Dealers Seek Help, May Resurrect Divorcement

Getty asks bankruptcy court to evict retailers, then withdraws request

Carole Donoghue, Petroleum Editor

JERICHO, N.Y. -- In an abrupt about-face, Getty Realty Corp. has backed down from a bid to use a U.S. bankruptcy court to evict dealers occupying 63 stations it owns in Connecticut and New York, CSP Daily News has learned.

Getty Realty officials could not be reached for comment Saturday, but sources said the company withdrew its court motion six hours after U.S. Senator Richard Blumenthal (D-Conn.) raised questions about it actions.

It was not clear at press time whether Getty Realty would renew its bid, which some attorneys say had a "weak" legal foundation.

Getty Realty's request for an eviction order was in itself controversial. It asked the bankruptcy court in Manhattan to declare that it could take "all necessary steps" to evict the dealers, including "breaking open and entering" the stations and using the U.S. Marshals Service to arrest the retailers. The request was filed late on a Saturday night and dealers were given no advance notice of the move.

Getty Realty's motion would also have allowed it to seize stations in New York, where dealers say they have spent more than $1.6 million of their own pockets to install improvements, including convenience stores, canopies, pumps, tanks and EPOS equipment.

The company's eviction maneuver raised eyebrows on both sides of the legal divide.

Getty Realty is not in bankruptcy. Rather, it is the company's former tenant at the stations, Getty Petroleum Marketing Inc. (GPMI), which is in Chapter 11 reorganization. Getty Realty itself is only a GPMI creditor in the case, while the dealers themselves have never been party to the bankruptcy action.

Under usual legal procedures, Getty Realty would file separate eviction cases against each dealer in a state court, with every retailer having the right to mount a defense, legal sources say.

"I could see the court issuing an order holding GPMI in contempt for not surrendering the stations free of tenancy, but I don't understand how the dealers can be subject to the bankruptcy court or how the judge in that case would even have jurisdiction," admitted one jobber attorney. "But if it works, it would be a silver bullet for Getty."

In emergency filings, dealer lawyers asked the bankruptcy court not to give in to Getty Realty's demands. When GPMI gave up its leases on the stations, the court specifically stated that it was allowing the return of the sites to Getty Realty "without prejudice to any rights" the dealers had, the filings said.

The dealers have honored their obligations to Getty Realty by paying their rents and should be allowed to assert their rights to remain on the properties in the appropriate legal forum, which is not a bankruptcy court, Matthew K. Beatman, a lawyer representing the Connecticut dealers, told the court.

"They did nothing to warrant being dispossessed of their businesses, their life savings and rendered destitute," he said in a court motion. They are being hauled into court solely because two big companies--Getty Realty and GPMI--cannot amicably resolve a business dispute between themselves.

The Connecticut dealers appealed to Blumenthal after Getty Realty filed the eviction motion. Blumenthal contacted the trustee in the GPMI bankruptcy case, asking for more information, said CSP Daily News sources close to his office. The retailers also sent a message to the U.S. Department of Justice, complaining that Getty Realty was trying to use the U.S. Marshals Service as its private "policeman" to evict scores of dealers in one fell swoop, rather than follow normal court procedures.

"The use of these significant federal resources, marshals, at scores of locations, is an unprecedented, unwarranted and inappropriate move that is supported by neither the facts nor the law," said the message, sent by one dealer attorney. The retailers are being threatened not only with immediate loss of their property, their rights and business, "but their dignity and potentially, their freedom," he said.

"In my view, there is business and there is litigation and there is abuse. This is abuse," said John Morgan, another lawyer representing the Connecticut dealers.

Getty Realty signed new lease agreements with several different fuel marketers for most of the New England stations GPMI had been leasing after GPMI relinquished the sites on April 30.

The Connecticut outlets have been leased to Chestnut Petroleum Distributors Inc., a New Paltz, N.Y., jobber that operates mostly through commission dealers. The Connecticut dealers are currently franchisees under the Petroleum Marketing Practices Act and do not want to be forced to become licensees, which would force them to surrender pricing control of their pumps to Chestnut.

Whatever the final outcome of the legal battle, wholesalers in Connecticut are likely to feel repercussions. Dealer representatives say there could be a renewed push for jobber divorcement in the state because of the way Getty Realty and Chestnut are treating retailers.

"In the past, we have been able to work with distributors in Connecticut to avoid the need for a jobber divorcement law, but we may need to revisit the issue if this eviction goes ahead," Michael Fox, executive director of the Gasoline & Automotive Service Dealer's of America Inc. (GASDA), told CSP Daily News.

Images of mom-and-pop dealers being led from their stations in handcuffs are unlikely to polish the public image of Chestnut Petroleum, Getty Realty or jobbers as a whole, he added.

Meanwhile, Getty Realty also has issued legal threats against a small jobber supplying the dealers with unbranded fuel. In a letter to Forbes Premium Fuel, Getty realty warned that the East Haven, Conn.-based wholesaler will be subject to legal action if it does not stop delivering to the sites.

A representative of Chestnut photographed a Forbes truck delivering to Connecticut stations last week, according to a Getty Realty letter to the company. Forbes is "flagrantly and willfully" violating the rights of Getty Realty and Chestnut by delivering fuel into Getty Realty-owned tanks, the letter said.

Getty Realty went on to cite a CSP Daily News story (see Related Content below) that reported that Forbes was delivering approximately 42,000 gallons a day to the stations. Jerry Roberts, an official with Forbes, confirmed that he was also rebating 0.25 cents per gallon of the dealers' fuel payments to GASDA to help the dealers defend themselves.

Forbes had been given court permission to supply the dealers with fuel after Green Valley Oil, a subtenant of GPMI and the dealers' previous supplier, stopped delivering product to more than 200 stations in New England, including the Connecticut sites. The Forbes supply agreement was supposed to end when GPMI and Green Valley surrendered their leases on the outlets, sources say.

Click here for previous CSP Daily News coverage of the far-reaching news story that involves Getty Realty, GPMI, BP, Green Valley, Chestnut and other players.