Proceedings January 15, 2014 Scharfstein v. BP West Coast...

Proceedings January 15, 2014Scharfstein v. BP West Coast Products, LLC No.: 1112-17046

DTI Reporting 503.808-1690

1 IN THE CIRCUIT COURT OF THE STATE OF OREGON

FOR THE COUNTY OF MULTNOMAH

STEVEN SCHARFSTEIN, individually )and on behalf of all other )similarly situated persons, ) Plaintiff, ) ) ) vs. ) Case No.: 1112-17046 )BP WEST COAST PRODUCTS, LLC, a )Delaware limited liability company,) Defendant. )___________________________________)

BE IT REMEMBERED that on Wednesday, January

15, 2014, commencing at the hour of 9:14 a.m., the

above-entitled matter came on for trial before HONORABLE

JEROME LaBARRE, Circuit Court Judge, and was taken

before Victoria A. Guerrero, Notary Public and RPR, CSR,

CRR, in the City of Portland, County of Multnomah, State

of Oregon.



21 -:-

2 APPEARANCES:

3

4 For the Plaintiff:

5 DAVID F. SUGERMAN707 SW Washington Street, Suite 600

6 Portland, Oregon 97205Phone 503.228.6474

7 E-mail: [email protected]

8

9 TIM A. QUENELLE4248 Galewood Street

10 Lake Oswego, Oregon 97035Phone 503.675.4330


12

13 AMY JOHNSON2523 SE 30th Avenue

14 Portland, Oregon 97202Phone 503.939.2996


16

17 For the Defendant:

18 STOEL RIVES, LLPLOIS ROSENBAUM

19 BRAD DANIELS900 SW Fifth Avenue, Suite 2600

20 Portland, Oregon 97204E-mail: [email protected]


22

23

24

25



31 APPEARANCES: (cont'd)

2

3 GREENSFELDER HEMKER & GALE, PCDAVID HARRIS

4 ABBY L. RISNER10 South Broadway, Suite 2000

5 St. Louis, Missouri 63102Phone 314.241.9090

6 E-mail: [email protected]: [email protected]

7

8

9 GRAHAM & DUNN, PCDOUG BERRY

10 2801 Alaskan WaySeattle, Washington 98121

11 Phone 206.340.9626E-mail: [email protected]

12

13

14

15

16

17

18

19

20

21

22

23

24

25



41 INDEX TO EXAMINATION

2

3 EXAMINATION: PAGE LINE

4 Opening Statement by Mr. Sugerman 58 4

5 Opening Statement by Mr. Harris 80 17

6

7 WITNESS: Francine McKenna

8 Direct examination by Mr. Sugarman 111 14

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51 Wednesday, January 15, 2014; 9:14 a.m.

2 Portland, Oregon

3

4 THE CLERK: All rise. Multnomah Circuit Court

5 is now in session.

6 THE COURT: Good morning. Please be seated.

7 Here we are. We have our jury selected. And let me

8 tell you what I'd like to take up, because there are

9 some things to occur before the opening statements.

10 And one of those, which we will be dealing with

11 in due course sometime today, but I don't think we're

12 going to start with it right this moment, it's the new

13 letter from Mr. Metzger, one of the jurors, which I

14 asked Mr. Metzger, one of the 15.

15 And this letter was handed to the clerk who

16 handed it to me and I asked that copies be made and

17 handed out so counsel have that and we will take that

18 up. Again, it's not the very first thing.

19 This is what I'd like to go over. Because

20 we're starting here, we've got the jury, everyone's

21 fresh, the lawyers and parties each have your view of

22 the case, everyone, you know, wants to present their

23 case in the way they want to present it, and I want to

24 stay out of your way. I want to let the attorneys -- I

25 want you to try your own case.



61 But this is a really good time to go over rules

2 and expectations just so everybody knows, and hopefully,

3 as I indicated recently, it's hard work, I want to do

4 what I can consistent with the rules to have this be as

5 good a process and as pleasant a process for the

6 participants, the trial lawyers, of course, as well as

7 the jury. Of course, we want to have a fair trial here.

8 So the first thing I want to take up is just

9 going over some expectations and that whole set of

10 issues. Secondly, we have jury instructions to give.

11 Just like the lawyers, I've been burning the midnight

12 oil going over a lot of things. And last night I went

13 over the defendant's -- well, the various proposed

14 instructions.

15 And there's modified precautionary instruction

16 5.01, the Oregon State Bar Uniform Civil Trials

17 Committee, Trial Instructions Committee. These initial

18 instructions keep on getting varied, sort of tracking

19 technology. Because now technology is something a trial

20 judge really needs to deal with in instructing the jury.

21 So it's going to take me a little while; two

22 and a half pages, single spaced. So after I go over

23 this initial stage, expectations, then I'd like to bring

24 the jury in, instruct them on that, and then explain to

25 them that there are some legal matters I need to take



71 up.

2 And this will -- then we'll go into the

3 defendant's objection to plaintiff's exhibits,

4 demonstrative exhibits, that plaintiff's counsel has

5 indicated Mr. Sugerman wants to use during opening

6 statement.

7 And we started on that at the end of court

8 yesterday. And, again, I've spent a lot of time going

9 over the exhibits so I'm planning on taking that up out

10 of the presence of the jury and then starting opening

11 statements.

12 So we have these three matters. Okay. And

13 then, of course, there is the matter of Mr. Metzger,

14 dealing with that.

15 Okay. Let me go over rules and expectations.

16 And very simply, Oregon law applies, Oregon rules apply.

17 This court has high expectations of counsel to follow

18 the rules. Not just the Oregon Rules of Court and the

19 Oregon Evidence Code, but ethical rules, the rules of

20 professionalism, which are posted right on the wall of

21 the courtroom.

22 And I expect counsel, and I have no reason to

23 believe counsel have not been complying. But I do have

24 some concerns regarding both sides. And I thought right

25 at the beginning of trial, this would be a good time



81 just to put these concerns on the table. And more than

2 once in the past I worried about things that have never

3 come to pass. And I'm certainly hoping that that is my

4 situation right now.

5 These are some of the things that have raised

6 my concern. And I sincerely hope that we don't have

7 problems in the trial. First, jury nullification. Both

8 sides have talked about jury nullification.

9 I'm quite surprised that while it's a concept

10 that I've read about, I know about, it really, in the 45

11 years or so that I've practiced law and been a judge, I

12 really have not had it come up much, if at all. But it

13 certainly has seemed to come up in this case.

14 Most recently, and I don't mean any criticism

15 by this mention, but most recently yesterday,

16 Mr. Harris, in voir dire examination of the jury, talked

17 about jury nullification with the prospective jurors and

18 said words to the effect, we sure hope you're not going

19 to start thinking of yourself as legislators because we

20 have law and it's the judge's job to instruct you

21 concerning the law and jurors' job to follow the law,

22 not make law.

23 And so I'm glad that was brought up that way.

24 Because it's absolutely true. And on the plaintiff's

25 side, jury nullification has been mentioned both in the



91 briefing and in some of the recent oral presentations.

2 And there have been hotly debated issues in

3 this case concerning what are issues in the case and

4 what are not issues in the case. What are pure issues

5 of law and what are matters.

6 Plaintiff had over 20 motions in limine; I

7 granted over 20 of those that have had the effect of

8 excluding the mention of a whole list of things. And I

9 know defendants have very serious opposition to my

10 ruling and that's why we have appellate courts.

11 I'm trying to get it right, but my job as trial

12 judge is to make decisions based on disputed matters

13 submitted to me and I've made decisions and that's the

14 law of this case. And I have every expectation that

15 both sides will have, you know, play within the rules;

16 to use a football analogy, run down the field and stay

17 within the sidelines. And nobody can run down the field

18 out of bounds. That would not be right. It's

19 inconsistent with the law. It's very serious. There

20 are serious consequences that are possible. I'm going

21 to mention some of those in a minute.

22 And, of course, my comments here apply to both

23 sides. And to some extent are triggered by -- we now

24 have a preview of plaintiff's opening statement. I know

25 a lot of work has gone in on both sides. I'm sure -- I



101 don't have a preview of defendant's opening statement.

2 That's fine. I don't usually get any previews. But

3 there's some matters I want to take up.

4 There's objections by defendant to some of

5 plaintiff's demonstrative exhibits. Some of those

6 matters, it appears to me the defense objection is

7 essentially plaintiff's counsel is trying to run down

8 the field out of bounds, outside the sidelines. And,

9 you know, these rules apply to plaintiffs as well as

10 defendant.

11 Concerning defendant, there is some history

12 which is important which concerns me regarding following

13 the rules. It was necessary in an earlier stage in this

14 case for this court to make a long oral opinion on

15 certain matters that one could summarize as saying there

16 were rule violations.

17 And my oral opinion, at this time I'm

18 incorporating that by reference into these remarks. And

19 I'm concerned about defendant. I've just indicated my

20 concerns about plaintiff. I'm concerned about defendant

21 for three reasons.

22 Number one, the past rule violations; number

23 two, the many matters that came up in the motions in

24 limine hearings that essentially I would summarize as

25 saying the defense has a lot of defenses that they would



111 like to present that I excluded by the motions in

2 limine.

3 These potential defenses have a lot of

4 potential inflammatory effect and have a strong

5 potential jury appeal; but I have ruled that many of

6 those, my rulings, I'm not going to restate them, you

7 know my rulings, but I've ruled that many of those are

8 simply not part of this case. And as appealing as they

9 may be for defendant, they're outside the case.

10 And if defendant tries to make any of those

11 matters part of the case, even by a subtle mention in

12 some opening statement or in some other way, there could

13 be very serious consequences.

14 The third reason I'm concerned about defendant,

15 which Mr. Harris refers to as BP, and that's the

16 shorthand expression, even though, as everyone knows,

17 the actual title of defendant is BP West Coast Products

18 LLC, a Delaware limited liability company.

19 But the third reason I am concerned is the very

20 serious and prolonged PR campaign that BP is conducting

21 now, nationally. The papers that appeared in Portland

22 and elsewhere, but we're here in Multnomah County and

23 I'm concerned about Multnomah County, in which BP

24 appears to be essentially bashing plaintiff's lawyers as

25 a PR strategy.



121 And I'm reading the New York Times yesterday,

2 January 14, 2004, page A7, full-page ad. The initial

3 top of the page, three lines, in very large print which

4 reads, and I'm quoting, Some lawyers represent

5 businesses with losses from the spill, others represent

6 themselves.

7 And then this full-page ad which is part of a

8 series that has various critique of claimants on the,

9 apparently, the Deep Water Horizon court-supervised

10 settlement program. And, of course, that is not related

11 to this case. This court is not involved in that case.

12 But the defendant, well, BP, which is what we're talking

13 about here, has been conducting this national campaign.

14 And the reason I mention it is because it's

15 just something else that gives rise to my concern that

16 the lawyers in this case need to follow the rules.

17 Now, what happens if the lawyers don't follow

18 the rules? And this applies to both sides.

19 Well, we all remember courses we took on the

20 law of evidence. If there's an objection made, the

21 court can sustain the objection. And the court can

22 sustain the objection in the presence of the jury.

23 And, of course, the basic rule applies that a

24 very short summary basis for the objection should be

25 stated as opposed to an argument in front of the jury, a



131 lot of argument. And if we need a sidebar, that's

2 always the fastest.

3 And then if something really deserves taking a

4 recess and having it taken up out of the presence of the

5 jury, we can do that. Or very frequently, the matter

6 can be delayed. If the matter comes up at quarter to

7 10:00 in the morning and we're going to take a recess at

8 10:15, frequently the matter can be delayed and we can

9 take it up during the recess.

10 So the court can sustain -- the court can

11 sustain it in the presence of the jury or out of the

12 presence of the jury. And I don't like to embarrass

13 counsel, and it is embarrassing sometimes to have a

14 judge sustain objections right in front of the jury.

15 But it's permitted and I'll do it. Again, it's not my

16 first choice, but I have done it a lot and I will do it.

17 The court also is authorized to enter sanctions

18 of various kinds. Counsel know well about the range of

19 sanctions. Potentially, the kinds of things we're

20 talking about here threaten a mistrial if one side or

21 the other does something. And a mistrial is a huge

22 thing, especially in a case like this, that already has

23 been so expensive. And with each passing day, the

24 expense continues to mount.

25 The court has a particular obligation where we



141 have a class action. And I'm not going to recite class

2 action law, but trial judges have certain

3 responsibilities in class actions. And, actually, under

4 the Oregon class action provision of the Oregon rules of

5 Civil Procedure, courts also have added discretion.

6 And in terms of consequences, I've never had to

7 do this and I don't want to, but a colleague just told

8 me of a situation where an out-of-state counsel with pro

9 hac vice admission violated the rules and the pro hac

10 vice admission was revoked.

11 Court has the power to grant out-of-state

12 counsel admission to practice for a case, but if the

13 rules aren't followed, the court has the power to take

14 that away. And if that were to happen, and I have no

15 reason to think it would, the trial's going to go on.

16 We have local counsel here and local counsel

17 would step into the lead trial counsel role and the case

18 goes on.

19 So there are a whole range of consequences. I

20 prefer to be a Pollyanna and to think that everything's

21 going to go great. But it is my obligation to make

22 clear what the rules are and to enforce those rules.

23 And I'm hoping that this will be -- everything will go

24 very smoothly.

25 But a lot is at stake. And when there is a



151 high stakes trial, the ordinary temptations become even

2 greater. So I wanted to go over what the rules were.

3 I've got great admiration for all of the lawyers in this

4 case. The lawyers are highly skilled. It's a real

5 pleasure to be a judge presiding over a trial like this.

6 With the types of cases that are taking up more

7 and more of our time in Multnomah County Circuit Court,

8 it's a joy for me to -- and a privilege and an honor to

9 be a judge presiding on this case. And I'm trying to do

10 the best job I can.

11 So I wanted to go over that. And I think at

12 this point we're probably ready to bring the jury in to

13 go over the instructions. Before we bring the jury in,

14 if there's any question about the rules or the

15 application of the rules or what I just said, now is a

16 good time to ask a question.

17 MR. SUGERMAN: None from plaintiff, your Honor.

18 Thank you.

19 MR. HARRIS: No, your Honor.

20 THE COURT: All right. So please bring in the

21 jury.

22 THE CLERK: All rise for the jury.

23 (Whereupon, the jury was seated in the jury

24 box.)

25 THE COURT: Good morning, everyone. Court is



161 in session. Please be seated.

2 All right. What I'm going to do at this time

3 is I'm going to instruct the jury concerning the law

4 that applies through your work as jurors during the

5 trial.

6 And I believe I've already mentioned at the

7 very end of the case I will give a longer set of

8 instructions regarding the law that applies of when you

9 go in the jury room after you've heard all the evidence,

10 heard the arguments, and heard the instructions of law,

11 you go in to decide the case. And so I'll give other

12 instructions at the end of the case as part of that

13 process.

14 Fundamentally, your duty as jurors is to decide

15 the facts from the evidence. You and you alone are the

16 judges of the facts. You will hear the evidence, decide

17 the facts, and then apply those facts to the law which I

18 give you. And that is how you will reach your verdict.

19 Now, in doing this, you must follow the law

20 whether or not you agree with the law. To be an

21 effective juror, you must not be influenced in any way

22 by personal feelings, by sympathy for or prejudice

23 against any party, witness, or lawyer, or any other

24 participant in the state -- in the case. Pardon me.

25 So I'm going to go over a series of matters.



171 First, the evidence. The evidence you are to consider

2 in the case will consist of the testimony of witnesses

3 under oath from the witness stand. And I believe in

4 this case there will also be some deposition testimony

5 put into the record.

6 What's a deposition? A deposition is a

7 proceeding in which lawyers on both sides and a court

8 reporter appear and testimony is given under oath, the

9 same oath that's given here in court. That oath is

10 given and for various reasons, including unavailability,

11 a deposition transcript may be put in the record. And

12 it's put in the record in various ways.

13 If and when that arises, we'll go over more

14 procedures. But in any event, witness testimony is part

15 of the evidence. And exhibits, any exhibits received

16 into evidence, those are part of the body of evidence

17 that you will have in the end of the case.

18 What is an exhibit? An exhibit can be almost

19 any kind of physical object. A document is a typical

20 kind of exhibit or photographs, charts, or other

21 objects. And concerning the exhibits, you'll have those

22 in the jury room at the end of the case when you go out

23 to deliberate.

24 What you will not have is a written transcript

25 of the witness testimony or a tape recording of the



181 witness testimony. There are various reasons why that

2 just doesn't seem to work. But in any event, once you

3 have the evidence, then you must decide how believable

4 the evidence is.

5 We don't have any smartphones or anything being

6 looked at, I hope? Okay. Good.

7 And what weight or value you will give to the

8 evidence. Now, concerning the evidence, you may draw

9 reasonable inferences from the evidence. But you must

10 not guess or speculate.

11 I have an instruction concerning the law of

12 evidence. What's that about? Well, I'm sure you've all

13 seen TV shows and movies involving trials and you see a

14 lawyer jump up, usually vigorously, saying I object,

15 stating some objection. So what's that all about?

16 Well, that is about the law of evidence. And

17 I'm holding up a treatise on the law of evidence in

18 Oregon. When I was in law school, a long time ago, we

19 studied the law of evidence for an entire semester. And

20 the purpose of the law of evidence is to make sure we

21 have good, reliable, trustworthy information going to

22 the decision-makers, you, so you can decide the case

23 based upon that which is trustworthy and not decide the

24 case on things like guesswork, rumor, speculation.

25 So if something's being presented that doesn't



191 conform to the law of evidence, it's the duty of the

2 lawyer to object. And it's my duty as trial judge to

3 decide whether it's proper under the law for you to

4 consider such evidence.

5 Now, please don't guess why the lawyer objected

6 or why I rule as I did. If I overrule the objection,

7 then the question can be answered or the exhibit

8 received. If I sustain the objection, then the question

9 cannot be answered nor could the exhibit be received.

10 And whenever I sustain an objection to a

11 question, please ignore the question and don't try to

12 guess what the answer would have been. This procedure

13 works the same way on what's called a motion to strike.

14 Sometimes things arise during a trial and

15 there's a later motion, sometimes immediately, sometimes

16 somewhat later, a motion to strike that from the record

17 based on the law of evidence and the other laws of

18 Oregon.

19 Now, if I grant a motion to strike and if I

20 instruct you to disregard or ignore something that came

21 up, you've got to follow my instructions. And when

22 you're deciding the case, you must not consider anything

23 that I instructed you to disregard.

24 Okay. Interactivity. We have a procedure I

25 still think of as new procedure, because for centuries



201 this was not a procedure allowed, but it is allowed now.

2 And it's a very limited procedure for jury questions of

3 a witness while a witness is on the witness stand.

4 It takes me just a minute to say we allow juror

5 questions; but as you see, it's going to take me a long

6 time to tell you how restricted it is, how limited it

7 is, why it's restricted, why it actually -- it's kind of

8 a big deal. It takes a lot of time. It's a good rule.

9 It's part of the Oregon Rules of Civil Procedure, but

10 it's very narrow and specific and needs to be used in

11 the right way.

12 Okay. First let me talk about witnesses. The

13 lawyers in this case have been working on this case for

14 a very, very long time. And that is actually true of

15 every case. But it seems to me the bigger the deal of

16 the case, the longer the lawyers work.

17 So it's the duty of a lawyer to call a witness.

18 And when that lawyer questions the witness, it's called

19 direct examination. And when that lawyer gets done, the

20 opposing lawyer can ask questions, it is called

21 cross-examination. And then the first lawyer gets a

22 chance to ask the witness questions again, it's called

23 redirect examination.

24 And the lawyers know the case. And they're

25 supposed to cover everything important with the witness.



211 And, again, they put a lot of work and preparation into

2 this. But if there's something that you believe is

3 important, and if it's not covered by the lawyer's

4 questions, that's where you can submit a written

5 question. And it goes through a whole lot of review

6 steps. And let me explain.

7 So first, if you have any questions, they need

8 to be submitted in writing. And these are the

9 procedures: You must wait until the lawyers finish

10 asking all their questions before it is your turn.

11 So at the end, if you still have an unanswered

12 question when the lawyers are finished, you may write it

13 down on a separate piece of paper. I'm going to explain

14 how it's going to become processed. And it's going to

15 become part of the court file as a court exhibit.

16 So write it down and hold it up to get my

17 attention. If you're still writing, raise your hand,

18 let me know you need time to write out the question.

19 Now, this has the, you know, it's like any rule

20 that you ever devise. It can be a good thing or it can

21 cause problems if it's not used in the right way or if

22 it's abused.

23 I've been a judge a long time. Some cases

24 don't have any juror questions. And most of the time

25 this rule is followed and it's helpful. In a few cases



221 I've presided over there has been some misunderstanding

2 by jurors because some of the jurors have sort of

3 thought they were lawyers. And for every witness jurors

4 would write out lots and lots of questions. And it can

5 really add to the time of the case.

6 So the first thing is when you have the

7 question, if the lawyer's questions are still going on,

8 it's fine to write it out then, but whatever you're

9 wondering about might be answered by other questions the

10 lawyer asked later and then we don't allow questions to

11 be asked twice. So then crumple up the piece of paper

12 or turn the page of your pad and we move on, covered,

13 fine.

14 If it's still, at the end of all the

15 questioning, you believe this is really important, you

16 need to know this, all right, fine, submit it. It's

17 going to take time, but we want to put the time into the

18 case. We want to have a fair trial here. We want the

19 system to work. Hold the question up.

20 Now, I just got done explaining the law of

21 evidence. The lawyers' questions are subject to the law

22 of evidence and so are yours. So just because you write

23 out a question doesn't mean that I will ask it of the

24 witness. And this is what we do next.

25 If you write out a question, hold it up.



231 Miss Honda or Miss Zangerly will pick up the question

2 and bring it to me so I can review it. And the lawyers,

3 and we have more than one lawyer on each side, maybe

4 lead counsel, but it might be another lawyer, I'll have

5 the two lawyers come up to the sidebar and they will

6 review the question.

7 And in very soft tones of voice I will ask them

8 whether there's any objection. And if there's an

9 objection, under the law of evidence I will ask them

10 what it is and I will rule on it. And if -- and I may

11 not permit it or I may permit it.

12 And if I do permit it, then I will ask the

13 question of the witness. And frequently it's necessary

14 for me to modify the question somewhat for clarity

15 purposes. Because clear questions -- and most jurors

16 haven't tried cases as lawyers, nobody expects that you

17 would know all about that.

18 So I may modify the wording, ask the question

19 of the witness, or questions, and then the exhibit --

20 the question is marked as a court exhibit. And then

21 when I get done asking the questions, even though the

22 lawyers already have told me they're finished with this

23 witness, but that opens the door again.

24 The lawyers then, starting with the lawyer who

25 called the witness, they get to ask questions within the



241 scope of the juror's questions. Now, if there's an

2 objection, I will decide whether it's proper under the

3 law. And I may not ask the question or I may modify the

4 question. And I may or may not advise you of the reason

5 for my decision, depending on the circumstances and the

6 applicable law.

7 Now, if the question is not asked, you should

8 not draw any inference about my ruling or speculate as

9 to what the answer to the question might have been. And

10 please do not weigh answers to a juror question more

11 heavily or lightly than any other answer simply because

12 the answer was given in response to a juror question.

13 And as I indicated, after the juror questions

14 are asked, the lawyers are allowed to ask follow-up

15 questions.

16 So as you can tell from my elaborate

17 explanation of these procedures, this certainly can add

18 time. It's a good procedure; it needs to be done in the

19 right way. The lawyers are in a position to know what

20 they believe is important to their case. And I wanted

21 to go over this because if you have questions, then,

22 within these rules that need to be asked, this is a long

23 trial already, and if this adds to the length for proper

24 questions, so be it.

25 Okay. I've been talking about the law of



251 evidence; I've been talking about evidence. What I'm

2 going to talk about right now is what is not evidence.

3 This morning, actually, before you came out, we took up

4 some legal matters. I'm instructing you on the law now.

5 When we get done with these instructions, and it's going

6 to take me a while to finish these instructions, then

7 we're going to take a jury recess and we're going to --

8 there's some other legal questions that have come up

9 that I'll take up out of the presence of the jury.

10 And then when we come back we will have the

11 lawyers' opening statements. Plaintiff has the burden

12 of proof, plaintiff goes first. And then defense,

13 defendant argues. Now, the purpose of the opening

14 statement is to give an overview of the evidence as the

15 lawyers expect it to be presented.

16 But the opening statements are not evidence.

17 At the end of the case we have closing arguments. The

18 lawyers are advocates. They can argue points of fact or

19 law which they believe support their case. The closing

20 arguments are not evidence.

21 These statements and arguments are intended to

22 help you understand the evidence and apply the law. But

23 the evidence is simply what comes from the witness stand

24 by witnesses under oath and what comes before you by way

25 of exhibits.



261 Now, also, please do not interpret any

2 statement, ruling, or remark I make during the trial as

3 any indication I have formed any opinion about the case

4 or the outcome of the case. Remember, you and you alone

5 are to decide the facts.

6 And you must decide this case based only on the

7 evidence received here in this courtroom. Which brings

8 me up to the two rules. Okay.

9 When I used to talk about the two rules in the

10 early days when I was judge, it was fairly short because

11 we talked about face-to-face communications and we

12 talked about if you had to do research, you went up to

13 the public library. And the world has certainly

14 changed. The technology. So the old reality is in

15 effect, but with the technology changes, the new reality

16 is also in effect. And they affect these two rules.

17 Very simply, you are not allowed to do any --

18 rule one, no research; rule two, no communication about

19 the case. Rule one, you are not allowed do any

20 independent research on any idea, location, or person

21 connected with this case. The law forbids you from

22 seeking information from any source outside this

23 courtroom. That is a court order. Both these rules are

24 court orders.

25 And the rule concerning no communication, you



271 cannot discuss the case during the trial up until the

2 time at the end of the case when you've been discharged,

3 can't discuss the case with anyone, including any of the

4 lawyers, parties, witnesses, your friends, or member of

5 your family.

6 If someone asks you or the topic comes up, you

7 simply must say, I am a juror in a civil case and I am

8 under a court order not to talk about it. I have no

9 reason to believe, I don't know that there will be any

10 media coverage.

11 But if there is media coverage or matters

12 appear on the internet, I told you yesterday, and I'll

13 be telling you again, you need to not read that. You

14 need to stay away from that. You need to not listen to

15 it or be affected.

16 But human nature being what it is, if things

17 are in the newspaper or on the internet, that tends to

18 raise the excitement level and probably results in

19 situations where the temptation may be stronger to talk

20 about it, but you cannot do it. It would wreck the

21 trial and there are consequences. And I'll be getting

22 into that in a few minutes.

23 And on the no communication about the case, as

24 I indicated, you also cannot talk to your fellow jurors

25 about the case until you begin your deliberations on the



281 case. And that's down the line a ways. And we're not

2 there yet.

3 But I'll jump ahead and let you know that even

4 when we get all the way down the line and the whole case

5 is presented and the 12 jurors are in the jury room

6 deliberating on the case, and let's say they started

7 deliberating late in the afternoon the day before and

8 they came back the morning of the next day and there are

9 11 jurors there and they're missing one.

10 And everyone's all worked up about the case and

11 now is the time to deliberate and now finally we can

12 talk to our fellow jurors. But no, the jury, 12-person

13 jury, is a unit. And you can't talk about the case

14 until all 12 jurors are present in that situation.

15 I guess I'm just mentioning that now, even

16 though it's down the line a long ways, because it sort

17 of illustrates how sensitive all these matters are. So

18 I wanted to go over. Okay.

19 Now, technology. As judges we get

20 instructions, suggested language for instructions that

21 complies with the law. And these instructions

22 concerning the technology, concerning what I'm going to

23 talk to you about right now, they keep on changing as

24 there are more and more technological ways to

25 communicate or do research or whatever. And this



291 becomes so much a part of all of our lives.

2 So although many of you use cell phones,

3 smartphones, the internet, and other tools of

4 technology, communicating with others about the case

5 before it ends, before you're discharged, that is

6 strictly prohibited. You may not communicate in any

7 way, shape, or form by any of these means of technology,

8 including not just voice communication, but e-mail, text

9 messaging, Twitter, blogging, internet chat rooms,

10 anything of any way, shape, or description, including

11 social networking, websites, Facebook, LinkedIn,

12 YouTube. It goes on and on and on.

13 I try to stay in touch, but I can't -- if

14 somebody asked me -- I don't know what Instagram is and

15 I guess it's a really big deal right now. And I've read

16 about it, but I've never gone to it. So -- someday

17 maybe.

18 Okay. Now, the law recognizes -- as trial

19 judge I recognize that these rules may require you to

20 refrain from some activities that are very common and

21 important to you in your daily lives. However, the law

22 requires these restrictions to ensure that the parties

23 have a fair trial here based on the evidence that each

24 party has had an opportunity to address.

25 If one or more of you get additional



301 information from an outside source, that information

2 might be inaccurate or incomplete. Or it may not apply

3 to this case. So these are some of the reasons why

4 these rules are so important and why they would mess up

5 a fair trial.

6 It may be inapplicable information and the

7 parties in the case who have worked so hard at it would

8 not have a chance to explain or contradict that

9 information because they wouldn't know about it. It

10 would be something happening outside this courtroom.

11 And that's why it's so important that you base

12 your verdict only on information that you receive in

13 this courtroom.

14 Now, consequences. I believe, and I try to go

15 through life day to day with the belief that people do

16 the right thing for the right reasons. But we all know

17 there are sanctions. And if we mess up, if we get

18 caught speeding down the freeway, there are

19 consequences.

20 And if the rules that I'm explaining to you are

21 violated, it has consequences. And I need to go over

22 some of these negative consequences and some of the

23 effect.

24 First, it jeopardizes the fairness of these

25 proceedings. And on this trial, could result -- that



311 would require the entire trial process to start all over

2 again in front of a brand-new jury at a later time with

3 huge additional expense.

4 What is a mistrial? A mistrial sort of happens

5 if things blow up, if there's a violation of the law

6 that deprives one side or the other or both sides of a

7 fair trial. So it wrecks the trial. Everybody goes

8 home. All this waste of money. And later it has to

9 start over.

10 And as you can imagine, a mistrial is a

11 tremendous expense and inconvenience to the parties, the

12 courts, and the taxpayers.

13 Now, I have never had to do this and I don't

14 want to even have to think about doing it, but some

15 judges around the country where jurors have done things

16 that cause a mistrial, judges have had to impose

17 sanctions and big expenses on jurors.

18 A judge has -- because you are officers of the

19 court, you have taken an oath, you're here in this very

20 solemn responsibility of being a jury in a trial here in

21 the courthouse. So if you violated the rules and it

22 caused a mistrial, some judges have imposed the court

23 costs and large fees on jurors.

24 The judge has a contempt power, which is a

25 fairly awesome power. Again, I'm happy to say that's --



321 I haven't really, in the -- I'm in my 15th year and I

2 haven't really had to focus on using the contempt power.

3 But a judge has the contempt power and it can

4 be and has been used if there's juror misconduct. So

5 there are important consequences. And I'm trusting

6 jurors will do the right thing for the right reason.

7 But I do need to put out the negative consequences.

8 Now, what happens if you are exposed to outside

9 information or you, as a member of the jury, see another

10 juror doing something that violates these rules,

11 violates these instructions of law? Go over that now.

12 If you're exposed to outside information or you

13 have difficulty following these instructions, please

14 notify the court immediately. If someone, as an

15 example, someone were to approach you on the street

16 outside the courthouse and try to talk about the case,

17 simply tell them I'm a juror, I can't talk about the

18 case. And if that person persists, simply walk away and

19 report the matter to the court.

20 But there are many other situations potentially

21 where this would come up. And I'm not suggesting that

22 it really will happen, but I don't know. Anything can

23 happen.

24 Now, you're under a juror oath. If any juror

25 becomes aware that one of your fellow jurors has done



331 something that violates these instructions, you are

2 obligated to report the matter to the court. And if

3 anyone tries to contact you about the case either

4 directly or indirectly or sends you any information

5 about the case, please report that promptly as well.

6 Now, all the restrictions I've gone over will

7 remain in effect throughout the trial until you have

8 been discharged. Once the trial is over, then you're

9 free to read or research anything you want to about

10 anything under the sun including this trial.

11 And you will be free to talk to anyone you want

12 to or don't want to talk to in terms of writing or

13 posting or Tweeting anything about the case if you

14 choose to do so.

15 Now, there's some ethical limitations Oregon

16 lawyers are under and I'll explain that in a minute.

17 But in terms of what I just said, the only limitation is

18 that you must wait until after the verdict and when you

19 have been discharged from your jury service.

20 The ethical limitations, the law is different

21 in various states. And the law in Oregon is when a

22 trial is over, a lawyer who is practicing law in Oregon

23 and governed by the Oregon rules or rules of this court,

24 they cannot approach you to ask you about the case.

25 Now, you can approach them if you want to. And



341 sometimes jurors say, gosh, I really liked what that

2 lawyer did, 80 percent of what that lawyer did I thought

3 was really effective; but I'd like to tell that lawyer

4 that there were a couple things that lawyer did that

5 really were -- really bothered jurors and in their

6 future trials maybe they should think about not doing

7 that. Or whatever.

8 You can -- once you're discharged, once the

9 verdict's in, you can talk to anybody you want to or

10 don't want to talk to. And I don't know if this case

11 will be media covered, but at the end of the case if you

12 do talk to somebody, and sometimes it opens the door if

13 there is media coverage, then you might get lots and

14 lots of questions and whatnot. So as a juror, these are

15 decisions which you can make.

16 Again, it's up to you at the end of the case if

17 you want to decide if you want to talk to somebody or

18 you don't want to talk to somebody, this is America.

19 You can do what you want when the case is over. But

20 while the case is going on, you must follow these rules.

21 Okay. I think I told you it was going to take

22 me a long time to go through all this law, and I'm

23 getting near the end, but there's more I've got to go

24 over.

25 The instructions in terms of all the dos and



351 don'ts I've just gone over, the instructions give little

2 more explanation as to the reasons for these rules and

3 why the law limits the communications that I've

4 mentioned.

5 Now, the lawyers and the parties in the case

6 have selected you, and only you, as the people they want

7 to make the very important decisions that will be

8 involved in the verdict on this case. The lawyers did

9 not choose anyone else. They did not choose anyone else

10 in your family. They did not choose anyone else among

11 your friends and your social circle or anyone in your

12 virtual world of the internet.

13 They chose you. And it's not fair to the

14 parties or it's not fair in terms of what -- I have to

15 look at what's fair under my oath as a judge. And it's

16 not fair under your oath as jurors to have people

17 involved in deciding the case that aren't here in this

18 courtroom.

19 And with the attorneys, the parties have never

20 met. With backgrounds the attorneys do not know, and

21 there's no -- it's not right that if people who are not

22 here in this courtroom influence the decision on this

23 case.

24 And that is why the law does not allow it.

25 Now, at the very end of the trial you will have to make



361 your decision based upon what you recall of the evidence

2 and the law that I instruct you. I want to go over now

3 those juror notepads and provisions on juror notes.

4 At the end of the case you will not have a

5 written transcript to consult. And it is difficult to

6 play back recorded testimony. And that is not typically

7 done even when requested. So I urge you to pay close

8 attention to the testimony that is given.

9 Now, you don't have to, but you may take notes

10 if you wish during the trial on those notepads. If you

11 take notes, please don't let your note-taking interfere

12 with your ability to observe the witnesses and evaluate

13 their testimony. Don't feel obligated to take notes

14 just because we have notepads.

15 Taking notes helps some people listen and

16 remember, but for others it gets in the way and they

17 remember better if they don't try to take notes. But --

18 so please do whatever works for you.

19 Now, when you leave the courtroom, please leave

20 your notepads on your chair. And you only take them to

21 the jury room with you at the very end of the case.

22 They will be kept confidential, they'll be here

23 overnight, they'll be kept confidential.

24 Now, jumping way ahead to jury deliberations,

25 and I'll be instructing the jury about this, but just so



371 you know, during your deliberations each juror needs to

2 make up his or her own mind about the facts. And please

3 do not rely on another juror's notes, especially if

4 they're different from or conflict with your own memory

5 of the evidence. It is your memory that counts.

6 Now, depending on the results of your initial

7 deliberations, the trial may continue with limited

8 additional evidence and argument. And I'll be

9 instructing the jury as we move along here step by step.

10 The jury may resume deliberating on one or two

11 additional issues.

12 So in just -- well, in just a moment here I'm

13 going to declare a recess for the jury and I'm going to

14 take up some legal arguments. And then when I bring you

15 back, we'll hear the opening statements in which the

16 lawyers will outline the evidence as they expect it to

17 be presented, consistent with the rules in the court

18 orders that I've already given.

19 And then after the opening statements from both

20 sides, then we'll begin hearing evidence. And the

21 plaintiff presents their evidence first. And so the

22 plaintiff will call plaintiff's first witness, we'll

23 have direct, cross-examination, redirect examination.

24 And as I indicated, at the conclusion of all

25 the evidence, plaintiff's evidence, defense evidence,



381 after everything's been presented, that's when you hear

2 the lawyers' closing arguments and the instructions of

3 the law before you begin your deliberations.

4 Thank you very much for your attention to these

5 instructions of law. And at this time, the jury will

6 please go with Miss Honda. Jury recess.

7 (Whereupon, the jury was excused from the

8 courtroom.)

9 THE COURT: Okay. Please be seated. At the

10 close of proceedings yesterday there was discussion and

11 some argument, which I told you I would continue this

12 morning, relating to defendant's objection to various

13 demonstrative exhibits which plaintiff's counsel,

14 Mr. Sugerman, indicated he wanted to use in his opening

15 statement.

16 And I made some general statements. And I know

17 everyone, including me, including the jury is eager to

18 get moving into opening statements. But it appears that

19 some rulings, and I hope that this -- these legal

20 arguments can be shorter rather than longer so we can

21 really get started with opening statements.

22 And so I'm -- number one, I guess I'll ask if

23 anything has been withdrawn as an objection. I've noted

24 what the objections were. If I don't have to decide

25 something, that's great. And if anybody has anything to



391 advise me about, let me know, that's no longer an

2 objection.

3 MR. HARRIS: Your Honor, we took to heart your

4 comments yesterday afternoon. We have one objection.

5 THE COURT: Oh, okay. That's good news.

6 MR. HARRIS: The one objection touches upon

7 elements in, I believe, four of the slides plaintiffs

8 want to use. The objection is as to the treatment of

9 this, what the plaintiffs have been terming the

10 spoliation issue.

11 And the four slides that this affects is slide

12 268, 270, 272, and just one comment on 275. And most of

13 these are things where the exhibit itself could be used

14 if the reference to allegations of spoliation are

15 removed from the exhibit.

16 The grounds for our objection, your Honor, let

17 me know when you're --

18 THE COURT: Can I -- I should get something in

19 front of me to look at so I can track with you.

20 MR. HARRIS: I have a flagged set available as

21 an extra copy for your Honor.

22 THE COURT: I just got 272 -- I have a set

23 here, I think, so let me try to pull them all out.

24 Okay. I think I have the four that you just mentioned.

25 I think I have all of this.



401 And let me just say, the court understands that

2 the objections that were put on the record yesterday

3 concerning the other exhibits of the demonstrative

4 exhibits, those objections are withdrawn. So I'm not

5 going to rule on that. Those are permitted.

6 So now I'm limiting my focus to 268, 270, 272,

7 and 275. And please go ahead.

8 MR. HARRIS: Thank you, your Honor.

9 The one that probably encapsulates the

10 plaintiff's argument the best is 272.

11 THE COURT: Okay.

12 MR. HARRIS: Your Honor, really, we have two

13 principal objections to this material being introduced.

14 One is, is that it's our belief that this is all

15 questions of law for the court to determine after the

16 case is over.

17 The plaintiffs are claiming that BP did not

18 preserve certain information that would be necessary for

19 them to identify the class members or to aid them in the

20 identification of the class members.

21 Well, the question of who's in and out of the

22 class, as your Honor has observed throughout our

23 dialogues on various issues, is a matter for the court

24 to manage.

25 And that management process begins once a



411 verdict is rendered and the court begins to look at

2 who's in, who's out, and what it takes to be a

3 participant in the recovery if the plaintiffs prove to

4 be successful in their claims.

5 So to the extent that this evidence is

6 unnecessary to identify the class, then it's not really

7 properly before the jury. The jury doesn't get to

8 adjudicate the number of class members. It is for the

9 court to determine that.

10 THE COURT: We'll need to get to the jury

11 verdicts, and I don't even know if that's still proposed

12 by plaintiffs. That was a question. I'm not going to

13 take that up this morning.

14 MR. HARRIS: Right. No, I understand that,

15 your Honor. But I don't think that -- this sort of

16 relates to the second.

17 So first of all, I believe that the questions

18 concerning size, nature, scope of the class are reserved

19 for your Honor's determination subsequent to the verdict

20 in this case if the plaintiffs prove successful.

21 The second issue is really that this is a --

22 that the question of whether or not evidence has been

23 spoliated is a question for the court to determine

24 because the remedy is not to litigate it in front of the

25 jury.



421 The remedy is for the court to consider whether

2 or not it should provide an instruction to the jury at

3 the point in time which it conducts a full hearing on

4 all the facts and circumstances to determine the

5 critical elements necessary to decide that question.

6 Those questions are contested here. One is was

7 there ever proper requests made for some of the

8 information that the plaintiffs are alluding to?

9 They have in their slide for opening, BP has

10 yet to produce sales drafts. I could not find a request

11 for documents for sales drafts in the plaintiff's

12 document requests contained in this case.

13 The other part is whether or not BP had control

14 over this particular information. And the document that

15 the plaintiff's cite is a document card agreement with,

16 I believe, Citibank, that is with a different BP entity,

17 BP Products North America, Inc.

18 BP Products North America, Inc., only operates

19 east of the Rockies. And it operates by distributing

20 motor fuel under a different brand than ARCO. It's

21 called BP east of the Rockies. The defendant in this

22 case is not a signatory to the document that's been

23 cited.

24 Now, your Honor, I'm not asking you to prejudge

25 any of those matters. The point of it is, this is



431 really a discovery dispute that the parties have and

2 that that discovery dispute is a matter for the court to

3 adjudicate and the court adjudicates that it does not

4 adjudicate that, or delegate its power and duty and

5 authority to the jury in order to ask the jury to make

6 judgments about it.

7 And, in fact, the plaintiff's exhibits, and

8 this is the troubling thing, is they say that BP, that

9 they intend to prove that BP withheld and destroyed

10 documents. That is a question for your Honor to decide.

11 Not because it would be -- it would only occur

12 as a result of your Honor's determination based upon a

13 full record as to what was the document request, what

14 was actually produced, if there's a question about who

15 controlled what, who was in control of the information

16 at the time the requests were made, and so on and so

17 forth.

18 That is my principal objection to the

19 plaintiff's presentation. And, your Honor, it obviously

20 is being -- we would argue that apart from the fact that

21 it's an attempt to ask the jury to invade your Honor's

22 province in terms of what you get to determine, that it

23 has resolved discovery disputes, determined what the

24 instructions are and so forth, it renders the evidence

25 highly irrelevant and, of course, highly prejudicial



441 under the applicable rules of evidence here.

2 So that would be our concern with those slides,

3 typified by slide 272, your Honor.

4 THE COURT: Well, yes. And I'd like to hear in

5 a moment from Mr. Sugerman about the control issue in BP

6 North America, Inc., and that whole matter. But first,

7 a question for you.

8 In terms of relevant evidence that somehow

9 relates to liability, certainly in -- and I know you've

10 had a lot of trials and you've done securities fraud

11 cases and you've had a lot of cases.

12 So if you are defending a fraud case and an

13 issue arose that the opposing side had deleted a whole

14 series of e-mails that contained evidence and there was

15 proof that they had deleted the e-mails and that those

16 e-mails would have given -- had probative value in terms

17 of indicating what happened, maybe supporting the

18 plaintiff's claim, that kind of tampering typically

19 is -- that could come into evidence, couldn't it, for

20 purposes on the liability?

21 MR. HARRIS: Not in this case, your Honor.

22 THE COURT: No. No. I mean in a fraud case.

23 MR. HARRIS: It would depend upon the facts and

24 circumstances.

25 And in this case, the allegation is that we



451 have violated the Unfair Trade Practices Act. There's

2 no provision of the Unfair Trade Practices Act that's

3 been alleged that BP, this alleged mishandling of

4 documents in any way is a component or element of a

5 claim under the Unfair Trade Practices Act that's been

6 pled in this case.

7 There's no allegation that whether we put a

8 pole sign up that complies with rules and regulations is

9 influenced by whether or not we kept a document about a

10 sales receipt.

11 The plaintiffs' theory, as I understand it, and

12 your Honor's, your MIL rulings concerning what's

13 permissible, has made it pretty clear that you have a

14 set of regulations, you have a set of transactions. And

15 the court's going to take a look at, and the jury will

16 take a look at, the application of those regs to those

17 signs and those sales practices. The sales practices at

18 issue is street sign, dispenser, receipt, total charge

19 rule.

20 There is no component of liability in there

21 related to the handling of the materials. Or like the

22 smoking gun e-mail that somebody sort of ditches because

23 they say, well, I promised you a 50 percent return on

24 your securities --

25 THE COURT: Are you saying the smoking gun



461 e-mail just has to relate to an element in the case? It

2 can't be related to -- I mean, every case, civil,

3 liability causation and damages.

4 This relates to damages, right?

5 MR. HARRIS: No. Damages are statutory, your

6 Honor.

7 THE COURT: Well, okay. But if you have $200

8 statutory amount for 10 people, it's different than for

9 3 million people.

10 MR. HARRIS: Right. And you get to decide that

11 as you've already ruled, when we've talked about what

12 the nature, size, and scope of the class is going to be

13 in terms of who gets the 200 bucks.

14 And by the way, I'm not arguing that the

15 plaintiffs cannot adduce evidence talking about their

16 3 million person class. We never objected to them being

17 able to say to the jury and they've already said it to

18 the jury, without objection from us, that there are

19 potentially millions of people in there.

20 But the ultimate determination, and I believe I

21 quote Mr. Sugerman, not verbatim, but in substance, of

22 saying that that will all get sorted out at the end

23 because the court, that's the court's province to

24 determine who's in, who's out.

25 And if there's some monkey business associated



471 with, by one side or the other is something that impacts

2 the court's ability to adjudicate that, the court's got

3 the power and the authority to deal with it at that

4 time.

5 THE COURT: Okay.


7 THE COURT: I'm interested in hearing about

8 control. We've had an argument, BP North America, Inc.,

9 east of the Rocky Mountains.

10 MR. SUGERMAN: Your Honor, we have provided in

11 discovery a processing agreement which has been marked

12 as Exhibit 65. And this processing agreement by its

13 terms covers ARCO. The definition on page 1 of 65,

14 Exhibit 65. The discovery we were provided.

15 ARCO is a defined term. ARCO means BP West

16 Coast Products LLC. I read this agreement between BP

17 Products North America, Inc., and First Data Merchant

18 Services to cover the data of BP West Coast Products LLC

19 and ARCO. Otherwise, those terms would not be in there.

20 There are provisions in here, for example, on

21 page 22 of Exhibit 65, subpart -- this is Section 17

22 which starts on page 20 and subpart G on page 22.

23 Subpart G, the title, Disclosure of

24 Confidential Information in Response to Discovery. If

25 either party receives interrogatories, subpoenas, civil



481 investigative demands, or other compulsory process

2 seeking confidential information, and that includes this

3 transaction data under Exhibit 65 agreements, that party

4 shall immediately notify the other party.

5 The party receiving discovery requests shall

6 comply with such requests to the extent of its legal

7 obligation. But before complying with such requests,

8 the party receiving the request shall use its

9 commercially reasonable efforts to obtain a protective

10 order acceptable to the other party. Confidential

11 information may also be disclosed pursuant to written

12 agreements of the parties.

13 Now, as between BP, the entity, and the BP

14 network, BP Products North America, Inc., and First

15 Data, BP West Coast Products is viewed as confidential

16 data and both parties obviously may be required to

17 produce it in discovery. They contemplated that in this

18 agreement and they made specific provision for it.

19 So that's the basis that we get to, to our

20 understanding, that this transaction data is certainly

21 in custody, control, or possession of BP, probably

22 jointly.

23 THE COURT: Okay.

24 MR. SUGERMAN: So I want to respond on this

25 other issue, if I may.



491 THE COURT: You don't need to.

2 MR. SUGERMAN: Thank you. Then I'll sit down.

3 THE COURT: All right. I'm going to make my

4 ruling.

5 We're dealing with something to be -- that may

6 be presented at opening statement. And concerning this

7 ruling and concerning any other ruling I make in court,

8 if, in part, citing Oregon Rule of Evidence 104,

9 Subsection 2, which gives guidance, but is -- and we are

10 dealing with relevancy here.

11 And it states when relevancy of evidence

12 depends upon the fulfillment of a condition of fact, the

13 court shall admit it upon or subject to the introduction

14 of evidence sufficient to support a finding of the

15 fulfillment of the condition.

16 Mr. Sugerman just referred to Exhibit 65. I

17 haven't seen that exhibit. He's represented as an

18 officer of the court what it contains. To the extent

19 the condition is not fulfilled, that's certainly fair

20 comment by the defense. And on this matter or on any

21 other matter, the defense or the plaintiff can move for

22 a limine instruction, a curative instruction.

23 The way I always like that done is with

24 specific wording of instruction, usually in writing,

25 submitted so I can consider it regarding a curative



501 instruction.

2 But both sides have a right to make opening

3 statements concerning -- within the rules and in

4 accordance with prior rulings, both sides have the right

5 to make opening statements concerning the evidence they

6 expect to be presented.

7 And this court is not going to micromanage the

8 defendant or the plaintiff on opening statements unless

9 something's pointed out that would violate an earlier

10 court ruling or a rule of court.

11 Concerning what is now in front of the court,

12 objections to evidence, Exhibits 268, 270, 272, and 275.

13 I've noted the basis for the objections. The first

14 argument by Mr. Harris related to this is really a

15 matter for the court and concerning class size,

16 certainly are a lot of matters the court's going to need

17 to decide if the case keeps moving forward related to

18 class matters.

19 I believe the applicable provision of the

20 Oregon Evidence Codes that apply here, it's Rule 401,

21 402, are dealing with relevancy.

22 While spoliation is a term of art and judges do

23 take that up concerning discovery disputes, sometimes in

24 terms of sanctions or in terms of electronic discovery

25 there's been a lot of cases.



511 Here, the spoliation, and I prefer to really

2 characterize it as it's an accusation of destruction of

3 evidence. Now, courts have long allowed evidence into

4 trials concerning alleged destruction of evidence.

5 My example in colloquy with Mr. Harris

6 concerning civil cases, if evidence is destroyed, if

7 e-mails are deleted in a fraud case and that impacts the

8 evidence of the deletion of e-mails, can come in.

9 In criminal cases. In a murder case, if an

10 accused is alleged to have thrown the murder weapon into

11 the river and a witness saw that, with the idea of

12 hiding evidence, that is admissible, throwing the gun

13 into the river is admissible in a murder case.

14 Flight is admissible in a criminal case. So

15 the Rules of Evidence indicate, we have relevancy under

16 Rule 401, and I don't see any real argument or problem

17 under Rule 403. So on the basis of the objections that

18 were made, the objections are respectfully overruled and

19 these exhibits can be used as demonstrative exhibits in

20 the opening statements.

21 We're now going to take a short recess. Are

22 you still estimating 45 minutes for your opening

23 statement, Mr. Sugerman?

24 MR. SUGERMAN: I am, your Honor.

25 THE COURT: Okay. We'll take a recess. Do the



521 parties need about ten minutes?

2 MR. SUGERMAN: That would be fabulous. Did you

3 want to deal with the Metzger matter before we bring the

4 jury back in?

5 THE COURT: Oh, you know, this would be a good

6 time to deal with it. Miss Honda, do you have that

7 letter?

8 THE CLERK: I do.

9 THE COURT: Okay. So the record's clear, and

10 this is -- I guess we need to figure out if we have

11 juror questions. We usually use court exhibits A, B, C,

12 et cetera. We're limited. This is also marked as Court

13 Exhibit A at this time.

14 And this is a letter to the court from Juror

15 Metzger. I'm just going to put it on the record so we

16 can discuss it. This is what it says: It says, I

17 informed Miss Linda -- but that reference, I believe, is

18 to Linda Zangerly, my judicial assistant.

19 So Jordan Metzger indicates that he informed

20 her that I notified my supervisors that I was picked as

21 a juror and the expected length of the trial. But they

22 told me that they -- there's some misspellings here,

23 they -- were only going to cover my wages for the first

24 two weeks. I was unsure of this or else I would have

25 spoken up yesterday.



531 So a related matter concerning this is the

2 length of the trial. And given the court's rulings and

3 the lengthy pretrial proceedings, and looking at the

4 trial plan, I have a very strong suspicion this trial is

5 not going to go all the way till February 7. So

6 Mr. Metzger's concern that he only gets paid the first

7 two weeks, maybe it's possible the case won't go much

8 beyond two weeks.

9 And if anyone can advise me, for instance, in

10 view of some of my rulings that might have excluded

11 certain witnesses. So I'll hear presentations by the

12 parties now on this letter from Mr. Metzger. Go ahead.

13 MR. SUGERMAN: Thank you, your Honor.

14 It absolutely occurred to me as it has to the

15 court that it is possible with the court's rulings that

16 we would be in under two weeks. That said, I'm

17 reluctant to make promises.

18 And I am reluctant to leave a juror who thinks

19 they have a hardship problem on a jury such that they

20 may be distracted by the concern over wages and dismayed

21 by the pace.

22 I don't think it would be wise to turn around

23 now and tell the jury, by the way, we think it's now two

24 weeks, even if -- even if that is closer to where we are

25 going to wind up.



541 THE COURT: What if we run out of jurors,

2 Mr. Sugerman?

3 MR. SUGERMAN: Well, it's a real issue.

4 THE COURT: Then there's a mistrial.

5 MR. SUGERMAN: I know. I know. I guess part

6 of me says, well, at least we had the presence of mind

7 to add a third. Maybe what happens is we get going and

8 the next other alternate --

9 THE COURT: We'll know a lot more a week from

10 now than we know now.

11 MR. SUGERMAN: Right. Do you want --

12 THE COURT: It's not written anywhere that I

13 need to decide this right now.

14 MR. SUGERMAN: Well, that's a really good

15 point. And I don't know if the court wants to say to

16 Mr. Metzger, can we keep you on for a week and see where

17 we are? Because it may -- things may change as we get

18 going. I don't have any objection to that as long as we

19 give him some feedback. Maybe the way to do it, the

20 hardship --

21 THE COURT: It would be in the presence of

22 everyone.

23 MR. SUGERMAN: Sure.

24 THE COURT: The other jurors.

25 MR. SUGERMAN: Maybe the way to do it is, the



551 hardship, his hardship starts in two weeks. That might

2 be a way to manage it.

3 THE COURT: Any suggestions or statements?

4 MR. HARRIS: Your Honor, I don't think that

5 this case -- I agree with the observation that it's --

6 it's less likely that the case is going to take till

7 February 7th.

8 THE COURT: I didn't hear all of that.

9 MR. HARRIS: I do agree that it's less likely

10 that this case will go into that -- all the way to

11 February 7th.

12 My concern is I think it could go into the

13 third week very clearly. In part, because we have a

14 short week next week, we've had, you know, we got

15 started on Tuesday and Wednesday, so we're talking about

16 trial days.

17 It seems pretty much, counting up the days on

18 the trial plan, even condensing it for some of the

19 witnesses who might not testify now, we would still go

20 through that last week of January, which would be the

21 third week, from what I understand from Mr. Metzger's

22 note.

23 However, if your Honor wants to wait and see

24 how things develop, we have no objection to that

25 whatsoever. Otherwise, we would have no objection to



561 him being excused for hardship.

2 THE COURT: Okay. I think what I'll do is when

3 the jury comes in, I will acknowledge that I received

4 the letter and make a general statement that we're going

5 to see how things go and I note that his problem starts

6 in two weeks. And as we get closer to that, I'll

7 perhaps be taking it up again and making a decision.

8 Unless either side has an objection to this

9 sort of general acknowledgment, thank you,

10 we're-working-on-it approach.

11 MR. HARRIS: No objection, your Honor.

12 MR. SUGERMAN: Acceptable to plaintiff. Thank

13 you.

14 THE COURT: Okay. Why don't we take a

15 ten-minute recess and why don't you tell the jury that

16 we'll probably start in ten minutes. Thank you.

17 (Recess taken.)

18 THE CLERK: All rise. Court is back in

19 session.

20 THE COURT: Okay. Remain standing, please

21 bring in the jury.

22 Okay. We are all in session. Please be

23 seated. We've gone over the legal matters we needed to

24 address. Before opening statements start, there is one

25 matter I want to take up.



571 Mr. Metzger -- you're Mr. Metzger. Thank you

2 for your note. You did hand a note to my staff which

3 they handed to me and which I've reviewed with the

4 attorneys on the case as I am required to do. And just

5 for the record, we mark all of these as exhibits, court

6 exhibits. This is Court Exhibit A.

7 So I wanted to let you know that I got your

8 note, Mr. Metzger. And as you know, as I made clear

9 yesterday during jury selection, yesterday was the last

10 time I was able to consider hardship excuses because the

11 whole process of selecting a jury did move forward and

12 the 15 trial jurors were selected and trial jurors have

13 taken an oath.

14 So we have our trial jury. Nonetheless, I will

15 take this matter under advisement. Mr. Metzger, you

16 indicate that you have a problem that may start in two

17 weeks. And I want to see how things go.

18 As we get closer to that two-week mark, I may

19 be speaking further on this subject. But for now, you

20 are on the jury. I'm not able to make any change in the

21 jury at this time. And that's what I wanted to say and

22 I wanted to let you know I did get your note and have

23 considered it. So thank you. You don't need to speak

24 now, but thank you very much.

25 Okay. So this is the time for opening



581 statements. So Counsel, Mr. Sugerman, you may proceed.

2

3 OPENING STATEMENT

4

5 MR. SUGERMAN: Thank you, your Honor. I

6 thought I had it all wired, but I'm not wired. Thank

7 you. I know you-all can hear, but because I talk loud,

8 but the Court is recording this as well, so that's why I

9 need to use the mic. Excuse me.

10 Well, good morning. There's a company that

11 runs a gas station network across Oregon that knows

12 something its first-time customers do not know, cannot

13 know. This company knows that just under half of its

14 first-time customers will be charged more for the price

15 of gas that they buy at the company, company's stores,

16 than the signs tell them the price is.

17 This company also knows that first-time

18 customers find out they are being charged more than the

19 full price they were promised after it's too late. It

20 will be too late because the customer will find out when

21 they go to pay.

22 When the first-time customer goes in to pay at

23 a BP ARCO, AMPM Mini Market Station, BP reveals what it

24 is really doing. It hasn't put important information on

25 its street sign about the total price of gasoline. It



591 hasn't put important information on its street sign

2 about what it will charge all of its customers.

3 When a first-time customer goes in to pay, the

4 customer discovers if he or she is paying with a debit

5 card, that there is an additional charge that raises the

6 total price of gasoline.

7 Now, you're going to learn that this retail --

8 this type of retail business practice is against the law

9 in Oregon. You'll learn when a retail seller of gas in

10 Oregon advertises its lowest cash gas price on street

11 signs, the gas price it advertises must -- must -- match

12 the prices charged. That's a rule.

13 If there is any condition, an asterisk, a

14 footnote, fine print that affects the lowest cash price

15 advertised, the retail seller of gasoline must --

16 must -- disclose that on the street sign.

17 That same rule about disclosing conditions,

18 fine print, asterisk, footnote, that same rule applies

19 to signs on the pump.

20 And there's one more Oregon rule on top of it

21 all. A retailer -- a retail seller of gasoline can only

22 charge the customer an amount equal to the price on the

23 pump times the number of gallons purchased.

24 Now, a business that recklessly or knowingly

25 violates these rules is violating the Oregon Unlawful



601 Trade Practices Act. And they're doing that every time

2 they withhold the real full price they are going to

3 charge one of their customers. Under the laws that

4 apply, when these violations cause financial losses to

5 consumers, the business must pay a damage penalty amount

6 of $200 to each consumer who makes a valid claim. That

7 $200 damage amount was set in 1971. It has not

8 increased a dime in the last 40 years.

9 Those are the rules that apply in Oregon. And

10 there are other rules. There's a BP rule. And the BP

11 rule is a rule for the employees. They must be familiar

12 with and comply with local laws where BP does business.

13 Now, let me tell you the story about what

14 happened here. When you're out on the road and you need

15 gas, one of the things you look for are gas station

16 street signs. They tell you the price. As you drive by

17 an ARCO station or an AMPM Mini Market, you see a price

18 is advertised this way: Three grades of fuel and a

19 single price for each grade of fuel.

20 Now, BP's street signs show you only the bare

21 price. And as you pull in under the canopy up to the

22 pump, there may be a sign on the pump that looks like

23 that. It tells you what debit cards they accept. And

24 there's some other information down there.

25 And so maybe you say to the attendant, fill it.



611 Or maybe you said, hey, five gallons please, or I'll buy

2 $20 worth. And at BP's ARCO stations, at BP's AMPM Mini

3 Market, they allow only two methods of payment. They

4 allow you to pay by cash and they allow you to pay with

5 a debit card.

6 Now, a few have a pay station down from the

7 pumps. So the street sign and the pump, and you pull in

8 and you get out of the car and you talk to the

9 attendant, very few stations you walk down here, but

10 almost all of them you go inside to pay.

11 And if your method of payment is a debit card,

12 you walk up to this little gizmo down here, and as you

13 walk up and get close to the PIN pad, you see this fee

14 notice. And this fee notice, when you're up close, the

15 first sentence reads, this merchant charges a fee of 35

16 cents for each approved debit card transaction. Now, we

17 now know that that fee is BP's fee. So this merchant,

18 the one that is charging the 35 cents, is BP.

19 And so if your method of payment is a debit

20 card, BP charges a fee that raises the total price of

21 gasoline. You'll learn that these ARCO and AMPM

22 stations are part of the BP retail sales network. And

23 the debit card transaction fees, they belong to BP.

24 And you're going to hear about the volume of

25 these transactions. Debit card gas purchases, State of



621 Oregon, ARCO, AMPM Mini Markets, State of Oregon, about

2 15,000 of these per day. BP knows about the fee, of

3 course, because it's their fee; but first-time debit

4 card customers can't know.

5 As a matter of fact, you may conclude from the

6 evidence, that BP puts real effort into keeping those

7 first-time customers from knowing about the fee until it

8 is too late.

9 Now, how did we get here? Let me take you back

10 to 1971. That was the year that the modern Unfair Trade

11 Practices Act -- we're lawyers, we said it -- the UTPA

12 up there on the sign, that's a common abbreviation, that

13 was the year the modern Unfair Trade Practices Act was

14 passed by the Oregon legislature. It's the granddaddy

15 of consumer protection law within the State of Oregon.

16 It's been in place over 40 years.

17 A few years later, 1985, the Oregon Department

18 of Justice passes the first version of Oregon's gas

19 advertising rules. That was before debit cards even

20 existed.

21 Now, a few years later ARCO stations start

22 charging this debit fee. And by about 2000, ARCO

23 customers are upset about the information that ARCO

24 withholds.

25 A class action lawsuit is filed here in this



631 courthouse where we're all gathered today. That case,

2 Dobson versus ARCO. In that case, back in 2000, ARCO

3 debit card customers claim that ARCO stations are

4 improperly hiding this debit card fee.

5 I was the lawyer who filed that case some 14

6 years ago. That case, Dobson versus ARCO, settled in

7 about 2002.

8 Now, after that first case about hiding the

9 full price, consumers continued to complain about debit

10 card fees. You might recall the financial crisis of

11 2008, the meltdown on Wall Street, the big banks too big

12 to fail. Well, about that time, the Oregon Department

13 of Justice goes through a process to update these 1985

14 rules.

15 And in 2010 the Oregon Department of Justice

16 adopts and publishes a new rule. And those new rules

17 become effective January 1, 2011. January 1, 2011. And

18 in January of 2011, at least four, maybe more, but at

19 least four different BP employees get at least one copy

20 of these new rules. They come in an e-mail.

21 Now, of these four employees that got this

22 e-mail with the new rules, only one -- only one of the

23 four, Mr. Abendhoff, claims to have reviewed the rules.

24 Mr. Abendhoff, not a lawyer, not a compliance

25 person, not somebody responsible for the day-to-day



641 interpretation and compliance with laws and rules and

2 regulations, he is, instead, BP's in-house lobbyist.

3 You'll learn that Mr. Abendhoff thinks he skimmed the

4 rules, he thinks he got them in 2011, he thinks he

5 skimmed them, and he thinks he decided that the rule did

6 not apply to BP.

7 He decided BP is not in the retail business in

8 Oregon. He decided that because BP is not in a retail

9 business in Oregon, these rules do not apply. Now, we

10 don't know exactly what he did with those new rules in

11 2011. Did he delete them from his e-mail? Did he throw

12 them away? Did he shove them in a drawer and forget

13 about them?

14 But here's what we know he did not do. He did

15 not check with the legal department, he did not talk to

16 the people in retail operations, and he did not talk to

17 anybody in compliance. He did not seek more

18 clarification.

19 There's one other thing Mr. Abendhoff did not

20 do. You'll learn from the evidence that BP has a

21 massive retail network that includes ARCO and AMPM brand

22 stores.

23 Now, Mr. Abendhoff did not say anything to any

24 of the contractors or the franchisees who are part of

25 the BP retail network. He withheld from BP's partners,



651 the station managers, the contractors, the franchisees,

2 that the law had changed.

3 He didn't say anything because he said it

4 wasn't his job. Now, remember, there is a BP rule,

5 employees must comply with the law in places where BP

6 operates. Later that same year, October 2011,

7 Mr. Scharfstein needs gas. He goes into a local ARCO

8 station, he asks the attendant for $40 on his debit

9 card, and he walks in to pay.

10 And he gets up to the gizmo and he sees this BP

11 sticker and he reads and learns that this merchant

12 charges a fee for each approved debit card transaction.

13 He pays the debit fee, it increases the advertised

14 price, he gets less gas than he pays for.

15 Now, we filed this lawsuit in January 2012,

16 like December, very end of December, very beginning of

17 January. From January 1, 2011, the date of the

18 effective regulations, kind of the starting gun, until

19 Judge LaBarre, in managing this class action, closes off

20 the case August 2013.

21 During that whole time BP's charging the same

22 fee, same signs, just one sign with supposedly full and

23 complete information, same pump, same pay station

24 disclosures. Millions of debit card transactions. Most

25 likely, one-time buyers, first time only, one per



661 customer, most likely between 2.9 and 3.1 million.

2 We are suing BP West Coast Products LLC which

3 is part of BP. And we are suing BP in this class action

4 for recklessly and knowingly violating the Unfair Trade

5 Practices Act and these gas price advertising rules.

6 The first gas price rule is the street sign

7 rule. If a gas seller chooses to advertise its lowest

8 cash price, it may do so. But it must -- it must

9 include on its street signs any condition that applies

10 to the lowest cash price that it has advertised on its

11 sign.

12 Well, what's a condition? A type of service?

13 A method of payment like cash, credit, or debit? Or

14 anything else that raises the effective price of

15 gasoline. Now, BP knows about this rule. You see on

16 their signs, these are BP signs, ARCO, part of BP, BP

17 retail sales network, and on the left, mini serve

18 gasoline. Mini serve is exactly one of these

19 conditions. It is a type of service.

20 You will learn that BP controls these street

21 signs. BP violates the street sign rule by refusing to

22 disclose the conditions, the debit card charge. That's

23 the charge that BP adds to the gas price register at the

24 pump. The rules are important because they ensure that

25 consumers pay the price it is advertised and they get



671 the same amount of gas that they pay for. And they're

2 also important for a different reason.

3 When we go shopping, we want to be able to

4 compare apples to apples, the prices, whether it's by

5 GasBuddy or whether it's by driving around and looking

6 at street signs.

7 And so the condition rule and the disclosure

8 rules help us know what we're truly getting for our

9 money.

10 The next gas price rule that BP violated

11 relates to the on-pump information. Now, like the

12 street sign rule, BP is required to disclose on its

13 pump, conditions. And those disclosures have to be

14 clear and conspicuous.

15 Finally, we're suing BP for recklessly and

16 knowingly violating the total price or the pump price

17 rule. Let's go back to this e-mail, January 2011, that

18 is the rules. It comes to these four people in early

19 January 2011, gasoline info, State of Oregon.

20 And if you read through the rule instead of

21 skimming it you would have come -- you would see it's

22 gasoline price advertising on the first page. And if

23 you read it, you would find there's a very clear rule

24 and it's new as of January 2011. You can charge the

25 customer only the total amount registered on the



681 dispensing device at the selected unit price. You can't

2 charge something on top of it that raises the price.

3 What happens through these violations is that

4 BP customers are put in a position of having to pay an

5 undisclosed charge. And because it's their fee, BP

6 obviously knows what they're doing. BP knows that the

7 first-time customers aren't going to see anything on the

8 signs that aren't there. They're going to pay a higher

9 effective rate per gallon.

10 Let's talk about the losses. Because loss is

11 part of this as well. What are these losses? Well,

12 this is a small transaction. The price on the day that

13 this sale was made was 3.559 per gallon. And the

14 purchaser bought $5 worth. And at that price on that

15 day, and everybody knows prices go up and down and they

16 vary across town, $5 bought you 1.406 gallons.

17 But the purchaser actually paid $535 cents for

18 this gas. And if you do the math, the purchaser

19 actually paid $3.80 a gallon. That's how the debit card

20 fee raises the price. And obviously, it's a much bigger

21 increase on the low end and a much smaller increase on

22 the high end. But you never get what's on the sign.

23 And the other loss is withholding gas. So when

24 a customer says, hey, give me ten gallons, please, how

25 does it work? Well, let's work this through together.



691 I have to do this in a simple way because I'm a little

2 bit math challenged, but I like to think of it this way.

3 If a customer says give me ten gallons and the

4 price is $3.50 a gallon, then the customer should be

5 charged $35 for 10 gallons, ten times $3.50. Well, but

6 the debit card customer is getting charged $3535 cents

7 because of BP's fee on top.

8 Well, what happened here? Well, the customer

9 who bought 10 gallons should have gotten 10.1 gallons.

10 She was shorted by a tenth of a gallon. That's gas that

11 BP withholds.

12 And if you think about the volume of this in

13 Oregon on a daily and an annual basis, the numbers start

14 to get staggering. So let's look at street signs used

15 at BP and ARCO stations in Oregon for a minute. And now

16 let's look at how competitors do it.

17 So Chevron -- we had some jurors -- gives you a

18 simple price. Safeway, lower left corner. You can see

19 on top there, cash/debit price, same price. 76 does a

20 stack, cash on top, credit/debit below. Am I blocking

21 your view? Sorry. Fred Meyer, similar to Chevron.

22 Shell, two different prices. Space Age, cash or credit.

23 Well, what do we know about Chevron and Fred's?

24 That's the price you pay regardless of the method of

25 payment. Just BP, they stand alone.



701 When the competitors charge you more, you can

2 see it on the price signs. They disclose the conditions

3 on the prices, they advertise on their street signs

4 based on the method of payment.

5 And when they only advertise one price, that's

6 the price you're going to pay regardless of whether you

7 pay cash, whether you pay debit, or whether you pay

8 credit. Competitors honor the rules. They don't

9 recklessly violate the Unfair Trade Practices Act.

10 They also show it's really not very hard to

11 comply with these rules. You'll learn BP chooses to

12 price this way. And it could make different choices

13 that honor the rules. It could do what its competitors

14 do. It could not charge for a debit card. Or it could

15 add the debit card charge into the price of fuel.

16 And to meet the street sign rule, BP could add

17 a grand total of two words, can't do it in the fine

18 print, got to be readable on the street sign. Two

19 words, cash price. Or they could even tell you more.

20 Debit card transaction applies, on the street signs.

21 Because the street signs and the pump have to match.

22 And that is why we are suing BP. BP recklessly

23 withholds price information from its street signs. BP

24 knowingly uses pump disclosures that cannot be seen. BP

25 recklessly increases the cost of gasoline over the price



711 on the street sign. And they don't reveal that

2 information until you go in to pay.

3 Now, before deciding to come to trial, we had

4 to investigate a few things. And the first thing we had

5 to investigate is exactly how customers were handling

6 their own responsibilities. And we looked into it. And

7 our investigation revealed that BP controls these street

8 signs and all the street signs in all Oregon ARCO and

9 all Oregon AMPM Mini Market stations are the same. None

10 of them ever tell the customers about the debit card

11 charge.

12 So I've said the new rules took effect

13 January 1, 2011. So we limit the case to only

14 first-time debit card purchasers after January 1, 2011.

15 First time only. One transaction.

16 The next thing we had to consider before coming

17 to trial is BP's control. We looked into it and we

18 learned that the fee charged by the merchant is BP's

19 fee. The contractors never touch that transaction fee.

20 It all goes to BP. So BP is the merchant referred to.

21 Also we learned that BP controls most of the

22 operations of these franchise stores in its retail sales

23 network including the content of the street signs and

24 the actual gas, excuse me, other than the actual gas

25 prices. That's the one thing that the independent, the



721 franchisees control; they get to put the prices up.

2 BP is responsible for the small disclosures.

3 BP's own witness admitted that BP requires its

4 contractors to charge this fee. The contractors don't

5 have any control over the fee or the disclosures, so the

6 case goes forward against BP.

7 Let's talk about how these rules apply. These

8 rules apply to everyone in the business of retailing

9 gasoline. The business of retailing gasoline includes

10 corporations that operate businesses for the purpose of

11 delivering fuel into cars. And that is what BP does in

12 this long line that ends at the ARCO location.

13 BP will actually claim it is not in the

14 business of retailing. You'll get to hear the

15 deposition testimony of Mr. Reeder of how BP is not a

16 retailer.

17 By the way, Mr. Reeder's job title is director

18 of retail operations. There will be other evidence on

19 this issue. Another thing that had to be determined

20 before trial was how Mr. Scharfstein, first-time debit

21 customers are harmed by this fee. Pretty simple, they

22 pay more, they get less.

23 Now, BP will also claim that it charges the

24 same fee no matter how much gas you buy, no matter

25 whether you buy gas and a Twinkie or whether you buy



731 just a Twinkie. What BP says is you buy a Twinkie, if

2 you buy gas and a Twinkie, or you buy gas, no matter how

3 much you pay and you pay with a debit card, we're going

4 to charge you 35 cents. So what? Let's talk about

5 that.

6 Well, no Twinkies in this case. There are no

7 rules about debit card charges and Twinkies. There's a

8 reason for that. Gas is something we all need. Gas

9 prices affect all of us. Twinkie prices, not so much.

10 Well, what about this whole idea of gas plus

11 Twinkie? Okay. Good question. The first thing that

12 happens is you pull into the station and you talk to the

13 attendant who starts to fill the car while you go in to

14 pay. And while there, you pick up a Twinkie. Now, you

15 can always put down the Twinkie. The gas, however, is

16 in your car. It is not coming out. You are stuck.

17 So this same fee is charged the same way every

18 day. It starts at the street on the street signs, it

19 runs to the pump, and it comes when you go in to pay.

20 What you learn is they can't sell gas this way

21 under Oregon law. Each consumer is harmed by this

22 charge. BP holds back some things. Now, when it passed

23 the Oregon Unfair Trade Practices Act, this 200 penalty

24 per violation came into effect, $200 per cheated

25 customer. Your job actually fits into an overall system



741 of consumer protection.

2 The bottom are the customers, the contractors

3 are controlled by BP, we've got a concealment problem,

4 and the laws set the consumer protection standards, you

5 and Judge LaBarre are the enforcers. You, together, are

6 at the top of this system that's been in place since the

7 1970s.

8 We must prove that BP acted recklessly or

9 knowingly in violating these rules. What's

10 recklessness? Well, Judge LaBarre will provide you with

11 the definition and you'll, of course, follow that.

12 We don't know exactly how he will define it,

13 but we expect it will be something like this. A party

14 acts recklessly that way. And when we talk about

15 recklessness, it's not homicide and it's not the single

16 minute of inattention that leads to the car crash, it's

17 something that happens over and over again. And you'll

18 see a lot of evidence of this, as you'll need to.

19 You'll see that BP ignores the lessons from

20 that lawsuit in Dobson versus ARCO filed in 2000 about

21 withholding information. You'll learn that BP ignores

22 years of customer complaints, some of which are daily.

23 You'll hear that BP put a lobbyist in charge of making

24 legal decisions about what rules do or don't apply to

25 the retail business network that operates in Oregon.



751 You'll see that the lobbyist does not call the

2 legal department, that lobbyist does not call compliance

3 people, that lobbyist does not talk to the retail

4 operations people, and that lobbyist does not talk to

5 the franchisees. And on top of it all, BP chooses to

6 continue its conduct and not do anything different after

7 we file this lawsuit January 2012.

8 There's one other bit of evidence relating to

9 recklessness that I need to talk to you about and that's

10 missing transaction data. When you use one of these

11 things, one of these debit cards, no surprise that it

12 generates information. It generates in the system that

13 operates here a lot of information.

14 Now, BP hires a contractor, First Data

15 Corporation, to do its data processing. And the two of

16 them work together. And when you swipe this card, the

17 first thing that is part of the information is the

18 complete debit card number, all digits. That is like a

19 snowflake or a social security number. No two alike.

20 That is a unique number.

21 Other transaction data that's collected with

22 each swipe, the location, which store you're at, the

23 time, the date, what you bought. Is it gas? Gas and

24 Twinkies? Or was it something else? Not Twinkies

25 exactly, but gas and nongas.



761 Next amount of data, how much did you spend?

2 And also was there a 35 cents debit card charge on top.

3 Why am I telling you this? Well, it's now fully

4 confirmed the BP transaction records on some 2 million

5 BP customers have been lost or destroyed.

6 By not ensuring that they saved this

7 transaction data on their retail customers, BP made it

8 harder for each individual to prove their case. You'll

9 learn there are pretty good reasons to keep this data.

10 You'll also hear that there are almost no good business

11 reasons, and once a lawsuit is filed, absolutely no

12 reason whatsoever to destroy transaction records that

13 are evidence.

14 BP knows that letting that data get overwritten

15 makes it harder for people who got cheated to prove

16 their claims. If you find that BP acted recklessly or

17 knowingly, Judge LaBarre will apply the $200 damage

18 amount. If you decide BP did not act recklessly or

19 knowingly, you pay nothing. Everything continues the

20 way it is.

21 Now, we look forward to bringing you more than

22 enough evidence. You will need to make your decision

23 about BP's retail practices and the costs they continue

24 to impose on all their first-time debit card customers.

25 This has a long history. And we're still dealing with



771 hidden fees.

2 At the end of this consumer protection system

3 is you, ladies and gentlemen. We look forward to

4 working with you. Thank you.

5 THE COURT: All right. We've heard plaintiff's

6 opening statement. And I think it makes most sense,

7 rather than interrupting Mr. Harris' opening statement,

8 to start that after lunch. And so we will recess now.

9 There's matters scheduled over the noon hour on my

10 schedule. And we will be back at 1:30. Please be in

11 the jury room.

12 You'll follow out. And Mr. Sugerman, could you

13 move the -- whatever might obstruct the jury as they go

14 into the jury room.

15 MR. SUGERMAN: Thank you.

16 THE COURT: Again, I think you know the

17 procedure already. You follow Miss Honda out. Then

18 again, please do not, after lunch, don't come into the

19 courtroom. Just go into the jury room. What's the

20 reason for that?

21 As I've been indicating as trial judge, I need

22 to go over various legal matters. And these are matters

23 for the judge and not for the jury. The facts are the

24 matters for the jury.

25 So it would be wrong to walk into the courtroom



781 and hear some of the legal arguments even by mistake,

2 just forgot about it. But please try to remember, go

3 into the jury room and wait there. And then we will

4 start at 1:30 with defendant's opening statement. Thank

5 you. We are in recess.

6 (Lunch recess taken.)

7 THE CLERK: All rise. Court is back in

8 session.

9 THE COURT: I understand there is a legal

10 matter? What is that matter?

11 MR. HARRIS: I think you'll be pleased to hear

12 Mr. Sugerman and I are in agreement, but we wanted to

13 confirm it with your Honor.

14 THE COURT: Sure.

15 MR. HARRIS: It was with respect to the scope

16 of my opening, your Honor.

17 THE COURT: Okay.

18 MR. HARRIS: And based upon some of the

19 arguments, I just wanted to confirm with Mr. Sugerman

20 that I would be able to mention during opening, without

21 drawing an objection from Mr. Sugerman, and, of course,

22 I would be interested in knowing if I would draw an

23 objection from your Honor, concerning these two facts:

24 BP, there is an argument that was made during opening

25 about competitors follow the rules and BP chooses a



791 price in a certain way and handles -- makes -- its

2 decision-making process is conducted in a certain

3 fashion.

4 THE COURT: Right.

5 MR. HARRIS: I want to be able to say that BP

6 has a special deal with the debit card companies that

7 permit it to offer a per-transaction fee as opposed to

8 incorporating it into the price per gallon.

9 Number two, that BP pays bank fees out of the

10 35 cents. Not arguing whether it's a cover cost or how

11 it's calculated, but just that that's -- there are bank

12 fees and it's paid by BP out of the 35 cents.

13 THE COURT: All right. And no objection?

14 MR. SUGERMAN: Well, I understood the second

15 one just a little different.

16 Certainly, the fact that there are bank fees

17 incurred, I don't have a problem with. If we're going

18 to talk about BP pays, then it sounds like a

19 pass-through and we get closer to. And so I would just

20 suggest that the bank part of that, their bank fees

21 associated with the transaction, leave it at that and

22 then we don't get close to any line.

23 And then the other part I have no objection to.

24 THE COURT: Any problem with that?

25 MR. HARRIS: I can live with that for the time



801 being, your Honor, without giving it up forever and

2 ever, because we have to see how things go.

3 THE COURT: It's totally understood. So I

4 approve the stipulation.


6 THE COURT: And you may proceed. So we'll now

7 bring the jurors in. I guess there's a clear pathway

8 for them to get through.


10 THE COURT: All right. We are all here.

11 Please be seated. Court is in session. All right.

12 This is the time for the defense opening statement. And

13 Mr. Harris, you may proceed.


15

16 OPENING STATEMENT

17

18 MR. HARRIS: Well, if it please the Court,

19 ladies and gentlemen of the jury, again, my name's David

20 Harris and I'm going to present the opening statement

21 for the defendant in this case, BP West Coast Products.

22 Now, I think we all know what the issue is in

23 this case. It relates to the debit card fee that BP

24 charges consumers, every time they swipe a debit card at

25 an ARCO location, the 35 cents.



811 Now, BP has been doing this, has had this fee

2 for approximately 30 years. And it's been employed only

3 where BP West Coast Products does business. And I just

4 want to let you-all know where that is.

5 The evidence will show that BP today, BP West

6 Coast Products does business in the state of Oregon,

7 does business in the State of Washington, and in

8 Northern California; which, as I understand it, some

9 people consider a state unto itself. But, in fact, is

10 the only place that it does business today.

11 It used to do business in Southern California,

12 Arizona, and Nevada, but sold those assets about a year

13 ago. So that's the geographic scope that we're going to

14 be talking about during the case. And, of course, this

15 case is only about Oregon, what are Oregon laws and what

16 practices and activities take place in Oregon.

17 Now, the evidence that we intend to introduce

18 for this claim is going to break down into sort of four

19 big subject matters that we'd like to talk about. First

20 of all, we just want to identify what are the rules that

21 BP is accused of violating in this case. And so the

22 plaintiff provided some evidence of it. They're right

23 out of the law books. We'll show you what we -- what

24 those laws say.

25 Number two, we want to develop evidence to



821 explain to you how those rules, if they do apply to BP.

2 One of the issues in this case is whether the rules

3 apply to BP or not.

4 Number three, if the rules do apply, did BP

5 break those rules? And this is the most, perhaps,

6 important question and one that both sides have spent a

7 lot of time addressing in one way or the other.

8 Is that even if BP broke the rules, did BP

9 break the rules in such a way as to arise to a level of

10 recklessness, which is a legal term that his Honor is

11 going to define for you-all during the course of this

12 case.

13 Now, I'd like to get right into what we're

14 going to talk about. So first of all, what are the

15 rules that we're addressing in this case? So if I could

16 have the slide showing the gasoline price advertising

17 statute as it existed in 1985. That's what I've labeled

18 as the original statute.

19 If anybody has a problem seeing because I put

20 this thing here, let me know. I'll move it. Can

21 everybody see? No. I got a nod of no. So it will go

22 over here for the time being, if that's better.

23 All right. In 2010 these rules were amended.

24 And we're going to talk about those amendments because

25 they led to the 2011 regulations that have been



831 discussed about in this case.

2 The point I want to make is that the

3 requirement that if a cash price displayed on a sign is

4 subject to a condition that has been in the law since

5 1985. And that was the same provision of the law that

6 Mr. Sugerman showed you. And it's the same as it would

7 exist in 2010, '11, so on and so forth. Now,

8 regulations define that.

9 Now, since 1985, the statutes and rules have

10 made the obligation of posting these conditions on a

11 certain defined group of people. So let's go to the

12 next slide, please.

13 This is definitions right out of the Oregon

14 Administrative Rule, the gasoline price advertising

15 rule. Because the rule applies to retailers about

16 posting signage and the definition of retailer from the

17 original rule to the rule that is in play today, this is

18 essentially the same. It says retailer, means any

19 person who operates a service station, business, or

20 other place for the purpose of retailing and delivering

21 gasoline, diesel, or other fuel into the tanks of motor

22 vehicles.

23 Now, folks, like a lot of things, there's a lot

24 of words there, but they're all important. No one word

25 is more important or less important than another one.



841 And I do want you to look carefully at this. Because it

2 is a person who operates a service station for the

3 purpose of retailing. That's a term we'll talk about.

4 The evidence will be that retailing means the person who

5 sells, person who actually sells the motor fuel.

6 And -- not or -- and delivering the gasoline

7 into the tanks of motor vehicles. So we want to just

8 keep those rules in mind. Now, this law also provides

9 that if someone violates it, these rules, in a reckless

10 manner, $200 per violation can be assessed.

11 So the first question under the rules become,

12 is BP a retailer? And so I've got another slide for

13 this, which I've blown it up so hopefully everybody can

14 see. It's the same definition as was on the prior

15 slide.

16 So let's talk about it. Is BP a retailer?

17 What would be the evidence on that question? BP's

18 evidence is this: At one time, and for a lengthy period

19 of time, BP was a retailer under this definition within

20 the state of Oregon. Because it operated -- it operated

21 service stations and sold fuel to motorists and its

22 employees put the fuel into the tanks of the motoring

23 public.

24 But that by 2008, BP got out of that business

25 entirely in the state of Oregon and turned over its



851 entire station operations to independent dealers who

2 operate pursuant to contracts that allow them to operate

3 and serve as independent business operators of those

4 gasoline service stations.

5 So let me talk about this in a little more

6 detail. We have what was known as a dual channel of

7 trade. Dual channel of trade in the industry means that

8 there was two ways in which gasoline could be sold to

9 the motoring public.

10 The first way was through company stores.

11 Company stores had a specific meaning and understanding

12 in the industry. It meant that the service station site

13 was operated, this is the service station site, was

14 operated by BP. And this was an ARCO site.

15 This meant that the employees were all hired by

16 BP, they worked for BP, their wages were set by BP,

17 their hours were determined by BP, and their work rules

18 were determined by BP. You know, wear uniforms and all

19 the rest of that kind of stuff.

20 In addition to all of the facets concerning the

21 employees, the fuel at the site that was for sale was

22 all owned by BP. In other words, as we all know, fuel

23 is delivered to a gas station in tanker trucks, put into

24 underground storage tanks, and then pumped out to the

25 consumer.



861 So all the fuel that was there was owned by BP.

2 BP set the price. So when you think of the price on the

3 big price sign, BP's employees figured out the price and

4 set the price that you, as the motoring public, would

5 pay.

6 In addition, BP kept all the money from motor

7 fuel sales. So revenue from gas belonged to BP. And

8 that meant that BP took the business risk of either

9 making money or losing money on the sale of motor fuel.

10 I'm going to call that business risk.

11 Now, at the same time that BP had ARCO stations

12 in Oregon, that it was running as its sort of, like,

13 company store, if you will, it also had independent

14 dealers. And independent dealers performed these same

15 tasks, but they did so on their own terms and

16 conditions.

17 So if we had an ARCO site, there would be a

18 contract. And that contract would say there's a dealer

19 and it actually says it is an independent business

20 person. We'll show you the actual contract language.

21 But when I tried to blow it up, it's so small, because

22 it's a legal document, it was hard to read.

23 But all the employees belonged to the dealer.

24 They hire and fire. They set all the work rules. They

25 own all the fuel. They set the price. They get the



871 revenue from the gas and they take the business risk.

2 So in 2000, the year 2000, this is what existed

3 in Oregon. You had both of these kinds of stations

4 existing in the state. And that's going to be important

5 when we talk about the Dobson lawsuit, about why BP

6 resolved that, because it was a retailer at the time.

7 This existed up until 2008. In 2008 BP no

8 longer operated a single gas station in Oregon. All of

9 them were converted over to dealer-operated locations at

10 that time.

11 And so what we ended up with is a completely

12 different sort of approach in 2008, 2009 than we had

13 back in the year 2000 in terms of who was retailing

14 motor fuel to consumers. So let's, again, we have a

15 little diagram to sort of illustrate this. It might be

16 a little bit simpler to take a look at.

17 So if we could pull up a little picture real

18 quickly. So here's how -- here's how fuel gets to a gas

19 station. Starts out from a refinery. BP has one

20 refinery. It's Cherry Point in the state of Washington.

21 Fuel gets refined into gasoline at the refinery

22 and it's transported typically by pipeline, but it could

23 be by rail car, could be by barge, could be by other

24 means, ship and so forth, to what's called a terminal.

25 We've all seen terminals, those big storage tanks where



881 they keep all the gasoline.

2 And there is a loading area there. And it's a

3 very technical term. It's called a rack. And the

4 reason they call it a rack is it's a rack of ladders

5 that hang over tanker trucks that pull up underneath and

6 then the motor fuel is loaded into those racks.

7 Then the motor fuel is delivered to sites. And

8 before 2008 we had company-operated and dealer-operated

9 sites. So let's run the animation of what would happen

10 if you were a customer at the company-operated site

11 before 2008.

12 You're buying gas, what was the experience?

13 Yes. It's the little ARCO man comes rumbling out of the

14 station. That is the person who is retailing the motor

15 fuel to you because they're selling it to the motorist

16 and they're dispensing it into the motor fuel tank.

17 So what happens after, by 2008? Let's go to

18 the next slide, please. And let's move to the next one.

19 That whole channel was eliminated. All we're left with

20 is the dealer-operated.

21 So taking the definition in mind about who is

22 selling you motor fuel and who is actually delivering it

23 into the tank of the motorist? Who is it? It's the

24 dealer/employee comes marching out of the station and

25 that's the person who puts the gas in. Wanted to do



891 something to liven it up. It's after lunch, folks.

2 So the two salient facts is, who's selling the

3 gas after 2008, it's the dealer. The dealer sets the

4 price, keeps the money, it's their gas that they're

5 selling to the motoring public. And who is delivering

6 the motor fuel into the tank of the motoring public?

7 It's the employees of the dealer.

8 And why is that a term? We all know we don't

9 have self-serve in Oregon. You have an attendant put

10 the gas in. So the definition provides whoever is the

11 person who is delivering it into the tank is the

12 retailer along with who is selling the motor fuel to the

13 customer.

14 So by 2008, BP was no longer selling, no longer

15 retailing motor fuel, was not a retailer within the

16 state of Oregon. And yet that is the threshold

17 requirement for any of these rules to apply to BP.

18 Now, even though BP is not a retailer, BP does

19 assess a debit card fee of 35 cents. So BP is going to

20 present some evidence about where did that come from and

21 what is that debit card for?

22 The history of the debit card in the mechanics

23 of how PIN debit works are all going to be discussed in

24 this case. Some of it's going to be a little bit

25 technical. But let me just sort of strip away the



901 technical explanation and just give you an overview of

2 what we think the evidence will be.

3 In 1980 ARCO made the business decision, at

4 that time it was just called ARCO instead of BP West

5 Coast Products, made the decision to no longer accept

6 any credit cards. It became a cash-only gas station.

7 The only way to buy anything there was you had to pay

8 cash.

9 Well, they quickly found out that customers

10 sometimes don't bring all the cash they might want to

11 have or need in order to pay for their purchases, so

12 they put ATM machines in all of the gas stations. So

13 that if a customer needed to get some cash to pay for

14 motor fuel, they could go to the ATM machine and use

15 that to get cash to pay for their purchase.

16 And ATM machines, I think we all know how they

17 work. It's a box that has cash in it and then you have

18 to swipe your ID cards. It's got one of those magnetic

19 strips on it that then communicates with a bank that

20 said, your bank, that says you want to access the money

21 in your account. And you have to type in a little

22 personal identification number to verify that you're the

23 authorized person to access that bank account.

24 And then if the bank electronically permits

25 that, the machine spits out whatever amount of cash is



911 and charges whatever fee the bank charges for that

2 service. And then in the old days, the customer would

3 take that cash, walk over to the cashier, and pay for

4 the motor fuel, whatever it was that they were buying at

5 the ARCO location.

6 Well, come about 1985 -- and it's 1985, folks.

7 The evidence will be pretty clear on that -- that ARCO

8 decided to accept a newfangled device at the time which

9 was called a PIN debit card. A PIN debit card works

10 just like the ATM machine, with one big exception.

11 Instead of swiping the card, getting money

12 withdrawn from your bank account, and then it comes out

13 of the machine in the form of cash that you hand to the

14 cashier, the PIN debit card had the money taken out of

15 your account electronically and then it would send

16 that -- deposit that money electronically into the store

17 owner's account. Everything else was the same,

18 including a bank fee for that particular service.

19 So ARCO decides to offer that back when there

20 were very few debit cards being offered, very few of

21 them were made available. And because of that, ARCO was

22 able to cut a deal with the debit card companies. And

23 the deal was they would be permitted to charge customers

24 a per-transaction fee.

25 What's now the 35 cents fee. Because unlike



921 the other company, they have to build in the cost of

2 their debit cards into the price of the product that

3 they're selling. In this case, it's fuel.

4 So if somebody says -- a competitor, like we

5 saw their pictures, puts up a higher price, it's because

6 that's how they pay for those fees.

7 Now, that started in 1985. It's been going on

8 as a consistent practice ever since that time. So if

9 you go to an ARCO back -- starting in 1985, all the way

10 up until the 2000s, you buy anything there including

11 motor fuel, the same set of statutes applicable, and you

12 would be charged a 35 cents fee if you used your debit

13 card.

14 So during this period of time there's no

15 inquiry about whether it's a good or a bad practice or

16 violates Oregon law. But a lawsuit is filed. As

17 Mr. Sugerman said, he brought a lawsuit on behalf of

18 some consumers in 2000 saying that the debit card fee

19 wasn't adequately disclosed. And that case was settled.

20 And it was settled in 2002.

21 And pursuant to the settlement agreement

22 between Mr. Sugerman's clients, which, by the way, was a

23 class of all --

24 MR. SUGERMAN: Excuse me. Objection, your

25 Honor, relevance.



931 THE COURT: Would both counsel please come to

2 the sidebar.

3 (Discussion held at the sidebar.)

4 THE COURT: All right. I've given counsel

5 guidance. And Mr. Harris, you may proceed, sir.

6 MR. HARRIS: All right. Thank you.

7 So here we are in the early 2000s. And you

8 were shown some signs that -- by Mr. Sugerman that were

9 at the locations, that had been there since that

10 approximate time. There was one sign, however -- can we

11 go to the three signs, please?

12 This sign has been there. This sign is posted

13 on the canopy poles right next to the dispensers when

14 you pull into an ARCO-branded location. This sign, of

15 course, lists the cards. It says, fee notice. It says

16 that the merchant's going to charge 35 cents for each

17 approved ATM transaction. Remember, I said that

18 originally debit was like the ATM, that's what they

19 called it back in those days.

20 So this sign was on the canopy poles. No, it

21 wasn't on the street sign, but it was on the canopy

22 poles at each location. So when you would pull up

23 driving up to the dispenser, you would drive past this

24 sign. Now, it might be small, it might not have been

25 seen by everybody. Don't know what people saw or what



941 they didn't see. But this sign has been there.

2 Then, as Mr. Sugerman mentioned, each one of

3 the dispensers -- and if we could get to the dispensers

4 decal -- had this decal. We have a different size decal

5 that I'll bring in and show you. It's a little bit

6 larger, but it's not that big by any means. It's a

7 decal that fits on the dispenser where all the rest of

8 the stickers that are placed on dispensers appear.

9 And, again, it lists the debit card networks

10 and says there's a fee, 35 cents for a debit card

11 transaction. Again, not saying that it's giant

12 lettering that you could read from the street, but there

13 it is on the dispenser.

14 Then we have a third sign which is this

15 sticker. Again, it's not this big in real life. In

16 fact, I think I might have a -- one of those PIN pads to

17 actually show you that was the actual machine that you

18 can get some sense for how large it is. Thank you.

19 Here it is. It sits on the counter. And of

20 course, this sticker is right there on top of it that

21 says fee notice 35 cents per transaction. And yeah,

22 it's small. Nobody's going to say that this is a

23 billboard-sized thing. But this is the device that you

24 use and you punch through. So you're looking right down

25 at it. And I'm going to run you through exactly what a



951 PIN debit transaction looks like in an ARCO station so

2 that you can see what the prompts are.

3 So there are actually at each station at least

4 three different types of signs that are up. And we're

5 going to adduce evidence that some of the dealers

6 actually put up a lot more signs. And we'll show you

7 pictures of their stations of the additional signage

8 that they often provide.

9 But there are these three signs that are the

10 principal signs at each one of the ARCO locations. Now,

11 let's talk about what happens, though, if you're a

12 customer and you go in and you want to pay using your

13 debit card. So let's go to this little -- this is the

14 same device. You walk up to the counter.

15 The gas is already in the car. Almost always.

16 Sometimes there's prepay, but almost always the gas is

17 in the car because you've told the attendant, yes, fill

18 it up, $40 a tank, just as in Mr. Scharfstein's case.

19 So I don't have this one plugged in, but it

20 would welcome you to ARCO if it was plugged in on the

21 little message board there. So let's go to the next

22 step. You've got the fee notice thing. And it says,

23 gives you a prompt to swipe your card. The cashier will

24 say okay, paying with debit, they'll hit a button on the

25 register. It'll say welcome to ARCO, swipe your card.



961 So what do you do? You see the fee notice. If

2 you don't want to move forward with the transaction, pay

3 the fee, you don't have to. You can use cash or you can

4 use the ATM machine to get cash if you wanted to. So

5 but you want to use the debit card, so what's the next

6 step? Swipe. Now, I don't have a debit card to show

7 you, but it is, looks like, you-all know what a debit

8 card looks like, it's a credit card, it's got a magnetic

9 strip on it, it's got some numbers on it.

10 And that magnetic strip has data in it about

11 the individual customer. And we're going to present

12 some witnesses to talk about what that data is so that

13 we all know that that's encrypted data, merchant and

14 other people are not supposed to see it because,

15 obviously, everybody's concerned about the integrity of

16 their personal financial information and how people can

17 get into their credit card data.

18 So you've swiped the card. What happens next?

19 The first prompt is, folks, we're going to charge you a

20 35 cents fee and ask you the question, you want to say

21 yes or no. And those words show up and you've got to

22 pick a button to press.

23 So you say yeah, I'd like to do that. And then

24 you enter your PIN number. And then like an ATM

25 machine, it asks you, do you want cash? Because you can



971 ask for, off of a PIN debit card, cash back from the

2 cashier. Say yes or no. Again, it prompts you to say

3 that.

4 Let's say you say no, you just want to pay for

5 the gas that you're buying. And then it asks you, is

6 the total correct? That's the $4035 cents that

7 Mr. Scharfstein said he spent when he bought his gas at

8 the ARCO station. So it shows you that amount and you

9 say, is that a correct amount or not? And if it says

10 no, it cancels the transaction and you do not have to

11 pay the 35 cents.

12 You can pay with cash, you can go to the ATM

13 machine if you are unhappy with paying the fee. And I

14 believe that's the end of the transaction, other than

15 printing out a receipt that shows what you've got for

16 your purchase, including a line item for the debit fee.

17 And that's true for each transaction since the

18 early 2000s. That there have been three signs, starting

19 with the canopy pole sign with the dispenser sticker

20 with the sticker on the PIN debit device, with the PIN

21 debit device notifying on the little screen a 35 cents

22 charge and asking yes or no, not once, but three times

23 during the process, before you actually have to pay the

24 35 cents. That's how the PIN debit system actually

25 works.



981 Now, everything's all quiet. There is no

2 lawsuit or regulatory activity going on challenging BP's

3 practice in the late 2000s, leading up into 2010, 2011.

4 Then some things change.

5 In 2010, a statutory change was proposed and at

6 the same time the Oregon Department of Justice started

7 looking into developing a new set of rules for gasoline

8 price advertising, dealing with street signs,

9 dispensers, all of that sort of stuff.

10 And the regulations start at the Department of

11 Justice and there is this change to the statute that is

12 being looked at in the Oregon State legislature.

13 Now, BP does have a system for keeping track of

14 changes in law. Among other things, and there are all

15 sorts of processes and procedures that they have, they

16 have a group called government relations who are in

17 charge of monitoring changes in the law.

18 Now, you can call somebody up, the lobbyist,

19 but really, what their job is, is to keep track of the

20 law and to interface with regulators over how those laws

21 might apply or try to persuade people to change laws or

22 to not enact laws.

23 The person that fulfilled that role in the

24 Pacific Northwest during the time period we're talking

25 about, 2010 on, was a gentleman by the name of Michael



991 Abendhoff who had been working in that role for a number

2 of years at refineries and other locations.

3 He will testify that in order to help keep

4 track of the laws, BP does what most big companies do.

5 They belong to a trade association. And that trade

6 association has systems in place to track legislative

7 changes in the states where business is done.

8 It's the same thing as having sort of the

9 unions or educational associations, whatever it is that

10 keeps professional associations to keep track of changes

11 in rules and regulations.

12 The one that's at issue here is called the

13 Western States Petroleum Association. And this

14 association is just for oil refiners and suppliers like

15 BP, Chevron, Shell, all the rest of them. And they have

16 banded together, formed this association. And they did

17 it to share the cost of keeping an eye on the laws and

18 regulations that were going to be passed by the various

19 states.

20 How they do this. They appointed individuals

21 or a group of individuals to be assigned to specific

22 states. Now, like California had more than one, Oregon

23 had one gentleman. His name was Mr. Brian Dougherty.

24 He's a lawyer here in Portland who was -- also just

25 happened to be the executive director of the Western



1001 States Petroleum Association.

2 His system and the association's system is that

3 he and his colleagues were assigned to each one of the

4 states that are in that group, are responsible for

5 interfacing with the government to make sure that they

6 are notified of law changes and proposals that are going

7 to affect oil refineries and suppliers.

8 When they are doing -- when they are active,

9 which is typically when the legislature is in session,

10 they then get those laws, prepare a summary of them, and

11 send that summary out to all of the membership in WSPA.

12 Mr. Abendhoff was BP's representative and he

13 got the reports from Mr. Dougherty. He got a report

14 about this changed motor fuel price advertising statute,

15 the law, in 2010.

16 Now, WSPA also has a committee of lawyers.

17 Every company that's a member contributes a lawyer to

18 this committee, including BP. And they look at these

19 laws, in addition to Mr. Dougherty, who is also a lawyer

20 looking at these laws.

21 You'll hear from Mr. Dougherty as a witness

22 that everybody that -- it was the information given to

23 BP, Mr. Abendhoff, was that these statutory changes in

24 2010 did not apply to refiners like BP that did not

25 operate retail sites.



1011 And so the group decided, WSPA, that they would

2 take no action with respect to this particular statute.

3 And although they monitor it, they did not oppose it,

4 propose any changes, because they believed it did not

5 apply to them.

6 Now, Mr. Abendhoff is not the sole

7 decision-maker here. He has superiors to report to.

8 And indeed he did. He took the information that he got

9 from WSPA and he -- about the statutory change and he

10 reported it up the line to his boss, a woman, Crystal

11 Ashby, also a BP lawyer, to report that based upon what

12 we understand about this law, we do not think it applies

13 to us. And so we don't need to take any further action.

14 And that was the end of it. The law was passed

15 without any opposition or interference by the refiners.

16 Now, after the law was passed, then these new

17 regulations from the Department of Justice got going.

18 There was a process there, too. And you're going to

19 hear from a witness, a Mr. Romain.

20 Mr. Romain is a lawyer who used to work for the

21 Department of Justice and who now is the head of a trade

22 association here in Oregon for who? Gasoline service

23 station operators. Dealers. It's called the Oregon

24 Petroleum Association.

25 He will testify that he was in contact with the



1021 Department of Justice about these rules because it was

2 the belief that they applied to his membership. And as

3 a consequence, this is the process that was followed.

4 The head lawyer for DOJ -- even though, who we

5 have taken a deposition of, she's on maternity leave, so

6 we're not making her come to court, we're going to play

7 her video -- was in charge of a process.

8 She said we're going to create a committee,

9 industry, consumers, and regulators. And we're going to

10 all talk about these rules and put them together. So

11 she invited Mr. Romain's group to participate as well as

12 individual dealers. And you're going to hear from some

13 of those folks during the course of the trial today.

14 But guess who she didn't invite? Refiners.

15 Nobody from the refining community was invited to

16 participate in this committee. So this committee

17 promulgates a bunch of rules and they come up with the

18 rules that are the subject matter of this lawsuit.

19 They are communicated, sure enough, by

20 Mr. Romain. Mr. Romain did not -- will testify that he

21 did a fax blast, an E-blast. I'm not technical, so what

22 he tells me is that that means everybody in his e-mail

23 list got a copy of these rules.

24 The person who delivered -- who was a vendor of

25 theirs that delivered coffee to the place, people who



1031 dug up holes in the ground for underground storage

2 tanks. Everybody who was on the association mailing

3 list got a copy of the rules.

4 Why? Because he's going to say it was the

5 easiest way for him to do it and he made no distinctions

6 as to whether or not he thought it applied to people or

7 didn't apply to people.

8 So Mr. Abendhoff, through Mr. Syta (phonetic),

9 gets these rules. And these rules are to implement a

10 statute that he's been advised doesn't apply to him. So

11 yeah. He puts them in the drawer and does nothing

12 further with them because the evaluation had already

13 been made, the statute does not apply to BP.

14 Now, after these rules went into effect

15 January 1, 2011, the evidence will be nobody came

16 knocking on BP's door from the Department of Justice

17 saying you're in violation of this rule.

18 In fact, there is silence until the lawsuit

19 is -- this present lawsuit is filed at the end of 2011.

20 Now, that has been the only regulatory -- that has been

21 the only legal action taken with respect to these rules

22 involving BP, is the present lawsuit. The Department of

23 Justice, who by statute is charged with enforcing this

24 rule --

25 MR. SUGERMAN: Objection, your Honor. Motion



1041 in limine.

2 THE COURT: Sidebar, please.


4 THE COURT: Objection sustained.

5 MR. HARRIS: So the only other activity that we

6 have during this period of time is complaints.

7 What we have, you will see evidence, is that a

8 limited number of consumers registered complaints. Now,

9 there's a couple different ways in which complaints can

10 be registered and we'll walk through each one of them

11 with you.

12 One is complaints were made by consumers to the

13 Department of Justice. During the relevant time period

14 that we're talking about, there were approximately 12

15 consumer complaints as against, according to the slide

16 we just saw, over 3 million first-time users since 2011.

17 We also found out that those complaints just as

18 much were about, I don't like paying fees, I don't like

19 paying baggage fees, I don't like paying debit card

20 fees, I don't like paying fees as opposed to disclosure.

21 There are three that talk about disclosure.

22 And, in fact, one of them did get a response from the

23 DOJ. We'll give you the copy of what they wrote back to

24 that particular consumer.

25 Now, there's also a hotline that BP has. BP



1051 has a hotline that they advertise to say if you don't

2 like something that we, BP, are doing, let us know. And

3 we have the records of that hotline.

4 Again, there are maybe a dozen or so, couple of

5 dozen complaints that were registered over the years as

6 against millions of swipes of the first-time debit card

7 users during the relevant time frame.

8 At the end of the day, what we believe the

9 evidence will show here, folks, is that the BP debit

10 card fee is a fee that has been in existence for a

11 lengthy period of time, has been looked at at a couple

12 of different points in time.

13 But BP's position, based upon advice given to

14 them by their trade association, trade association

15 lawyers and other lawyers, is that it didn't apply to

16 them. Now, there's one -- so if BP happens to be wrong

17 about that, it's not reckless, it's just wrong.

18 Now, there's one other topic that we need to

19 address. There is an allegation that's been made about

20 BP not preserving or destroying data. The allegation is

21 that BP did not keep transaction data. BP never had it.

22 The evidence is going to be -- why don't you make this

23 thing go dark. The evidence is going to be that BP does

24 not run its own debit card electronic system.

25 You know this little PIN pad that I was showing



1061 you? This PIN pad is electronically connected. Here's

2 the retail site, service station PIN pad, here's BP, the

3 data that gets swiped by the electronic, by the little

4 magnetic strip goes to a company called First Data.

5 First Data has a contract with BP. The

6 contract says you will process all of these transactions

7 for us. But the data that is collected here goes to

8 First Data. The data that's collected is an electronic

9 file that is encrypted so as to preserve people's

10 privacy and personal financial information.

11 And what is on that file? When the file leaves

12 the station, it's got the name of the -- it's got the

13 encrypted customer information and it's got the station

14 and it's got the transaction amount. Those three files.

15 When it goes to First Data, First Data does not

16 read the customer information. It does not read the

17 transaction amount or the service station number. What

18 it reads is what PIN debit network does this card belong

19 to? Which is one of those four digit numbers that's on

20 there.

21 So let's say it's the Visa Interlink, which is

22 one of them First Data collects all of the Visa

23 Interlink card swipes at all ARCO locations, puts them

24 together into a file, and transmits that electronic file

25 over to Visa Interlink to read.



1071 What does Visa Interlink read? It does not

2 know the customer name or address. What it reads is who

3 was the bank who issued the card. So let's say it's

4 Wells Fargo. Wells Fargo gets an electronic file where

5 Visa pulls together all of the Wells Fargo debit card

6 swipes for that day and sends them an electronic file to

7 Wells Fargo.

8 What does Wells Fargo do? Wells Fargo reads

9 the file and it's there that the customer is identified.

10 That's where the encryption is decrypted by the bank, as

11 to identify the customer and the account number.

12 Because that's the only way the bank can say,

13 yes, Dave Harris has got 40 bucks in his account so he

14 can buy this gas using this debit card transaction. And

15 the bank authorizes it and charges the customer account

16 both the fees and the transaction amount.

17 And what happens, then, is they create an

18 electronic file that goes right back through here. The

19 first thing that the file does is it goes back to the

20 store to tell the store this is an authorized

21 transaction. You know how long that takes? Less than

22 ten seconds.

23 It also sends back, electronically, the amount

24 of the purchase. So that if it's 40 bucks for gas, the

25 station owner in 28 -- or 24 to 48 hours from swiping



1081 the card gets to electronically deposit it into their

2 account, the $40 for the gas purchase.

3 And First Data holds onto the 35 cents for BP.

4 And that's how this system works. And we'll go through

5 the documents. And we've got the head of the card

6 services for BP who's going to walk you through this

7 process to explain BP does not keep customer identifying

8 information, does not keep these files. In fact,

9 there's rules about getting rid of this information for

10 privacy and confidentiality reasons.

11 And that during this case, both sides had the

12 ability to go to First Data and get whatever information

13 they were able to get from First Data. And that First

14 Data would only cooperate to a certain level of

15 cooperation in terms of holding onto data and producing

16 it.

17 Do not believe that anything that BP did here

18 would have limited the ability of either the plaintiff

19 or the defendant to get information. Because either

20 way, the information can help us, too. So why would we

21 not want to be able to access it?

22 And, in fact, what you will see is the

23 plaintiffs were able to get, from BP's efforts, a little

24 more than a year's worth of data from which they've been

25 able to extrapolate whatever numbers they want to use



1091 for their case.

2 So when it comes time to evaluating

3 recklessness, ladies and gentlemen, let's focus on

4 whether or not BP recklessly disregarded the gasoline

5 pricing regulations in this case. Because what

6 transpired, withholding onto data is no part of

7 anybody's desire or effort to avoid complying with

8 gasoline price advertising rules.

9 And this is what I believe the evidence will

10 show. Now, ladies and gentlemen, at the end of the case

11 we'll come back and we'll argue about whether we were

12 able to successfully prove every one of the assertions

13 that we've -- both sides have made in this case. And as

14 his Honor has observed and everybody has said, this is

15 not the evidence. This is just our opinion as to what

16 we think the evidence will be.

17 And we ask you to keep an open mind till you

18 hear everything, because we're going to next start going

19 through the plaintiff's case and then we'll get to the

20 defendant's case.

21 In the meantime, I appreciate all of your

22 careful attention. Gave you a lot of detailed

23 information. We'll go over it once again with the

24 witnesses a little bit later on. Thank you, ladies and

25 gentlemen.



1101 Your Honor, that concludes my opening

2 statement.

3 THE COURT: Thank you. And you or someone can

4 move the chart when you get a minute.

5 MR. HARRIS: Sure.

6 THE COURT: I know you've got your hands full

7 at the moment.

8 MR. HARRIS: I'll move, your Honor.

9 THE COURT: Yeah. Okay. This would be a good

10 time to stand and stretch. And Mr. Sugerman, do you

11 have your first witness ready to go?

12 MR. SUGERMAN: I do, your Honor.

13 THE COURT: That's a yes?

14 MR. SUGERMAN: Yes, we do.

15 THE COURT: By the time you get a witness in

16 here, everything will be cleared. So yes, the

17 plaintiffs should call plaintiff's first witness. Thank

18 you.

19 Just wait a minute until everybody's organized,

20 please. So if the jury's ready. We'll take another

21 recess around 3:15, usually between 3:15 and 3:30. And

22 I've asked plaintiff to call plaintiff's first witness.

23 MR. SUGERMAN: Thank you, your Honor. At this

24 time we call Francine McKenna.

25 THE CLERK: Please step forward. Raise your



1111 right hand. Under the penalty of perjury, do you

2 solemnly swear or affirm that the testimony you are

3 about to give in this case shall be the truth, the whole

4 truth, and nothing but the truth?

5 THE WITNESS: I do.

6 THE CLERK: Please be seated. Please state and

7 spell your first and last name for the record.

8 THE WITNESS: Francine McKenna,

9 F-r-a-n-c-i-n-e, M-c-K-e-n-n-a.

10 THE CLERK: Thank you.

11 THE COURT: Okay. You may proceed.

12

13 DIRECT EXAMINATION

14

15 BY MR. SUGERMAN:

16 Q Thank you, your Honor. Good afternoon,

17 Ms. McKenna. Are you here to help us understand how

18 BP's conduct measures up to standards for corporate

19 behavior?

20 A I am.

21 Q Will you help us understand how well or how

22 badly BP followed consumer laws in the state of Oregon?

23 A I will.

24 Q Thank you. You'll be reviewing what happened

25 for us and helping us understand what should have



1121 happened?

2 A Yes.

3 Q Tell us, how is it you're qualified to do that?

4 A I'm an accountant by training. I have a degree

5 in accounting from Perdue University and a CPA with more

6 than 25 years of experience in managing these types of

7 issues.

8 Q And have you done compliance work in the past?

9 A I have.

10 Q Have you done compliance work in distant

11 places?

12 A I worked in Latin America and also in Europe.

13 Q Have you done compliance work for oil

14 companies?

15 A BP was a client of mine from 2001 to 2003 for

16 compliance-related work.

17 Q And what was the compliance-related work you

18 did for BP 2001 to 2003?

19 A My team was working on internal audit and

20 operational audit and compliance with the Sarbanes-Oxley

21 law, the law that was passed after Enron's collapse.

22 Q You have a certification?

23 A I'm a CPA.

24 Q What is a CPA?

25 A I'm a certified -- I passed the certified



1131 public accounting exam after I graduated in 1987. And

2 I'm not licensed, I don't do external audits. But I am

3 registered in the state of Illinois.

4 Q You've used a term, external audits. What is

5 that?

6 A An external auditor is the one that looks at

7 the financial records of a company from the outside.

8 Q Are there internal auditors, too, in

9 accountants?

10 A Internal auditors work for the company and

11 they're the ones that look at financial, operational,

12 and other safety and risk issues within a company.

13 Q Are you working as an accountant these days?

14 A I am not. I'm primarily working as a

15 journalist.

16 Q And what kind of journalism work do you do?

17 A I write primarily about the accounting industry

18 and about frauds and scandals and other kinds of issues

19 that relate to the financial services industry, et

20 cetera.

21 Q Are you published?

22 A Uh, I write for Forbes Magazine, for American

23 Banker. I'm a freelance journalist and so I write about

24 the things that I know, where people are interested in

25 them.



1141 Q You also write on a blog?

2 A I have my own site that I started at the end of

3 2006 called re: The Auditors in reference to The

4 Auditors. And I've been doing that for about seven

5 years.

6 Q And do you also lecture and speak on business

7 conduct issues?

8 A I speak to professional conferences and I visit

9 universities a lot and talk to students and faculty

10 about these issues.

11 Q I asked if you would consider reviewing this

12 matter?

13 A Yes, you did.

14 Q And how did you go about evaluating BP's

15 conduct?

16 A I read through the initial filings and some of

17 the other information that was filed with the court as

18 well as all the depositions and looked at exhibits that

19 were going to be, um, shown during the sessions.

20 Q Okay. And as we go through today, will you

21 help us by expressing your opinions more likely right

22 than wrong?

23 A I will.

24 Q Okay. In any way, are you sure beyond more

25 likely right than wrong?



1151 A I am.

2 Q Now, before we get into specifics and details,

3 based on your review, kind of a summary, what did you

4 conclude from your work reviewing the choices BP has

5 been making for these years in Oregon?

6 MR. HARRIS: Your Honor, we would object.

7 Lacking in foundation in order for the witness to be

8 certified as an expert to offer any opinions at this

9 point in time.

10 THE COURT: Have you established all the

11 foundation for qualifications that you intend to

12 establish?

13 MR. SUGERMAN: I believe I could establish

14 more, if you would like.

15 THE COURT: All right. I'll give you an

16 opportunity to establish more in the way of foundation

17 for expert qualifications.


19 THE COURT: Because what we have is an

20 objection, essentially, on qualifications that she's

21 qualified to make an opinion on the matter that's asked.

22 So please proceed, Mr. Sugerman.

23 BY MR. SUGERMAN:

24 Q Thank you.

25 Ma'am -- your Honor, permission to lead through



1161 her CV?

2 THE COURT: No objection?

3 MR. HARRIS: We would object to him leading.

4 He's been leading the whole time. It's his own expert.

5 THE COURT: Okay. I sustain the objection on

6 leading questions.


8 MR. HARRIS: Thank you.

9 MR. SUGERMAN: May I approach the witness, your

10 Honor?

11 THE COURT: Certainly. Both sides in the case,

12 both counsel have standing authority to approach

13 witnesses with exhibits. You don't need to ask. Thank

14 you. Go ahead.

15 BY MR. SUGERMAN:

16 Q Thank you. Do you recall your CV?

17 A Yes, I do.

18 Q All right. In addition to what we've already

19 talked about, have you worked for McKenna Partners?

20 A That's my firm that I use to provide consulting

21 services when I do. Which is not that often, but I do.

22 Q And have you had experience in internal audit

23 with any major accounting firms?

24 A My first job was as an internal auditor with

25 Continental Bank in Chicago when I graduated from



1171 college. I provided internal audit services for a

2 division of Manpower called Jefferson Wells, which is

3 now called Spheres. That was when I worked with BP.

4 I provided internal audit services to

5 PricewaterhouseCoopers, the firm itself, internally from

6 2005 to 2006. So auditing the firm itself. And also

7 provided internal audit services to clients of PwC and

8 my own clients when I worked independently.

9 Q And have you worked for any other major

10 accounting firms?

11 A I started my career in professional services in

12 1993 with KPMG Consulting where I implemented financial

13 systems, mostly purchasing systems in the United States

14 and in Latin America.

15 Q And did you work at any other accounting firms

16 in Latin America?

17 A KPMG Consulting became Bearing Point. That was

18 a spin-off of the consulting firm. And I worked as a

19 managing director for Bearing Point in Latin America,

20 responsible for a practice that served industrial,

21 automotive, and transportation clients which included

22 all the major oil companies in Latin America.

23 Q In your Latin American compliance work with oil

24 companies, what did those jobs typically involve?

25 A We were implementing software to help those



1181 companies manage their purchasing processes to make sure

2 that they were implementing purchasing processes,

3 managing their vendors, making sure that they were

4 spending appropriately, and that they were controlling

5 those costs, and we were responsible for implementing

6 that software and making sure that it was working

7 properly.

8 MR. SUGERMAN: Your Honor, we can go on, but at

9 this time I would tender the witness.

10 MR. HARRIS: And, your Honor, I would continue

11 to object. And I'm happy to do a sidebar to detail it,

12 if you would prefer. Or I can just address it from

13 here.

14 THE COURT: I'll talk to counsel at the

15 sidebar, please.



18 THE COURT: I have given guidance to counsel.

19 And Mr. Sugerman, you have leave to establish a further

20 foundation.

21 BY MR. SUGERMAN:

22 Q Thank you. Ms. McKenna, let's talk about your

23 experience in compliance and setting up compliance

24 programs.

25 Are they all in one sector and industry or in



1191 different?

2 A Many different industries. Most recently when

3 I worked for PricewaterhouseCoopers.

4 Q Okay. Have you had specific experience setting

5 up and monitoring compliance systems for oil and gas

6 companies?

7 A When I worked for Bearing Point I was managing

8 implementation of purchasing systems and that includes

9 compliance with local laws and regulations, for example,

10 in Mexico, Columbia, Brazil, Argentina, Venezuela.

11 Q Are the standards that apply for compliance

12 with local laws for oil and gas companies significantly

13 different from those that would comply from a financial,

14 excuse me, from those that would apply to a financial

15 compliance program?

16 MR. HARRIS: Objection. He's asking for an

17 opinion without having the witness prequalified.

18 MR. SUGERMAN: It's foundation.

19 THE COURT: I will overrule this objection. Do

20 you remember the question? Or do you want it repeated?

21 MR. SUGERMAN: It was pretty bad. I should

22 maybe rephrase it.

23 THE WITNESS: If you can repeat.

24 BY MR. SUGERMAN:

25 Q Thank you. Is there anything about compliance



1201 in oil and gas that makes it really different from

2 compliance in the financial sector, in the accounting

3 world, in widgit manufacturing and sales?

4 A The laws and regulations may be different.

5 And, of course, laws and regulations are different in

6 each location that you're operating in.

7 But the processes that a major multinational

8 has to put in place to make sure that they're complying

9 with local laws and regulations are the same.

10 Q Is that true when we're talking about banking?

11 A Yes.

12 Q Is it true when we're talking about land sales?

13 A Yes.

14 Q Is it true when we're talking about

15 manufacturing automobiles?

16 A Yes.

17 Q Is it true when we're talking about oil and

18 gas?

19 A Yes.

20 Q Thank you.

21 THE COURT: You continue to object or not?

22 MR. HARRIS: I do, your Honor.

23 THE COURT: All right. Having considered the

24 foundation that has been established, the objection is

25 overruled. You may proceed, Mr. Sugerman.




2 BY MR. SUGERMAN:

3 Q Ms. McKenna, I think where we were is I started

4 to ask you if you could provide us with a summary of

5 your conclusions from all your work reviewing the

6 choices BP has been making in Oregon for the past years.

7 A In my opinion, BP had many opportunities to

8 follow the local laws and regulations and they

9 recklessly disregarded that.

10 Q Well, let's start with BP's role in charging

11 the debit fee. In his opening statement, Mr. Harris,

12 the lawyer for BP, said that BP is not a retailer so

13 these rules do not apply to them.

14 A BP calls itself --

15 MR. HARRIS: I'm going to object, your Honor.

16 I don't know that that was a question. I'm going to

17 object to her testifying, offering an expert opinion as

18 to what is a retailer. It's application of law to fact,

19 not expert opinion.

20 MR. SUGERMAN: To understand the debit card

21 transaction --

22 THE COURT: As I understand, you're withdrawing

23 the last question?

24 MR. SUGERMAN: Correct.

25 THE COURT: So the objection is sustained.




2 THE COURT: Ask your next question, please.

3 BY MR. SUGERMAN:

4 Q To understand the debit card transaction at

5 issue here, what did you need to consider?

6 A I needed to consider the laws and regulations

7 and whether or not BP had, in good faith, followed them.

8 Q What did you need to consider about BP's role

9 in the debit card charge?

10 A Whether they were a retailer in operating

11 business locations that were providing gas to consumers.

12 Q Well, let me ask you this: As between BP and

13 its contractors or franchisees, who put the debit card

14 fee in place?

15 A BP.

16 Q And based on your review of the file, who

17 charges the debit fee?

18 A BP.

19 Q And based on your review of the file, who

20 collects the debit fee?

21 A BP does, directly.

22 Q And based on your review, who controls it?

23 A BP does.

24 Q Thank you.

25 Your Honor, move to publish Exhibit 6, move to



1231 admit.

2 MR. HARRIS: No objection.


4 THE COURT: All right. And the procedure on

5 publishing exhibits, whenever I hear that, even though

6 I've heard it for many years, I always think somebody's

7 writing a book, but nobody's writing a book.

8 That means in a court of law, an exhibit's

9 going to be handed to a juror. And the way we'll do it

10 is we hand it to a juror in the back row on my left and

11 each juror looks at the exhibit. And when we're done

12 looking at it, please pass it to the next juror. And

13 when it comes all the way around, the last juror has

14 looked at it, if you would please leave it on the ledge

15 and Miss Honda will pick it up.

16 MR. SUGERMAN: Your Honor, I was assuming that

17 we could just do it electronically.

18 THE COURT: Oh, okay.

19 MR. SUGERMAN: If that's okay.

20 THE COURT: I thought we were back in the

21 old-fashioned days. Okay. So we're doing it

22 electronically.

23 MR. SUGERMAN: Yeah.

24 THE COURT: Well, then, everything I just said,

25 forget it.



1241 MR. SUGERMAN: Well, what you said, but this

2 way.

3 THE COURT: Okay.

4 BY MR. SUGERMAN:

5 Q Can you help us understand what Exhibit 6 is?

6 A Mr. Battiest, a BP employee, a marketing

7 manager, marketing or sales manager, is sending a letter

8 out to the station owners saying that there's been a

9 change in the debit fee and telling them how to

10 implement it at the stations.

11 Q What does that tell you about control and

12 responsibility for the fees and the disclosures?

13 A That BP particularly, their sales or marketing

14 group is the one that would instruct the stations on how

15 to implement the debit fee, that they controlled that

16 process.

17 Q Okay. And let's look at Exhibit 15, please. I

18 believe there's no objection to this?

19 MR. HARRIS: No objection to 15, your Honor.

20 THE COURT: All right.

21 BY MR. SUGERMAN:

22 Q And Exhibit 15 is the decal?

23 A Yes.

24 Q Your understanding, is that a First Data

25 document?



1251 A This is a BP document.

2 Q And then there and at the PIN reader,

3 Exhibit 24, which I would move to admit.


5 THE COURT: Received into evidence.

6 BY MR. SUGERMAN:

7 Q Both of these refer to the merchant charging 35

8 cents, correct?

9 A Yes.

10 Q The merchant is?

11 A BP.

12 Q How does this idea of who was the merchant

13 charging the fee at the debit card transaction relate to

14 who is the retailer?

15 MR. HARRIS: I'm going to object again.

16 Calling for a legal conclusion from a witness who is not

17 offered or qualified to render legal conclusions.

18 THE COURT: Let me look back on the wording of

19 the question. The question is: How does this idea of

20 who was the merchant charging the fee at the debit card

21 transaction relate to who is the retailer?

22 I will sustain the objection as to form and let

23 you rephrase.

24 MR. SUGERMAN: Well, let me move to something

25 else, your Honor. Thank you. I'll just withdraw.




2 BY MR. SUGERMAN:

3 Q At this time I move to admit Exhibit 13A and

4 publish.

5 We heard about BP not being a retailer -- I

6 don't think there's an objection. Are we okay, your

7 Honor?

8 THE COURT: Yeah. I was just getting all of

9 the exhibit volumes. I'll be ready to go with all the

10 exhibits. Go ahead.

11 MR. SUGERMAN: This is Exhibit 13. We've

12 offered 13A which is in conformance with the Court's

13 prior rulings.


15 MR. SUGERMAN: And we move to admit 13A at this

16 time.


18 THE COURT: Okay. And let me just -- a note to

19 counsel.

20 MR. SUGERMAN: Yes, your Honor.

21 THE COURT: That a lot of times I would take

22 these details out of the presence of the jury, but I

23 know a number of exhibits, there's no objection on both

24 sides. They'll be in the record. Other exhibits there

25 are objections, I'm going to need to rule on.



1271 MR. SUGERMAN: Okay.

2 THE COURT: And we're just getting started.

3 But at the first opportunity we can do it, I'd like to

4 try to.


6 THE COURT: I guess I'll have a conference with

7 the attorneys. And if we could speed things up so if

8 there is an objection -- no objection to an exhibit,

9 then we can just kind of speed things along and make it

10 easier for the jury.

11 MR. SUGERMAN: I will act accordingly. I think

12 we have a record we can refer to and I'll just -- I'll

13 stop asking to admit unless I know of an objection.

14 THE COURT: Okay.


16 THE COURT: Thanks.

17 BY MR. SUGERMAN:

18 Q Exhibit 13 is what?

19 A This is a frequently asked questions for ARCO,

20 the BP brand of gasoline.

21 Q And outside of court on this website, what does

22 BP say about whether it's a retailer? Can we see the

23 next page, please?

24 A BP talks about its retail operations, largest

25 US gasoline retailer.



1281 Q And let me ask you about Exhibit 257. Outside

2 of court, how does BP describe its business?

3 MR. HARRIS: Your Honor, just for the record,

4 we do object to this exhibit and have objected to it

5 previously.

6 MR. SUGERMAN: I'm sorry. I'm sorry. Thank

7 you. Actually, let me turn you to Exhibit 27 which

8 is -- also has an objection.

9 THE COURT: I have that here.

10 MR. SUGERMAN: Yes.

11 MR. HARRIS: Again, there's an objection to

12 this document that we had previously made, your Honor.

13 MR. SUGERMAN: No, I indicated as much.

14 THE COURT: You are not offering it now. You

15 want to ask the witness about it?

16 MR. SUGERMAN: I would like to ask the witness

17 about it and be able to publish. I can ask preliminary

18 questions about it.

19 THE COURT: Okay. Please ask preliminary

20 questions.

21 BY MR. SUGERMAN:

22 Q Thank you. I'm handing you the paper copy of

23 Exhibit 27. Can you identify that for us?

24 A That's the BP annual report, specifically the

25 Form 20F, which is the form that they file with



1291 regulators and exchanges as a UK-headquartered company.

2 MR. HARRIS: Your Honor, to the extent that we

3 have an objection to this particular document, we would

4 like you to, so as to avoid repeated interruptions,

5 allow a continuing objection to the witness giving the

6 contents of the document to the jury rather than

7 presenting the document to the jury. It's the same

8 objection.

9 THE COURT: Well, I'm just thinking we're not

10 exactly at the point I wanted to take our afternoon

11 recess, but maybe it would be prudent to take -- give

12 the jury a recess now and we can have a hearing out of

13 the presence of the jury on these various objections to

14 exhibits.

15 MR. HARRIS: Thank you.

16 THE COURT: Okay. So would the jury please go

17 with Miss Honda.


19 (Whereupon, the jury was excused.)

20 THE COURT: Please be seated. So in order to

21 be efficient, I'm declaring -- the Court is going to

22 conduct a Rule 104 hearing now to the extent this

23 witness who is on the stand needs to be asked questions,

24 the rules of evidence are relaxed, she can be asked

25 leading questions.



1301 It does appear that there are a series of

2 exhibits that are objected to and there may be more that

3 haven't been mentioned.

4 And I just want to go over one matter. And

5 that is that under the Oregon Evidence Code, it's

6 fundamental that a witness may be shown exhibits. And

7 sometimes the witness may even refer to an exhibit

8 without reading it into the record, but refer to it.

9 All of this in the presence of the jury, even

10 though an exhibit has not been received in evidence.

11 Because, after all, to lay a foundation for the receipt

12 of an exhibit into evidence, the foundation frequently

13 is laid by asking the witness about it.

14 So the mere fact that a witness is handed a

15 document that's not yet in evidence, that does not

16 preclude the witness from at least answering preliminary

17 questions. And as a matter of fact, sometimes it takes

18 several witnesses testifying about a specific document

19 before the document is actually offered into evidence

20 and a judge rules on whether or not it will be received.

21 Now, I'll stop talking in just a moment, but on

22 one of the documents, and this was a document that was,

23 I think, going to be part of Mr. Sugerman's opening

24 statement. It was handed in close of court yesterday,

25 it was disputed. It showed the various stages from an



1311 oil rig, oil drilling rig to transportation of petroleum

2 products ultimately to the gasoline station.

3 And that was objected to. And I think the

4 objection was withdrawn. And then today, this

5 afternoon, in Mr. Harris' opening statement, I saw

6 Mr. Harris put up on the screen a very similar-looking

7 exhibit that talked about the various stages from the

8 oil coming out of the ground to ultimately getting to

9 the service stations.

10 And the point of the exhibit, even though it

11 contained other things, seem to be on Mr. Harris' point

12 that there was some BP-owned stations and BP was, in

13 fact, the retailer.

14 There was a fork in the road. And I believe

15 this fork went over to the left. And on the fork in the

16 road going to the right, those were independent service

17 station operators. And there's defense contention that

18 BP is not a retailer for those in that fork in the road.

19 I mention that because to the extent that this

20 is being objected to now, it seems to me both sides have

21 already been talking about this. So what are we going

22 to do?

23 You're the proponent, Mr. Sugerman, go ahead.


25 I was laying a foundation that it was their



1321 annual report, which they had objected to on relevance

2 OEC 403 foundation and hearsay. And so, your Honor, I'm

3 going to, if I may, approach you with three pages from

4 that document. I'll show it first to Mr. Harris. Pages

5 4 and 5 and page 77.

6 MR. HARRIS: I can respond without seeing those

7 pages because there's an objection that's not specific

8 to a particular page or whatever. So whenever you're

9 ready. Thank you for letting me see it.

10 THE COURT: So in terms of procedurally,

11 Mr. Sugerman, you're actually offering the exhibit now?

12 MR. SUGERMAN: Yes. Thank you.

13 THE COURT: And what is the objection?

14 MR. HARRIS: Your Honor --

15 THE COURT: This is Exhibit 27, the annual

16 report of BP.


18 MR. HARRIS: Yes. And that's the objection

19 where is stated which is relevance, prejudice, because,

20 and your MIL, the resolution of the MIL that was

21 presented to your Honor earlier talking about the fact

22 that we're only going to be addressing the fact that the

23 defendant in this case is BP West Coast Products LLC.

24 And now I can see what's going on. Your Honor,

25 in an effort of convenience, let's just call it BP. But



1331 for the record, BP is defined as BP West Coast Products

2 LLC per, you know, the initial statement that your Honor

3 made concerning the case.

4 So I can understand where a witness when asked,

5 well, what is -- is this a BP document? Well, sure.

6 It's BP PLC, a completely different company. This

7 annual report is not for BP West Coast Products LLC.

8 It's a description of this global firm and it's all of

9 its activities and it's not a description tethered and

10 limited to the defendant that is in this case in terms

11 of its operations.

12 THE COURT: Is that part of what this witness

13 is going to testify about? I hear what the defense

14 says. Do you have a different view on that, that this

15 witness is going to be getting into?

16 MR. SUGERMAN: BP West Coast Products is part

17 of BP. And if you will turn to page 77 of that exhibit,

18 Exhibit 27.

19 THE COURT: I'm there.

20 MR. SUGERMAN: You will see that BP is

21 representing to its shareholders that it operates under

22 the logistics and marketing heading, We supply fuel and

23 related convenience services to retail consumers

24 throughout company -- through company-owned and

25 franchised retail sites as well as other channels.



1341 The next paragraph, Our retail network is

2 largely concentrated in Europe and US. And then it goes

3 on to talk about the table showing the BP-branded retail

4 sales by region.

5 And in the US, in the upper right column,

6 10,100 facilities. And there's an asterisk. And it's a

7 little hard to read, but it's clear from that first

8 footnote, the A footnote, the last sentence, retail

9 sites are primarily branded BP, ARCO and Aral.

10 And it goes on to talk about BP's worldwide

11 retail network. Now, BP West Coast Products is part of

12 the accounting that is contained in the annual report, I

13 believe.

14 THE WITNESS: Right. BP West Coast Products is

15 consolidated into the overall organization.

16 MR. SUGERMAN: So, your Honor, when BP says

17 it's not a retailer and then takes credit with its

18 shareholders for its retail network that includes ARCO

19 stations, their branded facility, I think I'm entitled

20 to point that out to the jury.

21 MR. HARRIS: Your Honor, we would object.

22 Because what Mr. Sugerman just read you excluded a very

23 important point. The asterisk that says the number of

24 retail sites includes sites not operated by BP, but

25 instead operated by dealers, jobbers, franchisees, or



1351 branded licensees that operate under a BP brand.

2 This is no confession of the ultimate legal

3 issue in this case about retailer. If they're going to

4 try to use the document, the document disclaims its

5 usability on its face by saying this is not a

6 description of who the operator is of so-called -- of

7 the retail locations.

8 It doesn't talk about Oregon. It does

9 consolidate. And it doesn't say that all of the sites

10 in here are retail sites within the meaning of the

11 Oregon gasoline price law advertising rules. Which is

12 the only issue we're grappling with here.

13 I think the opportunity for confusion to the

14 jury and this use of BP as a general misnomer to capture

15 in its umbrella, all kinds of just generic statements

16 about a global company unlinked to Oregon is completely

17 improper and would violate Rule 401/403.

18 THE COURT: I'm going to say a couple things

19 and then make a suggestion about how we proceed this

20 afternoon. And what we do about the whole matter of

21 exhibits which, in the flood of events on this case,

22 while a protocol was established for exhibits, at least

23 as a judge, we -- it's not really come to my attention

24 yet.

25 And it seems like the time has now arrived



1361 where it needs serious attention and I want to set aside

2 the time and perhaps send the jury home early.

3 I want to just, before I forget to be clear, I

4 want to -- I want to clarify in the record. And I think

5 we're probably going to have a substantial hearing on

6 this issue of -- I guess I'll call it BP, and then

7 there's also BP West Coast Products LLC.

8 Now, throughout, I believe, almost all of the

9 time I've been presiding on this case, the defendant has

10 generally been referred to by the participants in this

11 case, including defense counsel, by the term BP.

12 And I believe in much of the briefing, that

13 terminology has also been used by both sides. And

14 Mr. Harris correctly states that when I -- when the

15 parties could not agree about a joint summary of the

16 case, then it became necessary for me as the judge to

17 draft one. I did draft it. I sent it out for comment.

18 We had a hearing. It got finalized.

19 And what Mr. Harris just said is quite true. I

20 made a statement toward the beginning of that that these

21 are the parties in the case and the plaintiffs are going

22 to be referred to as plaintiffs or the class, the

23 defendant's going to be referred to as defendant or BP.

24 And then in various parts of the case so far,

25 counsel for both sides, I'm pretty sure I heard



1371 Mr. Harris yesterday during jury selection frequently

2 refer to his client as BP and frequently -- or the

3 statement was made at least once that I represent the

4 large oil company or words to that effect.

5 So that's the history on that. Now, I guess

6 what I have in mind, and let me now stop making a

7 statement and turn this more back into a question to the

8 counsel.

9 There are lots and lots of exhibits. And I

10 think you agreed on a lot of them. And fundamental and

11 evidence law is that with exhibits you have issues of

12 authenticity, foundation, and relevancy. And I know

13 some grids have been submitted, plaintiffs and defendant

14 exhibit lists. I haven't spent any time at all studying

15 them or trying to become familiar with what is in

16 dispute.

17 And seems like, would this afternoon be a good

18 time to do two things? First, conduct more of a Rule

19 104 hearing with this witness; secondly, deal with this

20 issue.

21 I need to know more where plaintiffs are coming

22 from and more what the defense is arguing on the issue

23 of BP and the BP annual report. Is plaintiff contending

24 there's a concert of action here? Do we have a classic

25 corporate law parent subsidiary division here?



1381 There's no claim of breaching, piercing a

2 corporate veil. I need to get up to speed on where the

3 parties are coming from and it's going to take time.

4 So we have this witness and it sounds like

5 various decisions need to be made concerning her. We

6 secondly have this legal point on BP versus BP West

7 Coast Products LLC. And thirdly, we have -- to the

8 extent we can make progress on the exhibits. These are

9 in, these are out, Judge you need to decide these 25

10 exhibits for the next week. Here they are, go to it.

11 Let us know. And we'll give arguments on some.

12 So is that a plan for the afternoon or do you

13 have better plans?

14 MR. SUGERMAN: Well, it's the plan if the Court

15 tells me it is. But I guess I had hoped that we could

16 move -- I'm anxious to get going, of course, as you

17 probably remember from your days trying cases.

18 That said, let me just suggest a fairly simple

19 level of analysis. As I understand their objections,

20 and they are in summary form: They're relevance, 403,

21 foundation and hearsay. And I started to lay foundation

22 with this witness and then it was hearsay. But the

23 relevance is pretty simple. This is a consolidated

24 annual report that includes the defendant BP West Coast

25 Products. They don't do a separate. And in this --



1391 THE COURT: I don't know much about that LLC.

2 Does that have stockholders or is it wholly owned by BP?

3 Which I think is a publicly-held company.

4 MR. SUGERMAN: I believe it is wholly owned by

5 BP. I may be wrong about that. My witness is telling

6 me I'm right about that.

7 THE WITNESS: And it's listed in the back as

8 one of the wholly owned subsidiaries.

9 MR. SUGERMAN: Wholly owned subsidiary.

10 THE COURT: In essence, are you saying

11 Exhibit 27 is the annual report for BP West Coast

12 Products LLC?

13 MR. SUGERMAN: That's certainly part of it.

14 And apart from that, these are the operations of BP West

15 Coast Products LLC. They are ARCO as we referred

16 earlier today in the First Data contract. ARCO and BP

17 West Coast Products.

18 And so the question is, when BP is reporting in

19 a consolidated annual report on all of its activities,

20 including all of its subsidiaries and it's talking about

21 its ARCO operations and its worldwide retail network

22 that will specifically includes ARCO, they are talking

23 about BP West Coast products.

24 Now, am I trying to rope in BP or turn this

25 into the parent's liability for the subsidiary? No.



1401 But this is a public statement by BP obviously

2 authorized to make it about the operations of BP West

3 Coast Products LLC. It is the retail network. And

4 that's what ARCO means.

5 THE COURT: Do you need this in evidence to get

6 through this witness? Or a lot of times I don't need to

7 rule for a couple days.

8 MR. SUGERMAN: Well, I would want her to cover

9 it at some point because it is important. I could

10 restructure and move off of it for today.

11 THE COURT: Your summary talks about, like, two

12 and a half hours, I believe.

13 MR. SUGERMAN: Yes, I think that's right.

14 Maybe more.

15 THE COURT: I guess I'll hear whatever response

16 you have to the admissibility of Exhibit 27 based on

17 what has been proffered at this point.

18 MR. HARRIS: Your Honor, as we've stated

19 before, and as we stated in the outline of objections to

20 this document, this is not a statement or declaration on

21 behalf of the party defendant in the case.

22 THE COURT: Well, he just said it was, but

23 you're saying he's wrong.

24 MR. HARRIS: It says right on the first line,

25 this is the annual report and accounts in accordance



1411 with Form 20F in accordance with the US Securities and

2 Exchange Act of 1934 for BP PLC. Not BP West Coast

3 Products. BP West Coast Products by itself doesn't have

4 to report anything. It doesn't have to report. It's a

5 subsidiary of a whole family of companies.

6 THE COURT: He says -- if it's not publicly

7 held, yeah. That's how I understand the' 34 act.

8 You're absolutely right.

9 But as a summary of the activities of BP West

10 Coast Products LLC, Mr. Sugerman just said there are

11 entries in here that make it clear this is a summary of

12 their activities for that year.

13 MR. HARRIS: It's a summary of the activities

14 of BP PLC and its holdings. So the bottom line is, your

15 Honor, is not -- the only way it can be offered is

16 through the author of the document who is not here or

17 not on the witness list or as an admission of some sort

18 against BP West Coast Products, Inc. And BP West Coast

19 Product, Inc., is not the declarant here. That's one

20 problem why it's hearsay.

21 The second issue is the document itself says

22 it's not admissible for the purpose for which it's being

23 offered, which is a characterization of retail under the

24 Oregon act, which is the only relevant inquiry here.

25 It says, the list of stations that they're



1421 calling retail are retail independent of who runs them.

2 And says it includes independent jobbers, dealers, and

3 other participants.

4 So the document, to admit it would be

5 irrelevant under 401 and highly prejudicial to the

6 defendant because it's exactly the kinds of confusion

7 that I think the plaintiff wants to promote here, which

8 is to take the word, generic word like retail and just

9 take soundbites out of documents without looking at the

10 definition.

11 And the definition in this document says it

12 can't be applied in the way that he wants to apply it.

13 And the only issue in this case is the retail definition

14 set forth in the Oregon law. And that's the elements

15 that we're going to have to -- that the jury will be

16 instructed to apply by your Honor to the facts of who is

17 retail. Who is, you know, delivering into the tanks of

18 consumers.

19 Not whether somebody used the word retail in a

20 report filed two years ago with the SEC.

21 THE COURT: I think this is a very important

22 matter. And to some extent, it's a threshold matter

23 which appropriately enough is coming up at an early

24 stage of the case. And I think -- I want to do my best

25 to make the right decision under Oregon law on this.



1431 Because it is very important.

2 I'm going to, in a moment, declare a recess and

3 ask Miss Honda to tell the jury to -- not quite yet --

4 to tell them to go home for the day and come back at

5 9:00 tomorrow morning.

6 And I'm going to spend the rest of the day on

7 the three matters that I just indicated, which would be

8 to the extent I can conduct a complete 104 hearing so we

9 don't need to keep going in the 104 hearings with this

10 witness. I really would like to do that.

11 MR. SUGERMAN: Understood.

12 THE COURT: And she's here.

13 MR. SUGERMAN: Yeah.

14 THE COURT: And I don't really know where she's

15 from, but I suspect out of town.

16 THE WITNESS: Chicago, but I'm at your

17 disposal, your Honor.

18 THE COURT: Thank you. And then Number 2, deal

19 with the BP versus BP West Coast Products matter which,

20 Mr. Sugerman, I know you don't want to go all through

21 the case. And if you're lucky enough to get a jury

22 verdict, in three years or so have the Oregon Supreme

23 Court tell you, you really goofed, there's a parent

24 subsidiary issue here and corporate form and separate

25 entities. So I don't know where that's all going. But



1441 that's the second matter.

2 The third matter, and I'll be also, during the

3 recess, talking to Miss Honda about the exhibit lists

4 that have those grids. I don't have that in front of me

5 now. And if we can make progress to speed up the trial

6 later, that'll be great. So why don't I take about ten

7 minutes now and come back and you can excuse the jury,

8 please.

9 THE CLERK: Yes, Judge.

10 (Recess taken.)

11 THE COURT: I have indicated there are some

12 matters I'd like to address. And I have what I call the

13 grid where you've summarized objections on exhibits. I

14 think we will deal with that last. Because we have an

15 out-of-town witness, we need to move things along so she

16 can get home at some point soon.

17 So I'm very concerned about a legal concept,

18 Mr. Sugerman. And I need to hear about it. And I

19 suspect the determination on this legal question, which

20 has been advanced by various defense objections, I

21 suspect this determination will affect the questions

22 that you ask the witness who's on the stand.

23 So probably makes most sense to start with the

24 legal proposition. And then to the extent we need to

25 conduct a Rule 104 hearing concerning other matters



1451 relating to the witness' proposed testimony, I suggest

2 we do that.

3 So the concept is, I'm putting it in the

4 context of the parent subsidiary issue. And over the

5 years I've looked at that issue. It has seemed to me

6 that the law is quite solid.

7 And I understand just yesterday the United

8 States Supreme Court spoke again on this subject, which,

9 without citing that case, the general proposition is

10 where you have two companies, even though one might be

11 the parent company, and the other one is the wholly

12 owned subsidiary, the law treats them as two different

13 legal entities.

14 And you can't -- a lawyer can't just, in suing

15 the subsidiary, automatically bring in a lot of things

16 concerning the parent. There needs to be a basis.

17 Now, there may be some arguments you have

18 getting around that over the years. I've seen an

19 expanse of approaches. Some of them work on the

20 plaintiff's side. But tell me, how do you -- where are

21 you coming from? How do you get around that

22 long-standing legal principle?

23 MR. SUGERMAN: I'm not trying to create

24 liability in the parent. Okay.

25 THE COURT: Well, I know that, but you just



1461 automatically --

2 MR. SUGERMAN: I understand.

3 THE COURT: It is a separate entity.

4 MR. SUGERMAN: I understand. But shall we talk

5 about it in terms of the annual report, the exhibit that

6 we're tussling with?

7 THE COURT: However you want to. This issue

8 probably cuts through --

9 MR. SUGERMAN: It does.

10 THE COURT: -- into various other issues too, I

11 suspect.

12 MR. SUGERMAN: I think it does. So you get

13 to -- the point is that BP West Coast Products LLC is

14 saying we are not a retailer, we operate this business

15 that provides fuel, and we have -- we are -- we have the

16 ARCO brand. And we, our franchisees sell gas.

17 And I think that is -- and the defense vision

18 of that is our franchisees are independent, we used to

19 be in the retail business, but we're not anymore.

20 The regulation under Oregon law goes -- doesn't

21 really ask about retailer as much as business of

22 retailing. And you can't do this business of retailing

23 without a network. Now, the document that we're

24 offering here is a business record. And I was starting

25 to lay foundation on that.



1471 And as a business record, BP, the parent, is

2 talking about all of its operations. And it's narrating

3 about its retail network that includes the ARCO retail

4 sites. And that's on page 77. And they talk about the

5 retail network.

6 And if you look also at a --

7 THE COURT: Where does it start on page 77? I

8 couldn't follow it before.

9 MR. SUGERMAN: Okay. May I approach and show

10 you?

11 THE COURT: Yeah. I've got it opened to page

12 77. It's got two columns. I see -- I see the table up

13 in the upper right-hand corner.

14 MR. SUGERMAN: If you actually start the column

15 to the left at logistics and marketing.

16 THE COURT: I see that. I'm there.

17 MR. SUGERMAN: And if you read that entire

18 entry logistics and marketing all the way through

19 including the table and you'll have to squint at the

20 fine print, that's -- that's the information we want to

21 put before the jury.

22 THE COURT: Okay. Well, for instance, second

23 paragraph, we supply fuel and related convenience

24 services to retail consumers through company-owned and

25 franchise retail sites.



1481 MR. SUGERMAN: Right. And if you look at the

2 next paragraph they talk about the retail network. And

3 they say that it's largely concentrated in Europe and

4 the US.

5 And then the following paragraph is explaining

6 the table. The following table shows the number of

7 BP-branded retail sites by region. And describes those

8 retail sites. Some convenience store. And then it

9 talks about in the table, the retail sites. And there

10 are footnotes there, A and B. And it shows that in the

11 US there are 10,100 in the year 2012.

12 And Footnote A explains the number of retail

13 sites includes sites not operated by BP, but instead,

14 operated by dealers, jobbers, franchisees or brand

15 licensees that operate under a BP brand.

16 These may move to or from the BP brand as their

17 fuel supply or brand license requirements expire and are

18 renegotiated in the normal course of business. Retail

19 sites are primarily branded, BP, ARCO, and I think that

20 last one's pronounced Aral, I don't even know. The B

21 footnote doesn't really mean anything salient here.

22 And then it continues with that paragraph

23 reference to BP's worldwide retail network.

24 Now -- oh, I'm sorry, in that paragraph, these

25 retail sites are primarily branded BP, ARCO, and Aral.



1491 We expect the number of branded retail sites to fall in

2 2013, et cetera.

3 So what we have here is a consolidated

4 financial that includes the activities of BP LLC. Does

5 this create -- is this an admission by BP? No. Is it

6 an admission by BP LLC? No. This is a document that is

7 a business record that reports on the operations of

8 ARCO.

9 And what it says is ARCO is BP's retail

10 network. And so what they're saying to the shareholders

11 is very different than what they're saying to the jurors

12 in this case. We're not a retailer. Except we operate

13 a retail network. You can't do it any other way.

14 And we have had some, you know, we're not

15 strictly limiting ourselves. Because the code of

16 conduct is not a BP West Coast Products LLC document.

17 THE COURT: Okay. I need to take things one at

18 a time.

19 MR. SUGERMAN: I understand. But in other

20 words, everybody agrees that's admissible. Because it

21 governs the LLC.

22 THE COURT: And your expert is going to talk

23 about that. And --

24 MR. SUGERMAN: Yes.

25 THE COURT: I had the names of the witnesses in



1501 front of me and too many papers.

2 MR. SUGERMAN: Ms. McKenna would address the

3 code of conduct as well, but I understood defense was,

4 as well, addressing that.

5 THE COURT: Okay. And you can certainly do

6 that.

7 MR. SUGERMAN: And the point of that only --

8 excuse me.

9 THE COURT: Under the Securities Exchange Act

10 of 1934, publicly-held companies must file annual

11 reports. And a wholly owned subsidiary LLC, such as BP

12 West Coast Products, is not required to file an annual

13 report. And to the extent it's referred to in

14 Exhibit 27, it doesn't make it the document of the

15 defendant in this case, it's the document of the parent,

16 BP.

17 Now, there are about at least a half-dozen

18 bases for the objection on Exhibit 27. And both sides

19 have filed objections with the court. I have

20 defendant's in front of me filed December 20th. And I'm

21 going to rule on those objections.

22 But first I'm going to make this statement:

23 Oregon law on expert witness testimony changed radically

24 in the early 1970s. And among other things, the law of

25 evidence in Oregon is that an expert can look at almost



1511 anything and then formulate opinions after a review.

2 And what the expert looks at does not need to

3 be admissible in evidence or even offered in evidence,

4 it can be stated by the expert. What did you review,

5 Mr. Expert or Ms. Expert? I reviewed documents 1

6 through 25, these are the documents I reviewed. All

7 right. Did you form an opinion? What is your opinion?

8 Please explain your opinion.

9 I'm going to allow you to do that with the

10 annual report, Mr. Sugerman.


12 THE COURT: But I'm sustaining the objection,

13 in part, on these -- I want to make a clear ruling.

14 The objection was made 401 relevance, objection

15 overruled on that ground.

16 Objection's made on Rule 403, balancing

17 objections, overruled on that ground. Objection is made

18 on foundation; objection's overruled on that ground.

19 Objection's made on hearsay; objection sustained on that

20 ground. This is not a business record of BP West Coast

21 Products LLC, the defendant in this case.

22 Objection's also made on financial condition, I

23 believe that's deferred until if and when we get to the

24 punitive damages stage. Objection made on the basis of

25 wrong party, objection's overruled on that ground. I



1521 don't construe that as being offered against BP, the

2 corporation.

3 And then two other statements, MIL and other

4 activity. I don't really know what those mean so I'm

5 not ruling on those.

6 So is there any other -- well, let me phrase

7 this question to you, Mr. Sugerman. You don't have any

8 other legal theory that you're putting in front of the

9 Court that you haven't identified.

10 It sounds to me that, the words that you used a

11 few minutes ago, that you say the parties are working

12 together, that it's really -- you're making an argument

13 that they're in a concert of action. And there's a lot

14 of cases in Oregon in concert of action.

15 And it's -- it's by analogy somewhat similar to

16 aider and abettor liability. But you're not going after

17 the parent. But in terms of evidentiary law, I mean,

18 if -- a lot of these concepts are borrowed from the

19 criminal law.

20 And if five young men go about breaking into a

21 building to burglarize it and one young man is caught

22 running out and four -- his four compatriots got away,

23 in pursuing a prosecution against the person caught, the

24 witnesses can certainly describe what everyone did and

25 what they observed and the whole picture.



1531 And the fact that conduct might have actually

2 been done by another person other than the defendant

3 does not prohibit that coming into evidence. It's

4 relevant. And to the extent you're pursuing that

5 direction, I may permit it. But you need to clarify

6 what you're doing, what you're not doing.

7 MR. SUGERMAN: Well, I am describing -- I am --

8 it is a description of activities. And respectfully,

9 your Honor, I do believe it is a business record. The

10 fact that it's not BP West Coast Products LLC's business

11 record, that's not the business record exception. I

12 don't have to have a party defendant's business record

13 to meet the exception to the hearsay rule.

14 THE COURT: Well, I don't know anything about

15 this document until it was announced in court. I don't

16 know where you got it from. You could have gotten it

17 off the internet.

18 MR. SUGERMAN: I did.

19 THE COURT: From the defendants.

20 MR. SUGERMAN: I got it off the internet.

21 THE COURT: Well, then we do --

22 MR. SUGERMAN: But I can lay that -- that part

23 of foundation, that's actually what I was starting to do

24 with Ms. McKenna about regular course and all of those

25 things.



1541 THE COURT: I'll give you an opportunity. And

2 I'm going to retract what I said on foundation. I don't

3 think you actually -- I thought you got it from the

4 defendant in a request for production of documents.

5 MR. SUGERMAN: I don't think I did.

6 THE COURT: So right now there's no foundation.

7 MR. SUGERMAN: I can lay that through

8 Ms. McKenna.

9 THE COURT: Are there other controversial items

10 concerning Ms. McKenna's testimony we need to take up in

11 a Rule 104 hearing? You can tell me about those. We

12 can try to rule on them. Hear from the defense, too.

13 MR. HARRIS: Your Honor -- thank you, your

14 Honor. Look, I think, and I don't know if maybe we

15 ought to ask Ms. McKenna to perhaps sit outside when we

16 talk about what her testimony should or shouldn't be.

17 The fundamental concern I have --

18 THE COURT: Sometimes the witness is needed in

19 a 104 hearing.

20 MR. HARRIS: I understand that.

21 THE COURT: But I'll probably grant your

22 request if she's not needed in here.

23 MR. HARRIS: No. I don't believe she's needed

24 in here for the two objections that I want to bring to

25 the Court's attention.



1551 THE COURT: And you're requesting that she be

2 asked to wait outside?

3 MR. HARRIS: Not for these, not for this. It's

4 more about how the colloquy develops. But I just want

5 to -- I wanted to identify that concern.

6 Let me just tell you what they are, then you

7 can -- we can decide whether it's worth having

8 Ms. McKenna step out.

9 One is, plaintiff is wanting to ask the

10 ultimate opinion of Ms. McKenna, what is the ultimate

11 legal question for the jury to decide, is BP a retailer?

12 That's not a proper subject matter for expert testimony,

13 the ultimate question of fact for the jury to decide.

14 And she's not tendered any credentials to the

15 extent that there is expert testimony even applicable to

16 it. She doesn't identify herself as an expert in the

17 definition, structuring of retail networks for oil

18 companies. It just seems so far afield.

19 And to the extent that a lot of this evidence

20 is driving at trying to get her to testify, yes, in my

21 opinion, based upon what I read in the annual statement

22 and other materials presented to me, I believe that BP's

23 operations in Oregon means that BP is a retailer, that's

24 not an admissible opinion to render because it's the

25 ultimate legal question -- the ultimate factual question



1561 for the jury to decide in this case.

2 THE COURT: And I think I'm following you. And

3 you're -- I don't know if you're objecting to this. But

4 based on what she testified earlier, I would suspect she

5 could be asked a whole series of questions that you

6 probably would not object to such as in companies like

7 BP that you're familiar with, tell us about the process

8 that's used for compliance with state and federal laws.

9 MR. HARRIS: That's what I thought we were

10 going to do.

11 THE COURT: And in terms of general process

12 questions about retailing, you know, oil and gas

13 companies retailing, controlling the dealers, these

14 activities, collecting -- maybe collecting money for

15 things like debit cards, governing signage, what's the

16 process?

17 When you listened, which I know you did very

18 carefully to Mr. Sugerman's opening statement, he went

19 through a lot of those matters.

20 He has some of those matters on charts. He's

21 got one of his graphic, demonstrative exhibits, two

22 sides, one side has all the things he says that the

23 defendant did, controlling matters relating to the debit

24 card. And then just two little things concerning what

25 the service station operators do. And that's part of



1571 his case, which I don't know if the jury's going to go

2 for it or not.

3 But you're not opposing her testifying about

4 those kinds of things on which she has some knowledge to

5 opine?

6 MR. HARRIS: If what she wants to do -- of

7 course, your Honor, you know, I withdraw my objections

8 because it took -- I heeded your Honor's advice and

9 reminded myself of your admonition that opening is not

10 evidence. You get to object, Mr. Harris, when that

11 evidence is tendered. So now we're getting to those

12 points.

13 THE COURT: You're right.

14 MR. HARRIS: That's why I tried to not

15 interrupt and, you know, let -- get the ball rolling.

16 THE COURT: Yeah.

17 MR. HARRIS: So the ball's in the gutter right

18 now. I'm trying to get it out.

19 And if what I may have -- if what the plaintiff

20 intends to do is to not ask the ultimate factual

21 question of this entire case to be stated by

22 Ms. McKenna, but, for example, help -- help Mr. Sugerman

23 build his chart.

24 Say now you've reviewed the contracts and

25 agreements between the dealers and BP. What does the



1581 contract say about who controls -- I think it was the

2 oderant that you, you know, was on the list. You know,

3 hours of operation.

4 Sure. Sure. I don't know if she's got

5 credentials to be like I'm a designer of retail systems.

6 But if she has no credentials, that's what I expected

7 this witness to testify about. As well as what your

8 Honor alluded to, which is the first thing listed by her

9 name. Which is corporate compliance system.

10 Did BP have a corporate compliance system and

11 what was her assessment of that corporate compliance

12 system to know and understand laws. Her opinion would

13 be -- I would be astonished if it was anything other

14 than BP doesn't have an adequate or it didn't execute

15 very well on its corporate compliance system. That's

16 what I thought her testimony would be.

17 And yes. That general umbrella, that topic, if

18 she's properly qualified, and I've objected to her

19 qualifications.

20 THE COURT: Yes.

21 MR. HARRIS: To do that, would be the risk,

22 proper risk for Q and A for plaintiff in this case.

23 THE COURT: So an outline has been put forward,

24 Mr. Sugerman. I think you really do run into problems

25 when you ask the ultimate questions. I'll let you speak



1591 and reply right now to what was just stated by

2 Mr. Harris.

3 But I'm leaning his way on this ultimate

4 question's for the jury that you're not going to be able

5 to go that far.

6 MR. SUGERMAN: That's fine. Part of -- your

7 Honor, two things. One is, I note a little bit of irony

8 that I asked in deposition BP's spokesperson, corporate

9 designated representative, is it BP's position that BP

10 is not a retailer?

11 And he said -- and that was Mr. Reeder who is

12 in the courtroom, the director of retail operations --

13 it is our position that we are not a retailer.

14 Now, that's been their thing in this case. And

15 I have to be able to get at the reasonableness of that

16 opinion. Does that mean a witness testifies they are a

17 retailer? I think -- I think that is probably not

18 necessarily, but gonna be hard to avoid that.

19 Because the real question is, was this

20 assessment that they weren't a retailer part of their

21 recklessness? And to get at that, you have to get at

22 the underlying question of, well, are they a retailer?

23 And if so, why? And if so, why not?

24 Because that recklessness is part of what we

25 have to prove. And Mr. Harris has alluded to both in



1601 pretrial and in opening, we might have been wrong, but a

2 mistake by itself isn't reckless.

3 So was I going to ask Ms. McKenna -- was I

4 intending to ask Ms. McKenna what's your opinion, were

5 they a retailer? No, maybe some other witness is

6 qualified to opine.

7 THE COURT: Well -- and both sides say this is

8 a fact question. This is a question on the verdict

9 form. And if it is a fact question, again, you're

10 already saying it, you're not going to ask Ms. McKenna.

11 MR. SUGERMAN: Right.

12 THE COURT: Because I do think that there's a

13 problem with lack of qualifications so far on her being

14 able to make that opinion.

15 MR. SUGERMAN: Right.

16 THE COURT: But if we've got fact questions,

17 witnesses can put in evidence a fact. And that could

18 include expert opinion testimony.

19 MR. SUGERMAN: Right. Was the surgeon

20 negligent? Did the surgeon violate the standard of

21 reasonable care in one or more ways that caused injury

22 to the patient? Was the surgeon negligent is a question

23 of fact. You simply cannot try that case without an

24 expert.

25 Now, is an expert required on retailer?



1611 Probably not. But is an expert helpful to the finder of

2 fact on this? Probably so. And the standard for

3 experts is helpfulness to the trier of fact.

4 The fact that it's a fact question or even an

5 ultimate fact question, whatever the heck that is,

6 because I never understood that language, specifically

7 in OEC 7, that's not barred to admissibility of that

8 evidence --

9 THE COURT: That's -- it's specifically stated

10 in the rules of evidence, isn't it, I guess?

11 MR. SUGERMAN: 701 and 702. Yeah. So I think

12 there's a question, was I planning to ask Ms. McKenna

13 for her legal opinion? No. I don't think that would be

14 very good from a CPA.

15 I was using her for history of what happened

16 here and also to talk about financial documents and then

17 to talk about regulatory structure and to talk about

18 standards for data retention.

19 And those, I believe, she's perfectly qualified

20 to talk about. Am I going to ask her her legal opinion?

21 No. She's not a JD.

22 THE COURT: So are there any other Rule 104

23 matters we need to take up? It sounds like we're

24 planning on putting Ms. McKenna back on the stand

25 tomorrow morning.



1621 MR. SUGERMAN: Yes. There's one exhibit that I

2 know was objected to and I know may be an issue. And

3 that is one of the documents Ms. McKenna will testify

4 that she reviewed is the declaration of Barbara

5 Rapposelli. Miss Rapposelli is the First Data attorney,

6 now retired.

7 Her declaration is offered as Exhibit 7. And

8 we specifically gave notice to the defense that we were

9 offering it under the residuary exception to the hearsay

10 clause -- hearsay rule, excuse me -- hearsay exceptions

11 for both unavailable and available witnesses.

12 Miss Rapposelli is no longer at First Data and

13 we can not locate her. She did a declaration which we

14 provided to the Court in class certification that

15 explained what had happened with the data that was and

16 was not preserved. And that will be part of the basis

17 of Ms. McKenna's opinion.

18 I am well aware of the rule that allows her to

19 testify. But I will probably want to offer the

20 Rapposelli declaration because I believe that it helps

21 the jury to understand what Miss Rapposelli said. I

22 assume the defendants -- defendant has objected

23 previously, I assume, they continue to object, and that

24 might be one issue that we need to hammer out.

25 MR. HARRIS: We do object.



1631 THE COURT: Okay. I'll take out Exhibit 7.

2 MR. SUGERMAN: If I need foundation on that,

3 your Honor, I have sent a letter to defendants under the

4 rule citing the rule and notifying them of our intention

5 to offer it under the residuary exception. I don't know

6 if we've laid a foundation. If I need to I can provide

7 a letter or e-mail or copy. I assume defendants agree

8 that that part of the rule is complied with.

9 THE COURT: Okay. Before we get into another

10 matter relating to the Rapposelli declaration, I do want

11 to wrap things up concerning Exhibit 27 and on

12 Miss McKenna's testimony. And ultimate fact, came back,

13 but it's not Rule 701.

14 MR. SUGERMAN: I think it's 702, from memory,

15 your Honor.

16 MR. HARRIS: It's 703. 704? Your Honor, I

17 believe it addresses.

18 MR. SUGERMAN: I'm getting warmer. Mr. Daniels

19 tells me it's 704 and I think his memory is probably

20 better than mine.

21 THE COURT: Okay. I'm going to read 704 out

22 loud. It's entitled Opinion on Ultimate Issue. And it

23 states, Testimony in the form of an opinion or inference

24 otherwise admissible is not objectionable because it

25 embraces an ultimate issue to be decided by the trier of



1641 fact.

2 That's what it says. So your analogy of a

3 medical malpractice case and one physician testifying

4 about the conduct of another physician that was

5 negligent, that's your example under this rule?

6 MR. SUGERMAN: Classic example, your Honor.

7 THE COURT: And on Exhibit 27, it sounds like

8 even though I think you can have references to it based

9 on this being something reviewed by the expert, even if

10 it's not in evidence, you're, tomorrow, going to want to

11 push to get that in evidence.

12 And I suppose we could -- I don't know what

13 kind of a foundation you're purporting to establish in a

14 104 hearing. You can just tell me.

15 It sounds like you're going to say, are SEC

16 documents on the internet, are these reliable in terms

17 of what the annual report is? And so is Exhibit 27, to

18 your knowledge, a true and accurate copy of the annual

19 report of BP for the year indicated? And are documents

20 like this off the internet customarily relied upon by

21 people in your work?


23 THE COURT: And she'll say yes to all those

24 answers.

25 MR. SUGERMAN: And regular sustained business



1651 record, in other words, regular sustained business

2 activity, normal course of business in terms of how an

3 annual report is put together and all those things that

4 set up the business record.

5 THE COURT: I can't believe I'm saying this,

6 but I don't think I've ever -- so much is on the

7 internet now. I don't think I've ever seen something

8 being offered into evidence under the business records

9 exception based on something pulled off the internet.

10 I don't know if defendant's objecting or

11 agreeing on the business records exception based on

12 that.

13 MR. HARRIS: No. We're continuing our

14 objection.

15 THE COURT: On business records, hearsay?

16 MR. HARRIS: Yes. For the annual report, your

17 Honor. For the reason you said earlier. It's not our

18 declaration.

19 MR. SUGERMAN: Right. It's BP's. But I don't

20 think we just -- I don't think defense disputes that

21 this is an authentic BP annual report pulled off -- I

22 mean, it's made available to the public and produced in

23 the regular course of BP's business.

24 MR. HARRIS: Frankly, I haven't looked at it.

25 I would imagine that it's probably a valid document.



1661 But frankly, there's an easy way to do this. You know,

2 there's official filings with the SEC and so forth as

3 opposed to just getting things off the internet as to

4 whether or not they're complete or not.

5 Your Honor, the only other thing I'd say about

6 Rule 704, in the comment to 704, it specifically

7 cautions that courts should stand -- and I'm reading on

8 page 156 at the very top of the comment.

9 Where it begins with the -- they also stand

10 ready to exclude opinions phrased in terms of

11 inadequately explored legal criteria, thus the question,

12 did T have the capacity to make a will? Would be

13 excluded.

14 For example, is BP a retailer would be

15 excluded. While the question, did T have sufficient

16 mental capacity to know the nature and extent of the

17 property and the natural objects of his (unintelligible)

18 to formulate a rational scheme of distribution would be

19 allowed.

20 So the opinion that would be rendered is as to

21 the factual elements of the definition under the

22 statute, is BP delivering motor fuel into the tanks of

23 motorists, for example? But what you can't say even

24 under 704 is BP's reckless, BP's a retailer, more likely

25 than not.



1671 THE COURT: She's not going to say BP's a

2 retailer.

3 MR. HARRIS: Okay. I just wanted to make my

4 comment on it. I understand your Court's observation.

5 I just wanted to note for the record the legal

6 authority.

7 MR. SUGERMAN: I did have one more foundational

8 fact. And that is the annual report did come off the

9 internet, but it came off of BP's website. And there,

10 again, if you go to the BP website, the annual report is

11 available, but they're by BP.

12 So I don't hear -- I mean --

13 THE COURT: You know.


15 THE COURT: I'm still way on step one. Can you

16 pull something off the internet from a different company

17 and get it in under the business records exception to

18 the hearsay rule? There must be a lot of law on that.

19 But you haven't cited any here.

20 And I just have not had it come up in the past.

21 MR. SUGERMAN: Off the internet I think is a

22 foundation question as opposed to changing whether

23 something is a business record or not. We offer

24 business records of other entities all the time.

25 For example, I may be trying a case involving



1681 personal injuries. And I may offer public records or

2 business records of an entity that is a nonparty.

3 I haven't laid my foundation. My opponent

4 opposes or puts me to my proof, but the hospital or

5 medical records or the employment records of a plaintiff

6 in a personal injury can easily be put into evidence as

7 business records even though they're not defendants.

8 So I -- I don't get this whole business record

9 exception is tied to the identity. Admission is.

10 Admission is. And admission requires either party or

11 agent of a party. There's a left-handed argument that

12 I'm reluctant to make, which is that for purposes of the

13 hearsay rule, BP is actually an agent of BP LLC

14 describing, and I don't -- I'm not advancing that. But

15 technically, one can be an agent in all sorts of

16 different ways under the hearsay rule.

17 That's neither here nor there, but it does

18 illustrate that the hearsay exceptions don't run by

19 identity of the party. The party identity issue is all

20 about admission.

21 THE COURT: I don't want to create reversible

22 error, at least on the first day of taking evidence.

23 Maybe on the last day.

24 MR. SUGERMAN: I'm with you-all the way, your

25 Honor. I don't want reversible error. And I also will



1691 tell you that you have discretion in all sorts of ways

2 and I respect the authority of the Court. It's an

3 interesting problem, though.

4 THE COURT: Well, I am going to announce in the

5 morning my ruling on Exhibit 27. But I do believe,

6 still seems to me, you know your case, Mr. Sugerman, and

7 I do not, that getting it -- what you need from

8 Exhibit 27 by way of a document reviewed by your expert

9 as part of your expert's --


11 THE COURT: -- general testimony might get you

12 to the same goal --


14 THE COURT: -- in a much safer way.


16 THE COURT: Okay. Now, the Rapposelli

17 declaration. Which, as I understand it, this was a

18 declaration that was filed in connection with what, the

19 motion for certification of class action? Or resisting

20 a summary judgment? When was it filed in this court

21 proceeding?

22 MR. SUGERMAN: Oh, gosh, your Honor. I would

23 have to --

24 THE COURT: I'll turn to it. It's Exhibit 7.

25 MR. SUGERMAN: Yes. When it was filed, I don't



1701 have that at fingertips, but it was in the -- it was in

2 supplemental briefing on class certification, I believe.

3 And I believe it was actually --

4 THE COURT: I've got it right here. July of

5 2013.

6 MR. SUGERMAN: Yeah, July 2013 is the signature

7 date, July 26, 2013. I would have to go back to tell

8 you exactly where it was in the record. But it was well

9 prior to trial and it involved the class certification.

10 THE COURT: And you've already made a statement

11 on what basis you believe it's admissible. And --


13 THE COURT: -- assuming you're going to argue

14 for the defense? I take it it's objected to.

15 MR. HARRIS: It is.


17 MR. HARRIS: Hearsay, lack of foundation, lack

18 of the right to cross-examine, we've got a relevance

19 objection, and prejudice objection, 401, 403. The

20 principal one, your Honor --

21 THE COURT: What about the residual clause of

22 the Oregon Evidence Code at hearsay?

23 MR. HARRIS: Okay. So if I understand what

24 Mr. Sugerman is saying, is after he finds out she's

25 unavailable, he says, hey, you can take her deposition.



1711 But we don't know where she is and we don't know

2 anything about that. We've never had an opportunity to

3 take her deposition ever in this particular case.

4 Because the plaintiffs were the ones who

5 negotiated, originally noticed some kind of deposition

6 of Miss Rapposelli, I think as a representative of First

7 Data, and then cancelled it and took this declaration in

8 lieu of that.

9 Well, that's not an opportunity to

10 cross-examine where the plaintiff acts to eliminate the

11 ability of the defendant to cross-examine the woman on

12 the contents of her declaration. And the first notice

13 we got that it was intended to be used for trial, it

14 was, of course, around December when the parties were

15 exchanging their exhibit lists.

16 I mean, we've already objected to the whole

17 spoliation matter, your Honor. And I understand you've

18 ruled on that, so I'm not going burden the Court with

19 that line of discussion again.

20 But clearly, the inferences that plaintiff's

21 expert is going to try to testify from concerning this

22 document are extremely inflammatory to BP to claim

23 destruction of documents and loss, deliberate failure to

24 preserve materials necessary for determining the

25 identity of the class when we don't have the opportunity



1721 to cross-examine Mrs. Rapposelli concerning whether or

2 not who's the proper custodian, who is -- whether the

3 information that the plaintiffs claim is missing is, in

4 fact, part of the data that First Data has.

5 And in the discussion of her affidavit, I mean,

6 we should be entitled to challenge all of that. So

7 it's -- for the record, I preserve the relevance,

8 prejudice objections, we assert them here on the grounds

9 that it raises all the spoliation issues.

10 But really, the focus is, is getting the

11 affidavit -- the affidavit should not be admitted as an

12 exhibit in this case because we've never -- because of

13 the hearsay rule and the lack of an opportunity to

14 cross-examine the witness.

15 MR. SUGERMAN: Shall I respond?

16 THE COURT: It looks like you're in trouble on

17 this one, Mr. Sugerman. But you want to respond?


19 THE COURT: The residual, I mean, that's sort

20 of, like, the included, but not limited to.

21 MR. SUGERMAN: I understand.

22 THE COURT: Go ahead.

23 MR. SUGERMAN: Yeah. So what happened with the

24 Rapposelli declaration and deposition is that we got

25 this data eventually from First Data.



1731 Now, we were supposed to have gotten it

2 earlier. It went to BP, to Miss Freeman, and

3 Miss Freeman, instead of forwarding it to us, returned

4 it to First Data.

5 And it set us back months in obtaining the

6 transaction records. And we learned in the process that

7 we only had nine months of 16-digit transaction data.

8 And we were concerned about the reliability of the data

9 and that the data be treated as a business record and

10 Mr. Berry and Mr. Quenelle were working on this issue.

11 My understanding is they agreed to the

12 declaration of Miss Rapposelli in lieu of deposition

13 because nobody wanted to challenge the authenticity,

14 everybody wanted to be able to rely upon this

15 transaction data, and establish it as a business record.

16 So Ms. Rapposelli does this declaration and

17 explains what are the gaps in the data. And this is

18 what comes to us. And we provide it as part of our

19 showing on, as I say, a class certification.

20 As we're getting ready for trial and we come to

21 understand, because it takes a very long time to finally

22 get the data, exactly how much has been preserved and

23 how much has been destroyed, we realize we have nine

24 months of data, not a year and some odd. And that nine

25 months curiously omits the summer months, peak driving



1741 season.

2 And so we start to have real concerns about

3 this. And as we get ready and our experts finally

4 analyze the data, we come to this understanding. And we

5 go back to First Data and we say we need somebody, we

6 need Miss Rapposelli to come, can we schedule a

7 deposition? Well, Miss Rapposelli has retired and she

8 is not available.

9 She did a declaration for you for both sides so

10 that you understood what the data was and the process

11 and how we got here. We will not help you find her, we

12 will not make her available. I believe she's in Florida

13 or Georgia.

14 THE COURT: Well, yeah. It's not like she's a

15 clandestine person in a clandestine location. It might

16 take some more effort, but you probably can find her,

17 probably. And I'll work with counsel if you want to do

18 a perpetuation deposition once you find her.

19 And it does strike me -- also, there is the

20 thing being referred to at times of the spoliation issue

21 and other terminology. But to the extent, if and when

22 plaintiff prevails, then we get to the claims process.

23 And I don't know if there's any recovery potential on

24 what you're saying is missing data. Maybe there is.

25 MR. SUGERMAN: To recover the data, you mean?



1751 THE COURT: Yeah.

2 MR. SUGERMAN: We've been told that it is gone,

3 irretrievably gone.

4 THE COURT: But we're told all the time that

5 nothing is ever gone on computers.

6 MR. SUGERMAN: I understand, your Honor. And

7 we're told we're not spied upon and I take all of it now

8 with more and more grains of salt. That said, I can

9 only report to the Court what I have been told.

10 And my little brain in my little laptop and my

11 small slow connection to the internet doesn't allow me

12 to contest those facts. So we can see if we can locate

13 Miss Rapposelli for a phone deposition or some other

14 mechanism to get there.

15 THE COURT: I think it would be an error to

16 admit the declaration based on --


18 THE COURT: I believe the objections are

19 well-taken.


21 THE COURT: And they're sustained at this

22 point.

23 MR. SUGERMAN: We will take that as a ruling.

24 I will ask if she -- the expert can't obviously rely

25 upon it.



1761 THE COURT: So have we gone through all the

2 issues and we're now ready to maybe just generally go

3 over where we stand on exhibits and maybe the best

4 methodology to use to expedite this and to put matters

5 in front of me so I can make decisions and let you know

6 and move things along?

7 MR. HARRIS: Your Honor, during the break

8 Mr. Sugerman and I had a brief conversation about what

9 might be the most expeditious way to do that so that

10 we're not burning up a lot of court time. And I see we

11 only have, like, 15 minutes or thereabouts left.

12 Here's what I had proposed: I don't know that

13 I actually completed my discussion with Mr. Sugerman,

14 but we -- both teams have point people on these

15 exhibits. And as is often happens, everybody starts out

16 with a lot of objections and then, you know, things

17 start up and then they fall to the wayside because

18 reality sinks in and people make different judgments,

19 perhaps, about objections.

20 THE COURT: Yeah.

21 MR. HARRIS: I certainly know that a lot of our

22 foundation and other sorts of authentication-type

23 objections like that are not ones we are going to want

24 to assert. So my proposal was, is that counsel for the

25 parties meet and confer and resolve as much as they can.



1771 THE COURT: Okay.

2 MR. HARRIS: And then report to the Court

3 whatever is leftover for your Honor to rule. Because

4 I'm afraid right now we're going to have to do this

5 quick huddle with each other to determine, are we

6 getting rid of these things? Are we not?

7 Now, I'm not sure whether this is a one-hour

8 meeting or a telephone call or exactly how long it will

9 take, and that's why I didn't want to burn up the

10 Court's time doing that, but I think counsel can

11 certainly do that and report back.

12 Again, that would be my proposal.

13 THE COURT: I think that's a good plan. And I

14 think you should do it at the earliest opportunity. And

15 I note that besides Mr. Abendhoff's deposition, after

16 Miss McKenna gets done, then there's Mr. Slottee, a

17 local lawyer who's going to be a witness for plaintiff.

18 And then Luke O-z-c-e-l-i-k.

19 MR. SUGERMAN: Ozcelik, your Honor.

20 THE COURT: Okay. And that person, then

21 Mr. Scharfstein, and then we have a consumer, Michelle

22 Roberta. So perhaps at least for these early witnesses

23 who I just named, if you could try to arrive at what are

24 the issues, and maybe there's only a handful of exhibits

25 I'll need to rule on.



1781 If you somehow communicate that to me, maybe at

2 start of court tomorrow morning or sometime soon so we

3 can, you know, avoid offering an exhibit, object, what

4 are the objections, and just, you know, the old tedious

5 way.

6 So why don't you try to work together and let

7 me know and I think we'll get there. And it looks like

8 you've already made a lot of progress on no objection on

9 many exhibits.

10 Okay. So I think we're at a stopping point

11 right now, as I understand it. So I see Mr. Williams in

12 the back of the courtroom. Why don't you come on

13 around, Mr. Williams. Okay. So thank you very much.

14 We're in recess until 9:00 a.m. tomorrow morning.



17 (Evening recess taken at 4:28 p.m.)

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1791 STATE OF OREGON )

) SS.2 COUNTY OF MULTNOMAH )

3

4 I, Victoria A. Guerrero, CSR, RPR, CRR, and

5 Notary Public, hereby certify that, pursuant to the

6 Rules of Civil Procedure, personally at the time and

7 place set forth in the caption hereof;

8 that at said time and place I reported in

9 stenotype all testimony adduced and other oral

10 proceedings had in the foregoing matter;

11 that thereafter, my notes were reduced to

12 typewriting under my direction;

13 and the foregoing transcript, pages 1 through

14 178, both inclusive, constitutes a full, true, and

15 correct record of such testimony adduced and oral

16 proceedings had and of the whole thereof.

17 Witness my hand and notarial seal at Portland,

18 Oregon, this Thursday, January 16, 2014.

19

20

21

22 ________________________________________Victoria A. Guerrero, CSR, RPR, CRR

23 Washington CCR No. 3293California CSR No. 8370

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Proceedings January 15, 2014 Scharfstein v. BP West Coast...

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