Franchisees Whack BP With Class Action

SAN FRANCISCO (CN) - Fifteen ARCO, BP, and AmPm franchise owners claim that BP manipulates gas supplies and prices, so as to deliver less gas when oil future prices are trending up and to deliver more gas at a higher price when oil future prices are trending down. The federal class action also claims that BP required franchisees to install a defective, centralized point-of-sale system that hurt their businesses and brought customer complaints.

Lead plaintiff Green Desert Oil Group claims that BP sold plaintiffs ARCO-brand gas stations "on the notion that ARCO has been and would continue to be known for its low-priced gasoline strategy as compared with other national brands, mainly due to an early 1980s decision to emphasize cost cuts for cash-only policy at its fuel pumps."

The class, led by 15 plaintiffs nationwide, says it has found that BP does not deliver fuel on an "automatic" basis, despite having the ability to.

The class claims BP manipulates "gas pricing by deliberating delivering gas before or after price increases or decreases that serve to increase the sales price charged to franchisees."

Franchisees say BP tells them by 1 p.m. of price changes, which become effective at 3 p.m. that very day. They say that "if the price change increases, BP defendants will manipulate delivery schedules so most of the deliveries occur past 3 p.m.," but if the price decreases, defendants rush deliveries before 3 p.m.

Franchisees say that in 2009 they were forced to install a point-of-sale system made by co-defendant Retalix Ltd., an Israeli company.

They claim the defendants knew during beta testing of the system that there were "several material defects in the design and architecture of the software which would cause substantial harm and damage to plaintiffs," but that BP required nationwide installation of the system anyway.

BP West Coast Product's President William Fry recognized in March this year that the Retalix system was only "75 percent effective," but BP still refused "to implement the older system which was satisfactorily working and refused to consider other POS solutions used by other national service station brands," the class claims.

The Retalix system fails to charge some customers who use debit cards to pay for gas, but will charge other customers twice: for their gas and for the gas bought by the customers who were not charged, the franchisees say.

The franchisees claim that BP has deducted 5.5 percent of their gross sales as an "advertising and promotion" fee, but actually dumped some of that money into its general fund.

They also claim that they are required to buy certain supplies from BP or specific third-party vendors, with "the prices paid for most of these items and supplies ... far higher than what plaintiffs could pay in the open and fair market."

The class claims that BP intentionally diverts "placement fees" by labeling them "placement allowances," since the defendants are supposed to pay the franchisees placement fees. The allowances, however, "are assigned to BP defendants from franchisees for the stated purpose of advertising and promotion," the complaint states.

The franchisees seek class certification, damages, injunctive relief to remove the Retalix system, and punitive damages for breach of contract and negligence.

They are represented by Jonathan Shub with Seeger Weiss, and James Lee with Lee, Tran & Liang, both of Los Angeles.

Follow @jamierossCNS

Subscribe to Closing Arguments

Sign up for new weekly newsletter Closing Arguments to get the latest about ongoing trials, major litigation and hot cases and rulings in courthouses around the U.S. and the world.

Email *

Submit