Two independent gas-station dealers are taking Shell Guam Inc. to court alleging the petroleum company is trying to put them out of business by terminating franchise agreements. One dealer claims Shell Guam instituted unfair competitive tactics and only supported corporate or agent-run service stations.
Shell Guam in court documents states it has the right to terminate the contracts and is competing fairly and in line with federal law. Both cases have waited years for trial dates.
Anthony J. “Tony” Ada who operates the Shell Mangilao and Shell Barrigada service stations filed his case in the Superior Court of Guam six years ago but Shell Guam Inc. has since moved the case to the District Court of Guam. Ada and Richard A. Pipes the attorney representing Ada have been in depositions since July 5. The case goes to trial Nov. 7.
RCS Enterprises Inc. and its owners Renato C. Silvestre and Stephanie L. Silvestre will face Shell in court after six years of legal manueuvers in the Superior Court of Guam.
RCS and the Silvestres also represented by Pipes are suing Shell alleging the gas company is trying to muscle them out of operating a Shell service station. RCS and the Silvestres are also suing Mariana Acquisition Corp. – a Commonwealth of the Northern Mariana Islands corporation doing business on Guam. According to court documents MAC is a corporation that works with Shell Guam to obtain properties in relation to Shell Guam’s business operations. The case goes before Judge Michael J. Bordallo of the Superior Court of Guam on Aug. 4.
Ada is alleging unlawful termination of a petroleum franchise damages exemplary damages fraudulent inducement intentional misrepresentation breach of duty of good faith and fair dealing and violation of deceptive trade practices an outbound in the Consumer Protection Act.
At the center of Ada’s lawsuit is his claim that Shell Guam Inc. is violating the Petroleum Marketing Practices Act by terminating a franchise agreement that allows him to operate both locations. The PMPA is intended to protect franchised distributors and retailers of gasoline and diesel motor fuel against arbitrary or discriminatory termination or nonrenewal of franchises. Ada’s complaint alleges that the PMPA and the franchise agreements protects him from Shell terminating his contract “Shell Guam made false representations or failed to disclose material facts to Ada relating to Shell Guam’s belief that Ada had no rights under the PMPA even though the franchise agreements authored by Shell Guam specifically indicate that Ada is entitled to such rights information which had it been disclosed would have resulted in Ada not entering into the franchise agreements with Shell Guam.”
Shell Guam Inc. rebuts Ada’s claim “The Petroleum Marketing Practices Act does not apply to the agency agreements and the amendment of agency.” Shell Guam Inc. also alleges that Ada agreed with the terms and conditions the corporation set forth “At all times in his dealings with Shell Ada knew and intended that he would be an “agent” for Shell and not a “franchisee” as defined by the PMPA.” Despite rebutting the claim Shell Guam also stated in the same counterclaim document “If the PMPA does apply to the agency agreements and the amendment to agency Shell’s termination and nonrenewal of the agreements complied with the PMPA.”
On May 4 2000 Ada filed a motion calling for a temporary restraining order and preliminary injunction against Shell Guam in the Superior Court of Guam. Bordallo said “The franchise agreements conspicuously stated that the Petroleum Marketing Products Act (“PMPA”) applied to the relationship.” Bordallo wrote “The PMPA requires that prior to termination of any franchise or nonrenewal of any franchise relationship the franchisor is required to notify the franchisee not less than 90 days prior to date on which the termination or nonrenewal takes effect.” Bordallo also stated that the notification should include “a statement of intention to terminate the franchise or not to renew the franchise relationship together with the reasons therefor; the date on which such termination or nonrenewal takes effect”. The judge also wrote “No reason for termination was given other than Shell is exercising its option not to renew the agreement.” Bordallo ordered the injunction “Defendant Shell its agents servants and employees and all those in active concert or participation with them shall be and hereby are enjoined from terminating the agency sales agreements between the parties and related agreements with Ada in the operation of the Shell Barrigada Service Station Barrigada Guam and the Shell Mangilao Service Station Mangilao Guam and Shell shall maintain the relationships under such agreements until further order of this court”.
Shell Guam Inc.’s later counterclaim filed in District Court said the corporation is prevented from fulfilling contractual agreements because Ada refuses to stop operating the Shell Mangilao and Barrigada service stations: “At the time Ada refused to surrender possession of the Mangilao and Barrigada Stations to Shell Ada knew that in July 1999 Shell entered into an agency agreement with Delta a new agent to take over the management and operation of the Barrigada and Mangilao Stations on March 1 2000.”
The Silvestres through RCS are independent dealers managing the Shell Harmon service station.
According to a complaint filed in Superior Court the Silvestres said that the Shell Fleet Charge Account Program was supposed to bring more business to Shell service stations “However from the outset Shell administered the Fleet Program in a discriminatory manner and with the intent to harm dealers and force them out of business. Dealers including RCS were paid a commission at the rate of $0.085 per gallon of gasoline sold to Fleet Program customers while “agent” stations were paid $0.21 per gallon. After several years of complaints from dealers Shell eventually increased the commission paid to dealers.”
RCS and the Silvestres also allege while Shell increased commissions the corporation increased wholesale fuel costs to dealers such as RCS Court documents state “Shell has used and continues to use the Fleet Program as a means to decrease sales at the Shell Harmon Service Station to damage RCS and to force RCS out of business.” The Silvestre’s first amended complaint continued “As an example and not by way of limitation on or about March 31 1999 Shell offered regular gasoline for sale to its Fleet Program customers for $0.964 per gallon but charged RCS $1.380 per gallon for the same fuel. Such discriminatory and predatory pricing on the part of Shell has continued to the present and has substantially damaged RCS in amounts to be proved at trial.”
RCS and the Silvestres also claim Shell sold fuel directly to customers that were not part of the fleet charge account program at lower prices than to RCS. According to RCS “on or about October 12 1998 Shell sold diesel fuel to Core-Tech International for $1.041 per gallon while at the same time Shell charged its own dealer RCS $1.50 per gallon inclusive of the liquid fuel tax for the same diesel fuel.”
In court documents RCS said it received unfavorable wholesale fuel costs when compared to Shell agent stations. “As an example and not by way of limitation in late 1998 Shell “agent” stations offered diesel fuel for sale to the public at $1.539 per gallon. However at the same time RCS’ cost for diesel fuel from Shell including Guam gross receipts and liquid fuel tax which RCS must pay was $1.529 per gallon.” Documents stated RCS would lose on every sale if it charged the same for diesel fuel as a Shell agent station.
RCS alleges in its complaint that Shell directly approached RCS commercial charge account customers and offered the companies discounts under the fleet charge account program.
RCS and the Silvestres are also suing Mariana Acquisition Corp. At issue is a lease. Court documents state “The lease provides for an initial term of ten years commencing on March 1 1988 and expiring on Feb. 28 1998. The lease allowed MAC four options to extend the lease for an additional five years each provided that MAC give written notice to lessor at any time prior to the end of the then existing term or in a reasonable period of time thereafter.” According to the documents the Silvestres gave written notice to MAC and Shell that the holdover tenancy of MAC under the lease was terminated on July 1 1999. “MAC and Shell contend that MAC allegedly exercised its option to extend the lease for an additional term even though it has no legal right to make such a claim.”
RCS alleges the franchise agreement it held with Shell was unlawfully terminated. “RCS is informed and therefore believes and on that basis alleges that defendants’ attempted unlawful termination of RCS’s franchise as described above was wilful in that the grounds given for termination are a mere pretext and part of a plan by the defendants to obtain the premises occupied by RCS for their own use and benefit.”
Steven A. Zamsky is Shell Guam’s attorney. Shell Guam states that agent-run service stations compete directly with Shell dealer-run service stations. Shell Guam’s answer to the complaint also denies the majority of allegations. According to documents filed by Shell Guam the corporation terminated the franchise relationship lawfully. Shell Guam also alleges that RCS and the Silvestres waived any requirement of written notice that it intended to extend the lease and that the plaintiff’s claims are barred because they have passed the statute of limitations. Shell Guam also asserts that information related to its practices are protected “All conduct alleged to have been undertaken by Defendant Shell Guam Inc. is privileged.” Shell Guam also states “If Defendant Shell Guam Inc. competed with Plaintiff RCS Enterprises Inc. such competition was fair competition.” MBJ
