34 F.3d 220 (4th Cir. 1994), 92-2242, Mobil Oil Corp. v. Virginia Gasline Marketers and Automotive Repair Ass'n, Inc.

Docket Nº:92-2242, 92-2244 and 92-2256.
Citation:34 F.3d 220
Party Name:MOBIL OIL CORPORATION, Plaintiff-Appellee, v. VIRGINIA GASOLINE MARKETERS AND AUTOMOTIVE REPAIR ASSOCIATION, INCORPORATED, Defendant-Appellant, and Attorney General of the Commonwealth of Virginia; Commissioner of Agriculture and Consumer Services of Virginia, Defendants, Minnesota Service Station Association; Iowa Retail Gasoline and Automotive Tr
Case Date:July 19, 1994
Court:United States Courts of Appeals, Court of Appeals for the Fourth Circuit

Page 220

34 F.3d 220 (4th Cir. 1994)

MOBIL OIL CORPORATION, Plaintiff-Appellee,

v.

VIRGINIA GASOLINE MARKETERS AND AUTOMOTIVE REPAIR

ASSOCIATION, INCORPORATED, Defendant-Appellant,

and

Attorney General of the Commonwealth of Virginia;

Commissioner of Agriculture and Consumer Services

of Virginia, Defendants,

Minnesota Service Station Association; Iowa Retail Gasoline

and Automotive Trades Association; North Dakota Petroleum

Marketers Association; Service Station Dealers Association

of Michigan; Wisconsin Retail Gasoline and Automotive

Trades Association; Service Station Dealers of America,

Amici Curiae.

MOBIL OIL CORPORATION, Plaintiff-Appellee,

v.

ATTORNEY GENERAL OF THE COMMONWEALTH OF VIRGINIA, Defendant-Appellant,

and

Commissioner of Agriculture and Consumer Services of

Virginia; Virginia Gasoline Marketers and

Automotive Repair Association,

Incorporated, Defendants,

Minnesota Service Station Association; Iowa Retail Gasoline

and Automotive Trades Association; North Dakota Petroleum

Marketers Association; Service Station Dealers Association

of Michigan; Wisconsin Retail Gasoline and Automotive

Trades Association; Service Station Dealers of America,

Amici Curiae.

MOBIL OIL CORPORATION, Plaintiff-Appellant,

v.

ATTORNEY GENERAL OF THE COMMONWEALTH OF VIRGINIA; Virginia

Gasoline Marketers and Automotive Repair

Association, Incorporated, Defendants-Appellees,

and

Commissioner of Agriculture and Consumer Services of

Virginia, Defendant,

Minnesota Service Station Association; Iowa Retail Gasoline

and Automotive Trades Association; North Dakota Petroleum

Marketers Association; Service Station Dealers Association

of Michigan; Wisconsin Retail Gasoline and Automotive

Trades Association; Service Station Dealers of America, Amici Curiae.

Nos. 92-2242, 92-2244 and 92-2256.

United States Court of Appeals, Fourth Circuit

July 19, 1994

Argued Sept. 30, 1993.

Page 221

[Copyrighted Material Omitted]

Page 222

ARGUED: Peter Robert Messitt, Asst. Atty. Gen., Office of Atty. Gen., Richard McPhail Bing, Elmore, Pearce & Bing, Richmond, VA, for appellants. Dimitri George Daskal, Alexandria, VA, for amicus curiae Service Station Dealers of America. Thomas G. Slater, Jr., Michael J. Lockerby, Jr., Hunton & Williams, Richmond, VA, for appellee. ON BRIEF: Stephen D. Rosenthal, Atty. Gen. of VA, Eric K. G. Fiske, Asst. Atty. Gen., Office of Atty. Gen., Richmond, VA, Gerald M. Bowen, Mc Lean, VA, for appellants. R. Hewitt Pate, Michael C. Whitticar, Hunton & Williams, Richmond, VA, Edward H. Beck, III, Mobil Oil Corp., Fairfax, VA, for appellee. Randy V. Thompson, Persian, MacGregor & Thompson, Minneapolis, MN, for amici curiae Minnesota Service Station Ass'n, et al.

Before ERVIN, Chief Judge, HALL, Circuit Judge, and CHAPMAN, Senior Circuit Judge.

Affirmed in part and reversed in part by published opinion. Senior Judge CHAPMAN wrote the majority opinion, in which Judge HALL joined. Chief Judge ERVIN wrote a dissenting opinion.

OPINION

CHAPMAN, Senior Circuit Judge.

This case addresses the validity of amendments to the Virginia Petroleum Products Franchise Act under the United States and Virginia Constitutions. These amendments, known collectively as S.B. 235, prevent the inclusion of certain terms in agreements between petroleum refiners and their franchisees. Mobil Oil Corporation brought suit against the Attorney General of Virginia seeking a declaratory judgment that S.B. 235 is unconstitutional and an injunction preventing S.B. 235's enforcement. The Attorney General appeals the district court's determination that the Petroleum Marketing Practices Act, 15 U.S.C.A. Secs. 2801-2806 (West 1982), preempts all but the "rent control" provision of S.B. 235, and that S.B. 235 violates the Virginia Constitution's prohibition on special laws. Mobil appeals the district court's grant of summary judgment against Mobil on its claims: (1) that S.B. 235 violates the Contract and Takings Clauses of the United States Constitution, (2) that the Act is preempted by the Lanham Act, and (3) that the "rent control" provision is preempted by the PMPA.

I.

Mobil Oil Corporation is involved in all aspects of the petroleum industry, including exploration, drilling, production, refining, and distribution. Mobil brand petroleum products are marketed to the public through service stations, most of which fall into one of four categories:

1) SALOPS (Salary Operated), which are owned and operated by Mobil and staffed with salaried personnel;

2) OG & L (Owned Station, Ground Lease Station and Leased Station), which are operated by franchisees who lease their stations and equipment from Mobil;

3) N (no lease dealers) operated by independent owners, who purchase Mobil petroleum

Page 223

products under franchise agreements; and

4) Distributor Stations, which are owned and operated by wholesale distributors of Mobil products.

The Petroleum Marketing Practices Act (PMPA) governs the relationships between petroleum refiners and their retail franchisees. The PMPA's primary purpose is to protect petroleum franchisees from arbitrary or discriminatory terminations and nonrenewals. S.Rep. No. 731, 95th Cong., 2d Sess. 15, reprinted in 1978 U.S.C.C.A.N. 873, 874. This Act also serves two secondary purposes: to provide uniformity in the law governing petroleum franchise termination and nonrenewal, and to allow franchisors flexibility in dealing with franchisee misconduct or changes in market conditions. 1978 U.S.C.C.A.N. at 877. It expressly preempts state law governing termination or nonrenewal which differs from its provisions. 15 U.S.C.A. Sec. 2806(a).

The Virginia Petroleum Products Franchise Act (VPPFA) also regulates the refiner-franchisee relationship. Va.Code Ann. Secs. 59.1-21.8 to -21.18(1) (Michie 1992). S.B. 235 became effective as an amendment to the VPPFA in July 1990 and contains:

1) a prohibition on gasoline purchase or sales quotas (the "no quotas" provision) (59.1-21.16:2(C));

2) a prohibition, with an exception not relevant here, on refiner-required hours of operation exceeding sixteen consecutive hours per day or six days per week (the "no minimum hours" provision) (59.1-21.11(1));

3) a requirement that rents be "based on commercially fair and reasonable standards" and "uniformly applied to similarly situated dealers of the same refiner in the same geographic area" (the "rent control" provision) (59.1-21.11(6));

4) a requirement that all franchise renewals extend at least three years (the "minimum renewal" provision) (Id.); and

5) a prohibition on refiner limits as to the number of stations a single dealer can operate (the "no maximum stations" provision) (59.1-21.11(4)).

These sections prohibit certain terms contained in Mobil's standard service station franchise agreements. 1 Mobil claims that when it ceased enforcing the prohibited terms so as to comply with S.B. 235, its sales and the profitability and value of its service station operations in Virginia declined.

Mobil filed suit against Virginia's Attorney General on June 29, 1990 claiming S.B. 235 was unconstitutional because: 1) it was preempted by the PMPA; 2) it violated the Special Laws provision of the Virginia Constitution; 3) it was preempted by the Lanham Act; 4) it violated the Contract Clauses of the United States and Virginia Constitutions; and 5) it violated the Takings Clauses of the United States and Virginia Constitutions. At the close of discovery, the Attorney General moved for summary judgment on all counts, and Mobil moved for summary judgment on its claims that S.B. 235 was preempted by the PMPA and violated Virginia's special laws prohibition. The district court found that the questions of PMPA preemption and the Special Laws violation were ripe for summary judgment, but that additional evidence on the Lanham Act, Contract Clause and Takings Clause claims would be necessary. The court reserved ruling on the summary judgement motions and heard the testimony of a number of witnesses.

The district court then found that S.B. 235 was not preempted by the Lanham Act, that the Virginia Act did not violate the Contract Clause or the Takings Clause, and that the PMPA did not preempt the "rent control" provision of S.B. 235. The court granted Mobil's cross motion for summary judgment in part, and found that S.B. 235 violated Virginia's special laws prohibition and that the PMPA preempted the "no quotas," "no minimum hours," "no maximum stations" and "minimum renewal" provisions of the Virginia Act. Both parties appeal. 2 The Virginia

Page 224

Gasoline Marketers and Automotive Repair Association, the national dealers' organization and similar groups from other states filed amicus briefs supporting the Attorney General's position on the issue of PMPA preemption, and we have considered these briefs in reaching our conclusions.

II.

Under the Supremacy Clause of the United States Constitution, federal law may preempt state legislation governing the same subject matter. U.S. Const. art VI, cl. 2.; Louisiana Pub. Serv. Comm'n v. FCC, 476 U.S. 355, 368, 106 S.Ct. 1890, 1898, 90 L.Ed.2d 369 (1986). Preemption will occur if Congress has expressly stated its intent to preclude state regulation of the subject. 476 U.S. at 368, 106 S.Ct. at 1898. The PMPA contains the following express preemption clause:

To the extent that any provision of this subchapter applies to the termination (or the furnishing of notification with respect thereto) of any franchise, or to the nonrenewal (or the furnishing of notification with respect thereto) of any franchise relationship, no State or any political subdivision thereof may adopt, enforce, or...

To continue reading

FREE SIGN UP