Antitrust Law Daily Indirect propane tank purchasers’ antitrust suit over reduced fill volumes survives dismissal
Tuesday, April 16, 2019

Indirect propane tank purchasers’ antitrust suit over reduced fill volumes survives dismissal

By E. Darius Sturmer, J.D.

Indirect purchasers had standing to seek damages under Maine, Vermont, and Wisconsin antitrust laws for allegedly conspiratorial underfilling of tanks.

Indirect purchasers of pre-filled propane tanks may proceed with putative class action claims that distributors of the tanks violated the antitrust laws of several states by conspiring to reduce the amount of propane in each standard-size tank while maintaining the same price per tank, the federal district court in Kansas City, Missouri, has decided. Prior appellate rulings paring the litigation down on statute of limitations and standing grounds did not preclude a finding that the indirect purchasers had standing to assert state law damages claims. Therefore, the defendants’ motion for judgment on the pleadings was denied (In re: Pre-Filled Propane Tank Antirust Litigation, April 15, 2019, Fenner, G.).

Background and previous proceedings. The defendants to the action—AmeriGas Propane, Inc. and several related corporate entities (collectively, AmeriGas), along with Ferrellgas, L.P. and its parent company (collectively Farrellgas)—are the leading distributors of pre-filled propane exchange tanks in the United States. Beginning in 2006, AmeriGas and Farrellgas, which does business under the name Blue Rhino, entered into co-packing agreements wherein each company agreed to refurbish and refill propane tanks for the other. A standard refill contained 17 pounds of propane. In the summer of 2008, however, following a spike in propane costs, both companies reduced the fill level of the tanks to 15 pounds, though neither reduced the price per tank to consumers.

The following year, a first round of private litigation ensued, alleging that the companies’ actions violated Section 1 of the Sherman Act and state antitrust and consumer protection laws. The parties agreed to settle the claims late in 2009, and those settlements were approved by this same court in October 2010.

The Federal Trade Commission then entered the picture, issuing a complaint on March 27, 2014, that contended AmeriGas and Farrellgas had restrained price competition through their 2008 decision to decrease the fill level. The FTC action resulted in consent orders wherein the defendants agreed to cease and desist from any conspiracy between them to raise, fix, stabilize, or maintain prices of the tanks through any means, and also agreed to refrain from communicating competitively sensitive information to any competitor, with limited exceptions for propane refilling agreements.

The present litigation was initiated shortly thereafter, with the filing of lawsuits on behalf of direct purchaser plaintiffs and indirect purchaser plaintiffs who again alleged that the 2008 reduction was due to collusion that violated the Sherman Act and state antitrust laws. Over the course of the next two years, the court dismissed the direct purchasers’ complaint in its entirety for untimeliness, and on the same basis dismissed all but the injunctive relief claim that the indirect purchasers had asserted.

The direct purchaser ruling was reversed on appeal and remains pending. The indirect purchasers, however, responded to the ruling by amending their complaint to add three new subclasses asserting damages, and the court eventually allowed the indirect purchaser plaintiffs to add one of them—a six-year statute of limitations subclass pursuing state law claims under the laws of Maine, Vermont, and Wisconsin. The court granted dismissal or summary judgment to the defendants on each of their remaining claims, and the U.S. Court of Appeals for the Eighth Circuit upheld dismissal of the indirect purchasers’ federal injunctive claims. The appellate court then remanded the case to the district court to determine whether it should exercise supplemental jurisdiction over the state law damages claims.

Jurisdiction. Addressing first the threshold issue of whether the state law damages claims belonged and should remain in federal court, the court determined that it actually had original jurisdiction—not just supplemental jurisdiction—over the claims. Because the plaintiffs’ pleadings of more than 100 class members, the existence of minimal diversity, and an amount in controversy exceeding $5 million satisfied the statutory requirements of the Class Action Fairness Act, jurisdiction pursuant to 28 U.S.C. §1332(d)(2) was apparent from the face of the complaint, in the court’s view.

Judgment on the pleadings. The defendants’ attack on the sufficiency of the indirect purchasers’ complaint, resting primarily on the contention that the plaintiffs lacked standing because they failed to plead an ongoing conspiracy after 2010, was without merit, in the court’s view. The Eighth Circuit’s prior rulings did not compel the conclusion that the indirect purchasers lacked standing to pursue monetary damages for their state law claims. There was no indication from either ruling that the plaintiffs had only plausibly pleaded a conspiracy through the end of 2010 or that the appellate court had limited the timeframe of the alleged conspiracy to end before the class periods applicable to the direct purchasers’ and indirect purchasers’ claims. Further, the appellate rulings did not show cause for alteration of the district court’s prior analysis finding that the indirect purchaser plaintiffs had standing to assert their state law claims. Thus, the court stated, "at this stage in the proceedings, [the] Indirect Purchaser Plaintiffs have demonstrated standing to bring their state-law claims."

This case is No. 14-02567-MD-W-GAF.

Attorneys: Barrett J. Vahle (Stueve Siegel Hanson, LLP) for Mario Ortiz. Richard F. Lombardo (Shaffer Lombardo Shurin) for Yocum Oil Co., Inc., Johnson Auto Electric, Inc. and Morgan-Larson, LLC. Brendan McShane (Latham & Watkins, LLP) for Ferrellgas Partners, LP and Ferrellgas, LP d/b/a Blue Rhino. Joseph Daniel Lee (Munger, Tolles & Olson LLP) for Amerigas Partners, LP d/b/a Amerigas Cylinder Exchange and Amerigas Propane, Inc.

Companies: Yocum Oil Co., Inc.; Johnson Auto Electric, Inc.; Morgan-Larson, LLC; Ferrellgas Partners, LP; Ferrellgas, LP d/b/a Blue Rhino; Amerigas Partners, LP d/b/a Amerigas Cylinder Exchange; Amerigas Propane, Inc.

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