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HOUSTON -- A U.S. Court of Appeals agreed with an earlier jury ruling and sided with Exxon franchisees, who claimed the Irving, Texas-based oil company was using gas pricing as a means of driving its franchisees out of business.
In affirming the verdict for the Exxon franchisees, the appellate said Exxon acted in bad faith by setting its gas prices too high for the franchisees to stay in business. The prices were so high that nearby competitors were selling their gas to the public for less than Exxon was charging its franchisees.
According to the court's opinion, Exxon benefits economically by owning rather than franchising convenience stores. The court noted that Exxon's own documents had outlined secret plans to eliminate gas franchisee stations and turn them into company-owned stations.
"Exxon's bad faith, in this regard, is shown by the record," the Fifth Circuit Court of Appeals said. "Exxon decided years ago that retail marketing through franchise dealers was becoming economically unsound."
A federal judge in May awarded the independent Exxon gas station dealers nearly $10 million from the oil giant after a jury found the former Exxon Corp. breached its contracts by overcharging them for their gasoline supplies. In November 2000, a Texas jury found that Exxon did not set its prices in good faith when it required the independents, known as lessee-dealers, to purchase all their fuel from Exxon at prices set by the company.
"Hopefully this will cause Exxon and other major refining companies to change the way they are treating their franchisees," says George Fleming of Fleming & Associates, which represented more than 50 Houston and Corpus Christi, Exxon franchisees in a suit against former Exxon Corp., which merged with Mobil Oil Corp. in 2000. The suit was filed in February 1999.
The dealers contended their wholesale prices were nearly 9 cents a gallon more than what Exxon-owned stations were selling to motorists at the pump.