Pumped Out

Major gas companies are driving away independent station operators, all in the name of greed

Such smoking guns are rare, but more are emerging, including a damaging deposition by a former Shell marketing executive in a Florida case. The testimony indicates that while the dealers thought they were getting a break on rent if they sold more gallons under the Variable Rent Program, the company was making it back by charging them more for gas. The hidden rent component in its wholesale gas price has been the basis for one of many fraud charges against Shell.

That deposition has made its way to Texas. 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 Steinberg's team to travel to Indianapolis and copy whatever it wanted from the case file (though the material is still officially sealed).

Lawyers for the dealers have generally taken the shotgun approach, tossing as many charges as possible into every suit 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. However, a recent verdict in a California Chevron case may have a chilling effect on future litigation. A group of 22 dealers won $3.4 million from Chevron in 1995--13 years after they filed the case--following a jury verdict that the company illegally manipulated prices to pressure the dealers. But a three-panel court overturned the verdict, and a judge recently awarded Chevron its attorneys' fees, which total $6.8 million. Most of the dealers, who spent much of their money during the 18-year battle, will have to declare bankruptcy.

Texaco is making it impossible for independent dealers such as Greg Kraft to stay alive. Kraft shut down his service station at Forest Lane and Webb Chapel Road earlier this month.
Michael Hogue
Texaco is making it impossible for independent dealers such as Greg Kraft to stay alive. Kraft shut down his service station at Forest Lane and Webb Chapel Road earlier this month.
The neighborhood service station is disappearing -- and the big oil companies are glad to see them go.
Paolo Vescia
The neighborhood service station is disappearing -- and the big oil companies are glad to see them go.

Another remedy for dealers can be found in Congress. The federal Petroleum Marketing Practices Act has proved to be weak enough for the companies to dodge, but 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."

Six states and Washington, D.C., have tough laws protecting dealers, and six others have gas laws that shield them from predatory pricing. Not surprisingly, Texas hasn't considered such a law for years.

Dealers recognize the odds, and most say that all they really want is to be bought out at a fair price that will enable them to move forward with their lives. But unless companies are brought to their knees in court, they aren't likely to give that up voluntarily. As a Shell motion in the Steinberg case reads, under Texas law, "Shell does not owe a duty of good faith and fair dealing to plaintiffs."

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