Mobil's Handling of AV-1 Claims Questioned

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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 Corporation settled a class-action lawsuit brought by Cessna T210 owner Malvern Gross on behalf of owners of Teledyne Continental engines damaged by the use of Mobil's AV-1 synthetic oil. In the hard-fought and complex settlement, Mobil agreed to pay for inspection and repair of TCM 360/470/520/550 engines that used AV-1 oil for more than 150 hours.

It now appears that, in at least some cases, Mobil's AV-1 Program office in Atlanta (which was set up specifically to deal with claims under this settlement) is giving owners of AV-1 engines the run-around in an attempt to minimize its payout under the settlement.

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

Settlement and Protocol

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

The rest of the document describes specific inspection procedures for determining whether the engine has been damaged, together with certain repairs that are authorized if the engine flunks the inspection. Under the settlement, Mobil agreed to pay for the inspections and the repairs called for by the Protocol. Mobil also 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 the processing of claims are to be resolved by one six "Special Masters" appointed by the Court. These Special Masters are designated A&P/IA mechanics who were jointly agreed upon Mobil and the plaintiffs, and whose job it is to provide unbiased arbitration of disputes and to decide what Mobil must pay for and what the owner must pay for. The Special Masters serve as agents of the Court, and their decisions are final.

Section Eight

One of the most important and hard-fought parts of the settlement is embodied in Section VIII of the Protocol. It deals with cases where the owner's mechanic believes that an inspection or repair is called for beyond the scope of items specifically addressed in the Protocol.

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

Ultimately, Mobil — who clearly didn't want this case to go to trial — relented and agreed to Section VIII of the Protocol. This section provides that an inspecting mechanic who feels that further inspection or repair is necessary beyond what is called for in the Protocol may submit a written recommendation to Mobil. Mobil will then provide a representative who may meet with the mechanic, inspect the engine, and attempt to reach agreement with the mechanic on what should be done. If they can't agree, then the claimant may escalate the recommendation to the Special Master for his review. The Special Master will then decide whether the recommended inspection 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 now trying to pretend it doesn't exist.

Randy Kerr's Experience

Randy Kerr lives in Salt Lake City where he sells and services boats. He owns a Cessna 340 twin, N383DQ, powered by a pair of TCM TSIO-520-N engines. The engines were majored in 1989, run on Aeroshell 15W-50 for about 200 hours, and then switched to Mobil AV-1 in early 1990. Shortly after Mobil withdrew AV-1 from the market in the summer of 1994, the engines were put back on Aeroshell 15W-50 at about 650 hours. They've now accumulated about 750 hours since overhaul.

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

Keystone pulled the props and governors from Kerr's engines and found them to be heavily contaminated with sludge. Grupe was alarmed to find that the sludge had broken up into small, hard pieces that he believed could migrate through the oil system and clog critical oil passages. Grupe recommended to Kerr that the engines be removed, inspected, and cleaned. On December 8th, Kerr phoned his Mobil AV-1 Program representative Danny Branham, described what was found and what his mechanic recommended, and asked that Mobil send a representative to look at the engine and discuss the 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 of the oil system. Grupe stated in his letter that some of the pieces of sludge "are large enough to block oil galleys and oil cooler core tubes, which obviously would lead to internal engine disintegration," and further stated that he "would not return this aircraft to service without a thorough investigation as to the extent of existing or potential damage created by this problem." In the same letter, Grupe reported the results of the compression and crankcase pressure tests, including the fact that the #5 cylinder on the right engine showed compression of 51/80.

Branham requested that Grupe send pictures of the sludge that was found. Grupe indicated that he'd have to hire a professional photographer, and requested that Mobil send a representative instead. Branham denied this request, so Grupe hired a photographer and had the photographs made.

On December 18th, Grupe sent the photographs to Branham, together with another letter emphasizing how serious he believed the sludge problem to be in Kerr's engines. He also advised Mobil that he had contact the Salt Lake FSDO and asked them to review the situation, and that he was preparing an FAA Malfunction/Defect Report "in order to alert the industry to the hazard associated with this unsafe condition."

The next day, Kerr telephoned Branham to again ask for authorization to 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 for his refusal in writing. Branham wrote Kerr on December 21st, denying the request to remove and disassemble the engines, but authorizing the props and governors to be sent out for de-sludging (but no other repairs).

First Look Inside

In the meantime, Grupe and Kerr decided to pull the #5 cylinder on the right engine, despite the fact that Mobil did not authorize this. Grupe found that the cylinder was worn to service limits, the choke was gone, the oil control ring was heavily fouled with sludge, and the connecting rod bearing exhibited abnormal wear and pitting. In addition, a large piece of sludge was found about ready to separate from the inside of the piston and fall into the oil pan; Grupe estimated it was large enough to cover approximately 20% of the oil pickup screen.

Grupe decided to have another set of eyes look at this, so he called in Bob Despain of Precision Air Power (a Salt Lake City overhaul shop) to have a look. Despain concluded that the rod bearings had the appearance of an engine "at TBO", the rocker arms were worn and unserviceable, the cylinder bore was worn to service limits, the choke was gone, the oil control ring was collapsed from sludge, and the inside of the piston was coated with heavy sludge. All this information was sent to Mobil's Branham on January 4th, and also to the local FSDO.

On January 13th, Branham sent a letter authorizing (after the fact) removal and inspection of the #5 cylinder on the right engine. The letter specifically disallowed removal of any of the other 11 cylinders, and again refused Grupe's request to remove and disassemble the engines. The letter further stated that Mobil had forwarded the sludge samples, photographs, letters, and reports to Mobil's expert consulting engineer, Les Waters, and that it was Waters' opinion that "the engine components do not show any undue wear that is caused by AV-1." Mobil once again declined 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 had no intention of sending a representative to inspect the engine and attempt to reach a consensus on what should be done, as provided for in Section VIII of the Protocol. So on January 16th, Kerr wrote to Branham to say that he wished to exercise his right to escalate the matter to a Special Master for resolution. Branham indicated that Kerr's case would be assigned to Special Master Brian Kotso in Carefree, Arizona, and that Mobil would send the entire file on Kerr's claim to Kotso by Federal Express. But a week passed and this had not been done.

On January 25th, Branham called Kerr and asked if Kerr would agree to hold off on the Special Master process if Mobil sent their expert Les Waters to inspect Kerr's engines. Kerr was furious. From his point of view, Mobil had dragged out the dialog for more than seven weeks, repeatedly refused to send a representative each time Kerr and Grupe asked for one, and now proposed to send Waters who had already made up his mind that Kerr's engines had not been damaged by AV-1. Kerr was fed up, and told Branham he insisted 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 Brian Kotso, accompanied by a letter from Mobil AV-1 Program Director Ron Richards. In that letter, Richards urged Kotso to rule that Kerr must pay for any inspection or repair outside the strict terms of the Protocol, and stressed that Kerr's engines did not qualify for a teardown inspection under the Protocol. Richards indicated that the Protocol was the result of a long and difficult negotiation between Mobil and the plaintiffs, and suggested that approval of any out-of-protocol inspection or repair would be a 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 to pull the engines and send them to Western Skyways in Montrose, Colorado, for a teardown inspection. The teardown is to be witnessed by Mobil's expert and a plaintiff expert, and both will submit reports to Special Master Kotso indicating what bottom-end damage was found and whether it was attributable to AV-1. Kotso will then make a decision on how to apportion financial responsibility between Kerr and Mobil.

The following day, Kerr wrote to Kotso saying that he wanted to make sure that the teardown inspection performed by Western Skyways would 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 other 11 cylinders, and that the only cylinder that qualified for inspection and replacement under the Protocol was the right engine's #5 that had already been pulled and inspected. Branham's letter once again stated that Mobil believed Kotso was obligated to stick strictly with the terms of the Protocol and to deny any recommendation for 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 inspect the remaining 11 cylinders as deemed necessary to determine their airworthiness. No promises were made about who would pay for any necessary cylinder repairs-Kotso will review the reports from the experts representing both sides and make his determination of how financial responsibility will be apportioned between Mobil and Kerr.

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

Kerr has already lost two and a half months and will now clearly lose one or two more. The engines are going to be torn down, and realistically Kerr has little choice at this point but to have Western Skyways overhaul them. Kerr hopes that Kotso will rule that Mobil should bear partial responsibility, but he's not holding his breath.

Mobil's Response?

In the interests of journalistic fairness and because of our desire to tell both sides of the story, we submitted a pre-publication draft of this article to the Mobil AV-1 Program office in Atlanta, and asked them for Mobil's response. They forwarded our request to Los Angeles attorney James W. Hunt of Mendes & Mount, who represented Mobil in the class action litigation. Hunt sent us a lengthy, lawyer-like response (which we've reprinted verbatim at the conclusion of this article) but asked us to make it clear that the remarks were his alone, not Mobil's.

Hunt's response is interesting, particularly where it discusses all of the technical information that was uncovered during the course of the litigation about what sort of engine damage was and was not suffered by Mobil AV-1 engines. From the outset of the lawsuit, we've consistently said that we felt the threat of in-flight failure and the likelihood of bearing damage due to AV-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 demonstrate this. Unfortunately, none of the information was made public and available to owners like Kerr or mechanics like Grupe. If it had been, it's possible that the Kerr claim might have been settled amicably without the need for costly teardown or escalation to the Special Master.

Nevertheless, Hunt's closing comments seem to echo Mobil's view that owners or mechanics who attempt to exercise their rights under Protocol Section VIII are simply trying to obtain additional compensation beyond what they deserve.

Our Opinion

After studying the entire file in the Randy Kerr case, we believe that 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 strictest possible interpretation of the Protocol, and to act as if Section VIII 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 unwillingness to authorize inspection of Kerr's 11 other cylinders after one has already been clearly shown to have been trashed by AV-1. And the letters sent by Mobil to Special Master Brian Kotso demanding that he disallow any out-of-protocol inspection or repair seem entirely inappropriate — it is the Court's role to instruct the Special Masters about their duties, not Mobil's.

While Mobil sees Kerr as just another class member, we see him as a victim. Kerr didn't sue Mobil and had no say regarding the terms of the settlement. He didn't even use AV-1 — the previous owner of the airplane did that. Kerr needs the airplane for his business — which is now entering its high season — and would be flying 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 compensation from Mobil for whatever it takes to make his airplane airworthy again, it's a mighty sad comment on the fundamental injustice of class action suits and their one-size-fits-all solutions.

In fairness to Mobil, we have talked to a number of other owners who were very pleased at the fair and expeditious manner in which the Mobil AV-1 Project office handled their claims. But in all of those cases, the claims were limited to reimbursement for prior repair or replacement of cylinders, and did not involve prospective authorization or bottom-end work. Ironically, had Kerr been lucky enough to have replaced his cylinders and desludged his props prior to the class action settlement, it seems clear that Mobil would have reimbursed him without hassle.

We can't help but be struck by the contrast between Mobil's handling of the AV-1 situation and the way another giant oil company, Chevron, behaved in the avgas contamination episode of 1994. Chevron owned up to its mistake and replaced all affected engines on a no-questions-asked basis. We think Mobil could take a lesson in corporate citizenship from Chevron.

Response from Mobil's Counsel

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

Mobil's primary and overriding concern in negotiating the Protocol was aviation safety. In fact, long before the class action was even 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 maintenance problem, but not a safety problem. The class action., which was filed in April 1995, about 10 months after Mobil voluntarily withdrew AV 1 from the market, alleged that certain Teledyne Continental Motors engines were at risk of catastrophic failure and that lives were at risk. The complaint alleged that virtually every part of the class representatives' engines showed severe distress from lubrication deprivation and that they were on the verge of imminent catastrophic failure.

Mobil's response was swift, decisive and motivated first and foremost by it's concern for safety. Mobil quickly sought out the most knowledgeable experts regarding Continental engines and bearings. The experts included Les Waters, Retired Sr. Vice President for Aeronautical Engineering at Teledyne Continental Motors with 40 years of engine design and research experience; Paul Eberly, a former FAA DER and an engineer with 30 years experience at Teledyne Continental Motors including Chief of Engine Development, Manager of Engine Development and Director of Engineering; and Lee Swanger, Ph.D., a materials engineer with extensive bearings industry experience including 8 years as Director, Research and Development ot Imperial Clevite, the manufacturer of most of the tri-metal hearings used in Continental engines.

Soon after the class action commenced, Class Counsel served Mobil with a "Notice of Peril" which purported to document 34 engines which had been damaged by AV 1. Mobil studied each of these claims with its consultants and found that the information provided did not support Class Counsels' claims. Because safety concerns were alleged, Mobil forwarded the materials to the FAA and invited their participation in a meeting with consultants representing both parties. Mobil also requested further information from 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 of 10 engines selected by Class counsel. These tear downs and inspections were attended by consultants from both sides. Eventually, about 20 TCM engines that had once used AV 1, and a number of engines that had never used AV 1, were torn apart and fully inspected. In each engine where class members' consultants noted bottom end wear and other internal signs as evidence of AV 1 damage, Mobil's consultants found that such parts measured. within service limits or that the other damage noted was caused by factors other than AV 1. Indeed, the main bearing in the engine owned by class representative Gross exhibited mechanical damage resulting from improper assembly during overhaul. While Mobil's consultants observed some stuck oil control rings caused by sludge, they found absolutely no evidence to support the claim that hardened sludge could develop, and block oil ports and galleys.

After completing the engine examinations, all consultants from both sides met for extensive discussion. and negotiation. Lawyers were present as observers, but were not allowed to speak. Class Counsel and their consultants abandoned their demand that all engines 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 technical points and eventually agreed to the terms of the Protocol. The technical merits of all points of view were exhaustively examined in light of the engine tear downs and with the benefit of the vast collective experience of the experts. In the end, the consultants from both sides agreed that the Protocol answered their safety concerns and provided the safety guarantees that the class members required and were entitled to. Indeed, the federal judge assigned to this class action praised the efforts of both sides in reaching this compromise settlement and even Class Counsel were complimentary of 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 and their mechanics, who were unaware of the extensive inspection program and Protocol negotiations, have raised essentially the same points that were raised and settled by the class action litigation. These points were thoroughly discussed by the best experts that both parties could find, having the benefit of many tear down examinations of AV 1 engines. While those few claimants and mechanics may be genuinely motivated by their concern for safety, they should recognize that their safety concerns, which are not new or unique, were thoroughly addressed and met in the Protocol to the satisfaction of both parties' experts, the Class Counsel acting on their behalf and the federal court judge. Accordingly, it makes no sense to repeat the process in each case. Yet, that is what is happening in Mr. Kerr's situation. Perhaps additional information made available to the general aviation public, mechanics and other interested parties, may be in order. But any claim that Mobil is not complying with the Protocol is not accurate. (For instance, section VIII of the Protocol provides that ". . . Mobil will provide a representative who may meet with the mechanic . . ." — this requires Mobil to provide a representative, but not necessarily to have one travel across the country).

The Protocol is a settlement of a class action lawsuit and a document negotiated and agreed to by the parties. Thus, in the interest of justice and fairness, it should be adhered to. Claimants and mechanics, who may view the Protocol as a means to demand further compensation from Mobil, deserve the only benefit of the bargain made in their interest, nothing more and nothing less. In fairness, Mobil deserves the same consideration.

— James W. Hunt, Mendes & Mount LLP