Compass Lexecon’s Clients Eight Current and Former California Refiners Prevail in Multibillion-Dollar Alleged Collusion Case

Two classes of putative consumers filed lawsuits alleging that eight gasoline refiners conspired to fix prices in California starting in 2012. Plaintiffs’ economic experts argued that the California gasoline market was susceptible to market manipulation and certain business practices by the Defendants were suggestive or indicative of collusive behavior and/or market manipulation. Plaintiffs’ damages experts also claimed damages to California gas stations and retail gasoline consumers totaling over $24 billion.

Compass Lexecon expert Janusz Ordover, who passed away before the Court’s decision, provided expert testimony demonstrating that the empirical evidence was not consistent with Plaintiffs’ allegation of a conspiracy and that the behavior of refiners was consistent with independent business conduct. He further demonstrated that Plaintiffs’ experts’ damages models were flawed and unreliable, among other reasons, because the models found damages where none existed and did not support plaintiffs’ claim that higher prices were caused by the alleged anticompetitive conduct.

Compass Lexecon Senior Managing Director Jon Orszag submitted expert testimony further showing that Plaintiffs’ experts’ econometric analyses overstated the pass-through rates between rack and retail gasoline prices and also ignored variation in pass-through rates across different areas within California. He further concluded that Plaintiffs’ experts’ analyses overstated the relevant volume of commerce, and their methods could not determine reliably the overcharges allegedly incurred by named plaintiffs.

On September 30, 2022, the District Court for the Southern District of California granted Defendants’ motions for Summary Judgement. The Court also granted Defendants’ motion to exclude Plaintiffs’ experts’ damages opinions, finding them unreliable and irrelevant to plaintiffs’ case. Among other things, the Court found that the models were based on assumptions that were contradicted by the actual evidence in the case, including plaintiffs’ sworn interrogatory responses, and as a result were insufficient to prove that the alleged conduct caused higher prices. The Court ultimately ruled that because the models were “divorced from the reality of the case,” they would not help the factfinder.

Janusz Ordover was supported by a Compass Lexecon team led by Guillermo Israilevich that included Steve Peterson, Steve Makowka, Catherine Barron, Georgi Giozov, Meade Atkeson, Mario Escarcega, Ben Spulber, John Campbell, and Greg Pelnar. Jon Orszag was supported by a Compass Lexecon team led by Aren Megerdichian that included Marc Huntley, Rob Foley, and Yu Zhu.

Compass Lexecon was retained by a joint defense group that included Dan Swanson, Sam Liversidge, Thomas Hungar, and Chris Whittaker from Gibson, Dunn & Crutcher LLP; Charles Lifland, Dawn Sestito, and Harwell Jefferson from O'Melveny & Myers LLP; Robert Mittelstaedt, David Kiernan, and Rasha Gerges Shields from Jones Day; Robin Wofford, Katherine McCray, and Hugh Kim from Wilson Turner Kosmo LLP; Robert Sacks, Diane McGimsey, and Robert Smith from Sullivan & Cromwell LLP; Kent Roger, Colin West, Minna Lo Naranjo, and Rishi Satia from Morgan, Lewis & Bockius LLP; Gerald Hawxhurst and Kyle Foltyn-Smith from Hawxhurst LLP; Josh Lichtman, and Layne Kruse from Norton Rose Fulbright; and Carl Hittinger, Jeffry Duffy, Tyson Herrold, and Alyse Stach from Baker & Hostetler LLP.