Aguilar v. Atlantic Richfield
| Decision Date | 31 January 2000 |
| Parties | (Cal.App. 4 Dist. 2000) THERESA AGUILAR et al., Plaintiffs and Appellants, v. ATLANTIC RICHFIELD CORPORATION et al., Defendants and Appellants. D030628 Filed |
| Court | California Court of Appeals Court of Appeals |
APPEALS from an order and judgment of the Superior Court of San Diego County, David J. Danielsen, Judge. Reversed in part and affirmed in part.
Cohelan & Khoury, Timothy D. Cohelan, Isam C. Khoury, Margaret L. Coates; Daniel J. Mogin and Angela Milea Mogin for Plaintiffs and Appellants.
John J. Sansone, County Counsel (San Diego), Diane Bardsley, Chief Deputy County Counsel, Timothy M. Barry, Deputy County Counsel; Casey Gwinn, City Attorney (San Diego) and Leslie E. Devaney, Assistant City Attorney, as Amici Curiae on behalf of Plaintiffs and Appellants.
Ronald C. Redcay, Richard C. Morse, John J. Kralik, IV, Susan C. Wright; Post, Kirby, Noonan & Sweat, David J. Noonan, Sandra L. Lackey; Latham & Watkins, James W. Baker, Peter H. Benzian, John J. Lyons, Gregory N. Pimstone, Julia E. Parry; Pillsbury, Madison & Sutro, Robert A. Mittelstaedt, Craig E. Stewart, Caroline N. Mitchell; Paul R. Truebenbach; Hogan & Hartson, Mary Carter Andrues, Kirsten S. Harbers, John Mark Potter, Andrew J. Kilcarr, Stephen G. Vaskov; Elizabeth J. Haeglin; Patrick J. Sullivan, Kelly Scoffield, Gregory T. Kenny; Munger, Tolles & Olson, Ronald L. Olson, Bradley S. Phillips, William D. Temko, Hojoon Hwang; Raymond V. McCord; Robert E. Fuller, Mark D. Litvak; Howrey & Simon, Charles H. Samel, Dale J. Giali, Cheryl O'Connor Murphy, Mark I. Levy, Alan M. Grimaldi; Lawrence R. Jerz; Blecher & Collins, Maxwell M. Blecher, Harold R. Collins, Jr., William Hsu; Marylin Jenkins Milner; Manatt, Phelps & Phillips, Craig J. de Recat, Kevin O'Connell and Dennis Franks for Defendants and Appellants.
Neilsen, Merksamer, Parrinello, Mueller & Naylor, John E. Mueller, Andrew M. Wolfe; McDougal, Love, Eckis & Grindle, and Glenn P. Sabine as Amici Curiae on behalf of Defendants and Appellants.
CERTIFIED FOR PUBLICATION
The defendants in this class action lawsuit are companies that refine oil and market gasoline to California consumers.1 Plaintiffs' antitrust lawsuit asserts that defendants seized the opportunity provided by California's requirement that a cleaner-burning gasoline (CARB gas) be used in California, and agreed with each other to restrict CARB gas refining capacity and production, and fix CARB gas prices. Plaintiffs allege defendants' conduct violated the Cartwright Act (Bus. & Prof. Code, 16720 et seq.) and the Unfair Competition Act ().
After exhaustive discovery proceedings, defendants moved for summary judgment. Defendants relied on (1) the declarations by numerous senior managers of each defendant except Tosco that denied CARB gas refining capacity, production or pricing resulted from any agreement or conspiracy but rather from independent decisions based on each defendant's self-interest (the "denial declarations") and (2) plaintiffs not having evidence to support a reasonable inference that the defendants' CARB gas capacities, production or pricing resulted from an agreement or conspiracy (the "no evidence" contention). The trial court granted summary judgment for defendants, concluding defendants' showing shifted the burden to plaintiffs to demonstrate the existence of a triable issue of material fact, and plaintiffs' counter-showing did not raise a triable issue of the existence of an agreement in violation of the Cartwright Act.
Plaintiffs moved for a new trial. The trial court concluded it had erroneously shifted the burden to plaintiffs to raise a triable issue of material fact and granted plaintiffs' motion for a new trial.
Defendants appeal the order granting a new trial. Plaintiffs cross-appeal the summary judgment for defendants, asserting that if the new trial order is reversed it was error to grant summary judgment. We conclude the trial court erred by granting plaintiffs' motion for a new trial. We also conclude the defendants are entitled to summary judgment because they showed there is no evidence of an agreement among them and plaintiffs' showing of collusion among defendants is based on inferences from circumstantial evidence that are equally explicable by defendants' independent actions as by an illegal agreement.
Plaintiffs represent the class of consumers in California who purchased CARB gas produced and marketed by defendants at allegedly inflated prices during 1996. Defendants are companies that refine oil in California and market gasoline to California consumers.
In 1991, the California Air Resources Board adopted regulations requiring a cleaner-burning gasoline for sale in California. (13 Cal. Code Regs., 2260 et seq.) The regulations required that by June 1, 1996, only CARB gas could be sold at retail in California.
Defendants' refineries required modification to produce CARB gas for the California market. These modifications required extensive capital expenditures.
Each defendant modified its California refineries to produce some CARB gas. The capital expenditures and capacities created varied widely among defendants. Chevron spent more than $1.3 billion to create a capacity of 240,000-250,000 barrels of CARB gas per day (BPD). Shell spent more than $1 billion to create a capacity of approximately 100,000 BPD. ARCO spent approximately $450 million to create a capacity of 150,000 BPD. Unocal spent more than $400 million to create a capacity of 100,000 BPD. Ultramar spent approximately $325 million to create a capacity of 60,000 BPD. Exxon spent almost $200 million to create a capacity of 100,000 BPD. Mobil spent $126 million to create a capacity of 88,000 BPD. Texaco spent more than $113 million to create a capacity of 47,000 BPD. Tosco spent $100 million to create a capacity of 50,000 BPD. The refinery modifications converted a significant portion of California's oil refinery capacity from conventional gasoline to CARB gas.3
The resulting capacities did not all equal the volume of each defendant's historic gasoline sales to California consumers. Some defendants, including Texaco, created a capacity equal to the volume of its historic gasoline sales level. Other defendants, including Tosco and Unocal, created capacities less than each anticipated would be necessary for its California customers; each elected to fill its shortfalls by obtaining CARB gas from other refiners through exchange agreements. Other defendants, including Chevron, maximized their capacity.
Prices for gasoline significantly increased when CARB gas was introduced in 1996, although defendants' total gasoline production in 1996 exceeded gasoline production in 1995. Defendants operated their refineries at almost full capacity and as efficiently as possible to produce CARB gas consistent with the production of other refined products.4
Defendants' summary judgment motions were based on denial declarations and the no evidence contention showing.
Plaintiffs alleged defendants agreed to limit each defendant's capacity by coordinating their refinery modifications. A typical evidentiary showing attacking this allegation was submitted by Texaco. Mr. Walz, Texaco's most senior executive with direct responsibility over Texaco's two California refineries during the relevant time periods, averred he was continuously and personally involved in the decision-making process and the decisions about Texaco's CARB gas refinery modifications. He averred that Texaco's decisions were made independently and without agreement or collusion with other defendants, and were based on Texaco's best business judgment of its own economic interests. He explained that to comply with California Air Resources Board regulations, Texaco assessed whether to purchase or produce CARB gas to meet its CARB gas needs. Texaco compared the costs of refinery modifications with the risks that the market price for CARB gas would not provide an adequate return on its investment, and the cost to import CARB gas from outside California with the cost to produce CARB gas in California. Texaco used internal analyses and outside consultants to evaluate the alternatives, and ultimately determined it was in Texaco's best independent economic interest to modify its two California refineries to produce CARB gas.5 Texaco made refinery modifications that its studies deemed economically justifiable.
Mobil, ARCO, Chevron, Ultramar, Exxon and Shell made similar evidentiary showings that denied capacity decisions were based on agreement or collusion with other defendants and affirmatively demonstrated each independently followed its own economic self-interests in determining capacity. (See Appendix A.)
Tosco's evidentiary showing asserted that its decision to make CARB gas refinery modifications was driven by its independent business judgment of its own economic interest. In 1991 Tosco began investigating the costs and benefits of converting some or all of its Avon refinery product from conventional gasoline to CARB gas. In 1991 its engineers estimated converting to 100 percent capacity would cost almost $300 million. A 1992 outside study commissioned by Tosco estimated those costs would exceed $400 million, which might be understated by 50 percent. Based on an estimate that CARB gas would yield 9.5 cents per gallon (cpg) more than conventional gasoline, the study concluded that Tosco would lose money by converting Avon to 100 percent capacity. Tosco determined the cost of converting Avon to CARB gas production would be minimized by converting to only 50 percent capacity. Tosco authorized $100 million to convert its Avon refinery to a 50,000 BPD capa...
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