Getty Serves Eviction Notices

Tries to cut off dealers' supply source

Published in CSP Daily News

By
Carole Donoghue, Petroleum Editor

JERICHO, N.Y. -- Getty Realty Corp. continues to try to regain possession of several of its Connecticut stations. The company has now served eviction notices on dealers occupying the sites and is moving to choke off the independent fuel supply they have been buying from local jobbers, CSP Daily News has learned.

Meanwhile, the retailers continue to enlist the aid of more members of Congress. Dealers met on Monday with U.S. Representative Jim Himes (D-Conn.), who has suggested that he might be able to act as a mediator to find a resolution to the impasse, sources said.

The dealers are fighting for the right to remain at stations they have been subleasing from Getty Petroleum Marketing Inc. (GPMI), the now-bankrupt tenant of Getty Realty. GPMI had in turn sub-subleased the sites to Green Valley Oil (GVO), a Providence, R.I.-based BP jobber that stopped delivering full loads of fuel to the outlets in January, blaming gasoline price increases from its supplier for its problems.

Following GPMI's Chapter 11 filing, Getty Realty signed new subleases for the Connecticut sites with Chestnut Petroleum Distributors Inc. a New Paltz, N.Y.-based jobber. Chestnut wants to convert the retailers into commission dealers, which would give Chestnut control of the dealers' pump prices. Currently, the dealers are franchisees under the federal Petroleum Marketing Practices Act. As commission dealers they would have no legal protections under the law.

The retailers want to sign agreements directly with Getty Realty, buying their own product and paying their own credit card processing fees, but Getty has refused to enter leases with them.

They had been buying fuel from A.F. Forbes, a small East Haven, Conn., jobber. After legal threats from Getty Realty, Forbes said it would not continue delivering to the stations unless the dealers provided a $10 million bond, which they cannot afford.

The dealers have now secured a second source of supply under an agreement with Tuxis-Ohr's Fuel Inc., a Meriden, Conn.,-based company. Getty Realty issued a legal threat within hours of Tuxis's first delivery to dealer station, enclosing pictures taken by Chestnut of the Tuxis tanker.

Any product deliveries Tuxis makes to the Getty stations "are in derogation of Getty's property rights and interests," said the letter from a Getty lawyer, a copy of which was obtained by CSP Daily News. Getty owns the tanks, piping and dispensing equipment at the sites and has directed that the dealers obtain fuel exclusively from Chestnut. Tuxis could be liable for damages for lost profits and attorneys' fees.

"It's amazing to me that Getty Realty, a publicly traded company, continues to exhaust shareholder dollars in an effort to circumvent the law, using threats and intimidatory tactics against dealers and companies that want to supply them," Michael Fox, executive director of Gasoline & Automotive Service Dealer's of America Inc. (GASDA), told CSP Daily News.

Retailers have seen less success in their fight to get back an estimated $1.427 million they paid in security deposits to Green Valley Oil, however. In court filings, GVO said it is not required by law to return the retailers' funds until at least May 30, and then has the right to deduct from the money other charges and fees it says the dealers owe.

Green Valley Oil leased a total of 254 stations from GPMI in April 2009. When GPMI filed for bankruptcy in December 2011, GVO tried to negotiate a direct leasing deal with Getty Realty, according to an affidavit filed by Oleg Aliferov, the manager member of the limited liability company. But, unknown to GVO, Getty was "simultaneously negotiating" with other wholesalers to take over and supply the sites, he said. In doing so, Getty was allowing those jobbers "to benefit by the millions of dollars in signage and other improvements to the 254 stations that GVO had been leasing from GPMI."

Then, late in first-quarter 2012, GVO's wholesale price of gasoline "increased from $2.90 to $3.60 per gallon," so reducing the amount of fuel it could buy under its credit terms from its suppliers, which meant GVO couldn't deliver the same amount of fuel it had sold to the dealers before. In his affidavit, Aliferov blames the complexity and cost of the GPMI bankruptcy and the "negative publicity" surrounding GPMI for the price hike. Getty Realty then terminated GVO's subleases on the sites.

GVO intends to provide a written account to each dealer on or before May 30 setting down the amount of security deposit and interest that they are owed; however, those amounts will be offset by the value of the equipment and improvements GVO made at their stations. Aliferov maintains that GVO's equipment and installation cost per station was approximately $40,000. He said GVO is also owed for utilities, taxes, credit-card chargebacks and bank service fees.

Eviction proceedings usually take place in state courts, where the individual tenant has a right to mount a defense. Getty Realty initially tried to circumvent the state court process, asking a federal bankruptcy court to send in U.S. Marshals to arrest the retailers if necessary. U.S. Senator Richard Blumenthal (D-Conn.) intervened after dealers claimed that the company was trying to use the marshals as its "private policemen." When Blumenthal questioned the company's actions, Getty withdrew its request and turned to the state courts instead.

The company will now have to engage in legal proceedings against each of the dealers involved, a process that could take a year or more. Getty's tribulations may be worsened by the fact that some eviction notices list the wrong landlord for the sites, according to copies of the notices obtained by CSP Daily News. Getty will now have to restart the process at those sites, sources said.

 Chestnut Petroleum Distributors has also encountered a small bump in the road. The company does not have state licenses allowing it to retail fuel at some stations, and will have to apply for them, dealer sources said.

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