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. HendersonRich and Henderson, P. C, and

Alan GartenFedder and Garten Professional Association

.

Two Decisions:1. Exxon Mobil Corp. v. Ford, 433 Md. 426, as supplemented on denial of reconsideration, 433 Md. 493 (2013)

2. Exxon Mobil Corp. v. Albright, 433 Md. 303, on reconsideration in part, 433 Md. 502 (2013) and cert. denied, 134 S. Ct. 648 (U.S. 2013)

Two Key Issues i) Diminution of Real Property Value from Contamination ; and ii) Recoverable Damages for Environmental Torts (or how to avoid or secure $1.65 billion in verdicts)

Exxon Reports A Leak…

• On February 17, 2006• Approximately 26,000 gallons of gasoline

leaked• Jacksonville, Baltimore County, MD • 317 wells and 466 residents and businesses

filed suit

Here’s The History…Albright

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.

How Does It End?

• January 5, 2014, The Daily Record reported Exxon has reached settlement agreement with multiple households

• Other Plaintiffs prepare for retrial• In 2008, Exxon entered into $4 Million

settlement with Maryland• Exxon claims massive spending in clean-up

efforts

More Detailed Facts

Exxon’s Post Notice ActionsMultiple Meetings with Public – from 2/21/06 to 4/2007 when lawsuits filed

• MDE and Exxon projected the gasoline plume would migrate through the underground aquifer in a ½ mile radius along a line running northeast and southwest from the station, the “strike line.”

• In March 2006, Exxon began posting progress reports for the public.

MDE Ordered Investigation and Remediation• MDE directed Exxon to investigate the severity and scope of the leak, and to

drill and sample monitoring and recovery wells . • In March 2006, Exxon began sampling drinking wells and provided bottled

water to residents whose wells MDE ordered them to test; and where tests found gasoline, installed water treatment systems.

• 9/07 - MDE and Exxon entered into a Consent Decree. Pursuant to the Decree, Exxon has installed over 227 monitoring and recovery wells in the Jacksonville area, and, as of the time of the Albright trial in 2011, had spent over $46 million on remediation.

Two Lawsuits: Ford & Albright – claiming fraud, and toxic torts seeking both punitive and compensatory damages

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Given these Findings, Why the Reduction in the Jury Award ?

– Basically, due to the lack of evidence/ or proof

• The contaminants of concern, MTBE & benzene were found in only a few drinking water wells serving the 500 plaintiffs, and at levels exceeding state/ federal standards for even fewer.

• The inhabitants of the affected properties drank the water for too little time to support a claim of dangerous exposure.

• Only a few of the plaintiffs had experts testify about the specific harm or threat of harm to their health posed by the specific exposure they suffered.

• The real estate experts attempted to use novel theories to support the award to the plaintiffs of the full value of their property unrelated to the actual reduction in market value each suffered; even for those owners that sold their property for more than the value at the time of the release.

Lessons re Real Estate Values: i) Diminution in Property Value; and ii) Loss of Use and Enjoyment.

– Both required expert testimony “…to establish diminution in property value resulting from environmental contamination.”

– Damages for diminution in value in MD - the difference between the fair market value of the property immediately preceding the harm and the fair market value of the property immediately following the harm.

• Fair market value - the “price as of the valuation date for the highest and best use of the property which a [seller], willing but not obligated to sell, would accept for the property, and which a purchaser, willing but not obligated to buy, would pay....”

• Generally available only for permanent injury to real property

– Methodology used by expert must include ‘comparable sales data’; Dr. Kilpatrick in Albright did not; Kenneth Acks in Ford did.

Lessons re Real Estate Values: Dr. Kilpatrick Out; Kenneth Acks In

– Dr. Kilpatrick in Albright used three methods for “impaired” valuation analysis of residential properties:

• (1) meta-analysis derived from a study by Dr. Robert Simons; • (2) case studies, including jury verdicts and settlements from

around the country (including Ford ); and • (3) a contingent valuation telephone survey asking what

persons would be willing to pay for a hypothetical house with MTBE well water contamination.

– Dr. Kilpatrick did not use comparable sales data, despite numerous sales of residential properties in the relevant Jacksonville area following the announcement of the leak,

– Why? the market was unreliable and the buyers were uninformed.

– Court of Appeals would not consider other methods because Dr. Kilpatrick ignored comparable sales data.

Lessons re Real Estate Values: i) Diminution in Property Value; and ii) Loss of Use and Enjoyment.– Mr. Acks opinion based on: (1) the stipulated pre-leak

appraised values of the Respondents' homes; (2) the presence of actual potable well contamination; (3) another expert's determinations of the risk of future contamination; (4) whether people have been able to sell homes within a one mile radius of the Exxon station; and (5) peer-reviewed articles discussing diminution in property value in other contamination events.

– Mr. Acks opinion: properties with evidence of contamination decreased in value by 60%; properties with a high probability of future contamination decreased in value by 50%; properties with a medium probability of future contamination decreased in value by 45%; and properties with a low probability of future contamination decreased in value by 30%. Ford Jury Ignored & gave 100%

– Ct. of Appeals found no competent evidence to support “zero value” and remanded to trial court to consider Mr. Acks expert testimony.

– LESSON? Need an expert and expert must incorporate comparable sales data into opinion.

Lessons re State/ Federal Action Levels– Mere exposure to a toxic substance is insufficient;

circumstances of actual exposure to a toxic substance must lead a reasonable person to believe that contracting a disease is a real consequence of the defendant's tortious conduct.

– Physical injury, e.g. symptons of a disease or actual impairment required.

– Exposure to MTBE or benzene (as determined by tests of their potable wells), at levels below the relevant EPA and MDE action levels, (5 ppb benzene or 20 ppb MTBE) does not support an objective, reasonable fear of developing cancer.

– Similarly, exposure to less than the governmental action levels, cannot support a claim of significantly increased risk of developing a latent disease required to support an award of damages for medical monitoring.

– LESSON? Uphill fight to obtain damages if exposed to less than government action levels/ cleanup standards.

Summary of Lessons LearnedThree 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.