Judge denies first set of 'hot fuel' settlements from retailers

By David Tanner, Land Line associate editor | 10/12/2012

The judge in the ongoing class action lawsuit over “hot fuel” has sent 10 retailers back to the drawing board on their settlement offers, an attorney in the case said. Hot fuel refers to retail gas and diesel sold without the retailer adjusting for temperature. Plaintiffs, including truckers, say hot fuel shortchanges consumers to the tune of billions of dollars a year.

Robert King, a St. Louis attorney for the plaintiffs on behalf of the Chicago firm Korein Tillery, says the retailers – including Shell, BP, ConocoPhillips and ExxonMobil – are currently retooling the settlement offers in an effort to appease Judge Kathryn Vratil of the U.S. District Court for the District of Kansas.

Vratil is presiding over the consolidated case consisting of lawsuits filed in 26 states dating back to 2006.

Truckers were among the first to recognize that the temperature of the fuel they purchased seemed to affect how far they could travel on a fill-up. Numerous OOIDA members are named plaintiffs in the lawsuits, but the Association is not a named party.

Ten retail companies offered settlements earlier this year, the majority of which involve a gradual, voluntary move to install technology known as automatic temperature compensation, or ATC, on fuel pumps. ATC would adjust the price the consumer pays to account for the temperature of the fuel.

Retailers have fought against ATC proposals in Congress and at national weights-and-measures meetings, saying installation of the technology would be cost-prohibitive and cause fuel prices to rise.

In September, one of the hot fuel cases went to trial in U.S. District Court for the District of Kansas. In that case, two Kansas businessmen, including a FedEx trucker, came up short in trying to convince a 10-member jury that three retailers – QuikTrip, 7-Eleven and Kum & Go – knowingly intended to harm consumers by selling hot fuel.

King says the “intent to harm” standard in Kansas law was tough to prove, but plaintiffs in other states might have a better shot.

According to King, the plaintiffs are working on bringing another of the cases to trial, perhaps in a state that produces higher temperatures than Kansas. But for that to happen, Judge Vratil must certify another class. King estimates it could take until late 2013 or early 2014 to get another case to trial, but that is not set in stone.

How much does hot fuel matter? Wholesalers and refiners have known about the effects of temperature on liquid fuels for more than 100 years. At that level “above the rack,” wholesalers and refiners rely on a 60-degree standard to ensure a fair deal on both sides of the transaction. Curiously, the retail pump remains the solitary holdout in the fuel supply chain to implement a 60-degree standard for the sale.

Evidence in the lawsuit suggests that for every 15 degrees that fuel temps are above 60, a consumer is shortchanged about 1 percent in energy content.

Some truckers have reported diesel temperatures as high as 120 degrees, which, according to the formula, could lead to a consumer being shortchanged 8 percent.

According to the OOIDA Foundation, small-business truckers purchase an average of 18,000 gallons of fuel in a year, demonstrating that truckers have the most to lose from hot fuel.

The defendants say they are not breaking any current laws and have no intent to harm consumers or profit from fuel temperature. A Kansas City-based lawyer representing retailers has called the lawsuits frivolous, a claim the plaintiffs take exception to.

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