Key Parts of Oil Pricing Suit Dropped : U.S. Judge Dismisses Antitrust Charges by Long Beach and State

Unconvinced by 10 years of pretrial testimony, a federal judge in Los Angeles has dismissed the key allegations in a case that accused several major oil companies of conspiring in the early 1970s to fix the price of oil pumped from Long Beach tidelands.

U.S. District Judge William P. Gray, in an oral decision Wednesday, declined to give startled lawyers representing the two sides the reason behind his surprise ruling to dismiss the 10-year-old lawsuit brought by the City of Long Beach and the state of California. He would say only that an explanation will be filed at a later date and that he is making the ruling “with prejudice,” meaning that the six oil companies remaining as defendants cannot be sued again over the same allegations.

However, the judge is expected to tell the parties at a court hearing on Monday--whose original purpose was to set a trial date--that in nine years of pretrial discovery, he has seen no solid proof that the defendants conspired for more than a decade to keep the price of heavy California crude oil below what it was worth on the free market.

Hearing on Monday

In an earlier opinion, the 75-year-old Gray said he believes that the defendants did pay the City of Long Beach less than market value for its oil during the years in dispute but wasn’t convinced that they had broken federal antitrust laws by doing so. He is expected to tell the hearing Monday that the defendants can’t be criticized for failing to raise prices at a time when the U.S. government was itself keeping oil prices artificially low through such mechanisms as price controls.

Gray dismissed what is considered the heart of the case--the antitrust and conspiracy allegations. All that remains are minor breach-of-contract charges against both the plaintiffs and the defendants--Chevron, Unocal, Exxon, Texaco, Shell and Mobil.

Unocal for one said Thursday that it intends to keep pursuing that part of the case.

California Atty. Gen. John K. Van de Kamp, through a spokeswoman, said he was “surprised and disappointed” and will appeal to the U.S. 9th Circuit Court of Appeals. Lawyers in Van de Kamp’s office were huddling on the matter Thursday and weren’t immediately available to speculate on the future of a second, even broader price-fixing suit brought against the companies by the state attorney general.

Gray is expected to decide at the Monday hearing whether the second lawsuit belongs in state or federal court.

Robert Hight, chief counsel for the state Lands Commission, one of the plaintiffs in the case, called the decision “incomprehensible” and said it “came totally out of the blue.”

He said the only reason that an appeal hasn’t already been filed is that the plaintiffs are awaiting elaboration before deciding the specific grounds for appeal.

No less surprised were the six defendants and a seventh oil company, Atlantic Richfield, which only six months ago was dropped from the suit after it paid a $22.5-million out-of-court settlement.

“Obviously, had we known then what we know today, we might not have made that settlement,” said Arco General Counsel Francis X. McCormack.

Nevertheless, McCormack called Gray’s decision “correct and courageous” and said it “vindicates Arco’s position that the charges were without merit.”

McCormack also affirmed the company’s decision last December to settle out of court, saying “the case was then some 9 years old, and Judge Gray was urging the litigants to reach an out-of-court settlement.”

Gray urged the parties in a March, 1984, memo to settle in order to avoid the costs of further legal delays and a yearlong trial.

McCormack said the settlement also served to remove Arco from yet another pending lawsuit brought by Long Beach. It involves charges of price fixing in the 1980s.

In any event, McCormack said, “this lawsuit is far from over. The plaintiffs indicate they will appeal Judge Gray’s decision and we foresee a long and expensive legal process.”

Arco, which has been criticized by some of its former co-defendants for accepting the out-of-court settlement from the state, has said it decided to settle rather than incur more legal expenses, which stood at $20 million last December.

Thursday, two of the remaining defendants said they are glad that they stuck to their guns.

“We all have that Arco settlement in mind,” said Anthony P. Brown, chief trial counsel for Chevron.

Brown said the defendants “have always known that there was not enough there.” But he said it nevertheless “took courage on the part of Judge Gray” to rule that way.

Mark Eversole, a spokesman for Unocal, characterized the company as “extremely pleased” with the ruling and said that “we have always regarded (the lawsuit) as frivolous and without merit. For all practical purposes,” he said, “this ends the case.”