Hunting for the Smoking Gun

An Alabama lawyer with St. Louis ties takes on big oil

Jim Gunther wasn't easily convinced to take on the big oil companies. The Alabama attorney is as comfortable with defense work as he is representing plaintiffs, and his firm counts insurance companies and the state of Alabama among its clients. But a couple of years ago a group of BP dealers showed Gunther that they could consistently fill up their cars at a nearby company-operated station for less per gallon than they had to pay BP wholesale. "Until I saw that," Gunther says, "I refused to get involved in these cases."

He's involved now. Gunther, who has family in St. Louis, filed price-manipulation cases against Shell and Amoco on behalf of dealers in the city, including Dan Self. "This is probably the best story in the country, what the companies have done to these St. Louis guys," he says.

It's not easy to sue a major oil company, no matter how obvious the transgression. With a seemingly unlimited legal budget, a Shell or an Exxon can throw banks of lawyers and other resources at a case that the cash-strapped dealers can't possibly afford to match. Even when the dealers' attorney works on contingency, the company can delay and obfuscate for years with relative impunity. In two Exxon cases reviewed by New Times, the list of motions alone ran more than 100 pages.

Invariably the companies request that documents and testimony produced in a dealer case be sealed, claiming that the release of proprietary information could damage their business. In the event the cases settle before trial, the seal becomes permanent. Such was the case in Gunther's BP case, which he settled for an undisclosed sum. "I've got smoking-gun kind of evidence," he says, "but they put that ["confidential'] stamp on everything."

Such smoking guns rarely escape the files, but more are emerging, including a damaging deposition by a former Shell marketing executive in a Florida case. The testimony indicates that although the dealers thought they were getting a break on rent if they sold more gallons under Shell's Variable Rent Program, the company was making it back by charging them more for gas. The hidden rent component in their wholesale gas price has been the basis for one of many fraud charges against Shell.

That deposition has now made its way to other states. A judge in an Indiana case became so incensed at Shell's consistent refusal to obey the rules and produce documents as ordered that he allowed a legal team from Texas to travel to Indianapolis and copy whatever it wanted from the case file (though the material is still officially sealed).

Lawyers for the dealers generally have taken the shotgun approach, tossing as many charges as possible into every suit and seeing whether anything sticks. Results to date have been decidedly mixed. Some of the Shell suits seem to be gaining momentum, and the dealers have won a few scattered victories, but a recent verdict in a California Chevron case may have a chilling effect on future litigation. A group of 22 dealers there won $3.4 million from Chevron in 1995 -- 13 years after they filed the case -- after a jury found that the company illegally manipulated prices to pressure the dealers financially. But a three-panel court overturned the verdict, and a judge recently awarded Chevron its attorney's fees, which total $6.8 million. Most of the dealers, who spent most of their money during the 18-year battle, will have to declare bankruptcy.

Another other remedy for dealers can be found in Congress. The federal Petroleum Marketing Practices Act has proved weak enough for the companies to dodge, but recent gas-price spikes have the Federal Trade Commission, as well as several U.S. senators and state governors, conducting an investigation. As the oil companies like to point out, however, those investigations usually die on the vine. Millions in campaign contributions and hordes of lobbyists flooding legislative hallways probably help, as Chevron spokesman Jack Coffey hinted recently. The money is spent, Coffey said, "to be sure our business opportunities can continue in the way we want them to continue."

The state level seems to provide more opportunities for dealers. Six states and Washington, D.C., have enacted divorcement laws, which generally prohibit refiners from running their own retail outlets. The Missouri House of Representatives passed a divorcement bill in 1988 by a 2-1 margin. According to Lee Lauer, who directed the Missouri-Kansas dealer organization that led the divorcement fight, heavy industry lobbying killed it in the state Senate. The organization tried it again the next year, but the bill stalled in committee. "It broke the spirit of the dealers," Lauer says. Though Missouri passed a watered-down bill in 1991 that barred below-cost pricing, it hasn't stopped the decline.

Dealers recognize the odds, and most say that all they really want is to be bought out at a fair price or compensated for their years of service. But unless they're brought to their knees in court, the companies aren't likely to give that up voluntarily. As a Shell motion in a Texas case clearly states, "Shell does not owe a duty of good faith and fair dealing to plaintiffs."

 
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