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Archive for Saturday, January 12, 2008

Oil industry seeks to quash ‘hot fuel’ lawsuits

January 12, 2008

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— An attorney for the oil industry said Friday that it isn't fraudulent to sell "hot fuel" because it is legal to sell gasoline and diesel in the U.S. that's not adjusted for temperature.

That argument was made in a Kansas City, Kan., federal courtroom as the industry sought to quash more than 40 lawsuits seeking damages for consumers who have bought fuel hotter than the 60-degree industry standard. The hearing at U.S. District Court in Kansas City, Kan., was to hear arguments about the oil industry's motion to dismiss the suits.

James Tuite, an attorney for the Washington law firm of Akin Gump Strauss Hauer & Feld, said the lawsuits are claiming a "breathtaking" breadth of fraud by attacking a method of selling fuel that has been used since the beginning of the motor age.

But laws and regulations either call for or allow a gallon of fuel with a volume of 231 cubic inches, Tuite said, and there is no legal duty to adjust the gallon or price to reflect the effect of temperature. And because it's not illegal, he argued, the oil companies and fuel retailers can't be accused of fraud.

"We are not talking about consumer fraud," he said. "We're going to give you 231 cubic inches, and this is what you can hold us to."

But Howard Miller of the Los Angeles law firm of Girardi & Keese, speaking on behalf of attorneys who filed the suits, said the oil industry has engaged in fraud by selling gas and diesel at retail that's not adjusted for temperature.

At the longtime industry standard of 60 degrees, the 231-cubic-inch U.S. gallon puts out a certain amount of energy. But fuel is often sold at much higher temperatures, causing the fuel to expand and the amount of energy to decline for each gallon dispensed.

"It's clear that a wrong that has gone on long enough is not right," Miller said.

Moreover, he said, fuel at other stages of the distribution channel, including at wholesale, is adjusted for temperature. He also noted that fuel in Canada, where it averages below the 60-degree standard, was adjusted for temperature at retail because doing so is an advantage to the industry.

Selling retail fuel that's adjusted for temperature is allowed in the U.S. But because it isn't done, U.S. consumers are being shorted. For instance, a consumer consistently buying 90-degree fuel in essence buys one tank of air over a year's time because of the energy value he's not receiving.

"The consumer fraud is as clear as can be," Miller said.

Lawsuits filed since 2006 were earlier this year consolidated by the Judicial Panel on Multidistrict Litigation, which picked the U.S. District Court in Kansas City, Kan. The cases were assigned to Judge Kathryn Vratil, who may issue a ruling on the motion to dismiss later this month. A case filed in a California state court is proceeding separately.

The suits have more than 100 defendants, including major oil companies such as Exxon Mobil Corp., distributors, and fuel retailers such as QuikTrip Corp. and Wal-Mart. The plaintiffs include everyday consumers, truckers and small businesses. If the suits eventually win class-action status, millions of them will be covered.

The attorneys representing consumers, in other arguments, said there are enough facts for a count of civil conspiracy, because the oil industry pressured a pump manufacturer not to sell a pump that could adjust for temperature after the state of California certified the pump. The industry's attorneys replied that there are insufficient grounds to include that in the suits.

The two sides also argued over whether gas and diesel stations are collecting more fuel taxes than they remit to state and federal governments because of hot fuel.

But the industry's basic contention in the motion to dismiss is that selling fuel not adjusted for temperature is legal. When asked by Vratil about a count of unjust enrichment in the suits because of selling fuel not adjusted for temperature, Tuite, one of the industry attorneys, said that wasn't the case.

"We did not deceive anyone, so any benefit was fairly obtained," he said.

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