Lippo v. Mobil Oil Corp.
| Decision Date | 30 October 1985 |
| Docket Number | No. 84-1175,84-1175 |
| Citation | 776 F.2d 706 |
| Parties | Bruce LIPPO, d/b/a "Walden-Woodfield Service Station," Plaintiff-Appellee, v. MOBIL OIL CORPORATION, Defendant-Appellant. |
| Court | U.S. Court of Appeals — Seventh Circuit |
Fred E. Schulz, Wildman, Harrold, Allen & Dixon, Chicago, Ill., for defendant-appellant.
Michael R. McKenna, Chicago, Ill., for plaintiff-appellee.
Before CUMMINGS, Chief Judge, and CUDAHY and POSNER, Circuit Judges.
For a number of years plaintiff Bruce Lippo operated a gasoline service station in Schaumburg, Illinois, as a franchisee of the defendant Mobil Oil Corporation. This case arises from Mobil's attempt to terminate the franchise prior to its expiration. After lengthy proceedings below, Lippo obtained judgment for $67,500 and an amount of attorney's fees to be determined. Mobil has appealed, raising five issues: 1) whether the attempted termination was permitted under the several franchise agreements or the Petroleum Marketing Practices Act, Pub.L. No. 95-297, 92 Stat. 322 (1978) (the "PMPA"), codified at 15 U.S.C. Secs. 2801-2841; 2) whether the damages are proper; 3) whether summary judgment for Lippo on Mobil's counterclaim was proper; 4) whether Lippo is entitled to attorney's fees; and 5) whether denial of attorney's fees to Mobil on Lippo's punitive damages claim was proper. We affirm the district court in part and reverse in part. 1
From 1974 until 1982 Lippo operated a Mobil service station in Schaumburg, Illinois. From October 1, 1979, through September 30, 1982, the franchise was governed by a series of documents executed on March 1, 1979, as well as the PMPA, which had become effective upon enactment on June 19, 1978. Provisions of these agreements will be set out as necessary to our analysis.
On September 29, 1980, Lippo purchased on the spot market 7500 gallons of non-Mobil gasoline. 2 The non-Mobil gasoline was delivered to the station at 2:00 p.m. that afternoon, and sold to the public through Mobil equipment, and under Mobil's signs until 4:00 p.m. September 30, 1980. 3 Under Mobil's direction Lippo then covered Mobil's pumps and signs with plastic and masking tape. He continued to sell the remaining non-Mobil gasoline, and also sold Mobil gasoline that was delivered on October 1, 1980. 4
On November 12, 1980, Mobil sent Lippo a Notice of Termination in response to his sale of non-Mobil gasoline. 5 The notice charged Lippo with violation of paragraphs 7(d) and 8 of the Service Station Lease and paragraphs 6 and 12 of the Retail Dealer Contract, and stated that the franchise would terminate on February 13, 1981.
On February 13, 1981, Lippo initiated the present action. His amended five-count complaint states claims for promissory estoppel, fraudulent misrepresentation, breach of contract, waiver and violation of the PMPA. On February 13, 1981, Lippo obtained a temporary restraining order enjoining Mobil from terminating the franchise. The TRO was subsequently extended and later converted first to a preliminary and then to a permanent injunction by Judges Decker and McMillen. The complaint prayed for injunctive relief and for damages for lost profits and diminution in value of the automobile service and repair operation at the service station alleged to be caused by the attempted termination. Lippo remained in possession of the service station premises at all times. Pursuant to the injunctions Mobil continued the franchise relationship until the agreement expired on September 30, 1982. As could be expected, Mobil did not renew the franchise agreement.
Mobil filed an amended counterclaim on February 24, 1981. Its five counts alleged violations of sections 32(1)(a) and 43(a) of the Lanham Act, 15 U.S.C. Secs. 1114(1)(a) & 1125(a), the Illinois common law of unfair competition, the Illinois Uniform Deceptive Trade Practices Act, ILL.REV.STAT. ch. 121 1/2, p 311 et seq., and breach of contract. All of Mobil's counterclaims are predicated upon Lippo's sale of non-Mobil gasoline through pumps and facilities of Mobil and under its trademarks and name.
The parties filed cross motions for summary judgment on liability. Mobil argued that misbranding was such a serious violation of the agreement that it could not be cured, and, even if the default was cured, Mobil did not violate the PMPA. Lippo argued that the default could be and had been cured, and so the attempted termination violated both the agreement and the PMPA.
On January 14, 1982, the district court granted summary judgment for Lippo on his breach of contract (Count III) and PMPA (Count V) claims and on all claims of Mobil's counterclaim. Mobil's cross motion for summary judgment was granted on Lippo's promissory estoppel (Count I), fraudulent misrepresentation (Count II) and waiver (Count IV) claims, but denied as to Counts III and V. The district court reasoned that, although Lippo violated his franchise agreement and the PMPA, his misbranding and commingling of non-Mobil gasoline was excused by the ten day cure provision of the Supplemental Agreement. The court found Lippo had cured his violation by selling off all the non-Mobil gasoline within ten days, and entered its judgment order and permanent injunction enjoining the termination.
A trial on damages was conducted in May 1983. Lippo asserted that he had sustained a loss of profits and a diminution in the value of his automobile service and repair operation because of his fear of termination. A jury returned verdicts in Lippo's favor in the amount of $67,500. Mobil's post-trial motion for judgment n.o.v. or a new trial was denied.
In January 1984 the district court conducted a hearing on Lippo's claim for punitive damages under the PMPA. A finding was made in Mobil's favor at the close of Lippo's evidence. Final judgment was entered on January 12, 1984, and this appeal followed. 6 The district court entered an order granting Lippo his attorney's fees in connection with his compensatory damages claim only (in an amount to be determined) and denying Mobil's request for attorney's fees with respect to Lippo's punitive damages claim.
Mobil's first argument is that it was entitled to terminate its franchise relationship with Lippo after Lippo sold non-Mobil gasoline under Mobil's mark and name and through Mobil's pumps and facilities. The district court ruled that the franchise agreements gave Lippo a right to cure the default, and that he had done so, 7 and thus that Mobil's attempted termination was a breach of the franchise agreements and a violation of the PMPA. Mobil argues that the franchise agreements between itself and Lippo did not allow Lippo to cure his sale of non-Mobil gasoline, and hence that it did not breach the franchise agreements or violate the PMPA.
The franchise relationship between Mobil and Lippo is evidenced by five documents: (1) the Retail Dealer Contract, (2) the Service Station Lease, (3) the Supplemental Agreement, (4) the Sign and Equipment Rider, and (5) the Equipment Loan Agreement. These documents were all executed on March 1, 1979. All the documents were form contracts drafted by Mobil and were executed by Lippo as presented.
Paragraph 6 of the Retail Dealer Contract expressly prohibits the sale of non-Mobil gasoline through Mobil equipment. It provides:
6. Brand Names, Trademarks, Advertising. Buyer shall use Seller's trademarks and brand names to identify and advertise Seller's products, and shall not use such trademarks and brand names for any other purpose. Buyer shall not mix any other products with Seller's products or adulterate them in any way, and shall not use Seller's trademarks or brand names in connection with the storage, handling, dispensing or sale of any adulterated, mixed or substituted products. All advertising, including color schemes, of Seller's products shall be subject to Seller's approval. Any violation of the provisions of this paragraph by Buyer shall give Seller the right to immediately terminate this contract. On any termination of this contract, Buyer shall cause all reference to Seller and all use of Seller's color schemes, trademarks, brand names, slogans and advertising to be discontinued and shall return to Seller all such advertising and promotional material in Buyer's possession. Buyer acknowledges and recognizes that injunctive relief is essential for the adequate remedy of any violation of the provisions of this paragraph by Buyer.
App. 31. In relevant part, paragraph A of article 4 of the Supplemental Agreement provides:
A. The duties and obligations set forth in this supplemental agreement, the Service Station Lease and the Retail Dealer Contract are agreed by the parties to be material to the relationship between Mobil and Dealer. The parties hereby agree that should either party default in the performance of any duty, responsibility or obligation imposed by this supplemental agreement, the Service Station Lease or the Retail Dealer Contract, and such default continue uncorrected for ten (10) days after written notification of such default (or if the default cannot be corrected within ten (10) days, if the work of correcting same has not been commenced within such period) then the party aggrieved by such default may forthwith upon additional written notice to the other party given, terminate the Service Station Lease and the Retail Dealer Contract, and cease doing further business with the other party as of the date of said notice, unless a longer time be required by law. In the event a longer period is required by law, the parties shall cease doing further business at the end of the minimum period required by such statute.
Paragraph 6 of the Retail Dealer Contract imposes a duty not to sell non-Mobil products through Mobil equipment or under Mobil signs, and gives Mobil a right to immediate termination if the provisions of the paragraph are violated. Article 4A of the Supplemental Agreement...
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