Retailers Sue East Coast Distributor

Disputes roil Getty marketing operations

Published in CSP Daily News

By
Carole Donoghue, Petroleum Editor

EAST PROVIDENCE, R.I. -- Some 36 retailers have asked a federal judge in Connecticut to stop Russian oil giant Lukoil and companies associated with it from evicting them from their stations. The dealers, who fly the BP or Getty flag, say they want to debrand their sites and seek alternative sources of supply.

Their stations are currently subleased to large East Coast distributor Green Valley Oil LLC, East Providence, R.I., which has frequently failed to deliver fuel to the sites, according to the dealer lawsuit. The retailers want a court order barring Green Valley and Lukoil Americas Corp., East Meadow, N.Y.,  and Cambridge Petroleum Holding Inc., East Meadow, from assigning their leases to other distributors or hindering their search for a new supplier. They are also asking the court to appoint a receiver to collect their rents and protect their security deposits.

"The dealers' business value, as well as their ability to generate profits, has been destroyed by the actions of Green Valley Oil," Michael Fox, the leader of state dealer group Gasoline & Automotive Service Dealer's of America Inc. (GASDA), told CSP Daily News. Green Valley has been charging the retailers 30to 40 cents per gallon over rack prices for gasoline but the dealers are prohibited by contract from buying fuel elsewhere, even when Green Valley fails to deliver, he noted.

The stations are owned by Jericho, N.Y.-based Getty Realty Corp. and were part of a package of 797 outlets that were subleased to Getty Petroleum Marketing Inc., East Meadow, a subsidiary of Lukoil Americas Corp.

In 2010, Getty Petroleum decided to itself lease out 254 of the sites to Green Valley Oil, a deal which made Green Valley Getty Petroleum's largest subtenant.

The ownership situation became more complex when Lukoil Americas sold its interest in Getty Petroleum in February 2011 to Cambridge, a new company set up for the transaction by Norwegian multi-millionaire businessman Bjorn Q. Aaserod.

Ten months later, in December 2011, Getty Petroleum filed for Chapter 11 bankruptcy.

Since then, legal disputes have erupted between Getty Realty, Lukoil, Getty Petroleum, Cambridge and Green Valley Oil over the stations' master lease, with the dealers caught in the middle of it all.

Getty Realty has been looking for other companies to take over the stations and retailers fear that a new landlord would not allow them to stay on as lessees. A U.S. bankruptcy court is expected to decide soon if Getty Realty can transfer the master lease to another company.

"We want the court to grant dealers the right to de-brand and obtain full loads of gasoline in order to meet their rental obligations required under the lease," Fox told CSP Daily News. "It is our hope that the judge will see it is in the best interest of the creditors and the individual station owners to get full loads of gasoline and pay the rent, rather than have more bankruptcies fall into the court's lap."

The dealers allege in their lawsuit that Lukoil and Cambridge "deliberately raided" Getty Petroleum's assets for their own benefit, resulting in the company's insolvency. The two companies operated Getty Petroleum as an "alter ego," causing it to breach its master lease with Getty Realty by not forwarding the dealers' rent money, the dealer lawsuit alleges.

According to documents in another case, Green Valley says it paid about $2 million in rent to Getty Petroleum Marketing last October, but it was never forwarded to Getty Realty. Green Valley says it paid a further $1.99 million in November but Getty Petroleum did not turn over that money either. Getty Realty then announced that it was terminating Getty Petroleum's master lease and would "reposition" the station portfolio to "maximize its long-term value."

Green Valley, in the meantime, said it would not pay more rent to Getty Petroleum until it knew if there was a valid and enforceable master lease. It was then served with a default notice by Getty Petroleum.

BP signed a deal with Green Valley in 2009 to rebrand 235 stations in Connecticut, Rhode Island, New Hampshire and Massachusetts from Lukoil and Getty flags.

Green Valley Oil was incorporated in 2009. The principal behind the firm is Oleg V. Aliferov, formerly chief operating officer of Arfa Enterprises, a large Pennsauken, N.J., distributor. Arfa was established in 1985 by Russian emigre Semyon Logovinsky, who became wholesale vice president for Lukoil and Getty Petroleum in 2001. In 2007, an Arfa subsidiary, Bronson Holdings LLC, also acquired 52 Shell stations in the Philadelphia and southern New Jersey.

According to its Facebook site, Green Valley operates around 300 stations in New England. The company did not return calls for comment by press time.