Southern California Gas Station Franchisees Sue BP

Some 40 station owners claim BP failed to comply with the federal and state rules for terminating a franchise, seek $1 billion in damages and a restraining order to protect them from being forced from their property.

A group of Southern California Arco and Thrifty gas station franchisees are suing BP and Thrifty Oil Co., which are not renewing the station leases, effectively putting the station owners out of business, the Orange County Register reported.  

The more than 40 station owners involved in the suit are seeking $1 billion in damages, claiming BP failed to give proper notice of its intention in July 2010 not to renew its master lease with Thrifty Oil Co. The franchisees are also asking the federal court for a temporary restraining order to protect them from being forced from their property.

More than 200 Arco and Thrifty gas stations in Southern California are scheduled to close in the next two years because BP is not renewing the franchisee leases. BP has advised the station owners they would need to vacate their station properties as their leases expire during the course of the next two years, beginning in April.

Tesoro has signed new lease agreements with Thrifty Oil and plans to take over 240 Arco and Thrifty stations that are losing their leases with BP. Those stations are set to be rebranded as USA Gas. However, the franchisees said they were told Tesoro plans to hire its own employees, which means the current owners and their employees are set to lose their jobs, the Orange County Register reported.

In anticipation of the franchisee lawsuit, BP filed a separate suit last weekend, asking that the federal court find it followed the rules for notifying the franchisees of its decision not to renew the leases and lawfully terminated the franchises. “Although BP doesn’t typically comment on the details of pending litigation, as our filing states, we are not the owner or landlord of these properties,” BP said in a statement. “We are simply a lessee whose lease is expiring and we are taking this step to ensure that the sites are vacated as required by the lease.”

The issue at hand is once BP knew it was not going to renew its Thrifty leases whether or not it complied with the federal and state rules for terminating a franchise.

David Schiller, an attorney for the franchisees, contends BP did not. He asserts the company knew in 2009—and possibly as early as 2001—that it intended to exit the Southern California gasoline market by 2012, but never informed the franchisees, some of whom bought their stations in the last year. The lawsuit further claims franchisees also were never given the master lease with Thrifty Oil, which says they had the right of first refusal to negotiate a lease directly with Thrifty if BP chose not to renew in July 2010 “There was no good faith dealing with BP saying (to the franchisees), ‘You need to make some plans because two years from now you’re not going to have a lease,'” Schiller told the Orange County Register.





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