No Deception In Selling ‘Hot Fuel,’ Jury Says

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Price at the pump – Verdict is a victory for gas retailers
Lawsuits shed light on practice, which some say misinforms consumers.

Selling “hot fuel” — gasoline that isn’t adjusted for its temperature — does not violate the Kansas Consumer Protection Act, a federal jury in Kansas City, Kan., said Monday.

The case, in the U.S. District Court of Kansas, was the first to come to a jury verdict in years of legal proceedings over the practice. The jurors found, 10-0, that selling fuel over the industry’s 60-degree standard was not “deceptive” under the state law. It was a victory for QuikTrip, 7-Eleven, and Kum & Go, the three main gasoline retailers who were sued.

Several other retailers reached settlements earlier this year regarding their sales practices in Kansas and other states.

“We agree with the verdict and that selling fuel in gallons without reference to temperature is fair and accurate,” Margaret Chabris, director of corporate communications for 7-Eleven, said Monday.

Mike Thornbrugh, manager of public and government affairs for QuikTrip, said the verdict affirmed that the retailers “were doing what we were supposed to do by law.”

Another charge — whether the practice was “unconscionable” — has yet to be decided, and is up to the judge of that court, Kathryn Vratil, rather than a jury. It is not known when she will rule.

Although the verdict went for the defendants, Tom Bender, an attorney for the class of Kansas consumers bringing the suit, said, “This trial exposed the practices of the industry in failing to tell consumers one important piece of information when they purchase fuel, and that is temperature.”

He also noted that the case had led other retailers to agree to a settlement and “change their selling practices as the law permits.”

“Hot fuel” refers to gasoline sold above the industry standard of 60 degrees without adjusting the volume of a gallon of fuel.

Gasoline at higher temperatures contains less energy per gallon, and The Kansas City Star estimated in a series of stories in 2006 that hot fuel costs consumers $2.3 billion annually.

Roughly 30 class-action lawsuits were filed across the country — in 26 states, the District of Columbia, and Guam — alleging that oil companies and fuel retailers improperly profited from the sale of hot fuel. They were consolidated in Vratil’s court to streamline pretrial proceedings.

She now could send the other suits back for trial in their original jurisdictions, but she has yet to do that.

The practical effect of the verdict could be limited. It affects only the defendants in this case, in Kansas. And several other fuel retailers have settled their cases covering multiple states — Costco, Wal-Mart and its Sam’s Club outlets, Valero, Casey’s General Stores, ConocoPhillips, Shell Oil Products US, and BP Products North America.

The terms of those settlements varied but included such steps as telling consumers the temperature of the fuel they were buying, or putting in pumps that adjusted the volume of a gallon for temperature, especially in hotter states.

Vratil’s ruling on the “unconscionable” issue also is still to come. The Kansas law says consumers should be protected from unconscionable acts by suppliers, which include transactions that are “excessively one-sided” or have prices “grossly” exceeding “the price at which similar property or services were readily obtainable.”

In addition, the other states’ cases are still to be tried. In many of those states, a violation of consumer protection laws could be easier to prove.

Bender, the plaintiffs’ attorney said, “There are other cases in other states, particularly in warmer states, where we intend to vigorously pursue our claims on behalf of consumers.”

Compared with many other states, Kansas law has a high standard for a “deceptive” practice. In the hot fuel case, plaintiffs had to prove that retailers were leaving out information — the fuel’s temperature — that was material, that made a real difference. And they had to prove the sellers left it out willfully, with the intent of harming consumers.

The oil industry and fuel retailers have maintained that estimates of the harm from hot fuel sales are overstated, and the effects tend to even out since gasoline also could be sold at less than 60 degrees. So, the industry argues, it isn’t worth the costs of refitting pumps or taking other steps to mitigate the effects of temperature.

One issue in the current case, Thornbrugh said, was, “Would another way of measuring fuel benefit consumers? No.”

And because QuikTrip won’t have to take expensive steps such as putting in new pumps, and pass the cost along, Thornbrugh said, “The consumer is the big winner as well.”

Kansas regulations also require that a gallon sold be the standard 231 cubic inches, so adjusting that for temperature could be illegal.

“I find it incredible that we get sued for following the law,” Thornbrugh said.

But Jamie Court, president of Consumer Watchdog, a not-for-profit public interest group based in California that has followed the hot fuel issue for years, said, “We’re going to see the California and Sunbelt states react very differently.The average temperature in California is over 70 degrees. And gas is sold in Bakersfield at 100 to 105 degrees. That costs people a dime a gallon.”

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