Pumped Dry

Gas station dealers find big oil blocking the way in their struggles against extinction

In that environment, the companies are having a field day. Texaco and Shell have admitted publicly that since they merged their marketing operations, both now price their gas the same. "They've equalized the price of two different products that ordinarily would be competing in the marketplace," says Los Angeles attorney Tom Bleau. The admission has inspired Bleau to file a price-fixing case against the companies in federal court, but there has been no concurrent peep from regulators.

Nor has a wave of station swaps among companies that began in the late 1980s resulted in any visible concern. In 1993, for example, Chevron swapped 66 stations in the D.C. area for 59 Exxon stations in South Florida; this August, Shell sold all 27 of its stations in the Orlando area to BP Amoco. The swaps enable the companies to instantly increase their market share in regions where they already have a strong presence, while bailing out of more marginal markets. Almost every one of the swaps has spelled trouble for dealers, who are often given a choice: Buy their stations at a premium or find something else to do.

With no help in sight from elected officials and the court route posing a major financial risk, service station dealers are at a crossroads. Too stubborn to throw in the towel but too streetwise to ignore reality, they waffle between two distasteful options. "I've spent my life building this business, and I'm not gonna let them take it away from me," Cleveland Shell dealer Jerry Gorczyca says defiantly. Moments later, he changes course. "I don't know if we're fighting a losing cause and we should just let go, or if we should keep on fighting."

Attorney Robert Steinberg: "I want to get back our pound of flesh for these dealers."
Deron Neblett
Attorney Robert Steinberg: "I want to get back our pound of flesh for these dealers."

After 39 years, Gorczyca is saddened by the changes he's seen, and not just in the gas business. Before, a man was only as good as his word. Relationships were built to last, with customers as well as suppliers, and loyalty was rewarded in kind. All the institutions that gave meaning to the word community -- florists, funeral parlors, hardware stores -- operated on the same principles. Those principles, Gorczyca laments, seem as distant today as the dealers he's seen driven away.

"What they built this country on, the small people, they're going to eliminate 'em.

Lone Star Stymie

Texas being Texas, the legislature has shown no interest in even considering dealer protection laws. In 1991 a state association of wholesale gas distributors failed to get a hearing on a divorcement bill, and none has been considered since. The oil and gas industry, so much a part of the state's identity, still holds sway in Austin. "You'd never find [divorcement] in Texas," says Houston attorney Paul Rosen.

You won't find much else, either. While only five states have divorcement laws in effect, six others have laws that prohibit companies from selling gas below their cost. And numerous others have laws that protect franchisees or other statutes that can apply to dealers. Texas has almost nothing.

Service station dealers who say they've been targeted for removal by their oil companies have only the courts as an avenue for relief. But legislative inaction hurts the dealers in state court as well. "The judges can only use what they're armed with," says Rosen, who represents Shell and Exxon dealers along with law partner Robert Steinberg. "That is maybe our biggest hurdle."

Federal court provides a different barrier. The Petroleum Marketing Practices Act, designed to protect dealers from predatory practices, has proved to be easily circumvented. Although company actions have had the clear effect of driving dealers out of business, Rosen says, "That doesn't mean they can't get away with it."

Dealers in Texas have cases pending in both state and federal court, but the sledding has been rough. In April state District Judge Scott Brister partially deflated a Harris County case against Shell involving more than 600 dealers from 17 states. Brister granted Shell's motion for summary judgment on fraud and other charges, though a few of the claims are still pending. Perhaps most telling, however, was the judge's introductory note in his ruling. "Plaintiffs' underlying complaint -- that Shell is attempting to drive them out of business or convert all lessee-dealer stations to company-owned stores -- does not appear to be the basis of any of Plaintiffs' causes of action," Brister wrote. "Obviously, unless Shell violates a statute Shell may conduct its business as it sees fit -- with or without Plaintiffs."

One month later federal Judge Nancy Atlas dismissed a case brought by former Shell lessee dealer A.V. Meghani. Eighteen of the 21 stations Meghani relinquished to Shell were still under a current lease, meaning that Shell did not actually terminate him. Meghani argued that he was effectively terminated after Shell presented him with new leases he could not afford to sign, but Atlas noted that the courts have not recognized such "constructive termination" as a legitimate cause of action under the PMPA.

Rosen, whose firm represents Meghani, believes that Atlas erred in her decision for other reasons and is appealing to the Fifth Circuit Court in New Orleans. But he agrees that the PMPA is hardly an effective tool to protect dealers as advertised. "The courts' interpretation of the PMPA has been so watered down, it effectively makes it worthless," Rosen says.

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