Earning mixed marks from the class
Counsel representing the plaintiffs in the class-action lawsuit filed against Mobil Oil Corporation (and subsequently settled) over alleged damage to engines from use of AV-1 synthetic oil has submitted an interim report to the court. Call it a grade card on how Mobil has been handling the multimillion-dollar settlement with owners of Continental-powered airplanes that used AV-1 for more than 150 hours. (For background, see " Aircraft and Powerplant: Molecular Mayhem," January Pilot.)
According to the report, filed in late September, Mobil has far from earned straight As. In fact, both the report and comments directly from participants in the settlement are highly critical of Mobil's action. While the report acknowledges that the lawsuit and settlement, along with the subsequent widespread reporting of problems in Continental engines, has probably saved lives, it points out what the class believes are several serious problems in the execution of the settlement agreement.
Among these glitches: various misunderstandings and delays; allegations that the independent mediators (called Special Masters) are being strongly influenced by Mobil; a belief by some in the class that by refusing certain claims, Mobil is trying to deny that bottom-end damage could have been caused by AV-1; and a level of animosity toward Mobil for managing claims adjusters who are "generally adversarial in tone and substance." Further, the report says that, "The experience of many class members...is that Mobil is exploiting every opportunity in the claims process to avoid payment to class members." In all, Mobil's handling of the affair stands in sharp contrast to Chevron's comparatively generous and forthright fix following its 1994 fuel contamination incident in California.
Earl Jordan has made certain aspects of the Mobil AV-1 class-action lawsuit settlement something of a crusade. Rallying against what he sees as corporate indifference, Jordan, the head of a California pharmaceutical company and owner of a Cessna P210, has been compiling information from claimants in the Mobil case and comparing notes. He says, that time and again, damage to bottom-end components — cams, lifters, oil pumps, and so on — is found during the course of complying with the protocol. He points out that Mobil has been exceptionally successful in rebuffing mechanics' assertions that camshaft damage could have been caused by the failure of AV-1 to control sludge accumulations and, perhaps, by allowing the occurrence of an acidic reaction that could corrode the cam and lifters take place. (A special set of tests is being performed by class experts on the possible effects of lead sludge on lubrication of bottom-end parts and the oil's prevention of corrosion; the results had not been released at press time.)
Ironically, Jordan got bottom-end work paid for by Mobil — and is the claimant who got his Special Master in deep hot water for allowing the repair to be made. (More on this brouhaha further on.)
It has been Jordan's intent to find a way to force Mobil to pay for what he believes are the deleterious effects of AV-1 on the bottom end. He took the case to the FAA, which at press time had done little more than rescind the AV-1 STC and ask the engine manufacturers to pull the product's name from the list of approved oils (or to specifically disapprove of AV-1's use).
Drino Miller, another Los Angeles-based owner, thinks that the lower-end problems relate to corrosion. "I saw three other AV-1 engines that looked really, really bad. Plus, when we tore my own engine down, we found corrosion in a lot of places it shouldn't be." Mobil paid for a top overhaul in 1993 on Miller's 1975 Cessna 206 after oil consumption increased radically. Later, after the top, the Stationair's propeller became sluggish and, after a series of other events, Miller elected to tear the engine down. What he found amazes him. "There is corrosion on the lifters, the camshaft, the valve tips, the valve springs...and there is serious pitting on the wrist pins in an area critical to their fatigue resistance. Virtually every steel part in the engine has some signs of premature damage." Lest you think Miller is just an average owner, consider that until last year he was COO and executive vice president of Toyota's racing division; Miller knows his way around engines.
Randy Kerr is another aircraft owner who came out of the protocol less enamored with Mobil. His Cessna 340 was among the first to be inspected under the protocol. Initially, the compression in one cylinder of one engine was below limits, and Mobil authorized removal and inspection of that cylinder only. Kerr's A&P found excessive sludge deposits and demanded that the rest of the cylinders be inspected before he would sign off the 340 as airworthy. Mobil declined, citing the specifics of the protocol; Kerr's engines passed the remainder of the protocol tests. So Kerr appealed to a Special Master.
According to Kerr, before Mobil would consent to keep his engine in the protocol, he had to agree to pay for any teardown inspection and for parts replaced that were not out of limits according to the protocol. Fortunately for Kerr, all 12 cylinders were found to be outside of new limits. His engines were less than halfway to TBO; had they been more than halfway, service limits would apply. Even so, Mobil refused to pay for the teardown and subsequent overhaul of the engines; Kerr got 12 new cylinder kits as per the protocol and no other repair compensation. Bottom line: Even after being compensated for loss of use by Mobil — Kerr's airplane was down for six months- -he was still $30,000 out of pocket for the affair. The loss-of-use compensation spelled out in the protocol — $175 per hour for 550 and 520 Continentals and $100 an hour for the 470s and 360s — is a total figure per airplane, regardless of how many engines it has. (Loss-of-use compensation is based on logged average daily use.) Kerr's 340 costs well more than $175 an hour to fly. He is adamant that he would not feel safe flying with his old engines after just a top overhaul.
These case histories present close-focus snapshots of a much larger picture. At the time the class counsel filed its pleading to the court, 651 members of the mandatory class had submitted claims for 775 engines — this class-action suit does not allow members to "opt out" and file their own suits. Mobil has spent more than $4 million in repairs and compensation for lost use of affected aircraft — about $2.3 million for repairs made under the protocol; $1.09 million for payments of past repairs; and the remainder in loss-of-use and miscellaneous expenses (reimbursing owners for color photocopies of airframe and powerplant logbooks, for example). Of those 651 claims, 340 have been closed; the owners have been paid for repairs. About half of those whose cases are closed opted for Mobil-sponsored ongoing spectrographic oil analysis program (SOAP) that was part of the settlement; owners whose engines did not get a complete teardown under the protocol can opt to keep the powerplants on SOAP for 150 hours or two years, whichever comes first. If the owner feels that, based on information from the oil-analysis lab, additional damage has been done as the result of past use of AV-1, he can submit a claim. That leaves 311 open cases.
At the outset, the class counsel believed that aircraft owners who found engine troubles would go through the protocol in a reasonably short period of time — not the months that some claimants have been forced to wait — and that Mobil would follow the protocol closely. What has surprised participants we've talked to is just how closely Mobil is sticking to the protocol. Mobil has paid for precious few repairs that are not specifically spelled out in the protocol.
The architects of the settlement on the class side expected one important provision to help owners to get more than what was spelled out in the protocol. Under protocol Section IV (d), the mechanic handling each claim where repair work has been performed must certify the airplane as airworthy. Many mechanics have been unwilling to sign off an engine that has had one cylinder go soft because of lead sludge accumulation, on the perfectly reasonable grounds that the same sludge will eventually damage the other cylinders. Because the subject engine may well pass the other tests in the protocol — and is therefore ineligible for any other specified inspections or repairs — Section VIII invokes the Special Master rule.
The Special Masters are six individuals — theoretically experts in Continental engines — who act as court-appointed mediators. They are supposed to have the final say on any repairs to be made on Mobil's nickel that are not specifically allowed in the protocol. Mobil, by the terms of the protocol, has no right to appeal, nor does the claimant. The intention of the class counsel and the original plaintiffs in the suit was to have the Special Masters be unbiased and unimpressionable go-betweens who would look at both sides of an issue and offer equitable compensation.
If, for example, an owner's mechanic refuses to sign off a protocol-repaired engine or he discovers a 400-hour-old camshaft with excessive wear and several spalled lifters — a condition not specifically called out for remedy in the protocol — he can appeal to a Special Master for resolution. As the protocol demands, the Special Master must find that AV-1 conclusively caused distress outside of the narrowly defined protocol before Mobil is obliged to pay. Any costs associated with the teardown inspection and replacement of parts is to be borne by the aircraft owner unless the Special Master rules in his favor. So far, that has happened with astonishing infrequency.
Actions of the Special Masters come under the greatest criticism in the class counsel's report. "A significant percentage of these disputes [to be arbitrated by the Special Masters] involve inspections and repairs related to 'bottom end' damage which the claimant believes was not detected in the course of the [presettlement] Protocol inspection process," the report says. "Mobil has rejected the majority of such requests [for compensation]. With respect to nearly all of the engines inspected under protocol Section VIII, the Special Masters have attributed engine damage found to causes other than Mobil AV-1, or, alternatively, [have] declined to find that Mobil AV- 1 is the probable cause of such engine damage," says the report.
But the members of the class have more to complain about than simply losing the Special Masters' rulings. Pursuant to court order, Special Masters were not to have ex parte communications with Mobil or class counsel; much of the underlying paperwork in the case seeks to "de-lawyer" the Special Master aspect of the settlement.
And yet, according to the class counsel's report, there has been extensive ex parte communication between the Special Masters and Mobil. Part of what caught class counsel's attention was Mobil's brazen remonstration of one Special Master who approved replacement of bottom-end components. In one fell swoop, Mobil audaciously delivered a strongly worded ex parte missive to the Special Master, as well as attempted to reserve rights specifically given to the Special Masters according to the settlement. Mobil's response was prompted by Special Master Brian Kotso's approving bottom-end repairs on Earl Jordan's airplane at Mobil's expense. Mobil said in a letter to Kotso: "For the record, we believe that you have exceeded your authority as a Special Master with respect to this dispute and Mobil therefore reserves the right to take further action as appropriate." Precisely what action was not spelled out in the letter. Regardless, the protocol is quite clear that any ruling by the Special Masters is considered final.
Such a visible reprimand to the Special Master may have had a chilling effect on the remaining five, say several individuals in the class. Moreover, according to the report, the Special Masters have come under fire for failing to remind claimants that they may have expert testimony — paid for by Mobil — as Mobil will, without fail, have for its side of the case.
Summing up class counsel's laundry list of complaints about the Special Masters, the report goes on to say that, "Some issues may require that the parties seek the intervention of the court to admonish and remind the Special Masters of their responsibilities to, among other things (1) avoid ex parte contact with Mobil or claimants; (2) solicit plaintiff expert testimony whenever the Special Master relies upon or received Mobil expert testimony; and (3) actively assume the role of a decision maker who must resolve disputes between Mobil and claimants. "Many class members have reported...frustration with respect to substantial delays by either Mobil or the Special Masters in connection with the processing of their claims," the report says. With regard to claims sent to the Special Masters, this issue is important because, as the report points out, "Mobil is only required under the Protocol to compensate class members for loss of use associated with Section VIII inspections where a Special Master finds that any damage...was in fact caused by Mobil AV-1.
Are all claimants in the Mobil case gnashing teeth and clenching fists? No. In fact, a good number of them report good service and quick payment for engine maladies. But here's the rub: The vast majority of the satisfied customers seem to be those who had engine problems and commenced repairs before the settlement was reached late in 1995. For them, Mobil has apparently paid for repairs without any of the hassle being given to those wending their way through the protocol. Mobil has by no means opened the piggy bank for these first-in-line souls, but by all accounts has paid for work that would be done under the current protocol.
Is there an end in sight for those still in the protocol? At press time, class counsel anxiously awaited the aforementioned report by a non-Mobil expert on the possibility that AV-1 could be responsible for bottom-end damage. With that report, many claimants believe that the Special Masters will have the ammunition to find in favor of owners whose low-time engines often show signs of high-time distress. In the meantime, class counsel expects Mobil to continue its policy of sticking precisely to the protocol. Recalling, with some irony, all the money Mobil was willing to pay for repairs, inspections, and loss of use, one claimant suggested that he could have had a factory-remanufactured engine instead of a headache.
