Judge brakes Exxon's departure from Southland; firm temporarily barred from ending franchise deals.

A ruling in a suit filed against Exxon Corp. by 41 of its dealers has temporarily halted Exxon's planned departure from Southern California.

A U.S. District Court judge issued a preliminary injunction last week preventing Exxon from terminating any franchise agreement with the dealers.

"It's a clear message that these oil companies can't just knock out more than 100 dealers whenever they feel like it," said Joseph Alioto, the attorney representing the dealers in the suit.

Irving, Texas-based Exxon, which has held 4 percent of the Southern California retail gasoline market, announced last May it would vacate the 167 stations it operates in Los Angeles, Orange and Ventura counties.

About 148 of these 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 buy the other 125 stations Exxon owns outright, as well as first right of refusal to by the master leases it holds on 10 other stations.

The nine stations owned and operated by Exxon will probably be shut 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. The dealers accused Exxon of violating both the Sherman Antitrust Act and the Petroleum Marketing Practices Act.

Exxon officials released a statement after the judge's ruling last week saying they are "disappointed" with the judge's action. "However, this ruling is not a ruling on the merits of the case but solely a determination that a triable issue exists," the statement said.

"Exxon's position remains that its withdrawal from these Southern California counties has been and continues to be conducted properly and in accordance with all applicable laws," the statement went on to say.

Among many allegations, the dealers' suit claimed Exxon violated the Petroleum Marketing Practices Act, which requires the oil giant to act in "good faith" when it decides to withdraw from a market.

Exxon officials decided to quit Southern California before they entered into new lease agreements with dealers, a move that wasn't made in good faith, the suit stated.

Judge Robert Takasugi, in his ruling, said evidence presented supported the possibility that Exxon indeed made its decision beforehand.

The evidence "raises at least a serious question on the merits as to plaintiffs' (dealers) contention that Exxon's determination to withdraw from the Southern California market was made prior to the date Exxon entered into or renewed franchise agreements with plaintiffs," the ruling stated.

The dealers entered into franchise agreements between 1988 and 1992. Yet "as early as 1988, Exxon considered Los Angeles as an area for potential divestment," the ruling stated.

Then, in a retail marketing strategy review document dated Sept. 9, 1990, Exxon stated its situation in the Los Angeles market was weak. Subsequently, Exxon began pursuing the sale or trade of all its Los Angeles, Ventura and Orange county outlets to various other gasoline retailers.

Exxon had a firm proposal by May 11, 1992, from Chevron to buy 23 stations, the ruling went on to state.

Yet the dealers were not notified until May 13, 1992, that their franchise agreements were being terminated in the course of Exxon's withdrawal, the ruling noted.

Now that Exxon is being prevented from terminating its leases with the dealers, the company will probably be forced to start competing in the Southland marketplace again, Alioto said.

Judge Takasugi also issued a preliminary injunction preventing Exxon from requiring the dealers to buy gasoline from Exxon on a cash on delivery or certified check basis, a course of action Exxon officials have recently taken against the dealers, Alioto said.

According to the suit, Exxon is also preventing the dealers from accepting credit cards at their stations, threatening to remove equipment and raising prices to a noncompetitive level, among other prohibitive measures.

The judge is giving Exxon an opportunity at a Nov. 20 "show cause" hearing to indicate why he shouldn't place preliminary injunctions against these actions as well, Alioto said.

The preliminary injunctions are valid until an actual trial takes place. A trial date has not been set, but Alioto said it could possibly be during fall 1993.

One Exxon dealer expressed satisfaction with the judge's ruling. "I know I can hang in there now," said Hoss Meftagh, the dealer at Freeway Exxon in Lawndale.