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MD CT of Appeals, Exxon Jacksonville Gasoline Spill Decisions – Lessons Learned: (or how to avoid or secure $1.65 billion in verdicts) Al Timothy R. Henderson.

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Presentation on theme: "MD CT of Appeals, Exxon Jacksonville Gasoline Spill Decisions – Lessons Learned: (or how to avoid or secure $1.65 billion in verdicts) Al Timothy R. Henderson."— Presentation transcript:

1 MD CT of Appeals, Exxon Jacksonville Gasoline Spill Decisions – Lessons Learned: (or how to avoid or secure $1.65 billion in verdicts) Al Timothy R. Henderson Rich and Henderson, P. C, and Alan Garten Fedder and Garten Professional Association.

2 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)

3 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

4 Here’s The History… Albright April 5, 2007 Albright is lead Plaintiff in class action suit filed in the Circuit Court for Baltimore County March 12, 2009 Circuit Court entered judgment in favor of Albright class awarding over $1.5 Billion in damages 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 Albright class filed Motion for Reconsideration in Court of Appeals 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). September 20, 2013 Albright filed Petition for Writ of Cert. in U.S. Supreme Court November 18, 2013 U.S. Supreme Court denied Writ of Cert.

5 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

6 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 some tank protection upgrades. No releases/ incidents for over 20 years.

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8 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.

9 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.

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11 Two Lawsuits: Ford & Albright – claiming fraud, and toxic torts seeking both punitive and compensatory damages - Albright by Angelos residents (mostly residential but a few businesses) Ford by Snyder: 88 residents Toxic Torts – strict liability, trespass, nuisance, and negligence Fraudulent Concealment- sign fraud; remediation fraud. Only basis for punitive damages. Three Types of Compensatory Damages Sought Diminution in the fair market value of real property Non-economic damages for emotional distress, including loss of property & fear of contracting cancer. Costs of future medical monitoring.

12 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.

13 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

14 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.

15 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

16 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.

17 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.

18 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.

19 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.

20 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.

21 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.


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