East Bay Municipal Utility District v. Mobil Oil Corporation, et al.
Published: May 27, 2000 | Result Date: Jan. 17, 2000 | Filing Date: Jan. 1, 1900 |Case number: 390303 Verdict – $7,397,250
Judge
Court
San Mateo Superior
Attorneys
Plaintiff
Defendant
Experts
Plaintiff
Peter Badala
(technical)
Salvatore S. Stivala
(technical)
Alexander Chudnovsky
(technical)
Defendant
J. David Rogers
(technical)
Lawrence J. Broutman J.D.
(technical)
Paul Switzer
(technical)
Avram S. Tucker
(technical)
David Wiles
(technical)
Clyde Dugan
(technical)
Isadore Allen Cooper
(technical)
Facts
ACCORDING TO THE PLAINTIFF: In 1969, EBMUD installed approximately 65,000 service laterals made of
plastic polybutylene tubing, which provided water service from the districtÆs mains to the customerÆs water
meters. EBMUD approved polybutylene as a standard material for service laterals based on representations by
resin manufacturers such as Mobil and Witco that tubing made from polybutylene resin was as durable as
copper, would not "rust, rot or corrode," could be placed in any type of soil, was easy to install and would last
50. FMC supplied polybutylene resin in the early 1970s.
Shell became the exclusive manufacturer of polybutylene resin in 1978 and hired key individuals who had
worked for both Mobil and Witco. In 1988, EBMUD ceased using polybutylene because of problems
experienced by other utilities. The district experienced unexplained failures in its polybutylene laterals in 1992,
and from that time until September 1999, more than 6,800 laterals failed on an emergency basis. Over 4,000
failures were attributable to FMC and Shell resin.
The district brought suit against numerous parties, eventually settling with all defendants expect Shell and
FMC. Settlements totaled $5.5 million. At trial, EBMUD asserted fraud and negligence against Shell and
product liability against both Shell and FMC. The jury found against Shell and in favor of the district on
product liability and negligence. With respect to fraud, the jury found Shell had made reckless material
misrepresentations about the properties and characteristics of polybutylene but determined that Shell did not
intend to defraud the district.
The jury held FMC liable for product liability. The jury awarded damages consistent with one of four damage
models asserted by EBMUD. The damages relate to just 10 percent of the total laterals installed. Since
September 1999, the districtÆs polybutylene laterals have continued to fail. These failures will be the subject of
future litigation.
Settlement Discussions
The District reached settlement with more than a dozen of the original defendants for $5.5 million. Of this amount, $419,200 constituted an offset against the verdict. The district and Shell attempted to resolve their issues through mediation. The district rejected Shell's C.C.P. Section 998 offer of $2.185 million and demanded $5 million for past failures. The District demanded $1.7 million from FMC and FMC offered $250,000 for past and future failures.
Specials in Evidence
From 1969 until EBMUD
Other Information
FACTS ACCORDING TO THE DEFENDANT: Plaintiff purchased and installed water service laterals made from polybutylene resin from 1969 to 1992. The service laterals are lengths of tubing connected to water mains, which run to customersÆ water meters. Plaintiff selected polybutylene tubing because it was less expensive and easier to transport and install than copper tubing. The polybutylene tubing was purchased from various manufacturers pursuant to contracts issued by plaintiff, which contained no service lifetime requirements or warranties. Defendants supplied raw polybutylene resin to the manufacturers; FMC for a short time in the early 1970s, and Shell from 1978 on. Plaintiff installed between approximately 70,000 to 100,000 polybutylene laterals until it discontinued use in 1992. PlaintiffÆs experience with polybutylene laterals through the 1970s and 1980s was excellent; it reported only one failure of a polybutylene lateral, not due to faulty installation or accidental dig-in, prior to 1992. In mid-1992, however, failures began to occur throughout the district. As of the time of trial, plaintiff claimed about 6,600 laterals had leaked (most of which had been in the ground for 15 to 30 years), of which 2,818 were allocated to Shell and 1,087 to FMC. At trial, plaintiff asserted that Shell had concealed material information about polybutylene and made intentional or negligent misrepresentations, which allegations were rejected by the jury. Plaintiff further claimed that the resin was defective as designed because, when extruded into pipe, it would not last a minimum of 50 years installed underground due to susceptibility to oxidation and degradation. Shell disputed that there existed any 50-year minimum lifetime requirement as the plaintiffÆs contracts were silent on this point, Shell made no representation to this effect and the district did not adduce any expert testimony to support its assertion. Shell argued that the number of failures was consistent with the number to be expected in a population of laterals presumed to have an average lifetime of 50 years, as calculated in accordance with industry depreciation guidelines used by the district itself. Indeed, more than 90 percent of the polybutylene laterals installed since 1969 were still in service or had been removed for reasons other than failure. And if a lifetime requirement of 25 or 40 years on average was used instead, the plaintiffÆs experience was far better than expected. Shell further pointed out that the plaintiff supplied no written guidelines to its crews concerning how to install polybutylene laterals, and that there were inconsistencies in practices with respect to bending of the pipe, bedding of the trench, fill type, and compaction. Shell argued in addition that failures were exacerbated by severe contraction and expansion of the soil caused by the most severe drought in recorded California history that ended in 1993, immediately followed by periods of the heaviest rains in history. PlaintiffÆs claimed damages represented the costs to replace the failed laterals. During closing arguments, as against Shell, plaintiff sought compensatory damages of as much as $10,046,170, plus prejudgment interest and punitive damages.
For reprint rights or to order a copy of your photo:
Email
jeremy@reprintpros.com
for prices.
Direct dial: 949-702-5390