Aldin Associates Limited Partnership v. Hess Corp.

ALDIN ASSOCIATES LIMITED PARTNERSHIP v. HESS CORPORATION

No. X04HHDCV106016873S

Superior Court of Connecticut, Judicial District of Hartford, Hartford, Complex Litigation Docket

January 7, 2019

UNPUBLISHED OPINION

OPINION

Budzik, J.

The plaintiff, Aldin Associates Limited Partnership (Aldin), sues the defendant, Hess Corporation (Hess), in three counts alleging Hess violated the Connecticut Petroleum Franchise Act (CPFA), General Statutes § 42-133j et seq., breached the covenant of good faith and fair dealing, and violated the Connecticut Unfair Trade Practices Act (CUTPA), General Statutes § 42-110a et seq. The case was tried to the court from August 13, 2018 through August 24, 2018. The court heard ten days of testimony from seven witnesses. The parties introduced more than 300 exhibits. This is the second time this case has been tried.^[1] Based on the evidence presented at trial and for the reasons set forth below, the court finds for Hess on each count of the complaint and, therefore enters judgment in Hess’s favor.

FACTS

As the trier of fact, the court must weigh the evidence and determine the credibility of witnesses. Connecticut Light & Power Co. v. Proctor, 324 Conn. 245, 259, 152 A.3d 470 (2016). It is the exclusive province of the trier of fact to weigh the conflicting evidence, determine the credibility of witnesses, and determine whether to accept some, all or none of a witness’ testimony. Palkimas v. Fernandez, 159 Conn.App. 129, 133, 122 A.3d 704 (2015). With these principles in mind, the court makes the following factual findings.

Aldin is a limited partnership 100% controlled by David Savin. Mr Savin is an accomplished and sophisticated businessman. Mr Savin started Aldin in 1982. By 2010, Aldin employed approximately 300 to 350 employees and had gross revenues of approximately $ 250 to $ 300 million. Aldin is primarily a wholesale gasoline supplier to independently owned gas stations and to Aldin owned gas stations. Aldin also operates convenience stores at many of its Aldin owned gas stations. During the relevant time period, Aldin operated and supplied approximately 50 Aldin-owned gas stations and supplied gasoline to approximately 25 to 30 independently owned stations. Aldin has experience doing business with oil companies such as Mobil, Shell, Exxon, BP, Citgo, and Sunoco.

Hess Corporation is a multinational oil company with billions of dollars in annual revenue. Hess refines and sells gasoline for sale throughout the United States at both the wholesale and retail levels. Hess operates approximately 870 company owned gas stations in the eastern United States and has franchisee relationships with approximately 100 Hess branded gas stations in the eastern United States. Hess branded stations are required to post Hess signage and color schemes and operate according to the rules set forth in their Hess franchise agreements.

In 2000, Hess bought the Merit chain of gas stations. The Merit chain included 16 gas stations in Connecticut. Because Connecticut law forbids a gasoline refiner like Hess from directly owning more than one gas station in Connecticut, Hess was required to divest itself of 15 of the previously Merit branded gas stations in Connecticut. Aldin expressed an interest in the Merit stations. Ultimately, Aldin entered into franchisee agreements with Hess for six of the former Merit stations. Four of those stations (New Haven, East Haven, West Haven, and Groton) are the subject of this law suit.

Under the franchise agreements with Aldin, Hess agreed to lease the stations to Aldin and Aldin agreed to purchase only Hess branded gasoline for retail sale at each location. The franchise agreements also required Aldin to use Hess signage and branding and to sell a minimum volume of gasoline each year. In addition to monthly lease payments for each location, Aldin also paid Hess a total of $ 983, 000 to enter into the franchise agreements. A pro rata portion of this purchase price was refundable to Aldin if Aldin terminated any of the franchise agreements at any point during the initial lease period. The franchise agreements initially ran for five-year terms and then were renewed by Aldin and Hess every three years. Each of the four stations was subject to a separate franchise agreement. The three Haven stations were subject to separate franchise agreements running from 2000 to 2005, 2005 to 2008, and 2008 to 2011. The Groton station was subject to a franchise agreement running from 2002 to 2007, 2007 to 2010, and 2010 to 2013.

Although Aldin sought and received several relatively minor changes to the franchise agreements at the time the agreements were initially signed, the lease agreements are largely standard franchise agreements offered by Hess. The franchise agreements did not change in any material way after they initially went into effect. Under the agreements, Aldin was required to purchase gas from Hess at "Hess’s dealer tank wagon prices in the marketing area of the Station, as determined by Hess, for the grades and quantities delivered, in effect at the time of delivery ... All prices are subject to change at any time without notice." "Dealer tank wagon," or "DTW," pricing is a common gasoline industry term, but not one with a standard definition. Different oil companies calculate DTW prices in different ways.^[2] As relevant to this case, DTW simply means the price of gas delivered to the station, as opposed to what is known in the oil industry as the "rack" price, which is the price a retailer or distributor pays if it picks up gas at the wholesale distribution terminal.^[3]

Important to Aldin’s claims is the fact that none of the four stations were in prime locations, nor did they include modern amenities that gasoline consumers value. For example, none of the locations were on a busy street corner, and some locations were difficult to access from a major road. None of the stations had a full service convenience store, a car wash, attractive restrooms (relatively speaking), open and convenient traffic patterns or modern fuel dispensers. As a result, Aldin strongly contends, and Hess does not appear to seriously dispute, that Aldin had to set gasoline prices at or near the bottom of the local market to attract customers to the four stations.

From 2001 through 2004, Aldin and Hess’s relationship went well, at least from Aldin’s perspective. In 2001, Aldin made $ 614, 818 in profit on the stations and achieved a net margin of 8.21 cents per gallon.^[4] In 2002, those figures were $ 612, 083 and 8.1 cents, respectively. In 2003, $ 672, 642 and 7.67 cents. In 2004, $ 532, 305 and 8.0 cents. Beginning in 2005, Aldin claims Hess began violating its agreement with Aldin regarding how Hess was to price the gas it sold to Aldin (and that, under the franchise agreements, Aldin was obligated to buy). In 2005, Aldin made a profit of $ 428, 498 on the four stations and achieved a net margin of 7.71 cents per gallon. In 2006, those figures were $ 162, 109 and 6.6 cents. In 2007, $ 228, 330 and 6.83 cents. In 2008, $ 190, 475 and 7.46 cents. In 2009, $ 198, 210 and 7.76 cents. In 2010, $ 64, 409 and 9.29 cents. In 2011, $ 165, 882 and 9.48 cents. Over the approximately ten-year life of the franchise agreements, Aldin made a total of $ 3, 869, 761 in profit and sold gas for an average net margin of 7.83 cents a gallon. During the years that Aldin sues over (2005-2011), Aldin made a total profit of $ 1, 437, 913 and achieved a net margin of 7.73 cents per gallon. Aldin contends it was only able to achieve a relatively high net margin per gallon during the disputed period by maintaining relatively high gas prices and that those prices hurt Aldin’s overall sales volume.^[5] In 2004, Aldin sold about 12.6 million gallons of gas at the four stations. By 2011, that volume had declined to 7.7 million gallons.

The facts found above by the court are largely undisputed by the parties. The court now turns to resolving contested factual issues.

The focus of the parties’ dispute revolves around two key issues: whether Hess promised to set its DTW prices in such a way as to allow Aldin to achieve an 8 cents per gallon margin while still selling the same volume of gas as when Merit owned the stations, and, relatedly, the meaning of the DTW pricing language in the franchise agreements.

With respect to Aldin’s claim that Hess agreed to an 8 cents per gallon profit margin, the court concludes that the evidence that there was such an agreement is, at best, equivocal, and, therefore, the court finds that Aldin failed to carry its burden of showing that, more likely than not, there was such an agreement. See Lopinto v. Haines, 185 Conn. 527, 533, 441 A.2d 151 (1981) (burden of proof in civil actions is on plaintiff to prove essential elements of cause of action by fair preponderance of evidence). In making this factual finding, the court begins by noting that while the court viewed each of the witnesses who testified on this point as testifying in good faith and to the best of their recollection, each witness was, nevertheless, testifying as to their recollection of one or two conversations that occurred 18 years ago. Each witness’ testimony was, understandably, somewhat vague, lacking in detail, and contradictory to each of the other witnesses on key points.

More specifically, Mr. Savin testified that in June of 2000, and before agreeing to the initial franchise agreements, he met for about two hours with Hess’s representative, David McAfee at Aldin’s offices in East Hartford. Mr. Savin testified that, at this meeting, he and Mr. McAfee discussed the general pricing methodology used by Hess to set DTW prices each day^[6] and that, as part of this discussion, Mr. McAfee orally promised that Hess would set...