In the summer of 2011, Tacoma businessman Hatem Shalabi stood at the controls of a small business empire: 22 Arco gas stations sited throughout Western Washington and Oregon. He employed more than 220 workers.
Today Shalabi presides over a single operating station, the big Chevron outlet at Puyallup and Portland avenues. Just seven people are on Shalabi’s payroll.
Seven of his former Arco stations are boarded up awaiting new operators. The others in his former empire were either lost to the banks or leased to others.
Despite his businesses’ shrinkage, Shalabi considers himself fortunate to have survived at all in a two-year fight with one of the world’s largest oil companies, BP, Arco’s parent company.
“God has blessed me,” said Shalabi in his office at the Portland Avenue station. “I have been very fortunate.”
As he spoke recently to The News Tribune, workers were finishing up the rebranding of his flagship station to Chevron and its associated convenience store was getting new signage and decor.
Shalabi didn’t win his David and Goliath fight with Arco over his gas station empire, but he did manage to consolidate control over his largest station, the station near Interstate 5 at Portland Avenue in Tacoma.
That station was the crown jewel of his small empire. At its peak before he and Arco began fighting, Shalabi said the station sold some 973,000 gallons of gasoline a month, making it one of the largest volume stations in Arco’s West Coast network.
For more than a year, Arco effectively cut off gasoline supply to Shalabi’s gas station network, claiming that he was bound by contract when he bought the stations to sell only Arco gas at those stations for 20 years.
Shalabi said Arco manipulated the wholesale price of gasoline to him to squeeze his margin to an unsustainable level and then cut off his gasoline supply when he couldn’t pay his bills as quickly as they wanted.
The oil company, he claimed in court filings, also threatened gasoline distributors with legal consequences if they sold gas to him.
Arco, in court documents, denied Shalabi’s accusations and asked the federal district court to uphold the validity of the deed restrictions permitting him to sell Arco products only. The oil company argued that the price Shalabi’s paid for the stations when he bought them from the oil company factored in the deed restriction provisions.
The immigrant businessman tried to sell unbranded gas obtained from other suppliers, but Arco’s threat of lawsuits halted those deliveries.
Ultimately a Southern California supplier beat Arco in court there and began supplying Shalabi’s mothership station with gas.
But the lack of branding and credit card services kept the volume lower than normal. Before he began rebranding his largest station as a Chevron, he sold about 300,000 gallons a month there, less than a third of what he had sold as an Arco.
According to Shalabi, the often-postponed federal case between him and Arco was dismissed late last summer on what Shalabi called “technical grounds.”
Arco’s lawyers didn’t return phone calls inquiring about the case.
Shalabi said that dismissal means that new owners or lessees of all but his largest station must sell only Arco gasoline. He’s found new operators for most of those stations, but still has seven that are vacant.
In some of those cases, he has brought potential operators to Arco, but the oil company has either rejected them or is taking a long time scrutinizing their credentials.
As for the largest station, Arco agreed to allow Shalabi to rebrand it, the station owner contends. That rebranding, he claims, was allowed because of an environmental dispute over station cleanup that is still pending in court.
“Arco wanted to wash its hands of this station,” he claimed.
Though he lost full control over much of the chain of stations he had created, Shalabi says he would cross swords with Arco all over again.
“It’s been a very difficult time these last two years, but we stuck to it. I would do it again if I had to,” he said.
“I consider myself blessed.”
John Gillie: 253-597-8663