BP Prevails Over Two Chicago-Area Franchisees

But judge chastises oil company for how it dealt with potential station buyers

Published in CSP Daily News

CHICAGO -- BP Products North America Inc. emerged victorious but not unscathed in a protracted lawsuit involving two of its Chicago-area franchisees that alleged that the oil company had defrauded them, reported the ChicagoTribune.

Cook County Circuit Judge Sanjay Tailor ruled Wednesday that the franchisees, RWJ Management Co. and Joliet Petroleum LLC, failed to prove all of the elements of their fraud claims, which were brought in 2009.

"We are pleased with the court's decision, which supports our view that this was nothing more than a commercial dispute between sophisticated businesspeople," BP said in a statement.

But Tailor did not completely absolve BP, said the report. In a 46-page opinion, the judge found that the company intended to deceive the plaintiffs when it concealed the profit margins on fuel at the suburban stations it sold to the franchisees in 2006.

BP was losing money on its company-owned stations and began the process of selling them in late 2005, court papers cited by the newspaper said. When potential buyers asked about the fuel margins, BP and its real-estate broker told them to look at industry average margins. But the company hid the fact that its margins at the stations for sale were significantly lower than the industry average, the ruling said.

"BP's decision to sell stores where it employed a pricing tactic to dramatically increase its fuel volumes at the expense of margin is strong evidence of BP's fraudulent intent," Tailor wrote.

Tailor, though, said the plaintiffs did not establish that they relied on BP's concealment in deciding to buy a total of seven stations in separate sales. Tailor said both buyers have a lot of experience in the retail gasoline industry. Bob Juckniess of Oak Brook-based RWJ Management used to be a Shell franchisee in Indiana and Ohio. Nrupesh Desai, Joliet Petroleum's principal, also operates a number of other CITGO and Clark stations, according to court papers.

Moreover, Juckniess and Desai purchased more stores from BP after 2006 in separate transactions, Tailor wrote. RWJ Management and Joliet Petroleum each bought five more stations in 2007 and 2008, spending more than $42 million, according to court papers.

"We're very disappointed with the decision," said Carmen Caruso, RWJ Management's attorney. "We have to read the opinion and decide our next step."

RWJ Management is operating under Chapter 11 bankruptcy protection, said the report.

Panna Patel, Joliet Petroleum's attorney, also expressed disappointment with the court's decision and said she is reviewing the opinion with her client, the report added.

London-based BP, with U.S. headquarters in La Palma, Calif. (West), and Warrenville, Ill. (East), markets more than 15 billion gallons of gasoline every year to U.S. consumers through more than 11,000 BP- and ARCO-branded retail outlets and supplies more than four billion gallons of fuel annually to fleets, industrial users, auto and truck manufacturers, railroads and utilities. More than 1,300 ARCO-branded sites currently operate in five western states: California, Nevada, Oregon, Washington and Arizona.

BP is the single, global brand formed by the combination of the former British Petroleum, Amoco, Atlantic Richfield (ARCO) and Burmah Castrol. BP is a global producer, manufacturer and marketer of oil, gas, chemicals and renewable energy sources.

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