Class-action lawsuit against Peterson Oil settles for $14 million

WORCESTER – A judge on Thursday, Nov. 13, granted preliminary approval of a $14 million settlement in a long-running class-action lawsuit against Peterson Oil regarding its biodiesel fuel mix. 

If granted final approval following a hearing in January, thousands of customers who purchased oil from the longtime Worcester fuel company as far back as 2012 and as recently as this month would be eligible to file claims by a Feb. 11, 2026, deadline. 

The settlement is the second Peterson Oil or its insurers have reached regarding allegations the company put too much biodiesel in its fuel, causing equipment to break down and increasing the amount of fuel needed to deliver the same amount of heat. 

The company’s insurers, over its objection, reached a $5.6 million settlement last year regarding customers who alleged property damage from its oil between 2016 and 2019. 

The second and final settlement is open to customers who received oil from Peterson and two other companies it operates, Cleghorn Oil and Cape Discount Fuel, between January 2012 and Nov. 12 of this year. Customers who were part of last year’s settlement would not be entitled to property damage payments. 

The settlement, court documents show, will, after a ⅓ fee for lawyers and other lawsuit costs, provide about $8.2 million for consumers who allege property damage or economic loss based on their oil purchases.

“These settlements provide meaningful relief to thousands of families and small businesses across Central Massachusetts who dealt with unexpected heating-system problems and economic losses,” Jeffrey Strom, a lawyer for the plaintiffs, said in a statement to the Telegram & Gazette. 

Court records show Peterson Oil did not admit wrongdoing in the settlement, which was reached on the eve of what was to be a lengthy jury trial this fall. 

Howard Peterson, the company’s owner, declined to comment on the settlement when reached by phone Saturday, Nov. 15. 

The lawsuit dates to 2019, when nine customers, including Temple Beth Israel, alleged their systems broke down because Peterson elevated concentrations of biodiesel, a mix derived from plants and animals, above industry norms without their consent.

The suit alleged Peterson stood to make a profit from using more biodiesel than conventional oil because it owns a facility where it produces its own biodiesel fuel, and because more of its fuel was needed to produce the same amount of heat. 

Howard Peterson has, in court documents and prior interviews, disputed the allegations, casting his effort as part of emerging efforts to create more environmentally friendly fuel. 

A lawyer for Peterson noted last year that other northeastern states, most notably Rhode Island and Connecticut, have begun mandating biodiesel be blended into heating oil

Rhode Island’s law calls for a 20% minimum blend by 2025, while Connecticut’s calls for a 10% minimum blend this year.

Strom noted last year that Massachusetts has not enacted the same requirements, and said that until 2020 no burner was rated to handle above 5% biodiesel. 

Peterson, he alleged in an email at the time, was “delivering 80% biodiesel blends prior to 2020 and sometimes even more.” 

Court records show the Massachusetts Department of Energy Resources, following an audit, ordered Peterson in 2018 to disclose notice of its maximum biodiesel blend, and the company, without admitting wrongdoing, agreed to pay the state $450,000 in 2021 after the attorney general alleged Peterson sold its oil with higher-than-contracted levels of biodiesel. 

The Better Business Bureau revoked Peterson and Cleghorn’s accreditation shortly following its settlement with the AG and, court records show, Peterson’s insurers tried to argue they shouldn’t have to defend the company’s actions. 

Strom, in a statement to the T&G, said he and other plaintiff lawyers succeeded in arguing the insurers were liable in federal court, including to the First Circuit of Appeals. 

In pitching the settlement to a Superior Court judge, however, Strom noted that while federal courts required insurers to defend the lawsuit, the issue of liability for payment on a judgment after trial had not yet been settled. 

The insurers, he wrote, argued they shouldn’t be liable for any judgment “because Peterson Oil acted intentionally” and had “substantial knowledge of the risks its fuel posed to customers and delivered the fuel anyway.” 

Strom argued that the $14 million settlement was a good deal for the class because the insurers had agreed to pay $12.8 million, with Peterson Oil paying $1.2 million. 

Strom wrote that, as part of negotiations, Peterson provided confidential financial records that “raised concerns” about the ability of the company or Howard Peterson’s family to “satisfy a large verdict.” 

Peterson, court records show, testified in 2023 he owed more than $3 million to his bank to avoid foreclosure – and that the bank has closed his line of credit – after a judge approved a $6 million attachment of company assets tied to the lawsuit. 

Peterson, while declining to comment on the settlement Nov. 15, told the T&G his company remains financially secure. 

Strom, in arguing for the ⅓ to his team in lawyer’s fees, which is typical in similar cases, said the team put $500,000 of its own money into the case, argued successfully in front of the U.S. Court of Appeals, pored over hundreds of thousands of pages of documents, defended the use of a contested expert it intended to call at trial, conducted more than 40 days of deposition testimony and secured “discovery sanctions” against Peterson’s wife Sharon. 

Customers seeking more information on settlement eligibility and terms can go to a website set up for the settlement, https://petersonoilclassactionsettlement.com/. 

A fairness hearing on the settlement is slated for Jan. 29 in Suffolk Superior Court. Customers with claims must file paperwork online, or postmark claims, by Feb. 11. 

If the settlement is approved and checks are issued, claimants will have 120 days to cash them until they expire.