Gas station case reaches high court

Karol's own rent jumped to $99,000 per year from about $34,000. Karol said she believes the company's actions were motivated by a desire to replace independent operators with company-owned stores. Shell, in its appeal, said it was merely changing an outmoded rent system based on the amount of gasoline sold to one tied to the overall value of the locations which had begun to sprout convenience stores to augment the filling stations.

http://www.thesunchronicle.com
December 10, 2009

Gas station case reaches high court
Rick Foster, Sun Chronicle Staff

ShellCynthiaKarol.jpg

Cynthia Karol at her Pleasant Street Auto Center. (Staff photo by Mike George)

ATTLEBORO - A David-and-Goliath legal battle pitting a local service station owner against an international oil company has finally reached all the way to the Supreme Court.

Cynthia Karol, owner of Pleasant Auto Center and a former Shell service station operator, is one of eight Shell franchisees who will get their day in court Jan. 19, when the nine justices will hear oral arguments.

The Supreme Court has already agreed to address issues stemming from a 2004 trial, a Shell representative said.

Karol is among eight current and former Shell station operators who have been battling Shell Oil Products and two related companies since 2000 over changes in company practices they say drastically increased their rents and violated federal law. Shell, through court documents, contends its actions were legal and clearly spelled out in contracts with its franchisees.

The Attleboro station owner and her co-plaintiffs won their initial case in U.S. District Court in Boston in 2004 when a federal jury awarded them $3.3 million plus $1 million in interest. Shell's appeal was rejected by the U.S. Court of Appeals, resulting in the company filing with the Supreme Court.

For Karol and the other plaintiffs, it's been a long road.

"I don't know how many times over the years we've thought 'just six more months and this will be over,'" she said.

The lawsuit began with 49 plaintiffs, but a majority either dropped out or arrived at settlements with Shell Karol said. Karol said she and the others persisted "because of the principle" and because the value of her and others' franchises had been eroded.

At the heart of the lawsuit are contractual arrangements between Shell, its affiliate, Motiva Enterprises LLC, and its independent franchisees governing the price of gasoline and the rent they would pay for their locations.

According to legal briefs filed with the court, each franchisee had a "contract rent" they were obligated to pay but received rebates based on the amount of fuel they sold that reduced the amount due.

Although franchisees allegedly signed contracts that allowed the company to change that practice, plaintiffs claim they were told by company officials to disregard the contract language and that the rebate system or something very like it would always be in effect.

When the oil company changed the rent subsidy program, the plaintiffs said, it effectively tripled their rents. Some, Karol said, were forced out of business while others continued to operate while they considered legal action.

Karol's own rent jumped to $99,000 per year from about $34,000.

Karol said she believes the company's actions were motivated by a desire to replace independent operators with company-owned stores. Shell, in its appeal, said it was merely changing an outmoded rent system based on the amount of gasoline sold to one tied to the overall value of the locations which had begun to sprout convenience stores to augment the filling stations.

Motiva, which is 50 percent owned by Shell and 50 percent by Saudi Refining Inc., has now settled all but a handful of claims in the original suit by agreement according to a spokeswoman for the company. Terms of the settlements are confidential.

Motiva refines and markets products through about 8,100 Shell stations in the eastern and southern United States.

Karol, who operated the Shell station on the corner of Pleasant Street and Starkey Avenue since 1981, gave up that location in November after moving her auto repair business to the former Tarbox Jeep Chrysler at 676 Pleasant St.

The long-time station owner says she hasn't decided yet whether to travel to Washingon to hear her case argued. She said she's more intent on building her new venture - including an expanded auto service facility, convenience store and amenities such as a spotless customer lounge and a children's area - into a success.

"After so many years in court, it gets tiring," she said. "If you asked me would I do it again, I don't think I would."

RICK FOSTER can be reached at 508-236-0360 or at moc.elcinorhcnuseht|retsofr#moc.elcinorhcnuseht|retsofr.

http://www.thesunchronicle.com/articles/2009/12/10/news/6588556.txt


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Risks: Any pretence will do, David and Goliath story, Divide and conquer, Franchisor takes store and converts to corporate, Gag order (confidentiality agreement), Justice delayed is justice denied, Lawsuits, group, Opportunism Test: If asset ownership were reversed, would decision likely change?, Principle of the thing, Rent increase, Trial decision always appealed, U.S. Supreme Court, War of attrition, United States, 20091210 Gas station

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