Pumped Up

Batting .500: Dealer attorney Robert Steinberg won a jury verdict against Exxon but lost to Shell on a judge's ruling.
Deron Neblett

The same day that the Houston Press published the last of a series on the elimination of service station dealers by their parent oil companies ("Pumped Dry," by Bob Burtman, November 2), Exxon dealers won a major victory. Jurors in Corpus Christi decided in favor of more than 50 dealers who had claimed Exxon was using various tactics to push them out. The verdict put damages against Exxon at $5.5 million, 60 percent less than what the plaintiffs requested. With attorneys' fees and interest, the total should reach about $8.5 million.

Exxon issued a brief statement denying liability and saying it believes its pricing practices are fair: "We did not attempt to drive our dealers out of business, and we intend to appeal this judgment."

The appeal part is certainly true, which is consistent with oil company practices when they lose a dealer case. The innocence claim, however, will be more difficult for Exxon to defend. Internal company documents produced in the case outlined Exxon's plans to eliminate most of their dealers in South Texas while increasing the number of company-run stations by an equivalent percentage. Evidence indicated the company-run stations were undercutting the dealers on price with no apparent justification.

The day after the Exxon verdict, 22 Shell dealers in Indianapolis won a victory when that company agreed to settle their federal case. The settlement was rumored to be in excess of $22 million, though neither side would disclose terms. Shell was left in a weak position after the judge sanctioned the company for violating discovery orders, destroying evidence and otherwise obstructing the case. In addition, attorneys for the dealers had gathered evidence similar to the Exxon documents, showing that Shell planned to downsize dealer ranks and replace them with company-operated stations.

However, any chance for other dealers pursuing cases against Shell to see those documents -- and other pertinent case evidence -- has now disappeared, because both parties agreed to seal them as part of the settlement terms. It's unclear how many incriminating documents have been buried in other settlements or remain sealed in active cases, but attorneys around the country know they exist. Several are joining forces or intervening in each other's lawsuits to try to get access to them.

Documents in the Indianapolis case, for example, are now in the possession of Houston attorney Robert Steinberg, who represented the victorious Exxon dealers and has a massive case against Shell pending in Harris County district court. The Indianapolis judge allowed attorneys in the state case to photocopy files and bring them back to Houston, though they remain under a protective order.

Whether or not they will ever be used is in doubt. On December 13, state District Judge Scott Brister granted Shell summary judgment on mostly technical grounds. The heart of the case was a fraud claim -- the dealers said that while Shell was offering rent breaks for increased gas sales in its Variable Rent Program, it was simultaneously taking them back by artificially inflating the price dealers paid for the gas. The increased expense, the dealers claimed, was enough to pump them dry. Brister didn't deny that the "hidden rent component" existed, but he decided it wasn't enough to support the claim.

Though Brister apparently didn't find the Indianapolis documents definitive, he did indirectly acknowledge their existence. In a preliminary ruling, the judge wrote that "Plaintiffs have presented no direct evidence establishing an intent by Shell to drive them out of business." That comment was left out of his final order. Steinberg plans to appeal.

As various other cases continue in the courts, legislators in Ohio, Arizona and California are preparing to introduce dealer protection bills in 2001. Whether outrage over high gas prices and sympathetic new faces in state capitols are enough to move the bills forward remains to be seen.

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