varied and will vary
over time and requires investigation, remediation, abatement, and/or treatment. The City of
Fresno has engaged, or will engage, in remediation, abatement, investigation, and/or treatment
programs and in securing replacement water supplies, and thereby has sustained, is sustaining,
and will sustain, the damages alleged herein.
99. The defendants, and each of them, caused, created, and/or assisted in the creation of
the trespass alleged herein.
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100. For the reasons alleged herein, Fresno is entitled to an award of exemplary damages
against defendants ARCO, Chevron USA, Shell, Exxon, Tosco (after 1996), Unocal, Union Oil,
Kern Oil, TRMI, Ultramar (after 1996), Conoco, Equilon, ARCO Chemical, Lyondell, Valero
Refining, Valero Marketing, and DOES 100 through 200. After the completion of additional
investigation and discovery, Fresno may seek leave of court to amend this complaint to allege a
claim for exemplary damages against additional defendants if warranted by the facts.

FOURTH CAUSE OF ACTION
(Nuisance Against All Defendants)
101. Fresno refers to paragraphs 1 through 100 above, and by this reference incorporates
them into this cause of action as though fully set forth herein.
102. The negligent, reckless, intentional and ultrahazardous activity of the defendants and
each of them, as alleged herein, has resulted in the contamination and pollution of and threats to
Fresno's water system and thereby constitutes a nuisance. The contamination, pollution, and
threats to Fresno's water system with MTBE and/or TBA and gasoline containing MTBE and/or
TBA is a public nuisance as defined in Civil Code section 3479, Civil Code section 3480, Health
and Safety Code section 5410, and Water Code section 13050, as it is injurious to health,
indecent and offensive to the senses, obstructs the fiee use of property, interferes with the
comfortable enjoyment of life or property, and is reasonably abatable. The defendants, and each
of them, caused, created, and/or assisted in the creation of the nuisance alleged herein.
103. The Refiner, Manufacturer and Distributor Defendants, their agents and employees,
marketed, distributed, promoted, and/or sold their products with reckless disregard for human
health and the environment.
104. Fresno's water system is adversely affected by the nuisance.
105. The nuisance caused by defendants, and each of them, has substantially interfered
with and obstructed Fresno's ability to provide a water supply free from unacceptable health risk,
taste, odor, color, pollution and contamination, and to protect its water system and groundwater
supplies from such harm.
106. Fresno owns and holds property rights and interests damaged by the nuisance.
Fresno's injury is separate and distinct from that of the public.
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EXHIBIT 3

EXHIBIT 4

EXHIBIT 5

Law Offices of

MILLER, AXLINE & SAWYER
A Professional Corporation

49963024 
Mar 07 2013 
01:46AM 

TRACEY L. O'REILLY
EVAN EICKMEYER
DANIEL BOONE
JUSTIN MASSEY
BRIAN D. SHANNON

DUANE C. MILLER
MICHAEL AXLINE
A. CURTIS SAWYER, JR.

DONALD MOONEY, of Counsel

March 6, 2013
VIALNFS
M. Coy Connelly, Esq.
BRACEWELL & GUILIANI LLP
711 Louisiana Street, Suite 2300
Houston, TX 77002-2770
Re:

City of Fresno v. Chevron US.A., Inc., et al.
No. 1:04-cv-04973-SAS (MDL 1358)
Plaintiff City of Fresno's Further Meet-and-Confer re Ultramar and
Valero's Proposed Motion for Partial Summary Judgment

This letter responds to yours of February 8 and 15,2013.
Both of your letters ask the City to distinguish between its claims against Ultramar and its
claims against Valero. Both letters also claim, "Valero Defendants did not do business in the
State of California prior to the year 2000." As cited in (and attached to) Evan Eickmeyer's
December 11,2012, e-mail, however, the Valero Defendants' Objections and Responses to
Plaintiff City of Fresno's First Set of Interrogatories to Defendants ("Responses to First Set of
Interrogatories") stated that the Valero Defendants supplied gasoline containing MTBE to Fresno
customers prior to the year 2000. Responses to First Set ofInterrogatories, Exh. A. The Valero
Defendants also admit to selling 2-3 million barrels of gasoline containing MTBE within Fresno
County each year from 1997 to 2000, with a smaller amount sold in 1996. Responses to First Set
ofInterrogatories, Response to Interrogatory No. 10. These interrogatory responses were served
on behalf of Ultramar and two Valero entities, referenced collectively as the "Valero
Defendants." Our confusion, if any, was caused by your joint interrogatory responses.
Some MTBE gasoline shipments and releases may have occurred before "1995 when
Ultramar Inc. merged with Diamond Shamrock Corporation," or before "the December 31, 2001
merger of Ultramar Diamond Shamrock Corporation with and into Valero Energy Corporation."
Id. Whether or not Valero gasoline was delivered to or released at the site, however, Valero has
successor liability for Beacon's activities regarding each site.
Your February 8th letter cites to the January 11,2013, status conference with Judge
Scheindlin and the discussion of Duke Energy, a distributor of MTBE gasoline, for the
proposition that the City must provide evidence that a jobber delivered Duke MTBE gasoline to a

1050 Fulton Avenue, Suite 100, Sacramento, CA 95825-4225; Telephone: [phone]
Facsimile: [phone]; Email: [e-mail]

M. Coy Connelly, Esq.
March 6, 2013
Page 2

particular station. As 1 am sure you are aware, in In re MTBE, 591 F.Supp.2d 259 (S.D. N.Y.
2008), Judge Scheindlin, in discussing the commingled product theory, distinguished suppliers of
neat MTBE from refiners and distributors of MTBE gasoline, and also distinguished both neat
MTBE suppliers and MTBE gasoline distributors and refiners from gasoline retailers.
At the January 11,2013, status conference, in a discussion of Fresno's claims against
Duke Energy, Judge Scheindlin rejected defendants' argument that the City would have to amend
its complaint to allege the commingled product theory, and made clear that use of the theory is
simply "a matter of proof." Tr. at 40 :20-21. She also made clear that she was not interested in
re-visiting her prior commingled product rulings. Tr. at 40:11-16 ("I said what 1 had to say about
that theory, and it's old news.")
After stating that the City did not need to amend its complaint to allege commingled
product theory, Judge Scheindlin asked: "can you also do it with direct product, Tracey [tracing?]
or do you have to rely on the blended, you know, total product and the markets?" Tr. at 41 :4-6.
Ms. O'Reilly stated in the context of the discussion of Duke that "[w]e're not going with
commingled in the pipeline. We're going with direct evidence, is what we explained [with
respect to Duke in the City's pre-conference letter]." Tr. at 41:12-13. Ms. O'Reilly went on to
explain the City has evidence that "Duke Energy mixed several gas station sites, received
delivery, deliveries ofMTBE gasoline from jobbers to whom Duke Energy sold MTBE
gasoline." Tr. at 42:11-13.
This discussion, and Ms. O'Reilly's statements, merely clarified that with respect to some
defendants, including Duke, the City's evidence will allow the jury to conclude that the
defendants' product was delivered directly to some stations. Ms. O'Reilly did not state that the
City would not rely on the commingled product theory for all defendants or even all stations.
Since, as Judge Scheindlin's commingled product opinion makes clear, it is impossible to trace
neat MTBE to individual release sites, such a conclusion would never have been reached in such
an off-hand and indirect way.
As 1 stated during our face-to-face meet and confer session on March 1,2013, the City
will be relying on the commingled product theory method of proof for defendants against whom
the City does not have direct evidence of delivery to particular stations. This evidence will show
delivery of a defendant's product to terminals serving the Fresno area during the relevant time
period. This evidence will include (but not be limited to) the deposition of Dickman Lum in the
South Tahoe and Merced cases and the deposition of Fresno terminal manager Robert Kennedy
in City of Dinuba v. Unocal Corp.
The consequence of relying on the commingled product theory with respect to a particular
defendant, of course, is that the City cannot pursue nuisance claims or punitive damage claims

M. Coy Connelly, Esq.
March 6, 2013
Page 3

against that defendant. As you know, the City has already notified you that it will not be
pursuing nuisance claims against Ultramar and Valero at the Smith Tank Lines site. See
February 8, 2012, Eickmeyer letter to Jeff Parker. As discussed infra, the City will also
withdraw certain other claims. Consequently, there is no need to file any summary judgment
motions with respect to the claims being withdrawn.
As Judge Scheindlin made clear in In Re MI'BE, 591 F. Supp.2d 259,268 (S.D. N.Y.
2008): "even when the jury concludes that plaintiffs have not met their burden to prove that any
particular spill of gasoline caused contamination in a well, plaintiffs may still prove their claims
against gasoline manufacturers under the commingled product theory."
As Judge Scheindlin also recognized, the time that the contamination of groundwater
occurred is an issue of fact for the jury and the jury may estimate, from evidence presented, a
range of time during which the contamination occurred. 591 F. Supp.2d at 275. Judge
Scheindlin's ruling is consistent with expert testimony. As Marcel Moreau explains, during the
time that MTBE gasoline was in use at this station, releases of gasoline were routine, due not
only to the ineffectiveness of underground storage tanks, piping systems to dispenser islands and
dispensers themselves, but also due to vapor leaks and individually small but cumulatively
significant releases that occur during fuel deliveries and customer overfilling and dripping during
fueling. Moreau Report, sections I, II and V. As defendants' own expert Sam Williams
testified: "I don't know, except under certain specific sites, when an individual release occurred.
The release occurred over a certain time period, usually during the period from '92 to '97 or '98
or '99 .... " June 7, 2012, Deposition of Sam Williams, at 101:12-16. For these reasons, the
City declines to dismiss claims on the purported ground that Mr. Moreau did not identify a
release after a particular date.

(1)

Red Trianele (2809 S. Chestnut Ave.)

Our December 11, 2012, e-mail from Evan Eickmeyer to you asserted that Valero
supplied gasoline containing MTBE to Red Triangle between 1997-2002. The cited source for
this information was the Valero Defendants' interrogatory responses, discussed supra. The
Valero Defendants' responses stated that Valero supplied gasoline containing MTBE to Red
Triangle from 1997 through 2002. (See first page of Exhibit A [Red Triangle is listed
alphabetically as "DBA RED TRIANGLE OIL CO."].)
The City will withdraw its nuisance claims against Ultramar and Valero for the Red
Triangle site. There is sufficient evidence, however, for the City to pursue its remaining claims
against the entities that delivered to Red Triangle, Ultramar andlor Valero. Mr. Shehadey
produced bills of lading and highway transportation receipts showing deliveries by Red Triangle
to Fleet Card Fuels at 2809 S. Chestnut Ave. All of the gas delivered by Red Triangle to 2809 S.

M. Coy Connelly, Esq.
March 6, 2013
Page 4

Chestnut Ave. came from the Fresno terminal, because they were in such close proximity, only
about 2 miles apart. Mr. Shehadey's testimony and production establish that gasoline containing
MTBE was picked up at the Kinder Morgan terminal by Red Triangle, then delivered to 2809 S.
Chestnut Ave.
In addition, Mr. Shehadey's documents show that Nella Oil was a shipper of gasoline to
Red Triangle. Shehadey Depo., at 30:14-25,31-32, and Exh. 5. The Valero Defendants list
Nella Oil as ajobber from 1997 through 2003. Responses to First Set ofInterrogatories,
Response to Interrogatory No.5.

(2)

Smith Tank Lines (30 E. Divisadero St.)
The City will withdraw all claims against Ultramar and Valero for the Smith Tank Lines

site.

(3)

Beacon-Arco #615 (1625 Chestnut Ave.)

Your letters ask the City to withdraw its claims for this site based on your assertions that
(1) Mr. Moreau did not identify releases after June 1998, and (2) Valero did not do business in
California prior to the year 2000.
First, for the reasons explained by Judge Scheindlin, Mr. Moreau, and Mr. Williams,
discussed supra, the City declines to drop its claims due to the date of the last identified release.
Second, the Valero Defendants' collective discovery responses stated that they leased the
1625 Chestnut Ave. station from July 24, 1998, to the date of the responses. Responses to First
Set ofInterrogatories, Response to Interrogatory No.3. As discussed supra, even if the station
was leased by Ultramar, Valero would have successor liability.

(4)

Valley Gas (2139 S. Elm St.)

Your letters ask the City to withdraw its claims for this site (1) as to Valero, because
MTBE gasoline distributed or manufactured by Valero was not delivered to the site, and (2) as to
Ultramar because "its ownership of the station ended well before MTBE was commonly added to
gasoline in California."
The Valero Defendants' collective discovery responses stated that the Valley Gas site was
formerly Beacon #538. Responses to First Set ofInterrogatories, Response to Interrogatory No.
3. Beacon's lease was terminated November 1, 1991. Id. Whether or not Valero gasoline was
delivered to the site, however, Valero has successor liability for Beacon's lease of the site.

M. Coy Connelly, Esq.
March 6, 2013
Page 5

The Valero Defendants' relationship with the site continued beyond the Fall of 1992,
when MTBE was first required to be present in Fresno County gasoline. Marcel Moreau report.
The Declaration of the Valero Defendants in Anticipation of30(b)(6) Deposition provides that
Ultramar maintained a branded relationship with the station from November 1, 1991, until May
31, 1994, whereby the station purchased Beacon-branded gasoline. After the site was purchased
from Ultramar, Beacon and Ultramar gasoline were delivered to the station. (Ahmad Depo., at p.
139:9-11.) Mr. Ahmad testified there was a brand distribution marketing agreement between
Petro Group II and Beacon that prohibited him or Petro Group from buying gasoline from anyone
other than Ultramar. (Ahmad Depo., at pp. 139:13-25, 140:7-8.) The brand name agreement
ceased in 1995. (Ahmad Depo., at p. 140:7-15.)
While branded Valley Gas, the station received gasoline supplies from Total Energy and
Sabek Oil. (Ahmad Depo., at p. 25:3-6.) The Valero Defendants' collective discovery responses
listed Southern Counties Oil (dba Total Energy) as ajobber from 1997 through 2002. Responses
to First Set ofInterrogatories, Response to Interrogatory No.5. During this time period, a line
leak was discovered in October 1999, and a soil sample taken after a hole in a pipe was
discovered and repaired in November 1999 was found to contain 920,000 ppb MTBE. Marcel
Moreau report.
Mr. Moreau's report explains that MTBE releases likely occurred intermittently between
the Fall of 1992 and 2003. Because these releases occurred during times that Ultramar and
Valero had relationships with the station, the City declines to drop its claims for this site.

(5)

Beacon #519 (4591 E. Belmont)

Your letters ask the City to drop its claims against Valero for this site, because Mr.
Moreau noted that a release was discovered in December 1998, and because Valero "did not do
business in the State of California prior to the year 2000."
The Valero Defendants' collective discovery responses show that this station was leased
by them from 1971 through October 20, 1999. Responses to First Set ofInterrogatories,
Response to Interrogatory No.3. The discovery responses further reveal that Valero had a retail
supply contract with this site, identified as Beacon #4984, from October 20, 1999, to the date of
the responses. Responses to First Set ofInterrogatories, Response to Interrogatory No.4. The
Declaration of the Valero Defendants in Anticipation of30(b)(6) Deposition establishes that
Arco-branded gasoline was purchased from Ultramar, Inc., and Valero Marketing and Supply
Company from September 22, 1999, through December 31, 2003, for resale at the station.
Because leaks of gasoline were routine at stations, per Mr. Moreau, and because
Ultramar's and Valero's activities continued through the years that MTBE was added to Fresno

M. Coy Connelly, Esq.
March 6, 2013
Page 6

gasoline, the City declines to dismiss its claims for this site.
(6)

Beacon #537 (798 West Gettysbur2)

The City will agree to withdraw all claims as to all defendants for the Beacon #537 site
without prejudice.

Counsel for ity of Fresno
cc: All Counsel (via LNFS)