Wednesday, November 14, 2007

Oil Companies Must Defend Artifically High Gas Price Claim

This posting was written by Mark Engstrom, Editor of CCH State Unfair Trade Practices Law.

An Illinois Consumer Fraud and Deceptive Business Practices Act (CFA) claim could proceed against five oil companies that allegedly used their market dominance in concert to artificially inflate the price of gasoline to consumers, even though the Illinois Antitrust Act may have provided relief, the federal district court in Chicago has ruled.

The oil companies argued that an Illinois Supreme Court decision had effectively prohibited CFA actions for claims that could be brought under the Illinois Antitrust Act. However, the federal district court disagreed.

Because the high court’s decision rested on the fact that the CFA did not supplement the state’s antitrust statute (like the Clayton and Robinson-Patman Acts supplement the Sherman Act in the federal context), the decision meant only that a plaintiff could not sue under the CFA when doing so would be inconsistent with the legislative intent of the Illinois Antitrust Act. The decision was silent on whether plaintiffs could pursue a CFA remedy when the Illinois Antitrust Act also provided relief. The decision, therefore, did not bar the plaintiffs’ CFA claims.

Sufficiency of Pleading

Allegations that the oil companies controlled the nation’s gas supply, purposefully limited gasoline supply by maintaining low inventory levels, and decreased gasoline production during distribution disruptions and peak usage period, thereby achieving larger profits than they otherwise would have achieved, were sufficient to state a CFA claim under Rule 8 of the Federal Rules of Civil Procedure, the court determined.

Rule 8 required only a short and plain statement of a claim, showing that the pleader was entitled to relief. It did not require proof of an intentional misrepresentation. Based on these allegations, the court could not conclude “beyond doubt” that the plaintiff could prove no set of facts that would entitled him to relief. Indeed, facts consistent with these allegations could establish that the defendants had acted deceptively or unfairly. Several averments of fraud, however, failed to meet the heightened pleading standards of Rule 9(b).

The decision is Siegel v. Shell Oil Co., ND Ill., CCH State Unfair Trade Practices Law ¶31,497.

No comments: