State official says California's gasoline market was impacted
In a recent California case, a South Korean company’s officers were allegedly directly involved in policy formulation constituting an anticompetitive scheme, which affected the state’s gasoline market and breached California law.
In SK Trading International Co. Ltd. v. The Superior Court of San Francisco County, California’s attorney general filed an action on behalf of the People of the State of California claiming violations of the Cartwright Act, s. 16720 of the Business and Professions Code, and s. 17200 of the Unfair Competition Law in May 2020.
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He brought the action against SK Trading International Co. LTD, a South Korean corporation and the defendant in this case; SK Energy Americas, Inc., a California corporation and SK Trading’s subsidiary; and Vitol Inc., a Delaware corporation.
He alleged that SK Energy functioned as SK Trading’s California trading arm and engaged in trading under SK Trading’s “continuous and pervasive” control and supervision. Allegedly, SK Trading directly participated in almost every aspect of hiring SK Energy’s head trader and specifically reviewed and approved SK Energy’s key decisions to coordinate certain trading activities with Vitol.
SK Trading sought to quash service of the summons based on the lack of personal jurisdiction. The trial court denied the motion to quash. It determined the following:
- SK Trading purposefully directed its activities at California residents through SK Energy, whose employees traded on the California spot market and engaged in business in California on SK Trading’s behalf;
- The court’s assertion of specific jurisdiction over SK Trading was proper, given that the People’s claims for collusion, market manipulation, and unfair competition were sufficiently related to SK Trading’s contacts with California;
- The exercise of jurisdiction was in line with fair play and substantial justice.
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SK Trading asked for a writ of mandate, which would compel the trial court to reverse its order. It argued that its limited contacts with California did not justify exercising specific personal jurisdiction.
The California Court of Appeal for the First District, disagreeing with this argument, denied SK Trading’s petition for writ of mandate and agreed with the trial court’s decision to deny SK Trading’s motion to quash. According to the appellate court, assuming specific personal jurisdiction over SK Trading was fair and reasonable, given that SK Trading did the following:
- purposefully undertook activities that should have made it reasonably anticipate being required to defend such activities in California legal proceedings;
- actively implemented a plan intended to increase SK Energy’s profits derived from trading on the California spot markets;
- encouraged and participated in forming alliances or joint ventures between SK Energy and Vitol that were supposedly crucial to the alleged anti-competitive scheme.
SK Trading did not directly conduct specific trades on the California spot market, the appellate court noted. However, its officers personally and directly participated in making decisions that impacted California’s gasoline market and allegedly violated California law, and were involved in formulating policies that allegedly amounted to an anticompetitive scheme, as the evidence showed.
SK Trading also approved and supported the employment of SK Energy’s new West Coast gasoline trader, who ended up engaging in the trades that the People challenged, the appellate court said.
The appellate court acknowledged that SK Trading’s executives held meetings with Vitol representatives outside of California. However, the meetings’ purpose was at least partly to discuss and to strategize about California’s gasoline market.
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