Persian Gulf Inc. v. BP West Coast Products LLC

1 □

2

3

4

5

6

7

8 UNITED STATES DISTRICT COURT

9 SOUTHERN DISTRICT OF CALIFORNIA

10

11 || PERSIAN GULF INC., Individually CASE NO. 15cv1749-JO-AGS

2 and on Behalf of All Others Similarly

Situated, ORDER GRANTING

13 DEFENDANTS’ MOTIONS

14 Plaintiff, FOR SUMMARY JUDGMENT

Vv.

15 || BP WEST COAST PRODUCTS LLC,

16 || al.,

17 Defendants.

18 RICHARD BARTLETT, et al., Lead Case No. 18-cv-1374-JO-

Individually and on Behalf of All AGS (consolidated with No.18-cv-

19 || Others Similarly Situated, 1377-JO-AGS)

Plaintiffs, □

20

V.

21 || BP WEST COAST PRODUCTS LLC,

77 || et al.,

23 Defendants.

24

25

26 15cv1749-JO-AGS and 18cv1374-JO-AGS

27

1 In this putative class action for antitrust conspiracy, Defendants Chevron U.S.A. Inc.

2 ||(“Chevron”), Exxon Mobil Corporation and ExxonMobil Refining & Supply Co.

3 (“Exxon”), Phillips 66, BP West Coast Products LLC (“BP”), Tesoro Refining &

4 || Marketing Company LLC (“Tesoro”), Equilon Enterprises LLC (d/b/a Shell Oil Products

5 ||US) (“Shell”), Valero Marketing and Supply Company (“Valero”), and Alon USA Energy,

6 ||Inc. (“Alon”) (together, “Defendants”) filed motions for summary judgment. Dkts. 615,

7 ||619, 625. Defendants also filed motions to exclude the expert testimony of Plaintiffs’

8 || proffered experts: Robert McCullough, Dr. Paul Hanouna, and Dr. Michael Williams.

9 ||Dkts. 613, 616. Plaintiffs have similarly filed motions to exclude the testimony of

10 Defendants’ proffered experts: Andrew Lipow, Dr. Janusz Ordover, and Dr. Richard

11 ||Bergin. Dkts. 622, 626.

12 For the reasons stated below, the Court grants Defendants’ motions for summary

13 ||judgment. Dkts. 615, 619, 625. The Court also grants in part Defendants’ motion to

14 || exclude the expert testimony of Dr. Williams and Dr. Hanouna on the issue of causation.

15 ||Dkt. 616. The parties’ remaining motions to exclude expert testimony, including

16 || Defendants’ motion to exclude Dr. Williams’ and Dr. Hanouna’s testimony on issues

17 || outside of causation, are dismissed as moot. Dkts. 613, 622, 626.

18 I. PROCEDURAL HISTORY

19 Plaintiff Persian Gulf Inc. (“Persian Gulf’), the operator of a retail gas station, filed

20 antitrust lawsuit on behalf of retail stations in California on July 7, 2015. See Dkt 1.'

21 June 21, 2018, individual consumers Joshua Ebright, Paul Lee, and David Rinaldi (the

22

©.

24 ! Unless otherwise noted, citations to “Dkt.” refer to Persian Gulf, Inc. v. BP West Coast Products

25 LLC, et al., 1Scv1749-JO-AGS.

26 15cv1749-JO-AGS and 18cv1374-JO-AGS

27

1 ||“Consumer Plaintiffs”) filed two separate lawsuits on behalf of consumers who purchased

2 || gasoline in California. These lawsuits alleged that eight current and former gas refiners

3 ||in California—Defendants Chevron, Phillips 66, BP, Tesoro, Shell, Valero, Exxon, and

4 |; Alon—conspired to fix gas prices in California from 2012 to present in violation of § 1 of

5 Sherman Act, Cartwright Act, Cal. Bus. & Prof. Code § 16700, et seg., and § 17200 of

6 || the Cal. Bus. & Prof. Code, commonly known as the UCL. See Dkt. 76; Bartlett, Dkt. 44.

7 On July 25, 2018, the Court consolidated the two Consumer Plaintiffs’ cases into

8 action. Bartlett, Dkt. 37. Thereafter, the Court ordered the coordination of Persian

9 ||Gulfs and Consumer Plaintiffs’ cases for discovery and motion briefing because the

10 || allegations were nearly identical. See Dkt. 143. Accordingly, the Court set a single

11 || briefing schedule governing both Persian Gulf’s and the Consumer Plaintiffs’ cases which

12 |/included deadlines for motions for summary judgment and motions to exclude expert

13 || testimony. See Dkt. 589.

14 After exhaustive discovery proceedings, Defendants Chevron, Shell, Valero, and

15 || Phillips 66 filed a joint motion for summary judgment, arguing that Plaintiffs did not have

16 || evidence to support a reasonable inference of conspiracy or causation. See Dkt. 625 (“Joint

17 ||MSJ”). The remaining Defendants joined the Joint MSJ, and Defendants Alon and Tesoro

18 || also filed separate motions for summary judgment. See Dkts. 615, 619, 630, 632, 634, 636.

19 ||In addition, the parties moved to exclude one another’s expert reports under Daubert v.

20 || Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993). See Dkts. 613, 616, 622, 626.

21

22

23 ©

24 ? See Bartlett et al v. BP West Coast Products LLC et al., 18cv1374-JO-AGS; Rinaldi et al. v. BP

25 West Coast Products LLC et al., 18-cv-1377-J ace

26 15ev1749-JO-AGS and 18cv1374-JO-AGS

27

1 II. FACTS

2 || A. Background Information on the Gasoline Market in California

3 Plaintiffs’ price fixing allegations are best understood within the larger context of

4 ||California’s gas market and its unique supply-chain challenges. The Court, therefore,

5 || provides the following brief overview of the players in the market, how the market is

6 ||supplied, and how gas is sold in the state.

7 In California, a small group of refiners control the entirety of gas production in the

8 See, e.g., Dkt. 622, Ex. 2 (“Lipow Report”) 7 31; Dkt. 647, Ex. 1 (“McCullough

9 Report”) Ff 20, 66.2 This highly concentrated market is comprised of the eight Defendants

10 this case, including gas giants like Exxon and Chevron,’ plus additional non-Defendant

11 |/refiners with varying market shares.” Because Defendants do business in a highly

12 ||concentrated market with few players, they are admittedly conscious of one another’s

13 || pricing and actions in the market, as the actions of any one refiner can substantially impact

14 other refiners. See, eg., J. Hodgson Declaration §§ 11-15, 19-20; P. Brooks

15

16

17 || —————--

18 3 The Court declines to rule on the admissibility of the expert opinions contained in the

19 || McCullough and Lipow reports as moot. Where there is no dispute, however, the Court has referenced

these reports as sources of background information about the gas industry.

20 4 For instance, evidence in the record suggests that Exxon may have accounted for 8% of California

gas supply in 2015, see Dkt. 629-1 (“Defs. Exs.”) Defs. Ex. 1 at 144:17-145:9, and Plaintiffs’ expert

21 suggests that Chevron may have accounted for 18% of California gas production during the class period.

See McCullough Report § 67.

> The evidence in the record also indicates that additional non-Defendant refiners may have

23 || contributed substantially to California gas production at various points during the class period. See, e.g.,

id. (noting that non-Defendant PBF accounted for 12% of production and non-Defendant Marathon

24 || accounted for up to 30% of production).

25

26 15cv1749-JO-AGS and 18cv1374-JO-AGS

27

1 || Declaration J 96; K. Archambault Declaration 4 59; J. Harris Declaration { 6; M. O’Neal

2 Declaration ¥ 3.°

3 The California gas market largely depends on this small group of in-state refiners

4 || because California is a “gasoline island” isolated from other sources of supply. Dkt. 629-

5 (“Defs. Exs.”) Defs. Ex. 2; McCullough Report J] 37-39. California suffers from a lack

6 || of direct pipeline connectivity to other major refinery centers, such as the Gulf Coast and

7 ||the Pacific Northwest. See McCullough Report 4{ 37-39; Dkt. 722, Joint Statement of

8 || Undisputed Facts (“Joint Statement”) 9 12. Thus, California can only receive imports by

9 which is costly and requires weeks of lead time. See, e.g., Joint Statement J 12; K.

10 || Archambault Declaration [] 22—26, 34; H. Henderlite Declaration 24-26; Dkt. 699

11 |}(“Opposition”) at 29. Given refiners’ finite production capacity and the limited options for

12 external supply, prices in the California gas market are sensitive to events such as refinery

13 ||shutdowns. See, e.g., Opposition at 1; Joint Statement 9 15. According to the Attorney

14 ||General of California, because of these factors, “California’s gasoline market has been

15 || characterized by high gas and diesel prices and recurrent price spikes.” See Defs. Ex. 2 at

16 1.

17 The California gas market also faces another unique limitation: only a specific gas

18 || formulation called CARBOB may be sold in the state. California refiners produce a variety

19 gas products, such as diesel, jet fuel, and different formulations of gas, including

20

21 {| ———x“«

22 Unless otherwise stated, citations to declarations in this opinion refer to the declarations in

93 || Defendants’ Joint Appendix (hereinafter, “J.A.”) in support of their Joint Motion for Summary Judgment.

Dkt. 629-2. Similarly, citations to Chevron’s, Shell’s, Exxon’s, Phillips 66’s, Valero’s, and BP’s exhibits

24 || (e.g, Chevron Ex. 1) refer to the exhibits to the declarations in the Joint Appendix at Dkt. 629-2.

25

26 15ev1749-JO-AGS and 18cv1374-JO-AGS

27

1 || CARBOB. Joint Statement 7 17. Within California, however, gas must meet the California

2 ||Reformulated Gasoline Blendstock for Oxygenate Blending standard, known as CARBOB.

3 ||Joint Statement FF 11, 13; 220 CCR § 2266.5. Refiners sell CARBOB directly to retail

4 || stations either (1) “at the rack,” i.e., distribution terminals where retailers can pick up gas;

5 || or (2) via “Dealer Tankwagon,” i.e., delivery by truck from the rack to the retail station.

6 || Joint Statement § 18. Refiners set the wholesale prices for gas sold to retailers at the rack

7 ||and by Dealer Tankwagon. See C. Yates Declaration { 6; D. Smith Declaration □□□□ C.

8 Dickson Declaration 7 27; J. Hodgson 9 4-5; M. O’Neal Declaration 42; P. Brooks

9 ||Declaration ff 93-94; K. Archambault Declaration 55-56; Dkt. 621-1—2, Tesoro’s

10 || Appendix (“T.A.”), W. Eckard Declaration { 21.

1] Once gas reaches retail stations, it is sold by retail stations directly to consumers at

12 ||the pump. Retail stations in California are owned either by refineries or by independent

13 parties. Joint Statement f{ 19-20. In the latter scenario, independent retail stations

14 ||can enter licensing agreements with refiners that give them the right to sell gas under a

15 ||refiner’s brand. Jd. § 20. For example, Plaintiff Persian Gulf purchased gas from Phillips

16 ||66 via Deal Tankwagon and licensed the right to sell under the Phillips 66 brand. □□□

17 ||Independent owners, like Plaintiff Persian Gulf, autonomously set prices at their retail

18 || stations, while refiners set prices at their corporate-owned retail stations. See, e.g.,C. Yates

19 || Declaration § 7; P. Brooks Declaration 4 9.

20 California refiners, like many of the eight Defendants in this case, also buy and sell

21 ||CARBOB and other gas products to cover their supply shortages or dispose of excess

22 ||supply. Joint Statement § 21; C. Yates Declaration § 8; M. Perez Declaration □□ 4—5; L.

23 ||Lockhart Declaration § 4. In order to buy and sell, as described above, refiners like the

24 || Defendants employ gas traders to trade on the “spot market,” a trading market for gas on

25

26 15ev1749-JO-AGS and 18cv1374-JO-AGS

27

1 ||the West Coast. Joint Statement § 21. Gas traders perform two primary functions for their

2 respective refineries, (1) purchasing gas to cover production shortages, and (2) selling gas

3 ||to compensate for excess production. See, e.g., Lipow Report F920, 22, 26. When

4 || executing spot-market transactions, West Coast traders either communicate directly with

5 another or through independent brokers on a bid-ask basis, typically negotiating within

6 || a range of the current spot-market price, reflected by pricing agencies such as the Oil Price

7 Information Service (“OPIS”). See J.A. 562—76, Phillips Ex. 17; M. O’Neal Declaration

8 1194; C. Dickson Declaration § 59; L. Lockhart Declaration §§ 12-13; H. Henderlite

9 || Declaration { 14. West Coast traders can refer to OPIS prices when trading because OPIS

10 || publishes the daily high, low, and average West Coast spot prices based on a sampling of

11 actual trades executed in the spot market that day. See id.

12 ||B. Plaintiffs’ Conspiracy Case

13 1. Plaintiffs’ Initial Conspiracy Allegations

14 In Plaintiffs’ complaints, they initially alleged that Defendants entered a price-fixing

15 || conspiracy on or around February 2012. See Dkt. 76 at 64; Bartlett, Dkt. 44 at 46. While

16 complaints included allegations that Defendants manipulated supply to raise prices and

17 |}entered into exchange agreements in furtherance of a conspiracy,’ Plaintiffs’ original

18 theory of the case centered on allegations that Defendants utilized the cover of refinery

19 || maintenance to raise prices and take advantage of the reality that the California gas market

20 ||is sensitive to refinery outages. See generally id. Plaintiffs claimed that Defendants

21 |;planned and synchronized unnecessary maintenance in order to raise prices. See id.

22

23

24 7 See Dkt. 76 at 32, 43, 67; Bartlett, Dkt. 44 at 26, 35-41.

25

26 15ev1749-JO-AGS and 18cv1374-JO-AGS

27

1 ||Further, Plaintiffs alleged that certain of Defendants’ outages were not outages at all and

2 emissions data demonstrated that Defendants continued to produce despite claiming to

3 shut down. See id. Based on the evidence and arguments presented to the Court on

4 ||summary judgement, Plaintiffs appear to have wholly abandoned these “refinery

5 ||maintenance” allegations following discovery. See generally Opposition.

6 2. Plaintiffs’ Current Evidence of Conspiracy

7 Plaintiffs now argue and seek to prove that the eight Defendants conspired to fix gas

8 || prices by engaging in multiple coordinated actions designed to reduce supply and raise gas

9 || prices in California. Plaintiffs describe a conspiracy where Defendants blocked imports,

10 || increased exports, and lowered production levels to keep gas supply low in California, all

11 || while manipulating public facing gas-market prices to increase their profits. See generally

12 ||Opposition. This conspiracy was purportedly made possible by Defendants’ systemic

13 || exchanges of sensitive information and cooperation to cover each other’s supply shortages.

14 ||See id. As set forth in their discovery responses, Plaintiffs maintain that Defendants

15 || entered into, and began participating in, this illegal agreement in 2011: “Defendants, each

16 ||and all, agreed, and entered into an agreement . . . by no later than August 1, 2011, to fix,

17 || maintain, or make artificial prices for gasoline sold in California.” Dkt. 455, Ex. C at 12;

18 || Dkt. 455, Ex. D at 13.

19 In their summary judgment opposition, Plaintiffs point to the following in support

20 |lof their allegations of a price fixing conspiracy: (1) Defendants entered into exchange

21 agreements with one another throughout the class period to lend each other barrels of gas;

22 ||(2) Defendants systematically exchanged confidential information with one another;

23 ||(3) Defendants restricted gas supply in California, including by running their refineries

24 || below capacity, preventing gas imports, and unnecessarily exporting gas out of California;

25

26 15ev1749-JO-AGS and 18cv1374-JO-AGS

27

1 ||(4) In 2015, Defendants cooperated with Exxon after its refinery explosion instead of

2 leveraging the explosion to gain market share; (5) Defendants used various strategies to

3 ||manipulate public facing gas prices, including through a “gentleman’s agreement,” wash

4 |\ trades, selective price reporting, and false public statements.

5 Ill. LEGAL STANDARDS

6 ||A. Summary Judgment Standards

7 Summary judgment is appropriate under Rule 56 of the Federal Rules of Civil

8 || Procedure if the moving party demonstrates the absence of a genuine issue of material fact

9 || and entitlement to judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317,

10 (1986). A fact is material when, under the governing substantive law, it could affect

11 ||the outcome of the case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A

12 dispute as to a material fact is genuine if there is sufficient evidence for a reasonable jury

13 |/to return a verdict for the nonmoving party. Id. at 248-50.

14 A party seeking summary judgment always bears the initial burden of establishing

15 absence of a genuine issue of material fact. Celotex, 477 U.S. at 323. The moving

16 can satisfy this burden in two ways: (1) by presenting evidence that negates an

17 ||essential element of the nonmoving party’s case; or (2) by demonstrating that the

18 ||/nonmoving party failed to establish an essential element of the nonmoving party’s case on

19 || which the nonmoving party bears the burden of proof at trial. Jd. at 322-23. The court

20 || must view all inferences drawn from the underlying facts in the light most favorable to the

21 ||nonmoving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587—

22 || 88 (1986).

23 At the summary judgment stage, the parties have the burden to support their motion

24 || and opposition with evidence and specific references to the record that they wish the Court

25

26 15ev1749-JO-AGS and 18cv1374-JO-AGS

27

1 ||to consider. Fed. R. Civ. P. 56(c); Carmen v. San Francisco Unified Sch. Dist., 237 F.3d

2 1026, 1031 (9th Cir. 2001). It is not the Court’s task “to scour the record in search of a

3 || genuine issue of triable fact. [The Court relies] on the nonmoving party to identify with

4 ||reasonable particularity the evidence that precludes summary judgment.” Keenan v.

5 || Allen, 91 F.3d 1275, 1279 (9th Cir. 1996); Schneider v. TRW, Inc., 938 F.2d 986, 990 n.2

6 Cir. 1991) (“district court is under no obligation to mine the full record for issues of

7 ||triable fact”); Asset Mktg. Sys. Ins. Servs., LLC v. McLaughlin, 2007 WL 3232507, at *1

8 Cal. Nov. 1, 2007) (failure to cite to evidence “is a complete failure of proof”).

9 Pointing to an admissible expert opinion is one way that a party can create a triable

10 of material fact. Nevertheless, courts need not defer to an expert when the evidence

11 clear and conflicts with the expert’s testimony. In re Apple Computer Sec. Litig., 886

12 || F.2d 1109, 1116 (9th Cir. 1989); Stephens v. Union Pac. R.R. Co., 935 F.3d 852, 856-57

13 || (9th Cir. 2019) (“[e]xpert testimony cannot create a genuine issue of material fact if it rests

14 ||/on assumptions that are not supported by evidence”). Moreover, “an expert report cannot

15 || be used to prove the existence of facts set forth therein.” Jn re Citric Acid Litig., 191 F.3d

16 || 1090, 1102 (9th Cir. 1999); see also Rebel Oil Co., Inc. v. Atl. Richfield Co., 51 F.3d 1421,

17 || 1440 (9th Cir. 1995). Specifically, in the antitrust context, “[e]xpert testimony is useful as

18 ||a guide to interpreting market facts, but it is not a substitute for them.” Brooke Grp. Ltd.

19 ||v. Brown & Williamson Tobacco Corp., 509 U.S. 209, 242 (1993); Matsushita, 475 U.S.

20 |/at 594 n.19.

21 Standards Governing Antitrust Cases

22 On summary judgment in an antitrust conspiracy case, a party can move to show that

23 is no genuine dispute of material fact on any of the essential elements of a plaintiffs

24 || price fixing claim: (1) conspiracy to fix prices in violation of antitrust law; (2) injury—or

a 10

26 15¢v1749-JO-AGS and 18cv1374-JO-AGS

27

1 ||“impact”—resulting from that violation; and (3) damages. 15 U.S.C. § 15; Olean

2 || Wholesale Grocery Coop., Inc. v. Bumble Bee Foods LLC, 31 F.4th 651, 665-66 (9th Cir.

3 ||2022); see also Big Bear Lodging Ass’n v. Snow Summit, Inc., 182 F.3d 1096, 1101-02

4 || (9th Cir. 1999). Injury in the antitrust context is “injury of the type that the antitrust laws

5 || were intended to prevent and that flows from that which makes the defendants’ acts

6 |}unlawful.” Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 489 (1977).

7 ||Damages are measured only after antitrust impact has been demonstrated. Olean, 31 F.4th

8 || at 666 (9th Cir. 2022).

9 On the first element, conspiracy, a genuine issue of material fact can be established

10 either by direct evidence that Defendants agreed to fix prices or circumstantial evidence

11 which a reasonable factfinder could infer that Defendants entered into such an

12 ||agreement. Citric Acid, 191 F.3d at 1093. When the evidence is circumstantial, the

13 ||“crucial question” for the Court is “whether all the evidence considered as a whole can

14 reasonably support the inference that [Defendants] conspired” to fix prices. Jd. at 1097.

15 The Ninth Circuit applies the following two-step framework when a □□□□□□□□□□□

16 ||conspiracy allegations are based solely on circumstantial evidence. At step one, “the

17 || defendant(s] can ‘rebut an allegation of conspiracy by showing a plausible and justifiable

18 ||reason for its conduct that is consistent with proper business practice.’” Jd. at 1094

19 || (quoting Richards v. Neilsen Freight Lines, 810 F.2d 898, 902 (9th Cir. 1987)). Defendants

20 || may satisfy this burden by showing that the allegedly conspiratorial action “was in each

21 defendant’s independent self-interest.” Jd. at 1095. At step two, “[t]he burden then shifts

22 || back to the plaintiff to provide specific evidence tending to show that the defendant was

23 ||not engaging in permissible competitive behavior.” Jd. at 1094. Once Defendants have

24 || met their burden at step one, Plaintiffs must “come forward with specific factual support

25 il

26 15cv1749-JO-AGS and 18cv1374-JO-AGS

27

1 || for its allegations of conspiracy” to avoid summary judgment. Barnes v. Arden Mayfair,

2 759 F.2d 676, 680 (9th Cir. 1985) (citation omitted).

3 Plaintiffs can meet this “step two” burden by offering proof of parallel conduct

4 |lamong alleged conspirators alongside “plus factors’—that is, additional circumstantial

5 ||evidence that when combined with parallel-conduct evidence, reasonably supports an

6 ||inference of conspiracy. In re Musical Instruments & Equip. Antitrust Litig., 798 F.3d

7 1186, 1193-94 (9th Cir. 2015). Conscious parallelism—parallel conduct by competitors

8 || who adopt similar policies around the same time for the same reasons—is neither “in itself

9 || unlawful” nor uncommon. /d. at 1193; Stanislaus Food Prods. Co. v. USS-POSCO Indus.,

10 F.3d 1084, 1092 (9th Cir. 2015); Brooke Grp., 509 U.S. at 227; Theatre Enters., Inc.

11 ||v. Paramount Film Distrib. Corp., 346 U.S. 537, 540-41 (1954). In fact, conscious

12 || parallelism or parallel conduct is a common occurrence in concentrated, interdependent

13 ||markets among players who “recogniz[e] their shared economic interests and their

14 || interdependence with respect to price and output decisions.” Bell Atl. Corp. v. Twombly,

15 ||550 U.S. 544, 553-54 (2007) (quoting Brooke Grp., 509 U.S. at 227). Parallel conduct

16 || alone, therefore, is not sufficient to support an inference of conspiracy, but “it is a relevant

17 || factor to be considered along with the evidence as a whole” in determining whether the

18 || facts give rise to a reasonable inference of conspiracy. Citric Acid, 191 F.3d at 1102.

19 In order to distinguish between lawful conscious parallelism and unlawful

20 conspiracy, courts require that additional “plus factor” evidence that “tend[s] to rule out

21 || the possibility that the defendants were acting independently.” Twombly, 550 U.S. at 554

22 |\(citing Matsushita, 475 U.S. 574); see also Monsanto Co. v. Spray-Rite Serv. Corp., 465

23 ||U.S. 752, 763-64 (1984). “[P]lus factors are economic actions and outcomes that are

24 ||largely inconsistent with unilateral conduct but largely consistent with explicitly

29 12

26 15cv1749-JO-AGS and 18cv1374-JO-AGS

27

1 || coordinated action.” Musical Instruments, 798 F.3d at 1194. Plus factors may include

2 || circumstantial evidence demonstrating “a common motive to conspire, evidence that shows

3 ||that the parallel acts were against the apparent individual economic self-interest of the

4 || alleged conspirators, and evidence of a high level of inter-firm communications,” among

5 things. Ross v. Citigroup, Inc., 630 F. App’x 79, 82 (2d Cir. 2015), as

6 || corrected (Nov. 24, 2015) (citation omitted). Whatever form this “plus factor” evidence

7 takes, it must support the inference that the Defendants’ conduct is more consistent with

8 ||conspiracy than with unilateral decision. Musical Instruments, 798 F.3d at 1194.

9 ||“[C]onduct as consistent with permissible competition as with illegal conspiracy does not,

10 || standing alone, support an inference of antitrust conspiracy” at the summary judgment

11 ||stage. Matsushita, 475 U.S. at 587-88.

12 IV. EVIDENTIARY OBJECTIONS

13 Before turning to the substance of the summary judgment and expert exclusion

14 || motions, the Court briefly addresses the parties’ evidentiary objections. Plaintiffs made

15 |;over 350 objections to Defendants’ declarations, while Defendants, in turn, objected to

16 || over 100 of Plaintiffs’ exhibits. See Dkt. 699-1; Dkt. 719-2. The bulk of the objections on

17 ||both sides consisted of “boilerplate” objections on various grounds unsupported by

18 || explanation—e.g., “Hearsay,” “Lack of foundation and personal knowledge regarding sale

19 || of Carson refinery,” and “Best Evidence Rule.” See id. Defendants also objected to the

20 ||admissibility of all three of Plaintiffs’ expert reports because they were unsworn and

21 || unaccompanied by a declaration. See Dkt. 719-2.

22 Given the high volume of boilerplate objections, the Court will only rule on the

23 || objections to evidence that the Court considers in ruling on the motions currently before it.

24 || See Doe v. Starbucks, Inc., 2009 WL 5183773, at *1 (C.D. Cal. Dec. 18, 2009) (“it is often

2 13

26 15cv1749-JO-AGS and 18cv1374-JO-AGS

27

1 ||unnecessary and impractical” to rule on each evidentiary objection at summary judgment,

2 || “especially when many of the objections are boilerplate recitations of evidentiary principles

3 blanket objections without analysis applied to specific items of evidence”); Pinson v.

4 || Prieto, 2014 WL 7339203, at *4 (C.D. Cal. Dec. 19, 2014) (declining to rule on objections

5 ||to evidence that was immaterial to the summary judgment decision). The Court therefore

6 || addresses below the categories of evidence relevant to its rulings.

7 Plaintiffs’ Objections to Declarations Submitted by Defendants

8 Defendants submitted the declarations of over twenty company executives and

9 traders to testify about specific actions the company took and to explain the business

10 ||reasons behind those actions. See Dkt. 629-2. Plaintiffs objected to these declarations on

11 || grounds of hearsay, lack of personal knowledge, the best evidence rule, and improper legal

12 ||conclusions. See Dkt. 699-1.

13 I. Personal Knowledge Objections to Defendants’ 30(b)(6) Declarations

14 First, the Court declines to reject declarations submitted by Defendants containing

15 ||Rule 30(b)(6) testimony on the grounds that the corporate witnesses lacked personal

16 ||knowledge. See Opposition at 57-60. By definition, corporate witnesses (also called

17 ||“30(b)(6) witnesses”) testify regarding the company’s knowledge, not the individual’s

18 || personal knowledge. Fed. R. Civ. P. 30(b)(6). A 30(b)(6) witness designated to testify to

19 || matters on behalf of the company has a duty to prepare by reviewing documents, speaking

20 || with witnesses, and otherwise gathering the information available to the company on the

21 ||topics the witness has been designated to testify. See id; see also Bd. of Trs. of Leland

22 || Stanford Junior Univ. v. Tyco Int’l Ltd., 253 F.R.D. 524, 526 (C.D. Cal. 2008) (noting that

23 || Rule 30(b)(6) explicitly requires a company to prepare designees to testify on its behalf as

24 ||to all matters reasonably available to the company; personal knowledge of the deponent is

25 14

26 15cv1749-JO-AGS and 18cv1374-JO-AGS

27

1 || “of no consequence”). Thus, a 30(b)(6) witness’s testimony is determined by the limits of

2 ||the company’s knowledge, not the individual’s personal knowledge. See id.; Cooper v.

3 || United Air Lines, Inc., 82 F. Supp. 3d 1084, 1096 (N.D. Cal. 2015) (overruling objections

4 || based on personal knowledge with respect to 30(b)(6) declarations on summary judgment).

5 || Because 30(b)(6) witnesses may testify on behalf of the company at trial, they are similarly

6 || allowed to do so at summary judgment. Fraser v. Goodale, 342 F.3d 1032, 1036-37 (9th

7 || Cir. 2003) (finding that evidence that can be presented in an admissible form at trial is

8 ||admissible on summary judgment); see also Univ. Healthsystem Consortium v.

9 || UnitedHealth Grp., Inc., 68 F. Supp. 3d 917, 921 (N.D. Ill. 2014).

10 In response to Plaintiffs’ objections for lack of personal knowledge, Defendants

11 || explained that the following declarations (or portions thereof) contain designated 30(b)(6)

12 corporate testimony: K. Archambault (BP), C. Yates (Chevron), C. Dickson (Exxon), R.

13 ||Sharum (Phillips 66), J. Harris (Shell), and P. Brooks (Valero). See Dkt. 719-2.

14 Defendants have made a showing that the above corporate witnesses were designated to

15 || testify on broad aspects of Defendants’ businesses, including trading strategy, imports and

16 ||exports, maintenance, public communications, trade associations events, exchange

17 ||agreements, refinery production, trading, and price setting. C. Yates Declaration 7 5; J.

18 || Harris Declaration {J 4-5; C. Dickson Declaration 4; R. Sharum Declaration □ 1; P.

19 || Brooks Declaration J 5 & n.1; K. Archambault Declaration 75. Plaintiffs did not argue

20 ||otherwise; while they raised blanket “personal knowledge” objections to these

21 || declarations, they did not argue that any testimony was outside the scope of the topics for

22 ||these 30(b)(6) witnesses. See Opposition 57-60; Dkt. 699-1. The Court, therefore,

23 || overrules Plaintiffs’ personal knowledge objections: K. Archambault Declaration JJ 23-—

24 34, 39, 66, 68-70, 72, 74; C. Yates Declaration §§ 35-36, 46, 54, 56-67; C. Dickson

15

26 15ev1749-JO-AGS and 18cv1374-JO-AGS

27

1 || Declaration ff 13, 23; R. Sharum Declaration 10-17, 19, 20-21, 23, 25-28, 30-33; J.

2 || Harris Declaration 17, 21, 24; P. Brooks Declaration {J 22, 26, 32, 36, 38, 47-49, 54,

3 || 58-59, 72-75, 82, 85, 87-88, 90, 103, 105.

4 2. Personal Knowledge Objections to Defendants’ Non-30(b)(6) Declarations

5 Second, the Court overrules Plaintiffs’ objections to Defendants’ non-30(b)(6)

6 || declarations to the extent that the declarants’ personal knowledge can be inferred from the

7 || declarations themselves. Federal Rule of Civil Procedure 56(c)(4) requires declarations to

8 || be based on personal knowledge, but that requirement “imposes only a ‘minimal □□□□□□□□□

9 || Strong v. Valdez Fine Foods, 724 F.3d 1042, 1045 (9th Cir. 2013) (citation omitted). In

10 || determining whether this requirement is met, the Court can infer personal knowledge from

11 |/the declaration itself, including the declarant’s role in the company, the declarant’s

12 || participation in certain matters, and the declarant’s statements that her declaration is based

13 || on personal knowledge. Barthelemy v. Air Lines Pilots Ass ’n, 897 F.2d 999, 1018 (9th Cir.

14 1990) (personal knowledge of declarants can be “inferred from their positions and the

15 ||nature of their participation in the matters to which they swore”); Sea-Land Serv., Inc. v.

16 ||Lozen Int’l, LLC., 285 F.3d 808, 819 (9th Cir. 2002).

17 After a thorough review of the declarations from Defendants’ corporate executives

18 || and traders, the Court concludes that the personal knowledge requirement is satisfied with

19 ||regard to the following: J. Yomtoob Declaration ff 13, 17, 24-25; H. Henderlite

20 || Declaration 9] 16, 24-27, 30; S. Roveda Declaration §J 10-11, 13; M. Perez Declaration

21 ||4 10; J. Hodgson Declaration ff 4, 9-12, 15, 20, 23, 27-28; N. Weinberg-Lynn Declaration

22 1199 10-14, 18-21, 24-27, 31, 32; D. Smith Declaration ff 3, 10; J. Marino Declaration □□□ 3—

23 ||4; S. Rodrick Declaration J§ 9-10; L. Lockhart Declaration [J 4, 7-8, 21, 29-30, 32, 43,

24 ||47; E. Pestano Declaration §§ 43-45, 50; R. Plumier Declaration 7 13; G. Johnson

16

26 15cv1749-JO-AGS and 18cv1374-JO-AGS

27

1 || Declaration J 7-8, 10; M. Pais Declaration J 13. Each of the above non-30(b)(6) declarants

2 || was either a high-level employee for a Defendant and intimately involved with that

3 || Defendant’s business practices or was a trader offering information relevant to trading. See

4 || Dkt. 629-2. In addition, every declarant swore that his or her declaration was based on

5 || personal knowledge and that each could competently testify with respect to the information

6 described. See id. The foregoing allows the Court to infer personal knowledge from the

7 || declarations themselves, and thus, Plaintiffs’ personal knowledge objections to the above

8 || testimony are overruled. See Strong, 724 F.3d at 1045; Barthelemy, 897 F.2d at 1018.

9 3. Objections to Non-Hearsay Testimony in Defendants’ Declarations

10 Third, the Court overrules Plaintiffs’ hearsay objections to Defendants’ declarations

11 ||to the extent that Plaintiffs objected to evidence that does not contain an out-of-court

12 statement or is not being offered for its truth. Hearsay is defined in Federal Rule of

13 || Evidence 801 as an out-of-court statement offered to prove the truth of the matter asserted

14 the statement. Fed. R. Evid. 801(c); United States v. Lopez, 913 F.3d 807, 826 (9th Cir.

15 |}2019). While all declarations are technically out-of-court statements, declarations offered

16 ||in support of summary judgment are not hearsay if the testimony could be presented in an

17 || admissible form at trial. See Fraser, 342 F.3d at 1036-37. Plaintiffs frequently objected

18 ||to portions of Defendants’ declarations as hearsay without explanation, but a review of

19 || those portions reveals that this testimony, if presented live at trial, would not be out-of-

20 statements. Rather, the testimony comprised statements of the declarant’s personal

21 |;knowledge of business practices, the market, annual meetings, efc. See, e.g., K.

22 || Archambault Declaration § 27; C. Yates Declaration { 36. In other instances, where the

23 ||testimony incorporated an out-of-court statement, the statement was not being offered for

24 || the truth of the matter asserted. See, e.g., P. Brooks Declaration {48 (Homeland Security’s

25 17

26 15cv1749-JO-AGS and 18cv1374-JO-AGS

27

1 || statement offered to show effect on Valero). Based on the foregoing, the Court overrules

2 || Plaintiffs’ hearsay objections to the following testimony: K. Archambault Declaration

3 27; J. Yomtoob Jf 16, 22; C. Yates Declaration J 36; H. Henderlite Declaration JJ 24—

4 30; P. Brooks Declaration Jf 48, 72, 74; R. Pluimer Decl. § 6; R. Sharum Declaration

5 |/4 10; S. Rodrick Declaration ¥ 10; L. Lockhart J 47, 50.

6 The Court does sustain Plaintiffs’ hearsay objections where the evidence takes the

7 || form of out-of-court statements offered for their truth and no hearsay exception appears to

8 ||apply. Fed. R. Evid. 801-803. In accordance with these principles, the Court sustains the

9 || following hearsay objections: J. Yomtoob Declaration J 17 (the Court does not consider

10 || statements to the extent they are being offered for truth rather than to demonstrate effect

11 on the listener); H. Henderlite Declaration { 26 (the Court does not consider BPWCP-6 to

12 || the extent it is being offered for the truth); N. Weinberg-Lynn Declaration § 32 (the Court

13 not consider PSX-4—5); R. Sharum Declaration □ 30 (the Court does not consider

14 || PSX-12 or PSX-14).

15 4. Objections to Defendants’ Business Records as Hearsay

16 Fourth, over Plaintiffs’ objections, the Court will consider documents that meet the

17 ||business records exception to hearsay. The business records exception provides that a

18 || writing is admissible if, (1) it is “made or transmitted by a person with knowledge at or

19 the time of the incident recorded,” and (2) “is kept in the course of regularly conducted

20 || business activity.” United States v. Miller, 771 F.2d 1219, 1237 (9th Cir. 1985); Fed. R.

21 ||/Evid. 803(6). Here, Plaintiffs objected to certain of Defendants’ exhibits consisting of

22 ||emails, slide decks, and internal business reports as hearsay without further explanation.

23 || See Dkt. 699-1. Defendants responded that these documents were admissible because they

24 || were records kept in the ordinary course of business. See Dkt. 719-2. The Court agrees

18

26 15cv1749-JO-AGS and 18cv1374-JO-AGS

27

1 ||that where the documents appear to have been created regularly pursuant to Defendants’

2 || business activities (e.g., export reports or financial presentations) and the accompanying

3 || declarations indicated that they were created at or near the time of the event, the business

4 ||records exception applies. For the above reasons, the Court overrules Plaintiffs’ hearsay

5 ||objections to the following exhibits because it concludes that the business records

6 ||exception to the hearsay rule applies: K. Archambault Declaration § 68; J.A. □□□□□□□

7 Exhibit BPWCP-1; S. Roveda Declaration Jf 10-11; J.A. 52-67, Chevron Exs. □□□□ J.A.

8 428-48, Phillips Exs. 1-3; J.A. 649-88, Phillips Ex. 24; P. Brooks Declaration □□□□ 26, 79;

9 806-13, Valero Ex. 15; G. Johnson Declaration J 7—8, 10.

10 5. Objections to Defendants’ Testimony Discussing Documents

11 Fifth, the Court overrules Plaintiffs’ objections to testimony discussing documents

12 ||to the extent those objections are based on a misapprehension that the best evidence rule

13 || imposes a blanket prohibition on such testimony. That is not the case. The best evidence

14 provides that “[iJn proving the contents of a writing,” the original is required unless

15 ||certain exceptions apply. Fed. R. Evid. 1002. For the most part, the declarants’ references

16 ||to documents were not attempts to prove the contents of those documents but were

17 ||comments upon state of mind or beliefs about the contents. In addition, most of the

18 ||documents referenced are already in the record. In other cases, declarants were simply

19 || testifying to their personal knowledge and do not reference documents, let alone attempt

20 ||to prove their contents. For these reasons, the Court overrules Plaintiffs’ best evidence

21 || objections to the following pieces of evidence: K. Archambault Declaration {{] 35, 66, 67,

22 ||69-70; J. Yomtoob Declaration ff 16-17, 22, 24; C. Yates Declaration {J 25, 35, 56; H.

23 || Henderlite Declaration §¥ 23, 25, 30; J. Hodgson Declaration Jf 9, 13-14; N. Weinberg-

24 ||Lynn Declaration 10, 13-14; R. Sharum Declaration ff 11, 17, 19, 20, 23, 25—28, 30—

25 19

26 15cv1749-JO-AGS and 18cv1374-JO-AGS

27

1 ||33; D. Smith Declaration § 3; J. Marino Declaration {fj 4, 10-15; J. Harris Declaration

2 |199 19, 21-24, 26; S. Rodrick Declaration {{ 7, 9-10; P. Brooks Declaration {J 36, 88; L.

3 || Lockhart Declaration J§ 42, 43-45, 47; R. Pluimer Declaration §§ 6, 11; G. Johnson

4 || Declaration § 7-8, 10.

5 6. Objections to Declarations Containing Improper Legal Conclusions

6 Finally, turning to Plaintiffs’ objections regarding improper legal conclusions, such

7 ||objections are unnecessary because the Court only considers facts contained in

8 ||declarations, not legal conclusions or argumentative statements. “[S]tatements in

9 || declarations [containing] improper legal conclusions, or argumentative statements . . . will

10 || not be considered on a motion for summary judgment. Objections on any of these grounds

11 simply superfluous in this context.” Burch v. Regents of Univ. of Cal., 433 F. Supp. 2d

12 1110, 1119 (E.D. Cal. 2006). Plaintiffs objected to Defendants’ declarations containing

13 || statements such as, that a decision was “in furtherance of individual businesses interest,”

14 a sale was in a Defendant’s “economic interest,” that an action was “economically

15 rational,” that a trade was “not a wash trade,” or that “Plaintiffs are wrong.” See, e.g., K.

16 || Archambault Declaration § 27; R. Sharum Declaration § 12; S Rodrick Declaration { 10.

17 || The Court agrees that these types of statements are not facts and therefore, the Court does

18 consider them. Nonetheless, where a paragraph containing an improper legal

19 || conclusion is otherwise bookended by admissible statements, as is often the case here, the

20 Court has considered the admissible factual evidence but disregarded the improper legal

21 ||conclusions and argumentative statements.

22 ||B. Defendants’ Evidentiary Objections

23 Plaintiffs submitted over 200 exhibits in support of their oppositions to summary

24 judgment. See Dkts. 619-3—16, 689-2—4, 697-1, 781-2 (“Pltfs. Exs.”). Defendants objected

a 20

26 15cv1749-JO-AGS and 18cv1374-JO-AGS

27

1 many of these exhibits on grounds of relevance, hearsay, and Plaintiffs’ failure to

2 ||identify certain documents in their interrogatory responses. See Dkt. 719-2. Defendants

3 ||also argued that Plaintiffs’ expert reports were inadmissible because they were unsworm

4 ||and unaccompanied by an affidavit. See id.

5 I. The Court Considers Only Relevant Evidence

6 First, the Court declines to rule on Defendants’ objections on the grounds of

7 ||relevance because it is unnecessary to resolve the motions before the Court. Relevance is

8 || duplicative of the summary judgment standard. Sandoval v. Cnty. of San Diego, 985 F. 3d

9 ||657, 665 (9th Cir. 2021). “[I]f evidence submitted on summary judgement could create a

10 || genuine dispute of material fact, it is, by definition . . . relevant,” and if it cannot create a

11 genuine dispute of material fact, “there is no need for the court to separately determine

12 || whether it is relevant.” Jd. Accordingly, the Court will not further address Defendants’

13 relevance objections.

14 2. Defendants’ Hearsay Objections to its own Statements

15 Second, the Court overrules Defendants’ hearsay objections to the extent that

16 || Defendants objected to evidence of their own statements, which is not hearsay. An out-of-

17 || court statement offered for its truth is not hearsay if a party’s own statement or their agent’s

18 || statement is being offered against them. Fed. R. Evid. 802(d)(2). A statement is admissible

19 this context when an employee of a defendant makes a statement in the scope of her

20 |}employment. Jd. at 802(d)(2)(D). Plaintiffs submitted evidence consisting of emails and

21 instant messages among Defendants’ employees discussing logistics, deals, and trades. See

22 ||Pitfs. Exs. 1-198. These statements appear to have been made in the context of

23 {;employment, and Defendants did not offer any basis for the Court to conclude otherwise.

24

25

26 15cv1749-JO-AGS and 18cv1374-JO-AGS

27

1 || Accordingly, the Court overrules Defendants’ hearsay objections to Plaintiffs’ exhibits that

2 || contain communications made by Defendants or their agents.®

3 3. Defendants’ Objections to Admitting Professor Severin Borenstein’s Blog Post

4 Third, the Court sustains Defendants’ objection to the blog post of Professor Severin

5 ||Borenstein on the ground that it is inadmissible hearsay. Pltfs. Ex. 2. In ruling on

6 Defendants’ objection, the Court considers whether the out-of-court statements contained

7 |\in the blog post are being offered for their truth and, if so, whether there is an applicable

8 ||hearsay exception. See Fed. R. Evid. 801, 803. In the blog post, Professor Borenstein

9 || opined on the causes of gas prices in California. See Pltfs. Ex. 2. In opposition to summary

10 judgment, Plaintiffs cited to Professor Borenstein’s blog and stated that he “demonstrated

11 ||that factors internal to refiners, not externalities, caused . . . higher prices,” and described

12 || his conclusions to support their own claims of anticompetitive conduct. See Opposition at

13 || 1-2; Pltfs. Ex. 2. Because Plaintiffs offered Professor Borenstein’s blog statements for

14 || their truth to bolster their own claims, the exhibit is inadmissible hearsay unless a hearsay

15 exception applies.

16 Although Plaintiffs did not argue that any hearsay exception applied, the Court

17 confirms that there is no applicable exception. The learned treatise exception to hearsay

18 ||permits treatises, periodical, or pamphlets if, (1) an expert relies upon it on direct

19 ||examination or it is called to the expert’s attention on cross-examination, and (2) the

20 || publication is established as a reliable authority. See Fed. R. Evid. 803(18); Diodem, LLC

21 || v. Lumenis Inc., 2005 WL 6220667, at *6 (C.D. Cal. Jan. 10, 2005) (discussing the dual

22 |j___— SSS

8 Except where the element of conspiracy is met with respect to Defendants in this opinion, the

24 || Court finds that the co-conspirator exception (allowing statements made by a party’s co-conspirator during

|| and in furtherance of the conspiracy to be cdmited agains the party) does not apply.

26 15cv1749-JO-AGS and 18cv1374-JO-AGS

27

1 ||requirements of Fed. R. Evid. 803(18)). This exception has not been established here;

2 therefore, the Court will not consider the blog post for its truth.

3 4. Documents Not Identified in Interrogatory Responses

4 Fourth, over Defendants’ objections, the Court will consider Plaintiffs’ evidence not

5 ||cited in their interrogatory responses because the Court does not have the necessary

6 information to exclude this evidence. Rule 26(e) requires a party to supplement discovery

7 ||responses “in a timely manner” when it learns that the response is incomplete or incorrect

8 ||and the information has not otherwise been made known to the opposing party. Fed. R.

9 || Civ. P. 26(e). Failure to comply with Rule 26(e) can result in the exclusion of evidence

10 unless the failure to supplement was substantially justified or harmless. Fed. R. Civ.

11 ||P. 37(c). Whether supplementation is timely under Rule 26(e) hinges on facts such as when

12 || the original disclosure was made, when a party discovered its response was incomplete,

13 || when the supplementation was made in relation to those events, etc. None of those facts

14 || are in the record, let alone facts that would aid the Court in determining whether a late

15 || disclosure was justified or harmless under Rule 37(c). Accordingly, on the present record,

16 Court overrules Defendants’ objections to exhibits not previously disclosed in

17 || Plaintiffs’ interrogatory responses.

18 5. Objections to Plaintiffs’ Expert Reports

19 Lastly, the Court overrules Defendants’ objections to Plaintiffs’ expert reports as

20 ||unverified because the reports have been sufficiently verified through deposition

21 ||testimony. Liebling v. Novartis Pharm. Corp., 2014 WL 12576619, at *1 (C.D.

22 Mar. 24, 2014) (collecting cases). “[F]or an expert opinion to be considered

23 summary judgment, it must be accompanied by a proper affidavit or deposition

24 || testimony; courts in the Ninth Circuit have routinely held that unsworn expert reports are

25

26 15ev1749-JO-AGS and 18cv1374-JO-AGS

27

1 inadmissible.” FNBN-RESCON I LLC v, Ritter, 2014 WL 979930, at *5 (D. Nev. Mar. 12,

2 2014) (citation and internal quotations omitted); King Tuna, Inc. v. Anova Food, Inc., 2009

3 || WL 650732, at *1 (C.D. Cal. Mar. 10, 2009) (expert report can be verified by deposition

4 summary judgment purposes). While these expert reports are unaccompanied by

5 ||declarations, the parties have submitted excerpted deposition testimony of Plaintiffs’

6 || experts that authenticates their reports. Defs. Exs. 3, 8, 9, 13-14, 22, 25-27. Based on the

7 || deposition testimony in the record, the verification requirement is met.

8 V. CONSPIRACY TO FIX PRICES

9 || A. Plausibility of Allegations

10 As a threshold matter, the Court considers whether Plaintiffs allege a plausible

11 ||theory of conspiracy that makes practical economic sense for the alleged conspirators.

12 || Matsushita, 475 U.S. at 596. Matsushita requires courts to engage in this analysis because

13 || “‘[t]he absence of any plausible motive [for Defendants] to engage in the conduct charged

14 ||is highly relevant to whether a ‘genuine issue for trial’ exists.” Jd.; Stanislaus, 803 F.3d at

15 ||1090 (“[w]e first analyze whether the alleged conspirators would have had a rational

16 || motivation to conspire”). The question is not whether Defendants would have a motive to

17 || conspire generally but whether Defendants would have a motive to conspire specifically in

18 || the way alleged by Plaintiffs. Matsushita, 475 U.S. at 577-82 (finding no rational motive

19 || under plaintiffs’ theory that 21 defendants conspired over a 20-year period to cut prices in

20 hopes of expanding their market share in the future—defendants had no incentive to

21 || suffer losses based on speculative future profits); see also Eastman Kodak Co. v. Image

22 || Tech. Servs., Inc., 504 U.S. 451, 468 (1992). This plausibility inquiry does “not introduce

23 ||a special burden on plaintiffs facing summary judgment in antitrust cases,” but merely

24

25 24

26 15cv1749-JO-AGS and 18cv1374-JO-AGS

27

1 || articulates “that the nonmoving party’s inferences be reasonable in order to reach the jury.”

2 || Kodak, 504 U.S. at 468.

3 Here, Plaintiffs allege that the eight Defendants engaged in a wide ranging

4 ||conspiracy ranging from 2011 to the present to fix prices at supracompetitive levels. See

5 || generally Opposition. According to Plaintiffs, Defendants orchestrated a multi-faceted

6 ||conspiracy that operated as follows: Defendants agreed to reduce supply, by cutting

7 || production and imports and increasing exports, in order to raise prices. See id. at 26-36.

8 || Pursuant to Plaintiffs’ theory of conspiracy, Defendants also engaged in deceptive acts—

9 || issued false statements about refinery maintenance and manipulated gas trades—to create

10 ||a public perception of demand and further drive supracompetitive pricing in California.

11 id. at 45-49. Defendants effected this conspiracy through frequent exchanges of

12 |isupply-related information concerning refinery maintenance, production, imports, and

13 exports. See id. 9-16. Defendants also cooperated to cover each other’s supply shortages

14 || by trading gas on the spot market and utilizing exchange agreements to trade barrels of gas

15 || with each other, instead of purchasing elsewhere at market rates. See id. at 9-16, □□□□□□

16 ||37—45, 49-50. Through these arrangements, Defendants consistently collaborated rather

17 || than competed with each other in times of need, such as after the Exxon refinery explosion.

18 || See id. at 22-24, 49-52.

19 The Court concludes that Defendants would have a rational economic motive to

20 into the type of conspiracy alleged by Plaintiffs. Limiting supply and manipulating

21 public facing information are economically rational ways to increase demand and, thus,

22 || prices—even more so, because Defendants themselves would remain protected by a high

23 of collaboration (exchange agreements, coordinated spot-market trading, and

24 ||information sharing) that enabled them to anticipate market conditions, meet their own

25

26 15cv1749-JO-AGS and 18cv1374-JO-AGS

27

1 || supply needs, and avoid purchases at the high prices they created. In sum, Plaintiffs’ theory

2 ||that Defendants kept supply low and drove prices high, while implementing protections

3 || that kept their own costs and supply risks low, makes economic sense. The Court cannot,

4 || therefore, conclude that Plaintiffs’ conspiracy theory is economically implausible such that

5 should require Plaintiffs to “come forward with more persuasive evidence to support

6 claim than would otherwise be necessary.” Matsushita, 475 U.S. at 587.

7 While Defendants would certainly have an economic motive to act in the manner

8 |lalleged by Plaintiffs, that alone cannot establish an antitrust violation. Antitrust

9 || wrongdoing consists of concerted action pursuant to an illegal agreement, not independent,

10 || profit maximizing actions based on market conditions. See Citric Acid, 191 F.3d at 1105—

11 ||06. Thus, the Court turns to whether the evidence supports the inference that Defendants

12 pursuant to an agreement. Under Matsushita, unless Plaintiffs’ evidence tends to

13 ||exclude the possibility of independent action, it cannot raise a reasonable inference of

14 ||conspiracy. 475 U.S. at 588.

15 ||B. Plaintiffs Have Not Submitted Direct Evidence of a Price-Fixing Conspiracy

16 While both direct and circumstantial evidence can serve to create a triable issue on

17 ||conspiracy, it appears that Plaintiffs have only submitted circumstantial evidence in their

18 ||opposition. Direct evidence “is explicit and requires no inferences to establish the

19 || proposition or conclusion being asserted,” while circumstantial evidence requires one or

20 ||more inferential steps to reach a conclusion of conspiracy. Citric Acid, 191 F.3d at 1094

21 (quoting Jn re Baby Food Antitrust Litig., 166 F.3d 112, 118 (3d Cir.1999); Toscano v.

22 || Pro. Golfers Ass’n, 258 F.3d 978, 983 (9th Cir. 2001). For instance, conversations among

23 Defendants explicitly confirming their agreement would constitute direct evidence, while

24 |lambiguous conversations among Defendants that require an inference to conclude

25 26

26 15cv1749-JO-AGS and 18cv1374-JO-AGS

27

1 |}agreement would be circumstantial evidence. Compare Markson v. CRST Int'l, Inc., 2022

2 || WL 790960, at *13 (C.D. Cal. Feb. 24, 2022) (“conversations between Defendants

3 ||confirming their agreements not to hire truckers” was direct evidence), with In re Dynamic

4 || Random Access Memory Antitrust Litig., 2007 WL 9752971, at *6—-8 (N.D. Cal. Feb. 20,

5 ||2007) (emails referencing “secret meetings” and comments regarding productions cuts

6 ||required inferences to conclude agreement and thus was not direct evidence). Here,

7 || Plaintiffs do not purport to submit evidence of conversations, emails, or other documents

8 || that would directly establish that Defendants entered into an agreement with one another.’

9 || Instead, their briefing focuses on circumstantial evidence of parallel conduct and plus

10 || factors to establish a genuine dispute as to conspiracy. See Opposition at 8—9; Toscano,

11 1/258 F.3d at 985. As Plaintiffs have submitted no direct evidence, the Court will turn to

12 ||whether the circumstantial evidence submitted by Plaintiffs is sufficient to raise an

13 || inference of conspiracy.

14 ||C. Plaintiffs Have Raised a Genuine Dispute of Material Fact as to Conscious

15 Parallelism

16 In considering the circumstantial evidence submitted by Plaintiffs, the Court first

17 examines whether Plaintiffs have raised a triable issue of fact that Defendants engaged in

18 conscious parallelism, before turning to an analysis of “plus factors.” Defendants argue

19 ||that there is no genuine dispute of material fact as to conscious parallelism because

20 || Plaintiffs have failed to submit evidence of parallel pricing or other parallel conduct. See

21

22

23

” The only mention Plaintiffs make of the concept of direct evidence is that “[e]ven if Plaintiffs’

24 evidence is not considered direct evidence of the conspiracy, it nevertheless tends to exclude the

25 possibility” of independent conduct. Opposition at 9 (citation omitted).

27

26 15cv1749-JO-AGS and 18cv1374-JO-AGS

27

1 719 (“Joint Reply”) at 7-8. As discussed above, while parallelism is not alone

2 ||sufficient to show conspiracy, it is a relevant factor in addition to plus factors.

3 Parallelism exists when “competitors adopt[] similar policies around the same time

4 response to similar market conditions.” Musical Instruments, 798 F.3d at 1193.

5 || Plaintiffs can point to parallel prices to demonstrate conscious parallelism. Brooke Grp.,

6 U.S. at 227 (“[C]onscious parallelism, describes the process, not in itself unlawful, by

7 || which firms in a concentrated market might in effect share monopoly power, setting their

8 || prices at a profit-maximizing, supracompetitive level.”). Plaintiffs can also point to similar

9 || business behaviors to demonstrate conscious parallelism. Musical Instruments, 798 □□□□

10 1193 (defining parallel conduct as the adoption of “similar policies”); Zoslaw v. MCA

11 || Distrib. Corp., 693 F.2d 870, 884 (9th Cir. 1982) (considering whether defendants’

12 ||“account classifications, pricing structures and promotional policies” were sufficiently

13 similar to demonstrate parallel conduct). For instance, in Petruzzi’s IGA Supermarkets,

14 || Inc. v. Darling-Delaware Co., the Third Circuit found that, although “defendants did not

15 the same prices,” they “acted similarly by refraining from competing” on certain

16 || accounts and retaliating against competitors that did compete on accounts. 998 F.2d 1224,

17 || 1243 (3d Cir. 1993).

18 Plaintiffs here point to a mix of similar pricing and other parallel business conduct

19 demonstrate conscious parallelism. With respect to pricing, Plaintiffs point to a

20 ||combination of evidence obtained in discovery and from publicly available documents

21 suggesting that, (1) in 2015 and 2016, Shell based its “at the rack” prices in part on the

22 prices of Exxon, BP, and Chevron; (2) in 2016, Phillips 66 based its Dealer Tankwagon

23 prices in part on a brand average of the prices of Chevron, Shell, Tesoro, and non-

24 || Defendant Mobil; and (3) from January 2015 to May 2017, the Dealer Tankwagon prices

25 28

26 15ev1749-JO-AGS and 18cv1374-JO-AGS

27

1 ||of Chevron, Shell, and Valero were within approximately twenty cents of one another in

2 ||Richmond, California. See Dkt. 781-2 (“Surreply”) at 2, 4-5; Pltfs. Ex. 211 at

3 ||PSXPGI00089880; Pltfs. Ex. 212 at slide 25; Ex. Shell 1 at SOPUS_PGI_00002699. In

4 || addition, some of the evidence submitted by Defendants allows for an inference of follow-

5 ||the-leader pricing, one common form conscious parallelism. See, e.g., Musical

6 || Instruments, 798 F.3d at 1195. Five of the eight Defendants admitted that they regularly

7 ||monitored one another’s prices through services such as OPIS and factored that

8 ||information into their own pricing. See, e.g., J. Hodgson Declaration 11-15, □□□□□□ P.

9 || Brooks Declaration § 96; K. Archambault Declaration ¥ 59; J. Harris Declaration 6; M.

10 ||O’Neal Declaration 3.

11 In addition to the above evidence of parallel pricing, the evidence in the record also

12 ||suggests that Defendants engaged in other parallel actions. Defendants had common

13 reactions to market events, including selling gas to Exxon following its 2015 explosion,

14 ||increasing exports of gas out of California over the class period, and limiting gas

15 ||inventories at their respective refineries. See Pltfs. Ex. 200; C. Yates Declaration □□ 35—

16 ||36; N. Weinberg-Lynn Declaration 15-16; S. Roveda Declaration § 13; R. Sharum

17 || Declaration 9] 30-33; C. Dickson Declaration JJ 11—12; M. Perez Declaration □□ □□□□□□

18 Lockhart Declaration 430; P. Brooks Declaration 38-40, 90; T.A., E. Pestano

19 || Declaration J 42.

20 The Court finds that the foregoing evidence sufficiently raises a genuine dispute of

21 ||material fact that Defendants engaged in conscious parallelism. Both conscious

22 || parallelism—where players in a concentrated market independently mirror one another’s

23 prices or take similar profit maximizing actions—and illegal conspiracy to fix prices can

24 || result in high prices, but only the latter violates antitrust law. Because conduct as consistent

25 29

26 15ev1749-JO-AGS and 18cv1374-JO-AGS

27

1 legal conscious parallelism as with illegal conspiracy is insufficient to support a

2 ||reasonable inference of conspiracy, Matsushita, 475 U.S. at 587-88, the Court turns to

3 || Plaintiffs’ ten categories of plus-factor evidence to determine if any evidence “tends to

4 |; exclude the possibility of independent action.” Jd. at 588.

5 Plaintiffs’ Plus Factors

6 After concluding that Plaintiffs have introduced circumstantial evidence of parallel

7 ||conduct among the Defendants, the Court turns to an examination of the “plus factors” that

8 || Plaintiffs contend demonstrate Defendants’ illegal price fixing conspiracy. In all, Plaintiffs

9 || argue that ten categories of Defendants’ behavior evidence their wide-ranging, price fixing

10 ||conspiracy: (1) refineries cooperated with one another through exchange agreements to

11 cover each other’s supply shortages against self-interest; (2) traders frequently exchanged

12 ||confidential supply-related information against Defendants’ self-interest; (3) refineries

13 ||restricted production levels and maintained low inventories to reduce overall gas supply;

14 ||(4) refineries prevented gas imports into California to reduce overall gas supply;

15 ||(5) refineries exported gas out of California to reduce overall gas supply; (6) refineries

16 || protected Exxon after its refinery explosion in 2015 by selling it gas rather than competing

17 ||for its market share; (7) refineries manipulated the market through a “gentleman’s

18 ||agreement” to limit trading hours; (8) traders manipulated the market by entering “wash

19 || trades” to create a false sense of market demand; (9) traders manipulated the market by

20 ||selectively reporting trades to OPIS to raise public facing gas prices; and (10) refineries

21 manipulated the market by making false public statements about refinery maintenance to

22 create a fabricated sense of market scarcity.

23 The Court will examine each category of allegedly conspiratorial conduct under the

24 || Ninth Circuit’s two-step framework for determining whether circumstantial evidence can

25 30

26 15cv1749-JO-AGS and 18cv1374-JO-AGS

27

1 |icreate a reasonable inference of conspiracy. Citric Acid, 191 F.3d at 1094. For each

2 ||category, where Defendants meet their Step One burden to offer plausible and justifiable

3 |lreasons for their conduct consistent with proper business practice, the Court will consider

4 whether Plaintiffs have pointed to any evidence at Step Two that tends to exclude the

5 || possibility of independent conduct. Jd. Finally, the Court will consider the totality of

6 Plaintiffs’ evidence across all ten categories to determine whether they have successfully

7 ||raised an inference of conspiracy. Id. at 1097, 1106.

8 1. Cooperation Through Exchange Agreements

9 Plaintiffs contend that Defendants widely used exchange agreements to further their

10 || price fixing conspiracy. See Opposition at 37-45. The record shows that Defendants, with

11 ||the exception of Alon, entered into multiple bilateral exchange agreements with one

12 || another over the past twenty years or more to exchange fuel on a barrel-for-barrel basis.

13 || Joint Statement § 22; Pltfs. Exs. 114-28.!° Plaintiffs explain that exchange agreements

14 || allowed for geography-based exchanges of fuel, where a refinery provides fuel to another

15 one location and receives those barrels back in different location. See Opposition at 38.

16 || Exchange agreements also allowed a refiner to provide barrels today to have them returned

17 |jat a later date. See id. Plaintiffs argue that Defendants used exchange agreements to

18

19

20 |]

21 10 For instance, Exxon executed exchange agreements with Chevron in 2005, Phillips 66 in 2007,

77 Tesoro in 2012, and Shell in 2013. Pltfs. Exs. 114-15, 118, 128. In addition, Chevron executed exchange

agreements with Valero in 2006 and 2014, Tesoro in 2002 and 2015, and BP in 2013 (Pltfs. Exs. 116-17,

23 || 119-20, 124); Phillips 66 executed exchange agreements with Shell in 2011 and 2012, Valero in 2012,

and BP in 2015 (Pltfs. Exs. 121-23, 125); Tesoro executed exchange agreements with Shell in 1999 and

24 || Valero in 2013 (Pltfs. Exs. 126-27). Many of these agreements were amended throughout the years. See

25 Pltfs. Exs. 114-28.

31

26 15cv1749-JO-AGS and 18cv1374-JO-AGS

27

1 transfer large amounts of product to one another with little formality and that this evidences

2 ||}conspiracy because such behavior is inconsistent with competition. See id. at 39-40.

3 Defendants rebut these allegations by explaining that they independently entered

4 exchange agreements for self-interested business reasons—because they are

5 convenient, cost-saving, and allow for geographical competition. Defendants explain that

6 || these agreements enabled them to meet supply needs in specific geographical areas without

7 || physically transporting gas to locations where they did not have a refinery. See, e.g., Joint

8 || Statement J 22; C. Yates Declaration J 51.!! By enabling companies to receive gas in one

9 || location and return the gas in kind in another location, exchange agreements allowed

10 |/refineries to expand the geographic reach of their operations at lower costs or in areas

11 || where they otherwise would not be able to compete. See id Defendants also state that

12 used exchange agreements to quickly cover shortages and meet supply obligations,

13 || without having to buy barrels at market prices. See, e.g., K. Archambault Declaration

14 || 63, 66-70; C. Yates Declaration {§ 50—-52.'? They provide testimony that convenience-

15 || based exchange agreements helped them prevent supply shortages and disruptions without

16 |/incurring the costs of maintaining large inventories. See id. According to the terms of

17 ||Defendants’ exchange agreements, any imbalances remaining after the parties swapped

18 || barrels back and forth were usually settled monthly in cash. See, e.g., Pltfs. Exs. 114-28.

19 || By explaining that exchange agreements allowed them to save time and money transporting

20 || fuel, expand geographical reach, and cover supply shortages at lower cost and lower risk,

21

23 1! See also J. Harris Declaration §§ 21-22; R. Sharum Declaration § 20; P. Brooks Declaration

24 See also R. Sharum Declaration § 23; J. Harris Declaration §{ 21—24; P. Brooks Declaration

82-83, 86-88; T.A. 338-342, E. Pestano Dep. at 32:13-15, 38:17-19, 39:7—-14, 46:3-11.

25 32

26 15¢v1749-JO-AGS and 18cv1374-JO-AGS

27

1 || Defendants have offered plausible, justifiable, and self-interested business reasons to enter

2 exchange agreements.

3 Plaintiffs argue that these agreements are inherently against self-interest because a

4 || refiner has no incentive to loan to competitors in times of need instead of leveraging that

5 ||need to gouge them on prices.'? In support of this argument that exchange agreements

6 || were against self-interest, Plaintiffs highlight two instances of swaps performed at

7 || inequivalent values (e.g., Phillips 66 loaned barrels when the spot market price was $1.79,

8 Shell returned the barrels a few days later when the spot price was $1.72). See Pltfs.

9 || Exs. 147-50. While this evidence could support the conclusion that these two transactions

10 || in isolation were not profit maximizing for one of the parties, see Pltfs. Exs. 147—50,"4 the

11 value of any single, in-month transaction is not sufficient to raise an inference that

12 exchange agreements, which enable dozens of transactions between two parties over a year

13 ||or more, are not profitable for Defendants overall. See, e.g., Pltfs. Ex. 145. Plaintiffs’

14 || argument would hold true only if exchange agreements went one way and benefited only

15 party. The central premise of these exchange agreements, however, is that they

16

17 || ————

18 3 Plaintiffs point to an instance of a Shell employee explaining that “[t]he whole point of the

19 || convenience exchange is to help each other out volumetrically without adverse financial impact.” □□□□□□

Ex. 139. This statement, made in the context of a price negotiation to settle remaining balances, captures

20 || the mutually beneficial essence of exchange agreements. See id.

4 In Exhibit 147, Shell requested product from Phillips 66 under an exchange agreement and

21 Phillips 66 agreed to supply up to a certain amount and be paid back five days later. Plaintiffs highlight

77 that Shell received product on a day when gas prices were $1.79/gallon and ultimately returned product

to Phillips 66 five days later when gas prices were $1.72/gallon. See Pltfs. Exs. 148-49. Plaintiffs ignore

23 || the fact that Defendants entered into an agreement not knowing what the price would be five days later.

Exhibit 150 shows that Shell used an exchange agreement with Valero to cover a shortage and noted that

24 || the value of the swap was “29k.” See Pltfs. Ex. 150.

25 33

26 15¢v1749-JO-AGS and 18cv1374-JO-AGS

27

1 || facilitate reciprocal exchanges over extended periods of time: the party giving one day will

2 || be the receiving party the next day, when its time of need arises. The Court therefore finds

3 ||that Defendants have offered sufficiently plausible, legitimate, and self-interested business

4 ||reasons to enter into mutually beneficial, long-term exchange agreements to reduce their

5 and costs. Accordingly, Defendants meet their Step One burden.

6 While these types of agreements can be misused as part of an unlawful conspiracy,

7 || without more, this Court cannot conclude that exchange agreements, in and of themselves,

8 ||raise a reasonable inference of conspiracy. This Court is mindful that other courts have

9 ||emphasized the procompetitive features of exchange agreements. In Aguilar v. Atl.

10 || Richfield Co., a consumer brought a class action alleging that gas companies had conspired

11 restrict the output of CARBOB and pointed to exchange agreements as a plus factor. 25

12 4th 826 (2001).!° In concluding that these agreements did “not even imply collusive,

13 ||rather than independent, action,” the court stated that: “exchange agreements have long

14 recognized as procompetitive in purpose and effect, enabling or facilitating

15 ||companies to compete in product and/or geographical and/or temporal markets in which

16 otherwise could not or would not compete as efficiently or at all.” Jd. at 834; see also

17 || Blue Bell Co. v. Frontier Ref. Co., 213 F.2d 354, 359 (10th Cir. 1954); Thomas v. Amerada

18 || Hess Corp., 393 F. Supp. 58, 72 (M.D. Pa. 1975); Indep. Iron Works, Inc. v. U.S. Steel

19 || Corp., 322 F.2d 656, 666-67 (9th Cir. 1963) (business transactions between competitors,

20 || without more, do not allow for an inference of conspiracy). Absent evidence of misuse,

21 ||courts have uniformly rejected the argument that exchange agreements in the gas industry

22

234 ©)

24 'S The Court in Aguilar addressed the plaintiff's § 1 Cartwright Act claim, which it noted “is

5 analogous to section | of the Sherman Act.” 25 oe at 838.

26 15ev1749-JO-AGS and 18cv1374-JO-AGS

27

1 || are per se vehicles for coconspirators to exchange favors. See, e.g., Aguilar, 25 Cal. 4th at

2 ||863-64. The Court therefore turns to whether Plaintiffs have provided evidence of such

3 || misuse.

4 The additional evidence that Plaintiffs offer regarding exchange agreements at Step

5 does not tend to exclude the possibility of independent action. First, Plaintiffs offer

6 ||no evidence to substantiate their claim that “enormous” quantities of gas changed hands

7 || pursuant to these agreements. See Opposition at 39. The only evidence Plaintiffs submit

8 ||in support of this statement is a Phillips 66 document with three numbers on it but no

9 || indication of what the numbers signify. See Pltfs. Ex. 130. Moreover, Phillips 66 and

10 || Valero provide additional context explaining that their exchange volumes were less than

11 |}3% and 1% of their annual volumes, respectively. See R. Sharum Declaration 26; P.

12 || Brooks Declaration 82.

13 Second, Plaintiffs contend that the friendly and informal nature of exchange

14 |/transactions, as seen in the following, raise questions about their non-competitive and

15 |/collusive nature: Defendants (1) often amended agreements to accommodate different or

16 || additional product; (2) on eight occasions, settled exchange balances years after the original

17 ||exchanges; and (3) referred to performance under the agreements as “help” and “favors”

18 |j/or “borrowing” gas, which was “appreciated.” See Pltfs. Exs. 157-60 (referring to

19 || performance as “help” and “favors”; see also Pltfs. Exs. 161—64 (referring to performance

20 ||as “borrowing” gas).!° The Court agrees this evidence underscores the cooperative and

21

22) ©

23 '6 See also Ex. 133 (2011: Valero and Exxon informally add sub-octane to agreement); Ex. 134

(2014: Chevron and Tesoro amend to extend time frame); Ex. 144 (2012: BP and Phillips 66 “liquidate

24 || balances from old contracts” from prior five years); Ex. 145 (2012: BP and Valero settle exchange

25 balances); Ex. 141 (2013: Shell and Exxon “liquidated all aged balances... both active and inactive”

35

26 15cv1749-JO-AGS and 18cv1374-JO-AGS

27

1 || interdependent nature of exchange agreements but does not find that it adds dimension that

2 ||supports an inference of conspiracy. Given that the purpose of exchange agreements is to

3 ||mutually benefit the parties by meeting each other’s supply needs as they arise, allowing

4 || flexible contract amendments between participants could be consistent with furthering that

5 |}common goal. Furthermore, the language of “help” and “favors” could simply be

6 consistent with collegial language used in the context of the cooperative partner-supplier

7 ||relationships created by these agreements.

8 Plaintiffs also point to evidence of eight instances where Defendants did not settle

9 imbalances in the thousands of barrels until years after the swaps were made as evidence

10 |/of collusion. In light of the evidence that Defendants commonly produced hundreds of

11 || millions to billions of barrels per year, these are de minimis amounts. See, e.g.,C. Dickson

12 || Declaration {{ 6, 21 (Exxon refinery capacity was over | billion gallons per year); R.

13 ||Sharum Declaration { 28 (Phillips 66 refinery typically produced over 3 million gallons

14 || per day); see also Plitfs. Exs. 136-37, 139-41, 143-46. As these actions could be consistent

15 || with Defendants’ self-interest in flexible administration of mutually beneficial exchange

16 ||agreements or delayed bookkeeping of de minimis amounts, they do not tend to exclude

17 || the possibility of independent action.

18

19

20 |

21 || from 2012 totaling approximately 18,000 gallons); Ex. 146 (2014: Exxon tells Tesoro it cannot deliver

79 product to settle exchange balance and so pays); Exs. 136-37 (2014: Phillips 66 and Chevron settle

“inactive outstanding balances”); Ex. 142 (2015: Chevron and Valero amend to transfer “old

93 || product .. . to the active product”); Ex. 143 (2015: Phillips 66 and Exxon “clean up inactive balances” of

approximately 25,000 barrels from prior three years); Ex. 135 (2015: Valero and Shell negotiate

24 || amendment); Exs. 139-40 (2017: Chevron and Shell settle balances totaling $154,949.51 from prior three

years). 36

26 15ev1749-JO-AGS and 18cv1374-JO-AGS

27

1 Because the behavior that Plaintiff points to is “as consistent with permissible

2 ||competition as with illegal conspiracy,” it does not support an inference of antitrust

3 ||conspiracy. Matsushita, 475 U.S. at 588. Based on the above, the Court cannot conclude

4 || that Plaintiffs’ evidence concerning exchange agreements raises a reasonable inference of

5 conspiracy.

6 2. Exchanges of Information Among Traders

7 Plaintiffs point to interfirm exchanges of information among Defendants’ traders as

8 ||the main driver of Defendants’ alleged conspiracy. See Opposition at 9-16. California

9 ||refineries employ traders to buy and sell gas products on the spot market to meet refinery

10 |isupply needs. Joint Statement 921; McCullough Report §22 (describing trader

11 || transactions as “like a farmers’ market where farmers buy and sell potatoes to each other”).

12 || These traders buy and sell with traders at other refineries and third-party trading firms on

13 || behalf of the refineries that employ them. Joint Statement J 21; Lipow Report □ 20, 31;

14 ||McCullough Report 722. For example, traders will buy or sell in response to their

15 refineries’ supply conditions and either buy to ensure the refinery has enough product to

16 its contractual obligations (such as in the case of an outage), or sell in the market to

17 |}ensure that any excess product does not slow down refinery production. See, e.g., Lipow

18 || Report Jf 20, 22, 26; K. Archambault Declaration 28-30; C. Yates Declaration □ 54.

19 || Neither party disputes that the California trading market is characterized by a handful of

20 |}companies, and thus, traders are repeat players that are familiar with one another and buy

21 ||and sell from each other on a regular basis. See Lipow Report 7 31; McCullough Report

22

23

24

25 37

26 15ev1749-JO-AGS and 18cv1374-JO-AGS

27

1 || 99 20, 66.'’ Traders, therefore, regularly communicate with each other at trade association

2 ||events, as well as by phone, email, and messaging platform in the course of performing

3 || their duties. See McCullough Report ¥ 50.

4 Although the parties agree that traders must communicate to execute transactions,

5 Plaintiffs contend that Defendants’ traders consistently and inappropriately shared

6 ||confidential information regarding refinery maintenance, production, and supply in

7 || furtherance of a conspiracy. See Opposition at 9-16. For instance, Plaintiffs take issue

8 || with the fact that traders exchanged information like the following: In one conversation on

9 || April 17, 2012, BP’s trader asked if Shell’s trader had “27kb of pnw premium,” explaining

10 he needed the product because BP’s refinery was running a unit “at min rates until

11 may in order to build ls vgo inventory back to safety stock level.” Pltfs. Ex. 43.

12 || According to Plaintiffs, rather than just simply asking for the amount of gas needed, this

13 ||trader exchanged gratuitous and confidential supply information about BP’s refinery

14 || against self-interest. Dkt. 809 at 42-44. Plaintiffs point to various trader exchanges like

15 ||the above that occurred at trade association events and during trading communications as

16 || evidence of conspiracy. See, e.g., Pltfs. Exs. 6, 8-12, 19-20, 35-44, 46-50, 52, 192-93.

17 In order to meet their Step One burden of producing plausible and justifiable reasons

18 || for their actions, Defendants offer evidence that traders exchanged information, while

19 || buying and selling gas products to each other, as customers and suppliers. Defendants

20 || explain that although the refineries’ overall business model was premised on competition,

21 traders had very different roles: they acted as customers and suppliers that needed to

22

23 © |

24 17 See also C. Yates Declaration § 56; R. Pluimer Declaration § 6; M. Perez Declaration 10; L.

15 Lockhart Declaration 4, 36-37 38

26 15cv1749-JO-AGS and 18cv1374-JO-AGS

27

1 || cooperate because they conducted repeat business with one another. See, e.g., R. Pluimer

2 || Declaration § 6; M. Perez Declaration { 10.'® Defendants assert that, in this context, traders

3 ||shared information for strategic advantage—to build rapport and actively foster additional

4 ||trading opportunities. See, e.g., H. Henderlite Declaration § 16; R. Pluimer Declaration

5 1/99 5-7.'° Defendants also note that traders were communicating already public

6 information about refinery maintenance and import and export schedules to explain their

7 ||needs for buying or selling, rather than divulging confidential information. See, e.g., P.

8 || Brooks Declaration {§ 32, 36, 75; J. Yomtoob Declaration {J 15, 21 & n.4. Defendants

9 |; also submit that traders attended trade association events to stay informed on the industry

10 explore potential business opportunities rather than for conspiratorial purposes. See

11 ||K. Archambault Declaration J] 72, 74; J. Yomtoob Declaration 430.2? For example,

12 ||traders used these opportunities to discuss market conditions and develop business

13 ||relationships with other traders. See id.

14 Based on the above, the Court is satisfied that Defendants produced plausible and

15 justifiable business reasons for traders to share information with one another. Defendants

16 || provide evidence that traders needed to buy and sell gas from each other to meet their

17 refineries time-sensitive supply needs, and that they did so in a concentrated market with

18 || few players, meaning that the same traders conducted repeat transactions with each other.

19 || In this context, a reasonable juror could infer that traders shared information about their

20

21

29 18 See also P. Brooks Declaration 72; T.A., E. Pestano Declaration J 48, 50—51.

'9 See also J. Yomtoob Declaration § 13-15, 21, 24; C. Yates Declaration 956; R. Sharum

23 || Declaration J 19; L. Lockhart Declaration {J 4, 29, 36-37, 39-45; J.A. 587-93, Phillips Exs. □□□□□□

2° See also H. Henderlite Declaration J 19; C. Yates Declaration J 57; R. Pluimer Declaration □ 13;

24 || L. Lockhart Declaration §] 49-50; P. Brooks Declaration §{ 103, 105; C. Dickson Declaration § 71; M.

45 Perez Declaration § 17.

39

26 15cv1749-JO-AGS and 18cv1374-JO-AGS

27

1 respective refineries for self-interested reasons—in order to facilitate transactions, cultivate

2 |/relationships, and glean information for future trading opportunities. Armed with

3 knowledge of another trader’s supply needs, that trader is arguably better positioned to sell

4 |/to the other. In the same vein, disclosing one’s forward looking supply needs arguably

5 || better positions a trader to identify potential sources of product coverage. The Court also

6 || agrees that incidental sharing of already public information to explain the need to buy or a

7 without more, is consistent with legitimate business conduct. Overall, Defendants’

8 || evidence of the context and purpose of traders’ exchanges is consistent with what the Citric

9 || Acid court described as the legitimate practice of “[g]athering information about pricing

10 ||and competition in the industry.” 191 F.3d at 1098 (gathering information about other

11 |}producers did not allow for inference of conspiracy).”! Therefore, Defendants’

12 ||explanations meet their burden at Step One.

13 At Step Two, Plaintiffs submit dozens of communications among traders to attempt

14 ||to demonstrate that Defendants’ traders regularly exchanged confidential information, and

15 ||that such information was “widely dispersed” and reached the “highest echelons of

16 ||management.” See Opposition at 10-16. The Court has reviewed the communications

17 submitted by Plaintiffs and finds that they generally fall into three categories: (1) traders

18 two different companies exchanged refinery information in the context of a

19 transaction, (2) traders within one company shared information they obtained from an

20

|| ——_—_—_——__

22 21 See also Musical Instruments, 798 F.3d at 1196 (“participation in trade-organization meetings

93 || where information is exchanged and strategies are advocated does not suggest an illegal agreement”); see

also Pitfs Ex. 23 ((30(b)(6) witness for trade association testifying that traders discussing pricing at

24 informal meetings during a trade association event would not be problematic “if it’s a supplier and a

25 customer kind of a conversation’). 40

26 15ev1749-JO-AGS and 18cv1374-JO-AGS

27

1 || outside trader about another refinery, and (3) only one exchange where traders ultimately

2 || passed information up the chain-of-command as Plaintiffs allege.** The Court summarizes

3 ||these categories of evidence below before considering whether Plaintiffs meet their Step

4 || Two burden in light of these communications as a whole.

5 In the first category, Plaintiffs highlight communications between traders discussing

6 ||refinery maintenance, imports, and production that explicitly occurred in the context of

7 || executing or seeking to execute a transaction. For instance, on February 23, 2015, a Shell

8 ||trader asked whether Chevron could supply it in light of Shell’s “ongoing structural

9 ||demand.” See Pltfs. Ex. 41. Similarly, on December 2, 2015, BP’s trader told Shell’s

10 trader that he had “a fairly steady stream of barges coming in thru the month to both gatx

11 shell carson,” apparently in an effort to see if Shell had an interest in purchasing. Pltfs

12 11 at row 194801; see also Plitfs. Exs. 6, 11, 19-20, 40, 43-44, 52. In all of the

13 || foregoing, a trader from one company received information from a trader at another

14 || company regarding refinery maintenance, trading, or production in the context of securing

15 potential deal with that trader.

16 In the second category, Plaintiffs submit evidence of information exchanges between

17 || traders at different refineries that do not immediately appear to have occurred in the context

18 || of potential business transactions. The majority of these documents show traders internally

19 ||sharing information that they obtained from a trader at a different refinery. While it is

20 |/ unclear whether the information was originally obtained in the context of a sale, it appears

21 traders circulated this outside information internally to other traders, presumably to

22

24 22 The Court notes that Plaintiffs also submit communications in which traders speculate regarding

25 market conditions or third parties as discussed in detail at infra Section V.D.3.

41

26 15cv1749-JO-AGS and 18cv1374-JO-AGS

27

1 || facilitate their own work of buying and selling (i.e., identifying sources of supply or

2 ||potential buyers). For example, in one internal conversation between Tesoro traders on

3 ||March 17, 2017, a trader noted that he was “running out of options on who to buy from,”

4 the traders discussed that they could not buy from Valero because it was still

5 || undergoing maintenance and “traders indicat[ed] [Valero was] still struggling.” See Pltfs.

6 || Ex. 39; see also Pltfs. Exs. 10, 47, 192—93 (internally discussing the severity of other

7 ||refineries’ maintenance events).

8 The remaining conversations in the second category that Plaintiffs point to involve

9 || two traders from BP and Phillips 66; unlike the other trader communications submitted by

10 || Plaintiffs, these traders appear to also have exchanged potentially confidential export,

11 ||import, and supply information, in addition to refinery maintenance information. For

12 |/instance, on January 23, 2018, BP’s trader wrote an internal market update, noting that

13 ||“P66 also has a reformer TAR in Feb/March (pnc) that is unknown to the market.” Pltfs.

14 ||Ex. 48 at BPWC-PG-00039851; see also Plitfs. Exs. 8, 49-50 (discussing potentially

15 ||confidential information regarding maintenance, exports, and imports). The direct

16 || exchanges between BP and Phillips 66 may suggest something more nefarious, given that

17 ||the information shared was not clearly public. Where that information is then circulated

18 ||internally, however, it appears to be circulated solely to other traders, presumably for the

19 || purpose of aiding buying and selling. See, e.g., Pltfs. Ex. 48.

20 In the third and final category, Plaintiffs point to a single communication that

21 demonstrates that the information exchanged between traders was passed up the chain-of-

22 ||command to individuals responsible for production and pricing at Defendants’ refineries.

23 Opposition at 16. In an email dated March 7, 2015, Tesoro’s trader responded to an

24 |larticle that was sent to a large listserv regarding Exxon’s maintenance following an

42

26 15ev1749-JO-AGS and 18cv1374-JO-AGS

27

1 explosion at Exxon’s refinery in February 2015. See Pltfs. Ex. 35. Tesoro’s trader wrote:

2 || “[g]lood news—this report is erroneous.” Jd. The email does not clearly indicate the source

3 || of his knowledge.”’ Plaintiffs also submit evidence showing that the recipients of this email

4 || included high-level managers at Tesoro. See Pltfs. Exs. 36-38. Plaintiffs argue that, based

5 this exchange, a factfinder could reasonably infer that other information exchanges

6 || among traders were similarly passed up the chain-of-command.

7 Plaintiffs argue that these communications between traders prove that Defendants

8 || shared confidential information about their refinery operations and import/export decisions

9 ||against self-interest and in furtherance of a price fixing conspiracy. Turning to the

10 inferences that this evidence permits, the Court finds the information exchanges in the

11 |}record would not allow a reasonable juror to infer the wide ranging, eight-Defendant

12 ||conspiracy Plaintiffs seek to prove. The case law is replete with discussions on whether

13 exchanges of information are a plus factor tending to support conspiracy, and although no

14 || bright-line rules or tests emerges, the Court finds the following factors are relevant to the

15 || facts before it: (1) who is communicating and how frequently, see, e.g., Baby Food, 166

16 || F.3d at 121-22; (2) the proximity of the communications to pricing decisions, see, e.g., In

17 || re Flat Glass Antitrust Litig., 385 F.3d 350, 368-69 (3d Cir. 2004); and (3) the context and

18 || content of the communications, see e.g., Krehl v. Baskin-Robbins Ice Cream Co., 664 F.2d

19 || 1348, 1357 (9th Cir. 1982); In re Dairy Farmers of Am., Inc., Cheese Antitrust Litig., 60

20 ||F. Supp. 3d 914, 951 (N.D. Ill. 2014), aff'd 801 F.3d 758 (7th Cir. 2015).

21

22

23

*3 In their opposition, Plaintiffs claim that Tesoro also wrote that the information was “confirmed

24 || via several sources including the USWC XOM crude trader,” but that language is not reflected in Exhibit

3 || 35 and thus, is misquoted.

43

26 15cv1749-JO-AGS and 18cv1374-JO-AGS

27

1 The Court first addresses who is exchanging information and how often those

2 |}exchanges occurred. Exchanges of information among high-level executives who have

3 pricing authority bolster an inference of conspiracy, although “there must [also] be

4 ||evidence that the exchanges of information [actually] had an impact on pricing.”

5 || Stanislaus Food Prod. Co. v. USS-POSCO Indus., 2013 WL 595122, at *12 (E.D. Cal. Feb.

6 2013), aff'd, 803 F.3d 1084 (9th Cir. 2015) (quoting Baby Food, 166 F.3d at 125); In

7 \|\re Publ’n Paper Antitrust Litig., 690 F.3d 51, 65 (2d Cir. 2012) (holding circumstantial

8 || evidence supported conspiracy where presidents of two companies with pricing authority

9 || shared intentions to increase prices before those decisions had been publicly announced).

10 || On the other hand, exchanges of information among low-level employees without pricing

11 |/authority are generally not probative of conspiracy. Baby Food, 166 F.3d at 121-22.

12 || Nevertheless, exchanges of information between low-level employees can be probative of

13 || conspiracy where there is evidence that those employees routinely reported information up

14 || the chain-of-command. Jn re Static Random Access Memory (SRAM) Antitrust Litig., 2010

15 || WL 5138859, at *6 (N.D. Cal. Dec. 10, 2010). Distinguishing Baby Food, the court in

16 SRAM found that where exchanges between low-level employees were regularly reported

17 individuals with pricing authority, such conduct was more consistent with conspiracy

18 with unilateral conduct. Jd. at *7.

19 With these factors in mind, the Court turns to the trader conversations in the record.

20 || The volume of evidence that Plaintiffs submit suggests relatively frequent communications

21 || between Defendants’ traders. See, e.g., Pitfs. Exs. 8, 10-11, 19-20, 35, 39, 41-44, 46-47,

22

23

24

25 44

26 15cv1749-JO-AGS and 18cv1374-JO-AGS

27

1 64-65, 82, 169.24 However, frequency is not particularly probative of conspiracy in the

2 ||context of gas traders in California. Because these traders must communicate with one

3 || another to do their jobs and because there are a limited number of traders in the California

4 ||market, one would expect to see frequent communications among this small group.

5 || Moreover, the bulk of the communications took place between traders, low-level employees

6 || that did not have the authority to set rack prices or production levels. See In re Citric Acid Litig.,

7 || 191 F.3d at 1094. With regard to six of the Defendants—Chevron, Shell, Tesoro, Valero,

8 Exxon, and Alon—Plaintiffs can only point to one instance*> where information gained

9 || through trading was sent to higher-level employees and this evidence is ambiguous at best.

10 || See Pltfs. Ex. 35. In this instance, a Tesoro trader “replied all” to an article originally

11 circulated to a large listerv, stating, “this report is erroneous.” See id. Plaintiffs submit

12 || evidence to show that the recipients of this “reply all” included higher-up decisionmakers,

13 || although such decisionmakers appear to be included in the “reply all” because they were

14 recipients of the original email circulating the article. See id.*°

15 Plaintiffs’ evidence regarding communications between BP and Phillips 66 present

16 different picture. The traders of these two companies appear to have repeatedly

17

18

19 24 Some of the communications Plaintiffs submit are with unidentified third parties that may be

non-Defendants, which suggest little about an agreement between Defendants in this case. See, e.g., Pltfs.

20 || Ex. 9 (Valero trader and “dan_rnr”); Pitfs. Ex. 65 (Shell trader and “toddktk@YAHOO”).

25 Although the Court is not obligated to mine the record for evidence Plaintiffs do not point to in

21 |! their briefing, the Court has identified an additional instance where information may have been passed up

27 the chain-of-command. See Pltfs. Ex. 65 (Valero trader to Shell trader: “go tell your supply group that

gas in the bay is getting tight”; no further context or reply). This single message without a reply does not

23 || indicate whether information actually was reported up the chain-of-command. See id.

26 The Court also notes that Plaintiffs’ Exhibit 35 is the only piece of evidence that Plaintiffs have

24 || supported by submitting additional evidence showing that the recipients of the email held particular job

roles. See Pltfs. Exs. 36-38.

45

26 15ev1749-JO-AGS and 18cv1374-JO-AGS

27

1 ||}communicated potentially confidential information to each other and then passed that

2 ||information to production decision-makers. See, e.g., Pltfs. Ex. 8 (discussing imports,

3 || future projections, and production decreases); Pltfs. Ex. 48. For example, on December

4 || 18, 2017, BP’s trader asked, “you guys seein run cut incentive yet in LA,” and Phillips 66’s

5 ||trader responded, “yes indeed. Bay and LA.” Pltfs. Ex. 8 at rows 5832-33. On the same

6 || day, BP’s trader wrote an internal marketing update to other BP traders, stating in part that

7 does confirm to us that they are trimming runs.” Pltfs. Ex. 48 at BPWC-PG-

8 ||00039857. Plaintiffs also emphasize that BP’s trader testified at his deposition that he

9 || considered “run cuts” to be private information at BP. Pltfs. Ex. 74 at 228:9-229:19. These

10 ||documents reflect that Phillips 66’s trader disclosed the company’s internal, and perhaps

11 ||confidential, decision to decrease production levels (referred to as cutting or trimming

12 ||“‘runs”) with BP’s trader. This evidence of confidential exchanges is coupled with

13 || declarations from BP’s and Phillips 66’s traders admitting that, at times, they shared such

14 |/information with their respective production departments for the purpose of taking

15 || advantage of predicted market shortages.”’

16 Based on the above, the evidence does not suggest the eight-Defendant conspiracy

17 Plaintiffs urge. Given that frequency alone is not particularly probative of conspiracy

18 this context, as described above, the Court focuses on whether Plaintiffs have pointed to

19 ||evidence to support their argument that traders “widely dispersed” information gleaned

20 || during trading to the “highest echelons of management.” Opposition at 16. Plaintiffs have

21

23 27 See J. Yomtoob Declaration 25 (information “may sometimes be transmitted to BP’s supply

and refinery planning teams to determine whether there is an opportunity to supply counterparties”); L.

24 || Lockhart Declaration § 47 (‘on occasion, I discussed with our California refineries whether they could

25 increase production of CARBOB” based on trader (emphasis omitted).

26 15ev1749-JO-AGS and 18cv1374-JO-AGS

27

1 || pointed to no evidence that Chevron, Shell, Valero, or Alon passed trading information up

2 chain-of-command. Plaintiffs have pointed to one ambiguous instance involving

3 || Tesoro and Exxon where this may have occurred. See Pltfs. Ex. 35. No reasonable juror

4 |icould conclude based on this scant and ambiguous evidence that traders for each of the

5 |leight Defendants regularly passed information up the chain-of-command. Even

6 ||considering BP’s and Phillips 66’s admissions that they occasionally shared trading

7 ||information with their refineries’ supply teams (evidence that Plaintiffs do not point to but

8 the Court has read and considered), this evidence does not implicate any of the six

9 ||remaining Defendants such that a reasonable juror could infer an eight-Defendant

10 || conspiracy.

11 Next, the Court considers the proximity of the information exchanges to pricing

12 || decisions or other acts in furtherance of the alleged conspiracy. Courts have consistently

13 ||found that information exchanges are sufficient circumstantial evidence of conspiracy

14 || where the exchanges are closely followed in time by price increases. See, e.g., Flat Glass,

15 ||385 F.3d at 368-69 (holding that evidence of parallel price increases shortly following

16 information exchanges took the exchanges “outside the realm of ‘mere possession’” and

17 || allowed for an inference of conspiracy); Jn re Blood Reagents Antitrust Litig., 266 F. Supp.

18 ||3d 750, 778 (E.D. Pa. 2017) (holding that “the close temporal link between the transfer [of

19 || price information] and announcement of the 2001 price increases raise an inference of

20 ||conspiracy”); In re Platinum & Palladium Antitrust Litig., 2017 WL 1169626, at *13

21 }(S.D.N.Y. Mar. 28, 2017) (information exchanges shortly followed by price drops

22

23

24

2 47

26 15ev1749-JO-AGS and 18cv1374-JO-AGS

27

1 || supported inference of conspiracy).”® Here, Plaintiffs do not point to any evidence of

2 ||specific price increases, supply reductions, or other concerted activity in proximity to

3 || Defendants’ exchanges of information. Plaintiffs, therefore, have not created an inference

4 conspiracy by showing the proximity of information exchanges to specific collusive

5 || actions in furtherance of the conspiracy.

6 Lastly, the Court examines the context in which the communications occurred, and

7 || the nature of the information exchanged. Context is particularly important given that “the

8 || mere exchange of price information, without more, is not per se illegal,” Krehl, 664 F.2d

9 1357, and information exchanges between competitors “can in certain circumstances

10 ||increase economic efficiency and render markets more, rather than less, competitive.”

11 || United States v. U.S. Gypsum Co., 438 U.S. 422, 441 n.16 (1978). Indeed, where

12 ||defendants are competitors in a market but also customers and suppliers, the range of

13 || permissible inferences to be drawn from information exchanges must be determined in part

14 || by the context in which the exchanges occur. See, e.g., Dairy Farmers, 60 F. Supp. 3d at

15 (“having repeated communications with a supplier, who also is a competitor in certain

16 ||markets, does not a conspirator make”); In re Polyurethane Foam Antitrust Litig., 152 F.

17 Supp. 3d 968, 984-85 (N.D. Ohio 2015) (finding certain exchanges that occurred in the

18 context of a vendor-customer relationship did not support an inference of conspiracy).

19

20

28 See also, e.g., Inre Domestic Drywall Antitrust Litig., 163 F.Supp.3d 175, 197 (E.D. Pa. 2016)

21 (“Opportunities to conspire may be probative of a conspiracy when meetings of Defendants are closely

2 followed in time by suspicious actions or records.”); Richard A. Posner, Jnformation and Antitrust:

Reflections on the Gypsum and Engineers Decisions, 67 Geo. L. J. 1187, 1199 (1979) (“[I]f the effect of

23 information exchange were to raise the level [of] prices, one could infer that the motive was price

fixing.”).

24

25 48

26 15ev1749-JO-AGS and 18cv1374-JO-AGS

27

l Here, Defendants are competitors in the wholesale and retail gasoline markets in

2 || California, but their traders operate as customers and suppliers on the spot market where

3 buy and sell gasoline. See, e.g., M. Perez Declaration § 10; L. Lockhart Declaration

4 4, 36-37. The information exchanges in the first category of Plaintiffs’ evidence

5 || discussed above confirms this market reality. See Pltfs. Exs. 43-45, 78. Although many

6 || of the trader chats submitted by Plaintiffs appear excerpted, leaving the reader without the

7 context of the conversation, many of the conversations explicitly occur in the context of a

8 ||current or potential transaction. See, e.g., Pltfs. Ex. 43 (Shell and BP traders discussed

9 || product availability in context of potential transaction); Pltfs Ex. 44 (Tesoro internally

10 || discussed information about fire at BP and noted that “[BP] might be able to deliver us

11 || bbls”); Pltfs. Ex. 45 (Chevron discussed inventory when explaining an error in its delivery

12 ||to Phillips 66); Pltfs. Ex. 78 (Shell trader told other traders that he was talking to Phillips

13 || 66 about one of their imports and the possibility of selling them a blending component).

14 Regarding the nature of the communications, the Court considers whether the

15 |{information shared is the kind reasonably shared in the context of legitimate business

16 |Jinteractions. Citric Acid, 191 F.3d at 1094; Musical Instruments, 798 F.3d at 1194. Here,

17 || most of the information relates to the timing and nature of refinery maintenance, although

18 || there are also some discussions regarding imports, exports, and the state of the market. See

19 || Pltfs. Exs. 6-12, 35, 40-50. These are the types of information that are relevant to a trader’s

20 || need to buy or sell on the spot market. In fact, many of the communications submitted by

21 || Plaintiffs demonstrate that traders used the information they gained from traders at other

22 refineries for just that purpose—to help them locate buying and selling opportunities. See,

23 Pltfs. Ex. 19 (BP noted Exxon’s supply issues in context of potentially being able to

24 ||sell to Exxon); Pltfs. Ex 20 (Chevron noted Tesoro’s storage issues in context of potential

49

26 . 15cv1749-JO-AGS and 18cv1374-JO-AGS

27

1 with Tesoro); Pltfs. Ex. 40 (Chevron internally discussed Exxon’s delayed

2 maintenance in context of timing its delivery to Exxon).

3 With respect to the six Defendants aside from BP and Phillips 66, the context and

4 || content of the trader communications in the record renders the exchanges as consistent with

5 || conspiracy (or less so) as with customers and suppliers exchanging useful information in

6 ||the context of present and potential business transactions. See Pltfs. Exs. 10-11, 19-20,

7 39, 41-44, 46-47, 65, 169. Plaintiffs emphasize that an inference of conspiracy is

8 || created by the fact that traders shared refinery information not strictly necessary to transact

9 || purchases. See Dkt. 809, 43:444:4. In this buyer-supplier context, however, the evidence

10 || supports the inference that traders had legitimate business reasons to share refinery-related

11 || information while trading. For example, a trader might share information that its refinery

12 || will be down for maintenance in order to purchase product or gain information about who

13 ||might be able to sell. Traders also have a self-interested reason to share their own

14 || information so that they will receive valuable information in return—information that will

15 them locate either supply or parties seeking to buy. While such extensive exchanges

16 ||of refinery maintenance and other supply information could have been exchanged for

17 || conspiratorial purposes, the evidence that Plaintiffs point to does not tend to rule out the

18 || possibility that Defendants shared this information for the self-interested motives set forth

19 || above.

20 As a whole, therefore, the exchanges of information in the record do not permit an

21 inference of conspiracy with respect to most Defendants. Defendants’ traders are low-level

22 ||employees that regularly exchanged information in the course of their job duties, but there

23 not sufficient evidence that traders reported information up the chain-of command. See

24 ||Plitfs. Exs. 35, 65; Opposition at 16. Moreover, these exchanges are not linked to other

25 50

26 15cv1749-JO-AGS and 18cv1374-JO-AGS

27

1 || questionable events, occurred in the context of plausibly legitimate customer-supplier

2 ||relationships, and did not necessarily consist of confidential information. In light of these

3 || factors and based on a thorough analysis of the evidence in the record, the Court finds that

4 ||Plaintiffs’ evidence of information exchanges is not sufficient to permit a finding of

5 || conspiracy with respect to Chevron, Shell, Valero, Exxon, Tesoro, and Alon.

6 The Court also concludes that the above evidence of information exchanges is

7 ||sufficient to permit an inference of conspiracy with respect to BP and Phillips 66. The

8 || evidence concerning BP’s and Phillips 66’s exchanges reflects that their traders both shared

9 || potentially confidential information and passed information up the chain-of-command to

10 || people who made production decisions. See, e.g., Pltfs. Exs. 8, 64, 75, 82-84; J. Yomtoob

11 || Declaration J 25; L. Lockhart Declaration J 47. BP’s and Phillips 66’s traders testified that

12 shared information up the chain-of-command for the self-interested reason of enabling

13 refineries to better compete in the market. See id. From this evidence, however, a

14 |/reasonable juror could infer that BP’s and Phillips 66’s traders shared information based

15 ||on the understanding that each would use the information shared outside of trading. See,

16 Pltfs. Exs. 8, 46, 48. Accordingly, the Court finds that the nature of the

17 communications between BP’s and Phillips 66’s traders, coupled with their admissions that

18 reported information up the chain-of-command, is more consistent with conspiracy

19 || than with independent action—or, at least, that a reasonable juror could conclude so.

20 3. Supply Restrictions: Running Refineries Below Capacity

21 Plaintiffs argue that Defendants colluded to keep gas supply low in California to

22 supracompetitive prices and create conditions that enabled price spikes. Plaintiffs

23 |/contend that Defendants restricted supply against self-interest in three main ways: by

24

2 51

26 15cv1749-JO-AGS and 18cv1374-JO-AGS

27

1 || limiting production of CARBOB, discouraging and rerouting imports, and exporting gas

2 || when it would have been more profitable to sell in-state. See Opposition at 26-37.

3 In support of this plus factor, Plaintiffs point to Defendants’ increased CARBOB

4 || production after the 2015 Exxon explosion as proof that Defendants could have produced

5 ||more CARBOB prior to that point.”? See Opposition at 26; Pltfs. Exs. 66-67. They do not,

6 || however, offer any proof regarding optimal CARBOB production levels nor whether any

7 ||Defendant’s decision to produce less than that amount was not profit maximizing, and

8 ||therefore, against self-interest. Instead, Plaintiffs point to trader communications which,

9 ||they claim, demonstrate that Defendants shared information for the purpose of

10 || cooperatively reducing supply. See Opposition at 26-34.

1] To meet their Step One burden, Defendants explain that each refiner independently

12 production levels to maximize its profit. Defendants explain that their refineries

13 || produce primarily CARBOB but also a variety of other products, such as jet fuel, diesel,

14 non-CARBOB gasoline. See, e.g., J. Harris Declaration 4 7.°° Through detailed

15 || planning processes, each Defendant decided how much of its refinery capacity to devote

16 ||to producing CARBOB versus other products to maximize profit levels. See, e.g., K.

17 || Archambault Declaration J§ 8, 10, 15-21, 27; N. Weinberg-Lynn Declaration □□□□□□□□

18 || These decisions factored in considerations such as the relative demand levels for CARBOB

19 compared to their other products and the relative costs of producing each type of product.

20

21

79 29 Plaintiffs also point to an email by a Chevron employee stating that he expected production

levels at Exxon’s refinery to increase after the refiner was sold to a third party. See Pltfs. Ex. 69.

23 30 See also K. Archambault Declaration J 15; N. Weinberg-Lynn Declaration {J 7, 10; M. Bodziak

Declaration J 7; R. Sharum Declaration 4 5; P. Brooks Declaration {| 13-14; C. Dickson Declaration § 16.

24 3! See also M. Bodziak Declaration {J 8-10; R. Sharum Declaration 4 5; J. Harris Declaration

25 7-13; P. Brooks Declaration §{{ 13-23; C. oe Declaration Jf 14-21.

26 15¢v1749-JO-AGS and 18cv1374-JO-AGS

27

1 || See, e.g., K. Archambault Declaration Jf 8, 10, 15—21, 27; N. Weinberg-Lynn Declaration

2 || 49 10-14.°2 When prices for CARBOB rose, such as following the Exxon explosion,

3 ||Defendants produced more CARBOB relative to other products because it was profitable

4 ||to do so. See K. Archambault Declaration § 38; H. Henderlite Declaration 29-32.*°

5 Defendants further explain that their inventory decisions needed to factor in the

6 financial costs and logistical constraints of maintaining inventories. From a financial

7 ||standpoint, Defendants explain that they had little incentive to hold inventory in storage

8 || because it was costly and gas inventories had limited life spans and declining values. See,

9 J. Harris Declaration 17-19; C. Yates Declaration 435; N. Weinberg-Lynn

10 || Declaration {| 15-16. From a logistical standpoint, Defendants explain that refineries

11 stored a variety of raw materials and finished products, each of which required its own

12 ||storage tank. The fact that refineries only had a finite number of these storage tanks

13 ||necessarily limited how many tanks could be dedicated to CARBOB. See, e.g., N.

14 || Weinberg-Lynn Declaration {ff 15-16; P. Brooks Declaration {§ 38-40; C. Dickson

15 |}Declaration J§ 11-12. In light of these financial and logistical constraints, certain

16 Defendants state that they preferred to cover unexpected shortages through exchange

17 ||agreements or purchases on the spot market, rather than building up inventories. See J.

18

19

20

21 {| ——_——_—__——_

32 See also M. Bodziak Declaration J 8-10; R. Sharum Declaration 4/5; J. Harris Declaration

23 || 7-13; P. Brooks Declaration § 13-23; C. Dickson Declaration 9] 14-21.

33 See also S. Roveda Declaration J 11; N. Weinberg-Lynn Declaration §¥ 32-33, 35; M. Bodziak

24 || Declaration J 21; P. Brooks Declaration 22, 26; J.A. 733-38, Valero Exs. 1-2.

25 53

26 15cv1749-JO-AGS and 18cv1374-JO-AGS

27

1 |} Harris Declaration § 19; P. Brooks Declaration J 33; K. Archambault Declaration {J 45,

2

3 Based on the above, the Court finds that a reasonable juror could conclude

4 ||Defendants made CARBOB production decisions based on their own profit maximizing

5 ||calculus and logistical constraints rather than pursuant to a conspiracy to reduce supply.

6 || Especially because exchange agreements and spot market trades acted as insurance against

7 ||short-term shortages, Defendants’ decisions to produce profit maximizing amounts of

8 || CARBOB while maintaining low inventories to reduce costs could have been driven by

9 ||plausible and legitimate business objectives. The Court therefore concludes that

10 Defendants have met their Step One burden with regard to these allegations.

11 At Step Two of its analysis, the Court examines whether Plaintiffs offer any evidence

12 tends to exclude the possibility that Defendants acted independently and in their own

13 ||self-interest in setting CARBOB production levels. Plaintiffs’ raw assertion that

14 || Defendants could have and, therefore, should have produced more CARBOB is not a

15 sufficient basis for the Court to conclude that Defendants acted against self-interest.

16 || Antitrust law does not compel Defendants to produce the maximum amount of CARBOB

17 || possible; it only requires that Defendants’ production decisions be made independently for

18 || legitimate business reasons. At the least, information about the comparative costs and

19 || profitability of producing more CARBOB versus other products would be necessary to

20 ||evaluate whether foregoing additional CARBOB production was not in Defendants’

21 || financial self-interest. Plaintiffs submit no proof that any Defendant’s production or

22

23

24

54

26 15¢v1749-JO-AGS and 18cv1374-JO-AGS

27

1 |/inventory decisions were not profit maximizing given demand, costs, and logistical

2 ||constraints.*4 See generally Opposition.

3 Instead of offering evidence about the economics of Defendants’ CARBOB supply

4 decisions, Plaintiffs instead point to communications between Defendants’ traders as

5 || circumstantial evidence that the companies colluded to depress supply and shared

6 ||confidential information to implement that scheme. Opposition at 27-37. Because

7 || Plaintiffs offer largely overlapping examples of trader communications as circumstantial

8 ||evidence regarding Defendants’ other purported efforts to restrict supply, the Court

9 || considers all of this evidence together below.

10 After reviewing the communications submitted by Plaintiffs as “plus factor”

11 |}evidence of an agreement to “strangle” supply, see id, the Court finds that the trader

12 ||}communications generally fall into two categories: (1) communications in which traders

13 different companies generally expressed a preference for low-supply/high-price

14 || conditions while speculating about how third-party actions might impact the market; and

15 ||(2) communications, which only occurred between BP and Phillips 66, constituting an

16 ||actual exchange of import, export, or production information between traders from

17 different companies. The Court examines each of these categories of communications in

18 || turn for their tendency to exclude the possibility that Defendants acted independently in

19 || making supply decisions.

20 The first category features emails between traders, speculating regarding

21 ||competitors’ actions and bemoaning actions that could bloat supply and lower prices. For

22

23

* Plaintiffs do not appear to argue that Defendants’ refineries sat idle or that Defendants forewent

24 || production opportunities. Rather, Plaintiffs appear to argue that, to the extent Defendants produced other

25 products, they should have produced CARBOB instead. See Opposition at16.

55

26 15ev1749-JO-AGS and 18cv1374-JO-AGS

27

1 ||example, one BP trader and one Phillips 66 trader made various comments of this nature

2 ||to one another over the years, including that “[i]f the refineries don’t cut runs it could really

3 || get bad”; “[I] think we will structurally see more exports going forward”; “hopefully some

4 || of the current PMI exports will show up in the next week stats”; and, “[d]ec could be a S__

5 storm if exports don’t clean us up.” See Pltfs. Ex. 8. One internal BP email among its

6 || traders noted “chatter” that “AOT” and Shell were importing CARBOB to the West Coast

7 stated that “everyone is becoming very cognizant that high prices will attract oil and

8 slowed down their buying as a result.” Pltfs. Ex. 48 at BPWC-PG-00039839; see also

9 || Pltfs. Ex. 8 at rows 852-53 (message between BP and Phillips 66 also acknowledging that

10 traders may slow down buying to discourage imports.) Another internal BP email among

11 traders noted that Valero was importing a cargo to LA and that “Noble” rerouted a cargo

12 || headed to the Pacific Northwest. See Pltfs. Ex. 50 at BPWC-PG-00023780; see also □□□□□□

13 8 at rows 8329-9520; Pltfs. Ex. 83 (excerpted messages lamenting supply conditions

14 || without any context or evidence of a reply).

15 Some of these trader messages are written in unguarded and colorful language but,

16 || similarly, do no more than show competitors scrutinizing one other’s actions or expressing

17 displeasure at high supply conditions. In one set of emails, traders referred to market

18 conditions that attracted imports as the “bug light” being on, presumably referring to the

19 || fact that “bug lights” attract undesirable nuisances. Pltfs. Ex. 11 at row 134864; Pltfs. Ex.

20 ||48 at BPWC-PG-00039827; Pltfs. Exs. 79-82. In one of these conversations, BP and

21 ||Phillips 66 traders—apparently discussing what would happen if imports arrived—stated

22 || that “everyone will poop in our back yard, kill our market and leave us the dingle berries.”

23 || Pltfs. Ex. 8 at 592-95. In another email, an unidentified person asked Phillips 66’s trader

24

25 56

26 15cv1749-JO-AGS and 18cv1374-JO-AGS

27

1 he had any alkylate needs, and Phillips 66’s trader responded, “no and don’t bring it the

2 || west coast.” Pltfs. Ex. 84.

3 The second category of communications, the ones which demonstrate an exchange

4 || of potentially confidential import/export information between traders, all occurred between

5 ||BP and Phillips 66 and are discussed above. See supra Section V.D.2. Because

6 ||}communications of this kind only occurred between these two traders at these two

7 ||refineries, they do not create an inference of conspiracy for all eight Defendants. They

8 ||may, however, create an inference of conspiracy as to BP and Phillips 66, which the Court

9 || discusses separately supra.

10 Together, these communications and internal documents paint a picture of a small

11 || group of competitors who go out of their way to obtain information about each other’s

12 |/actions to inform their own. See Krehl, 664 F.2d at 1357 (“the mere exchange of price

13 |/information, without more, is not per se illegal”). They also portray Defendants’

14 ||hyperawareness of how competitors’ actions impact supply and price conditions for the

15 ||}whole market. The microcosm that these communications illustrate is consistent with

16 ||Plaintiffs’ characterization of the California gas market as highly concentrated and

17 ||interdependent. See McCullough Report 66; Defs. Ex. 8 at 44:15-22. Such

18 conscious parallelism in a market of this nature is not illegal, see supra Section V.C, and,

19 || without more, does not give rise to an inference of conspiracy.

20 The Court next considers whether the fact that traders expressed preferences for

21 ||lower-supply and higher-price conditions constitutes the “more” that tends to exclude the

22 || possibility that Defendants acted independently in making supply decisions. The Court

23 || finds that these trader discussions may establish that the eight Defendants, in general, had

24 motive to collude to maintain low-supply conditions. Motive alone, however, does not

25 57

26 15ev1749-JO-AGS and 18cv1374-JO-AGS

27

1 || permit an inference of agreement among the Defendants. Reserve Supply Corp. v. Owens-

2 || Corning Fiberglas Corp., 971 F.2d 37, 51 (7th Cir. 1992) (quoting 6 Phillip E. Areeda,

3 || Antitrust Law § 1411 (1986)); In re Late Fee & Over-Limit Fee Litig., 528 F. Supp. 2d 953,

4 (N.D. Cal. 2007), aff'd, 741 F.3d 1022 (9th Cir. 2014) (“[a]s one court put it, if ‘a

5 |;}motive to achieve higher prices’ were sufficient, every company in every industry could

6 || be accused of conspiracy”) (quoting Baby Food, 166 F.3d at 133). With the exception of

7 ||BP and Phillips 66, these communications do no more than illustrate that Defendants

8 || watched each other closely and desired lower supply conditions to generate higher profits.

9 With regard to the six Defendants not including BP and Phillips 66, the Court

10 ||concludes Plaintiffs’ proffered evidence does not tend to exclude the possibility of

11 ||independent decision making with regard to gasoline production and supply. To

12 |}summarize, Plaintiffs offer evidence that these six Defendants, (1) had the ability to

13 increase CARBOB supply but did not, (2) shared a desire to maintain lower-supply market

14 ||conditions, and (3) gathered information and closely monitored each other’s market

15 || behaviors. From this, a reasonable juror could infer conspiracy but could equally infer that

16 ||the six Defendants independently made profit maximizing production decisions while

17 || watching each other closely to inform those decisions. While it is illegal to act pursuant to

18 ||a conspiracy, it is not illegal to act pursuant to oligopolistic self-interest. Theatre

19 || Enterprises, 346 U.S. at 540-41 (“this Court has never held that proof of parallel business

20 ||behavior conclusively establishes agreement” without more). With regard to BP and

21 ||Phillips 66, the additional evidence that their traders shared confidential information and

22 passed that information to their production departments tends to exclude the

23 || possibility that these two refiners made independent decisions about gasoline production.

24 the remaining six refiners, however, the above evidence submitted by Plaintiffs does

25 58

26 15ev1749-JO-AGS and 18cv1374-JO-AGS

27

1 tend to exclude the possibility of independent action and, thus, is insufficient to create

2 inference of conspiracy.

3 4. Supply Restrictions by Preventing Imports

4 Plaintiffs also contend that Defendants’ actions to prevent gas imports into

5 California is “plus factor” evidence of an eight-Defendant conspiracy to fix gas prices in

6 || California. See Opposition at 28-33. In addition to the trader conversations discussed

7 ||above, Plaintiffs point to the following specific instances where Defendants rerouted

8 ||imports originally intended for the West Coast as circumstantial evidence of conspiracy:

9 ||(1) Chevron diverted two cargoes of unidentified product in August 2014, (Pltfs. Ex. 85);

10 ||(2) Valero “cancelled another 80mb barge of Al to LA” in 2014 or 2015,* (Pltfs. Ex. 86

11 |}at VMSC_003193); (3) Shell diverted a cargo originally intended for Los Angeles to New

12 || York sometime in late 2015, or early 2016,*° (Pltfs. Ex. 87 at p. 602; Pltfs. Ex. 88 at

13 || SOPUS PGI 00223181); and (4) BP diverted a cargo originally intended for California to

14 || New York in January 2016, (J.A. 915—16, BP Ex. 6).

15 To meet their Step One burden of providing plausible and justifiable reasons for their

16 actions, Defendants explain that importing gas into California is a slow and costly

17 || proposition and by the time imports actually arrive, market conditions may have changed

18 || such that importing is no longer profitable. In general, Defendants scheduled few imports

19 ||because they were often logistically and economically unfeasible. See, eg, K.

20

21

2) ©.

23 35 Plaintiffs do not submit any evidence regarding what “A1” is or the dates of these cancellations,

although the document appears to be dated in March 2014 or 2015.

24 □□ Plaintiffs do not identify the date of this diversion, although the documents appear to indicate

|| that it occurred sometime in late 2015 or early 2016.

26 15cv1749-JO-AGS and 18cv1374-JO-AGS |

27

1 || Archambault Declaration 22-26, 34; H. Henderlite Declaration § 23.7’ Because

2 || California is a “gasoline island,” imports could only be transported by sea. See id. And

3 || due to regulatory requirements, domestic imports could only be delivered by the limited

4 ||number of available Jones Act-compliant vessels (U.S.-assembled, -owned, and -crewed)

5 generally cost $10—-20 million per vessel, per year. See, e.g., K. Archambault

6 Declaration {J 22—23. Defendants Chevron, Valero, and BP also explain that the reroutes

7 || Plaintiffs highlight were necessary because by the time the import arrived weeks later, price

8 || margins had decreased, and Defendants determined that selling elsewhere would be more

9 || profitable. See, e.g., C. Yates Declaration J] 38-41; P. Brooks Declaration 4 47-48, 51—

10 57-59; see also Joint MSJ at 32; H. Henderlite Declaration 23-27; J.A. 915-916,

11 ||BP Ex. 628 The Court notes that some of Plaintiffs’ evidence supports, rather than

12

|| ——_ ————————

4

37 See also C. Yates Declaration {J 38-41; J.A. 30-32, Chevron Ex. 3; R. Sharum Declaration

15 || 15-17; L. Lockhart Declaration J 8; P. Brooks Declaration 47-48, 54; C. Dickson Declaration

52-56; M. Perez Declaration {| 6-8.

16 38 BP also submitted evidence that its alleged reroute in January 2016 was in fact a complex

transaction with Valero that benefitted BP. See Joint MSJ at 32; H. Henderlite Declaration {{ □□□□□□ J.A.

17 94 5-916, BP Ex. 6. Valero had a cargo shipping from the United Kingdom to its Bay Area refinery but

18 realized that it could not get its cargo into its harbor because the cargo was too heavy to get through the

“Pinole Shoals,” a channel that had to be crossed to reach Valero’s Bay Area refinery. See id. At the

19 time, BP had its own cargo coming to its Los Angeles refinery but realized that the cargo was

unlikely to arrive in time to be used there because it was stuck in the Pacific Northwest due to weather.

20 id Thus, BP sold its cargo to Valero since it was not going to reach BP’s Los Angeles refinery in

time and because BP was already at storage capacity at its Bay Area refinery and could not use the gas

21 See id. BP also purchased Valero’s shipment coming from the United Kingdom. See id. BP

ultimately determined that selling Valero’s cargo into New York was more profitable than bringing it to

the West Coast—at that time, Valero’s shipment was near Jamaica and thus was “over 1,000 nautical

23 || miles closer to the East Coast” than to the West Coast, and East Coast prices at that time were better than

what West Coast prices were predicted to be by the time Valero’s cargo would have arrived at one of BP’s

24 || West Coast refineries. See id.

25 60

26 15cv1749-JO-AGS and 18cv1374-JO-AGS

27

1 |}undermines, Defendants’ explanation that imports were rerouted because market

2 ||conditions changed while shipments were en route. For example, Plaintiffs submit an

3 internal Shell presentation to prove that Shell’s reroute occurred, but the presentation itself

4 || explains that, “[w]ith the LA market weakening, STUSCO was able to divert the cargo to

5 || NYH and take $1.5mln of value on the cargo for the West Coast.” See Pltfs. Ex. 87 at p.

6 ||602. The Court finds that based on the above, Defendants have offered plausible and

7 || legitimate explanations consistent with the limitations of a “gasoline island” where imports

8 || generally cannot arrive quickly, and gas prices are prone to shifts such that prices may be

9 || different by the time an import arrives. See Defs. Ex. 2; McCullough Report J 37-39.

10 On the whole, the evidence demonstrates that Defendants did reroute imports in the

11 || four instances identified by Plaintiffs (see Pltfs. Exs. 85, 86—-89),*? but Plaintiffs do not

12 ||demonstrate that these reroutes were common or against Defendants’ self-interest.

13 || Plaintiffs argue that the fact that these reroutes occurred is sufficient to support a reasonable

14 |/inference of conspiracy because it does not make economic sense to sell CARBOB in a

15 || lower-priced market than California. See Opposition at 32—33. Plaintiffs, however, do not

16 || point to any evidence that selling in California would have been more profitable for the

17 || handful of rerouted imports they identify.

18

19

20 || _—_vU0——_|

21 Defendants concede on summary judgment that BP rerouted a cargo in January 2016 as

77 described above, see supra note 38, and thus, the existence of this reroute is not disputed. In opposing

summary judgment, Plaintiffs point to Defendants’ admission that the reroute occurred but do not point

23 || to evidence in response to Defendants’ Step One explanation; instead, Plaintiffs merely state, without

supporting evidence, that: “[this was] obviously against BP’s self-interest” because the East Coast is a

24 “lower priced market.” Opposition at 33.

25 61

26 15cv1749-JO-AGS and 18cv1374-JO-AGS

27

1 With regard to the six Defendants other than BP and Phillips 66, the Court concludes

2 ||Plaintiffs’ proffered evidence regarding import decisions does not tend to exclude the

3 possibility of independent decision making. To summarize, Plaintiffs offer (1) four

4 instances of rerouted imports across a seven-year period from a pool of eight Defendants;

5 ||(2) no evidence that any of these reroutes were against economic interest; and (3) trader

6 ||communications discussing imports and expressing a preference for low-supply conditions.

7 ||As discussed above, the communications that tend to show that Defendants closely

8 ||monitored each other’s actions and generally preferred low-supply conditions do not,

9 || without more, support a reasonable inference of conspiracy. Considered together with the

10 || infrequent nature of rerouted imports and the lack of any evidence suggesting these reroutes

11 || were not profitable, a reasonable factfinder could infer that Defendants made independent

12 || decisions to disfavor imports in general and reroute imports when it was profitable to do

13 Plaintiffs’ evidence, therefore, does not tend to exclude the possibility that Defendants

14 || acted independently for self-interested reasons.

15 5. Supply Restrictions Through Exports

16 Plaintiffs also argue that Defendants exported gas out of California against self-

17 || interest when it would have been more profitable to sell in-state. They contend that these

18 j|actions provide further “plus factor” evidence that the eight Defendants in this case

19 || conspired to fix gas prices in California. See Opposition at 33-37.

20 To support these arguments, Plaintiffs submit three categories of evidence. First,

21 || Plaintiffs contend that Defendants increased their exports over the class period even though

22 |\their production capacities did not correspondingly increase. See id. at 34; Pltfs. Ex. 200.

23 ||Second, Plaintiffs point to certain Defendants who dual certified their gas to meet both

24 ||CARBOB specifications and other state requirements. See Pltfs. Exs. 94, 97-98; see also

25 62

26 15ev1749-JO-AGS and 18cv1374-JO-AGS

27

1 ||Opposition at 34-35. Third, Plaintiffs identify two specific exports that they claim were

2 || against self-interest: (1) Phillips 66 exported 5,003 gallons of CARBOB from California

3 ||to Nevada in 2017, (Pltfs. Ex. 96 at 183:17—25 at p. 602); and (2) Tesoro began exporting

4 || gas to Mexico in 2017, (Opposition at 37).

5 To meet their burden at Step One, Defendants explain that they independently made

6 ||necessary, profit maximizing business decisions to export non-CARBOB and to dual

7 ||certify gas. With respect to exports of non-CARBOB, Defendants start by explaining that

8 ||manufacturing CARBOB necessarily creates byproducts that cannot be blended into

9 || CARBOB and thus cannot be sold in California. See, e.g., C. Yates Declaration 46.”

10 || Defendants therefore sold all product that did not meet CARBOB specifications outside of

11 || California to make a profit from it. See id.

12 In addition to exporting product that could not be sold in California, certain

13 || Defendants also utilized their California refineries to meet supply obligations in nearby

14 || geographies (e.g., Arizona) that were most conveniently supplied from California. See,

15 C. Yates Declaration ff 43-48." Defendants explained that they did so to meet supply

16 || obligations in nearby states like Arizona. See P. Brooks Declaration J 24—25, 55; Pltfs. Ex.

17 ||94; T.A., M. Pais Declaration J 13. For instance, Valero had contractual obligations to sell

18 || gas in Arizona, which requires “AZRBOB.” See P. Brooks Declaration Jf 24, 55. Because

19 || Arizona is connected by pipeline to both California and Texas, Valero usually supplied

20 || Arizona through its Texas refinery but supplemented from their California refinery when

21

20

3 40 See also N. Weinberg-Lynn Declaration {| 18-20; R. Sharum Declaration 10-12, 14; J.

Harris Declaration {| 26-27; J. Marino Declaration § 3; P. Brooks Declaration 4 61-63.

24 41 See also P. Brooks Declaration 4 24-25, 63; J.A. 805, Valero Ex. 11.

25 63

26 15cv1749-JO-AGS and 18cv1374-JO-AGS

27

1 Texas refinery could not supply enough product to meet Valero’s contractual

2 |}commitments in Arizona. See id. Dual certifying its gas as CARBOB and AZRBOB

3 |;enabled this flexibility. See id.

4 Finally, with respect to specific exports, Phillips 66 submitted evidence that it

5 ||exported 5,003 gallons of CARBOB to its Nevada site in 2017—“an extraordinarily

6 || unusual occurrence” likely following a supply disruption—which “constituted less than □

7 ||of 1 percent of one day’s production.” R. Sharum Declaration §.13. As to Tesoro, it

8 ||explained that exports to Mexico in 2017 did not impact its supply commitments in

9 California and were part of a long-term strategy to develop in a market with growing

10 ||demand when California demand was forecasted to decline. See T.A. 348-352.

11 The evidence discussed above satisfies Defendants’ Step One burden to show that

12 ||Defendants exported gas consistent with proper business practice. For one, a reasonable

13 could find that Defendants justifiably exported non-CARBOB that they could not sell

14 California. In addition, a reasonable juror could find that the practice of dual

15 certification is consistent with competition. Dual certification produces a more fungible

16 || form of gas, which would have allowed BP and Valero flexibility as market needs arose.

17 || For instance, it would be reasonable for Valero to dual certify gas so that it could supply

18 || Arizona from California when its Texas refinery could not meet supply needs. Finally,

19 || based on Phillips 66’s and Tesoro’s explanations regarding their exports of CARBOB, a

20 ||reasonable juror could find that these specific exports were justified by proper business

21 practice. Phillips 66 explained that its one-time export was de minimis and justified by an

22 unusual supply need. Tesoro explained that its 2017 exports to Mexico were performed

23 ||for the purpose of establishing market presence in Mexico according to its long-term

24 || business strategy. Because Defendants meet their burden at Step One, the Court turns to

25 64

26 15cv1749-JO-AGS and 18cv1374-JO-AGS

27

1 || whether Plaintiffs meet their Step Two burden to identify evidence that tends to exclude

2 possibility that Defendants exported gas independently.

3 Plaintiffs attempt to meet their Step Two burden to show that Defendants’ exports

4 || were inconsistent with unilateral conduct by first pointing to a general increase in export

5 volumes between 2000 and 2020. Plaintiffs point to government data reflecting yearly

6 “finished gasoline” exports from the West Coast. See Pltfs. Ex. 200. This aggregated data,

7 || however, does not contain any information on (1) the extent to which the state of California

8 ||accounts for those exports, (2) the extent to which Defendants specifically account for

9 || those exports, or (3) how much of those exports were CARBOB versus non-CARBOB.

10 ||See id. Plaintiffs infer from this overall trend that some of Defendants’ exports were

11 j/unnecessary, but this generalized evidence does not shed light on whether the eight

12 ||Defendants in question engaged in unnecessary exports or whether any of their exports

13 || were against their financial self-interest. Plaintiffs also reiterate that certain Defendants

14 certified gas and argue that this practice was unprofitable but offer no evidence to

15 || support that argument. See Opposition at 34-35.

16 Next, Plaintiffs highlight two specific instances of exports against self-interest by

17 Phillips 66 and Tesoro. First, Plaintiffs point to a Phillips 66 export from California to

18 ||}Nevada in 2017 as evidence showing that Defendants “routinely dumped” CARBOB

19 || outside of California. See Opposition at 34-35. The only evidence that Plaintiffs point to

20 ||regarding Phillips 66’s 5,003-gallon CARBOB export to Nevada in 2017 is deposition

21 testimony that merely confirms the existence of that export. See Pltfs. Ex. 96 at 183:17—

22 In the face of Phillips 66’s explanation that this was a one-time export of a de minimis

23 ||amount of CARBOB, representing less than “2 of 1 percent of one day’s production,” the

24 fact that the export occurred does not tend to exclude the possibility that Philips 66

25 65

26 15cv1749-JO-AGS and 18cv1374-JO-AGS

27

1 |)independently made this export to cover its own supply shortage, rather than pursuant to a

2 ||conspiracy. See R. Sharum Declaration 7 13. As to Tesoro, Plaintiffs do not specify

3 ||whether those exports were CARBOB versus non-CARBOB, nor do they submit any

4 evidence to support the argument that those exports were unprofitable.*” Aside from the

5 || bald assertion that gas is cheaper in Mexico, Plaintiffs have submitted no evidence that

6 || Tesoro’s exports were not profitable, either in the short term or long term. Instead,

7 || Plaintiffs submit two documents: (1) a Chevron document noting that certain exports to

8 || Mexico would be uneconomic in 2014; and (2) data showing that California gas prices in

9 || late 2020 and early 2021 were above $3.00. See Pltfs. Exs. 100, 106. Whether exports to

10 Mexico would have been uneconomic for Chevron in 2014 has little bearing on whether

11 ||such exports would be equally uneconomic for Tesoro in 2017, especially given Tesoro’s

12 |/long-term business plan to expand to that geographic market. See Pltfs. Ex. 100.%

13 ||Similarly, Plaintiffs’ data that gas was selling for $3.00 per gallon in California during

14 || 2020 and 2021 has little bearing on the overall lack of profitability for Tesoro’s long-term

15 || growth plan. See Pltfs. Ex. 106. Without more concrete evidence, a factfinder should not

16 ||second guess Tesoro’s long-term business strategy “where the evidence concerning the

17 rationality of the challenged activities might be subject to reasonable dispute.” Citric Acid,

18 ||191 F.3d at 1101. Therefore, the Court finds that Plaintiffs have not pointed to evidence

19 || of exports that tends to exclude the possibility of independent conduct.

20

—_ —_——_

22 42 Despite citing to certain exhibits, Plaintiffs fail to attach those exhibits to the record, which are

23 || marked “purposefully omitted” and thus are not considered by the Court. See Pltfs. Exs. 101-04.

43 This Chevron document appears to discuss exports to Mexico being uneconomic, at the time,

24 || because of a variety of factors, including production costs, Chevron-specific refinery considerations, and

other then-present market factors. 66

26 15cv1749-JO-AGS and 18cv1374-JO-AGS

27

1 6. Cooperation After the 2015 Exxon Explosion

2 Plaintiffs also point to Defendants’ behavior following an explosion at the Exxon

3 {refinery in 2015 as indicative of improper cooperation among supposed competitors. See

4 || Opposition at 22-24. Plaintiffs allege that instead of competing for Exxon’s market share

5 || when its refinery was down, as one would expect competitors to do, Defendants sold gas

6 Exxon to help it cover its supply shortage. See id. at 23. Plaintiffs also argue that when

7 Defendants sold gas to Exxon, they should have done so at higher prices to take maximal

8 || advantage of Exxon’s crisis. See id. at 22—23. Plaintiffs claim that these actions were quid

9 || pro quo favors in furtherance of the conspiracy. See id.

10 To satisfy their Citric Acid Step One burden, Defendants explain their responses to

11 Exxon explosion in 2015 as follows. Defendants offer evidence showing that each

12 ||refinery promptly responded to the explosion by maximizing in-state supply to take

13 || advantage of the overall shortage in the market and attendant price increases. See, e.g., K.

14 || Archambault Declaration 38-40; H. Henderlite Declaration □□ 29-32.% Defendants

15 || Shell, Tesoro, Chevron, Valero, and Phillips 66 also explain that they sold gas to Exxon at

16 || prevailing market rates rather than trying to circumvent the long-term contracts Exxon

17 ||maintained station-by-station with its retailers. See, e.g., C. Dickson Decl. 49 24—25; S.

18 || Roveda Declaration § 13; R. Sharum Declaration □□ 31-33; J.A. 339-53, Exxon Ex. 1.%

19 || Defendants explain that pursuing Exxon’s retail customers would have entailed convincing

20 || each local retailer to break its Exxon contract, and thus selling gas to Exxon directly □□□

21

°°

23 “4 See also S. Roveda Declaration {J 10-12; N. Weinberg-Lynn Declaration § 32-33; M. Bodziak

Declaration J 21; P. Brooks Declaration §f 26, 46; J.A. 733-38, Valero Exs. 1-2.

24 45 See also M. Perez Declaration {J 13-16; L. Lockhart Declaration 4 30; P. Brooks Declaration

25 90; E. Pestano Declaration § 42-45.

26 15cv1749-JO-AGS and 18cv1374-JO-AGS

27

1 market rates was the more attractive and profitable alternative. See id.; see also Joint MSJ

2 44. Because it is plausible that pursuing individual negotiations with Exxon’s retail

3 ||stations could be costly and time consuming, the Court finds that Defendants have

4 ||produced a legitimate reason for preferring to sell gas to Exxon directly instead.

5 || Accordingly, Defendants meet their Step One burden.

6 At Step Two, Plaintiffs respond that it nonetheless would have been better for

7 || Defendants to pursue Exxon’s retail market share or extract higher prices from Exxon. See

8 Opposition at 22-24. The bare contention that pursuing Exxon’s market share was the

9 better economic course does not create a genuine dispute for the purpose of summary

10 ||judgment. Plaintiffs do not point to any specific evidence which would allow an inference

11 ||that sales were made to Exxon at below-market prices or that such sales were favors to

12 || Exxon rather than profit maximizing decisions. Moreover, based on evidence that multiple

13 ||refiners sold gas to Exxon, the inference that no one Defendant had the leverage to extract

14 || higher than market-rate prices from Exxon is as plausible as the inference that Defendants

15 || conspired to help Exxon against self-interest. Plaintiffs point to one email on February 24,

16 2015, from a Chevron employee in an unidentified role, questioning why Chevron would

17 ||sell alkylate, a gasoline blending component, to Exxon “from a competitive standpoint.”

18 || See Pltfs. Ex. 187. B

This text is long and has been trimmed here. Open the source document for the complete record.