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BOSTON � A recent 1st U.S. Circuit Court of Appeals decision upheld a $4.5 million U.S. District Court in Massachusetts jury verdict for eight gasoline station franchise operators who alleged that Shell Oil Co. and a joint venture partner deliberately overcharged them for rent and wholesale gas. The franchisees claimed that Shell and Motiva Enterprises, its joint venture with Saudi Refining Inc. to sell oil products to the eastern and southern U.S., charged too much for gasoline and rent for the franchisees to compete in the marketplace. On April 18, the 1st Circuit upheld the Dec. 8, 2004 district court jury verdict. Marcoux v. Shell Oil Products Co., No. 05-2771 (1st Cir.) Jay Farraher, a Boston shareholder at Greenberg Traurig who represented the franchisees, called the decision precedent setting. “The 1st Circuit Court of Appeals is one of the only appellate courts in the country to have held that dealers have the right to challenge the wholesale price where dealers feel there is evidence that the oil company may not be acting in good faith,” Farraher said. A 5th Circuit decision upheld a lower court jury verdict that found that Exxon breached its duty of good faith and violated the Texas Uniform Commercial Code in how it set wholesale prices. Mathis v. Exxon Corp, 302 F.3d 448,457-59 (5th Cir. 2002) But a later Texas Supreme Court decision said that when an oil company sets a price there’s a presumption that the price is set in good faith in the absence of discrimination. Farraher said. Shell Oil v. HRN Inc., 144 S.W. 3d 429, 435-38 (Texas 2004) Greenberg Traurig also represents about 50 other franchisees with claims because the district court decided to hear the claims of a small group of franchisees first, Farraher said. Shell’s attorneys at Goodwin Procter referred questions to the company. Shell’s joint venture Motiva is considering further court action, said Shell spokeswoman Karyn Leonardi-Cattolica. “Motiva is considering its options to seek further review of the court of appeals’ decision to correct errors that led the court to affirm, in part, the jury verdict,” said Leonardi-Cattolica. In the ruling, Circuit Judge Jeffrey R. Howard upheld the franchisees’ win on state contract and unreasonable gasoline pricing claims under the Massachusetts Uniform Commercial Code. “While perhaps more specific and more comprehensive evidence would be preferable, the jury had enough evidence of the defendants’ motives and practices, as well as enough information about competitors’ pricing, to come to the conclusion that the [wholesale prices charged to dealers] were commercially unreasonable,” Howard wrote. “Specifically, the use of competing gas stations’ retail prices to draw conclusions about what those stations might be paying for gasoline is not ideal, but it is adequate to the task at hand.” Despite the win on the contract and pricing claims, the franchisees’ collected a mixed ruling on two claims related to the Petroleum Marketing Practices Act, which governs contracts between gasoline refiners or distributors and retailers. The 1st Circuit affirmed the jury’s award on the constructive termination claim, which alleged that Shell improperly terminated the franchisees’ agreements by assigning them to Motiva, which did not continue a subsidy program. Yet the 1st Circuit reversed the lower court’s ruling that Motiva’s increase of their rent constituted a constructive nonrenewal of the contracts. Because it issued a mixed decision about Petroleum Marketing Practices claims, the 1st Circuit also vacated and remanded the lower court’s award of attorney’s fees and costs.

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