Wednesday, September 01, 2021

failure to disclose environmental risks in MTBE data sheets not actionable

In re Methyl Tertiary Butyl Ether (“MTBE”) Products Liability Litig., 2021 WL 3371938, No. 1:00-1898, MDL 1358, No. 14 Civ. 6228 (VSB) (S.D.N.Y. Aug. 3, 2021)This MDL litigation centers on contamination—actual or threatened—of groundwater from various defendants’ use of the gasoline additive MTBE and/or tertiary butyl alcohol, a product formed by the breakdown of MTBE in water.

I will focus on the court’s holding that the commonwealth of Pennsylvania failed to make specific allegations of deceptive and misleading conduct that are actionable under the Pennsylvania Unfair Trade Practices and Consumer Protection Law (UTPCPL).

Pennsylvania alleged, that in connection with the marketing, distribution, and sale of their products, certain defendants prepared and distributed material safety data sheets (MSDSs), which are documents used by manufacturers of hazardous materials to address OSHA hazard communication requirements. The relevant defendants allegedly knew that MTBE was highly soluble in water and mobile, and that MTBE contamination of water was therefore difficult to remediate. Despite this, they published MSDSs between 1986 and 2006 that suggested that MTBE gasoline could be handled just like traditional gasoline, according to the same standard of care. However, internal documents acknowledged, e.g., that ethers “are much more water soluble than hydrocarbons and will have a tendency to dissolve in – groundwater if allowed to leak or spill” and that they are more difficult to clean up than non-oxygenated gasoline. Thus, the document continued, “facilities handling ethers and ether/gasoline blends must be designed and operated to insure (1) low likelihood for spills and leaks, (2) early detection of leaks when they occur, and (3) rapid repair and cleanup when leaks are found.” And an e-mail to Shell Oil from its hydrologist detailed the risks to groundwater posed by MTBE and cautioned that “MTBE and similar oxygenates should not be used at all in areas where groundwater is a potential drinking water supply. If it is used, engineering design and site operations ... should be carefully developed to minimize the potential for a release.”

But in public statements, the relevant defendants allegedly promoted MTBE gasoline as “clean burning gasoline good for the environment,” failed to disclose “the significant environmental dangers that MTBE and MTBE gasoline posed to the public and private water supplies in the event of a spill or leak,” and “disparage[d] ethanol oxygenated gasoline.”

A UTPCPL claim may only be based on an omission if the maker of the statements has a duty to disclose, and Pennsylvania didn’t sufficiently allege such a duty. Nor was there a clear statement in the MSDSs that MTBE gasoline “could be handled according to the same standard of care as ordinary gasoline.” Nor did the Commonwealth provide “any context or explanation to suggest that the text could mislead a downstream purchaser or customer into believing that regular gasoline and MTBE gasoline could be handled in the same manner.” The Commonwealth didn’t compare the MSDSs for regular gasoline to support its argument for implied falsity. “Indeed, the example MSDSs advise the handler to ensure the MTBE gasoline does not enter the water supply; the Commonwealth has not provided any allegations or context as to why these warnings were insufficient or misleading.”

At the time of briefing, there was also an issue of whether the MSDSs were “advertising,” but the Pennsylvania Supreme Court subsequently held that “subsection (v) ... encompass[es] activities other than ‘advertising,’ ” and that a statement need not have impacted a purchasing decision to be actionable. Commonwealth by Shapiro v. Golden Gate Nat’l Senior Care LLC, 194 A.3d 1010, 1028 (Pa. 2018) (accepting allegations that a nursing home made representations to individuals after they had become residents of facility about “the extent and quality of services to be provided”).

What about public statements about ethanol and MTBE? An allegedly disparaging ad placed by the American Petroleum Institute disparaging ethanol as “Government Gas” was protected by Noerr-Pennington: it “exhorts readers to contact their legislators and ask them to vote against specific amendments to the Clean Air Act.” It wasn’t relevant that this served API’s commercial interests, or that it allegedly contained misrepresentations; the First Amendment still precluded liability. There was nothing to distinguish UTPCPL “from the many Pennsylvania state law causes of action that courts have found to be subject to Noerr-Pennington. Moreover, courts have applied the doctrine to consumer protection statutes in other states.” This was not commercial speech: the Supreme Court specifically held in Noerr that “a publicity campaign to influence governmental action falls clearly into the category of political activity.”

What about statements to newspapers about “cleaner” gasoline? E.g., “[T]he future is in gasolines, in fuels that are more environmentally compatible”; Shell “came to the conclusion that the customer ... really wanted an environmentally enhanced fuel”; the MTBE blend was “an important step in the right direction for cleaner air” that it “reflect[ed] Shell’s commitment to make environmental considerations a priority in development of our new products and processes.” These weren’t false representations of fact about MTBE or ethanol, or disparaging ethanol—they were vague, nonactionable puffery.

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