By John Donovan
We recently published an article about how the management of Shell Oil Products in the USA had for a number of years turned a blind eye to a lube chain in Illinois blending Shell’s Pennzoil oil brand with a cheaper product and selling it to consumers as Pennzoil.
Apart from the consumer fraud aspect, Shell management also failed to protect Shell employees from threats of violence by the management of the lube chain, The Grease Spot, Inc. The lube chain and Shell Oil Company both had reasons to keep a lid on the scandal.
Consumer fraud involving Pennzoil and Shell Oil Products:
Information from a Shell insider led us to electronically search US Court files for current litigation involving Shell Oil Products, Shell Lubricants and Pennzoil seeking confirmation of further misdeeds by Shell management.
The results provide evidence of predatory practices by Shell against small American companies, in line with Shell’s ruthless conduct in the UK, as revealed in a recent article authored by me. This is the first article stemming from the search. Another case involving Pennzoil will follow almost immediately. More articles will be published as we proceed to search the US courts for current litigation cases involving Shell and/or its subsidiaries.
THE WEXCO CASE: Case 2:04-cv-05244-JLL-CCC
Wexco Industries, a company located in New Jersey with 19 employees, is a supplier of windshield wiper products. It used to source them from ADM, a Korean company. Wexco in turn had a contract to supply the products to Shell. After months of Wexco negotiating in good faith to secure a new contract with Shell, the company discovered Shell had gone behind their back direct to ADM. As was stated succinctly in the complaint filed on behalf of Wexco on October 26, 2004, “the facts underlying this dispute exemplify the classic run-around scenario”.
Unfortunately for Shell, in a deposition in August 2006 a representative of ADM revealed during his examination that Shell had disclosed to ADM confidential information concerning the covert negotiations between Shell and Wexco. In doing so, Shell had acted in breach of confidence and breach of contract. It had committed these serious breaches during the period of several months when it was still in negotiation with Wexco: a blatant act of bad faith. Shell had even requested more information from Wexco while negotiating directly with ADM.
As a result of the admissions, Wexco filed an Amended Complaint on January 2, 2007. Apart from claiming breach of confidence and breach of contract it also alleged that Shell had acted fraudulently.
This is the relevant extract from the Amended Complaint (SOPUS is an abbreviation for Shell Oil Products US) : –
COMMON LAW FRAUD / FRAUDULENT MISREPRESENTATION AGAINST SOPUS
71. Wexco incorporates the allegations contained in Paragraphs 1 through 70 of this Complaint and Demand for Jury Trial as though fully set forth herein.
72. SOPUS made misrepresentations regarding its good faith in negotiating new terms and conditions, specifically its intent to maintain an exclusive supply relationship with Wexco. SOPUS communicated to Wexco on several occasions that it continued to negotiate in good faith and it wished to continue operations and negotiations with Wexco. Furthermore, SOPUS made misrepresentations regarding its intention to enter into a new agreement have a two (2) year duration.
73. SOPUS’s communications regarding its good faith in negotiation new terms and conditions, specifically its intention to continue an exclusive relationship with Wexco and its intention to enter into a two (2) year agreement, were made intentionally and with the knowledge that Wexco would rely on the representation. SOPUS made these misrepresentations at a time when it was negotiating directly with ADM.
74. Wexco relied on SOPUS’s fraudulent misrepresentations in order to meet and fulfill its obligations under the ADM Agreement.
75. SOPUS’s fraudulent misrepresentations have caused actual damage to Wexco.
On August 17th, 2007, a Magistrate Judge in the United States District Court of New Jersey granted permission to Wexco to file a Second Amended Complaint against Pennzoil-Quaker State Co., Shell Oil Products and Shell Lubricants US. The attorneys acting for Wexco are Mandlebaum, Salsburg, Gold. Lazris & Discenza, P.C. located in New Jersey and New York law firm, Stroock & Stroock & Lavan LLP.
David Pirret, currently Executive Vice President of Shell Lubricants, was the senior SOPUS executive during the period the above events took place.
The high command of Shell has been given advance sight of this article. This is the comment authorised by Shell: –
As always, you should never assume that failure to deny your assertions is an admission on Shell’s part, nor should you represent this to be so on this occasion, or ever
The relevant correspondence with Royal Dutch Shell can be viewed via this link:
The email was sent to Richard Wiseman, General Counsel of Shell International, and copied to Jeroen van der Veer, CEO of Royal Dutch Shell Plc; Jorma Ollila, Chairman of the company; Michiel Brandjes, Company Secretary and General Counsel Corporate; David Pirret, Vice President of Shell Lubricants; John Hofmeister, President of Shell Oil Company and Michael Wilson, a lawyer at Shell Oil Products;
UNITED STATES DISTRICT COURT OF NEW JERSEY (SELECTION OF COURT DOCUMENTS)
Wexco Motion for Leave to File a Second Amended Complaint (filed 1 Feb 2007)
Declaration of Laura Goldbard (filed 1 Feb 2007)
The case continues.