Persian Gulf Inc. v. BP W. Coast Prods.
| Decision Date | 30 September 2022 |
| Docket Number | 15cv1749-JO-AGS,18-cv-1374-JO-AGS,18-cv-1377-JO-AGS |
| Parties | PERSIAN GULF INC., Individually and on Behalf of All Others Similarly Situated, Plaintiff, v. BP WEST COAST PRODUCTS LLC, et al., Defendants. RICHARD BARTLETT, et al., Individually and on Behalf of All Others Similarly Situated, Plaintiffs, v. BP WEST COAST PRODUCTS LLC, et al., Defendants. |
| Court | U.S. District Court — Southern District of California |
ORDER GRANTING DEFENDANTS' MOTIONS FOR SUMMARY JUDGMENT
In this putative class action for antitrust conspiracy, Defendants Chevron U.S.A. Inc. (“Chevron”), Exxon Mobil Corporation and ExxonMobil Refining & Supply Co. (“Exxon”), Phillips 66, BP West Coast Products LLC (“BP”), Tesoro Refining & Marketing Company LLC (“Tesoro”), Equilon Enterprises LLC (d/b/a Shell Oil Products US) (“Shell”), Valero Marketing and Supply Company (“Valero”), and Alon USA Energy, Inc. (“Alon”) (together “Defendants”) filed motions for summary judgment. Dkts. 615, 619, 625. Defendants also filed motions to exclude the expert testimony of Plaintiffs' proffered experts Robert McCullough, Dr. Paul Hanouna, and Dr. Michael Williams. Dkts. 613, 616. Plaintiffs have similarly filed motions to exclude the testimony of Defendants' proffered experts: Andrew Lipow, Dr. Janusz Ordover, and Dr. Richard Bergin. Dkts. 622, 626.
For the reasons stated below, the Court grants Defendants' motions for summary judgment. Dkts. 615, 619, 625. The Court also grants in part Defendants' motion to exclude the expert testimony of Dr. Williams and Dr. Hanouna on the issue of causation. Dkt. 616. The parties' remaining motions to exclude expert testimony, including Defendants' motion to exclude Dr. Williams' and Dr. Hanouna's testimony on issues outside of causation, are dismissed as moot. Dkts 613, 622, 626.
Plaintiff Persian Gulf Inc. (“Persian Gulf'), the operator of a retail gas station, filed its antitrust lawsuit on behalf of retail stations in California on July 7, 2015. See Dkt 1.[1]On June 21, 2018, individual consumers Joshua Ebright, Paul Lee, and David Rinaldi (the “Consumer Plaintiffs”) filed two separate lawsuits on behalf of consumers who purchased gasoline in California.[2] These lawsuits alleged that eight current and former gas refiners in California-Defendants Chevron, Phillips 66, BP, Tesoro, Shell, Valero, Exxon, and Alon-conspired to fix gas prices in California from 2012 to present in violation of § 1 of the Sherman Act, Cartwright Act, Cal. Bus. & Prof. Code § 16700, et seq., and § 17200 of the Cal. Bus. & Prof. Code, commonly known as the UCL. See Dkt. 76; Bartlett, Dkt. 44.
On July 25, 2018, the Court consolidated the two Consumer Plaintiffs' cases into one action. Bartlett, Dkt. 37. Thereafter, the Court ordered the coordination of Persian Gulfs and Consumer Plaintiffs' cases for discovery and motion briefing because the allegations were nearly identical. See Dkt. 143. Accordingly, the Court set a single briefing schedule governing both Persian Gulfs and the Consumer Plaintiffs' cases which included deadlines for motions for summary judgment and motions to exclude expert testimony. See Dkt. 589.
After exhaustive discovery proceedings, Defendants Chevron, Shell, Valero, and Phillips 66 filed a joint motion for summary judgment, arguing that Plaintiffs did not have evidence to support a reasonable inference of conspiracy or causation. See Dkt. 625 (“Joint MSJ”). The remaining Defendants joined the Joint MSJ, and Defendants Alon and Tesoro also filed separate motions for summary judgment. See Dkts. 615, 619, 630, 632, 634,636. In addition, the parties moved to exclude one another's expert reports under Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993). See Dkts. 613, 616, 622, 626.
Plaintiffs' price fixing allegations are best understood within the larger context of California's gas market and its unique supply-chain challenges. The Court, therefore, provides the following brief overview of the players in the market, how the market is supplied, and how gas is sold in the state.
In California, a small group of refiners control the entirety of gas production in the state. See, e.g., Dkt. 622, Ex. 2 (“Lipow Report”) ¶ 31; Dkt. 647, Ex. 1 (“McCullough Report”) ¶¶ 20, 66.[3] This highly concentrated market is comprised of the eight Defendants in this case, including gas giants like Exxon and Chevron,[4] plus additional non-Defendant refiners with varying market shares.[5] Because Defendants do business in a highly concentrated market with few players, they are admittedly conscious of one another's pricing and actions in the market, as the actions of any one refiner can substantially impact the other refiners. See, e.g., J. Hodgson Declaration ¶¶ 11-15, 19-20; P. Brooks Declaration ¶ 96; K. Archambault Declaration ¶ 59; J. Harris Declaration ¶ 6; M. O'Neal Declaration ¶ 3.[6]
The California gas market largely depends on this small group of in-state refiners because California is a “gasoline island” isolated from other sources of supply. Dkt. 6291 (“Defs. Exs.”) Defs. Ex. 2; McCullough Report ¶¶ 37-39. California suffers from a lack of direct pipeline connectivity to other major refinery centers, such as the Gulf Coast and the Pacific Northwest. See McCullough Report ¶¶ 37-39; Dkt. 722, Joint Statement of Undisputed Facts (“Joint Statement”) ¶ 12. Thus, California can only receive imports by sea, which is costly and requires weeks of lead time. See, e.g., Joint Statement ¶ 12; K. Archambault Declaration ¶¶ 22-26, 34; H. Henderlite Declaration ¶¶ 24-26; Dkt. 699 (“Opposition”) at 29. Given refiners' finite production capacity and the limited options for external supply, prices in the California gas market are sensitive to events such as refinery shutdowns. See, e.g., Opposition at 1; Joint Statement ¶ 15. According to the Attorney General of California, because of these factors, “California's gasoline market has been characterized by high gas and diesel prices and recurrent price spikes.” See Defs. Ex. 2 at 1.
The California gas market also faces another unique limitation: only a specific gas formulation called CARBOB may be sold in the state. California refiners produce a variety of gas products, such as diesel, jet fuel, and different formulations of gas, including CARBOB. Joint Statement¶ 17. Within California, however, gas must meet the California Reformulated Gasoline Blendstock for Oxygenate Blending standard, known as CARBOB. Joint Statement ¶¶ 11, 13; 220 CCR § 2266.5. Refiners sell CARBOB directly to retail stations either (1) “at the rack,” i.e., distribution terminals where retailers can pick up gas; or (2) via “Dealer Tankwagon,” i.e., delivery by truck from the rack to the retail station. Joint Statement ¶ 18. Refiners set the wholesale prices for gas sold to retailers at the rack and by Dealer Tankwagon. See C. Yates Declaration ¶ 6; D. Smith Declaration ¶¶ 2-3; C. Dickson Declaration ¶ 27; J. Hodgson ¶¶ 4-5; M. O'Neal Declaration ¶ 2; P. Brooks Declaration ¶¶ 93-94; K. Archambault Declaration ¶¶ 55-56; Dkt. 621-1-2, Tesoro's Appendix (“T.A.”), W. Eckard Declaration ¶ 21.
Once gas reaches retail stations, it is sold by retail stations directly to consumers at the pump. Retail stations in California are owned either by refineries or by independent third parties. Joint Statement ¶¶ 19-20. In the latter scenario, independent retail stations can enter licensing agreements with refiners that give them the right to sell gas under a refiner's brand. Id. ¶ 20. For example, Plaintiff Persian Gulf purchased gas from Phillips 66 via Deal Tankwagon and licensed the right to sell under the Phillips 66 brand. Id. Independent owners, like Plaintiff Persian Gulf, autonomously set prices at their retail stations, while refiners set prices at their corporate-owned retail stations. See, e.g.,C. Yates Declaration ¶ 7; P. Brooks Declaration ¶ 9.
California refiners, like many of the eight Defendants in this case, also buy and sell CARBOB and other gas products to cover their supply shortages or dispose of excess supply. Joint Statement ¶ 21; C. Yates Declaration ¶ 8; M. Perez Declaration ¶¶ 4-5; L. Lockhart Declaration ¶ 4. In order to buy and sell, as described above, refiners like the Defendants employ gas traders to trade on the “spot market,” a trading market for gas on the West Coast. Joint Statement ¶ 21. Gas traders perform two primary functions for their respective refineries, (1) purchasing gas to cover production shortages, and (2) selling gas to compensate for excess production. See, e.g., Lipow Report ¶¶ 20, 22, 26. When executing spot-market transactions, West Coast traders either communicate directly with one another or through independent brokers on a bid-ask basis, typically negotiating within a range of the current spot-market price, reflected by pricing agencies such as the Oil Price Information Service (“OPIS”). See J.A. 562-76, Phillips Ex. 17; M. O'Neal Declaration ¶ 4; C. Dickson Declaration ¶ 59; L. Lockhart Declaration ¶¶ 12-13; H. Henderlite Declaration ¶ 14. West Coast traders can refer to OPIS prices when trading because OPIS publishes the daily high, low, and average West Coast spot prices based on a sampling of actual trades executed in the spot market that day. See id.
In Plaintiffs' complaints, they initially alleged that Defendants entered a price-fixing conspiracy on or around February 2012. See Dkt. 76 at 64; Bartlett, Dkt. 44 at 46. While the complaints included allegations that Defendants manipulated supply to raise prices and entered into exchange agreements in...
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