|
|
|
From Lawletter No. 150 Chevron dealer recoups 60% of transfer fee An arbitrator has ordered Chevron to refund most of the transfer fee it charged another former southern California dealer when he sold his business in the recent case of In the matter of Maroun Atallah, AAA Case No. 80 E199 0022 91 (10-23-91). The dealer was represented by SCSSA attorney Guy J. Gilbert. The award totaled $18,000. Facts: The dealer sold his station business and franchise for a total of $196,500. Chevron charged a transfer fee of $24,000, 20% of the amount attributable to goodwill. The dealer paid the fee and filed for arbitration as authorized by the Chevron lease. Ruling: The arbitrator ordered Chevron to return $14,000 of the fee and to pay the dealer $4,000 in attorney fees, for a total award of $18,000. Analysis: Section 22 of the lease that Chevron started using in California sometime in 1986 or 1987 provides for arbitration of disputes related to the sale or assignment of the franchise. Section 22 provides that the arbitrator's decision is final. In other words, Chevron cannot challenge the merits of the decision in court. Binding arbitration can be much cheaper than going to court. Furthermore, Section 23 of the lease provides that the prevailing party shall recover attorney fees. Recommended procedures: We suggest the following in this area: (1) Dealers who have sold during the past four years: If you sold a Chevron station during the past four years, check your lease. If yours is one that provides for arbitration of matters related to a sale or assignment of the business, Section 22 should so state. If you paid a transfer fee of substantially more than $10,000, we suggest that you consider trying to recover the excess in an arbitration proceeding. Dealers have recovered as much as $35,000 in these cases. See Lawletter Nos. 137 and 145. (2) Dealers who sell stations in the future: If you sell a Chevron station anytime in the future, and if you pay a transfer fee substantially in excess of $10,000, we suggest that you consider trying to recover the excess in an arbitration proceeding. You may want to pay the transfer fee under protest. (3) Other dealers: Dealers who do not have arbitration clauses in their franchise agreements would have to go to court to challenge a transfer fee. This process is more expensive. See Lawletter No. 123. (4) Percentage fees: We strongly recommend against understating the actual purchase price in order to avoid large transfer fees for the reasons stated in Lawletter No. 123. (5) Comply with law: When selling or buying a station, be sure that you get good legal representation and that you comply with applicable law. |
|
|