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Scharfstein v. BP West Coast Products, LLC

Court of Appeals of Oregon

May 31, 2018

Steven SCHARFSTEIN, individually and on behalf of all other similarly situated persons, Plaintiff-Respondent,
v.
BP WEST COAST PRODUCTS, LLC, a Delaware limited liability company, Defendant-Appellant. and OREGON STATE BAR and Oregon Community Foundation, Respondents,

          Argued and submitted August 15, 2017

          Multnomah County Circuit Court 111217046 Jerome E. LaBarre, Judge.

          William F. Gary argued the cause for appellant. With him on the briefs were Sharon A. Rudnick, Susan Marmaduke, Nathan R. Morales, and Harrang Long Gary Rudnick P.C.

          W. Eugene Hallman argued the cause for respondent Steven Scharfstein. With him on the brief were David F. Sugerman, Tim Alan Quenelle, Amy Johnson, Joshua Ross and Hallman Law Offce.

          No appearance for respondents Oregon State Bar and Oregon Community Foundation.

          Jill Gibson and Gibson Law Firm, LLC; Doug Kantor, Kate Jensen, and Steptoe & Johnson LLP, fled the brief amicus curiae for National Association of Convenience Stores.

          Janet M. Schroer and Hart Wagner LLP fled the brief amicus curiae for Associated Oregon Industries.

          [292 Or.App. 70] Robert M. McKenna, Washington, Daniel J. Dunne and Orrick, Herrington & Sutcliffe LLP fled the brief amicus curiae for The Chamber of Commerce of the United States of America and National Association of Manufacturers.

          Before Tookey, Presiding Judge, and DeVore, Judge, and Linder, Senior Judge.

         Case Summary: In this class action, plaintiff, Steven Scharfstein, alleged that defendant, BP West Coast Products, LLC (BP), violated the Unlawful Trade Practices Act (UTPA) and the Gasoline Price Advertising Rule, OAR 137-020-0150, by illegally assessing and collecting debit card fees from millions of Oregon consumers. The trial court certified the class, which ultimately consisted of 2, 046, 500 individuals who, between January 1, 2011 and August 30, 2013, bought gasoline at BP's service stations with a debit card and were charged a 35-cent debit card fee. A jury found that BP violated the UTPA when it charged a debit card fee because BP failed to disclose the 35-cent debit card fee on its street signs and, alternatively, because BP charged more than the total amount registered on the gas pump. The trial court entered an amended general judgment that awarded plaintiff and the class attorney fees, costs, and $409, 300, 000 in statutory damages. On appeal, in its first, second, and third assignments of error, BP challenges various rulings by the trial court relating to the provisions of OAR 137-020-0150. In its fourth and fifth assignments of error, BP contends that plaintiff was required to prove reliance as part of his UTPA claim and that the trial court erred in denying its motion for directed verdict and its motion to decertify the class because plaintiff did not, and could not, prove reliance on a class-wide basis. In its tenth assignment of error, BP argues that the trial court erred in denying defendant's alternative motions to strike the statutory damages or to decertify the class because the statute that authorizes statutory damages under the UTPA, ORS 646.638(8)(a), as applied, violates due process. Held: The Court of Appeals rejected BP's third assignment of error because in BP West Coast Products, LLP v. Dept. of Justice, 284 Or.App. 723, 725, 396 P.3d 244, rev den, 361 Or. 800 (2017), the court held that the Attorney General had the authority to define "condition" under OAR 137-020-0150(1)(b). With respect to BP's second assignment, the court concluded that a 35-cent debit card fee is a "condition" under OAR 137-020-0150(1)(b) and, therefore, the trial court did not err in denying BP's motion for directed verdict on plaintiff's theory of liability under OAR 137-020-0150(3)(d)(A) because BP did not post that "condition" on its street sign. In light of those conclusions, the court declined to address BP's first assignment concerning whether it was error to send plaintiff's alternative theory of liability under OAR 137-020-0150(4)(e) to the jury because any such error would be harmless. With respect to BP's fourth and fifth assignments on the issues of causation and reliance under the UTPA, the court concluded that the trial court did not err in denying BP's motion for directed verdict and its motion to decertify the class because proof of reliance was not necessary to prove plaintiff's claims. With respect to BP's tenth assignment, the court concluded that BP failed to timely raise its argument that the statutory damages under ORS 646.638(1) and (8)(a) violated due process.

          [292 Or.App. 71] TOOKEY, P. J.

         In this class action, plaintiff, Steven Scharfstein, alleged that defendant, BP West Coast Products, LLC (BP), violated the Unlawful Trade Practices Act (UTPA) and the Gasoline Price Advertising Rule by illegally assessing and collecting debit card fees from millions of Oregon consumers.[1] Specifically, plaintiff alleged that BP engaged in unfair or deceptive gasoline price advertising when it failed to disclose that it charged a 35-cent fee for the use of a debit card to purchase gasoline at ARCO and am/pm service stations as required by the rule. A jury found that BP violated the UTPA when it charged a debit card fee because BP failed to disclose the debit card fee on its street signs and, alternatively, because BP charged more than the total amount registered on the gas pump. The trial court certified the class, which ultimately consisted of 2, 046, 500 individuals who, between January 1, 2011 and August 30, 2013, bought gasoline at Oregon ARCO or am/pm service stations with a debit card and were charged a 35-cent debit card fee. The trial court entered an amended general judgment that awarded plaintiff and the class attorney fees, costs, and $409, 300, 000 in statutory damages. BP appeals that judgment, raising 10 assignments of error. As we will explain, we conclude that the trial court did not commit reversible error and, accordingly, we affirm.[2]

         I. BACKGROUND

         A. Historical Facts

         "Because plaintiffs prevailed before the jury in the trial court, we review the facts in the light most favorable to them." Hall v. Dept. of Transportation, 355 Or. 503, 505, 326 P.3d 1165 (2014). BP is a retailer of ARCO-brand gasoline products throughout Oregon, and is a franchisor of [292 Or.App. 72] the ARCO and am/pm franchise. BP oversees the independent dealer operated ARCO and am/pm service stations in Oregon, and it retains certain rights relating to the implementation of brand standards at ARCO and am/pm service stations. At some ARCO and am/pm service stations, BP assesses a 35-cent fee when a customer pays with a debit card. BP is responsible for the street signs, and it does not allow its franchisees to disclose the debit card fee on its street signs. Additionally, when a customer pays for gasoline with a debit card, the fee is not registered on the gasoline dispensing device and the customer pays more than the amount registered on the pump.

         B. Plaintiffs Specific UTPA Claims

         On December 29, 2011, plaintiff filed a putative class action complaint against BP alleging that BP illegally assessed and collected debit card fees in violation of the UTPA. ORS 646.608(1)(u) provides that a "person engages in an unlawful practice if in the course of the person's business, vocation or occupation the person * * * [e]ngages in any other unfair or deceptive conduct in trade or commerce." For a person's conduct to constitute "any other unfair or deceptive conduct in trade or commerce" under ORS 646.608(1)(u), the Attorney General must adopt an administrative rule prohibiting that specific conduct. See ORS 646.608(4) ("An action or suit may not be brought under subsection (1)(u) of this section unless the Attorney General has first established a rule * * * declaring the conduct to be unfair or deceptive in trade or commerce."). As we discuss in more detail below, the Attorney General has adopted a rule in OAR chapter 137, division 20, declaring that unfair or deceptive gasoline price advertising is an unlawful trade practice.

         In his complaint, plaintiff alleged that BP violated numerous provisions of OAR 137-020-0150. As relevant here, plaintiff alleged that BP "failed to clearly and conspicuously display on all street signs * * * the debit fee charge in violation of OAR 137-020-0150(3)(d)(A)." That rule requires retailers of gasoline to disclose any "condition" affecting the availability of the lowest cash price for gasoline that is advertised on their street signs. See OAR 137-020-0150(3)(d)(A) ("[i]f the lowest cash prices are available only under some [292 Or.App. 73] conditions * * * [t]he retailer must clearly and conspicuously display all conditions on each street sign, price sign and dispensing device (e.g., cash only, mini serve"). OAR 137-020-0150(1)(b) defines "condition" as "any payment method (e.g., credit), service level (e.g., full service or mini service), or any other modifying circumstance affecting the price per unit of measurement of motor vehicle fuel from the lowest cash price." Additionally, plaintiff alleged that BP "charged more to members of the class than the total amount registered on the dispensing device in violation of OAR 137-020-0150 (4)(e), " which requires retailers to "[c]harge the customer only the total amount registered on the dispensing device at the selected unit price."

         C. Procedural Background

         To provide general context for the assignments of error, we outline the procedural history of this case. We provide more detail later in our discussion of each individual assignment of error.

         Plaintiff sought class certification, and, on August 30, 2013, the court certified a class of individuals who, between January 1, 2011 and August 30, 2013, bought gasoline at Oregon ARCO or am/pm service stations with a debit card and were charged a debit card fee. Before trial, BP moved for summary judgment, arguing that it had not violated OAR 137-020-0150(4)(e) as a matter of law. The court denied BP's motion for summary judgment. The claims proceeded to trial in January 2014. At the close of evidence, BP moved for directed verdict on plaintiff's claim under OAR 137-020-0150(3)(d)(A), arguing that the evidence was insufficient to prove that it had violated that rule. Additionally, BP argued that plaintiff had failed to prove causation or reliance. The trial court denied BP's motion for directed verdict. On January 31, the jury returned a verdict of liability for statutory damages after separately finding that BP had violated OAR 137-020-0150(4)(e) and OAR 137-020-0150(3)(d)(A).[3] [292 Or.App. 74] On February 4, 2014, the jury returned a verdict in favor of BP on the issue of punitive damages.

         Then in April of that year, BP filed two motions: The first was a motion to dismiss on the grounds that the Gasoline Price Advertising Rule is invalid, and the second was a motion to strike or, alternatively, to decertify the class on the ground that the statutory damages were unconstitutionally excessive. The trial court denied those motions. On December 14, 2015, after the Supreme Court decided Pearson v. Philip Morris, Inc., 358 Or. 88, 361 P.3d 3 (2015), BP filed alternative motions for judgment notwithstanding the verdict (JNOV), new trial, and class decertification, reiterating its argument that plaintiff had failed to prove reliance on a class-wide basis. The court denied those motions. On May 31, 2016, the court entered an amended general judgment awarding the 2, 046, 500 members of the class attorney fees, costs, and $409, 300, 000 in statutory damages. BP appeals that judgment.

         II. DISCUSSION

         A. Challenges to OAR 137-020-0150

         In its first, second, and third assignments of error, BP challenges various provisions of OAR 137-020-0150, also known as the Gasoline Price Advertising Rule. In BP's second and third assignments, the essence of BP's argument is that the rule does not apply to any "flat fee" that is not part of the price per gallon of fuel. We disagree. As we explain below, the rule applies to "conditions" that affect the price per gallon of fuel. The 35-cent debit card fee is a "condition" that affects the price per gallon and, thus, the fee must be displayed on each street sign. Because BP charged a 35-cent debit card fee and did not disclose that "condition" on its street sign as required by OAR 137-020-0150(3)(d)(A), the trial court did not err in denying BP's motion for directed verdict. Additionally, we decline to address BP's challenge to plaintiff's alternative theory of liability under OAR 137-020-0150(4)(e) because, even if it was error to submit that theory of liability to the jury, it would be harmless because the jury separately found BP in violation of OAR 137-020-0150(3)(d)(A).

          [292 Or.App. 75] 1. The regulatory framework of OAR 137-020-0150.

         ORS 646.930 establishes the minimum requirements that a service station must meet if it has a fuel price sign that is visible from the street. BP West Coast Products, LLP v. Dept. of Justice, 284 Or.App. 723, 725, 396 P.3d 244, rev den, 361 Or. 800 (2017). ORS 646.930(1)(a) provides that a person operating a "service station, business, or other place for the purpose of retailing and delivering gasoline, diesel or other fuel" may "display on a sign visible from the street the lowest cash prices charged for the sale of the lowest grades of gasoline, diesel or other fuel." Under ORS 646.930(2)(b), if "a cash price displayed on a sign is available only under some conditions, the sign and the dispensing device must clearly state the conditions." The legislature did not define the term "conditions."

         OAR 137-020-0150 was adopted pursuant to Oregon Laws 1985, chapter 751, section 2, and ORS 646.608(1)(u). Oregon Laws 1985, chapter 751, section 2, required the Attorney General to adopt rules to aid in the implementation of former ORS 646.875, renumbered as ORS 646.930 (1985). The other statutory grant of rulemaking authority, ORS 646.608(1)(u), gives the Attorney General broad rulemaking authority under the UTPA to protect consumers from "any other unfair or deceptive conduct in trade or commerce." See BP West Coast Products, LLP, 284 Or.App. at 734-37 (discussing the "Attorney General's broad grant of rulemaking authority" under the UTPA "to identify and prohibit 'any other unfair or deceptive conduct' concerning the display of fuel prices" (quoting ORS 646.608(1)(u))). For a person's conduct to constitute "any other unfair or deceptive conduct in trade or commerce, " the Attorney General must adopt an administrative rule prohibiting that specific conduct. See ORS 646.608(4) ("An action or suit may not be brought under subsection (1)(u) of this section unless the Attorney General has first established a rule * * * declaring the conduct to be unfair or deceptive in trade or commerce.").

         The Attorney General has adopted a rule in OAR chapter 137, division 20, declaring unfair or deceptive gasoline price advertising an unlawful trade practice. See OAR 137-020-0160(3) ("Violation of OAR 137-020-0150 and this [292 Or.App. 76] rule is a violation of the Unlawful Trade Practices Act, ORS 646.608(1)(u)."). OAR 137-020-0150(3)(a) provides that, "[i]f a retailer displays a price for motor vehicle fuel, " the "retailer must clearly and conspicuously display on each street sign the lowest cash prices charged for the sale of the lowest grade of each type of motor vehicle fuel sold or offered for sale to all customers or potential customers." OAR 137-020-0150(3)(d)(A), in turn, requires the disclosure of any condition affecting the availability of the lowest cash price. The text of that rule provides that, "[i]f the lowest cash prices are available only under some conditions, " the "retailer must clearly and conspicuously display all conditions on each street sign, price sign and dispensing device (e.g., cash only, mini serve)." OAR 137-020-0150(3)(d)(A).

         In 2010, the Attorney General defined "condition" under OAR 137-020-0150(1)(b) as "any payment method (e.g., credit), service level (e.g., full service or mini service), or any other modifying circumstance affecting the price per unit of measurement of motor vehicle fuel from the lowest cash price, " to address the numerous complaints that the Department of Justice had received "pertaining to disclosure of full service and added fees to use credit or debit cards." Oregon Bulletin, Volume 50, No. 2, p. 167-69 (February 2011); see also Notice of Proposed Rulemaking, Statement of Need and Fiscal Impact, filed Nov 9, 2010.

         2. Is the Attorney General's definition of condition under OAR 137-020-0150(1)(b) invalid?

         In BP's third assignment of error, BP argues that "the trial court erred in denying defendant's motion to dismiss for failure to state a claim, " because "[t]he rule's definition of'condition' is invalid." After we decided BP West Coast Products, LLP, plaintiff filed a supplemental memorandum of authorities, arguing that our decision in that case "rejects defendant's challenge to [the validity of] OAR 137-020-0150(1)(b)." BP concedes, and we agree, that BP West Coast Products, LLP, controls the outcome of BP's third assignment of error and, therefore, we reject BP's third assignment of error.

         We do pause, however, to briefly discuss that case to provide some background before turning to BP's second [292 Or.App. 77] assignment of error. In BP West Coast Products, LLP, we concluded that the legislature had granted the Attorney General broad rulemaking authority under the UTPA to protect consumers by regulating the display of fuel prices- including the authority to define "condition." 284 Or.App. at 737. In reaching that conclusion, we observed that the primary purpose of ORS 646.930 was "to protect consumers by enacting' [f]uel station signage requirements * * * during the 1980's to address situations where some fuel stations were placing signs advertising a low but misleading price for fuel on the street [sign] that did not match the higher prices they were charging at the pump.'" Id. at 734 (quoting Staff Measure Summary to House Bill (HB) 3677 A (2010)). One specific situation that was discussed at the legislative hearings was service stations charging a consumer more than the price displayed on its street sign when the consumer paid with a credit card. Id. at 731-32. We concluded that "[c]harging a consumer more than the displayed price if a consumer uses a credit card is an example of a modifying circumstance that affects the availability of the lowest cash price." Id. at 732 (citing Springfield Education Assn. v. School Dist, 290 Or. 217, 226, 621 P.2d 547 (1980) ("In some cases, legislative history will reveal that certain situations were expressly considered and intended to be included or excluded.")). After we acknowledged the Attorney General's broad grant of rulemaking authority under the UTPA, we also concluded that the Attorney General had the statutory authority to define "condition" to ensure the "'disclosure of *** added fees to use credit or debit cards.'" Id. at 736-37 (quoting Oregon Bulletin, Volume 50, No. 2, p. 167-69 (Feb 2011) (emphasis added)). With the purpose for which the legislature enacted ORS 646.930 and the purpose for which the Attorney General adopted the definition of condition in mind, we now turn to BP's second assignment of error.

         3. Is a 35-cent debit card fee a condition that must be disclosed on a service station's street sign under OAR 137-020-0150(3)(d)(A)?

         With respect to BP's second assignment of error, BP asserted at trial that "the rule defines a condition [as one] that 'affect[s] the price per unit of measurement of [292 Or.App. 78] motor vehicle fuel from the lowest cash price, '" and argued "[b]ecause there is no evidence that the debit fee affects the price per unit of measurement, directed verdict should be granted for [BP] on the issue of condition." In other words, BP contended that a debit card fee is not a "condition" because "the debit fee is not a charge for motor fuel, but for debit card processing." The trial court denied BP's motion for directed verdict. On appeal, BP assigns error to that ruling, renewing its argument that "a debit card fee is not a 'condition' under subsection (3)(d)(A)" and "thus, does not need to be posted on the street sign" because "[a] per-transaction debit-card fee * * * does not affect the price of the fuel at all."

         To determine whether a debit card fee is a "condition" under OAR 137-020-0150, "we consider the text of the rule and its context, including other portions of the rule and related laws, and the rule's adoption history." Brand Energy Services, LLC v. OR-OSHA, 261 Or.App. 210, 214, 323 P.3d 356 (2014). "[W]e begin by examining the text of the rule itself, together with its context" to "discern the meaning of the words used, giving effect to the intent of the body that promulgated the rule." Tye v. McFetridge,342 Or. 61, 69, 149 P.3d 1111 (2006). As noted, OAR 137-020-0150(3)(a) provides, in part, that "[i]f a retailer displays a price for motor vehicle fuel * * * [t]he retailer must clearly and conspicuously display on each street sign the lowest cash prices charged for the sale of the lowest grade of each type of motor vehicle fuel." Furthermore, OAR 137-020-0150(3)(d)(A) provides, in part, "[i]f the lowest cash prices are available only under some conditions *** [t]he retailer must clearly and conspicuously display all conditions on each street sign." OAR 137-020-0150(1)(b) defines "condition" as ...


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