Exxon Mobil to Pay Damages in Gasoline Discount Case

Exxon Mobil Corp. was ordered to pay $500 million in compensatory damages to about 10,000 dealers who claimed the company cheated them in a gasoline discount program, the plaintiffs’ lawyer said Tuesday. About 400 current and former dealers in California could be eligible to collect damages.

A U.S. District Court jury in Miami issued the judgment after a lengthy trial, which followed a first attempt to try the class-action lawsuit that ended in mistrial in 1999. With interest, the award would come to about $1 billion, the figure the dealers had sought, Miami attorney Gene Stearns said.

Exxon Mobil, based in Irving, Texas, expressed disappointment over the judgment and said it will appeal.

“We conduct our business in an ethical and responsible manner,” a spokeswoman said. “We will continue to vigorously defend ourselves in this matter.”

The lawsuit alleged that Exxon, before its 1999 merger with Mobil, cheated about 10,000 service station owners in 36 states out of promised discounts from 1982 to 1994.

Under the program, retail customers who bought gasoline with cash were charged 4 cents a gallon less than those paying with credit cards. The dealers, in turn, said they were to receive a discount of 1.7 cents a gallon on the gasoline they bought wholesale from Exxon.

The dealers said they suspected for years that they had not been receiving the discount but could not tell from Exxon’s invoices.

At a 1991 dealers meeting in Houston, a top Exxon executive admitted that dealers had not received the discounts but promised they would from then on, Stearns told the jury.

“Some of our dealers could be eligible for $100,000 or more,” said Dennis DeCota, executive director of the California Service Station & Automotive Repair Assn. in Novato, Calif.

DeCota said there were about 360 dealers in Northern California during the period of the discount program. Exxon had a much smaller presence in Southern California, actually withdrawing from the southern half of the state about a decade ago.

“But the former Exxon dealers in Southern California should be entitled to any recoveries made by the law firm,” DeCota said.

“People have been concerned about this for many years,” said Pat Brick, a Northern California dealer. “It was questionable all along.”

Brick, however, isn’t counting his money yet, noting that an appellate court could overturn the ruling.

Last March, San Antonio-based Valero Energy Corp. agreed to pay $895 million for 340 Exxon gasoline stations throughout California and its oil refinery in Benicia, north of San Francisco. The sale was ordered by the Federal Trade Commission as a condition of approval of the $80-billion merger of Exxon Corp. and Mobil Corp. in November 1999. That left the merged company with a refinery in Torrance and 712 Mobil stations throughout the state.

Exxon’s attorneys said the dealers did, in fact, receive the promised discounts. The company further argued that the program benefited dealers by allowing them to cut prices at the pump and thus better compete against smaller rivals that accepted only cash and charged less.

“We felt that the evidence in that case clearly demonstrated that Exxon’s discount-for-cash program, which is what the contention was about, provided our dealers with an appropriate wholesale gallon price,” the Exxon Mobil spokeswoman said Tuesday.

The previous trial in the lawsuit ended in a mistrial in 1999 when the jury deliberated for six days without reaching a verdict.

Lawyer Stearns expressed mixed feelings about the verdict, noting that his clients could have used the money years ago.

“These individual claims are huge. Some are hundreds of thousands of dollars. The average claim is over $100,000,” he said. “Many of them could have used the money to educate their kids years ago.”

Stearns said that if Exxon Mobil contests the award, as expected, he would appeal a pretrial ruling by U.S. District Judge Alan Gold that the jury could not consider punitive damages, which could have substantially increased the award.

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Reuters was used in compiling this report.