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State v. Exxon Mobil Corporation

October 2, 2015

THE STATE OF NEW HAMPSHIRE
v.
EXXON MOBIL CORPORATION & A.



The opinion of the court was delivered by: Dalianis, C.J.

Argued: May 21, 2015

Synopsis

Background: State sued oil company for negligence, strict liability for design defect, and strict liability for failure to warn, Seeking damages for groundwater contamination allegedly caused by gasoline additive used by company to increase octane levels of fuels in order to comply with Clean Air Act provisions requiring gasoline to have a minimum oxygen content. Following jury trial, the Superior Court, Fauver, J., found in favor of state, awarded approximately $236 million in damages, awarded state prejudgment interest, and imposed trust upon approximately $195 million of the damages award. Company appealed and state cross-appealed.

Holdings: The Supreme Court, Dalianis, C.J., held that:

[1] stateís suit did not violate Separation of Powers Clause of state constitution;

[2] negligence and strict liability claims were not preempted under Supremacy Clause;

[3] evidence was sufficient to support finding that company breached standard of care by choosing to add methyl tertiary butyl ether (MTBE) to gasoline as oxygenate;

[4] failure-to-warn strict liability claim was not improperly premised upon duty to warn state as sovereign;

[5] trial court did not unsustainably exercise its discretion in allowing state to use theory of market share liability to determine portion of damages caused by companyís conduct;

[6] company was not denied meaningful opportunity to apportion fault to third parties; but

[7] fact that state was allowed to proceed under parens patriae standing did not authorize imposition of trust over damages.

Affirmed in part and reversed in part.

Attorneys and Law Firms

Opinion

The defendants, Exxon Mobil Corporation and ExxonMobil Oil Corporation (collectively, either Exxon or ExxonMobil), appeal from a jury verdict awarding approximately $236 million in damages due to groundwater contamination to the plaintiff, the State of New Hampshire, after a trial in Superior Court (Fauver, J.). The State cross-appeals from the trial courtís order imposing a trust upon approximately $195 million of the damages award. We affirm the trial courtís rulings on the merits and reverse its imposition of a trust.

I. Background

In 1990, Congress amended the Federal Clean Air Act to require the use of an ìoxygenateî in gasoline in areas not meeting certain national air quality standards. See 42 U.S.C. ß 7545(k) (Supp. 1991) (amended 2005, 2007). An oxygenate is a substance used to reduce gasoline emissions. See Oxygenated Fuels Assín Inc. v. Davis, 331 F.3d 665, 666 (9th Cir. 2003). The amendment did not mandate the use of any particular oxygenate; it simply required that ì[t]he oxygen content of the gasoline shall equal or exceed 2.0 percent by weight.î 42 U.S.C. ß 7545(k)(2)(B). To implement the requirement, the Environmental Protection Agency (EPA) launched the Reformulated Gasoline Program (RFG Program), which required gasoline containing an oxygenate of the manufacturerís choice. See 40 C.F.R. ß 80.46(g)(9)(i) (2000). Methyl tertiary butyl ether (MTBE) was one among several possible oxygenates. Id. MTBE is a gasoline additive that increases the octane levels of fuels. Metropolitan areas with significant concentrations of ambient ozone were required to use reformulated gasoline. See 42 U.S.C. ß 7545(k). Other areas, like New Hampshire, could opt in to the program to receive credit toward mandatory emissions reduction requirements. See 42 U.S.C. ß 7545(k)(6)(A).

New Hampshire joined the RFG Program in 1991, with respect to the Stateís four southern-most counties, effective January 1, 1995. Between 1995 and 2006, gasoline with MTBE was sold throughout the State. In 1997, employees at the New Hampshire Department of Environmental Services (DES) became aware that MTBE could pose increased risks to groundwater. In 1998, studies from Maine and California raised concerns about MTBE. In 1999, DES adopted regulations setting a maximum contaminant level for MTBE in drinking water and groundwater at 13 parts per billion (ppb).

In 2000, the EPA advised:

MTBE is capable of traveling through soil rapidly, is very soluble in water ... and is highly resistant to biodegradation.... MTBE that enters groundwater moves at nearly the same velocity as the groundwater itself. As a result, it often travels farther than other gasoline constituents, making it more likely to impact public and private drinking water wells. Due to its affinity for water and its tendency to form large contamination plumes in groundwater, and because MTBE is highly resistant to biodegradation and remediation, gasoline releases with MTBE can be substantially more difficult and costly to remediate than gasoline releases that do not contain MTBE.

Advance Notice of Intent to Initiate Rulemaking under the Toxic Substance Control Act to Eliminate or Limit the Use of MTBE as a Fuel Additive in Gasoline, 65 Fed.Reg. 16094, 16097 (Mar. 24, 2000).

In 2001, the Governor petitioned the EPA to allow the State to opt out of the RFG Program, but did not receive a reply until 2004. See Removal of the Reformulated Gasoline Program From Four Counties in New Hampshire, 69 Fed.Reg. 4903 (Feb. 2, 2004). In 2004, the legislature enacted legislation banning MTBE gasoline effective in 2007. See RSA 146ñG:12 (2005) (repealed 2015). In 2005, Congress eliminated the oxygenate requirement and enacted a renewable fuels mandate to increase ethanol usage. See Energy Policy Act of 2005, Pub.L. No. 109ñ58, ßß 1501, 1504, 119 Stat. 594, 1067, 1076 (2005).

In 2003, New Hampshire sued several gasoline suppliers, refiners, and chemical manufacturers Seeking damages for groundwater contamination allegedly caused by MTBE. Before trial, all defendants except Exxon settled with the State. After almost ten years of litigation, the case went to trial in 2013 on three causes of action: negligence; strict liabilityódesign defect; and strict liabilityófailure to warn. After an approximately three-month trial, the jury found in favor of the State on all of its claims. The jury rejected Exxonís defenses that ìin designing its MTBE gasoline, it complied with the state of the artî; that ìthe hazards posed by the use of MTBE in gasoline were obvious, or were known and recognized by the Stateî; and that Exxon ìprovided distributors with adequate warnings of the hazards of MTBE gasoline.î The jury also found that Exxon failed to prove that ìthe actions of someone other than the State or ExxonMobil (which were not reasonably foreSeeable to ExxonMobil) were the sole cause of the Stateís harm,î that ìthe State committed misconduct that contributed to its harm,î or that some or all of Exxonís fault should be allocated to certain nonparties.

The jury awarded total damages in the amount of $816,768,018. These damages included: (a) $142,120,005 for past cleanup costs; (b) $218,219,948 to assess and clean up 228 high-risk sites; (c) $305,821,030 for sampling drinking water wells; and (d) $150,607,035 for treating drinking water wells contaminated with MTBE at or above the maximum contaminant level. The jury found that Exxonís market share for gasoline in New Hampshire during the applicable time period was 28.94%. Accordingly, the trial court entered an amended verdict of $236,372,644 against Exxon. The trial court subsequently awarded the State prejudgment interest in accordance with RSA 524:1ñb (2007).

On appeal, Exxon contends that: (1) the Stateís suit should have been dismissed on the grounds of separation of powers and due process; (2) the suit should have been dismissed due to waiver; (3) the Stateís claims are preempted by the 1990 amendments to the Federal Clean Air Act; (4) the State failed to establish that Exxon departed from the applicable standard of care; (5) Exxon did not have a duty to warn the State; (6) market share liability is not an acceptable theory of recovery; (7) the State should not have been permitted to rely upon aggregate statistical evidence; (8) Exxon was unfairly prejudiced in its ability to present evidence of fault on the part of other nonparties; (9) the trial court erred in deciding the State had parens patriae standing; (10) the Stateís damages claims for future well impacts are not ripe; and (11) the trial court erred in awarding prejudgment interest on future costs.

II. Separation of Powers and Due Process

Exxon argues that the Stateís suit should have been dismissed on the grounds of separation of powers and due process. Exxon asserts that based upon the Stateís decision to participate in the RFG Program beginning in 1991, and the legislatureís failure to ban MTBE before 2007, ì[t]he retroactive no-MTBE dutyî imposed upon it ìconflicts with bedrock principles of the separation of powersî and ìdue process.î Exxon also argues that the suit conflicts with the Oil Discharge and Disposal Cleanup Fund (ODD Fund), RSA ch. 146ñD (Supp. 2014); See Laws 2014, 177:1 (repealing RSA chapter 146ñD, eff. July 1,2025), and the Gasoline Remediation and Elimination of Ethers Fund (GREE Fund), RSA ch. 146ñG (Supp. 2014); See Laws 2014, 177:3, I (repealing RSA chapter 146ñG, excluding RSA 146ñG:9, eff. July 1, 2025), Laws 2014, 177:3, II (repealing RSA 146ñG:9, eff. October 1, 2025). The State asserts that Exxon failed to preserve its separation of powers argument because the arguments it raises on appeal were not made to the trial court, and that Exxon fails to identify where it preserved its due process argument.

The appealing party bears the burden of demonstrating that it ìspecifically raised the arguments articulated in [its appellate] brief before the trial court.î Dukette v. Brazas, 166 N.H. 252, 255, 93 A.3d 734 (2014). Generally, the failure to do so bars a party from raising such claims on appeal. N. Country Envtl. Servs. v. Town of Bethlehem, 150 N.H. 606, 619, 843 A.2d 949 (2004). But See Sup. Ct. R. 16ñA (plain error rule). We have reviewed the record and agree with the State that Exxon failed to preserve its separation of powers argument concerning the Stateís purported public policy decisions, as well as its due process argument. However, we address, as properly preserved, Exxonís separation of powers argument based upon the ODD and GREE Funds.

Before trial, Exxon moved for summary judgment on separation of powers grounds, arguing that the Stateís suit threatened to usurp the legislatureís appropriations power because the ODD and GREE Funds ìembody the legislative choice regarding how testing and remediation should be fundedî and ìthis suit would allow the Attorney General to fund remediation in a very different way and create an appropriation outside of the General Courtís purview.î Exxon asserted that, because ìthere is no existing statutory mechanism through which any damages awarded to the State in this litigation could be specifically appropriated to the investigation, testing, and remediation the State requests,î it would violate separation of powers for the court or the attorney general ìto order such an appropriation.î Thus, Exxon argued, ì[i]n light of the existing funds and their structure, this suit implicates appropriations-related separation of powers problems.î

The trial court denied the motion, concluding that Exxon had failed to establish that the legislature intended the ODD or GREE Funds to be the Stateís exclusive remedy. As to the ODD Fund, the court found that pursuant to the plain language of RSA 146ñD:6, I, and I-a, the Fund ìis only authorized to disburse funds to owners of underground storage facilities, bulk storage facilities, or the land on which such facilities are storedî and, thus, the statute did not demonstrate legislative intent ìto provide a remedy for the damages sought by the State in this litigation.î As to the GREE Fund, although noting that it does not contain an explicit limitation upon who may Seek payment, because the potential damages at issue in this suit far exceed the $2,500,000 capped balance of the fund, the trial court stated that

[i]t is reasonable to infer, then, that in creating the GREE Fund the legislature did not intend it to serve as the sole source of cleanup funds for any and all contamination event[s]. Its relatively small size indicates that it was intended to address a small number of isolated incidents at any given time, not a statewide contamination of the type alleged here by the State. Finally, the Court notes that neither fund claims to be an exclusive remedy.

Accordingly, the court found that ìthe existence of these funds does not evince the intent of the legislature to preclude suits such as this oneî and that ìthe Stateís suit does not threaten to usurp the legislatureís appropriations power.î

On appeal, Exxon argues that the legislature ìcreated two detailed statutory schemesóthe ODD Fund and the GREE Fundóenable direct spillers to pay the often substantial costs of remediation,î and that ì[i]t is precisely when the legislature has established a tailored regulatory framework to address a particular problem that this Court has declined to make judicial ëimprovementsí to the democratically-enacted scheme.î The State argues that its suit ìis consistent with the ODD and GREE fundsî in that the ìcaps on those funds, their purposes, and their structures confirm that neither was intended to replace recovery actions for tortious activity against manufacturers of dangerous products or to free manufacturers that withhold knowledge of a dangerous condition from liability.î

Whether the Stateís lawsuit violates the Separation of Powers Clause of the State Constitution, H. CONST. pt. I, art. 37, because it conflicts with the ODD and GREE Funds, is a question of law, which we review de novo. See Cloutier v. State, 163 N.H. 445, 451, 42 A.3d 816 (2012). ìThe separation of powers among the legislative, executive and judicial branches of government is an important part of its constitutional fabric.î Duquette v. Warden, N.H. State Prison, 154 N.H. 737, 746, 919 A.2d 767 (2007). ìSeparation of the three co-equal branches of government is essential to protect against a seizure of control by one branch that would threaten the ability of our citizens to remain a free and sovereign people.î Id. Thus, under the Separation of Powers Clause, ìeach branch is prohibited ... from encroaching upon the powers and functions of another branch.î Id. at 746ñ47, 919 A.2d 767. Nevertheless, Part I, Article 37 does ìnot provide for impenetrable barriers between the branches ... and the doctrine is violated only when one branch usurps an essential power of another.î Id. at 747, 919 A.2d 767 (citation omitted).

Statutory interpretation is a question of law, which we review de novo. Appeal of Local Govít Ctr., 165 N.H. 790, 804, 85 A.3d 388 (2014). In matters of statutory interpretation, we are the final arbiter of the intent of the legislature, as expressed in the words of the statute considered as a whole. Id. We first look to the language of the statute itself, and, if possible, construe that language according to its plain and ordinary meaning. Id. We interpret legislative intent from the statute as written and will not consider what the legislature might have said or add language that the legislature did not See fit to include. Id. Statutory ìprovisions barring [a] common law right to recover are to be strictly construed.î Estate of GordonñCouture v. Brown, 152 N.H. 265, 267, 876 A.2d 196 (2005). ìIf such a right is to be taken away, it must be expressed clearly by the legislature.î Id. at 266, 876 A.2d 196.

The purpose of the ODD Fund is ìto establish financial responsibility for the cleanup of oil discharge and disposal, and to establish a fund to be used in addressing the costs incurred by the owners of underground storage facilities and bulk storage facilities for the cleanup of oil discharge and disposal.î RSA 146ñD:1 (emphasis added). The ODD Fund allows owners of eligible facilities to apply for reimbursement of court-ordered damages to third parties for injury or property damage and costs of cleanup of oil discharges up to $1,500,000. RSA 146ñD:6, III. The ODD Fund is financed by a fee on imported oil that is paid on a per gallon basis by distributors who import oil into New Hampshire. RSA 146ñD:2ñ:3. As the trial court found, ìthe end goal of the ODD Fund is not to offset tort liability for Defendants but rather to provide an excess insurance mechanism for [underground storage tank] owners who are otherwise in compliance with all relevant laws and rules.î

The purpose of the GREE Fund, a fund in addition to both the Oil Pollution Control Fund established pursuant to RSA 146ñA:11ña (Supp. 2014) and the ODD Fund, ìis to provide procedures that will expedite the cleanup of gasoline ether spillage, mitigate the adverse [e]ffects of gasoline ether discharges, encourage preventive measures, impose a fee upon importers of neat gasoline ethers into the state and establish a fund for the remediation of groundwater and surface water contaminated by gasoline ethers.î RSA 146ñG:1, II. ìTh[e GREE] nonlapsing, revolving fund shall be used .... to mitigate the adverse [e]ffects of gasoline ether discharges including, but not limited to, provision of emergency water supplies to persons affected by such pollution, and ... the establishment of an acceptable source of potable water to injured parties.î RSA 146ñG:4, I. ìNot more than $150,000 shall be allocated annually for research programs dedicated to the development and improvement of preventive and cleanup measures concerning such gasoline ether discharges.î Id. The fundís balance is capped at $2,500,000. RSA 146ñG:4, II. The fund is financed in part by the ODD Fund. RSA 146ñD:3, VI(b); RSA 146ñG:1.

We agree with the trial court that there is no language in either of the statutory provisions establishing the ODD and GREE Funds indicating a legislative intent to preclude the damages sought by the State in this case. See also State v. Hess Corp., 161 N.H. 426, 431, 20 A.3d 212 (2011) (MTBE defendants conceded that the State may recover damages to test and treat statutorily defined public water systems). Accordingly, we reject Exxonís separation of powers argument based upon the ODD and GREE Funds.

III. Waiver

Exxon argues that the Stateís suit should have been dismissed due to waiver. Before trial, Exxon moved for summary judgment, arguing, in part, that ìby requiring that RFG ... gasoline be sold in New Hampshire, with full knowledge that such gasoline would contain MTBE and with full knowledge of all of MTBEís alleged defective properties, the State cannot now be allowed to sue Defendants who thereafter complied with the Stateís demands and supplied MTBE gasoline to the State.î (Quotation omitted.) In denying the motion, the trial court noted that, because Exxon did not assert that the State expressly waived its right to sue for harm from MTBE, Exxon could only proceed under an implied waiver theory. The court found that there were ìgenuine issues of disputed fact regarding the Stateís knowledge, [Exxonís] knowledge, and timing of this awareness.î

Following the jury verdict, Exxon moved to set aside the verdict and for a new trial. Exxon argued, in part, that it was ìunfairly prejudicedî when the trial court instructed the jury on waiver in its preliminary instructions ìbut then refused to include that instruction in its final instructions or in the verdict form.î In its order denying Exxonís motion, the trial court explained:

In its motion for summary judgment on waiver, Exxon argued that the State knew MTBEís characteristics but still opted in to the RFG program, thereby waiving any claims it had or would develop regarding MTBE contamination. However, the State disputed its level of knowledge. During trial, Exxon attempted to prove the Stateís knowledge by presenting witnesses that testified that MTBEís characteristics were widely known and understood thereby suggesting the State should have known about MTBE.

The State countered this testimony with its own witnesses explaining that the first time State employees found MTBE in a contamination site, those employees were unable to identify the compound and asked the U.S. EPA for assistance. The State also presented testimony that it did not become aware of MTBEís full nature until the State of Maine published a study.

This testimony goes to the issue of waiver but it is also relevant to the issue of [the Stateís] misconduct, and the Court gave an instruction on [the Stateís] misconduct. In fact, the Court instruction on [the Stateís] misconduct encompassed the same elements embodied in a waiver claim.

(Citations omitted.)

On appeal, Exxon argues that, ìwith knowledge of MTBE groundwater risks, the State opted-in to the RFG program, participated in that program for years, repeatedly opposed banning MTBE, and ultimately decided in 2004 that continuing MTBEís use for nearly three more years was better for the State than an outright ban.î Thus, there was ìample evidence to support a jury verdict finding waiver,î and the trial courtís ìfailure to instruct the jury is clear error.î Exxon also argues that the trial courtís reasoning that a waiver instruction was unnecessary is erroneous, ìas misconduct and waiver are distinct defenses that are appropriately charged separately.î The State argues that, at trial, Exxon adduced no evidence of express or implied waiver, that the special verdict form reflects that the jury rejected Exxonís defense ìthat the hazards posed by the use of MTBE in gasoline were obvious, or were known and recognized by the State,î and that, in any event, the trial court ìcorrectly concluded that its misconduct instruction adequately encompassed Exxonís waiver defense.î

Whether a particular jury instruction is necessary and the exact scope and wording of jury instructions are within the sound discretion of the trial court. See State v. Littlefield, 152 N.H. 331, 334, 876 A.2d 712 (2005). We review the trial courtís decisions on these matters for an unsustainable exercise of discretion. Id.

Exxonís ìplaintiffís misconduct defenseî jury instruction as given by the trial court provided in pertinent part:

If you find that ExxonMobilís product was unreasonably dangerous, ExxonMobil failed to provide a warning, or behaved negligently and that ExxonMobil is liable, you should then go on to determine if the State committed misconduct that contributed to cause its injuries. With respect to the Stateís alleged misconduct, ExxonMobil bears the burden to prove that it is more likely than not that the State committed misconduct in its use of the product.

Misconduct includes, but is not limited to, abnormal use of the product, misuse of the product, failing to discover or foresee dangers that the ordinary person or entity would have discovered or foreseen, voluntarily proceeding to encounter a known danger, and failing to mitigate damages.

(Emphasis added.)

We note that in its motion for judgment notwithstanding the verdict (JNOV) following the jury verdict, Exxon made the same argument regarding its misconduct defense that it makes on appeal regarding waiver. Asserting in its motion for JNOV that the evidence ìoverwhelmingly proved ExxonMobilís affirmative defenses,î Exxon argued that ì[t]he evidence at trial overwhelmingly proves that the Stateís misconduct contributed to its injuries. First, the evidence established that the State voluntarily encountered a known danger by opting-in to the RFG program with knowledge of MTBEís characteristics. Moreover, the evidence demonstrates that the State knew that MTBE would be used in New Hampshire to comply with the RFG program.î (Citation omitted.) In support of its waiver argument on appeal, Exxon asserts that ìwith knowledge of MTBE groundwater risks, the State opted-in to the RFG program [and] participated in that program for years.î

Concluding that the waiver and misconduct instructions are similar because they both address the

Stateís knowledge and subsequent actions based upon that knowledge, the trial court reasoned:

Depending on the Stateís knowledge, the jury could have found that the State knew or should have known the characteristics of MTBE gasoline and thereby either waived any challenge it is now raising or should have been held partially responsible for its own injury. In other words, because the jury was instructed on and considered the issue of the Stateís knowledgeóthat the State knew of MTBE and used it anywayóthe jury also considered whether the State waived any claims about MTBE contamination risks by knowingly using MTBE. The jury nonetheless rejected this theory. Thus, Exxon was not entitled to an independent waiver instruction because the plaintiffís misconduct instruction encompassed this affirmative defense.

Assuming, without deciding, that there was enough evidence for Exxonís implied waiver defense to go to the jury, we hold that any error was harmless given the juryís finding that the State did not commit misconduct that contributed to its harm.

IV. Federal Preemption

Exxon argues that the Stateís claims are preempted by the Federal Clean Air Act. Before trial, Exxon moved for summary judgment, arguing that Congress and the EPA ìtook actions providing that federal requirements were to be met by allowing refiners to choose MTBE as an additive to gasoline,î and that ìState law is preempted where it Seeks to ban an action that federal law affirmatively chooses to make available to state actors.î The trial court rejected Exxonís argument that the Stateís tort claims present an obstacle to the federal purpose of the Clean Air Act.

Noting that ì[o]n numerous occasions, courts throughout the United States have considered whether the [Clean Air Act] preempts state tort law claims regarding the use of MTBE,î the trial court applied the reasoning of the United States District Court for the Southern District of New York. The trial court explained that Exxonís arguments

are essentially identical to those made by the defendants during In re MTBE Products Liability Litigation. Here, the Defendants claim that the federal regulation deliberately provided manufacturers with a range of oxygenate choices and the choice was designed to further the regulationís objectives. The Defendants further argue that Congress and the EPA stressed the importance of MTBE as a choice and encouraged its use. Finally, they point to the lengthy legislative history of the [Clean Air Act] to support their arguments.

See In re Methyl Tertiary Butyl Ether (MTBE) Products, 457 F.Supp.2d 324, 336ñ42 (S.D.N.Y. 2006), affíd, 725 F.3d 65 (2d Cir. 2013), cert. denied, ñññ U.S. ññññ, 134 S.Ct. 1877, 188 L.Ed.2d 948 (2014). The trial court concluded that ì[l]ike the defendants [in MTBE Products], the Defendants here have failed to prove that the Stateís tort law claims are preempted by the [Clean Air Act], and their use of the legislative history is irrelevant due to the unambiguous language of the [Act].î

Exxon moved for a directed verdict at the close of the Stateís case-in-chief, based in part upon its assertion that the evidence presented ìdemonstrates that the Stateís claims are preempted based on the Clean Air Actís requirement that gasoline contain an oxygenate and the factual evidence demonstrating that no feasible alternative oxygenate existed sufficient to meet the requirements of RFG in New Hampshire.î Noting that Exxonís argument ìis presented in a highly summary fashion,î the trial court declined to revisit the preemption claim and relied upon its earlier decision denying Exxonís motion for summary judgment.

After the jury verdict, Exxon moved to set aside the verdict and for a new trial arguing, in part, that the trial court ìfailed to instruct the jury on ExxonMobilís affirmative defense of preemption or include it in the verdict form.î According to Exxon, the trial court erred because ìthere were sufficient factsî to support its argument ìthat MTBE was the only feasible oxygenate for use in New Hampshireî and, therefore, ìthe Stateís claim would be preempted because ExxonMobil was required to use an oxygenate under the Clean Air Act Amendments.î Exxon asserted also that ìas a matter of law, the Stateís claims were preempted ... because Congress specifically intended for refiners to be able to choose among oxygenates, including MTBE, to comply with the RFG program and eliminating MTBE would have interfered with the goals of the [Act].î

Noting that ì[t]he preemption argument Exxon raises directly alleges the argument it raised pretrial and in its directed verdict motion,î the trial court denied the motion. The court reasoned that

[t]o the extent Exxon argues the jury should have been instructed on preemption in order to find facts from which the Court could further evaluate preemption, the Court considered and rejected this argument in its [order denying Exxonís motion for a directed verdict]. Even assuming New Hampshire courts would adopt this view of preemption, there are no facts to support Exxonís theory. Exxon alleges the Stateís claims are preempted by the federal Clean Air Act and its RFG program. The Court rejected this legal argument. There are no facts that a jury could find that would alter the legal analysis this Court already undertook.

(Citation omitted.)

On appeal, Exxon argues that a state tort duty holding it liable for supplying MTBE is preempted by the Clean Air Act, ìparticularly because Exxon had no safer, feasible alternative to MTBE at the time.î According to Exxon, ì[p]reemption here follows a fortiori fromî Geier v. American Honda Motor Co., 529 U.S. 861, 120 S.Ct. 1913, 146 L.Ed.2d 914 (2000), and Williamson v. Mazda Motor of America, Inc., 562 U.S. 323, 131 S.Ct. 1131, 179 L.Ed.2d 75 (2011), ìwhich establish that when federal law imposes a mandate but leaves private parties with a choice of how to comply, a state-law tort duty that would take one option off the table obstructs federal objectives when maintaining the choice is a ësignificant objectiveí of the federal program.î Exxon asserts that despite ìample evidence that there was no safer, feasible alternative to MTBE,î the trial court erroneously refused to instruct the jury on this issue. The State argues that ì[p]reemption arguments like the one Exxon raises here have been rejected by every federal court of appeals to consider them.î The State contends that ìenabling suppliers to choose MTBE (as opposed to ethanol) was not a significant regulatory objective of Congress or EPA,î and that the trial evidence demonstrated that ìsafer, feasible alternatives to MTBE existed.î (Quotations omitted.)

Because the trial courtís determination of federal preemption is a matter of law, our review is de novo. N.H. Attorney Gen. v. Bass Victory Comm., 166 N.H. 796, 801, 104 A.3d 181 (2014). The federal preemption doctrine is based upon the Supremacy Clause of the United States Constitution. See Arizona v. United States, ñññ U.S. ññññ, 132 S.Ct. 2492, 2500, 183 L.Ed.2d 351 (2012); See also Appeal of Sinclair Machine Prodís, Inc., 126 N.H. 822, 826, 498 A.2d 696 (1985). Article VI provides that federal law ìshall be the supreme law of the land; and the judges in every state shall be bound thereby, anything in the Constitution or laws of any state to the contrary notwithstanding.î U.S. CONST. art. VI. ìAccordingly, it has long been settled that state laws that conflict with federal law are without effect.î Mutual Pharmaceutical Co., Inc. v. Bartlett, ñññ U.S. ññññ, 133 S.Ct. 2466, 2473, 186 L.Ed.2d 607 (2013) (quotation omitted).

Congress may preempt state law under the Supremacy Clause in several ways. Hillsborough County v. Automated Medical Labs., 471 U.S. 707, 713, 105 S.Ct. 2371, 85 L.Ed.2d 714 (1985). First, within constitutional limits, ìCongress is empowered to pre-empt state law by so stating in express terms.î Id. ìIn the absence of express preemptive language, Congressí intent to pre-empt all state law in a particular area may be inferred where the scheme of federal regulation is sufficiently comprehensive to make reasonable the inference that Congress left no room for supplementary state regulation.î Id. (quotation omitted).

ìEven where Congress has not completely displaced state regulation in a specific area, state law is nullified to the extent that it actually conflicts with federal law.î Id. This ìconflict preemptionî arises when ìcompliance with both federal and state regulations is a physical impossibility, or when state law stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.î Id. (quotations and citation omitted).

Exxon relies upon the so-called ìobstacle branchî of conflict preemptionóthat state law ìstand[s] as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.î Arizona, 132 S.Ct. at 2501 (quotation omitted). ìThe burden of establishing obstacle preemption ... is heavy: the mere fact of tension between federal and state law is generally not enough to establish an obstacle supporting preemption, particularly when the state law involves the exercise of traditional police power.î MTBE Products Liability Litigation, 725 F.3d 65, 101ñ02 (2d Cir. 2013) (quotations and brackets omitted), cert. denied, ñññ U.S. ññññ, 134 S.Ct. 1877, 188 L.Ed.2d 948 (2014). ìIndeed, federal law does not preempt state law under obstacle preemption analysis unless the repugnance or conflict is so direct and positive that the two acts cannot be reconciled or consistently stand together.î Id. at 102 (quotation omitted).

ìThe control and elimination of water pollution is a subject clearly within the scope of the police powerî of the State. Shirley v. Commission, 100 N.H. 294, 299, 124 A.2d 189 (1956). ìConsideration of issues arising under the Supremacy Clause starts with the assumption that the historic police powers of the States are not to be superseded by Federal Act unless that is the clear and manifest purpose of Congress.î Cipollone v. Liggett Group, Inc., 505 U.S. 504, 516, 112 S.Ct. 2608, 120 L.Ed.2d 407 (1992) (quotation, brackets, and ellipses omitted). ìAccordingly, the purpose of Congress is the ultimate touchstone of pre-emption analysis.î Id. (quotations and brackets omitted). ìSince preemption of any type fundamentally is a question of congressional intent, our preemption analysis begins with the source of the alleged preemption.î Bass Victory Comm., 166 N.H. at 803, 104 A.3d 181 (quotation, brackets, and citation omitted).

As discussed above, in 1990, Congress enacted amendments to the Clean Air Act that, among other things, created the RFG Program. See 42 U.S.C. ß 7545(k). The RFG Program required gasoline used in specific geographic areas to have a minimum oxygen content, achieved by the addition of an oxygenate of the manufacturerís choice. See 42 U.S.C. ßß 7545(k)(2)(B), (m)(2); See also 40 C.F.R. ß 80.46(g)(9)(i). After the passage of the amendments, the EPA certified various blends of gasoline for use in the RFG Program, including gasoline containing MTBE, but did not mandate the use of any one oxygenate. As the United States Court of Appeals for the Second Circuit explained,

the 1990 Amendments did not require, either expressly or implicitly, that Exxon use MTBE. Although the 1990 Amendments required that gasoline in certain geographic areas contain a minimum level of oxygen, they did not prescribe a means by which manufacturers were to comply with this requirement. The EPA identified MTBE as one additive that could be used to ìcertifyî gasoline, but certification of a fuel meant only that it satisfied certain conditions in reducing air pollution. ...


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