SAN FRANCISCO (CN) — A settlement resolving claims that two gas firms engaged in a scheme to artificially inflate the prices of gasoline in California is now one step closer to official approval.
On Friday afternoon, U.S. District Judge Jacqueline Scott Corley, a Joe Biden appointee, gave her preliminary approval to a $13.9 million settlement to compensate the class of businesses and non-California customers who were cheated in the scheme by gasoline firms SK Energy Americas and Vitol to manipulate gas prices at the pump via a convoluted series of concealed trades on futures markets following an oil refinery explosion.
Former California Attorney General Xavier Becerra accused Vitol and SK of executing a series of trades, some of which they hid from the Oil Price Information Service in order to drive up the price of gasoline and enrich their respective bottom lines at a significant cost to California consumers.
Some estimates indicate the scheme could have cost state residents as much as $150 million in 2015 alone, with the scheme likely persisting into late 2016.
The settlement class is composed of people who, at the time of purchase, were not residents of the state of California, and all persons that are not natural persons, wherever located, that: (i) purchased gasoline from a retailer for their own use and not for resale in California from February 18, 2015, through May 31, 2017.
The settlement agreement approved Friday requires the pair of firms to establish a non-reversionary gross settlement fund of $13.9 million in an escrow account maintained by Huntington National Bank.
Becerra first sued the two companies in 2020, accusing them of taking advantage of the 2015 explosion at an oil refinery in Torrance in Southern California.
The refinery explosion caused significant disruption in the gasoline market in California. The refinery in question was responsible for roughly 10% of the state’s gasoline supply, which decreased dramatically, driving up prices at the pump.
The companies used traders who were friends with each other to collude in driving up the price by making certain transactions appear materially different to confuse others about the true nature of supply in demand in the market at a given time.
The plan of allocation for class members recognizes two different pools of settlement class members: businesses, and non-California consumers. The Net Settlement Fund will be distributed in pro rata shares among these two pools based on the relative strength of the claims depending on whether the gas was purchased in Northern California or Southern California.
“85% of the settlement fund will be allocated to compensate businesses that allegedly paid supracompetitive prices for gasoline due to defendants’ conduct, and the remaining 15% of the settlement fund will be allocated to non-California natural persons (unless that leads to compensation of either group beyond their collective single damages),” Corley wrote in her order.
“Gasoline purchases made in Southern California will be compensated at twice the rate compared to those in Northern California (purchases in Southern California will carry weight of 1 and purchases in Northern California will carry a weight of 0.5),” she added.
Corley said the settlement was equitable, noting that the class faced significant hurdles if the litigation continued.
“Plaintiffs faced significant class certification challenges including ‘the possibility that the majority of their class’s claims would be precluded due to the settlement in the People’s Action,’ and even if not precluded, plaintiffs would need to prevail on class certification and ‘survive a possible interlocutory appeal of a class certification order, maintain class certification through entry of a final judgment, overcome numerous substantive defenses at trial, and succeed on a possible post-trial appeal,’” Corley wrote.
In their motion for preliminary approval, the plaintiffs said they will seek an award of up to 30% of the gross settlement fund, plus 30% accrued interest, and expenses of up to $7 million, plus an additional $1 million for notice and claims administration costs.
A separate, $50 million settlement announced in July by California Attorney General Rob Bonta resolved claims for California consumers.
Lawyers for the plaintiffs did not respond to requests for comment. Lawyers representing SK and Vitol did not respond to messages seeking comment before deadline.