Peterson Oil to face class action lawsuit for allegedly selling bad oil mix
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Peterson Oil in Worcester
A lawsuit filed by several customers against Peterson Oil Service Inc. of Worcester accusing the company of knowingly delivering the wrong mix of heating oil was certified on Dec. 12 as a class action lawsuit by a Worcester Superior Court judge.
Filed in 2019 by nine customers of Peterson Oil, the lawsuit alleges the company sold and delivered a mix of heating oil that caused damage to heating systems and burned at a less efficient rate.
“For over ten years Defendant Peterson Oil Service, Inc. (“Peterson Oil”) has engaged in an elaborate scheme to generate millions of dollars in tax credits and other profits, under the guise of helping the environment, by cheating its customers and leaving them out in the cold,” the initial filing says.
Peterson Oil will appeal the decision, said Louis Ciavarra, an attorney at Worcester law firm Bowditch and Dewey, LLP, who is representing Peterson.
“We do not believe the situation supports a claim for a class action,” Ciavarra said in an interview with WBJ. “The number of claims is minuscule and thousands of customers of Peterson continue to buy fuel without incidents, as does the Commonwealth and towns across the state.”
"A lot of people don't know they've been harmed. People are still in the dark," Jeffrey Strom, a lawyer for the plaintiffs, told WBJ in a phone on Thursday.
"Thousands of innocent customers were left out in the cold so that the Peterson's could financially enrich themselves through state tax credits. Their own internal documents and employees have confirmed allegations in the case," Strom said in a written statement. "Any suggestion that this was a scheme concocted to help the environment is not credible.
"Not only were customers left in the cold, but also overcharged because their oil was less efficient and their own documents show that," he added in the phone interview.
The lawsuit accuses Peterson Oil – along with then executives Howard Peterson Jr., Sharon Peterson and Kristen Peterson Halus – of promising heating oil and instead selling them fuel diluted with biodiesel, which is made from vegetable oils and animal fats. It claims Peterson Oil began adding biodiesel fuels to its heating oil in 2012 and began delivering oil with blends close to 20% and from 2015 to 2021 Peterson’s average biodiesel blend was 38%.
A heating oil blend with too much biodiesel can cause furnace parts to corrode, the lawsuit said, and it can gel fuel lines, causing heating systems to break down.
The lawsuit alleges more than 15,000 customers could have been affected by the practice.
At the same time, Peterson Oil began applying for alternative energy credits, which were introduced by the state government, and received 75% of the first round of credits for the entire state because it was blending so much more than anyone else in Massachusetts, the lawsuit said.
Peterson Oil was founded in 1946 and has been delivering fuel across Central Massachusetts ever since. According to Peterson Oil’s opposition filing, the company makes more than 45,000 deliveries of home heating oil to roughly 10,000 residents and commercial customers a year and it began delivering heating oil with biodiesel in 2012.
The company claims renewable biofuels have been researched, tested, and approved by leading heating oil industry groups and many government entities across the country who have concluded that it is a safe, viable alternative to toxic fossil fuels. The amount of biodiesel per delivery depends on availability, requests and requirements of Peterson Oil’s customers, the company said.
Peterson Oil said it purchased its heating oil wholesale from the Port of Providence in Rhode Island and the amount of service calls performed after it started blending did not change in any significant way, which the plaintiffs dispute, saying thousands of Peterson Oil customers have lost heat, many times, commonly in the cold winter months and technicians were going on at least one call per day with the majority of them being to fix issues where customers had no heat. One technician claimed that approximately 85% of his service calls were due to biodiesel, according to the plaintiffs.
Ciavarra said if the problem was so severe then Peterson wouldn’t have any customers left.
On March 3, 2021, Peterson Oil agreed to pay $450,000 and improve its record-keeping processes to resolve allegations it knowingly provided state entities noncompliant heating oil in violation of its contracts with Massachusetts’s Operational Services Division.
According to Attorney General Maura Healey’s office, the agreement resolved allegations Peterson Oil violated the Massachusetts False Claims Act when it entered into two statewide contracts, covering an eight-year period, with no intention of delivering compliant heating fuel.
“Instead, Peterson Oil regularly delivered fuel containing significantly more biodiesel by volume than the 5 percent allowed under the contracts,” Healey’s office said.
The Attorney General’s Office claimed Peterson Oil delivered fuel containing 40% or more biodiesel by volume, more than eight times allowed under the contract. State entities that purchased the heating oil from Peterson had issues with their heating systems because of the high biodiesel content.
Ciavarra said Peterson settled the suit because it “costs less to settle sometimes and sometimes you settle to move on and focus on business.”
In October, Kristen Peterson told Spectrum News 1 the company’s oil storage and biodiesel blending allows it to keep its prices down. The cost of oil has risen an average of 38.4% this year compared to last year’s price, according to the Massachusetts Department of Energy Resources.
EDITOR'S NOTE: John Regan, an attorney for the plaintiffs, is related to Kevin Koczwara, the author of this story.
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