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Korean energy giant can’t dodge suit over California gas price-fixing claims

A judge dismissed South Korea-based SK Trading International from a federal antitrust suit over gas prices last year, but an appeals court refused to let the company bow out of a related state court case on Monday.

SAN FRANCISCO (CN) — A South Korean energy giant cannot escape claims that it conspired to drive up the price of gasoline in a state that already suffers from some of the highest energy costs in the nation.

In an unpublished opinion Monday, the California First District Court of Appeal rejected South Korea-based SK Trading International Co.’s argument that it should be dismissed from a lawsuit over suspected manipulation of gas prices because it lacks concrete ties to the Golden State.

Former California Attorney General Xavier Becerra sued SK Trading, its subsidiary SK Energy Americas and its competitor Vitol Inc. in May 2020, claiming the companies concocted a scheme to inflate prices at the pump following a refinery accident in Southern California.

The case dates back to 2015, when an explosion at an oil refinery in the Southern California city of Torrance caused significant disruption in the state’s gasoline market. The refinery was responsible for roughly 10% of the state’s gas supply, which decreased dramatically, driving up prices at the pump.

The case, inherited by recently appointed California Attorney General Rob Bonta last year, claims Vitol and SK executed a series of trades — some of which they allegedly hid from the Oil Price Information Service — to inflate the price of gasoline and enrich their respective bottom lines at a significant cost to California consumers.

The state says the companies used traders who were friends with each other to collude in jacking up prices by making certain transactions appear materially different, confusing market watchers about the true nature of supply and demand at a given time.

The two firms purportedly made trades with each other that caused price spikes. Some estimates indicate it may have cost state residents as much as $150 million in 2015 alone, with the suspected scheme likely persisting into late 2016.

Vitol denied the allegations in a May 2020 statement.

"Following the 2015 explosion at Exxon’s Torrance, California refinery — which reduced gasoline production in California — Vitol aided the California markets by importing gasoline into the state, supplying refiners and other companies at competitive market prices, and managing risk using routine commercial practices," the company said. "Vitol’s actions were consistent with customary market practice and fully compliant with all applicable laws."

Last year, San Francisco Superior Court Judge Andrew Cheng refused to dismiss the lawsuit, finding the state of California’s allegations of a price-fixing conspiracy were adequately presented and should therefore advance to the next stage of litigation.

“The People sufficiently allege that defendants’ scheme to fix, maintain, control, increase, inflate, tamper with, or otherwise manipulate and make artificial the benchmark prices of imported gasoline-related products is per se unlawful,” Cheng wrote in a February 2021 ruling.

SK Trading appealed that decision to a higher court, arguing it should be dismissed from the case for lack of jurisdiction because it has never had a presence in California, conducted business in the state or exerted control over its subsidiary SK Energy’s day-to-day operations.

A three-judge appeals court panel rejected that argument Monday, finding the state adequately offered support for claims that SK Trading was actively involved in its subsidiary’s hiring and management of a former Vitol energy trader who executed the suspicious trades. The panel also found the Korean company facilitated agreements regarding gasoline sales in California between its subsidiary, SK Energy, and its subsidiary's rival Vitol.

“Here, the record establishes that SK Trading officers personally and directly participated in making the decisions affecting the California gasoline market that the People allege violated California law,” Justice Stuart Pollak wrote for a three-judge panel of California’s First District Court of Appeal.

Justices Jon Streeter and Tracie Brown concurred with Pollack’s opinion.

A federal judge overseeing a related antitrust suit against the energy giants reached a different conclusion last year when she dismissed the Korean parent company as a defendant in that case.

Jacqueline Scott Corley, who was recently elevated from a federal magistrate to U.S. district court judge, ruled in September last year the plaintiffs offered no evidence that SK Trading “controlled SK Energy’s day-to-day trading activity” or “purposefully directed the specific anticompetitive trading activity alleged here.”

In an emailed statement, Attorney General Bonta said Monday that the appeals court decision brings the state one step closer to holding all three energy companies accountable for a “price fixing scheme that drove up the price of gas and cost customers at the pump.”

“Market manipulation is illegal and unacceptable, particularly during times of crisis,” Bonta said. “As we find ourselves in another period of market disruption, my office is monitoring the market closely, and we will not hesitate to take action if we find companies violating the law."

An SK Trading spokesperson did not immediately respond to a request for comment.

Follow @NicholasIovino
Categories / Appeals, Consumers, Energy

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