Dealers Sue to Stop Couche-Tard's Purchase of 322 Mobil Sites

Cite attempts by refiner to circumvent state, federal law over California deal

Published in CSP Daily News

By
Carole Donoghue, Petroleum Editor

LOS ANGELES -- Scores of dealers have filed suit in California to stop the sale of their Mobil stations to convenience store chain Circle K, CSP Daily News has learned. The retailers accuse Exxon Mobil Corp. of trying to circumvent state law and want the courts to issue temporary restraining orders blocking any assignment of their franchises until the refiner agrees to modify its proposed purchase agreements.

In addition, the retailers are asking that ExxonMobil be barred from any "retaliatory conduct" against them because their lawsuit--one of the clauses in the purchase agreements requires that dealers forfeit their deposit money, lose their current lease and the right to buy their stations if they exercise their rights to sue ExxonMobil under the Petroleum Marketing Practices Act or California state law.

ExxonMobil declined comment. "As a matter of policy, ExxonMobil doesn't comment on pending litigation," a spokesperson said.

ExxonMobil signed a deal to sell 322 sites in Southern California to Laval, Quebec-based Alimentation Couche-Tard Inc.'s U.S. subsidiary Circle K in July 2011. The agreement included the sale of approximately 165 dealer-leased properties, as well as several sites operated by open dealer, third-party lessees or ExxonMobil itself. The precise number of retailers who have filed suit is unclear, but it is believed to be near the 100 mark, with separate suits being lodged in multiple courts, according to dealer sources.

The attorney representing the retailers, Tom Bleau, said he could not discuss the litigation because of ongoing talks with ExxonMobil.

Under California law, ExxonMobil is required to give retailers the right of first refusal on their stations before assigning their leases to Circle K. It must be a bona fide offer to sell at a fair market value and at commercially reasonable terms.

The dealers say Exxon is not giving them a fair price for their stations but rather has set "artificially inflated" prices to get around California's first-refusal requirements. The company has also imposed other conditions that are in breach of state law.

Retailers say ExxonMobil's sale and purchase agreements are "totally one-sided" and were presented on a "take-it-or-leave it" basis. "This is about the most one-sided agreement that I've seen in a long time -- it even tries to strip us of our rights to sue under federal and state law," one dealer said.

In particular, retailers are angry about a requirement that they sign waiver agreements that make them responsible for any environmental contamination at their sites, whether existing or still to be discovered. The clause says dealers must pay for any cleanup work that is deemed not to be Circle K's responsibility under a separate side agreement that ExxonMobil is signing with the c-store chain.

Additionally, dealers must promise not to sue ExxonMobil for any lost profits or punitive damages as a result of any fraudulent conduct regarding concealment of contamination.

The terms of the agreements, together with the inflated purchase prices, are designed to make it difficult for dealers to qualify for loans to buy their properties, the retailers say. ExxonMobil wants to force them to assign their first refusal rights to Circle K, which then would be able to buy their stations as Mobil-branded deed-restricted property. The dealers would not be able to rebrand the sites or further develop the premises.

According to a copy of one of the lawsuits obtained by CSP Daily News, ExxonMobil also wants retailers to:

  • Give Exxon the right to terminate any sales agreement if the tanks fail leak tests, rather than repairing the underground system;
  • Allow their franchises to be assigned to Circle K, and sign a 15-year branded supply contract as a covenant to the deed of the site;
  • Commit to a confidentiality clause about the sale and purchase agreement, release ExxonMobil from any possible PMPA claims under their lease agreements and waive all their rights under state law to a jury trial of any claims; as well as
  • Agree that any disputes between ExxonMobil and the dealer will be resolved under the state laws of Virginia law rather than the more liberal laws of California.

Retailers also say that ExxonMobil moved to sell part of their marketing premises without first offering refusal rights to them. They cite a deal the company inked in the fall of 2010 granting a firm called Pacific Coast Fund LLC perpetual easements for all billboard rights for all their stations for the sum of $10 in an effort to circumvent state law. ExxonMobil retained reversion rights to the locations that it can exercise at any time, the lawsuit says.