Texas SC denies class action against ExxonMobil by gasoline dealers

By The SE Texas Record | Nov 24, 2009

AUSTIN � Gasoline dealers who claim ExxonMobil tricked them into paying for their own rebates can't pursue a class action, the Supreme Court of Texas decided on Nov. 20.

"The dealers here point to nothing in the contracts that prohibited Exxon from taking rebate costs into account in setting prices," the justices wrote in an unsigned opinion.

They reversed 13th District appeals judges in Corpus Christi, who affirmed a class certification order from Nueces County Court of Law Judge James Klager.

Dealers Dan Gill, Howard Granby and Patrick Morrow originally sued on behalf of a national class.

They complained that ExxonMobil promised economic benefits but secretly recouped them by factoring them into prices.

They alleged breach of agreement, breach of promise and breach of good faith.

ExxonMobil denied that it fully recouped its costs or hid facts from dealers.

The oil company pleaded that the dealers alleged fraud, not breach of contract.

The distinction matters because a fraud plaintiff must prove he relied on a defendant's misconduct while a breach plaintiff doesn't have to prove reliance.

After the state Supreme Court clamped down on national class actions in a case that involved Compaq computers, the dealers limited their claim to Texas. However, their lawyers filed class action claims for dealers of other states in federal courts.

In Nueces County, Klager certified a Texas class on all three kinds of breaches.

On appeal, ExxonMobil asked 13th District judges to follow a Supreme Court decision from 2004 that stopped a class action against Shell Oil.

Dealers in that case claimed Shell Oil dishonestly charged prices that would force them out of business so Shell Oil could own more stations.

Shell Oil dealers alleged price discrimination under Texas uniform commercial code, but the Supreme Court held that they didn't overcome a presumption of good faith.

Requiring sellers to justify every price "would mean that in every case the seller is going to be in a lawsuit," the Justices ruled.

The Shell Oil precedent didn't impress appeals judges on the ExxonMobil case, who distinguished the cases by reasoning that ExxonMobil dealers asserted specific claims.

Justice Dori Garza identified "specific promises of economic remuneration for keeping stores open specified hours and selling specified volumes of gasoline."

The Supreme Court replied, "We do not see the distinction."

The justices wrote that claims of Shell Oil dealers were "just as specific, and certainly as reprehensible, as those asserted by the dealers in the present case."

They didn't convert the breach claims to fraud claims as ExxonMobil urged, but they distilled the breach claims to a simple question.

They asked if ExxonMobil violated commercial code by failing to disclose that it recouped rebate costs, and they wrote: "The answer is no."

They wrote, "Thus, it appears that the dealers' claim lacks merit."

A federal judge in New York reached the same conclusion last year in litigation from the other 49 states, the court said.

They wrote that Klager and the 13th District misconstrued and misapplied the Shell Oil decision, and they directed Klager to vacate his class certification order.

The justices didn't tell him to deny class certification, instead advising him to determine the effect of the Shell Oil precedent on the requirements for certification.

David Gunn represented ExxonMobil, along with Richard Godfrey, Mark Lillie, Andrew Kassof, Russell Post, John Adcock and Tony Canales.

David Bright, James Roy, Bob Wright, Walter Thompson Jr., James White III, Fredric Levin, Troy Rafferty, William Denton, Spencer Hosie, John McArthur, William Large, William Hoese, Robert Josefsburg and James McCartt represented the dealers.

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