Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION NEWS: BP constructively terminated ARCO gas stations, complaint asserts, (Sep 2, 2015)

By Greg Hammond, J.D.

Petroleum refiners and franchisors BP West Coast Products, Tesoro Refining & Marketing, and Treasure Franchise Co. violated the Petroleum Marketing Practices Act (PMPA) by constructively terminating a number of ARCO ampm branded motor fuel service station and mini market franchises, a complaint filed in the federal district court of Las Vegas alleges. The franchisors purportedly engaged in a campaign of bad faith and discriminatory conduct that resulted in the constructive terminations (Nevada West Petroleum, LLC v. BP West Coast Products, LLC, September 1, 2015).

Plaintiffs Nevada West Petroleum, LLC, Qaraman Sunset/Decatur, LLC, Wasef Qaraman, LLC, and Qaraman Mesquite, LLC owned and operated ARCO ampm branded motor fuel service stations and mini markets in Nevada, through ampm Mini Market Agreements and Contract Dealer Gasoline Agreements with BP. The relationships began to sour in 2011, when individual defendants Derek Tomita, Michael Glassman, and Jeff Cary—who were employed with BP—induced others to engage in a joint venture for the re-branding of a gasoline station and mini market in Las Vegas to a Petro/Rancho station, less than two miles from Qaraman’s ARCO ampm station. The operator of the Petro/Rancho project, however, allegedly embezzled funds from the company’s accounts, causing “catastrophic damage,” and the plaintiffs’ corporate bank froze many of the plaintiffs’ business accounts.

The complaint additionally alleges that BP promised to reduce the per-term fee to use the Retalix point of sale system from $28,000 to $18,000, if the plaintiffs did not join a class action suit against BP concerning claims that Retalix was defective, resulting in lost operation time, lost revenue, and lost or inaccurate inventory. BP did not honor the agreement, the plaintiffs claim, and instead charged over $43,000 per site, causing various overdrafts and other financial harm to each of the stations. BP then allegedly required pre-payment for fuel in the form of a cashier’s check or it repeatedly debited fuel transfers from an outdated bank account, causing payment difficulty and overdrafts. The plaintiffs claim that the defendants’ conduct severely and irreparably damaged their business operations. The operators additionally argue that the defendants intended to run them out of business, claiming that one BP employee told a Nevada West Petroleum investor to take her money out of an affiliated project because defendants were planning to force plaintiffs to sell all of their stations and to cancel all pending projects. The plaintiffs subsequently sold their stations at whatever price they could obtain, the complaint asserts.

The operators brought a four-count complaint, first alleging that the defendants violated the PMPA by failing to provide a PMPA-compliant notice of termination; by constructively terminating plaintiffs’ franchise agreements; and by acting with the intent of eliminating plaintiffs as franchisees to the benefit of other franchisees. Claims were also brought for breach of contract, breach of implied covenant of good faith and fair dealing, and civil conspiracy. The plaintiffs seek compensatory damages, exemplary and punitive damages, consequential damages, special damages, attorney fees, expert fees, out-of-pocket expenses, and costs.

The case is No. 2:15-cv-01684-APG-PAL.

Attorneys: Jeffrey I. Pitegoff (Morris, Sullivan, Lemkul & Pitegoff) for plaintiffs.

Companies: Nevada West Petroleum, LLC; Qaraman Sunset/Decatur, LLC; Wasef Qaraman, LLC; Qaraman Mesquite, LLC; BP West Coast Products, LLC; Tesoro Refining & Marketing Co., LLC; Treasure Franchise Co., LLC

News: FranchisingDistribution NevadaNews