Private Empire: ExxonMobil and American Power

by Steve Coll

  MTBE, the second dangerous element in gasoline, was developed in laboratories to raise gasoline octane ratings; after 1990, government policy encouraged its use to enhance the amount of oxygen emitted when cars burned gasoline, to reduce urban air pollution caused by tailpipe emissions. Nobody had studied MTBE’s health effects, however. Later, based on laboratory tests involving rats, the E.P.A. concluded that MTBE was a “potential human carcinogen at high doses.” That tentative finding led to fast policy reversals by state and federal regulators, who ordered plans to reduce and eventually eliminate MTBE from gasoline. The E.P.A. finding about MTBE’s potential health effects also stimulated massive numbers of lawsuits against oil companies by cities, towns, businesses, and individuals who claimed to have been affected by historical gasoline spills where MTBE had been present in the fuel. ExxonMobil found itself a defendant in hundreds of these cases after 2001. PACER, the computerized system containing records of lawsuits in the American federal court system, contained dozens of listings of civil cases where ExxonMobil stood accused of negligence for allowing MTBE to leach into groundwater because of gasoline spills—even though it had been encouraged by the government to put MTBE into its gasoline in the first place. The corporation’s law department managed these suits as a kind of high-cost division of legal operations, seeking to minimize ExxonMobil’s financial exposure. ExxonMobil’s Washington lobbyists pushed unsuccessfully for Congress to enact laws that would exempt oil corporations from liability, on the grounds that the government had encouraged MTBE’s use. Separately, the corporation accepted that the additive should be phased out: “ExxonMobil recognizes that MTBE use in gasoline has caused concern with some customers,” one of its lobbyists, D. L. Clarke, wrote to a state air pollution regulator in 2003, “and we support phase down of MTBE use in a manner consistent with maintaining reliable and affordable gasoline supplies.”9

  On the other side of the issue stood a network of plaintiffs’ lawyers who saw MTBE as an opportunity to sue oil companies and win lucrative verdicts. By the time of the Jacksonville Exxon leak, American plaintiffs’ lawyers who previously had represented victims of tobacco marketing, asbestos exposure, or faulty medical devices traded information and scanned for news of new gasoline leaks and spills. For the Baltimore area plaintiffs’ bar—ambulance chasers, to their critics—it would have been difficult to imagine more enticing news than that which circulated in the last weeks of February around northern Baltimore County: that 24,000 gallons of MTBE- and benzene-laced gasoline had spilled in an area of homes dependent on groundwater wells, and that the world’s largest and least popular publicly traded oil corporation directly owned the gas station responsible for the leak.

  In this way, the irresistible force known as Stephen Snyder came to meet the immovable object branded as ExxonMobil.

  Stephen Snyder grew up in a modest row house in West Baltimore. His father and uncles owned clothing stores. In high school, Snyder recalled, he rarely did so well as to earn a B. As an undergraduate at the University of Maryland, he at last began to study, and at the University of Baltimore School of Law, he excelled. He had the gifts of a natural salesperson and worked his way through school selling magazines—he was so successful that he soon was earning more than his father, even before he entered law. At twenty-four, he set up an independent legal practice devoted to “contingency-fee” cases, in which he generally sued corporations on behalf of individuals and got paid only if he won damages or settled for cash. “I don’t think you could hire me for an hourly rate, no matter what,” he explained later. “If I win, I have to have some skin in the game, a piece of the action.” He won his first million-dollar medical malpractice verdict in the 1980s and kept going. United Cable settled a racial discrimination case with him in 1990 for $106 million. The accounting firm Ernst & Young settled over a business bankruptcy matter for $185 million. He won a jury verdict against a bank for $276 million. A contingency attorney such as Snyder generally took about a third of such verdicts as his fee.10

  By the time of the Jacksonville Exxon gasoline leak, Stephen Snyder had reached his late fifties. His silver hair was receding from his forehead; he wore his hair cropped. He was not a tall man, but he was broad-shouldered and powerfully built. He had more wealth than even most successful lawyers could imagine. He had fathered five children by two marriages, and two of his sons had followed his footsteps and joined his law firm. And yet Snyder remained deeply restless, driven, and insecure. “How did I do?” he would eagerly ask anyone within earshot after a court appearance. “I just wish he’d take a deep breath and relax,” his second wife, Julie, said. “It’s never enough.”11

  Snyder displayed his wealth conspicuously: a diamond-studded Rolex watch; a gold chain with “Steve” encrusted in diamonds; an alligator-skin briefcase; expensive tailored suits. His office wall displayed a framed check written to his firm for $70 million. He almost lost a New Jersey trial when jurors mistook his Rolls-Royce in the parking lot for that of his client. He defied conventional thinking about how lawyers should comport themselves: He flashed his wealth inside the courtroom because he believed jurors would lean his way if they believed he was rich and successful. He wept and shouted at witnesses. He ignored judges when they ruled him out of line.12

  Some members of the corporate bar dismissed Snyder as “more showman than lawyer, a flashy cynic who manipulates unsophisticated jurors by twisting the facts,” the Baltimore Sun put it. Even within his own tort or plaintiffs’ law community, he remained emphatically and annoyingly in second place in the city of his birth. Peter G. Angelos, another street-smart University of Baltimore law school graduate, had earned an immense fortune in contingency-fee asbestos and tobacco cases and had used his winnings to purchase the Baltimore Orioles baseball team. Whereas Snyder’s greatest verdicts exceeded $100 million, Angelos had gotten rich from billion-dollar tobacco and asbestos cases.

  Snyder was desperate to catch up, to land his own white whale: Jacksonville Exxon seemed to have that potential, or so Snyder concluded as he solicited clients soon after news of the leak became public. He had not been tracking MTBE litigation nationwide, but soon educated himself. The attraction of the Jacksonville case had little to do with its complex environmental aspects. Snyder and his colleagues were drawn instead to the fact that the station had put up a misleading sign during the first day or two after the spill and then ExxonMobil had given talking points to the station manager that she found to be “lies.” Those were the sorts of facts that could turn a jury’s emotions against a giant corporation.

  Snyder found himself in a race with Angelos once again. His rival’s firm signed up as clients property owners around the Jacksonville station. Lawyers for the two competing firms prowled the same neighborhoods, seeking to recruit as many homeowners affected by the leak as possible. On Robcaste Road, Steve Tizard and two of his neighbors decided to interview the firms contending for their business. They met Angelos’s team and more than a dozen other firms. When it was Snyder’s turn, he arrived with his entire law firm, even as he declared he was not sure he wanted to take the case. It was “a show of force,” Tizard recalled. “I was getting sold every second. He was just so arrogant and nasty.” Eighty-nine families within the general vicinity of the station, including Tizard’s, eventually agreed to go with Snyder.13

  Exxon executives quickly removed the case from the Safety, Health, and Environment department and handed it over to the law department, putting it into the operations queue with the other MTBE cases the corporation faced. By now ExxonMobil’s in-house legal strategists had a playbook for such cases. In accidents like Jacksonville’s, the corporation had learned that there was usually no point fighting the basic question of legal responsibility; instead, the goal of its defense strategy was to avoid punitive damages. In the Exxon Valdez case, Lee Raymond had refused to bend by paying punitive damages, and his stubborn determination eventually made new and favorable law for corporations at the United States Supreme Court. (The Court he
ld that formulas under which actual damages found at trial might be multiplied to determine punitive damages could be constitutional, as long as the multiplier was relatively low, such as one or two times the actual damages.) “The strategic call we made,” Lee Raymond recalled, “was that the punitive damage issue is moving our way. . . . So we are just going to hang in there. That was the strategy for twenty years. And we just called it right. And had good lawyers.” ExxonMobil was hardly going to depart from these principles while defending itself in local trials over spilled gasoline. As to actual or compensatory damages—payments to homeowners for the actual losses they incurred because of the Jacksonville Exxon’s leaking gasoline—Exxon’s representatives told residents that in principle the corporation was willing to pay for declining property values and proven medical claims, including documented emotional distress. With Stephen Snyder’s clients, however, settlement negotiations failed. Snyder’s firm felt ExxonMobil’s lawyers were trying to skim off the clients in his group with the strongest cases, and settle with those, while leaving Snyder with the weaker cases at trial. He urged his clients to hang together, and they did.

  Because the case involved MTBE claims, it was initially assigned to the federal court system, to be consolidated with all of the other MTBE cases accumulating around the country. Snyder wanted to try the case before a state jury, on his home court, where he knew the rhythms and rules best. State court juries tended to award punitive damages more readily than federal juries. It took some maneuvering, but Snyder eventually won a decision removing the case to the Maryland courts in exchange for his agreement to drop claims specifically related to the health effects of MTBE.

  ExxonMobil honed its defense strategy as the trial date approached. Gasoline prices in the United States were rising, and oil companies were more unpopular than ever. The corporation could expect hostility from at least some jurors. Therefore, it would try to win sympathy from the jury by forthrightly admitting that it was at fault; it would apologize to the plaintiffs and the jurors; and it would invite the jury to determine what actual damages local homeowners deserved. At the same time, ExxonMobil’s lawyers would defend adamantly against the claim that it owed punitive damages. Before the Jacksonville trial opened, ExxonMobil paid $4 million to the Maryland Department of the Environment and accepted responsibility for the spill. The corporation spent, according to its representatives, another $38 million on cleanup efforts in the neighborhood around Jacksonville Exxon—it dug into the groundwater, installed test wells to monitor for the presence of benzene or MTBE, and used chemical and other treatments to clean and eliminate gasoline residues from the aquifer.

  To win his billion dollars, or at least something close to it, Stephen Snyder would have to persuade the jury that the Jacksonville gasoline leak was more than just an accident. He would have to show that ExxonMobil had acted maliciously, fraudulently, or with gross negligence, a standard that might amount to a finding of “willful blindness.” He had to show that greed and corporate cover-ups lay behind the Jacksonville leak—and therefore, ExxonMobil should be punished or deterred with an award of heavy punitive damages, beyond the actual losses of the homeowners, in order to send a signal to the corporation’s executives and to other companies in the oil industry. Snyder figured that if he won about $150 million in actual damages, and if the jury was outraged enough by Exxon’s actions, he might win a multiplier for punitive damages that could push the total verdict toward $1 billion. If he did that well, he hoped to withstand appellate scrutiny or at least force Exxon into a high settlement.

  Snyder subpoenaed hundreds of thousands of pages of documents and e-mails from ExxonMobil’s retail gasoline and safety divisions. As he and his partners painstakingly read through them before trial, they found what they felt was a winnable fraud case that could produce a billion-dollar jury verdict. Snyder decided to turn the trial into a story about the alarm bell that hadn’t rung at the Jacksonville station after the gasoline leak began to flow on January 12.

  The story involved a leak detector system called the EECO 3000. It was one of two different electronic alarm systems the corporation used at its stations nationwide—and of the two systems ExxonMobil employed to comply with federal regulations, it was the more problematic. Internal documents showed that the EECO 3000 was highly sensitive and prone to false alarms.

  ExxonMobil had decided to replace the EECO 3000 before the Jacksonville leak occurred, but it had not moved quickly to do so. Exxon said the devices were safe, just harder than they should be to operate, and therefore the pace of replacement was just a routine business matter. The company that originally manufactured the system had been sold; in 2004, the successor company informed ExxonMobil that it would no longer support the leak detector with spare parts. Budgetary constraints and corporate planning timelines meant the EECO 3000 changeover was proceeding gradually.

  Snyder concluded that the totality of evidence added up to fraud. His argument was that to enhance its gargantuan profits, ExxonMobil had avoided coming to terms with the EECO 3000’s fatal flaws; it had failed to act promptly to replace the system at stations near homes that relied upon groundwater wells; and the corporation had sought to hide evidence of the system’s troubles. It was perhaps not as obvious a jury-ready story of corporate neglect and greed as the case of the Exxon Valdez captain with a documented alcohol problem, but given the unpopularity of oil corporations and of ExxonMobil in particular, it might be good enough to bring home a fraud verdict from a Baltimore County jury.

  “It was a lemon,” Snyder said of the EECO 3000. “They knew it. It is a dark secret. It was the skeleton in Exxon’s closet.”14

  On an autumn morning, Snyder and dozens of his clients filed into Courtroom 2 on the third floor of the Baltimore County Courthouse, a massive prisonlike concrete box in suburban Towson, Maryland. Judge Maurice W. Baldwin Jr., a senior visiting judge assigned to the case from nearby Harford County, entered the courtroom and settled on his raised bench. On the wall to his left hung oil portraits of robed judges. Wood paneling, plush carpeting, and upholstered blue vinyl chairs contributed to a heavy, sleep-inducing aesthetic. They all might as well get comfortable; Stephen Snyder intended to speak at length about the cause he had now shouldered.

  “Members of the jury, this is a gas leak that should not have happened,” Snyder declared in his opening statement, pacing before the jury box. “It is a leak that took place because Exxon made a corporate decision to disregard the health and the welfare of the citizens. This is a company that decided that profits are much more important than safety.”

  Snyder warned the jurors that the trial would take months, and he urged them to pay close attention to the details. “It is not a contest between the lawyers—who wears the flashiest suit or jewelry. I will win that contest.”

  “Stipulate,” came the deadpan response from the ExxonMobil defense table.

  There sat James F. Sanders, a trial lawyer from Nashville, Tennessee. Sanders had participated in ExxonMobil’s trial defense in the Valdez case more than a decade earlier. He was one of the trial attorneys ExxonMobil relied on in its most risky, sensitive jury cases. Sanders had tested over years the best ways to reach jurors who might be naturally skeptical about the motives of a giant oil corporation.

  Among other things, as the Jacksonville Exxon trial unfolded, Sanders would avoid badgering witnesses or arguing vehemently with Stephen Snyder, no matter how provocative or outrageous Snyder’s behavior or accusations became. To build an emotional connection with jurors on behalf of an unpopular corporation, Sanders believed he had to come across as entirely reasonable, calm, humble, and interested only in a modicum of fairness on behalf of his client. His southern accent and soft voice reinforced his demeanor. Let Snyder bluster and thunder; Sanders would slip in behind him and speak calmly of common sense.

  ExxonMobil’s alleged greed lay at the heart of Snyder’s accusations, but he had to calibrate his charge. “No one is saying in this case that Exxon intentionally
allowed 26,000 gallons to go into the ground,” he explained to the jury. “Exxon did knowingly allow unreliable and defective equipment that they knew was a lemon—they knew for seven years and they did nothing about it because they didn’t care about residents and the environment. All they cared about was profits.”15

  Mr. Snyder’s time with you was quite a performance,” Sanders replied when his turn arrived. “And I will tell you from the very beginning that it is not my intention to try to match the performance. Indeed, I’m not going to perform at all. I’m not going to try to match the jewelry or his suits. . . .

  “The most important thing that I have to say to you is the first thing that I’m going to say to you: And that is, we are sorry. We are sorry for the leak. We are sorry that the leak went on for over 30 days without being discovered. We are sorry at the magnitude of this leak and the spill into the community. . . . We apologize. We apologize to the Plaintiffs in this room. We apologize to the Plaintiffs not in the room. We apologize to you. We apologize to the community. We apologize to the State of Maryland. . . .

  “Now, we do not—do not—accept liability under some of these theories you heard about” from Snyder, he went on. “We do not accept liability for fraud, we do not accept liability for any intentional misconduct, and we do not accept liability for anything that says we did anything intentionally or with malice. We don’t accept that. But we do accept liability to pay for the harm that you find was actually caused to the people who were actually harmed.”16

  The fraud charge centered on the EECO 3000 leak detector would be the “battleground,” as Snyder put it later, of what became a five-month trial. Day after day, Snyder presented ExxonMobil internal documents and cross-examined corporate witnesses in an effort to prove that ExxonMobil managers and executives knew the EECO 3000 was dangerously unreliable because it gave off so many false alarms, and that ExxonMobil accepted this flawed leak detector because it did not want to spend the money necessary to replace all of them at once—not even in Consequence I areas such as north Baltimore County, where a gasoline leak could infect household wells.