Class Action

Class Action Defense Cases-In re Motor Fuel: Kansas Federal Court Denies Defense Motion To Dismiss Class Action Challenging Practice Of Selling Gasoline Based On Volume Regardless Of Temperature

By Michael J. Hassen

Defense Motion to Dismiss Class Action Alleging Gasoline Retailers Overcharged Consumers by Failing to Account for Differences Based on Temperature of Gasoline Sold Denied because Class Action Allegations Adequately Pleaded Claims for Breach of Contract, Violation of Consumer Protection Statutes, and Various Other Claims Kansas Federal Court Holds

Several putative class action lawsuits were filed against various motor fuel retailers in 26 states, the District of Columbia and Guam (“the Region”); the class actions were consolidated in the District of Kansas for pretrial purposes by the Judicial Panel on Multidistrict Litigation (a summary of the Judicial Panel’s order may be found here). Though it alleged numerous causes of action, in essence the consolidated class action complaint alleged that defendants’ sale of gasoline “for a specified price per gallon without disclosing or adjusting for temperature expansion” subjects them to liability “under various state law theories including breach of contract, breach of warranty, fraud and consumer protection.” In re Motor Fuel Temperature Sales Prac. Litig., ___ F.Supp.2d ___ (D. Kan. February 21, 2008) [Slip Opn., at 1]. Defense attorneys moved to dismiss the class action on ten (10) different grounds, see id., at 13-14, but framed the arguments “in general terms” that did not “identify the elements of each cause of action or discuss whether the laws of each jurisdiction are the same,” id., at 14. The district court denied the motion.

In broad terms, the consolidated class action complaint alleged that gasoline expands when heated and so a given volume has less mass at warmer temperatures than the same fuel would have at cooler temperatures. In re Motor Fuel, at 3. Because of this, the industry has standardized the sale of gasoline based on temperature, defining a “gallon” as 231 cubic inches at 60 degrees Fahrenheit, and this standard - known as D-1250 - is used “at every state of the process except at retail.” Id. Retail gasoline is sold “based solely on volume (i.e. 231 cubic inches) without regard to temperature,” and is advertised without defining for the term “gallon” for the consumer, id. Further, the industry has fought selling gasoline at the D-1250 standard, so “Plaintiffs pay billions of extra dollars every year because retailers deliver fuel which is - on average - at least 10 degrees higher than the industry standard without making any correction in price and/or volume.” Id., at 4. This practice also “generate[s] hidden profits in the form of excess reimbursement for taxes paid on wholesale purchases,” because defendants pay federal and state taxes on the D-1250 standard, but collects reimbursement of those taxes from consumers on the additional gallons sold at higher temperatures, id. Finally, the class action alleges that equipment is available (and in use in Canada) to adjust the retail sale of gasoline to the D-1250 standard, but defendants have opposed putting the equipment into use by falsely claiming the average temperature of gasoline sold in the U.S. is 56^◦ F, while the American Petroleum Institute now concedes that it is higher than 60^◦ F, and that it would cost more than $6 billion to put the equipment to use, while the industry now estimates that cost to be $2.2 billion. Id., at 4-5. The nine (9) separate claims alleged in the class action complaint are discussed at pages 6 through 13 of the opinion.

Full post as published by Class Action Defense Blog on February 26, 2008 (boomark / email).