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

Filing 4543

NOTICE of Settlement . Document filed by Atlantic Richfield Company, Inc., BP Products North America, Inc., BP West Coast LLC (Doe 3). (Attachments: # 1 Exhibit A, # 2 Exhibit B, # 3 Exhibit C)Filed In Associated Cases: 1:00-cv-01898-VSB, 1:04-cv-04968-VSB(Heartney, Matthew)

Exhibit B

Case 8:03-cv-01742-CJC-DFM Document 603-1 Filed 01/23/19 Page 1 of 26 Page ID
#:27098

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TIMOTHY R. MACDONALD (Admitted Pro Hac Vice)
[e-mail]
ARNOLD & PORTER KAYE SCHOLER LLP
370 Seventeenth Street, Suite 4400
Denver, CO 80202-1370
Telephone: [phone]
Facsimile: 303.832.0428
MATTHEW T. HEARTNEY (State Bar No. 123516)
[e-mail]
STEPHANIE B. WEIRICK (State Bar No. 204790)
[e-mail]
ARNOLD & PORTER KAYE SCHOLER LLP
777 South Figueroa Street, 44th Floor
Los Angeles, CA 90017-5844
Telephone: [phone]
Facsimile: 213.243.4199
Attorneys for Atlantic Richfield Company, BP West Coast
Products LLC, and BP Products North America Inc.

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UNITED STATES DISTRICT COURT

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CENTRAL DISTRICT OF CALIFORNIA

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SOUTHERN DIVISION

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ORANGE COUNTY WATER
DISTRICT,
Plaintiff,

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v.
UNOCAL CORPORATION, et al.,
Defendants.

Case No. 8:03-cv-01742-CJC (DFMx)
Assigned to: Hon. Cormac J. Carney
DECLARATION OF MATTHEW T.
HEARTNEY IN SUPPORT OF
DEFENDANTS ATLANTIC
RICHFIELD COMPANY’S, BP
WEST COAST PRODUCTS LLC’S,
BP PRODUCTS NORTH AMERICA
INC.’S MOTION FOR ORDER
DETERMINING GOOD FAITH
SETTLEMENT
Date: February 25, 2019
Time: 1:30 p.m.
Courtroom: 7C
Judge: Hon. Cormac J. Carney

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Case No. 8:03-cv-01742-CJC (ANx)
DEFENDANTS’ NOTICE OF MOTION FOR ORDER DETERMINING GOOD FAITH SETTLEMENT;
MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT THEREOF

Case 8:03-cv-01742-CJC-DFM Document 603-1 Filed 01/23/19 Page 2 of 26 Page ID
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I, MATTHEW T. HEARTNEY, declare as follows:

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1.

I am an attorney admitted to the practice of law in the State of California

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and a partner at Arnold & Porter Kaye Scholer LLP, attorneys for defendants Atlantic

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Richfield Company, BP West Coast Products LLC, BP Products North America Inc.

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(collectively, “BP”). I have represented the present BP defendants or other BP

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affiliates in numerous lawsuits involving gasoline containing methyl tertiary butyl

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ether (“MTBE”), and have been counsel of record for BP in the present case since it

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was filed in May 2003. I have been BP’s outside counsel most directly involved in

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the mediation and settlement negotiations which led to the proposed settlement

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between BP and plaintiff Orange County Water District (“OCWD”). Except where

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noted below, I have personal knowledge of the facts set forth in this declaration, and

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if called upon to testify, will do so truthfully and competently.

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2.

A true and correct copy of the settlement agreement between BP and

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OCWD is attached hereto as Exhibit 1. Exhibit 1 has been fully executed by OCWD

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and by BP. The terms set forth in Exhibit 1 constitute all of the terms and

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understandings that make up the parties’ settlement. At no time when negotiating

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their agreement did the parties discuss or agree to side agreements or understandings

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not set forth therein.

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3.

I have communicated with counsel for defendants ExxonMobil and

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Shell, including informing them of the key terms of BP’s settlement with OCWD,

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and each have represented to me that their clients do not oppose BP’s motion for

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good faith approval of this settlement.

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4.

Prior to BP’s proposed settlement, the Phase I trial in this action was

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scheduled to address a group of 17 focus sites. BP was the owner or operator at six

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of these sites, and was identified by State and local regulators as the responsible party

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for these sites. These sites are known as stations ARCO 1887, ARCO 1912, ARCO

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1905, ARCO 3085, ARCO 6036 and ARCO 6131. OCWD also contends that BP is

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responsible for two additional sites initially owned and operated by Thrifty Oil
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Case No. 8:03-cv-01742-CJC (DFMx)
MATTHEW T. HEARTNEY’S DECLARATION IN SUPPORT OF BP’S MOTION FOR ORDER DETERMINING
GOOD FAITH SETTLEMENT

Case 8:03-cv-01742-CJC-DFM Document 603-1 Filed 01/23/19 Page 3 of 26 Page ID
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Company (“Thrifty”) (a party not named in this lawsuit) that later were leased by BP.

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These sites are known as Thrifty 368 and 383. Together, these eight sites are referred

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to as BP’s “Focus Sites.”

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5.

In addition to the sites included in the upcoming Phase I trial, OCWD is

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pursuing claims concerning approximately 100 additional service station sites that

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remain pending in the Southern District of New York. OCWD’s claims at these sites

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are subject to further discovery and motion practice and, following remand to the

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Central District of California, further trial proceedings. Based on past MDL

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proceedings, BP understands that OCWD is asserting claims against BP at 19 sites

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that were owned or operated by BP, together with 15 Thrifty sites, all of which

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remain pending in the MDL. These additional sites are referred to as BP’s “Non-

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Focus Sites.”

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6.

Atlantic Richfield Company (“Atlantic Richfield”) first added MTBE to

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gasoline sold in California in August 1989. After the passage of the oxygenate

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mandate in the Clean Air Act in 1990, Atlantic Richfield complied with this federal

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mandate by adding MTBE to its gasoline at the times, and in the amounts, required

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by federal law. In 1999, California announced that it would ban MTBE in gasoline

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effective beginning in 2003. In April 2000, Atlantic Richfield was acquired by BP

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and, subsequently, Atlantic Richfield transferred its West Coast retail and refining

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assets to an affiliate, BP West Coast Products LLC (“BP West Coast”). Although

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California extended the deadline for use of MTBE until the beginning of 2004, BP

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ceased manufacturing and selling gasoline with MTBE in California in January 2003.

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7.

At the six Focus Sites owned or operated by BP, BP and its successors,

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together with the professional remediation consultants retained for this purpose, have

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worked under the scrutiny and oversight of State and local regulators to carry out the

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remedial actions required to investigate, contain, and clean up the complained of

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MTBE releases. Such efforts have proven successful. At all six sites, initial

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concentrations of MTBE and TBA have been contained and reduced to levels that
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Case No. 8:03-cv-01742-CJC (DFMx)
MATTHEW T. HEARTNEY’S DECLARATION IN SUPPORT OF BP’S MOTION FOR ORDER DETERMINING
GOOD FAITH SETTLEMENT

Case 8:03-cv-01742-CJC-DFM Document 603-1 Filed 01/23/19 Page 4 of 26 Page ID
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pose no remaining threat to the deeper aquifers from which Orange County water

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production wells draw water supplied to consumers. Two of these sites have received

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regulatory closure and, at the remaining sites, cleanup efforts are far advanced, with

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several of the sites either close to obtaining closure or under pre-closure monitoring

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programs. When regulatory closure is granted, State and local regulators overseeing

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the site have determined that any remaining contamination attributable to the site is

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not a threat to groundwater or production wells and that the site does not constitute a

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nuisance. For these reasons, none of the six sites should pose any credible threat to

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drinking water supplies or production wells in Orange County.

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8.

At the two Thrifty sites, the needed remedial actions have been carried

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out by Thrifty under the supervision of State and local regulators, without

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involvement by BP. Both sites have received regulatory closure, and at one of them

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(Thrifty 368), OCWD’s expert Anthony Brown has withdrawn his prior opinions that

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MTBE and TBA were not adequately delineated and that additional investigation

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and/or remedial work is required; instead, he now acknowledges that no further work

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is needed there. In addition, because BP had no connection to the Thrifty sites at the

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times when MTBE was released there, and because Thrifty alone has been

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responsible for conducting the needed remedial actions at these sites under the

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regulators’ oversight, OCWD’s claims against BP based on these sites are

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unsupported and lacking in merit.

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9.

Starting in 2010, OCWD retained Hargis + Associates, a sophisticated

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hydrogeology consulting firm, to conduct cone penetration testing (“CPT”) at fifteen

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of defendants’ stations, including ARCO 1887, ARCO 1912, ARCO 1905, and

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Thrifty 383. This work consisted of advancing CPT borings down to nearly 100 feet

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below ground surface at numerous locations offsite and downgradient of the selected

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sites in order to collect water samples. As established during discovery, OCWD

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selected locations for these borings at which it believed significant concentrations of

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MTBE and TBA would be found. Rather than locating “escaped” contamination,
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Case No. 8:03-cv-01742-CJC (DFMx)
MATTHEW T. HEARTNEY’S DECLARATION IN SUPPORT OF BP’S MOTION FOR ORDER DETERMINING
GOOD FAITH SETTLEMENT

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OCWD’s CPT sampling produced MTBE and TBA results that were either non-

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detect at all depths sampled or, in a few instances, low detections of MTBE or TBA.

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As BP’s expert Tony Daus will testify, these results fall well below any level that

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could justify the extensive investigation and cleanup efforts sought by OCWD.

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Today, OCWD’s experts Anthony Brown and Robert Stollar

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acknowledge that they have failed to locate MTBE or TBA concentrations at seven of

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the eight BP Focus Sites sufficient to allow them to opine that any additional cleanup

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or remediation work will be required. Instead, these experts contend that OCWD

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should recover payments of $79,050 for each of these seven sites to fund continued

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CPT work attempting to locate additional MTBE or TBA. At the single remaining

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site (ARCO 1905), Mr. Brown proposes that OCWD implement a $3.14 million

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program to install and operate a groundwater extraction remedial system. In his

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deposition, Mr. Brown conceded that OCWD’s justification for this program rests

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upon detections of MTBE and TBA levels of 270 parts per billion (“ppb”) and 46 ppb

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at a single depth in one of the 18 CPT borings conducted at this site. All sampling at

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the other 17 CPT borings at this site produced only non-detect results at all depths

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sampled or de minimis detections of MTBE or TBA. As BP’s experts Dr. Michael

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Kavanaugh and Tony Daus will testify, the limited one-time only detections of

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MTBE and TBA at ARCO 1905 in no way supports conducting further cleanup or

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remediation steps at this site. To date, OCWD has not incurred any treatment or

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remediation costs related to MTBE or TBA at any of the eight BP Focus Sites.

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11.

OCWD also seeks to recover from defendants some $6.5 million in past

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costs and expenditures that it claims were incurred to investigate MTBE and TBA

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contamination within its territory. Defendants’ discovery indicates that a large

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majority of these costs represent litigation expenses, and not costs or expenses

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incurred in response to alleged contamination or that could be appropriately awarded

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under the OCWD Act. Moreover, OCWD has failed to support its alleged past costs

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with expert testimony or to tie those costs to any specific site or defendant.
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Case No. 8:03-cv-01742-CJC (DFMx)
MATTHEW T. HEARTNEY’S DECLARATION IN SUPPORT OF BP’S MOTION FOR ORDER DETERMINING
GOOD FAITH SETTLEMENT

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12.

For good reason, OCWD’s claims at the service station sites that remain

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in the MDL present even less exposure to BP in any future litigation or trials. During

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the MDL, OCWD was permitted to select its “best” sites to be remanded to California

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for the Phase I trial and, after some 15 years of litigation, I am unaware of any

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credible evidence establishing that OCWD suffered any injury or damages

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attributable to any sites that remain in the MDL. OCWD, for example, has yet to

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come forward with evidence linking gasoline supplied by BP to MTBE or TBA

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contamination present at any of these sites today, and OCWD has offered no evidence

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that any of these sites are responsible for any alleged impacts to groundwater or

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drinking water supplies in Orange County. Moreover, given the amount of time it

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will take to complete discovery, motion practice, and pre-trial work for the sites

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remaining in the MDL, I consider it unlikely that OCWD could succeed in

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developing the panoply of evidence of violation, causation, and damages required to

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pursue claims at these sites, particularly in light of the passage of time since MTBE

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was removed from gasoline in 2003.

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13.

The settlement negotiations which produced the present settlement were

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at arm’s length and vigorously contested at all times. I was a participant in all

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settlement negotiations between the parties, and I am aware of no evidence of fraud,

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collusion, or tortious misconduct aimed at injuring the interests of the non-settling

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defendants taking place at any time.

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14.

In October 2018, OCWD and BP participated in a full-day mediation

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before Magistrate Judge Edward Infante, but did not reach a settlement. Further

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discussions between Judge Infante and both parties continued thereafter and, in

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December 2018, the parties traded proposals back and forth through Judge Infante but

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again did not reach a settlement. The parties’ negotiations before Judge Infante set

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the stage for the final negotiations that produced the settlement by substantially

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narrowing the gap separating their position. The parties concluded their settlement

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Case No. 8:03-cv-01742-CJC (DFMx)
MATTHEW T. HEARTNEY’S DECLARATION IN SUPPORT OF BP’S MOTION FOR ORDER DETERMINING
GOOD FAITH SETTLEMENT

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on Sunday, January 13, 2019 after conducting further negotiations over the preceding

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ten days.

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15.

BP agreed to pay OCWD the sum of $14 million in full satisfaction of

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all claims asserted against it. In reaching this amount, the parties considered and

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discussed BP’s potential legal defenses and the strengths and weaknesses of OCWD’s

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evidence in support of its claims. The parties also considered OCWD’s possible

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damages claims faced by BP from future investigation and remediation at the sites in

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question, as well as the potential liability and damages at all stations remaining in the

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MDL as to which OCWD asserts claims against BP, even though certain of these

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claims do not yet appear to be ripe. The settlement amount takes into account all of

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these factors and others, and thus is in “the ballpark” of a reasonable settlement. The

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Settlement Agreement is neither fraudulent nor collusive, but was reached in arm’s-

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length negotiations, and is easily within the reasonable range of BP’s potential and

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comparative liability.

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In negotiating the settlement, BP considered OCWD’s total potential

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recovery from its claims against BP. OCWD’s potential recovery from BP cannot be

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predicted with precision given the number of sites and claims that remain in this case

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(both before this Court and before the MDL court) and the individual circumstances

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at each site which bear on this question. This is compounded by the fact that efforts

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to remediate any remaining contamination at the sites at which closure has not been

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granted are ongoing, further reducing any potential future costs for OCWD. In

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addition, because most of the sites that remain in the MDL are subject to further

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discovery and motion practice, any estimate of damages at those sites is necessarily

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premature.

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17.

Nonetheless, the information discussed in this declaration can be used to

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develop a rough, but reasonable, assessment of OCWD’s total potential recovery

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from BP. At BP’s eight Phase I trial sites, OCWD’s experts have computed its total

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alleged past and future damages as amounting to $3,689,934. To this amount should
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Case No. 8:03-cv-01742-CJC (DFMx)
MATTHEW T. HEARTNEY’S DECLARATION IN SUPPORT OF BP’S MOTION FOR ORDER DETERMINING
GOOD FAITH SETTLEMENT

Case 8:03-cv-01742-CJC-DFM Document 603-1 Filed 01/23/19 Page 8 of 26 Page ID
#:27105

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be added BP’s proportionate share of OCWD’s claimed $6.5 million in past costs and

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expenses to investigate MTBE and TBA contamination in its territory. BP’s share of

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this amount is likely be significantly reduced by OCWD’s failure to support its past

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cost claims with expert testimony or proof tying those costs specifically to BP, as

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well as by the settlement credits attributable to OCWD’s settlements with other

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parties.

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18. As explained above, OCWD’s claims against BP regarding the 34 stations

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that remain in the MDL are likely to present even less exposure for BP than its Phase

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I trial sites. Nonetheless, it remains possible that, given the number of sites

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remaining in the MDL, one or more of these could give rise to a substantial damages

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claim similar to that associated with certain of the more substantial Phase I trial sites,

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such as ARCO 1905 for example.

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19. Taking the foregoing factors into consideration, a rough approximation of

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OCWD’s total potential recovery from BP might reasonably range between an

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amount falling somewhat below the proposed settlement payment and an amount in

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excess of that payment, although there remain many unknowns at this time, especially

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as to the sites that remain in the MDL.

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20.

The amount agreed to in BP’s settlement with OCWD was not limited in

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amount by the potential existence of insurance or insurance policy limits. Nor was

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the financial condition of BP a factor in any way to increase or decrease the agreed

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settlement amount.

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As the Court is aware, since October 2017, three multi-million dollar

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settlements between OCWD and other defendants in this action have been presented

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to the Court, and each has been found to be in good faith. BP’s settlement with

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OCWD has been the largest settlement reached to date in this case, and the good faith

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approvals granted to these prior settlements provide potent evidence that BP’s

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settlement is “in the ballpark” of BP’s proportionate share of liability in this matter.

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Case No. 8:03-cv-01742-CJC (DFMx)
MATTHEW T. HEARTNEY’S DECLARATION IN SUPPORT OF BP’S MOTION FOR ORDER DETERMINING
GOOD FAITH SETTLEMENT

Case 8:03-cv-01742-CJC-DFM Document 603-1 Filed 01/23/19 Page 9 of 26 Page ID
#:27106

• In 2017, ConocoPhillips Company, Tosco Corporation, and Phillips 66

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(“Conoco”) reached a $4.8 million settlement of OCWD’s claims

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addressing two Phase I trial sites and what Conoco’s counsel identified

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as some two dozen additional sites remaining in the MDL. See

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Declaration of John J. Lyons In Support Of Motion For Good Faith

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Approval, ECF No. 294-1, ¶ 17. No defendant objected to Conoco’s

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motion for good faith approval and, after review, the Court granted

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approval.

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• In December 2018, G&M Oil Company, Inc. and G&M Oil Company,

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LLC (“G&M”), a marketing company that had never produced MTBE

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gasoline, reached a $3 million settlement of OCWD’s claims addressing

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two Phase I trial sites and some 14 additional sites in the MDL. No

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defendant objected to G&M’s motion for good faith approval and, after

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review, the Court granted approval.
• In January 2019, Chevron U.S.A. Inc. and Union Oil Company of

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California (“Chevron”) reached an $11 million settlement of OCWD’s

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claims addressing eight Phase I trial sites and what Chevron’s counsel

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identified as at least 19 additional sites remaining in the MDL. No

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defendant objected to Chevron’s motion for good faith approval and,

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after review, the Court granted approval.

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During the MDL proceedings, three other defendants obtained orders

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finding their settlements to be in good faith, including a $1.7 million settlement by 7-

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Eleven, a $2 million settlement by Petro Diamond, and a $3.5 million settlement by

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Lyondell Chemical. Both 7-Eleven and Petro Diamond were sellers of MTBE

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gasoline but did not produce such gasoline themselves, and Lyondell, which had been

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a major producer of neat MTBE, was in bankruptcy when its settlement was reached.

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In addition, since BP announced its settlement, the two remaining defendants in the

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Phase I trial, ExxonMobil and Shell, reached a settlement in principle with OCWD
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Case No. 8:03-cv-01742-CJC (DFMx)
MATTHEW T. HEARTNEY’S DECLARATION IN SUPPORT OF BP’S MOTION FOR ORDER DETERMINING
GOOD FAITH SETTLEMENT

Case 8:03-cv-01742-CJC-DFM Document 603-1 Filed 01/23/19 Page 10 of 26 Page ID
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which involved a joint settlement payment of $12.5 million. The Court will

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subsequently be called upon to review this settlement.

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I declare under penalty of perjury under the laws of the United States of

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America that the foregoing is true and correct. Executed this 23rd day of January,

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2019.

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By:

/s/ Matthew T. Heartney
Matthew T. Heartney

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Case No. 8:03-cv-01742-CJC (DFMx)
MATTHEW T. HEARTNEY’S DECLARATION IN SUPPORT OF BP’S MOTION FOR ORDER DETERMINING
GOOD FAITH SETTLEMENT

Case 8:03-cv-01742-CJC-DFM Document 603-1 Filed 01/23/19 Page 11 of 26 Page ID
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Exhibit 1

Exhibit 1
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Exhibit 1
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Exhibit 1
Page 13

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Exhibit 1
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Exhibit 1
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Exhibit 1
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Exhibit 1
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Exhibit 1
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Exhibit 1
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Exhibit 1
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Exhibit 1
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Exhibit 1
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Exhibit 1
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Exhibit 1
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Exhibit 1
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Exhibit 1
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