Lukoil North America sued over franchise agreement in the US
MOSCOW, August 22 (RAPSI) - Russian oil giant Lukoil’s North American subsidiary has been sued in the US by a Pennsylvania corporation over the termination of a petroleum marketing franchise, according to a copy of the complaint obtained by RAPSI.
According to the complaint, Hillmen, Incorporated is in the business of the retail sales of Lukoil motor fuel. Hillmen owns a Lukoil service station in Philadelphia, Pennsylvania.
Around February 1, 2007, Hillmen claims to have executed a three-year franchise agreement with Lukoil related to the purchase of motor fuel and to the convenience store. The franchise agreement was then allegedly renewed twice, in 2010 and 2013.
According to the complaint: “From February 1, 2007 to the present time, Plaintiff was required to buy his gasoline and all related fuels and supplies solely from LUKOIL. Consequently, despite ostensibly operating as an ‘independent’ retailer, Plaintiff’s economic survival depended exclusively upon the good will of LUKOIL in fairly and equitably establishing wholesale prices which would permit the Plaintiff to remain competitive with other petroleum service stations in the area.”
The plaintiff asserts that while for the first three years he was able to turn a profit on gas sales, “during the second 3-year term, LUKOIL began to arbitrarily increase the wholesale prices of gasoline and other fuels primarily for the purpose of increasing its profit margin in a manner not necessarily related to the cost of producing said fuel.”
Eventually the plaintiff claims that he could no longer raise his retail prices while remaining competitive as LUKOIL wholesale prices continued to rise. As such, he began losing money on gas sales.
The complaint asserts: “The actions of LUKOIL in unreasonably inflating its wholesale prices constituted an attempt to drive Plaintiff out of business by forcing it to pay inflated prices for gasoline.”
As a result of a series of financial difficulties, or – in the words of the Plaintiff – “due to the economic brutality of LUKOIL,” he was required to stop selling gasoline in March 2013.
In a letter dated April 3, 2013, LUKOIL notified the plaintiff that the agreement had been terminated.
Accordingly, Hillmen is suing for violation of the Petroleum Marketing Practices Act, breach of contract, violation of the Uniform Commercial Code, and fraud. The plaintiff seeks a series of forms of relief, including compensatory and punitive damages, and demands a jury trial.
LUKOIL has not yet responded to requests for comment.