Karak v. Bursaw Oil Corp.
| Decision Date | 30 May 2001 |
| Docket Number | No. Civ.A. 01-10727-RCL.,Civ.A. 01-10727-RCL. |
| Citation | 147 F.Supp.2d 9 |
| Parties | Elie N. KARAK and Russell and Elie Incorporated d/b/a Newton Mobil, Plaintiffs, v. BURSAW OIL CORPORATION, Alliance Energy Corp. and National Development of New England, Defendants. |
| Court | U.S. District Court — District of Massachusetts |
Richard P. Blaustein, Boston, MA, for Elie N. Karak, Russell & Elie Incorporated dba Newton Mobil, plaintiffs.
Raymond S. Ewer, Tennant & Ewer, Newton, MA, for Bursaw Oil Corporation, Alliance Energy Corporation, National Development of New England, defendants.
MEMORANDUM AND ORDER ON PLAINTIFFS' MOTION FOR PRELIMINARY INJUNCTION AND DEFENDANTS' MOTION TO DISMISS
Before the court are the plaintiffs' Emergency Motion for Mandatory or Prohibitive Injunctive Relief and Interim Equitable Relief (Docket No. 2) and the defendants' Motion to Dismiss (Docket No. 6). On May 10, 2001, a hearing was held on the motions. For the reasons stated below, the plaintiffs' motion is denied and the defendants' motion is allowed.
I will summarize the general background facts of the case, reserving other details for discussion with the issue raised. The plaintiffs, Elie Karak and Russell and Elie Inc., sell motor fuel at a retail service station in Newton, Massachusetts. The property is owned by Randolph Corporation, which is a wholly owned subsidiary of the defendant, Bursaw Oil Corp. ("Bursaw" or the "defendant"). Bursaw is a wholesaler and distributor of motor fuel products. Commencing in 1989, the parties began a series of agreements both to lease the property to the plaintiffs and to supply the station with motor fuel products. The most recent agreement between the parties with respect to the sale of motor fuel products, the Gasoline Consignment Agreement (the "Agreement"), effective beginning July 1, 1997, sets forth the current relationship of the parties. Details of the Agreement are set forth in the discussion section below.1
On or about February 20, 2001, the plaintiffs met with representatives from Bursaw. The plaintiffs were informed that their lease would not be renewed because the Newton station had been sold to a third party. On March 28, 2001, the plaintiffs received a thirty day notice to quit the premises. On April 27, 2001, the plaintiffs filed an Emergency Motion for Mandatory or Prohibitive Injunctive Relief and Interim Equitable Relief to prevent Bursaw from forcing them to quit the premises. The motion was based upon an alleged violation of the Petroleum Marketing Practices Act ("PMPA" or the "Act"), 15 U.S.C. §§ 2801-2841, which sets forth the permissible grounds for termination or nonrenewal of franchise relationships respecting the sale of motor fuels. The parties reached an interim agreement, holding in place the proceedings concerning termination of the lease pending a ruling from this court on the emergency motion. On May 7, 2001, the defendants filed a motion to dismiss asserting that the court lacked subject matter jurisdiction of the plaintiffs' claims. On May 10, 2001, the court held a hearing on the motions. Following the hearing, both parties submitted additional arguments and supporting materials.
The basis for the plaintiffs' motion for preliminary injunction is that the defendants violated the PMPA when they terminated or failed to renew the plaintiffs' lease. In opposition to the plaintiffs' motion, the defendants argue that PMPA does not apply to the relationship between the parties in this case; that the emergency motion therefore should be denied; and that count I of the amended complaint, which alleges a violation of the PMPA, should be dismissed for lack of subject matter jurisdiction.
I do not view the controversy as one in fact about jurisdiction. Based on the well-pleaded facts in the plaintiffs' amended complaint and drawing all reasonable inferences in favor of the plaintiffs, I cannot determine that the plaintiffs have failed to allege subject matter jurisdiction. See Pejepscot Indus. Park, Inc. v. Maine Cent. R. Co., 215 F.3d 195, 197 (1st Cir. 2000) (). Rather, the defendants' motion and the gravamen of the dispute between the parties is best characterized as one testing whether the plaintiffs can establish an essential element of their claim under the PMPA, namely whether a "franchise relationship" exists between the parties as the Act requires. Indeed, the parties have argued the matter as one for summary judgment. They have relied on matters outside of the pleadings, which they say are necessary to decide defendant's motion to dismiss and, by notice of the court, they have submitted additional argument and materials on the contested issue. See Maldonado v. Dominguez, 137 F.3d 1, 5 (1st Cir.1998) (). Had the defendants' motion to dismiss for lack of subject matter jurisdiction been appropriate, treatment of the motion as one for summary judgment would not have been necessary. See Dynamic Image Technologies, Inc. v. United States, 221 F.3d 34, 37 (1st Cir.2000) (). Therefore, I will treat the defendants' motion as one for summary judgment, raising the question of whether the plaintiff has a trialworthy claim under the PMPA. See Higgins v. New Balance Athletic Shoe, Inc., 194 F.3d 252, 258 (1st Cir.1999) ().
The PMPA was enacted by Congress to govern exclusively the area of termination and non-renewal of retail service station franchise relationships. See 15 U.S.C. § 2806(a). Section 2806(a) preempts any state law, statutory or common, in the area of termination or nonrenewal that is different than the PMPA. Section 2806(a) states:
To the extent that any provision of this subchapter applies to the termination ... of any franchise, ... no State or any political subdivision thereof may adopt, enforce, or continue in effect any provision of any law or regulation (including any remedy or penalty applicable to any violation thereof) with respect to termination ... of any such franchise ... unless such provision of such law or regulation is the same as the applicable provision of this subchapter.
Congress specifically set forth the permissible grounds for termination or nonrenewal of franchise relationships, and bestowed on federal courts jurisdiction to remedy violations of the PMPA. Generally, termination of a franchise relationship must have as its basis one of the grounds set forth in §§ 2802(b)(2) and 2802(b)(3),2 and must be undertaken in compliance with the procedural notice requirements of § 2804.3 At the hearing on this matter on May 10, 2001, the defendants acknowledged that they have failed to comply with the requirements of the PMPA, but contend that they were not required to do so because the PMPA does not apply to this case. Specifically, the defendants contend that the parties' relationship does not meet the definition of a "franchise relationship," set forth in the PMPA.
The PMPA provides that a "franchise relationship" only can exist between a "refiner and a distributor," a "refiner and retailer," a "distributor and another distributor," or a "distributor and a retailer" of motor fuels. See 15 U.S.C. §§ 2801(1)(A)(i)-(iv). The defendants acknowledge that they fall within the definition of a "distributor." Therefore, the gist of the dispute between the parties is whether the plaintiffs fall within the statutory definition of "retailer."4 Absent a showing by the plaintiffs that they are within the class Congress intended to protect, there is no coverage under the PMPA, general contract principles govern, and the plaintiffs' motion must be denied.
The starting point for this analysis, of course, is the Act itself, which states in pertinent part: "The term `retailer' means any person who purchases motor fuel for sale to the general public for ultimate consumption." 15 U.S.C. § 2801(7) (emphasis added). To determine whether the plaintiffs "purchase[] motor fuel," the court must look to the relationship between the parties as set forth in the Agreement.
Pursuant to the Agreement, the defendants undertake to use "reasonable efforts to keep in the underground storage tanks ... a quantity of motor fuels sufficient to furnish [the plaintiffs] with such amounts thereof as [the plaintiffs] may desire to purchase from [the defendants]." The defendants own and maintain the underground tanks. The plaintiffs are licensed to withdraw from the tanks as much motor fuel as the plaintiffs may wish to purchase at the retail price, which is set by the defendants, less nine cents per gallon. Title to the motor fuel stored within the tanks remains with the defendants until the plaintiffs withdraw the fuel from the tank. Withdrawal by the plaintiffs constitutes delivery to the plaintiffs of the quantities of motor fuel withdrawn, and title to that quantity of fuel passes to the plaintiffs. The plaintiffs have no right to prepay for any quantities of motor fuel that the plaintiffs may anticipate selling; nor do the plaintiffs have any rights or obligations with respect to the fuel stored in the underground tanks.
At first blush, it seems that the plaintiffs do "purchase" motor fuel from the defendants. Indeed, the Agreement states several times that the plaintiffs "purchase" the motor fuel from the defendants....
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