Exxon Mobil Corp. v. Albright
71 A.3d 30, 2013 Md. LEXIS 694, 433 Md. 303 (2013)
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Rule of Law:
A claim for fraud requires a plaintiff's personal reliance on the defendant's misrepresentation, not just reliance by a third-party governmental entity. To recover emotional distress damages for fear of contracting a latent disease, a plaintiff must prove actual exposure to a toxic substance that creates an objectively reasonable fear and results in an objectively determinable physical injury.
Facts:
- In 1983, an Exxon Mobil Corporation (Exxon) specialist, Frederick M. Anderson, testified before the Baltimore County Board of Appeals to obtain a construction permit for a new station in Jacksonville, Maryland, describing 'extraordinary' secondary containment measures, including a liner under the entire tank field.
- During construction in 1984, Exxon deviated from the described plans, installing double-walled fiberglass tanks but omitting the promised tank field liner.
- In 1992, during a federally mandated retrofitting of the station, the existing plastic overliner containment system was destroyed and never repaired.
- On January 13, 2006, a contractor for Exxon accidentally drilled a 3/16 inch hole in an underground gasoline feed line while performing maintenance.
- The station's electronic leak detection system sent an alarm, but technicians from Alger Electric, Inc. incorrectly diagnosed it as a motor problem and then wrongly recalibrated the system, rendering it unable to detect the ongoing leak.
- Station operator Andrea Loiero noticed gasoline inventory discrepancies in January but did not realize they were from a leak.
- On February 16, 2006, after Loiero reported the large discrepancies, Exxon shut down the station, by which time over 26,000 gallons of gasoline had been released into the ground.
- From February 17 to February 21, 2006, Exxon posted a sign at the station stating it was 'temporarily closed for upgrade,' not mentioning the massive leak.
Procedural Posture:
- 466 residents and business proprietors of Jacksonville sued Exxon Mobil Corporation in the Circuit Court for Baltimore County, a state trial court.
- The plaintiffs' Eighth Amended Complaint alleged claims including negligence, strict liability, nuisance, trespass, and fraud, seeking compensatory and punitive damages.
- After a six-month trial, the jury returned verdicts for the plaintiffs on all causes of action, awarding $496,210,570 in compensatory damages and $1,045,550,000 in punitive damages.
- The trial court granted Exxon's Motion for Judgment on punitive damages claims based on evil motive, leaving fraud as the sole basis for the punitive award.
- Exxon filed post-trial motions for judgment notwithstanding the verdict (JNOV) and for a new trial, which the trial court denied.
- Exxon, as appellant, noted a timely appeal to the Court of Special Appeals of Maryland, the state's intermediate appellate court.
- Before the intermediate appellate court could hear the case, the plaintiffs, as appellees, filed a petition for a writ of certiorari with the Court of Appeals of Maryland, the state's highest court, which the court granted.
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Issue:
Under Maryland law, does a claim for fraud require proof that the plaintiff personally relied on the defendant's misrepresentation, or is it sufficient to show that a third-party governmental entity relied on the misrepresentation to the plaintiff's detriment?
Opinions:
Majority - Harrell, J.
No. A cause of action for fraud requires the plaintiff to prove personal reliance on a defendant's misrepresentation; reliance by a third party, such as a governmental entity, is insufficient to sustain the claim. To establish fraud, a plaintiff must prove they personally relied on the misrepresentation, either directly or indirectly, and suffered a compensable injury as a result. In this case, the Appellees presented no evidence that they knew of or relied on Exxon's alleged misrepresentations to Baltimore County in 1983 or to the Maryland Department of the Environment (MDE) in 1992 and 2001. The court rejected the 'fraud on the government is fraud on the people' theory. Similarly, the claims for 'sign fraud' and 'remediation fraud' failed due to a lack of evidence of detrimental reliance; few Appellees proved they changed their behavior based on the sign or other remediation communications. As all fraud claims failed, the punitive damages award, which was predicated entirely on fraud, was reversed.
Analysis:
This decision significantly narrows the scope of fraud claims in Maryland mass tort litigation by reinforcing the traditional element of personal reliance, thereby preventing plaintiffs from basing claims on misrepresentations made to regulatory bodies without proving their own awareness and reliance. The court also curtails claims for potential future harm by establishing, for the first time in Maryland, stringent multi-part tests for both emotional distress for fear of a latent disease and medical monitoring as a remedy. By setting high evidentiary bars—requiring proof of actual exposure, an objectively reasonable fear, and a manifested physical injury for fear-of-cancer claims—the ruling signals a judicial preference for compensating concrete, present harm over speculative future injuries, making recovery in toxic tort cases more difficult.
