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Contingent Contention Conway Oil sues Couche-Tard for breach of contract over sale of c-stores in N.M.
By Greg Lindenberg
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CLOVIS, N.M. -- Conway Oil Co. is suing Alimentation Couche-Tard Inc. for breach of contract and fraud relating to a transaction between the companies four years ago, reported Dow Jones. According to the complaint, Conway Oil's sale of 16 stores in New Mexico to Couche-Tard's Circle K unit in September 2005 included a "contingent amount" provision, which required Circle K to pay Conway additional amounts in each of three 12-month periods after closing during which fuel gross margins exceeded $3,250,000.
Conway Oil sold most of its 24 Winners convenience stores to Couche-Tard, and it sold the remaining few stores shortly after the deal with Circle K. It still has a small propane business in eastern New Mexico.
The company alleged that, "as measured in the manner discussed and agreed upon by the parties," fuel gross profit exceeded the negotiated threshold, triggering a maximum payment of $1.9 million, less $450,000 advanced by Circle K at the time of closing.
"Despite demand on it to pay the contingent amount due, Circle K has failed and refused to do so, thus entitling Conway Oil to judgment against defendants Circle K and Couche-Tard in the amount of $1,450,000, plus interest, attorneys' fees, and costs," the complaint said.
The lawsuit, which also named Circle K and Brian Hannasch, Circle K's senior vice president of U.S. operations, was filed recently in the U.S. District Court for the District of New Mexico. None of the allegations have been proven.
Couche-Tard did not respond to a CSP Daily News request for comment.
Conway Oil also seeks punitive damages, alleging that Circle K reneged on an agreement not to deduct transportation costs in calculating fuel gross profit, according to the complaint.
Spencer Reid of Keleher & McLeod, Conway Oil's lawyer, said the fuel gross profit calculation method is not written in the actual sale contract, but it was carefully explained to Circle K before the deal closed and was "expressly and clearly" stated in e-mail exchanges between the parties, of which Conway has copies.
In the complaint, Conway said Circle K's management of the stores was "sloppy," resulting in diminished employee morale, higher turnover and lower sales. On top of that, Circle K "unreasonably increased its fuel costs" by failing to take advantage of discounts, volume incentives and cheaper alternatives, as well as charging its credit-card expenses against fuel gross profit, the complaint said.
Reid said Conway Oil believes that Circle K employs other categories of expenses that further reduce fuel gross profit reported to Conway, but that Circle K has so far refused to explain them in any detail. He noted that there have been several attempts to resolve the case, including mediation, but Conway ultimately resorted to a lawsuit because Circle K stopped responding to requests for information and efforts to settle.
Jim Conway, president of Conway Oil Co., now based in Clovis, N.M., told CSP Daily News, "We have an incredibly solid case and trust that the courts will quickly rule in our favor. Unfortunately, what appears to be [Couche-Tard's] 'Enron-style' accounting has made settlement discussions frustrating to date."
He added, "All I want is what I was promised when I made the deal. Not a penny more, nor a penny less."
The case is Conway Oil Co. et al v. Circle K Stores Inc. et al.
Laval, Quebec-based Couche-Tard is the top c-store company in Canada with 2,048 stores across 10 provinces and second in the United States with 3,858 in 43 states. The company operates under the Couche-Tard, Mac's, Circle K and On the Run banners and employs more than 52,000 people.
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The lawsuit, which also named Circle K and Brian Hannasch, Circle K's senior vice president of U.S. operations, was filed recently in the U.S. District Court for the District of New Mexico. None of the allegations have been proven.