in Re Petroleum Wholesale, L.P., and Pwi Gp, LLC "Operation Spotlight" Litigation

NO . 08-0956

IN RE PETROLEUM WHOLESALE LITIGATION

_______________________ _____________________

ON REVIEW BY THE MULTIDISTRICT LITIGATION PANEL
___________________ _________________________

JUSTICE MCCLURE delivered the opinion for the unanimous MDL Panel.

In a case of first impression, this Panel must consider whether three1 pending causes in Harris

County, Galveston County, and Ellis County – all of which include class action allegations – should

be transferred to a pretrial court for consolidated and coordinated pretrial proceedings. The

defendants, Petroleum Wholesale, L.P.; PWI GP, LLC; Petroleum Wholesale, Inc.; Sunmart, Inc.;

Sun Petroleum, LLC; and Sun Development, L.P. (collectively Petroleum), suggest that all three

lawsuits contain allegations of violations of the Deceptive Trade Practices Act (DTPA) and all three

seek restitution on behalf of affected consumers for innumerable transactions all over Texas.

Rule 13 authorizes us “to transfer ‘related’ cases from different trial courts to a single pretrial

judge if transfer will (1) serve the convenience of the parties and witnesses and (2) promote the just

and efficient conduct of the litigation.” See In re Ad Valorem Tax Litigation, 216 S.W.3d 83, 84

(Tex. M.D.L. Panel 2006); TEX . R. JUD . ADMIN . 13.2(f), 13.3(a), 13.3(l). For the reasons that follow,

we grant the motion to transfer.

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A fourth lawsuit was filed by the Texas Attorney General in Cause No. 2008-45789, pending in the 234 th
District Court of Harris County. This DTPA suit seeks disgorgement for victimized consumers and restoration of
“all money or other property taken from identifiable persons by means of unlawful acts or practices.” It was
originally included in Petroleum’s motion to transfer, but Petroleum has released the State of Texas from its motion.

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 FACTUAL SUMMARY

The lawsuits arise out of the Texas Department of Agriculture’s “Operation Spotlight”,

which was conducted between July 18 and July 20, 2008. In what Petroleum characterizes as a

statewide “blitz” targeting all of its retail gasoline pump devices, the Commissioner of Agriculture

publicly accused Petroleum of operating pump devices that dispensed less fuel than that being

purchased by the consumer. Three lawsuits were filed against the company within a matter of days:

! Cause No. 59,498, pending in County Court at Law Number One of Galveston County,
filed by John Marroney and Adrian Oatis, which includes class action allegations seeking to
represent all customers who purchased gasoline at any of Petroleum’s Texas stations within a four-
year period.

!Cause No. 2008-45087, pending in the 334th District Court of Harris County, filed by
Allison Snoddy, Stefanie Brigance and Charles Ziegler, seeking certification of a class of all
consumers who purchased gasoline at Petroleum’s unlawfully calibrated pumps in Texas over a four-
year period.

!Cause No. 77015, pending in the 40th District Court of Ellis County, filed by Joe C.
Webster, seeking to represent all customers who purchased gasoline by credit card from one or more
of Petroleum’s miscalibrated pumps in Texas from July 21, 2004, forward.

The essential allegations in each suit are that Petroleum (1) misrepresented statewide that the posted

or advertised price per gallon was the true price; and (2) concealed statewide that Petroleum or its

agents had calibrated the pumps at the station to deliver less product than lawfully allowed and less

product than it had represented would be delivered. Petroleum contends that all three lawsuits allege

violations of the Deceptive Trade Practices Act, seek restitution on behalf of affected consumers,

rely upon Operation Spotlight’s report of calibration errors, and seek the same type of damages on

behalf of the same consumers. The Harris County plaintiffs, joined by the Galveston and Ellis

County plaintiffs, respond that (1) transfer would be “premature before class certification discovery”,

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(2) Petroleum has not established that a common question of fact permeates the cases, or (3) transfer

would promote the just and efficient conduct of the lawsuits.

ARE THE CASES RELATED?

Petroleum contends that the class certification process in and of itself is undeniably a

common fact issue among the three competing putative class representatives. The plaintiff groups

respond that transfer is inappropriate because there is no single causative device, no common

agreement and no other common fact. As Petroleum notes, a purported statewide attempt to deceive

consumers qualifies as a single causative event. See In re Panhandle Fire Litigation, — S.W.3d —,

2008 WL 938431 (Tex. M.D.L. Panel 2008); In re Hurricane Rita Evacuation Bus Fire, 216 S.W.3d

70 (Tex. M.D.L. Panel 2006). Indeed, the plaintiffs in each suit will have to establish a common

causative element that will provide commonality to the class. Petroleum points to these ten common

fact issues:

• The integrity of the data maintained by the Department of Agriculture;

• The testing methodology employed by the inspectors and the accuracy of the results;

• The bias of Department officials to inspectors in the field;

• The bias of Department officials in applying more stringent standards to Petroleum than any
other company;

• Whether the “60-percent” rule was properly promulgated as a rule or is void for not
having been properly promulgated;

• Whether Petroleum reasonably relied on assurances from independent third-party service
technicians that their pump devices were properly calibrated;

• Whether there was an organized effort to alter the proper calibration of Petroleum’s fuel
dispensers;

• Whether Petroleum profited from any calibration errors;

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 • Whether plaintiffs were injured by any calibration errors; and

• The methods for calibrating and inspecting fuel service dispensers.

Although this Panel has not previously addressed MDL consolidation of putative class

actions, the federal courts have. Just weeks ago, the United States District Court for the Eastern

District of Louisiana considered a motion for class certification by plaintiffs in multi-district

litigation. In re FEMA Trailer Formaldehyde Products Liability Litigation, No. MDL 071873, 2008

WL 5423488 (E.D. Louisiana Dec. 29, 2008). These litigants filed suit for products liability against

the United States and several manufacturers, alleging that they lived in trailers provided to them by

FEMA after Hurricanes Katrina and Rita. The court framed the issue thusly:

The Court is presently faced with the issue of whether or not this litigation should be
certified and managed as a class action, or, more specifically, as six separate sub-
classes.2 If the Court chooses not to certify a class, then this matter will proceed as
a mass joinder in the MDL.

Id. at *2. The court explained that the federal rules require numerosity, commonality, typicality and

adequacy. Id. at *3. The first two requirements focus on the characteristics of the class while the

latter two focus on the desired characteristics of the class representatives. Id. Texas state court

procedure is substantially similar. See TEX .R.CIV .P. 42(a).

Clearly, there is a nexus between commonality for class certification purposes and relatedness

for consolidation purposes. “The test of commonality is not demanding ... The interests and claims

of the various plaintiffs need not be identical. Rather, the commonality test is met when there is at

least one issue whose resolution will affect all or a significant member of the putative class

members.” In re FEMA Trailer at *4. Ultimately, the court denied class certification, finding that

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The six subclasses included the Louisiana subclass, the Texas subclass, the Mississippi subclass, the
Alabama subclass, the Future Medical Services subclass, and the Economic Loss subclass.

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the plaintiffs alleged dozens of different manufacturing companies manufactured products that

caused harm, with some manufacturers providing multiple models. See also, In re

Bridgestone/Firestone, Inc. Tires, 288 F.3d 1012 (7th Cir. 2002) (plaintiffs unsuccesfully sought to

have the MDL court certify a nationwide class of consumers who purchased or leased any of the tires

included in the NHTSA investigation). The Texas Supreme Court has also determined that class

certification is an appropriate issue for an MDL court. Zurich American Insurance Company v.

Nokia, Inc., 268 S.W.3d 487, 496 (Tex. 2008).

We conclude that the cases involve common issues of fact and are related within the meaning

of Rule 13. We should not be heard to say that putative class action lawsuits asserted against the

same defendant should automatically receive MDL treatment. But consolidation is certainly

appropriate here.

CONVENIENCE OF PARTIES AND WITNESSES

A finding of common issues is not the final step of our analysis. In re Deep South Crane &

Rigging Company, No. 08-0725, slip op. at 3 (Tex. M.D.L. Panel 2008). Factors to be considered

include costly travel, duplicative discovery and depositions, and potentially conflicting orders. Id.

In its opening paragraph, the plaintiff groups state, in passing, that Petroleum has not established that

the convenience of the parties and witnesses will be better served by transfer. That is the extent of

their argument. Nowhere else have they contested Petroleum’s contention that transfer will facilitate

convenience. For example, Petroleum advises us that between fifty and seventy inspectors employed

by the Texas Department of Transportation participated in “Operation Spotlight”. Commissioner

Todd Staples and his staff are likely witnesses. Petroleum argues that duplicative discovery of these

witnesses and duplicative production of documents by the Department and Petroleum can be avoided

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by consolidation. Consequently, pursuant to Rule 13.3(j), we accept Petroleum’s recitation as true.

TEX . R. JUD . ADMIN. 13.3(j).

JUST AND EFFICIENT CONDUCT OF CASES

The plaintiffs’ response was filed before the lawsuit filed by the Texas Attorney General was

removed from the motion to transfer. Although the opportunity for additional briefing was offered,

the plaintiff groups did not submit further argument. They allege that transfer will not promote the

just and efficient conduct of the actions because the three private class actions seek a different

remedy and will follow a different process than the State’s action. Since this is no longer an issue,

we are left with their allegations that the litigants and counsel in the three private class actions have

coordinated class certification discovery, have agreed to depose Petroleum’s corporate representative

jointly on certification issues, and have agreed to do so at a time and location convenient to

Petroleum. They also argue that they have served no duplicative discovery other than requests for

disclosure. Petroleum counters that there have been hearings in Galveston regarding written

discovery and hearings in Houston concerning depositions. Moreover, it argues that there is no

agreement that can address the competing class certification efforts. And they explain that three trial

courts – within different appellate districts – will consider class certification:

If they reach conflicting results on similar factual records, lengthy appeals are a
certainty. Even if the trial court rulings are identical, the potential still exists for
duplicative appeals. A single pretrial judge is necessary, and is justified under Rule
13.

Petroleum also argues that in the absence of transfer, the proverbial race to the courthouse for class

certification will ensue. We agree. Each putative class will be competing to represent consumers

with regard to the same pumps in the same counties. Duplicative claims for damages on behalf of

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the same consumers for the same set of transactions is inherently tied to just and efficient trial

management. For all of these reasons, we grant Petroleum’s motion to transfer these cases to a

pretrial court.

APPOINTMENT OF MDL JUDGE

In this case, as in many of the motions to transfer recently filed, the movants have suggested

transfer to a particular county and even a particular judge. We disfavor this practice. Consolidation

of cases into a pre-trial court is not intended to facilitate forum shopping, nor the appearance of

forum shopping. Here, Petroleum contends that since one of the three suits is pending in Harris

County, plaintiffs’ counsel for the other two suits office in Houston, most of the gas stations in

question are located in Harris County, and the corporate headquarters for Petroleum is in adjacent

Montgomery County, a Harris County judge would be the most convenient appointment for all

parties. That may well be true, and if asked the plaintiff groups may agree. But the decision rests

solely within the discretion of the MDL Panel.

The motion to transfer is granted and a pre-trial judge will be appointed by separate order.

Presiding Judge PEEPLES, Justices LANG , HANKS, and STONE concur.

_________________________________
Ann Crawford McClure, Justice

OPINION DELIVERED: February 10, 2009

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