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An attorney representing 10,000 gas station owners in a class action lawsuit against ExxonMobil Corp. urged a federal appellate panel Tuesday to uphold a $500 million jury award he won against the oil giant. Eugene Stearns, a partner at Stearns Weaver Miller Weissler Alhadeff & Sitterson, argued that U.S. District Judge Alan Gold in Miami had “tripped at the finish line” by refusing to certify the award after a six-week trial early last year. “What happened in the disconnect between the jury’s verdict and the judge’s ruling is not understandable to me,” Stearns told a three-judge panel of the 11th U.S. Circuit Court of Appeals in Miami. “The liability and damages in this case were tried to conclusion.” While Stearns is fighting to protect one of the biggest verdicts against a major oil company, Exxon is asking the appellate court to overturn the award and decertify the class. After weeks of complicated testimony about the inner workings of price setting in the oil industry, a federal jury returned a verdict in February 2001 finding Exxon liable for fraud and breach of contract. Exxon merged with Mobil in 1999 to form the largest publicly traded oil company. The jury found that Exxon had secretly overcharged its gas station dealers for gasoline over the course of 12 years. At the heart of the case was an Exxon discount program that enabled the oil company to charge customers who pay cash at the pump a few cents per gallon less than those who paid by credit card. The program, Discount-for-Cash, was launched in 1982 to combat rising competition in an industry that recently had been deregulated. As part of the program, Exxon began charging its dealers a 3 percent processing fee on all credit card sales, but promised to offset the cost by reducing its wholesale gas prices. The oil company kept its promise for six months, reducing the wholesale price by 1.7 cents per gallon. But in March 1993, Exxon quietly took the discount away, the dealers claimed in the suit, which originally was filed in 1991. The class included station owners in 35 states. “In a falling price environment, Exxon kept its wholesale prices at the same level,” Stearns said. “At that moment, the offset was removed.” Following the jury verdict, Judge Gold refused to certify the jury award, saying he didn’t have the authority to enter an aggregate final judgment. Instead, Gold devised a plan to have each gas station owner file an application with supporting documents before they could claim any money. In August 2001, both sides petitioned the 11th Circuit to hear an interlocutory appeal. While Exxon is challenging the strength of the evidence presented at trial, Stearns argued it would be unnecessarily cumbersome to conduct “10,000 individual trials.” “Then what is the appropriate manner for dividing up the damages?” asked Judge Charles Wilson on Tuesday. Wilson heard the case with Judges Peter Fay and Richard Goldberg, a visiting jurist from the International Court of Trade. Stearns explained that the award could be divvied up using a simple mathematical calculation. In reaching its verdict, the jury determined that Exxon failed to reduce its wholesale prices by roughly 1.3 cents per gallon to offset the credit card fee. Based on the 40 billion gallons of gas sold during the 12-year program, the jury awarded $500 million, which could rise to as much as $1 billion with interest. Using similar methodology, Stearns said, the damages could be divided among the class members based on the number of gallons each station owner had purchased from Exxon. But ExxonMobil’s counsel, Jerrold Ganzfried an attorney with Howrey Simon Arnold & White in Washington, D.C., argued that the class didn’t have a viable case in the first place. Ganzfried contended that throughout the past two decades, Exxon’s dealers have signed individualized sales agreements with the oil company that were renegotiated every three years. As part of the sales contract, the station owners agreed to pay whatever fuel price was in effect at the time of the delivery. The Discount-for-Cash program, he said, was never part of the sales agreement. Additionally, the contract established open-price terms that were not subject to modification without written authorization by both parties, Ganzfried said. Ganzfried argued that the jury essentially rewrote the sales contract by interpreting it through Exxon’s promotional brochures and other evidence that was “extrinsic” to the contract. In addition, he said, the verdict should be overturned because the jury failed to find that Exxon had injured each individual station owner. Judge Gold erred in allowing the case to be presented to the jury as a monolithic, collective claim, he said. “At the end of the day we have no individual plaintiff claiming he was overcharged,” Ganzfried said. “That is a gaping hole, the hollow core at the root of this case.” Ganzfried also attacked the plaintiffs’ financial expert, professor Pat Fishe, a former chairman of the finance department at the University of Miami. To demonstrate that Exxon dealers were not receiving the promised discount, Fishe had compared the dealers’ profit margins with those of gas station owners associated with Exxon’s rivals. The comparison showed that Exxon station owners were making less money. But Fishe’s methodology was flawed and didn’t account for other factors that could have caused the discrepancy, Ganzfried said. Fishe also based his analysis on estimates and discounted evidence that showed Exxon’s wholesale prices were in line with its competitors. Stearns countered that the wholesale price comparison findings were really just coincidence because anti-trust laws prevented Exxon from knowing what its competitors were charging. Therefore, the company couldn’t have used the information as a benchmark for setting its wholesale prices. Stearns also argued that Exxon established the basis for a class action lawsuit by the nature of its own agreement with its dealers under the discount-for-cash program. In its proposal, Exxon had promised to offset the added credit card processing fees to its dealers “on average,” not individually.

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