throbber
NO. 1999-51879
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`IN THE DISTRICT COURT OF
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`HARRIS COUNTY, TEXAS
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`11"" JUDICIAL DISTRICT
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`§ §
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`FLEMING & ASSOCIATES, L.L.P.
`and ROBERT L. STEINBERG
`laintiffs,
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`v.
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`SHELII OIL COMPANY,
`MOTI\'(A ENTERPRISES, L.L.C. and
`EQUILION ENTERPRISES, L.L. C.
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`Irefendants.
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`DEII‘ENDANTS‘ OBJECTIONS T0 PLAINTIFFS’
`B_E_ U .S F0 A TEMPO ARY N UN TION
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`I. INTRODUCTION
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`Defendants Shell OilCompany, MotivaEnterprises LLC, EquilonEnterprrsEsLLC ."L
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`and Equiva Services LLC ("Defendants" or “Shell") file their Objections to PlainiiiTs-Refitst for-
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`“"-
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`a Temporary Injunction.
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`Liege-dual Histog;
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`A.
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`II. BAC GROUND
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`The defendants in this case manufacture and distribute Shell branded gasoline. This
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`dispute b'cgan on January 25, 1999, when the plaintith, Mr. Fleming and Mr. Steinbcrg, filed a
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`lawsuit i
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`federal court in New Orleans on behalfofa number ofShell service station operators. The
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`plaintiffs alleged that defendants had engaged in illegal tying, an anticompetitive conspiracy and
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`price discrmination under the federal Sherman Act, Clayton Act, and Robinson-Patman Act. The
`plaintiffs also alleged violations ofstatc tort and contract law. On defendants‘ motion to transfer,
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`the case was transferred to the Southern District ofTexas on May 27, I999. The case was assigned
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`to Judge Nancy Atlas. Mary Chawlu. ct at. v. Shell Oil Campaign er a1. , In the United States District
`HECOHDEFI‘S MEMORANDUM
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`Court For the Southern District of Texas, Houston Division, Civil Action No. Il—99-l7l 1. Mr.
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`Fleming and Mr. Steinberg responded to the transfer order by filing suit in state court in Houston
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`on behalfofa different group ofdealers, asserting both an antitrust claim under the Texas Antitrust
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`Act and.state common-law contract and tort claims. HRN, Inc, at al. v. Shell Oil Co., et aI. , in the
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`DistrictECourtofHarris County, Texas, 234thJudicial District, No. 1999-28202.
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`OnNovember 3, 1999, Judge Atlas granted defendants’ motion to dismiss most of
`theantit‘l'ustclaimsandorderedplaintiffstoreplead astootherclaims. Clrawla, at((1. 1‘. ShellOJ!
`dismisscld the Chan-la case and amended theirHRNpetition to delete all antitrustclaims. Motions
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`C0.. er a!“ 75 F. Supp. 626 (SD. Tex. 1999). [Exhibit A] Rather than attempt to replead, plaintiffs
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`for summary judgment as to plaintiffs’ common law breach ofcontraet and tort claims in HRN are
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`pending before Judge Brister and are set for hearing on March 13, 2000. [Exhibit B]
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`As discussed below, both Judge Atlas and Judge Brister have denied the same
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`injunctive relief being sought from the Court.
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`B.
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`fihell’s Business Practices
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`In order to understand the dispute, it is important to understand that defendants are
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`doing nothing more than carrying out the same day-to-day business practices which they have been
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`following for decades. Because of the litigation, this has created some conflict with the plaintiffs,
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`and defendants have attempted to respond to the concerns of the plaintiffs. reserving the right to
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`protect the defendants’ legitimate self-interests. Both Judge Atlas and Judge Brister have affimrcd
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`thecorreeinessofdefendantr:’actions. itisnecessarytounderstandthebackgroundofthesebusiness
`practices.
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`rrouoznrwsori
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`Shell has historically operated as an integrated oil company.1 It produced crude,
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`refined 1 into gasoline, and sold it to the public. Most of Shell’s retail outlets were operated by
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`independent dealers known as lessee-dealers. When Shell decided to open a new retail facility, it
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`would b y or lease the land, build the station and then operate the station itselfor lease it to a dealer.
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`When Shell leases a station, the dealer is required to sign a Motor Fuel Station Lease.
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`wherein the dealer agrees to lease the station and pay rent, and a Dealer Agreement, wherein the
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`dealer affrces to buy Shell gasoline. These agreements have a fixed term, usually five (5) years.
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`Thus, a dealer who operates a station for 15 years could have signed three or more sets ofagreements
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`over thatl 15 years. Each time the agreements expire, and renewal agreements are signed, the new
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`agreements provide that both parties agree to release certain claims that might have arisen against
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`one anot er prior to the date of the renewal. Likewise, when a lessee-dealer elects to sell his
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`business Ito a third party, Shell’s normal business practice is to execute a Consent to Assignment
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`Agreement with both the selling dealer and purchaser. One of the provisions in the Consent to
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`Assignment Agreement releases both Shell and the selling dealer from any actual or potential claims
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`that may rave arisen during the course oftheir relationship. Yet another example arises in the event
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`that an existing lessee-dealer sells his dealership to Shell. In such situations, the dealer will sign a
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`Mutual Tennination Agreement which will normally contain a release by both parties of claims
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`against the other party, which makes good sense because the parties are agreeing to terminate their
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`business rlelationship.
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`Shell's "downstream" refining, transportation and service station assets are now
`owned by'ltwo limited liability companies, Equilon and Motiva.
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`HUIIOIflutiS‘JT
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`These standard business practices have been followed for decades and were in no way
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`prompted by the Chan-la cr HRN litigation. However, once the litigation was filed problems began
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`to arise.
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`C.
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`[laintiffs’ Initial
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`.oncer 5 Re a din Releases.
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`In May, 1999, Mr. Fleming raised a concem about
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`two Chawla plaintiffs,
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`Messrs. orter and Peacock. He maintained that Messrs. Porter and Peacock were in the process of
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`selling their dealerships to third parties, and that they were being required to release their CIran-Ia
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`claims ill'l order to obtain Shell’s consent.
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`In fact, Mr. Porter and Mr. Peacock abandoned the
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`stations, and when that became clear, Mr. Fleming never again mentioned either Mr. Porter or
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`Mr. Peaciock.
`After these initial problems arose, counsel fordefendants agreed that in the event a
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`dealer Wtis in the process ot'renewing the Dealer Agreement but wanted to preserve his or her claim
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`in Chan-JP, defendants would agree to a side letteragreement exempting the Chanda claims from
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`the release language in the printed fonn. [See Exhibit C, letter from Greg Copeland to Katrina Von
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`liedemanln dated August 23, 1999].
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`Immediately thereafter, a similar agreement was made with respect to a release
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`contained! in a Mutual Terminal Agreement. [See Exhibit D, letter from Greg Copeland to Katrina
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`Von l-ledtI-mann dated September 2, 1999]. At the same time, a dealer named Bruce J. Sirchio sold
`two leaseJ; back to Shell. Sirchio requestedthe Shell representative to delete the release language
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`in the standard MTA and Shell agreed.
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`[See Exhibit E, Mutual Termination Agreements and
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`ReleasesH
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`"GUM-.7005“.
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`Ax.
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`InJanuary, 1999,Mr.MarkAmbroziakapproachedMr.RichardMorrissey,Shell’s
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`sales mrInager responsible for overseeing Mr. Ambroziak’s service station, about selling his service
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`station business to Shell. Mr. Ambroziak offered to sell Shell his dealership, including stock,
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`inventory and equipment, for $500,000. Mr. Morrissey made a subsequent counterproposal to
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`purchasr}thestationandequipmentfor$441,500,andMr.Ambroziakagreedtosellatthatprice.
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`As part of the sale, Mr. Ambroziak executed a Mutual Termination Agreement, Release and
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`Notification (“MTA”), which specifically released Ambroziak’s Chan-Ia claims. Throughout these
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`negotiations, Mr. Ambroziak was represented by a local attorney, M r. Tom Giles, of Birmingham.
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`Michigan. At no time during the negotiations did either Mr. Ambroziak or Mr. Giles complain to
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`Shell about the release of the Chan-Ia claims, or ask that the Chan-la claims he excepted from the
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`MTA. [ Fe Exhibit F, Affidavit ofRichard Morrissey.]
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`On August 17, 1999, Fleming and Steinbcrg filed a motion for injunctive reliefin the
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`CIran-Ia case, accusing defendants of improper conduct in dealing with Mr. Ambroziak.
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`D. He Federal Cougt Den'ed the In'unetion but Man ated an A reed Pr cedure for
`Re'lgases.
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`At oral argument on September 17, 1999, the federal court denied the motion for
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`injunction. The court allowed the parties' direct negotiations to proceed, but ordered defendants'
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`counsel tr notify Mr. Fleming about such discussions. [Exhibit G, Transcript at pp. 16-18]. Afier
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`the federal court approved use of this procedure in Chan-1a, counsel agreed to follow the same
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`proceduriwith respect to theHRNplaintiffs. [Exhibit ll].
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`IIUU02:706597.
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`'—-.—_.__—
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`Aw.
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`E.
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`_ aintiffs flare Sought Iniunetive Relief in Three Other Courts.
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`Immediately after Judge Atlas denied plaintiffs‘ request for an injunction, plaintiffs
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`filed yet another suit in state court claiming defendants were in violation ofthe Petroleum Marketing
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`Practice Act ("PMI'A"). Laura Dimakopoulos, er al. v. Shell Oil Company, at at, in the United
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`States District Court for the Southern District of Texas, Civil Action No. H-99—3546. The PMPA
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`is a fedLral statute which governs the temtination and nonrenewal of petroleum franchise
`relationsl!tips. Plaintifl'sobtainedastatecourtTROintheDimakopoulosactionfromJudgeDonovan
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`sitting as the ancillary judge. Defendants removed Dimakopoulos and it was assigned to Judge
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`Atlas. Plaintiffs dismissed the case.
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`After that failed attempt, plaintiffs’ counsel filed this lawsuit in October, 1999 in their
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`own names. While the petition in this case seeks injunctive relief, plaintiffs never pursued the
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`injunction nor even served defendants with process until February 2000.
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`Instead, plaintiffs attempted to get Judge Brister to enter an injunction in the URN
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`case. A hearing was held in HRN on January 31, 2000, and Judge Brister denied the motion.
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`[Exhibit J; Transcript, pp. 20-29].
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`Having failed to persuade Judgc Brister that defendants had done anything improper,
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`plaintiffs isought and obtained a TRO in this case from Judge Devine sitting as the ancillary court.
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`Plaintiffs now seek a temporary injunction. For the reasons stated below, it should be denied.
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`Ill.
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`PLAINTIFFS CANNOT MEET THE STANDARDS
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`FOR INJUNCTIVE RELIEF
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`Plaintiffs have not met their burden of establishing the required elements for
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`injunctivel relief. To be entitled to a preliminary injunction, plaintiffs must (i) plead a viable cause
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`ofactior'i; (2) demonstrate a probable right to recovery on the merits; and (3) show a probable injury
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`intheinlerim. Henderson3:. KRTS,Inc.,822S.W.2d769, 773(Tex.App.—-Houston [1stDist.] 1992,
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`no writ) Manufacturers Hanover Trust Co. v. Kingston Investors Corp, 819 S.W.2d 607, 610 (Tex.
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`App.-—Houston [lst Dist.] 1991 , no writ). Probable injury "includes the elements ofimminent harm,
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`irreparajle injury, and no adequate remedy at law.” Henderson, 822 S.W.2d at 773; Fasken v.
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`Darby, s01 S.W.2d 591, 592 (Tex. App.--E1Paso 1995, no writ).
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`A.
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`No fihowing of a Probable Right to Recovery on the Merits.
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`“To establish a right to an injunction, the applicant mustgenerally show a probable
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`right to recovery." Liberty 111m. Ins. Co. v. Mustang Tractor & Equip. Ca, 812 S.W.2d 663. 665
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`a probah e right to the relief they seek on the merits.
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`(Tex.Apr-«Houston[14thDist.] 1991,nowrit). Plaintiffshavefailedtodemonstratethattheyhave
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`Plaintiffs’ claimthattheyhavecontingencycontractswiththeirclients.andthey
`interfere%withtheircontingencycontract.
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`claim that a demand by defendants for a release of claims as part of the purchase of a station
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`First, there is no evidence that there is any merit to the underlying claims. Judge
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`Atlas granted defendants’ motions to dismiss in the Chou-la case and the plaintiffs thereafter
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`voluntarily dismissed Cliawla. Plaintiffs also voluntarily dismissed Dinmkopoulis. Motions for
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`summary judgment are pending on HRN and a hearing is set for March 13, 2000 on those motions.
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`Plaintiffs ave presented no evidence to this court demonstrating that they can prevail in the HRN
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`litigation. Without proving that they will prevail in ”RN, there is no evidence that plaintiffs will
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`recover my money on their contingency contracts. Absent some proofofdamage, there can be no
`cause ofa:etion fortortious interference. Kanos, Inc. v. AUZYCorp., 612 N.E.2d 289 (NY. 1993).
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`Second, there is no evidence that defendants have attempted to induce plaintiffs‘
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`clients tT breach theircontracts withplaintiffs. BothJudgeAtlas andJudgeBristerhave ruledthat
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`defendants have a right to seek a release as part ofthe negotiations ofa buy out. Judge Atlas stated:
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`. . . if a business person owning a station or leasing [it] wants to sell
`and doesn't care enough about the lawsuit to call his own lawyer,
`then why should I care?
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`I'm not going to interpret the rule [prohibiting lawyer contact
`with an Opposing litigant] to require [Defendants] to refrain from
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`negotiating with the clients [lessee-dealers] on the business side,
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`because you have ongoing independent business dealings with these
`individuals, and I think you're entitled to do business with them.
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`[Exhibit IG at 16, 18]. And Judge Brister reached exactly the same decision:
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`And it seems to be that it's pretty close to this. Ifthey, you
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`know, in the context of some ongoing or new transaction, you want
`to release all old transactions, it certainly seems like your clients need
`to be advised, you know, don't do that or be careful, call us before
`you do that or something like that, but I don’t see how 1 can tell them
`what kind of perspective contracts they can and can’t enter.
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`[Exhibit 1', p. 20]
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`Consequently, by seeking injunctive relief from other courts, plaintiffs have
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`effectivel destroyed their cause of action in this case. Now a federal judge and a state court judge
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`have stated that if the defendants agree to purchase a station they have a right to ask for a release.
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`That is, defendants had the legal right to engage in negotiations to buy stations and to obtain releases
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`aspart of'[heprocess. Since an allegedly interfering party is privileged toprotectits own legitimate
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`financial interests, plaintiffs have now created a record that would preclude them from ever
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`prevailing on a claim oftortious interference. Hill v. Heritage Resources. Lac. . 964 S.W.2d 89, 124
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`(Tex. App.--E1Paso 1997, pet. denied).
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`Finally, therealproblem hereisthattheplaintiffswantto stoptheirclientsfrom
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`doing deals that are in their clients’ best interest. But their clients have the absolute right to release
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`theirclaims. SeeRule 1.02 oftheTexas StateBarRulesofProfessional Conduct("[A] lawyershall
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`abide by his client's decisions . . . whether to accept an offer of settlement of a matter. . .") “It is
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`axiomatic that the decision to settle a case rests with the client." Artha Management, Inc. v. Som'a
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`Holding], Ltd, 91 F.3d 326, 328 (2d Cir. 1996). So if the plaintiff is willing to release his claims,
`he has thle right to do so if he thinks it is in his best interest. Fleming and Steinberg have no right
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`to demar d that their clients stay in the case because of their contingency interests. Singleton v.
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`Foreman, 435 F .2d 962, 969 (Sth Cir. 1970) (Moreover, it is clear that an attorney never has the
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`light to prohibit his client from settling an action in good faith.") Since they cannot stop their clients
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`directly I my are trying to do so indirectly through their repeated efforts to enjoin defendants. This
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`just hurts their own clients and is often contrary to their client's own best interests. As pointed out
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`by Judge Brister, they have a conflict of'Interest when they try to stop their clients from selling to
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`Shell and signing a release. [Exhibi11,p. 28]2
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`B.
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`__intifl's Face No___lmmincnt, lrrcparable Iniugy.
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`Plaintiffs earnot demonstrate the probable injury element for injunctive relicfbecause
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`they cannot show that they race an Immment, Irreparable hann that leaves them w1th no remedy at
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`law. Beylond this lawsuit, defendants have an ongoing business relationship with the plaintiffs’
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`Counsel for plaintiffs represented at the TRO hearing that they are receiving five
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`letters a day from plaintiffs demanding to be let out of the lawsuit. [See Exhibit J, pp. 26]. Even
`though no! attorney for defendants has done so, they would be authorized to meet with a platntIff If
`he represeitted that he no longer wanted his litigation counsel to be involved. See In re User SJ.stem
`Scn's., Imi. 42 Tex. Sup. Ct. J. 836 (Tcx.1999).
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`1101102:m597._t
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`clients. Shell lessee-dealers. These relationships ltave a fixed term and, in the regular course of
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`businesJ, comeup forrenewal periodically. Defendants have alreadyagreedto exceptthe pending
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`HRN claims for any release signed by a renewing lessee-dealer. Thus, no dealer is threatened with
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`nonrcne'val for failure to execute a release.
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`As recently as Thursday, February 24, 2000, Mr. Fleming’s office sent a letter
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`aflinnin-r that its clients were renewing their dealer agreements and continuing to execute the side
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`letter agreements. [See, Exhibit K, letter from Katrina Von Hcdemann dated February 24, 2000, to
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`Greg Copeland]. Hundreds of dealers have renewed their dealer agreements and the agreed
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`procedures have been followed. When requested, Equilon and Motiva have signed side letter
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`agreements, excluding the Chan-Ia and HRNclaims from the standard release language. [See Exhibit
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`L, Affidavit of Ann Spicgel].
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`With respect to mutual releases, assignments and purchases, counsel for defendants
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`has follchd the procedure dictated by Judge Atlas. Plaintiffs' counsel have routinely asked for and
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`received an exception from the release language contained in documents relating to the approval of
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`an assignment of a station lease to a third party or where the parties agreed to a mutual termination
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`oftheir business relationship. [Id]. As recently as January 3 I , 2000, Motiva agreed, at the request
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`of Shrihari Investment Corp., to modify a Mutual Termination Agreement and Release to exclude
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`the claim - in HRN. [Exhibit M].
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`When the negotiations involve a situationwhere Shell is buying out the lease, counsel
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`has notifieid Mr. Fleming ofthat fact in accordance with the instructions ofJudge Atlas. Subsequent
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`to the hearing in Chan-Ia, there have been approximately 25 situations where plaintiffs potentially
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`were going to be presented with standard paper containing releases. This number represents less
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`IIOUOZJOGSW.l
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`10
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`a
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`than 5%'ofthe total number ofplaintiffs in the litigation and less than 3% ofservice stations at issue.
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`Additionally, in only one Situation involvmg a purchase ofa plaintiff’s station was a release of URN
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`claims sought and obtained. And in that one instance, defendants have agreed to make plaintiffs'
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`counsel co-payee on the check made to the dealer.
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`[Exhibit N]. Thus, plaintiffs Fleming and
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`Steinberg cannot possibly show “interference,“ much less any ham to themselves, from the fact that
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`their clients have sold their stations and have executed releases as to their litigation claims.
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`C.
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`flilanee of Ilardship_s
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`The requested injunction would be detrimental to Shell. It would deprive Shell ofthe
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`right to negotiate the release ofclaims which it clearly has the right to do. Moreover, plaintiffs’
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`requester. injunction would require Shell to monitor a huge volume ofroutine business contact in
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`order to ensure that none of'the plaintiffs is presented with standard release language in the process
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`ofday to -|'.lay work. In light ofShell‘s large volume ofdaily dealer interactions, an injunction would
`place a iiisproportionate burden on Shell
`to prevent prohibited communications with the
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`comparat vely small numb-er of plaintiffs.
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`By contrast, plaintiffs would hear a relatively light burden if an injunction is not
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`entered.
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`IAll they have to do is talk to their clients. As indicated above, Shell has routinely
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`negotiatci‘l exceptions to its standardrelease language. All plaintiffs need do is infomi theirclients
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`when, in the ordinary course of their dealings with Shell, they need to contact their lawyers.
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`Plaintiffs fan then contact defendants’ counsel to work out a mutually acceptable resolution.
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`Because it is far easier for each plaintiffto monitor his own dealings with Shell than
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`it would be for Shell to monitor its thousands o ffranchise relationships to look-out for relatively few
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`special cases, the balance of hardships in this case militates against the entry of an injunction.
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`llOl'll2:706597.
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`IV. CONCLUSION
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`For the foregoing reasons, defendants respectfully submit that the piainti ffs’ request
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`for a tempormy injunction be denied.
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`HOUUZflObS'J'I
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`Respectfully submitted,
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`BAKER BOTTS L.L.P.
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` ._ 98500
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`. Michael Baldwin
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`State Bar No. 01625300
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`Richard A. Brooks
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`State Bar No. 03072700
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`David M. Rodi
`State Bar No. 00797334
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`910 Louisiana
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`Houston, Texas 77002-4995
`(713) 229-1646
`(713) 229-1522 (Facsimile)
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`George C. Hanks
`Wickli ff 8.: Hall
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`l000 Louisiana, Suite 5400
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`Houston, Texas 77002-5013
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`(713) 750-3100
`(713) 229-3101 (Facsimilc)
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`ATTORNEYS FOR DEFENDANTS
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`SHELL on. COMPANY,
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`MOTIVA ENTERPRISES LLC.
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`EQUILON ENTERPRISES LLc,
`EQUIVA SERVICES LLC
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`I'M...“
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`Certificate ofService
`I hereby certify that on the fit day ofM, 2000, a true and correct copy of
`the above and foregoing Defendants’ Objections to Plaintiffs’ Request for a Temporary injunction
`was served on all counsel of record.
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