Motor Fuel Temperature Sales Practices Litigation
CEI’s Center for Class Action Fairness appealed the approval of several settlements in multi-district litigation concerning the sale of motor fuel, which has been ongoing for many years. In 2006-07, plaintiffs sued retailers for selling gasoline by volume, alleging that such sales failed to account for fuel expansion and contraction with temperature and constitute consumer fraud for failure to disclose the laws of physics. The cases were consolidated in the U.S. District Court for the District of Kansas.
Collectively, the settlements provide plaintiffs’ attorneys with nearly $19 million in attorneys’ fees, while absent class members receive nothing.
Costco was the first defendant to settle, offering zero dollars to the class, but millions of dollars in attorneys’ fees, and injunctive relief—a promise to install automatic temperature correction (ATC) pumps in certain states if it is legal. Currently, no state expressly allows fuel to be sold by anything except volume, and sales using ATC would actually harm consumers. A cost benefit analysis by the California Energy Commission concluded in 2009 that non-volumetric sales would result in a “negative or a net cost to society under all the options examined.” For these reasons, CEI successfully objected on behalf of class members to the Costco settlement in 2010, but the parties secured approval of a revised settlement in 2013. The district court would not decide fees until 2016.
In 2015, CEI objected to several similar settlements with other defendants. None of the settlements provide any money to class members, but they all agree to pay plaintiffs’ counsel fees, some with an added pernicious provision requiring the defendants to lobby for consumer-unfriendly modifications to the regulation of gasoline sales. The district court also approved those settlements, and CEI appealed approval of the settlements. Meanwhile, on August 24, 2016, the district court approved fees totaling $18.95 million in settlements with 29 defendants.
CEI appealed the settlement approvals to the U.S. Court of Appeals for the Tenth Circuit, and oral argument was held on November 17, 2016. Despite favorable indications from oral argument, the panel issued a written decision on August 23, 2017 affirming the lower court’s approval of the settlements. On September 6, 2017, CEI moved for a rehearing by the full Tenth Circuit, which denied that motion on October 10, 2017.