THE WALL STREET JOURNAL/DOW JONES NEWSWIRES: Jiffy Lube Nears Deal To Settle Consumer Lawsuits: "It was just a straight rip-off for $1.25 every time someone came in," said Scott R. Shepherd, a Pennsylvania attorney who sued the company”: “Jiffy Lube, a wholly owned subsidiary of Shell Oil Co…”: “Marc A. Wites, a Florida lawyer, said it would cover only 8 million of the 34 million people who paid the surcharge.” (ShellNews.net)
DOW JONES NEWSWIRES
October 19, 2004 12:57 a.m.
DALLAS (AP)--An Oklahoma judge is poised to approve a settlement of class-action lawsuits by drivers who say they were cheated when Jiffy Lube International Inc. added surcharges to their oil-change bills over the past five years.
The settlement would close at least nine pending class-action cases from California to New Jersey -a similar accord has been reached in a New York case. Some customers would get $5 off their next oil change. The three law firms that negotiated with Houston-based Jiffy Lube would split $2.75 million.
Some attorneys are trying to kill the nationwide deal, however, calling it a sham that would shortchange millions of customers. They plan to ask a state judge in Tahlequah, Okla., to reject the deal at a hearing Nov. 17.
At issue is an "environmental surcharge" that ranged from 80 cents to $1.25 added to the price of an oil change at Jiffy Lube's 400 company-owned stores from late 1999 until April. Some but not all the 1,800 Jiffy Lubes owned by franchisees also charged fees, according to the company.
Jiffy Lube won't say how many customers paid the charge, which the company stopped assessing after customer complaints and several lawsuits. The company said there were 30 million oil changes performed last year at Jiffy Lube shops, including franchise stores.
The company mailed 7.3 million coupons to customers of company-owned stores, who were identified from a data base, and promised not to charge a similar fee again.
Critics say the company called the fee an environmental surcharge to fool customers into thinking it was a tax.
"It was just a straight rip-off for $1.25 every time someone came in," said Scott R. Shepherd, a Pennsylvania attorney who sued the company. "They were hiding a price increase."
Jiffy Lube began charging the fee to recover the costs of environmental regulations designed to prevent and clean up oil spills, said Mike Lawrence, a publicist hired by Jiffy Lube to answer questions related to the lawsuits.
"This is a pretty common fee. It's been charged by most of the companies in the quick-lube industry for a long time," Lawrence said. "However, because the practice has generated increasing controversy, we elected to stop charging this fee."
The use of such fees dropped in recent years as they came under attack from consumers and state officials and as recyclers began paying for used oil instead of charging to take it away. This year, only about one-third of the nation's oil-change garages add an environmental charge, with the average being $1.62, according to trade publication National Oil & Lube News.
Lawyers attacking the settlement complain that customers who went to one of the 1,800 stores run by franchisees will get nothing. Marc A. Wites, a Florida lawyer, said it would cover only 8 million of the 34 million people who paid the surcharge.
The lucky ones would get just a $5 coupon, he said, but that's less than Jiffy Lube's advertised deals. "Any time of the week, a consumer could open up a newspaper and get an $8 coupon," he said.
Jiffy Lube officials and lawyers declined interview requests.
Some of the plaintiff lawyers say the coupons reward the company for wrongdoing.
"Putting aside whether a $5 coupon is a good settlement, this is just a way of generating more business for Jiffy Lube," said Richard D. Greenfield, a Maryland attorney who said he will travel to Oklahoma to protest the deal.
Other companies, including video chains Blockbuster Inc. and Hollywood Entertainment Corp., have used coupons to settle class-action cases.
Mary B. Cranston, a San Francisco lawyer who has defended other companies against consumer lawsuits, said coupons "are often a good way to close the gap when a case isn't as good as the plaintiffs would like. You can get more value in the hands of plaintiffs without costing the defendant as much."
Jiffy Lube, a wholly owned subsidiary of Shell Oil Co., won't say how much the settlement will cost. Lawrence said it would not have a material financial effect on Shell . Jiffy Lube doesn't disclose annual revenue, but analysts have estimated it at about $1.4 billion.