Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Consumers challenge Ninth Circuit’s dismissal oil price fixing suit, (Jan 31, 2025)

By Justin Marcus Smith, J.D.

The petitioners focused on whether the courts below ignored a “seminal” Supreme Court case on per se price fixing.

A group of consumers have asked the U.S. Supreme Court to review a Ninth Circuit ruling that the political question doctrine barred a consumer antitrust action against various domestic oil companies that allegedly participated in an international political agreement to restrict oil production. The consumers, in their petition for certiorari, argue that the lower courts ignored the Supreme Court’s “seminal” decision in United States v. Socony Vacuum Oil Co., 310 U.S. 150 (1940) (Socony). The petitioners emphasized their contention that the Act of State and political question doctrines did not bar their claims (D’Augusta v. American Petroleum Institute, No. 24-800 (U.S. Jan. 23, 2025)).

Background. A group of consumers alleged that President Trump spearheaded a 2020 agreement between various American oil companies and OPEC members Saudi Arabia and Russia to cut oil production by around two million barrels per day as a “quid pro quo” to end a price war. The consumers alleged the purported agreement amounted to a conspiracy to: 1) fix gas prices in violation of Section 1 of the Sherman Act; and, 2) suppress oil production competition in violation of Section 2 of the Sherman Act. The consumers also alleged that the defendants violated Section 7 of the Clayton Act by engaging in anticompetitive mergers and acquisitions. The consumers sought declaratory relief, damages, disgorgement of profits, and injunctive relief. They asked the district court to enjoin any future agreements among the defendants, Russia, and Saudi Arabia. They also requested an order requiring breakup of the largest defendants: Exxon, Chevron, and Phillips.

The district court granted the defendant oil companies’ motion to dismiss, and on appeal, the Ninth Circuit affirmed. The Ninth Circuit explained that the political question doctrine meant it could not interfere with the Executive Branch on foreign policy questions much less the decisions of foreign states like Saudi Arabia and Russia. As for parallel conduct, the consumers did not sufficiently state the who, what, and when of the purported conspiracy. In the Ninth Circuit’s view, the circumstances of the COVID-19 pandemic presented an alternative explanation for substantial oil production cuts.

Questions presented. The petitioner asked whether American oil companies can enter into price-fixing agreements that raise prices in the U.S. without Congressional approval.

In dealing with the context and judicial reasoning below, the petitioners primarily ask whether the Ninth Circuit erred in dismissing their case despite the “plausibility” that the responding oil companies, without Congressional permission, accepted the invitation of Russian and Saudi oil companies to reduce oil production and increase prices in per se violation of the Sherman Antitrust Act. Here, the petitioners argue dismissal of their suit ran contrary to United States v. Socony Vacuum Oil Co., 310 U.S. 150 (1940).

The petitioners also ask whether the Act of State doctrine immunized the alleged “quid pro quo” deal that ended the price war between Russian and Saudi oil companies in exchange for the respondents’ production cuts, despite the petitioners’ insistence that the laws of Russia and Saudi Arabia were irrelevant; or, the petitioners ask whether the situation was simply a non-justiciable political question because of the alleged involvement of the U.S. President in facilitating the deal, despite the commercial nature of the deal, again, argued to be contrary to Socony. The petitioners also question whether the district court erred in deciding it did not have subject matter jurisdiction and in denying amendment.

Act of State inapplicable. The petitioners pressed that the Act of State doctrine did not bar their suit because it is limited to cases that require a court to determine the legality of a sovereign state’s official acts under that sovereign’s own laws. Here, the petitioners contend they never asked the courts below to make any ruling on the laws of Russia or Saudi Arabia or whether their oil companies obeyed the laws of those sovereign states.

No political question. The petitioners continued that their case did not raise any “nonjusticiable political question” because the issue they presented is strictly legal, about the antitrust laws, and falls within the competence of the courts, per Socony. The petitioners said the Supreme Court already found itself competent, in Socony, to decide an issue of executive branch involvement in a price fixing case, whereas the courts below did not deal with Socony at all.

The petitioners urged that Socony controls, that it is a “mirror image” of this case with many of the respondents’ predecessors having attempted to reduce oil production with the cooperation of government officials, including, at that time, the Secretary of the Interior. The petitioners contended that Socony unambiguously decided that the participation of government officials should be irrelevant and will not immunize private participants in a price-fixing conspiracy in the absence of congressional approval. In the petitioners’ view, as in Socony, the instant respondents engaged in per se illegal price-fixing in violation of Sections 1 and 2 of the Sherman Act.

Amendment. The petitioners argued the courts below erred in denying amendment of their complaint under Fed. R. Civ. P. 15 based on newly discovered evidence in the form of alleged admissions that Jared Kushner made in his memoirs. The petitioners argued Mr. Kushner directly implicated the respondent oil companies in what the petitioners term a “self-described, unlawful” deal to raise oil prices.

The case is Dkt. No. 24-800.

Attorneys: Joseph M. Alioto, Sr. (Alioto Law Firm) for Rosemary D’Augusta. Emily Johnson Henn (Covington & Burling, LLP) for American Petroleum Institute.

Companies: American Petroleum Institute

News: Antitrust GCNNews