Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—DKan: Classes Certified in California Fuel Sales Actions Against Chevron, (Apr 8, 2013)

By William Zale, J.D.

In three actions under the California Unfair Competition Law, Consumers Legal Remedies Act (CLRA), and common law seeking injunctive relief and damages from Chevron for selling motor fuels without disclosing or adjusting for the effects of temperature, the federal district court granted class certification (In Re: Motor Fuel Temperature Sales Practices Litigation, April 5, 2013, Vratil, K.). The actions are part of multidistrict litigation.

Although the California fuel purchasers asserted claims against Chevron and other sellers the court on March 27, 2013, severed the claims against Chevron after it contended that it would be prejudiced by joint trial. The decision on class certification was limited to Chevron.

The purchasers’ claims were based on their assertion that the temperature of motor fuel affects the energy content of a gallon of fuel, such that a warmer gallon of fuel contains less energy than a cooler gallon of the same fuel. They alleged that Chevron misrepresented or omitted material facts regarding the temperature, energy content, and value of motor fuel in every retail motor fuel transaction in California (to both individual consumers and entities). Among other things, the purchasers contended that Chevron’s practice of selling motor fuel without disclosing or adjusting for temperature and its effects on motor fuel deprived consumers of the ability to make accurate price and value comparisons, and affected purchasers’ pecuniary interest because the transactions are inaccurate, inconsistent, unfair, and non-transparent.

The UCL prohibits unfair competition, which includes any unlawful, unfair or fraudulent business act or practice. The allegations that Chevron violated the UCL by selling motor fuel by the gallon without disclosing or adjusting for temperature and its effect on motor fuel—a practice that Chevron applied uniformly to all consumers—presented common questions that do not require individualized proof, the court found.

Chevron may be liable for violating the CLRA if, among other things, it represented to consumers that the fuel they purchased had characteristics which it did not have or was of a particular standard, quality or grade, if it was of another, the court said. To prevail on a failure to disclose claim under the CLRA, the plaintiffs must show that Chevron had a duty to disclose the material fact(s) it withheld. A duty to disclose would have arisen, among other circumstances, if Chevron actively concealed a material fact from plaintiffs or if Chevron made partial representations but also suppressed some material facts. Because the plaintiffs alleged a common practice that caused class members a common injury, classwide proceedings would therefore generate common answers apt to drive the resolution of the litigation, and any dissimilarities within the proposed class do not impede the generation of common answers, the court determined

The court certified two classes in each of the three California cases. One class relates to plaintiffs’ CLRA claims and consists of all consumers that, at any time since January 1, 2004, purchased motor fuel at retail in the state of California, from a gas station owned, operated or controlled by Chevron. The other class relates to the UCL and common law claims and consisted of all individuals and entities that, at any time since January 1, 2004, purchased motor fuel at retail in the state of California, from a gas station owned, operated or controlled by Chevron. As to claims for damages, the court bifurcated the proceedings into liability and relief phases.

The basic "liability" elements of the UCL claims are that (1) plaintiffs and Chevron are "persons" under the UCL; (2) Chevron engaged in unfair competition (i.e. unlawful, unfair and/or fraudulent business acts or practices); (3) named plaintiffs suffered economic injury as a result of Chevron’s acts or practices; and (4) members of the public were likely deceived.

The basic "liability" elements of the CLRA claims are that (1) plaintiffs were "consumers" under the CLRA; (2) Chevron was a "person" under the CLRA; (3) plaintiffs and Chevron engaged in a transaction intended to result or which resulted in the sale or lease of goods or services; (4) Chevron used unfair methods of competition, or unfair or deceptive acts or practices, in violation of the CLRA; (5) as a result, plaintiffs suffered damage.

The basic "liability" elements of the common law unjust enrichment claims are that (1) plaintiffs conferred a benefit on Chevron, (2) which Chevron knowingly accepted, (3) under circumstances that make it inequitable for Chevron to retain the benefit without paying for its value.

The basic "liability" elements of the common duty of good faith and fair dealing claims are that (1) plaintiffs and Chevron entered into a contract; (2) plaintiffs did all, or substantially all of the significant things that the contract required; (3) all conditions required for Chevron’s performance had occurred; (4) defendant unfairly interfered with plaintiffs’ right to receive the benefits of the contract; and (5) plaintiffs were harmed.

The case is No. 07-1840-KHV (MDL No. 1840).

Attorneys: Christie R. Deaton (Korein Tillery, LLC) for Mark Rushing. Brendan A. McShane (Latham & Watkins LLP) for Chevron USA, Inc.

Companies: Chevron USA, Inc.

Cases: StateUnfairTradePractices KansasNews