Judge likely to dismiss South Korean gas firm from antitrust class action

A federal magistrate on Thursday sharply challenged arguments that a multinational gasoline trading firm based in South Korea must face claims in California that it engaged in a scheme violating U.S. antitrust law to inflate prices at the pump.

U.S. Magistrate Judge Jacqueline S. Corley indicated she will likely dismiss SK Trading International Co. Ltd. from the class action because it was not sufficiently involved in the operations of its subsidiary that allegedly engaged in the conspiracy.

"Maybe there's liability, but it needs to be venued elsewhere," she said.

Vitol Inc., SK Energy Americas Inc. and SKTI allegedly arranged to raise the price of a key gas component in 2015 after an explosion at an ExxonMobil refinery in Torrance. The accident disrupted the refinery's production, giving the firms the opportunity to use it as an excuse to hike the cost of gas in the state, according to the complaint.

The lawsuit sought to bring SKTI into the case because the company allegedly participated in the scheme between SKEA and Vitol. In re: California Gasoline Spot Market Antitrust Litigation, 20-cv-03131 (N.D. Cal., filed May 6, 2020).

During the hearing, plaintiffs' attorney Samantha Stein emphasized that SKTI approved SKEA's agreement with Vitol to fix the price of gas by manipulating trades and selectively reporting them to the Oil Price Information Service.

But Corley responded that SKTI appears to have been exercising routine oversight of a subsidiary. "Approved is very different from controlled," she said. "A parent company is going to supervise and monitor."

She added: "The case law is clear that macro management doesn't get you personal jurisdiction."

Stein, an attorney at Hausfeld LLP, pushed back on the judge's characterization that SKTI was minimally involved in the scheme. She noted that the company made the decision to hire David Neimann, the SKEA executive responsible for executing the allegedly fixed trades.

Jeffrey M. Davidson, a partner at Covington & Burling LLP representing the defense, countered that the required showing to satisfy jurisdiction in California is to prove that SKTI directed the anticompetitive activity. SKTI had limited involvement with SKEA's trading operations, he said, and nothing to do with the sham trades.

When Stein continued to press claims that she argued demonstrate how the scheme was a part of SKTI's overall business strategy, Corley questioned: "Are you saying that in order not be brought into court, parent companies can't have a global strategy of trading" and "that they just have to let them do whatever they do on their own and cross their fingers that it works out?"

Davidson agreed with Corley that the relationship between SKTI and SKEA is one of "classic corporate oversight" that does not allow the judge to exercise authority over claims against a foreign corporation. If plaintiffs' attorneys were correct on the standard, he said that "would bring in every overseas company in the world."

Stein challenged the argument because it would allow foreign corporations to escape liability in most instances. "What scares me a little bit is the idea that you can have a strategy that sounds general but is in fact very specific and has real implications for how companies behave," she said.

"We don't say there's jurisdiction just because there's liability," Corley shot back. "That's not the way it works."

Responding to Stein's claim that SKTI was constantly checking in with its subsidiary to ensure profitability, the judge quipped, "yeah, to make sure they make money."

The class actions consolidated in federal court in San Francisco piggyback on a lawsuit filed by the California attorney general in San Francisco Superior Court.

The price of gas in California is among the highest in the nation, which industry experts have blamed on taxes and the state's stricter clean-air regulations.