Nearly two dozen gas station owners in California on Tuesday sued Shell Oil Co., Chevron Corp. and Saudi Refining Inc., claiming the companies conspired to fix prices for 23,000 franchise owners nationwide.
The case filed in U.S. District Court in San Francisco, which is seeking class-action status, is similar to one California station owners filed in 2004. The U.S. Supreme Court tossed out that suit last year, but new plaintiffs hope the court will consider a slightly different argument.
Like the previous case, the new plaintiffs say chairmen of the three oil companies met privately nearly every month starting in March 1996 for the "purpose of forming and organizing a combination." The lawsuit alleges executives destroyed documents from the meetings, and a now-defunct joint venture violated U.S.
antitrust laws and caused artificially high wholesale gas prices in nearly every state from 1999 to 2001. In a new twist, the plaintiffs now say the venture violates a "rule of reason" governing antitrust matters.
Stephanie Price, a spokeswoman for San Ramon-based Chevron, said the company has not seen the lawsuit and she couldn't discuss specifics. But she said Chevron was vindicated last year, when Chief Justice John Roberts blasted the previous case for its "very artificial hook."
The lawsuit hinges on a marketing deal that, plaintiffs say, allowed former rivals to collude on prices starting in 1998, when Shell and Texaco Inc. formed Equilon Enterprises LLC to market gasoline in western states. They formed Motiva Enterprises LLC later that year for the eastern half of the country. Houston-based Saudi Refining also joined Motiva.
Equilon and Motiva began operations when crude oil prices, when adjusted for inflation, hit their lowest levels since the Great Depression, said Joseph M. Alioto, the San Francisco-based lawyer who represented both the previous and new plaintiffs. Yet gas prices soared for franchise owners, forcing them to pass on the cost to consumers or cut profit margins.
Crude oil prices fell from $12 per barrel in September 1998 to $10 per barrel in February 1999, but during that period, Equilon raised prices for Shell and Texaco gasoline from 62 cents per gallon to $1.02 per gallon in Los Angeles, and from less 60 cents per gallon to more than 90 cents per gallon in Portland and Seattle. In Chicago, Motiva raised prices from 55 cents per gallon to 75 cents per gallon, the lawsuit states.
"These executives get together and say, 'OK, we're going to raise Texaco's price to Shell's price, then we're going to raise both of them 50 to 75 percent, and we're going to do it after we've already had all these cost savings,'" said Alioto, who represented both the previous and new plaintiffs.
The lawsuit doesn't seek a specific financial award. But Alioto said that, according to a new economic analysis, alleged collusion increased wholesale prices at least 20 cents and possibly as high as 40 cents per gallon from 1999 to 2001.
An average gas station in the United States pumps about 100,000 gallons per month. By that measure, the companies owe each of the 23,000 stations in the class-action suit at least $240,000, Alioto said.
Station owners had little choice but to pay higher prices. Franchises typically sign long-term contracts with oil suppliers, making it tough to switch to another brand or an independent supplier.
Hassan Eghdami, owner of a Shell station in Belmont, said his wholesale cost surged 70 percent from 1999 to 2001. Rival stations in the Silicon Valley suburb had lower prices, forcing Eghdami's to lower his profit margins to be competitive.
"I put eight years of my life, my time and all my investments into this " I don't even go on vacations," said Eghdami, who says he clears about $2,000 per month after paying rent, franchise fees and worker compensation. "I cannot open another business from scratch. I cannot just leave Shell."
Representatives did not return phone calls and e-mails to Houston-based Shell, a subsidiary of the Royal Dutch/Shell Group, and Saudi Refining, affiliated with the state-owned oil company of Saudi Arabia.
