In re Cal. Gasoline Spot Mkt. Antitrust Litig.

Decision Date29 March 2021
Docket NumberCase No. 20-cv-03131-JSC
CourtU.S. District Court — Northern District of California
Re: Dkt. Nos. 222, 224

Plaintiffs allege that Defendants entered into horizonal agreements to restrain competition in the spot market for gasoline and gasoline blending components formulated for use in California. Plaintiffs filed a putative class action bringing federal and state antitrust claims as well as state law unfair competition and unjust enrichment claims against SK Trading International Co., Ltd. ("SK Trading"), SK Energy Americas, Inc. ("SK Energy"), Vitol Inc. ("Vitol"), and two individual defendants. Defendants' joint motion to stay this action pending a related state court action and motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) are now pending before the Court.1 (Dkt. Nos 222, 224.) Having considered the parties' briefs and having had the benefit of oral argument on January 28, 2021, the Court GRANTS IN PART and DENIES IN PART the motion to dismiss. Plaintiffs' Sherman Act claim is dismissed as Plaintiffs have not established standing to pursue a claim for injunctive relief and their UCL claim is dismissed as they have failed to show that their legal remedies are otherwise inadequate. The motion to dismiss is otherwise denied. Defendants' motion to stay is DENIED because Defendants have failed to establish a basis to stay this action under either Colorado River or this Court's inherent authority.

A. Consolidated Class Action Complaint Allegations

The gravamen of the CCAC is that SK Trading, SK Energy, and Vitol conspired to "restrain competition in the spot market for gasoline formulated for use in California and in certain gasoline blending components used in that gasoline." (Consolidated Class Action Complaint ("CCAC"), Dkt. No. 186 at ¶ 1.2) "Defendants' scheme exploited a disruption in refining capacity that resulted from an incident at the refinery in Torrance, California wherein a cracking unit exploded which impaired the refinery's ability to refine alkylates from February 2015 through at least June 2016. (Id. at ¶ 3.) The corporate Defendants and their employees—Lucas and Niemann—recognized that the supply disruption provided by the explosion provided them an opportunity to artificially inflate the price of alkylates and thus gasoline (given the relationship between the two). (Id. at ¶ 4.) Defendants negotiated large contracts to supply gasoline and gasoline blending components for delivery in California and entered into agreements with each other to "manipulate the spot market price for refined gasoline and gasoline blending components so that they could realize windfall profits on these contracts." (Id. at ¶¶ 5-6.) They also entered into profit sharing agreements and agreements to disguise their market interference. (Id.)

"Defendants' repeated and pervasive manipulation of the spot market price caused retail gasoline prices to be higher throughout the Class Period." (Id. at ¶ 152.) Indeed, California Energy Commission's Petroleum Market Advisory Committee "concluded that Californians may have paid at least $12 billion in extra gasoline costs due to the 'unexplained differential' since the 2015 Torrance Refinery explosion." (Id. at ¶ 155.) Plaintiffs thus allege that they paid more for gasoline as a result of Defendants' illegal activities. (Id. at ¶ 9.)

B. Procedural Background

Before this action was filed, the California Attorney General filed a parens patriae action in the San Francisco Superior Court. See The People of the State of California v. Vitol, Inc., et al., Case No. CGC20584456 (S.F. Superior, filed May 4, 2020) ("AG Action"). The AG Actionincludes Cartwright Act and UCL claims. Pacific Wine Distributors, Inc., filed the first action in this District two days after the AG Action was filed, on May 6, 2020. (Dkt. No. 1.) The other named plaintiffs subsequently filed separate actions, each of which was related to this action. The parties thereafter stipulated that all 23 related actions would be consolidated for purposes of trial. (Dkt. Nos. 67, 121, 133, 146, 148, 174.) The Court then appointed Hausfeld and Girard Sharp as co-lead interim class counsel. (Dkt. No. 167.) Shortly thereafter, Plaintiffs filed the now operative Consolidated Class Action Complaint which includes class claims for (1) violation of the Sherman Act, 15 U.S.C. § 1; (2) violation of the Cartwright Act, Cal. Bus. & Prof. Code § 16720; (3) violation of California's Unfair Competition Law, Cal. Bus. & Prof. Code § 17200; and (4) unjust enrichment. (Dkt. No. 186.)

Following a status conference on October 6, 2020, the Court set a phased briefing schedule for Defendants' forthcoming Rule 12(b) motions with SK Trading's motion to dismiss for lack of personal jurisdiction and improper venue to be heard before the other Defendants' Rule 12(b)(6) motion and motion to stay. (Dkt. No. 207.) The motion to dismiss for lack of personal jurisdiction and improper venue under Rule 12(b)(2), (3) came before the Court for hearing on December 16, 2020 and the Court subsequently granted Plaintiffs leave to take jurisdictional discovery and deferred ruling on the motion. (Dkt. No. 263.) The Rule 12(b)(6) motion and motion to stay came before the Court for hearing on January 28, 2021.


Defendants move to stay this action in light of the AG's action in state court and to dismiss each of Plaintiff's claims under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim and as barred in part by the statute of limitations.

A. The Cartwright Act

The Cartwright Act, Business and Professions Code section 16700 et seq., was "enacted to promote free market competition and to prevent conspiracies or agreements in restraint or monopolization of trade." Exxon Corp. v. Super. Ct., 51 Cal. App. 4th 1672, 1680 (1997). To state a claim under the Cartwright Act, plaintiffs must allege: "(1) the formation and operation of theconspiracy; (2) illegal acts done pursuant thereto; and (3) damage proximately caused by such acts." In re High-Tech Emp. Antitrust Litig., 856 F. Supp. 2d 1103, 1126 (N.D. Cal. 2012) (quoting Kolling v. Dow Jones & Co., 137 Cal. App. 3d 709, 718 (1982)); see also Cty. of Tuolumne v. Sonora Cmty. Hosp., 236 F.3d 1148, 1160 (9th Cir. 2001) ("The analysis under California's antitrust law mirrors the analysis under federal law because the Cartwright Act, Cal. Bus. & Prof. Code § 16700 et seq., was modeled after the Sherman Act.").

Plaintiffs allege Defendants entered into an agreement that constitutes a per se violation of the Cartwright Act. (CCAC at ¶ 177.) Under the per se rule, certain categories of restraint are treated as "necessarily illegal [which] eliminates the need to study the reasonableness of an individual restraint in light of the real market forces at work." Leegin Creative Leather Prod., Inc. v. PSKS, Inc., 551 U.S. 877, 886 (2007) (quoting Business Electronics Corp. v. Sharp Electronics Corp., 485 U.S. 717, 723 (1988)). "Restraints that are per se unlawful include horizontal agreements among competitors to fix prices, or to divide markets." Leegin, 551 U.S. at 886. To state a claim for a per se antitrust violation, Plaintiffs must allege that Defendants "(1) entered into an agreement (2) to fix prices, rig bids, or divide a market." In re WellPoint, Inc. Out-of-Network UCR Rates Litig., 865 F. Supp. 2d 1002, 1025 (C.D. Cal. 2011).

Defendants insist that Plaintiffs' Cartwright Act claim is deficient because it fails to plead (1) an unlawful agreement to restrain trade, (2) causation, and (3) injury. The Court addresses each in turn.

1) Unlawful Agreement to Restrain Trade

The Ninth Circuit recently summarized the federal court requirements for pleading an unlawful agreement to restrain trade:

Rule 8(a)(2) of the Federal Rules of Civil Procedure requires "a short and plain statement of the claim showing that the pleader is entitled to relief." The Supreme Court has held that plaintiffs must put forth: enough factual matter (taken as true) to suggest that an agreement was made.
Asking for plausible grounds to infer an agreement does not impose a probability requirement at the pleading stage; it simply calls for enough fact to raise a reasonable expectation that discovery will reveal evidence of illegal agreement. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 556, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). Buildingupon Twombly and its companion case, Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009), we have held that to state a claim for antitrust conspiracy, plaintiffs must allege "'who, did what, to whom (or with whom), where, and when?'"
In the context of antitrust conspiracy claims, plaintiffs may meet their burden by alleging parallel conduct among competitors and certain "plus factors" suggesting a conspiracy. Alternatively, plaintiffs may meet their burden by putting forth direct evidence of an agreement. To meet the direct evidence standard, however, the evidence must explicitly support the asserted proposition without requiring any inference.

Frost v. LG Elecs., Inc., 801 F. App'x 496, 497 (9th Cir. 2020). Plaintiffs sufficiently allege the who, what, when, and where and the existence of a conspiracy through direct evidence.

Plaintiffs allege that in October 2014 a Vitol executive advised Lucas—Vitol's primary West Coast gasoline and its blending components trader—that Vitol was looking to work with SK in 2015 and that Lucas should keep the information "super" confidential. (CCAC at ¶ 99.) The following month an internal SK status report explained that Vitol wanted to cooperate with SK in the California market. (Id. at ¶ 100.) The cooperation agreements were not in writing and legal counsel for neither party was involved; indeed, "Vitol and SK took steps not to reveal the nature of these agreements to other...

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