Analyzing legal action against cylinder distributors

December 8, 2017 By    

It is alleged that distributors worked in concert to agree to reduce cylinder fills to 15 pounds while maintaining price. They also made agreements not to encroach on each other’s territory. Image: iStock.com/Maudib/uscourts.gov

In what has been a long and tortuous road, the 8th U.S. Circuit Court of Appeals, sitting en banc, has revived anti-trust claims brought by numerous direct purchasers of pre-filled propane exchange cylinders against the distributors of those cylinders.

An example of direct purchasers would be gas stations and convenience stores that have cylinder exchange stations. These direct purchasers bought cylinders from leading distributors that, prior to 2008, were filled to 17 pounds. Starting in 2008, they were only filled to 15 pounds.

The distributors did not make the direct purchasers aware of the reduction in poundage and the cost of the cylinders remained the same. This is alleged to have accounted for an increase in price of 13 percent. It is alleged that the distributors worked in concert to agree to reduce poundage and maintain price. They also made agreements not to encroach on each other’s territory.

The district, or trial, court dismissed the complaint on various grounds, but primarily because the claims were brought after the running of the statute of limitations.

The plaintiffs appealed and members of the appellate court initially affirmed the dismissal in late 2016. The plaintiffs then requested the entire appellate court reconsider the original decision of the appellate court, which was made by a smaller panel of judges. This is known as an “en banc” decision. The request was granted and the en banc court has now held in favor of the plaintiffs and has allowed the cases to proceed at the trial level. It now goes back to the district court.

This class action was brought under the Sherman Antitrust Act. One of its provisions is that any claim must be brought within four years of the alleged wrongful act. Here, the first alleged acts were in 2008, but the lawsuit in this case was not filed until late in 2014, clearly more than four years after the alleged wrongful conduct began.

To sidestep this limitation, the plaintiffs cited a principle in an area of the law known as the “continuing violation” exception to the four-year limitation for bringing claims. Under this rule, each time a cylinder was filled to only 15 pounds and sold, a new violation would occur and the statute of limitations would begin to run again.

The en banc court accepted this argument for this case. The direct purchasers were not aware that they were purchasing cylinders that were only filled to 15 pounds. As they continued to purchase these cylinders, a new violation of the law would allegedly occur. The court explained, “Each overt act that is part of the violation and that injures the plaintiff starts the statutory period running again.”

The en banc court also reminded the parties that the violation can continue to occur with each overt act, even if the plaintiff is not aware of the anti-competitive conduct. Here, plaintiffs did not know of the alleged agreement between the wholesalers to fill only to 15 pounds, keep prices the same and to stay out of each other’s markets.

The court stressed, “Knowledge of anti-competitive conduct is not relevant to the continuing violation analysis.”

This is not the first case involving this issue. In 2009, a group of indirect plaintiffs who bought cylinders from retailers, like the direct purchasers in this case, brought a class action against the same distributors under the same Sherman Act and state consumer laws. That case was settled in 2010. In 2014, the Federal Trade Commission filed a complaint against these distributors, which was also resolved later that year.

We will follow this case as it winds its way through the trial court level and will provide updates as it moves forward.


John V. McCoy is with McCoy, Leavitt, Laskey LLC. His firm represents industry members nationally. He can be reached at jmccoy@MLLlaw.com or 262-522-7007.

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