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Ninth Circuit:
Court Lacks Jurisdiction Over Suit Alleging Antitrust Conspiracy Regarding Oil Prices
Opinion Says Action Asserting Collusion by Companies With Then-President Trump, Foreign Governments Impermissibly Raises Political
By a MetNews Staff Writer
The Ninth U.S. Circuit Court of Appeals held yesterday that a lawsuit filed by gasoline consumers against oil companies alleging that, in 2020, then-President Donald Trump engineered an antitrust conspiracy among the U.S., Saudi Arabia, Russia, and the defendants to create a rise in gas prices is barred under the political questions and act of state doctrines.
Rosemary D’Augusta and others filed suit in March 2022.
Their complaint asserts violations of the Sherman Act by defendants American Petroleum Institute, Exxon Mobil Corporation, Chevron Texaco Capital Corporation, Phillips 66 Company, and other oil companies, whom the plaintiffs allege agreed to fix oil prices in violation of §1 of the act and engaged in a conspiracy to suppress competition for oil production as prohibited by §2 of the statute.
In addition to declaratory relief, damages, disgorgement in profits, and injunctive relief, the plaintiffs request an order requiring that Exxon, Chevron, and Phillips “be split up into individual companies…to restore competition in the oil industry.”
Specific Allegations
Specifically, the plaintiffs contend that a price war erupted between Russia and Saudi Arabia in March 2020 as both countries sought to rapidly increase oil production, causing a drop in global oil prices and requiring the defendants to lower prices to compete.
The plaintiffs allege that the oil companies sought the aid of then-President Donald Trump, whom they claim brokered a deal whereby Saudia Arabia and Russia promised to stop a race to the bottom on rates and the defendants agreed to increase their oil and gas prices.
The complaint cites April 2020 articles by the Wall Street Journal and the New York Times stating that Russia and Saudi Arabia required the U.S. to curb its domestic oil production as a condition for calling off the price war.
The plaintiffs allege:
“[T]he American oil companies agreed to cut production by 2 million barrels per day (or 3 million barrels per day) by the end of the year as a quid pro quo for the cessation of the price war, just as Russia and Saudi Arabia had demanded. In addition, the Secretary of Energy aided and abetted the Defendants’ conspiracy by storing and taking off the market more than 20 million barrels of their oil in the Strategic Petroleum Reserve….
“By Easter Sunday, April 12, 2020, the deal was done. Competition in the oil industry was eliminated….
“Prices for oil and gasoline now began their steady rise by the summer and would increase from 99 cents (or lower) to over $7 per gallon within two years.”
Motion to Dismiss
Senior District Court Judge Jeffrey S. White of the Northern District of California granted the defendants’ motion to dismiss the complaint, with prejudice, on Jan. 9, 2023, saying:
“The facts proffered by Plaintiffs clearly include Russia and Saudi Arabia as indispensable members of the alleged conspiracy and include questioning the foreign policy decisions of President Trump and his administration. Although in opposition, Plaintiffs argue that they have alleged an independent and completely domestic conspiracy, the actual allegations in the complaint confirm a purported global, not just private or domestic agreement, between Saudi Arabia, Russia, and the United States to cut production of oil. The allegations include specific foreign policy decisions allegedly made by the Trump administration in furtherance of the alleged conspiracy.”
Circuit Judge Ryan D. Nelson wrote the opinion affirming the judgment in favor of the oil companies. Senior Circuit Judge Richard C. Tallman and Circuit Judge Ronald M. Gould joined in the opinion.
Political Question
Nelson said the political question doctrine requires a case-by-case analysis to determine whether the question posed by a lawsuit is a non-justiciable matter reserved for the executive branch.
Looking at the allegations of the complaint, he wrote:
“At bottom, Plaintiffs contend that President Trump improperly negotiated an end to an international oil price war. Yet allegations of a conspiracy between the President, foreign sovereigns, and American corporations raise exactly the non-justiciable issue barred by the political question doctrine….
“Here, regardless of any alleged meddling by Defendants, President Trump’s decision to negotiate with other countries was a fundamental foreign relations decision. If we subjected it to judicial review, it would amount to second-guessing the Executive Branch’s foreign policy….And if the President cannot freely negotiate with foreign powers, then he cannot properly execute the powers given to him by our Constitution….Recognizing Plaintiffs’ claim would depart from a proper judicial respect for the President’s constitutionally delegated authority.”
The jurist concluded that “[t]he act of state doctrine also deprives our court of subject matter jurisdiction” and opined:
“Plaintiffs’ claims seek to control how sovereign nations—Russia and Saudi Arabia—manage their own petroleum resources. Plaintiffs allege that these countries were indispensable co-conspirators in the scheme to reduce oil production. And these countries allegedly demanded Defendants’ cooperation as ‘quid pro quo’ to end the price war. Plaintiffs’ claims are thus covered by the act of state doctrine because they seek to litigate the petroleum policy of foreign nations.”
Statutory Scheme
Nelson acknowledged that “[w]hen a statutory scheme can guide us, we can, at times, examine the merits of a case that impacts our country’s foreign policy.” However, turning to the antitrust legislation, he reasoned:
“By recasting the conduct of foreign relations and national security interests into antitrust terms, we are still being asked to evaluate foreign relations decisions of sovereign nations, including our own. And oil plays a crucial role in our country’s economic and national security interests, increasing the complexity of the foreign relations implications. Plaintiffs cite no case to guide us. Nor were our antitrust laws designed to handle such difficult questions on areas of statecraft.”
The plaintiffs contend that they assert claims arising from solely private conduct by and between the domestic oil companies, such as allegations that “[d]efendants agreed to take any surplus oil off the market, cut their production, and substantially reduce their investment in exploration and production.”
The judge said that a plaintiff must, to successfully plead antitrust conspiracy claims, assert allegations plausibly suggesting an agreement with specificity as to the participation of each party. Nelson opined:
“Plaintiffs’ bare allegations meet neither requirement for an antitrust conspiracy. As for direct evidence, Plaintiffs allege broadly that Defendants privately ‘agreed [among themselves] to take any surplus oil off the market, cut their production, and substantially reduce their investment in exploration and production.’ There is nothing, apart from these conclusory allegations, to plausibly suggest an illegal agreement.”
He continued:
“Plaintiffs allege vague statements that ‘major oil companies’ planned to reduce their oil production. Yet Plaintiffs fail to allege which Defendants of these ‘major oil companies’ reduced their production, or when or how they allegedly made these decisions. Nor do Plaintiffs allege the amount of production cut or why these unnamed ‘major oil companies’ did so. Such bare and conclusory allegations do not ‘plausibly suggest’ an antitrust conspiracy.”
The case is D’Augusta v. American Petroleum Institute, 23-15878.
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