Exxon Asks Federal Court to Dismiss Maryland Operators' Suit

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Exxon Asks Federal Court to Dismiss Maryland Operators' Suit

IRVING, Texas -- An attorney for ExxonMobil Corp. argued in federal court this week for the dismissal of a lawsuit filed by dozens of Maryland gas station operators who have sued the oil giant for making moves to sell their stations in a way the operators say could violate federal and state laws, and possibly force them out of their own businesses, according to a report by the Baltimore Sun.

The dispute between the operators and ExxonMobil was sparked by a decision the company made in June 2008 to sell off gas stations it still owned and leased to the small-business owners who ran them essentially under a franchise system. ExxonMobil wanted to exit the direct-retail gasoline market because of its hyper-competitiveness and low profit margins, and it has sought to sell its holdings to other smaller companies, such as distributors, which would continue to sell gasoline under its brand name, the report stated.

The station operators claim ExxonMobil should give them the first chance to buy the stations they lease and operate from the oil refiner, under a federal law known as the Petroleum Marketing Practices Act. But ExxonMobil's attorney, Mark Lillie, argued that ExxonMobil hasn't yet moved to sell the properties of the 55 dealers who filed the lawsuit, so the lawsuit and a temporary restraining order weren't necessary.

"The essence of the case is they're concerned something might happen in the future, but hasn't happened yet," Lillie told Judge Alexander Williams Jr.

Harry C. Storm, who represents the 55 station operators, said in court that ExxonMobil's contractual language with its station operators went "way too far," forcing them to give up basic rights as gasoline dealers that were enshrined in federal and state law. "The dealers have seen this coming," Storm argued to the judge.

Dozens of ExxonMobil gas station operators sat in the courtroom during the hearing at the District Court House Monday afternoon, the newspaper reported.

After ExxonMobil announced its intention last year to begin selling off its gas station assets in several states, the Maryland station operators formed Local Dealers United LLC to protect their interests. At the time of the announcement of its plan to sell the stations in coming years, ExxonMobil had about 12,000 branded stations in the United States, but owned only about 2,200 of them, according to published reports.

Of those 2,200, about 1,400 were operated by dealers and the remaining 800 were owned and operated by ExxonMobil. In Maryland, about 170 gas stations were run by station operators who had leased the businesses from ExxonMobil, according to Steve Merrill, who has operated an Exxon gas station in Towson, Md. for the past 17 years and helped form Local Dealers United. Last month, 55 of those station operators filed the lawsuit for injunctive relief. The suit includes gas station dealers who operate in the Baltimore and Frederick areas, and the Washington suburbs in Maryland, according to the report.

Judge Williams told both sides he would reflect on the attorneys' arguments and give his decision in about a week on whether or not to dismiss the lawsuit. He's also expected to decide whether to issue a temporary restraining order that blocks ExxonMobil from selling any more stations in Maryland while the lawsuit winds its way through court.

Merrill said he and his fellow gas station operators are worried ExxonMobil will sell the stations they lease to local fuel distributors, forcing the operators into relationships with potential competitors that, in Maryland, may also operate their own gasoline stations. Merrill said such arrangements would ultimately lead to higher gas prices for consumers.

"When we purchased these franchises, we purchased them to be in partnership with one of the largest companies in the world. We did not consent to being partners with a small local company that's our direct competitor," Merrill said, noting the group has tried to communicate and negotiate with ExxonMobil on the possible sale of the Maryland stations to the dealer-operators, but the company has refused to talk to them.

A similar dispute related to ExxonMobil and its gas station operators cropped up in New Jersey. In that state, legislators passed a law this year granting operators the "right of first refusal" whenever a retail gas station property was about to be sold, the report stated.