Jerry's Shell v. Equilon Enterprises, LLC (2002)

In Jerry's Shell v. Equilon Enterprises, LLC (Super. Ct. Los Angeles County, 2002, No. BC 271208), HJF and Sitara (among others) sued Equilon, alleging Equilon, a joint enterprise of Shell and Texaco, developed a plan to convert independent franchise dealers' stations into company-operated stations or put them in the hands of "favored" dealers (named as individual defendants). According to the operative complaint, Equilon gave preferential treatment to these favored dealers and made it difficult or impossible for them to compete through such practices as predatory pricing, delayed payment for credit card sales and failure to make station repairs and improvements as promised. In addition, Equilon intentionally interfered with sales of HJF's and Sitara's franchises. HJF and Sitara had engaged in significant efforts to sell their franchises to third parties, and third party purchasers had agreed to purchase HJF's and Sitara's franchises on mutually acceptable terms and were ready, willing and able to complete the sales, contingent upon Equilon's approval pursuant to the existing franchise agreements. Although all necessary paperwork had been submitted, Equilon improperly withheld its consent and engaged in a deliberate course of conduct (for example, delaying meetings with purchasers and intentionally dissuading purchasers from proceeding through false and fraudulent misrepresentations) designed to prevent HJF and Sitara from selling the franchises to anyone other than Equilon or its favored dealers at a substantially reduced price. Equilon sought to wrongfully diminish the market value of the franchises and frustrate the sales so HJF and Sitara would "walk away" for a nominal sum, resulting in substantial savings to Equilon in "dealer buyouts."