Mobil’s Handling of AV-1 Claims Questioned

Mobil's handling of owner claims under the recent class-action settlement seems to be uneven at best. While some claimants have received quick and fair handling from Mobil, others feel they have been getting the run-around. A case in point is Randy Kerr of Salt Lake City, who has been has been struggling with Mobil for two and a half months now.


Late last year, Mobil Corporationsettleda class-action lawsuit brought by Cessna T210 owner Malvern Grosson behalf of owners of Teledyne Continental engines damaged bythe use of Mobil’s AV-1 synthetic oil. In the hard-fought andcomplex settlement, Mobil agreed to pay for inspection and repairof TCM 360/470/520/550 engines that used AV-1 oil for more than150 hours.

It now appears that, in at least some cases, Mobil’s AV-1 Programoffice in Atlanta (which was set up specifically to deal withclaims under this settlement) is giving owners of AV-1 enginesthe run-around in an attempt to minimize its payout under thesettlement.

As this article is being written with only one week remainingbefore the March 1st deadline for owners to file claimswith Mobil, only about 500 claims had been filed. Since the plaintiffshad estimated the total number of claims under the settlementto be about 2,000 you’d think Mobil would be rejoicing in theknowledge that they’re getting off easy. But at least some ofthe folks working in the AV-1 Program office sure aren’t actingthat way.

Settlement and Protocol

The keystone of the settlement is a complex 19-page document entitled"Mobil AV-1 Engine Inspection and RepairProtocol."The first section of this document defines "Qualified AV-1Engines" as TCM 360/470/520/550 engines in which Mobil AV-1oil was used for more than 150 hours.

The rest of the document describes specific inspection proceduresfor determining whether the engine has been damaged, togetherwith certain repairs that are authorized if the engine flunksthe inspection. Under the settlement, Mobil agreed to pay forthe inspections and the repairs called for by the Protocol. Mobilalso agreed to reimburse owners for certain prior repairs (generally,cylinder replacement done prior to the settlement) and for loss-of-use.

Any disputes that may arise between claimants and Mobil in theprocessing of claims are to be resolved by one six "SpecialMasters" appointed by the Court. These Special Masters aredesignated A&P/IA mechanics who were jointly agreed upon Mobiland the plaintiffs, and whose job it is to provide unbiased arbitrationof disputes and to decide what Mobil must pay for and what theowner must pay for. The Special Masters serve as agents of theCourt, and their decisions are final.

Section Eight

One of the most important and hard-fought parts of the settlementis embodied in Section VIII of the Protocol. It deals with caseswhere the owner’s mechanic believes that an inspection or repairis called for beyond the scope of items specifically addressedin the Protocol.

During the settlement negotiations, Mobil was adamant that itwould not pay for out-of-protocol inspections or repairs. Theplaintiffs were equally adamant that no formal written protocol,no matter how complex, could possibly cover all bases. The plaintiffsinsisted that the judgment of the owner’s mechanic as to the airworthinessof the engine was at least as important as any formal writtenprotocol. The negotiations very nearly broke down over this point.Ironically, Mal Gross (who brought the lawsuit) was convincedthat the bottom-end damage found in the engine of his T210 wouldnot have been uncovered under the strict terms of the inspectionscalled for by the Protocol.

Ultimately, Mobil — who clearly didn’t want this case to go totrial — relented and agreed to Section VIII of the Protocol. Thissection provides that an inspecting mechanic who feels that furtherinspection or repair is necessary beyond what is called for inthe Protocol may submit a written recommendation to Mobil. Mobilwill then provide a representative who may meet with the mechanic,inspect the engine, and attempt to reach agreement with the mechanicon what should be done. If they can’t agree, then the claimantmay escalate the recommendation to the Special Master for hisreview. The Special Master will then decide whether the recommendedinspection or repair should be paid for by Mobil, the claimant,or may apportion the cost between the two.

Although Mobil agreed to include Section VIII in the Protocol,it’s starting to look as if the Mobil AV-1 Project office is nowtrying to pretend it doesn’t exist.

Randy Kerr’s Experience

Randy Kerr lives in Salt Lake City where he sells and servicesboats. He owns a Cessna 340 twin, N383DQ, powered by a pair ofTCM TSIO-520-N engines. The engines were majored in 1989, runon Aeroshell 15W-50 for about 200 hours, and then switched toMobil AV-1 in early 1990. Shortly after Mobil withdrew AV-1 fromthe market in the summer of 1994, the engines were put back onAeroshell 15W-50 at about 650 hours. They’ve now accumulated about750 hours since overhaul.

Within days of the November 28 final settlement of the class-actionsuit, Kerr filed a claim form with the Mobil AV-1 Project office.On December 6th, he received a letter confirming that his engineswere both "Qualified AV-1 Engines" and that his mechanic,George Grupe, Director of Maintenance for Keystone Aviation inSalt Lake City, was authorized to proceed with the first two stepsof the Protocol: a propeller inspection and a top-end inspection.

Keystone pulled the props and governors from Kerr’s engines andfound them to be heavily contaminated with sludge. Grupe was alarmedto find that the sludge had broken up into small, hard piecesthat he believed could migrate through the oil system and clogcritical oil passages. Grupe recommended to Kerr that the enginesbe removed, inspected, and cleaned. On December 8th, Kerr phonedhis Mobil AV-1 Program representative Danny Branham, describedwhat was found and what his mechanic recommended, and asked thatMobil send a representative to look at the engine and discussthe matter with Grupe. Branham refused.

Unsafe Condition

On December 11th, Grupe phoned Branham and followed up by FAX,describing the sludge and his concerns about contamination ofthe oil system. Grupe stated in his letter that some of the piecesof sludge "are large enough to block oil galleys and oilcooler core tubes, which obviously would lead to internal enginedisintegration," and further stated that he "would notreturn this aircraft to service without a thorough investigationas to the extent of existing or potential damage created by thisproblem." In the same letter, Grupe reported the resultsof the compression and crankcase pressure tests, including thefact that the #5 cylinder on the right engine showed compressionof 51/80.

Branham requested that Grupe send pictures of the sludge thatwas found. Grupe indicated that he’d have to hire a professionalphotographer, and requested that Mobil send a representative instead.Branham denied this request, so Grupe hired a photographer andhad the photographs made.

On December 18th, Grupe sent the photographs to Branham, togetherwith another letter emphasizing how serious he believed the sludgeproblem to be in Kerr’s engines. He also advised Mobil that hehad contact the Salt Lake FSDO and asked them to review the situation,and that he was preparing an FAA Malfunction/Defect Report "inorder to alert the industry to the hazard associated with thisunsafe condition."

The next day, Kerr telephoned Branham to again ask for authorizationto remove and disassemble the engines, as Grupe insisted was necessary,and also to send the props and governors out to be de-sludged.Branham refused, and Kerr asked that Branham put the reasons forhis refusal in writing. Branham wrote Kerr on December 21st, denyingthe request to remove and disassemble the engines, but authorizingthe props and governors to be sent out for de-sludging (but noother repairs).

First Look Inside

In the meantime, Grupe and Kerr decided to pull the #5 cylinderon the right engine, despite the fact that Mobil did not authorizethis. Grupe found that the cylinder was worn to service limits,the choke was gone, the oil control ring was heavily fouled withsludge, and the connecting rod bearing exhibited abnormal wearand pitting. In addition, a large piece of sludge was found aboutready to separate from the inside of the piston and fall intothe oil pan; Grupe estimated it was large enough to cover approximately20% of the oil pickup screen.

Grupe decided to have another set of eyes look at this, so hecalled in Bob Despain of Precision Air Power (a Salt Lake Cityoverhaul shop) to have a look. Despain concluded that the rodbearings had the appearance of an engine "at TBO", therocker arms were worn and unserviceable, the cylinder bore wasworn to service limits, the choke was gone, the oil control ringwas collapsed from sludge, and the inside of the piston was coatedwith heavy sludge. All this information was sent to Mobil’s Branhamon January 4th, and also to the local FSDO.

On January 13th, Branham sent a letter authorizing (after thefact) removal and inspection of the #5 cylinder on the right engine.The letter specifically disallowed removal of any of the other11 cylinders, and again refused Grupe’s request to remove anddisassemble the engines. The letter further stated that Mobilhad forwarded the sludge samples, photographs, letters, and reportsto Mobil’s expert consulting engineer, Les Waters, and that itwas Waters’ opinion that "the engine components do not showany undue wear that is caused by AV-1." Mobil once againdeclined to send a representative to Salt Lake City.

Going Over Mobil’s Head

By now, it was apparent to both Kerr and Grupe that Mobil hadno intention of sending a representative to inspect the engineand attempt to reach a consensus on what should be done, as providedfor in Section VIII of the Protocol. So on January 16th, Kerrwrote to Branham to say that he wished to exercise his right toescalate the matter to a Special Master for resolution. Branhamindicated that Kerr’s case would be assigned to Special MasterBrian Kotso in Carefree, Arizona, and that Mobil would send theentire file on Kerr’s claim to Kotso by Federal Express. But aweek passed and this had not been done.

On January 25th, Branham called Kerr and asked if Kerr would agreeto hold off on the Special Master process if Mobil sent theirexpert Les Waters to inspect Kerr’s engines. Kerr was furious.From his point of view, Mobil had dragged out the dialog for morethan seven weeks, repeatedly refused to send a representativeeach time Kerr and Grupe asked for one, and now proposed to sendWaters who had already made up his mind that Kerr’s engines hadnot been damaged by AV-1. Kerr was fed up, and told Branham heinsisted that the matter be sent to Special Master Brian Kotso,who Kerr believed was at least a neutral party.

Two days later, Mobil finally forwarded the Kerr file to BrianKotso, accompanied by a letter from Mobil AV-1 Program DirectorRon Richards. In that letter, Richards urged Kotso to rule thatKerr must pay for any inspection or repair outside the strictterms of the Protocol, and stressed that Kerr’s engines did notqualify for a teardown inspection under the Protocol. Richardsindicated that the Protocol was the result of a long and difficultnegotiation between Mobil and the plaintiffs, and suggested thatapproval of any out-of-protocol inspection or repair would bea breach of the Special Master’s duty to the Court.

Teardown Inspection

On February 1st, a conference call was held between Kotso, Kerr,Grupe, Branham and Richards. The call resulted in a decision topull the engines and send them to Western Skyways in Montrose,Colorado, for a teardown inspection. The teardown is to be witnessedby Mobil’s expert and a plaintiff expert,and both will submit reports to Special MasterKotso indicating what bottom-end damage was found and whetherit was attributable to AV-1. Kotso will then make a decision on how to apportion financial responsibility between Kerr andMobil.

The following day, Kerr wrote to Kotso saying that he wanted tomake sure that the teardown inspection performed by Western Skywayswould include removal and inspection of the other 11 cylinders.

Branham followed up with another letter to Kotso on February 8th,stating that Mobil would not agree to an inspection of the other11 cylinders, and that the only cylinder that qualified for inspectionand replacement under the Protocol was the right engine’s #5 thathad already been pulled and inspected. Branham’s letter once againstated that Mobil believed Kotso was obligated to stick strictlywith the terms of the Protocol and to deny any recommendationfor out-of-protocol inspection or repair.

On February 14th, another conference call was held between Branham,Kerr, and Kotso. They agreed to allow Western Skyways to inspectthe remaining 11 cylinders as deemed necessary to determine theirairworthiness. No promises were made about who would pay for anynecessary cylinder repairs-Kotso will review the reports fromthe experts representing both sides and make his determinationof how financial responsibility will be apportioned between Mobiland Kerr.

That’s where things stand as this article is being written. Theengines have been removed and shipped to Western Skyways, withteardown scheduled for February 26th. Kerr has no assurance atthis point that Mobil will pay for anything. Mobil still contendsthat it has no obligation to pay for inspection or repair of Kerr’sother 11 cylinders, and the opinion of Mobil’s experts with regardto whether there is any bottom-end damage attributable to AV-1is already a foregone conclusion.

Kerr has already lost two and a half months and will now clearlylose one or two more. The engines are going to be torn down, andrealistically Kerr has little choice at this point but to haveWestern Skyways overhaul them. Kerr hopes that Kotso will rulethat Mobil should bear partial responsibility, but he’s not holdinghis breath.

Mobil’s Response?

In the interests of journalistic fairness and because of our desireto tell both sides of the story, we submitted a pre-publicationdraft of this article to the Mobil AV-1 Program office in Atlanta,and asked them for Mobil’s response. They forwarded our requestto Los Angeles attorney James W. Hunt of Mendes & Mount, whorepresented Mobil in the class action litigation. Hunt sent usa lengthy, lawyer-like response (whichwe’ve reprinted verbatim at the conclusion of this article) butasked us to make it clear that the remarks were his alone, notMobil’s.

Hunt’s response is interesting, particularly where it discussesall of the technical information that was uncovered during thecourse of the litigation about what sort of engine damage wasand was not suffered by Mobil AV-1 engines. From the outset ofthe lawsuit, we’ve consistently said that we felt the threat ofin-flight failure and the likelihood of bearing damage due toAV-1 was greatly overblown by the paintiffs (see our prior articles "Mobil AV-1 Under Attack" and"Mobil AV-1 Class-Action Settlement"),and Hunt indidates that substantial evidence now exists to demonstratethis. Unfortunately, none of the information was made public andavailable to owners like Kerr or mechanics like Grupe. If it hadbeen, it’s possible that the Kerr claim might have been settledamicably without the need for costly teardown or escalation tothe Special Master.

Nevertheless, Hunt’s closing comments seem to echo Mobil’s viewthat owners or mechanics who attempt to exercise their rightsunder Protocol Section VIII are simply trying to obtain additionalcompensation beyond what they deserve.

Our Opinion

After studying the entire file in the Randy Kerr case, we believethat the posture of the Mobil AV-1 Program office has been unjustified,and goes way beyond the bounds of prudent cost-control measures.Mobil seems absolutely determined to stick with the strictestpossible interpretation of the Protocol, and to act as if SectionVIII simply does not exist.

Mobil’s representatives seem uninterested in the issues of airworthiness,safety, and fairness. We’re at a loss to understand their unwillingnessto authorize inspection of Kerr’s 11 other cylinders after onehas already been clearly shown to have been trashed by AV-1. Andthe letters sent by Mobil to Special Master Brian Kotso demandingthat he disallow any out-of-protocol inspection or repair seementirely inappropriate — it is the Court’s role to instruct theSpecial Masters about their duties, not Mobil’s.

While Mobil sees Kerr as just another class member, we see himas a victim. Kerr didn’t sue Mobil and had no say regarding theterms of the settlement. He didn’t even use AV-1 — the previousowner of the airplane did that. Kerr needs the airplane for hisbusiness — which is now entering its high season — and would beflying it right now if it hadn’t been for AV-1. We’re not lawyers,but if Mobil’s Hunt is right that Kerr isn’t entitled to compensationfrom Mobil for whatever it takes to make his airplane airworthyagain, it’s a mighty sad comment on the fundamental injustice of classaction suits and their one-size-fits-all solutions.

In fairness to Mobil, we have talked to a number of other ownerswho were very pleased at the fair and expeditious manner in whichthe Mobil AV-1 Project office handled their claims. But in allof those cases, the claims were limited to reimbursement for priorrepair or replacement of cylinders, and did not involve prospectiveauthorization or bottom-end work. Ironically, had Kerr been luckyenough to have replaced his cylinders and desludged his propsprior to the class action settlement, it seems clear that Mobilwould have reimbursed him without hassle.

We can’t help but be struck by the contrast between Mobil’s handlingof the AV-1 situation and the way another giant oil company, Chevron,behaved in the avgas contamination episode of 1994. Chevron ownedup to its mistake and replaced all affected engines on a no-questions-askedbasis. We think Mobil could take a lesson in corporate citizenshipfrom Chevron.

Response from Mobil’s Counsel

As I read Mr. Busch’s prior articles on Mobil AV 1, I was struckby the fact that he largely agreed with Mobil’s points, but disagreedin many areas with the attorneys who brought the AV 1 class action.Mr. Busch’s most recent article concerning the Protocol and subsequentclaims handling, however, which he was kind enough to provideto me in draft form, compels a response.

Mobil’s primary and overriding concern in negotiating the Protocolwas aviation safety. In fact, long before the class action waseven filed, Mobil inspected many engines at significant cost.These inspections showed use of AV 1 in some cases, in some engines,at most caused a gradual, easily detected and corrected maintenanceproblem, but not a safety problem. The class action., which wasfiled in April 1995, about 10 months after Mobil voluntarily withdrewAV 1 from the market, alleged that certain Teledyne ContinentalMotors engines were at risk of catastrophic failure and that liveswere at risk. The complaint alleged that virtually every partof the class representatives’ engines showed severe distress fromlubrication deprivation and that they were on the verge of imminentcatastrophic failure.

Mobil’s response was swift, decisive and motivated first and foremostby it’s concern for safety. Mobil quickly sought out the mostknowledgeable experts regarding Continental engines and bearings.The experts included Les Waters, Retired Sr. Vice President forAeronautical Engineering at Teledyne Continental Motors with 40years of engine design and research experience; Paul Eberly, aformer FAA DER and an engineer with 30 years experience at TeledyneContinental Motors including Chief of Engine Development, Managerof Engine Development and Director of Engineering; and Lee Swanger,Ph.D., a materials engineer with extensive bearings industry experienceincluding 8 years as Director, Research and Development ot ImperialClevite, the manufacturer of most of the tri-metal hearings usedin Continental engines.

Soon after the class action commenced, Class Counsel served Mobilwith a "Notice of Peril" which purported to document34 engines which had been damaged by AV 1. Mobil studied eachof these claims with its consultants and found that the informationprovided did not support Class Counsels’ claims. Because safetyconcerns were alleged, Mobil forwarded the materials to the FAAand invited their participation in a meeting with consultantsrepresenting both parties. Mobil also requested further informationfrom Class Counsel regarding the 34 claims. There was no response.

To determine whether there was any merit to the class members’claims, Mobil paid for disassembly, inspection and overhaul of10 engines selected by Class counsel. These tear downs and inspectionswere attended by consultants from both sides. Eventually, about20 TCM engines that had once used AV 1, and a number of enginesthat had never used AV 1, were torn apart and fully inspected.In each engine where class members’ consultants noted bottom endwear and other internal signs as evidence of AV 1 damage, Mobil’sconsultants found that such parts measured. within service limitsor that the other damage noted was caused by factors other thanAV 1. Indeed, the main bearing in the engine owned by class representativeGross exhibited mechanical damage resulting from improper assemblyduring overhaul. While Mobil’s consultants observed some stuckoil control rings caused by sludge, they found absolutely no evidenceto support the claim that hardened sludge could develop, and blockoil ports and galleys.

After completing the engine examinations, all consultants fromboth sides met for extensive discussion. and negotiation. Lawyerswere present as observers, but were not allowed to speak. ClassCounsel and their consultants abandoned their demand that allengines that once used AV 1 be completely disassembled and inspected.In arms Iength, open and unrestricted discussions and negotiations,the consultants laboriously worked through the complex technicalpoints and eventually agreed to the terms of the Protocol. Thetechnical merits of all points of view were exhaustively examinedin light of the engine tear downs and with the benefit of thevast collective experience of the experts. In the end, the consultantsfrom both sides agreed that the Protocol answered their safetyconcerns and provided the safety guarantees that the class membersrequired and were entitled to. Indeed, the federal judge assignedto this class action praised the efforts of both sides in reachingthis compromise settlement and even Class Counsel were complimentaryof Mobil and its attorneys for reaching a settlement ". .. where the case was compromised, but safety wasn’t."

Both the class members and Mobil deserve, and have the right to,fair and evenhanded application of the Protocol — no more, no less.Unfortunately, in a few cases, individual aircraft owners andtheir mechanics, who were unaware of the extensive inspectionprogram and Protocol negotiations, have raised essentially thesame points that were raised and settled by the class action litigation.These points were thoroughly discussed by the best experts thatboth parties could find, having the benefit of many tear downexaminations of AV 1 engines. While those few claimants and mechanicsmay be genuinely motivated by their concern for safety, they shouldrecognize that their safety concerns, which are not new or unique,were thoroughly addressed and met in the Protocol to the satisfactionof both parties’ experts, the Class Counsel acting on their behalfand the federal court judge. Accordingly, it makes no sense torepeat the process in each case. Yet, that is what is happeningin Mr. Kerr’s situation. Perhaps additional information made availableto the general aviation public, mechanics and other interestedparties, may be in order. But any claim that Mobil is not complyingwith the Protocol is not accurate. (For instance, section VIIIof the Protocol provides that ". . . Mobil will providea representative who may meet with the mechanic . . ."— this requires Mobil to provide a representative, but not necessarilyto have one travel across the country).

The Protocol is a settlement of a class action lawsuit and a documentnegotiated and agreed to by the parties. Thus, in the interestof justice and fairness, it should be adhered to. Claimants andmechanics, who may view the Protocol as a means to demand furthercompensation from Mobil, deserve the only benefit of the bargainmade in their interest, nothing more and nothing less. In fairness,Mobil deserves the same consideration.

— James W. Hunt, Mendes & Mount LLP