14 ACC VALUE CHAMPIONS | A SPECIAL SUPPLEMEN T TO ACC DOCKET
In 2006, the Kansas
City Star published
a special report
entitled, “Hot fuel
for you and cold cash
for big oil,” which
claimed that consum-
ers were being bilked
out of $2.3 billion
a year by gasoline
retailers selling fuel
without temperature adjustments. Plaintiffs’ attorneys were
quick to file 52 class-action lawsuits in 28 states, the District of
Columbia and Guam, naming 80 defendants. The actions were
consolidated into multiple defendant litigation in Kansas and
became widely known as the “hot fuel” litigation.
“These suits attacked an entire industry practice,” explains
Tristan Duncan, Partner and energy law attorney at Shook,
Hardy & Bacon in Kansas City. “The industry is regulated by
government and required to sell gas the way it does — in fact,
federal and state regulators recently approved the challenged
business practice as in the public’s best interest.”
As a result, industry was united and its interests were aligned.
Tim Berry, an attorney now at Marathon Petroleum Compa-
ny, suggested that the defendants formulate a joint litigation
strategy to defend against the class actions across the country.
The National Association of Truck Stop Operators facilitated
the collection of proposals from law firms to handle the repre-
sentation and assembled the client-side defense team; interested
companies signed up to participate.
“Shook, Hardy & Bacon has done a variety of common representation cases. We thought this was a good fit for our model,”
says Duncan, who eventually worked with 13 co-defendants. The
parties designed an innovative strategy of pooling resources to
increase the impact of their individual investments; a cost-effective
defense spread the costs associated with the litigation. The fee
structure was innovative: Each group member paid for common
work based upon the number of cases in which it had been sued. It
was a simple model built to assign costs in proportion to exposure.
“We had never handled cases in this way. Our initial response
was to embrace it. The costs for defending the cases on our own
would have been astronomical; we probably would have had to
settle,” says Shawn Shearer, senior counsel of 7-Eleven, one of
the defendants with the largest percentage of cases.
“In this way, individual group members enjoyed economies of
scale and would not fall victim to the unfair and unprincipled
wars of attrition,” says Duncan. “These otherwise overwhelming
costs would not be borne by any single co-defendant.”
Duncan led a team of eight attorneys and two paralegals for
the bulk of the defense. Four core partners handled MDL-wide
responsibilities and issues, while four associates worked on
issue-specific work that cut across all defendants.
The SHB team conducted periodic status calls with the group
to evaluate their proposed litigation strategy and determine the
best course of action to achieve victory in all cases.
“This was cutting-edge, complex litigation. All our moves
were fully vetted,” says Duncan. “It is a tribute to this group of
in-house counsel that they worked so well together. The result
was better lawyering.”
Four defendants went to trial in Kansas. Circle K won
summary judgment and the case was dismissed; the other three
went to trial (Quik Trip, 7-Eleven, and Kum & Go). Nine other
companies were not sued in Kansas but continued to help fund
the work because they were defendants in other states. “It was
an insurance policy for the defendants who would be next,”
Duncan says. “Our clients took the long view, which allowed
us all to get set up to win.” In Kansas, plaintiffs failed to carry
their burden of proof; the jurors did not find a deceptive prac-
tice and awarded a unanimous defense verdict.
Defendants who bore defense costs alone were not as fortunate.
In April 2012, the Wall Street Journal reported that six of these
defendants agreed to settle for $21.6 million. (The proposed class
settlements have not been finally approved by the court.) vc
Hot Fuel Litigation Joint Defense Group and Shook, Hardy & Bacon LLP
Circling the Wagons and Holding Strong: Innovative Approach to Joint Defense
FROM THE JUDGES
“Having a law firm look for synergies amongst
a client group, rather than differences,
to the advantage of the entire group
and managing the group interests was a
great advance which also opened up more
opportunities for the client group.”
& Bacon LLP