Station Owners Court Supremes

Gas station dispute involving Shell, Motiva may draw high court scrutiny Dec. 02, 2008

WASHINGTON -- The U.S. Supreme Court signaled interest in a case that would affect how much leverage oil companies have to change their leases with tens of thousands of independent gas station owners, said Bloomberg. The judges on Monday asked the Justice Department for advice on a bid by Massachusetts station owners to sue Shell Oil Co. and Motiva Enterprises LLC. A group of station owners say Shell and Motiva used rent increases to try to end their franchise arrangements so the companies could take over operation of the stations.

The case, should the high court agree to [image-nocss] hear it, would shape the rights of the 75,000 independent U.S. station owners. "This court's decision will be felt immediately by franchisors and franchisees across the country," eight companies argued in court papers urging the Supreme Court to intervene.

The case centers on the U.S. Petroleum Marketing Practices Act, a 1978 law that gave independent station owners more power in their dealings with oil companies. The station owners are suing under provisions in the law barring improper lease terminations.

Shell and Motiva contend the station owners can't invoke those provisions because they accepted new lease terms and continued to operate their franchises.

Houston-based Motiva is a refining and marketing joint venture owned by Shell and Saudi Refining Inc. Shell, a unit of Royal Dutch Shell Plc, transferred its franchising rights to Motiva when the venture was created in 1998.

The case before the high court concerns eight of more than 50 Massachusetts station owners pressing lawsuits. The station owners object to Motiva's decision to phase out a rent subsidy that had been tied to gasoline sales and to begin calculating rent based on the value of the station's real estate.

A jury awarded the group $3.3 million, most for violations of the federal petroleum-marketing law.
A Boston-based federal appeals court upheld part of the award. The panel said the station owners could press claims for "constructive termination" even though they continued to operate their franchise. The court reached the opposite conclusion on the owners' allegations of "constructive non-renewal," saying they forfeited those claims by signing new leases.

Both sides then appealed to the Supreme Court. Shell and Motiva told the justices that "the impact on refiners and franchisees alike is difficult to overstate."

The cases are Mac's Shell Service v. Shell Oil Products, 08- 240, and Shell Oil Products v. Mac's Shell Service, 08-372. (Click here to view the court documents.)

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