Arco, Thrifty Station Owners File Suit in Lease Renewal Flap

ORANGE COUNTY, Calif. -- A group of more than 40 Arco and Thrifty gas station owners have filed suit in federal court in an effort to put the brakes on plans by BP and Thrifty Oil Co. to not renew their leases. The owners are seeking $1 billion in damages.

As CSNews Online reported earlier this week, BP acquired the Arco brand 12 years ago and today, there are roughly 920 Arco-branded stations in southern California operated by independent dealers and franchisees. Of that count, approximately 130 were leased from Thrifty Oil Co. and those leases are set to expire over the next two years. As they do, those stations will revert back to Thrifty Oil. The remaining 790 Arco-branded locations are not affected.

Thrifty Oil has a contract with Texas refiner Tesoro Corp. to operate the 130 sites under Tesoro's USA Gasoline brand.

However, the group filing suit contends that BP failed to give proper notice of its intention not to renew the master lease with Thrifty Oil as of July 2012, according to The Orange County Register. BP subsequently told the owners that since the company opted not to renew its deal with Thrifty, they would have to vacate their station property as their leases expire beginning in April.

In the suit, the franchisees have asked the federal court for a temporary restraining order to stop them from losing their businesses. BP, anticipating the franchisee lawsuit, filed a separate suit last weekend. In BP's suit, the oil company is asking the federal court to find that the company followed the rules for notifying the franchisees of its decision not to renew the leases and lawfully terminated the franchises, the news outlet reported.

"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," the company said in a released 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."

Thrifty Oil did not respond to the newspaper's a request for comment.

According to the newspaper's report, the central issue is when BP knew it was not going to renew its Thrifty leases and whether it complied with the federal and state rules for terminating a franchise. David A. Schiller, an attorney for the franchisees, contends BP knew in 2009 and possibly as early as 2001 that it would exit the southern California gas market by 2012, but never told the franchisees, some of whom bought their stations in the last year.

Schiller added that the franchisees also were never given the master lease with Thrifty Oil, which said they had the right of first refusal to negotiate a lease directly with Thrifty if BP chose not to renew in July 2012.