Facts

Plaintiff Elias Atallah operated a Riverside County gas station, owned by Equilon Enterprises, dba Shell Oil Products, US (Shell), for 10 years as a franchisee. Shell decided to sell the station and under the franchise agreement, Atallah had the right to buy the station. Atallah believed Shell was not operating in good faith and brought suit against Shell to enforce his right of first refusal.

Atallah contended that just prior to settling the first suit and agreeing to the sale, Shell learned that Atallah's station would soon be subject to the imposition of potentially costly additional protections and safeguards, being demanded by the Santa Ana Watershed Project Authority (SAWPA), and the California Regional Water Quality Control Board (CRWQB), because of the proximity of Atallah's (and other gas stations) to water wells that were going to convert to drinking water. Atallah further contended that, just about the time Shell was agreeing to sell Atallah his station and settle the litigation, the water agencies began meeting with Shell representatives to discuss expensive contingency plans, containment systems and indemnity agreements. None of this was disclosed to Atallah or his attorney.

The sale of the station to Atallah required a closure of the station so Shell could pull its Underground Storage Tanks (UST). During the original four-month escrow, an environmental monitor on the site was damaged during the tank removal process, causing an additional two-month delay in the close of escrow. Atallah contended that, during the entire escrow period, Shell employees continued to meet with the water agencies. Reportedly, the meetings took place about every month to month and half where the demands became more substantial. Indeed, because of the demands, Shell elected to close another station it had across the street from Atallah's station. None of this was disclosed to Atallah.

Because of the extended escrow, in October 2003, but unbeknownst to Atallah, the Conditional Use Permit (CUP) on his station expired. Atallah finally discovered the loss of the CUP in early 2004 when he applied for his own underground storage tank (UST) permit. However, the loss of the CUP allowed the water agencies to legally contest a reissuance of the CUP. They were ultimately successful. In 2005, SAWPA petitioned the court for a writ of mandamus and declaratory relief seeking to enjoin Atallah from reestablishing the property as a working gas station. Atallah was never able to obtain his CUP because of SAWPA's legal challenges and demands for compliance with CEQA.

In 2005, having learned of all the activity that Shell knew about, Atallah filed suit against Shell alleging a single cause of action for fraud. In 2006, a jury found Shell liable for intentional fraud and concealment and awarded Atallah $1.65 million in compensatory damages. The jury also found that Shell had acted with "oppression, malice, or fraud." However, the court ruled that the evidence of Shell's financial condition was insufficient and dismissed the jury before punitive damages could be addressed.
Shell appealed the jury verdicts and Atallah appealed the court's punitive damage ruling. In late 2008, the appellate court upheld Atallah's damage award and ruled that Atallah could go forward with the punitive damages phase. The case then went to trial on the punitive damages phase only.

The court instructed the jury that it was bound by the determination of the prior jury that Shell had acted with oppression, fraud, or malice and admitted into evidence the first jury's special findings to that effect.

PLAINTIFF'S CONTENTIONS:
Atallah contended that Shell deceived him and acted with fraud, oppression, or malice when it intentionally concealed the water agency activities from him. Atallah contended that the punitive damage award should be based primarily on Shell's gross revenue and not its net worth or net profits because of the manner in which it maintained its accounting systems.

DEFENDANT'S CONTENTIONS:
Shell argued that no punitive damages should be awarded because Atallah had already been fully compensated. Shell contended that it had admitted it was wrong and had changed its procedures. As such, Shell argued, no punitive damages were necessary to deter similar conduct in the future or punish.

Damages

Atallah sought punitive damages.

Result

The jury awarded Atallah $50 million in punitive damages.

Other Information

Shell was represented by different attorneys at each phase of the proceedings.

Deliberation

1.5 days

Length

11 days