Oil firms, state lock horns
By Frank Cho
Advertiser Staff Writer
For the past three years, the state has collected a mountain of documents and testimony in its effort to prove that oil companies conspired to fix Hawai'i gasoline prices, overcharging consumers millions of dollars for decades. The question now is whether that will be enough to take the case to a jury next year.
As they have from the beginning, the state and oil industry lawyers have offered such differing views of the facts that they barely seem to be talking about the same case.
During a four-day hearing that ended last week, Spencer Hosie, the lead attorney for the state, marched through a valley of corporate e-mails, market studies and executive testimony that he said demonstrated how Hawai'i oil refiners and wholesalers colluded to set high gas prices and punish competitors such as Aloha Petroleum.
Oil industry lawyers sternly dismissed the evidence as irrelevant and declared that Hosie was simply crying foul over aggressive competition — but failing to prove antitrust violations.
Now it is up to longtime U.S. District Judge Samuel King to decide whether the state will get its day in court. And the heart of the question facing King is whether the state has shown there are factual disputes between the two sides that a jury would need to decide.
For the most part, the state's case is based on circumstantial evidence, Hosie has acknowledged. He says Hawai'i gasoline prices were 50 to 60 cents higher than other markets for nearly 10 years and that can only be explained by the companies conspiring to keep those prices high. Otherwise, competitors should have entered the market to undercut the high prices.
Hosie points to supply contracts between market leader Chevron and some of the other oil companies, which Hosie said limited how much gasoline they could buy. He says the contracts restricted supply in the market to keep prices high, and the oil companies went along with the scheme.
But the oil companies argue there is no direct evidence that they conspired. And, they say, high gas prices can be explained by the fact that there simply is no economic incentive to lower prices, because it will not increase their market share. As for the contracts, they say, they did not restrict supply because the oil companies never needed more gasoline than Chevron provided under the agreements.
While the oil companies are hoping King will find there is insufficient evidence to take the case to trial — and instead grant their motion to dismiss the charges — legal scholars and experts say that's not likely.
"It's a very hard motion to win and most of them do not win it. Judges generally do not like to grant summary judgements," said Lawrence Foster, dean of the William S. Richardson School of Law at the University of Hawai'i. "And the bigger and more complicated the case, the less likely you are going to get summary judgement."
The last time an antitrust case was dismissed before trial was in September when U.S. District Judge Helen Gillmor dismissed a $65 million lawsuit against The Hawai'i Coalition for Health, the Hawai'i Medical Association and the Queen's Physician Group for lack of evidence. A Las Vegas-based healthcare company had accused the groups of trying to keep it from offering coverage in Hawai'i.
Foster said hearings to dismiss are sometimes more about strategy than actually trying to get the case thrown out.
"They are most often used as a strategy to flush out what the other side thinks their facts are and what is their case," Foster said.
Familiar with antitrust cases
Those who know King say he is no stranger to complicated antitrust cases and will not let the state's high-profile lawsuit against influential oil companies prevent him from doing what he thinks is right.
After the lawyers' final arguments on Tuesday, the last day of the hearing, King asked few questions that might signal his intent. After that, he stepped down from the bench and disappeared to write his ruling. Experts said the longtime jurist could throw out some, all or none of the charges against the oil companies.
Whichever way King rules, it is likely to be appealed, said David Louie, president of the Hawai'i State Bar Association.
"But I don't think that is going to play a part in (King's) mind," Louie said. "He is being asked to make a first cut at this. That is his job. And when it goes up on appeal — which could be a more conservative panel than him, or less conservative panel — Judge King knows there could be a disagreement on matters of law."
King's record has included rulings on several similar cases. In 1977, King fined four Hawai'i hotel companies and the Hawaii Hotel Association for conspiring to fix room rates in the early 1970s. Later that same year, King found several beer distributors guilty of conspiring to fix beer prices.
In 1982, he dismissed several antitrust claims, but refused to throw out others against Dillingham Corp. as the owner of Ala Moana Shopping Center over the center's refusal to renew a tenant's lease.
"His heart is here. He is from Hawai'i, and he certainly wants to do the right thing, but he will not hesitate to apply the law," Louie said.
During last week's hearing, King said he thought gasoline prices in Hawai'i were too high, but said he did not believe it should be illegal for a company to make as much profit as it could.
Robert Miller, who headed the state attorney general's antitrust division from 1977 to 1981, said he does not believe King would use this case as a referendum on gas prices regardless of his personal feelings.
"Sam is a no-nonsense kind of a judge," said Miller, who until recently also represented the Hawaii Gasoline Dealers' Association. "He is very direct and knows the law very well."
If the case is dismissed and the state appeals, Miller said it could increase pressure on the state to cut its losses and settle with the remaining oil companies. But if King lets the case go to trial, the oil companies might see that as a signal that King believes the state has a strong enough case to win in court — giving them increased incentive for an out-of-court-settlement.
The state launched its lawsuit Oct. 1, 1998, naming divisions of Chevron, Shell, Texaco, Unocal and Tosco Corp. as defendants. It accused them of fixing gas prices and allocating market share among themselves as early as 1987. It also accused the companies of organizing a boycott of Aloha Petroleum because it was undercutting gas prices.
BHP Hawaii and Tesoro also were named in the original suit, but were dismissed from the case as part of a $15 million settlement.
Now the fate of the rest of the case lies with King, who is not expected to rule until after the new year.
Reach Frank Cho at 525-8088, or at fcho@honoluluadvertiser.com.
