Wednesday, November 3, 1999

By Ken Ige, Star-Bulletin
Frank Young, who runs K&Y Chevron on South Street,
was sued by the company for allegedly failing to open
his station for hours specified in his lease.

Chevron gouging
prices, embattled
dealer claims

One of Hawaii's top producers,
targeted in a company suit, says
in a court filing that the oil giant
has forced operators to absorb
hundreds of thousands in costs

By Rob Perez


Chevron Corp. Service station dealer Frank Young says Chevron Corp. is trying to force him from the Kakaako business his family has run for decades because he has been an outspoken critic of the company.

In documents filed today in federal court, Young also says Chevron has artificially inflated wholesale gas prices to its Hawaii dealers for years, resulting in unprecedented profits to the company but forcing the dealers to absorb hundreds of thousands of dollars in extra costs.

The company denied the allegations.

Young, one of Chevron's top performing dealers in the state this year and a frequent critic of the company, is asking the court to dismiss a lawsuit Chevron filed in late September against him. The company sued Young for allegedly failing repeatedly to open his Queen Street station for the hours specified in his lease.

Chevron is refusing to renew the lease, which expired in May, and wants Young to vacate the station in January.

But Young's attorney, Eric Seitz, said the operating-hour issues are minor and that Young is being singled out to send a message to other dealers.

"The message was either you play ball with Chevron or it would affect your lease (renewal) in '99," Young said.

Chevron spokesman Albert Chee Jr. said the company's decision not to renew Young's lease had absolutely nothing to do with Young's criticisms.

"This is simply about Mr. Young failing to honor his contractual commitments," Chee said.

Chee said Young repeatedly violated the lease terms and was warned a number of times that such action could result in termination of the rental agreement. The situation is unfortunate, Chee said, but Young left Chevron with no choice but to end the agreement.

The lawsuit was filed even as Young was on his way to winning a statewide Chevron contest for the highest increase in dealer gas sales on a percentage basis for a recent 12-month period. He won a trip to the Lodge at Koele luxury hotel on Lanai.

In denying the company's charges, Young filed a countersuit that essentially raises many of the same allegations contained in the state's $2 billion antitrust lawsuit against Hawaii's major oil companies, including Chevron.

Chevron and the other defendants have repeatedly denied charges of conspiring to inflate local gas prices.

While the state's lawsuit was filed on behalf of consumers, Young's suit deals with the impact the allegedly inflated prices have had on dealers.

Because many of the fees dealers pay the oil companies are based on a percentage of sales revenue, the higher the wholesale price, the more the dealers pay the companies, Young said.

But because dealers also must compete with service stations run by those same companies, dealers can't always pass on higher costs to consumers, he said.

The result, Young said, has been that dealers have seen their profits shrink while the oil companies have enjoyed unprecedented margins in Hawaii.

"It appears the oil companies want to squeeze dealers out altogether," said Seitz.

Chevron's Chee said Young's failure to meet his contractual obligations has no connection to the issues raised in the state's antitrust lawsuit.

Seitz acknowledged that Young's odds of winning his battle with Chevron are not good. The company has such vast resources that it can outlast the dealer in a protracted, costly litigation process, he said.

But Young's chances are much better if the case becomes more than a legal battle and consumers band together to support him and other dealers, sending a message to oil companies that excessive profits won't be tolerated.

"I hope people take a stand," Seitz said. "If we just rely on the legal battle, (Chevron) will outlast us."

E-mail to Business Editor

Text Site Directory:
[News] [Business] [Features] [Sports] [Editorial] [Do It Electric!]
[Classified Ads] [Search] [Subscribe] [Info] [Letter to Editor]
[Stylebook] [Feedback]

© 1999 Honolulu Star-Bulletin