STAR-BULLETIN / OCTOBER 2001 This gas station in Kaneohe, which was operated by Lex Brodie's, is now closed. The company lost its financing to buy more than 20 Oahu gas stations.

Lex Brodie’s
gas deal falls apart

The company loses financing
to buy more than 20 gas stations

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By Tim Ruel
truel@starbulletin.com

Independent gasoline dealer and tire company Lex Brodie's has lost a deal to purchase more than 20 gas stations on Oahu, and has closed two stations it opened just five months ago, because an extensive court battle has cost the company its financing, an attorney said.

The company selling the gas stations, Dallas real estate investment trust U.S. Restaurant Properties Inc., said it is now looking at reopening as many as 10 of the stations under the Lex Brodie's trademark. U.S. Restaurant, not Lex Brodie's, would run the operations.

"The contract has been terminated between Lex Brodie and USRP but we are still working with them," said Richard S. Wilensky, general counsel for U.S. Restaurant. "They're still evaluating what they're going to do," he said of Lex Brodie's.

John Mayo, a Tennessee businessman who bought Lex Brodie's a decade ago, could not be reached for comment. Mayo's attorney, Margery Bronster, declined comment yesterday.

The deal broke off at the end of March because Lex Brodie's lost its outside financing, Wilensky said. The sale was originally supposed to take place in November, around the time Lex Brodie's took over two former Arco gasoline stations owned by U.S. Restaurant in Kaneohe and Waipahu. The entire deal was delayed because a group of Arco dealers has been fighting their pending evictions in court, saying they are being given a raw deal.

The dealers got a sublease to their stations three years ago from BC Oil Ventures, a California company led by Hani Baskaron, who originally got a master lease for 27 stations from U.S. Restaurant. BC Oil went bankrupt in the summer of 2000, and later subleased 10 of the Arco stations to Amgad Wahba and Riyad Khoury, who had previously worked for Baskaron.

U.S. Restaurant sued last year to evict Wahba and Khoury in state District Court and won, though the dealers have filed a notice of appeal before the Hawaii Supreme Court. Among other things, Wahba and Khoury plan to argue that District Court should not have jurisdiction because the issue is more complex than the normal landlord-tenant dispute, said a spokeswoman for their attorney, Mark Kawata. The state passed a controversial law in 1997 specifically to keep dealers in business. At the same time, the dealers are also seeking a new trial.

The litigation doesn't stop there.

Oahu's three remaining Arco dealers -- located in Diamond Head, Kaneohe and Laie -- have sued U.S. Restaurant in state Circuit Court to block their pending eviction.

U.S. Restaurant has sued BC Oil's Baskaron in Dallas over personal guarantees.

BC Oil's bankruptcy trustee, Los Angeles attorney James Joseph, sued Lex Brodie's in February, alleging that Brodie's owes $43,870 to BC Oil for gasoline purchases. In turn, Lex Brodie's has countersued Joseph for tortious interference, for allegedly wrecking Brodie's deal with U.S. Restaurant.

In court filings, Lex Brodie's said Joseph helped former Arco dealers Wahba and Khoury temporarily remain at their stations. On a Friday night in January, Lex Brodie's hired off-duty police officers to assist while U.S. Restaurant attempted to dismantle the pumps at each of 10 stations run by the dealers.

Joseph had opposed the move, and a Circuit Court judge later ordered U.S. Restaurant to fix the stations.

Joseph should have known that Lex Brodie's had a right to the properties, Lex Brodie's said in court filings. Lex Brodie's is seeking general, special and punitive damages. Joseph has denied the allegations, court records show.

It's not clear what the future is for the Lex Brodie's business. The first Lex Brodie's Tire Co. was started by local icon Lex Brodie nearly half a century ago on Queen Street in Kakaako.

Because the Lex Brodie's deal has fallen through, all the Oahu gas stations owned by U.S. Restaurant are back on the market for sale, said Wilensky. U.S. Restaurant, which lost $18.6 million last year, wants to get out of gasoline and focus on the food business.

U.S. Restaurant bought the stations four years ago from Texaco, which agreed to dispose of its Hawaii assets to get government approval to merge with Shell Oil. The agreement was signed by the state Attorney General's Office, which was led at the time by Bronster.