Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—D. Kan.: Claims against Chevron over deceptive fuel charges dismissed, (Jul 22, 2013)

By Jody Coultas, J.D.

The federal district court in Kansas City has dismissed California consumer protection law claims filed by motor fuel purchasers against Chevron USA, Inc. for allegedly misrepresenting the amount and quality of the fuel it sold to consumers (In re: Motor Fuel Temperature Sales Practices Litigation, July 19, 2013, Vratil, K.).

Consumers sued numerous motor fuel retailers and refiners, including Chevron, for selling motor fuel without disclosing or adjusting for temperature, without disclosing that temperature affects the energy content of the fuel they sell, and overcharging plaintiffs for motor fuel excise taxes in violation of the California Unfair Competition Law (UCL) and Consumers Legal Remedy Act (CLRA). A gallon of fuel at a higher temperature has less mass, and thus less energy, than a gallon of the same motor fuel at a cooler temperature. The parties dispute whether temperature affects the value and quality of fuel.

The consumers had Article III standing to assert the California consumer protection claims, according to the court. Chevron argued that the consumers lacked standing to bring a claim based on over-collection of fuel taxes because Chevron does not “collect” and consumers do not “pay” motor fuel excise taxes. Consumers must show a concrete and particularized injury that is fairly traceable to the challenged conduct and is likely to be redressed by a favorable judicial decision. The consumers were not seeking a tax refund from Chevron, but rather damages and injunctive relief based on a practice that overcharges consumers. Therefore, the consumers had Article III standing.

The court also rejected Chevron’s argument that the consumers lacked statutory standing because they received the benefit of their bargain. To establish standing, a plaintiff must establish a loss or deprivation of money or property sufficient to qualify as injury in fact, and show that that economic injury was the result of the unfair business practice. The consumers sufficiently stated an economic injury stemming from paying more for more fuel than they otherwise would have if the fuel was sold in temperature-adjusted gallons, and over-reimbursed Chevron for taxes on “phantom gallons.”

Chevron was protected by a safe harbor from the UCL and CLRA claims, according to the court. Chevron argues that California law barred the claims that Chevron’s method of selling motor fuel by the gallon without disclosing or adjusting for temperature violated the UCL because it specifically authorized the sale of motor fuel by the gallon without disclosing or adjusting for temperature. To trigger the safe harbor provision, a statute must actually bar the action or clearly permit the conduct. California law permitted Chevron to sell motor fuel without adjusting for temperature. It also did not require retail devices to determine temperature, compensate for changes in temperature, or deliver anything other than a gallon – 231 cubic inches – of motor fuel without disclosing or adjusting for temperature. Chevron was also allowed to pay taxes on net gallons and post applicable taxes.

The case is MDL No. 1840.

Attorneys: Amii Castle (Walters Bender Strohbehn & Vaughan, P.C.) for Zachary Wilson. Brendan A. McShane (Latham & Watkins LLP) for Chevron USA, Inc.

Companies: Chevron USA, Inc.

Cases: StateUnfairTradePractices KansasNews