Exxon won't sell stations to them, dealers charge; they file suit against oil giant as it departs Southland.

Forty-one local Exxon dealers who claim the oil giant isn't being fair as it pulls out of Southern California are playing hardball now. They filed suit late last month, accusing Exxon of violating both the Sherman Antitrust Act and the Petroleum Marketing Practices Act.

Irving, Texas-based Exxon, the world's largest oil company, which holds 4 percent of the Southland's gasoline market, announced in May it would vacate the 167 stations operating under its logo in Los Angeles, Orange and Ventura counties.

About 148 of those stations are owned by Exxon and operated by independent dealers under franchise agreements. Ten others are leased by Exxon from third-parties, and then subleased to independent dealers. Only nine of the stations are both owned and operated by Exxon, according to estimates by Tony Polk, spokesman for the dealers.

San Francisco-based Chevron Corp. has agreed to buy 23 of the 148 Exxon-owned, independently operated stations. Exxon has granted its Southland dealers "first right of refusal" to purchase the other 125 stations the oil giant owns outright, as well as first right of refusal to buy the master leases it holds on 10 other stations.

The nine stations owned and operated by Exxon will probably be closed down, Polk said.

Thirty-nine of the dealers who were granted first right of refusal to buy their stations, and two whose stations are being bought by Chevron, filed suit July 24.

Joseph Alioto, the attorney representing the dealers in the suit, charged there has been an industrywide move by major oil companies during the past five years to divvy up the country into geographic territories, thereby enabling them to avoid head-to-head competition with each other in the retail gasoline market.

In effect, this is what the dealers are accusing Chevron and Exxon of doing in the Southland, Alioto said.

"The defendants (Exxon and Chevron), through Exxon's withdrawal from the Southern California market and the transfer of stations to Chevron, have entered into a contract, combination and conspiracy to suppress and eliminate competition between themselves, divide and allocate markets geographically, and reduce output and raise prices of gasoline in violation of part of the Sherman Act," the suit alleges.

Exxon and Chevron are allegedly "conspiring" for a couple of reasons, Alioto said.

To begin with, he said, there is no other logical explanation for the biggest oil company in the world walking away from the biggest oil-consuming market in the world, namely Southern California.

Next, if Chevron's only intention was to operate more stations here, the company would have simply built stations and created more competition in the marketplace.

But instead there will probably be less competition if the proposed Exxon-Chevron deal goes through as planned, Alioto said.

The 135 stations Exxon doesn't sell to Chevron, or shut down, will most likely be put to other uses, unless the dealers win their lawsuit, because Exxon isn't making bona fide offers to the dealers, Alioto said.

As a result of Exxon's allegedly high asking prices, the dealers can't afford to buy the stations, he said. At least two stations that dealers decided not to buy have already been closed down, Alioto said.

He cited several other instances in recent years where two oil companies "swapped" stations in one specific geographic territory for ones in another, effectively lessening competition and hence allegedly violating the Sherman Antitrust Act, Alioto said.

In 1988, for instance, Exxon "swapped" 84 of its stations in Washington, Oregon, Southern California and Nevada for 92 Texaco stations in Northern California. Now Exxon operates the former Texaco stations in Northern California and Texaco operates the former Exxon stations in the other states.

Exxon officials gave a curt reply to the overall suit. "Exxon believes the complaint is groundless and without merit and intends to vigorously defend itself against the lawsuit," company spokesman Les Rogers said.

Chevron's inclusion in the lawsuit is "totally and completely" without merit, added Chevron spokeswoman Bonnie Chaikind.

The suit also accuses Exxon of violating the Petroleum Marketing Practices Act, which requires the company to make bona fide offers to sell the stations and to withdraw from the Southland in good faith.

The suit states, "Exxon's determination to withdraw from the Los Angeles Basin market was not made by Exxon in good faith and in the normal course of business."

The suit also states several reasons Exxon's offers to the dealers aren't bona fide.

In one example, Mansour Azizian operates an Exxon franchise in San Gabriel. Exxon offered to sell him the station for $1.4 million, but "this amount far exceeds the fair market value of the Azizian property," the suit states.

Next, virtually no lender will agree to finance the deals because Exxon has unreasonably required escrow to close before contamination at the stations is cleaned up, the suit states.

Most of Exxon's stations were built in the 1950s and 1960s and are contaminated to some degree by gasoline or oil from underground tanks that seeped into the soil. Now Southland lenders won't make loans to buy service stations unless the contamination has already been cleaned up, explained Jim Carroll, counsel for the Southern California Service Station Association.