LOS ANGELES -- A federal judge Tuesday dismissed a lawsuit that pitted Shell Oil Co. against California station operators who said the company overcharged them for gasoline to drive customers to nearby stations that were owned by Shell.
U.S. District Judge James V. Selna's decision to throw out key expert testimony and end the case was unusual because it came as attorneys for both sides were poised to deliver closing arguments to a jury, reported The Los Angeles Times.
The case, which went to trial May 29 in Santa Ana, Calif., [image-nocss] included 14 days of testimony from economic experts, Shell dealers and others.
The case was being closely watched, the report said, because it was one of the few legal challenges to the industry-wide practice known as zone pricing that went to trial.
Consumer groups have long criticized refiners for carving communities into geographic pricing zones and then giving dealers different wholesale fuel prices according to those territories. Those critics say the practice yields higher prices for drivers and gives oil companies the power to indirectly control retail prices by raising or lowering the dealer's fuel bill.
Refiners defend the pricing practice as a reaction to competition in various areas.
On Tuesday, Selna and the jury heard several hours of testimony from Robert Michaels, an economics professor at Cal State Fullerton hired by the Shell dealers to quantify the damage caused by the oil company's alleged discriminatory pricing policies. Selna struck Michaels' testimony and dismissed the case while the jury was taking a break, said the report.
I find that the methodology used by Dr. Michaels does not meet the standard, Selna told the attorneys. Without Michaels' evidence, Selna added, the jury cannot compute a reasonable estimate of lost profit for these defendants.
Anne Peebles, a spokesperson for Houston-based Shell Oil, said the company was pleased by the judge's decision. The plaintiffs clearly failed to present evidence to support their allegations, she told the newspaper.
Mike Madani, one of the six current and former Shell dealers who brought the lawsuit, was dejected after the judge announced the dismissal. Consumers lost, Madani, whose Shell station is in Redondo Beach, told the paper. We were very, very hopeful that we could get a federal decision here that would help all of California.
Madani testified that Shell sometimes charged him as much as 13 cents a gallon more for gasoline than it charged another Shell station about one mile away. He said the higher wholesale price forced him to raise his retail price, which caused him to lose business to the company-owned Shell that paid less for its gasoline.
Shell does not dispute that it charges different dealers different prices for fuel. But, Peebles said, the way Shell sets the prices is fundamentally fair and consistent with industry practice.
Thomas Bleau, an attorney for the Shell dealers, said he would appeal the ruling. He and the dealers are still seeking a permanent injunction that would bar Shell from charging those dealers different prices based on competition zones. Under California law, the dealers do not need to prove actual damages to get an injunction, he said.
Members help make our journalism possible. Become a CSP member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.