C.K. Smith & Co v. Motiva Enterprises

• Decision Date: 25 October 2001
• Docket Number: No. 01-1161,01-1161
• Citation: 269 F.3d 70
• Court: U.S. Court of Appeals — First Circuit
• Parties: (1st Cir. 2001) C.K. SMITH & CO., INC., Plaintiff, Appellant, v. MOTIVA ENTERPRISES LLC, Defendant, Appellee

Page 70

269 F.3d 70 (1st Cir. 2001)

C.K. SMITH & CO., INC., Plaintiff, Appellant, v. MOTIVA ENTERPRISES LLC, Defendant, Appellee.

No. 01-1161

United States Court of Appeals For the First Circuit

Submitted Sept. 12, 2001

Decided October 25, 2001

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS

[Hon. Nathaniel M. Gorton, U.S. District Judge] Thomas Paul Gorman and Sherin and Lodgen LLP on brief for appellant.

Richard E. Powers, Karen M. Connors, and Zizik, LaSalle & Powers, P.C. on brief for appellee.

Before Torruella and Selya, Circuit Judges, and Lisi,^* District Judge.

SELYA, Circuit Judge.

This appeal requires us to determine whether a franchisor's decision not to renew a service station franchise violated the Petroleum Marketing Practices Act (PMPA), 15 U.S.C. §§ 2801-2841. The ousted franchisee, plaintiff-appellant C.K. Smith & Co., Inc. (CKS), complains that the decision of the franchisor, defendant-appellee Motiva Enterprises LLC, to discontinue the franchise relationship following CKS's failure to execute a renewal lease in a timely manner contravened the PMPA.¹ The district court rejected these importunings, see C.K. Smith & Co. v. Motiva Enters., 126 F. Supp. 2d 34 (D. Mass. 2000), and so do we. The PMPA does not provide any relief for a franchisee who negligently fails to execute renewal documents in a timely fashion. Hence, we affirm the lower court's entry of summary judgment in favor of the franchisor.

I. BACKGROUND

In accordance with the conventional summary judgment praxis, we take the material facts in the light most favorable to the nonmoving party (here, the plaintiff) and indulge all justifiable inferences in that party's favor. McCarthy v. N.W. Airlines, Inc., 56 F.3d 313, 315 (1st Cir. 1995).

CKS is a Massachusetts corporation engaged in myriad fuel-related businesses ranging from home delivery of heating oil to the operation of service stations. One such venture involved a service station in Randolph, Massachusetts. In mid-1989, CKS entered into a three-year lease and sales agreement with Motiva for the Randolph location and thereby established a franchise relationship within the contemplation of the PMPA. See 15 U.S.C. §§ 2801(1)-(2), 2802. The parties renewed the salient agreements (and the franchise relationship) for additional three-year periods in 1992 and 1995. The last of these renewals -- the lease and sales agreement executed on or about August 1, 1995 -- is at the core of the instant case.

The arrangement negotiated in 1995 was scheduled to expire on July 31, 1998. The lease provided, inter alia, that notices from Motiva to CKS would be addressed to the latter's "place of business," identified in the lease as the service station premises.² On March 25, 1998, Motiva mailed a renewal package, containing a proposed renewal lease and sales agreement, to the Randolph location. CKS received the materials, but one of its employees misplaced them.

Nearly one month elapsed without any word from CKS to Motiva about the renewal package. Concerned by CKS's silence, Motiva sent written notice on April 24, 1998, advising CKS that the existing lease and sales agreement between the parties would not be renewed beyond the July 31, 1998 expiration date; that Motiva would terminate the franchise relationship on that date; and that the ground for nonrenewal was the parties' failure to reach agreement as to changes and/or additions to the governing documents. In the same communique, Motiva advised CKS that it stood ready and willing to rescind the notice of nonrenewal in the event that the parties entered into a mutually satisfactory lease and sales agreement for a period extending beyond July 31, 1998. CKS acknowledges that it received the nonrenewal notice.

On June 24, 1998, representatives of both companies met to discuss station maintenance issues and the possibility of a renewed franchise relationship. The parties provide differing accounts regarding the substance of that meeting. CKS's version, which we accept for summary judgment purposes, is that Judith Smith (CKS's president) told Motiva's representatives that she wanted to review the details of a program under which Motiva reimbursed its franchisees for a portion of station repair costs (the so-called "Freedom Five Hundred Manual") before executing any documents, but that she gave no indication that she was rejecting any of the renewal terms proposed by Motiva.

As of July 31, 1998, CKS had not executed the renewal lease and sales agreement. Motiva deemed the franchise relationship at an end, and John Molloy, a Motiva official, called Judith Smith on August 4 to inquire about her plans for vacating the premises. During that conversation, Smith expressed her firm's desire to continue the franchise relationship and, for the first time, voiced a willingness to execute the documents forwarded by Motiva to CKS on March 25. Smith reiterated these sentiments in a follow-up letter of even date. Motiva spurned Smith's entreaties as too little and too late.

On August 10, 1998, CKS filed a complaint in which it claimed that Motiva had violated the PMPA by refusing to renew the lease and franchise relationship. The complaint sought both injunctive relief and money damages. The district court preliminarily enjoined Motiva from terminating the lease and franchise for the Randolph service station.

In due course, the parties cross-moved for summary judgment. In a closely reasoned rescript, the district court granted Motiva's motion and denied Smith's cross-motion. C.K. Smith, 126 F. Supp. 2d at 40. This appeal ensued. At its inception, we stayed the district court's order, see Fed. R. App. P. 8(a), and, therefore, the preliminary injunction remains in effect.

II. DISCUSSION

We begin our analysis by limning the applicable standard of review. We next offer an overview of the pertinent portions of the PMPA, and then turn to the merits of the plaintiff's remonstrances.

A. Standard of Review.

We review the district court's entry of summary judgment de novo. Suarez v. Pueblo Int'l, Inc., 229 F.3d 49, 53 (1st Cir. 2000). Such peremptory relief is justified only "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c). Thus, to escape summary judgment, CKS, as the party bearing the ultimate burden of proof, must "affirmatively point to specific facts that demonstrate the existence of an authentic dispute." McCarthy, 56 F.3d at 315. The parameters of this duty are familiar: the contested facts must be material and the contest over them must be genuine. Id. Moreover, those facts must be backed by competent evidence. Garside v. Osco Drug, Inc., 895 F.2d 46, 48 (1st Cir. 1990).

Because CKS is the party opposing summary judgment, this court, like the court below, must test the adequacy of its proffer by resolving all conflicts in the record favorably to it and drawing all reasonable inferences to its advantage. Perez v. Volvo Car Corp., 247 F.3d 303, 310 (1st Cir. 2001). There are, however, limits to this indulgence: a reviewing court need not heed "conclusory allegations, improbable inferences, [or] unsupported speculation." Medina-Munoz v. R.J. Reynolds Tobacco Corp., 896 F.2d 5, 8 (1st Cir. 1990).

B. The PMPA: An Overview.

The PMPA, 15 U.S.C. §§ 2801-2841, governs franchise arrangements for the sale, consignment, or distribution of motor fuel. Congress enacted this statutory regime primarily to protect motor fuel franchisees by leveling the playing field between them and their franchisors (typically, large oil companies). See Four Corners Serv. Station, Inc. v. Mobil Oil Corp., 51 F.3d 306, 310 (1st Cir. 1995); Veracka v. Shell Oil Co., 655 F.2d 445, 448 (1st Cir. 1981). To accomplish this objective, the PMPA establishes minimum standards designed to prevent arbitrary or discriminatory discontinuance of franchise agreements. See Chestnut Hill Gulf, Inc. v. Cumberland Farms, Inc., 940 F.2d 744, 746 (1st Cir. 1991). In the paragraphs that follow, we delineate those features of the statute that underpin this appeal.

In the first place, it should be understood that the PMPA makes a distinction between a "franchise" and a "franchise relationship." As used in the PMPA, the term "franchise" covers the essential contracts between a retailer and a supplier (e.g., lease of retail premises, provision of motor fuel, use of the supplier's trademark in connection with retail sales). 15 U.S.C. § 2801(1). The broader term "franchise relationship" encompasses "the respective motor fuel marketing or distribution obligations and responsibilities of a franchisor and a franchisee which result from the marketing of motor fuel under a franchise." Id. § 2801(2). Congress created the legal rubric of a franchise relationship to preclude oil companies from asserting that because a franchise no longer exists after it expires, there is nothing left to renew. See S. Rep. No. 95-731, at 30 (1978), reprinted in 1978 U.S.C.C.A.N. 873, 888; see also DuFrense's Auto Serv., Inc. v. Shell Oil Co., 992 F.2d 920, 926 n.4 (9th Cir. 1993). Thus, even if the underlying agreements expire, the PMPA protects the franchise relationship by obligating the franchisor to renew the franchise, 15 U.S.C. § 2802(a)(2), unless the franchisor satisfies the requirements set forth in 15 U.S.C. § 2802(b) (discussed infra).

The PMPA maintains this binary approach in addressing a franchisor's right to discontinue an extant business relationship with a franchisee, specifically limiting both the franchisor's ability to "terminate any franchise" and its "fail[ure] to renew any franchise relationship." Id. § 2802(a)(1)-(2). Inasmuch as the instant case revolves around an expired lease agreement, our analysis focuses on the PMPA provisions pertaining to a ...