Gas dealers, station owners
fuel dispute in court

The lawsuit stems from
10 Arco stations leased after a
California company's bankruptcy

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By Tim Ruel
truel@starbulletin.com

The legal battle between two Oahu Arco dealers and the Dallas-based owner of their gas stations escalated into bitter accusations yesterday in state District Court, and an end to the dispute may not come soon.

Both sides accused each other of using an eviction trial to gather testimony for separate but related legal matters.

The owner of the 10 gas stations, real estate investment trust U.S. Restaurant Properties Inc., sued to evict dealers Amgad Wahba and Riyad Khoury, primarily to ease the pending sale of the stations to independent dealer Lex Brodie's.

The dealers say they are being evicted unfairly, and that they have a valid lease to the properties.

The dispute dates to 1998, when Texaco sold off its Hawaii gas stations as part of a settlement with the state Attorney General's Office so Texaco could proceed with a joint venture with Shell Oil. U.S. Restaurant bought 27 stations, and gave the master lease to the stations to a California company, BC Oil Ventures LLC.

BC Oil made a splash on Oahu when it introduced low gas prices under the Arco brand, but the company ran into financial trouble when its cost of gasoline shot up. BC Oil filed for Chapter 11 bankruptcy in July 2000, listing U.S. Restaurant as its biggest creditor, owed $10 million.

After BC Oil filed for bankruptcy protection, the firm's president, Hani Baskaron, subleased the 10 Arco stations to Wahba and Khoury, who had previously worked for Baskaron in California.

Wahba and Khoury pay $1,500 a month in rent for each of the stations, money that goes into BC Oil's bankruptcy estate. The first six months of operations came rent-free. U.S. Restaurant sued to evict Wahba and Khoury last year, claiming it never consented to the lease agreement. U.S. Restaurant accuses Baskaron of making a "sweetheart" deal with Khoury and Wahba. What's more, U.S. Restaurant argues that all the subleases BC Oil entered into were voided last year in U.S. Bankruptcy Court, when BC returned the stations to U.S. Restaurant.

Wahba and Khoury say they did get permission for the sublease from U.S. Restaurant's general counsel, Richard Wilensky, and have filed their own lawsuit against U.S. Restaurant in Circuit Court. The dealers, who are represented by attorney Mark Kawata, say the dispute is complex.

Indeed, the matter became murkier on a Friday night last month, when representatives of U.S. Restaurant, escorted by off-duty police officers hired by Lex Brodie, attempted to dismantle the stations run by Khoury and Wahba. U.S. Restaurant succeeded in disabling most of the stations, but was later forced by Circuit Judge Gary W.B. Chang to put the stations back in working order. Chang ruled that U.S. Restaurant had violated an emergency restraining order.

Meanwhile, Margery Bronster, who oversaw the 1998 divestiture of the Texaco stations while she was state attorney general, has signed on to represent U.S. Restaurant.

Tempers flared during the trial yesterday. U.S. Restaurant attorney David Minkin accused Kawata of using the testimony of petroleum analyst Tim Hamilton to gather evidence for a separate lawsuit. Two other Arco dealers, Andy Pung and Ricky Yamasaki, sued U.S. Restaurant in Circuit Court earlier this month. The dealers claim U.S. Restaurant returned Yamasaki's rent check in January, and they fear that they will be targeted for eviction if Wahba and Khoury lose. Kawata is also representing Pung and Yamasaki.

Later in the trial, Kawata accused Minkin of using the proceedings to gather testimony from Baskaron, who has been sued in Dallas by U.S. Restaurant over his debt to the company. Baskaron was served with the lawsuit minutes before he took the witness stand yesterday.

Baskaron testified that he entered the dealer agreement to put the stations back on a positive financial track, and that it was not a sweetheart deal. The lease terms were sent to Wilensky by overnight mail, Baskaron said. He noted that in several years of his dealings with U.S. Restaurant, Wilensky had never needed deals to be put into writing.

At one point in the trial, Minkin became verbally upset when Baskaron said he could not read exhibits because he had forgotten his glasses.

The District Court trial is not yet over. Judge Rhonda Nishimura has given both sides until tomorrow afternoon to deliver their closing arguments in writing, and oral arguments are scheduled to take place Friday.

However, Koury and Wahba's lawsuit against U.S. Restaurant in Circuit Court is still pending, and could potentially delay the current District Court proceedings. Khoury and Wahba are seeking protection under a controversial state law passed specifically to help gas dealers stay in business. Judge Nishimura noted yesterday that the relief the dealers are seeking does not fall under the jurisdiction of District Court.