State, oil companies settle anti-trust lawsuit
| • | Skepticism reigns at pump over price-fixing settlement |
| • | Gas settlement likely to go to highway fund |
By Frank Cho
Advertiser Staff Writer
Ending nearly four years of legal wrangling, lawyers for the state and several major oil companies reached a tentative agreement yesterday to settle Hawai'i's $2 billion antitrust suit alleging the companies fixed gasoline prices artificially high.
Richard Ambo • The Honolulu Advertiser
Terms of the deal, which settles all claims against the oil companies, were not revealed yesterday but could include financial payments as well as concessions by the oil companies on how they conduct business in Hawai'i. Although details of the financial portion have not been finalized, it will be significantly less than the nearly $2 billion the state had been seeking.
Jim Kershner fills up his Camaro at the Chevron station in lower Makiki. Having paid higher gasoline prices for "a long, long, long time," Kershner doesn't expect to see lower prices at the pump even after a state settlement.
"This settlement, like all settlements, was about reaching an equilibrium point between the competing claims of the state versus the gas companies," said Clyde Matsui, a federal mediator brought in to help settle the case. "I think it would be foolish to sit and analyze who won and who lost."
The agreement, which could be made public as soon as tomorrow, ends legal battles between the state and oil industry in Hawai'i that have cost both sides millions of dollars in legal fees and other expenses. The settlement, which will likely have little impact on the price of gasoline in the Islands, also marks the end of a case that some legal experts said would have been difficult for the state to win.
State Attorney General Earl Anzai said it also likely will end, for at least the near future, the state's investigation into the high cost of gasoline in the state.
The state has investigated Hawai'i's gasoline industry several times over the past 20 years, but this was the first time the state alleged the oil companies were breaking the law and filed a lawsuit.
"We have some thoughts on this whole situation which I am not at liberty yet to talk about," Anzai said.
Attorneys for the state and the oil companies declined comment yesterday, citing a court prohibition against discussing the settlement until it can be approved.
"The only thing I can do is confirm we have a reached a settlement in principle and the details are being worked out," said Albert Chee, a spokesman for Hawai'i gasoline market leader Chevron, which has been the primary focus of the state's case over the past several years.
Cayetano 'little disappointed'
Richard Ambo • The Honolulu Advertiser
Matsui said both sides will come out winners in the settlement because they avoided the long and expensive process of a trial that was to begin this spring, and the appeals that were sure to follow.
Chevron customer Drew Tucker fills up his motorcycle at the station in Kaimuki. For $3, he got less than 1.70 gallons of gas.
"The documents in this case go into the hundreds of thousands. So, after both sides got educated about the case, they come to the settlement talks where we try to work with them and share our view on what the case is really worth. And they ended up settling," Matsui said.
Gov. Ben Cayetano, who ordered then Attorney General Margery Bronster to file the suit in 1998, said yesterday that he could not talk about the details of the settlement, but said he was not entirely happy.
"It's a settlement that I'm a little disappointed in, but one of the big hurdles we had was to try and get the case before the jury, and I think that (federal) Judge (Samuel) King, through the mediation process, pretty much sent the message that he did not want the issues to go before the jury," Cayetano said. "We have accomplished, however, to put the oil companies on notice. After we filed the lawsuit, have you noticed that Hawai'i gas prices have gone down? So from that standpoint, I think we've done some good things."
The state could have fought to put the case before a jury, but if a recent motion for summary judgment for dismissal of the case had been approved, the state would have to appeal to the Ninth Circuit Court of Appeals, Cayetano said.
The appeals court "is now very, very conservative, so our chances there are now difficult," Cayetano said.
BHP, Tesoro settled earlier
The state filed its lawsuit in 1998, naming divisions of Chevron, Shell, Texaco, Unocal and Tosco Corp. and accusing them of fixing gas prices artificially high for Hawai'i drivers and allocating market share among themselves as early as 1987.
BHP Hawaii and Tesoro also were named in the original suit, but were dismissed from the case as part of a $15 million settlement.
Chevron, the state's leading gasoline supplier, had argued in federal court that Hawai'i's gas prices are high because of its small market and a Legislature that has saddled the industry with high taxes and anti-competitive legislation.
The oil companies all also have denied the charges and in July filed a motion for summary judgment, asking the judge to dismiss the case. Hearings on the motion were held in October and King was expected to rule on those motions this month, and the case was set to go to trial in Honolulu early this year.
Much of the evidence in the case has been kept secret from the public under a court-ordered seal.
It's not clear why the state and the oil companies agreed to a settlement, though some people familiar with the case said yesterday that they believe Judge King may have let it be known he was leaning toward throwing out all or portions of the state's case.
"My guess is that Judge King, in a high probability, communicated through his body language or otherwise, that the government's case was weak," said Robert Miller, a former state antitrust lawyer.
Tim Hamilton, a gasoline price consultant from Olympia, Wash., said yesterday's settlement will have little, if any, benefit for Hawai'i drivers.
"The court has gone as far as it is going to go in handling this problem under existing law, which shows the law is inadequate," Hamilton said.
No matter how much the oil companies agree to pay the state, without changes to the law, Hawai'i drivers will continue to be forced to pay the highest gasoline prices in the country, Hamilton said.
"The oil companies will give a pittance of the money back and now the state knows the truth about what the oil companies are doing in Hawai'i," Hamilton said. "The question is: What is the Legislature there going to do about it?"
Merger may be factor
Once terms of the settlement agreement are drawn up, a hearing will be scheduled for approval. If it is approved, a judge will dismiss the complaint against the oil companies "with prejudice," preventing the state from refiling the case again.
Scott Smith, a New York-based oil industry analyst with Dresdner Kleinwort Wasserstein, said Chevron had been facing increased scrutiny by federal regulators over its merger with Texaco, which may have played a role in its decision to agree to the settlement.
"They might not want to rock the boat right now with a trial," Smith said. "There are a lot of suggestions that the oil industry has been keeping gas prices down because of all the acquisition and mergers going on. They apparently don't want to draw too much unnecessary attention right now."
It's not the first time that a state has settled an antitrust case out of court with oil companies.
Washington, California and Oregon and a few other western states filed suit against several oil companies in 1975 alleging the companies fixed gas prices. It took 17 years for the case to work its way through the courts. The states eventually settled out of court for several hundred million dollars.
"We felt we had a good case, too, but unless you have a couple of people with direct evidence, it's very difficult to prove collusion in a market where you have a limited number of competitors," said Tina Kondo, senior assistant attorney general for the state of Washington.
Kondo said no state she knows of has been successful in bringing a price-fixing case against the oil industry in recent memory.
"As a consumer, I hate this situation as much as everybody else, but I understand it," said Widhyawan Prawiraatmadja, an oil pricing analyst with the East-West Center in Manoa. "The state was unable to prove its case. Now the key will be whether the Legislature will be able to do something about it."
Advertiser staff writer Robbie Dingeman contributed to this report. Reach Frank Cho at 525-8088 or by e-mail at fcho@honoluluadvertiser.com.
