Costco 2013 Annual Report Download - page 71

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Numerous putative class actions have been brought around the United States against motor fuel retailers,
including the Company, alleging that they have been overcharging consumers by selling gasoline or diesel
that is warmer than 60 degrees without adjusting the volume sold to compensate for heat-related expansion
or disclosing the effect of such expansion on the energy equivalent received by the consumer. The Company
is named in the following actions: Raphael Sagalyn, et al., v. Chevron USA, Inc., et al., Case No. 07-430 (D.
Md.); Phyllis Lerner, et al., v. Costco Wholesale Corporation, et al., Case No. 07-1216 (C.D. Cal.); Linda A.
Williams, et al., v. BP Corporation North America, Inc., et al., Case No. 07-179 (M.D. Ala.); James Graham,
et al. v. Chevron USA, Inc., et al., Civil Action No. 07-193 (E.D. Va.); Betty A. Delgado, et al., v. Allsups,
Convenience Stores, Inc., et al., Case No. 07-202 (D.N.M.); Gary Kohut, et al. v. Chevron USA, Inc., et al.,
Case No. 07-285 (D. Nev.); Mark Rushing, et al., v. Alon USA, Inc., et al., Case No. 06-7621 (N.D. Cal.);
James Vanderbilt, et al., v. BP Corporation North America, Inc., et al., Case No. 06-1052 (W.D. Mo.); Zachary
Wilson, et al., v. Ampride, Inc., et al., Case No. 06-2582 (D. Kan.); Diane Foster, et al., v. BP North America
Petroleum, Inc., et al., Case No. 07-02059 (W.D. Tenn.); Mara Redstone, et al., v. Chevron USA, Inc., et al.,
Case No. 07-20751 (S.D. Fla.); Fred Aguirre, et al. v. BP West Coast Products LLC, et al., Case No. 07-1534
(N.D. Cal.); J.C. Wash, et al., v. Chevron USA, Inc., et al.; Case No. 4:07cv37 (E.D. Mo.); Jonathan Charles
Conlin, et al., v. Chevron USA, Inc., et al.; Case No. 07 0317 (M.D. Tenn.); William Barker, et al. v. Chevron
USA, Inc., et al.; Case No. 07-cv-00293 (D.N.M.); Melissa J. Couch, et al. v. BP Products North America,
Inc., et al., Case No. 07cv291 (E.D. Tex.); S. Garrett Cook, Jr., et al., v. Hess Corporation, et al., Case
No. 07cv750 (M.D. Ala.); Jeff Jenkins, et al. v. Amoco Oil Company, et al., Case No. 07-cv-00661 (D. Utah);
and Mark Wyatt, et al., v. B. P. America Corp., et al., Case No. 07-1754 (S.D. Cal.). On June 18, 2007, the
Judicial Panel on Multidistrict Litigation assigned the action, entitled In re Motor Fuel Temperature Sales
Practices Litigation, MDL Docket No 1840, to Judge Kathryn Vratil in the United States District Court for the
District of Kansas. On April 12, 2009, the Company agreed to settle the actions in which it is named as a
defendant. Under the settlement, which is subject to final approval by the court, the Company agreed, to the
extent allowed by law, to install over five years from the effective date of the settlement temperature-correcting
dispensers in the States of Alabama, Arizona, California, Florida, Georgia, Kentucky, Nevada, New Mexico,
North Carolina, South Carolina, Tennessee, Texas, Utah, and Virginia. Other than payments to class
representatives, the settlement does not provide for cash payments to class members. On September 22,
2011, the court preliminarily approved a revised settlement, which did not materially alter the terms. On
April 24, 2012, the court granted final approval of the revised settlement. A class member who objected has
filed a notice of appeal from the order approving the settlement. Plaintiffs have moved for an award of $10
million in attorneys’ fees, as well as an award of costs and payments to class representatives. The Company
has opposed the motion.
On October 4, 2006, the Company received a grand jury subpoena from the United States Attorney’s Office
for the Central District of California, seeking records relating to the Company’s receipt and handling of
hazardous merchandise returned by Costco members and other records. The Company has entered into a
tolling agreement with the United States Attorney’s Office.
The Environmental Protection Agency (EPA) issued an Information Request to the Company, dated
November 1, 2007, regarding warehouses in the states of Arizona, California, Hawaii, and Nevada and
relating to compliance with regulations concerning air-conditioning and refrigeration equipment. On March 4,
2009, the Company was advised by the Department of Justice that the Department was prepared to allege
that the Company has committed at least nineteen violations of the leak-repair requirements of 40 C.F.R. §
82.156(i) and at least seventy-four violations of the recordkeeping requirements of 40 C.F.R. § 82.166(k),
(m) at warehouses in these states. The Company has responded to these allegations, is engaged in
communications with the Department about these and additional allegations, and has entered into tolling
agreements. Substantial penalties may be levied for violations of the Clean Air Act. The Company is
cooperating with this inquiry.
On October 7, 2009, the District Attorneys for San Diego, San Joaquin and Solano Counties filed a complaint,
People of the State of California v. Costco Wholesale Corp., et al, No. 37-2009-00099912 (Superior Court
for the County of San Diego), alleging on information and belief that the Company has violated and continues