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    Valero Sued

    Kirby Oil alleges its Diamond Shamrock subsidiary breached the companies' distribution contract.

    TYLER, Texas -- Kirby Oil Co., operator of 15 convenience stores in Texas, filed a breach-of-contract lawsuit against its former petroleum supplier after it was forced to close three stores last month.

    Kirby filed suit in late August against Diamond Shamrock Refining and Marketing Co. Documents filed at the U.S. Courthouse in Tyler state the reason for the suit is Diamond Shamrock's "wrongful, unlawful and hasty termination of the distributorship contract by and between Diamond [Shamrock] and Kirby," according to documents obtained by the Tyler Morning Telegraph.

    The lawsuit further alleges Diamond Shamrock violated the Petroleum Marketing Practices Act and breached its agreement with Kirby.

    Documents state Kirby has had a distribution and retail fuel relationship with Diamond Shamrock for about 41 years. Prior to termination, a three-year distribution marketing agreement was signed by both parties on April 1, 2001, the suit states. Under the agreement, Diamond Shamrock agreed to sell motor fuel products to Kirby and permitted Kirby to utilize Diamond Shamrock's logos in connection with the sale and marketing of the fuel products. In return, Kirby agreed to purchase certain quantities of fuel from Diamond Shamrock, the report said.

    The suit claims during the agreement, Diamond Shamrock "unilaterally and significantly modified the credit terms available to Kirby and also refused to deliver fuel to Kirby. Such actions by Diamond [Shamrock] materially breached the terms of the agreement."

    The suit further claims Diamond Shamrock terminated the agreement in early August of this year and "subsequently provided written notice of termination to Kirby on August 20." Kirby is asking for actual damages resulting from termination of the agreement and franchise relationship; exemplary damages for actions Kirby claims Diamond Shamrock did "knowingly and intentionally" and "with conscious indifference to the rights and welfare of Kirby"; as well as court costs and attorney fees.

    The letter to Kirby from Diamond Shamrock terminating the agreement states the return of a bank draft for insufficient funds caused the company to change Kirby's credit status on Aug. 1. "Distributor's new credit terms included prepayment for the purchase of petroleum products," the letter states.

    In addition, the letter claims Diamond Shamrock received another insufficient-funds notice from Kirby's bank for product received in July. The letter requires removal of all Diamond Shamrock logos from Kirby stations; reimbursement for distributor equipment; and payment for all accounts outstanding.

    A statement issued to the Morning Telegraph from Diamond Shamrock's parent company Valero Energy Corp. said, "Based on the pending litigation of the issue, we cannot discuss specifics of Valero's decision to end our contractual agreement with Kirby & Kirby Oil Co. However, we do intend to vigorously fight this lawsuit which we believe is without merit, and we are confident that it will be proven that our actions were completely justified."

    Kirby operates stores in Tyler, Jacksonville, Overton, Kilgore and Marshall.

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