See You in Court

There's plenty of fuel for lawsuits against gas companies.

The 1991 court victory against Amoco proved the last hurrah for service-station dealers in Colorado. The company chipped away at the trial verdict, partially overturning the decision on appeal. In 1996, exhausted from the struggle and facing a new round of appeals, the dealers agreed to settle, took the money and ran. Some sold their stations back to Amoco; today only a handful remain.

It's not easy to sue a major oil company, no matter how obvious the transgression. With a seemingly unlimited legal budget, a Shell or an Exxon can throw banks of lawyers and other resources at a case that the cash-strapped dealers can't possibly afford to match. Even when the dealers' attorney works on contingency, the company can delay and obfuscate for years with relative impunity. In a still-unresolved 1991 federal class-action case filed in Miami against Exxon, for example, the list of motions alone ran more than 100 pages.

Invariably, the companies request that documents and testimony produced in a dealer case be sealed, claiming that the release of proprietary information could damage their business. In the event that the cases settle, the seal becomes permanent. In the Amoco case, the company agreed to pay as long as the dealers promised to keep all information confidential. "What they didn't want was to establish a precedent," says Hubert Safran, the dealers' attorney.

Smoking guns rarely escape the files, but more are emerging, including a damaging deposition by a former Shell marketing executive in a Miami case. The testimony indicates that while the dealers thought they were getting a break on rent if they sold more gallons under the rent rebate program, the company was making it back by charging them more for gas. The hidden rent component in their wholesale gas price has been the basis for one of many fraud charges against Shell.

That deposition has now made its way to other states. A judge in an Indiana case became so incensed at Shell's consistent refusal to obey the rules and produce documents as ordered that he allowed a legal team from Texas to travel to Indianapolis and copy whatever it wanted from the case file (though the material is still officially sealed).

Lawyers for the dealers generally have taken the shotgun approach when suing oil companies, tossing as many charges as possible into every case and seeing if anything sticks. Results to date have been decidedly mixed. Some of the Shell suits seem to be gaining momentum, and the dealers have won a few scattered victories, but a recent verdict in a California Chevron case may have a chilling effect on future litigation. A group of 22 dealers there won $3.4 million from Chevron in 1995 after a jury found that the company had illegally manipulated prices to pressure dealers financially. But a three-judge panel overturned the verdict, and a judge recently awarded Chevron its attorney's fees, which total $6.8 million. Most of the dealers, bled dry after the eight-year battle, will have to declare bankruptcy.

Another remedy for dealers can be found in Congress. The federal Petroleum Marketing Practices Act was designed to protect dealers from predatory practices, but the law has proved easy to dodge. In 1990, for example, Exxon sold its 33 stations in Colorado for a reported $12 million to Conoco, which wanted no dealers. Under the PMPA, the dealers have a right to buy their stations if a company wants to sell or close them. No problem: In breaking down the total sale price, Exxon simply assigned excessively high values to the dealer stations and low values to the stations that the company operated. The dealers couldn't afford to buy at the inflated figure, and they all went out of business.

Recent gas-price spikes have the Federal Trade Commission, as well as several U.S. senators and state governors, conducting investigations. As the oil companies like to point out, however, those investigations usually die on the vine. Millions in campaign contributions and hordes of lobbyists flooding legislative hallways probably help, as Chevron spokesman Jack Coffey hinted recently. The money is spent, Coffey said, "to be sure our business opportunities can continue in the way we want them to continue."

The state level seems to provide more opportunities for dealer relief. Six states and Washington, D.C., have divorcement laws on the books, which generally prohibit refiners from running their own retail outlets. But without a strong dealer organization to push such a bill, Colorado hasn't seen much action on the legislative front since the early 1990s. Now, five companies control more than 60 percent of the retail market, and their ability to raise prices in lockstep has been well documented.

Dealers recognize the odds of going to war with Goliath, though most say that all they really want is to be bought out at a fair price or compensated for their years of service. But unless they're brought to their knees in court, the companies aren't likely to pay up voluntarily. As a Shell motion in a Texas case clearly states, "Shell does not owe a duty of good faith and fair dealing to plaintiffs."

 
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