State Sues Newtown Oil Over Customer Losses

By Andrew Gorosko

State Attorney General Richard Blumenthal has filed a lawsuit against Newtown Oil Company in seeking to recover money lost last winter by 1,400 company customers, whose prepaid home heating fuel contracts for the 2002–03 heating season were not honored by the firm.

Assistant Attorney General Thomas Saadi filed the lawsuit, on behalf of Mr Blumenthal, May 19 in Hartford Superior Court. The defendants have a June 10 court return date.

Besides Newtown Oil, named as defendants in the lawsuit are Andrew Hunihan, the president of the firm; Heather Bliss, the firm’s corporate secretary; and William A. Trudeau, Jr, a consultant to the firm, who regularly participated in its operations. The firm, which went out of business last December, was located at 47-49 South Main Street.

In a statement, Mr Blumenthal said, “This lawsuit seeks refunds for consumers, and a ban on the defendants from the fuel oil business, or any other business involving prepayment for delivery. Recovering [lost money] for consumers will be a tough uphill battle, but we’ll fight for them long and hard.”

The firm failed to deliver approximately one million gallons of home heating fuel that it was committed to deliver under the terms of the prepaid delivery contracts that it sold to customers, according to the legal papers.

“Newtown Oil left 1,400 customers out in the cold –– during a frighteningly frigid winter –– by failing to deliver heating oil. It promised to deliver, even when it knew, or should have known, it couldn’t. Many customers struggled to find new oil suppliers, and some went without heat during one of the coldest winters in recent history,” Mr Blumenthal said.

According to the attorney general, no later than May 2002, the defendants knew, or should have known, that the firm’s severe financial problems, including a credit cutoff from wholesale oil suppliers and its failure to buy “oil futures” contracts, would mean that it could not fulfill the terms of its commitments to deliver home heating fuel to customers.

“Despite this knowledge, the company took orders from consumers, and accepted prepayments from more than 1,400 consumers in the greater Danbury area,” according to Mr Blumenthal.

Among the remedies sought through the lawsuit, the state also seeks fines against the defendants, attorneys’ fees, and costs.

Mr Blumenthal said last week he may also pursue criminal charges against the firm.

Mr Trudeau currently is free on bond, awaiting sentencing in connection with unrelated federal convictions involving failure to pay payroll taxes and fraudulently obtaining loans.

Earlier this month, US Bankruptcy Court dismissed a bankruptcy filing by Newtown Oil, allowing the state to file its lawsuit against the firm. Aggrieved customers may also may file individual lawsuits.

Mr Blumenthal filed the lawsuit under the terms of the Connecticut Unfair Trade Practices Act, charging Newtown Oil with “unfair or deceptive acts and practices.”

 According to the lawsuit, “Although in severe debt and burdened with significant liabilities throughout the year of 2002, at no time did [the] defendants purchase fuel oil future contracts or maintain fuel oil in reserve to cover their obligations to supply more than 1,400 prepaid customers with more than one million gallons of home heating fuel.”

The lawsuit adds that although retail prices for home heating fuel ranged from $1.10 to $1.29 per gallon, Newtown Oil sold prepaid fuel contracts to customers at a price of 89.9 cents per gallon as late as last December 10, which was four days before the firm closed for business.

The 89.9 cent-per-gallon retail fuel price, in light of the firm’s severe financial problems, was too low a price to allow the firm to continue to operate and to procure fuel for its customers, according to the lawsuit.

Although Newtown Oil had “millions of dollars” of debt, it continued to offer the 89.9-cent price to its customers with prepaid fuel contracts, according to the court papers.

Although in May 2002 the firm knew that it could not honor fuel contracts for the for the full 2002–03 heating season, Newtown Oil solicited such prepaid fuel contracts from June through December 2002, the lawsuit adds.

The attorney general terms Newtown Oil’s contractual practices as false, deceptive, and likely to mislead.

As early as October 2002, Newtown Oil, in order to provide fuel to its customers, resorted to buying diesel fuel, which is usable as home heating fuel, at a retail premium price from a local gas station in Newtown, according to the court papers.

Beginning in mid-November 2002, the firm failed to deliver fuel to hundreds of its prepaid customers, many of whom ran out of fuel and then had to buy fuel from other suppliers at premium prices, according to the lawsuit.

Instead of advising prepaid customers that it could not fulfill contractual obligations to provide fuel, the firm continued to sell such prepaid contracts and claim it would deliver the fuel, it adds.