Free Memorandum in Support of Motion - District Court of Connecticut - Connecticut

Case 3:00-cv-00705-CFD Document 129-9 Filed O2/O3/2005 Page 1 of 3
LEXSEE 2000 USDISTLEXIS 798
THE CITY OF NEW YORK, THE BOARD OF EDUCATION OF THE CITY OF
NEW YORK, AND THE NEW YORK CITY HEALTH AND HOSPITALS
CORPORATION, Plaintiffs, — against - COASTAL OIL NEW YORK, INC. AND
COASTAL OIL REFINING & MARKETING, INC., Defendants.
96 Civ. 8667 (RPP)
UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF
NEW YORK
2000 US. Dist. LEXIS 798
January 28, 2000, Decided
January 31, 2000, Filed
”*$*T°S*"**°N= **1* Defendant tram . for ·-pm, rim. is only pubrrshcd indicator of
additional discovery of Bursky, Cox, and Savage denied. . . .
transactions prices in the petroleum market, the spot
LexisNexis(R) Headnotes price' (Report at 3`)
"Second, there can be only one transactions price for
No. 2 fuel oil at any time because the product is
COUNSEL: For Plaintiffs: June R. Buch, Esq., Leslie A. fungible." (Id. at 4.)
C E.Al K1` E.M`hlD.H . . . .
Comsoni Sq ’ an cmlmn? Sq ’ lc ae €SS’ "Thrrd, individuals doing business in the industry do
orporation Counsel of the City of New York, New . . ,
York NY not interpret the rack price quoted as the tank wagon
’ ` price` in publications such as Plattlv as an indicator of
For Defendants: Brian J. Gallagher, Esq., John Morris, mmsac/Hons prices} (Id')
Esq., Kronish, Lieb, Weiner & Hellman LLP, New York, "Platr’s posted rack prices are not reports of [*2] the
NY- prices willing buyers have agreed to pay willing sellers
for a specific product, in this case No. 2 distillate fuel oil,
JUDGES: ROBERT P. PATTERSON, JR., U.S.D.J. or the prices sellers necessarily expect buyers to pay. (Id.
at 4-5.)
OPINIONBY: ROBERT P. PATTERSON, JR. _ _
The conclusions in Dr. Verleger’s report are
OPINION: irrelevant to the plaintiffs' claims in this case. First,
Plaintiffs' claims does not rest on the proposition that the
OPINION AND ORDER posted prices are transaction prices as Dr. Verleger's
report assumes. Second, Dr. Verleger‘s finding that there
ROBERT P. PATTERSON, JR., U.S.D.J. can be only one transaction price for No. 2 fuel oil at any
I given time is irrelevant to the plaintiff`s' claims here.
Third, plaintiffs do not claim, as Dr. Verleger's report
Plaintiffs' motion to preclude the testimony of Dr. assumes, that rack prices are reports of the prices willing
Phillip K. Verleger, Jr., set forth in his report dated buyers have agreed to pay willing sellers for No. 2
November 15, 1999, is granted. distillate fuel oil on the prices that sellers necessarily
D U V 1 . k h . . : expect buyers to pay. Nor do plaintiffs claim that people
I cr cgcrs report ta CSI C posmon that in the industry interpret the rack price quoted in Platts as
an "indicator of transactions prices." (Report at 3.)

Case 3:OO—cv-00705-CFD Document 129-9 Filed O2/O3/2005 Page 2 of 3
Page 2
2000 U.S. Dist. LEXIS 798, *
Here, plaintiffs claim that the parties agreed in their them to rely on the Plattlv report of rack prices as being
contract that a change in the weekly average of the high bona fide rack prices offered by them to re-sellers.
and low of the rack prices reported to Plattk would result . .
. . * . For the foregoing reasons, the testimony of Dr.
in an adjustment to the [ 3] prices Coastal would V . .
. . erleger rs not allowed as it would not be helpful or
mcclvc from thc Clty under the contract The amended necessary to aid the jury's understanding of the issues in
complaint, dated May 1, 1997, states that the '"rack . . _
. , . . this particular case. See Kumho, 119 S. Ct. at 1175,
prices are the prices posted by a vendor at the fuel oil Daubert 509 US at 591
terminal from which trucks pick up fuel for delivery to ' ` ` `
the customer." (Amended Complaint P 14); that "the ll
' ' ' h . . . .
[rack] prices that Coastal reported to Platt sr during t e At argument on plamtlffs, motion to Smkc the
contract period were false and deceptive prices (rd. P . , . . .
_ . .. . . proposed testimony of defendants expert witness Philip
34) nl, that, with the knowledge of Coastal, plaintiffs . .
. K. Verleger, Jr., defendants made an application to re-
relred upon the truthfulness and accuracy of the reports t k th dd.t. I d .t. t t. f M
made to Plattlv by Coastal," and "believed that those a C G a Hom epcsl mn CS lmony O CSsls'
. . . . Bursky and Cox and Ms. Savage, particularly with
prices would reflect actual sales and actual conditions in . . ,,
the market',. (Id P 42.) respect to their understanding of the terms posted
prices" and "rack prices." Defendants based their
application on the claim that they still understood that the
nl UAS 3 direct result of Coastars pmcm Of Amended Compla1nt,.dated May 1,. 1997, charged fraud
. . . . . by defendants [*6] in that the prices they reported to
reporting disproportionately high rack prices to , . .
, , . Platts during the contract period (1992-1993) were false
Platt s...the Platts High/Low Average was . . .
. . . and deceptive in that they were not the same as the prices
sharply higher during the remainder of the . . ,
. . . Coastal actually received from its customers. Coastals
contract price than rt would have been if Coastal at umem is based on Pam ra h 34 ("Thc rims that
gigngzgnigjggid fictitious prices). (Amended Cciastal reported to Plattlv gdulling the contrict period
' were false and deceptive prices and were not justified by
prices actually charged by Coastal to its customers."),
As stated in the opinion and order of the Court, [*4] Paragraph 41 ("Platt’s relied upon reporting vendors,
dated July 9, 1999, the record in this case is clear that including Coastal, truthfully to report actual sales prices
"rack prices" were the prices posted by the vendor at the offered to customers, so that Plattk reports would reflect
fuel oil terminal. Those prices are claimed to be the actual sales and actual market conditions."), and
prices offered by the vendor as available to the Paragraph 42 ("Plaintiffs relied upon the truthfulness and
purchaser, not necessarily the price reflecting market accuracy made to Plattlv by Coastal and other vendors
prices. Plaintiffs are claiming that the defendants posted and reasonably believed that those reports would reflect
"rack prices" to Plattlv which were "fictitious" and false actual sales and actual conditions in the market. Coastal
and misleading as "rack prices," resulting in damages to knew that plaintiffs so relied.").
I§amt1ffS` Acicordmglw Defendants have not Shown that Defendants‘ reading of the amended complaint is at
r. Verlegers proposed testimony about rack prices not . . . , .
b . . . . . odds with what has been plaintiffs clearly articulated
erng an indicator of market prices is relevant. . . . . .
positron for over a year and is unjustified. The amended
The Court also does not find that Dr. Verleger's complaint, when read in full, makes clear in para raphs
2
testimony that individuals doing business in the industry 14 and 28-38, that the conduct complained [*7] of was
do not interpret rack prices as an indicator of transaction Coastal's reporting fictitious "rack prices" to Plattlv for
prices is competent expert testimony subject to testing publication in Plattls Oilgram Price Report. "Rack
for validity. See Kumho Tire Co. Ltd v. Carmichael, 526 prices" are defined in Paragraph 14 of the amended
U.S. 137, 119 S. Ct. 1167, 143 L. Ed. 2d 238 (1999); complaint as "the prices posted by a vendor at the fuel oil
Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 US. terminal from which trucks pick up fuel for delivery to
579, 125 L. Ed. 2d 469, 113 S. Ct. 2786 (1993). He does the customer." (Amended Complaint P 14.)
not offer a basis upon which his conclusion can be tested. , . . .
He does not offer a supporting survey that individuals do d f Tile t€:Our;.S Opllugugi Oi tgugh 9’ 1 1.92% ,d?lyuig
not regard rack prices as [*5] an indicator of transaction c cn an S mo mn pom S Ou a C p am I S (hmm is
. . . . . . . that Coastal reported to Plattlv a posted rack price for
prices. Instead, his conclusion is based on his positron N 2 .1. N Y k h. h h k . ,, h
that spot prices are the only indicator of transaction (l' O1 mh.?] . Or W lgf was nott ini?] pgcc’.lt 6
prices. (Report at 3.) Thus, it appears that his definition pu? at W IF It Wasl O crmg to Se O' O1 to
of "indicator" is an extremely limited one, and is not cus Omcrs ants tcrmma S`
relevant to plaintiffs claim that it was reasonable for

Case 3:OO—cv-00705-CFD Document 129-9 Filed O2/O3/2005 Page 3 of 3
Page 3
2000 U.S. Dist. LEXIS 798, *
Due to concern that defendants' counsel could defendants' summary judgment motion except in so far
possibly have been misled to believe, up until argument as it duplicated plaintiffs' contract claim, again rejected
on January 27, 2000, that plaintiffs' claim was that the Coastal's claim that if it made false representations of
rack price posted in Plattiv was fictitious and false and fact, that "any impact that [Coastal's] rack prices in
deceptive, (id. P 32), because they did not reflect actual Plattlv may have had on the City's prices would be
prices charged by Coastal to customers, (id. P 34), or material only if the prices charged under the contract
actual sales, (id. PP 41, 42,), the Court undertook to deviated from the market price, (id. at 19). The Opinion
review its opinion of July 12, 1999 and certain materials and Order clearly stated that the City's fraud claim could
referenced by the parties, (1) the transcripts of testimony be supported if the City shows that Coastal intended for
by Cox, Bursky, and Savage, attached as [*8] exhibits to the City to rely on Coastal's fraudulent representations to
Plaintiffs' Statement of Disputed Material Facts pursuant Plattlv and 'the damage the City sustained on other
to Local Rule 56.1., filed on November 20, 1998, in contracts were directly, immediately, and proximately
opposition to Defendants' Motion for Summary caused by the fraudulent representations... to Plattlv." (Id.
Judgment and (2) testimony cited in Paragraph 15 of the at 23.)
Compimson Of Dcfcndwtl §mtcmcm of Undisputcd Nothing could be clearer than that plaintiffs' claim
Material Facts and Plarntrffs Statement of Drsputed . . . ,
. drd not depend on the relationship of Coastals rack
Material Facts prepared by defendants on December 4, . , .
1 . , . . prrces posted to Platt s [*10] to actual market prrces was
998. Both of the parties submissions support the . . . , .
. . . irrelevant to plarntrffs claim and that what was relevant
conclusion that posted prrces are rack prrces offered at , . ,
. was whether Coastal s rack prrces posted to Platts from
the terminal to sellers of petroleum products and that .
. . , . . October 1992 to October 1993 were rn fact actual rack
plaintiffs claims are that defendants were reporting . G I fictitious rack Aces
posted prices to Plattlv for No. 2 oil from October 1992 pm S O p `
to October 1993 which were not the posted prices they Both parties have engaged in additional fact
were asking in New York. discovery since November 1999. The trial date was re-set
rrr as Opinion and Order dated July 9, 1999, and for F‘?0‘“"“y 14, 2000 °“ December L 1990
{ Accordingly, not only has defendant not shown that rt
rled on July 12, 1999, the Court, at pages 11-16, made . . . . .
, . . has been prejudiced or that any additional discovery of
clear that the defendants claim that the city could not . . .
. . ,, . Bursky, Cox, and Savage 1S necessary, but its request 1S
claim an overcharge unless rt showed that rt was , . . .
. . ,, . . too late. Defendants request for additional discovery of
charged prrces over the current market price, (Opinion B k C ds . d . d
and Order at 11) was incorrect. The Court stated that urs y’ OX’ an avagc is cme `
"artiflcial manipulation of Plattls rack price average SO ORDERED.
would directly impair the value of the contract for the
City," (id. at 15), and [*9] that if Coastal "posted prices Dated: New York, New York
higher than its wholesale asking prices, it would violate
the intentions of the parties, (id. at 15), and Coastal's 1¤¤¤¤ty28» 2000
duty of good faith and fair dealing (id. at 16). Robert P_ Patterson, JL
As to the plaintiffs claim for fraud, the Court, in its U_S_D_]_
Opinion and Order filed July 12, 1999, denying