Massey v. Exxon Corp.

• Decision Date: 14 August 1991
• Docket Number: No. 88-6335,88-6335
• Citation: 942 F.2d 340
• Parties: C.T. MASSEY d/b/a C.T. Massey Oil Company; B.W. Lyons Oil Co., Plaintiffs-Appellants, v. EXXON CORPORATION d/b/a Exxon Company, U.S.A., Defendant-Appellee.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 340

942 F.2d 340

C.T. MASSEY d/b/a C.T. Massey Oil Company; B.W. Lyons Oil Co., Plaintiffs-Appellants, v. EXXON CORPORATION d/b/a Exxon Company, U.S.A., Defendant-Appellee.

No. 88-6335.

United States Court of Appeals Sixth Circuit.

Argued July 15, 1991.

Decided Aug. 14, 1991.

Stuart A. Handmaker (argued), Seiller & Handmaker, Louisville, Ky., Eugene Goss, Goss & Goss, Harlan, Ky., for plaintiffs-appellants.

Robert G. Abrams (argued), Gaspare J. Bono and Joseph P. Lavelle, briefed, Howrey & Simon, Washington, D.C., Gregory L. Monge, Van Antwerp, Monge, Jones & Edwards, Ashland, Ky., for defendant-appellee.

Before GUY and NORRIS, Circuit Judges, and FRIEDMAN, District Judge. ^*

RALPH B. GUY, Jr., Circuit Judge.

Plaintiffs C.T. Massey Oil Company and B.W. Lyons Oil Company appeal the judgment of the district court granting summary judgment for defendant, Exxon Corporation, and dismissing their claims for wrongful termination of a franchise brought pursuant to 15 U.S.C. § 2801 et seq. Upon a review of the record, we affirm the ultimate holding, although we reject a portion of the district court's analysis.

I.

The plaintiffs were two of seven franchised wholesale distributors of Exxon products in Kentucky. Prior to the developments which precipitated this action, each had been operating under the provisions of written franchise agreements--a series of one-year contracts--the last of which was for the year ending March 31, 1981.

In March of 1981, Exxon wrote individual letters to both plaintiffs and to the other franchisees in Kentucky, informing them that Exxon would offer them three-year contracts for the period beginning April 1, 1981. Plaintiffs received these contracts in May 1981. Massey received his on May 21 and signed and returned it the same day. It subsequently was signed by R.L. Mize for Exxon on May 29. Lyons received his contract on May 5, which he also signed and returned. It was countersigned on May 28. Both contracts provided that they were "entered into" as of the dates of their respective signings by plaintiffs. Each agreement stated that "[t]he Agreement shall be in full force and effect for the period of three years beginning on the 1st day of April, 1981, and ending on the 31st day of March, 1984."

In June 1982, Lyons had entered into a separate agreement with Exxon to purchase a gasoline station from the company. The agreement included a provision by which Lyons would, as part of the consideration for the sale, release Exxon from any future claims and liability. This sale was completed in October 1982.

On August 25, 1982, Exxon issued a statement that it would withdraw from the sale of branded motor fuel in Kentucky and four other states. According to Exxon, this determination was made as a result of market changes in the petroleum industry. Plaintiffs were notified of the decision earlier in the day. On March 28, 1983, both plaintiffs received formal notices under the Petroleum Marketing Practices Act (PMPA), 15 U.S.C. § 2801 et seq., of termination of their franchises effective October 14, 1983, the date of Exxon's withdrawal.

On August 2, 1984, Massey filed suit under the PMPA to recover damages caused by Exxon's termination of his franchise. On January 4, 1985, Lyons was granted permission to intervene. Exxon filed a counterclaim seeking to recover more than $98,000 for Exxon products sold to Massey. Massey filed a voluntary petition in bankruptcy. These latter actions are not part of this appeal.

After substantial discovery by both parties, Exxon moved for summary judgment against both Massey and Lyons. It also moved for summary judgment against Lyons on the independent ground that he had executed a release that discharged his claim. Both motions were subsequently referred to a magistrate for a report and recommendation, pursuant to 28 U.S.C. § 636(b)(1)(a). On December 12, 1986, the magistrate recommended that the motion on the release issue be granted. On July 23, 1986, he issued a second report and recommendation which suggested that Exxon's second motion on the PMPA issue should also be granted. The district court issued an opinion on October 21, 1987, adopting the reports and recommendations as its findings of fact and conclusions of law, and granted summary judgment.

Plaintiffs raise four claims of error on appeal: (1) that the court improperly construed the contracts entered into by plaintiffs as contracts for a term of three years or more within the meaning of the PMPA; (2) that Exxon's withdrawal from Kentucky was not made in good faith; (3) that Exxon's decision to withdraw was based on facts which occurred prior to the signing of the contract; and (4) that Lyons' claim was not barred by the release.

II.

We review a district court's grant of summary judgment under a de novo standard of review. EEOC v. University of Detroit, 904 F.2d 331, 334 (6th Cir.1990). We examine the grant of summary judgment to determine "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Booker v. Brown & Williamson Tobacco Co., 879 F.2d 1304, 1310 (6th Cir.1989) (citation omitted). Although we must draw all justifiable inferences in favor of the non-moving party, Matsushita Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986), there must be a disagreement regarding a material fact. Kochins v. Linden-Alimak, Inc., 799 F.2d 1128, 1133 (6th Cir.1986). The evidence presented must be sufficient to permit the plaintiff to recover if accepted by the jury.

Congress enacted the PMPA in 1978 to create a uniform set of rules covering the grounds for termination and non-renewal of motor fuel marketing franchises, and "to protect 'franchisees from arbitrary or discriminatory termination or non-renewal of their franchises.' " Brach v. Amoco Oil Co., 677 F.2d 1213, 1216 (7th Cir.1982) (citing S.Rep. No. 731, 95th Cong.2d Sess. 15 reprinted in 1978 U.S.Code Cong. & Admin.News 873, 874).

The franchise relationship in the petroleum industry is unique in that the franchisor commonly not only grants a trademark license and supplies the products but also leases the service station premises to the franchisee. As Congress noted, "[t]his relationship is, therefore, often complex and characterized by at times competing interests." Id. at 17, U.S.Code Cong. & Ad.News at 875. Congress designed the PMPA to allay three specific concerns: that franchisee independence may be undermined by the use of actual or threatened termination or nonrenewal to compel compliance with franchisor marketing policies; that gross disparity of bargaining power may result in franchise agreements that amount to contracts of adhesion; and that termination or nonrenewal may disrupt the reasonable expectations of the parties that the franchise relationship will be a continuing one. Id. at 17-19, U.S.Code Cong. & Ad.News at 875-77.

The PMPA prohibits termination of any franchise or nonrenewal of any franchise relationship except on the basis of specifically enumerated grounds and upon compliance with certain notification requirements. 15 U.S.C. §§ 2802(a), (b)(1).

Brach, 677 F.2d at 1216 (footnote omitted). The relevant portion of the statute at issue in the present action states in pertinent part:

(2) For purposes of this subsection, the following are grounds for termination of a franchise or nonrenewal of a franchise relationship:

....

(E) In the case of any franchise entered into prior to June 19, 1978, and in the case of any franchise entered into or renewed on or after such date (the term of which is 3 years or longer, or with respect to which the franchisee was offered a term of 3 years or longer), a determination made by the franchisor in good faith and in the normal course of business to withdraw from the marketing of motor fuel through retail outlets in the relevant geographic market area in which the marketing premises are located, if--

(i) such determination--

(I) was made after the date such franchise was entered into or renewed, and

(II) was based upon the occurrence of changes in relevant facts and circumstances after such date....

15 U.S.C. § 2802(b)(2)(E). Plaintiffs allege that defendant failed to meet each of the four conditions outlined in this portion of the statute. They assert that Exxon's decision was part of a broader scheme to withdraw from the area, one ultimately linked to the decontrol of petroleum franchising in 1980 and involving the creation of a phony three-year agreement through which Exxon could then comply with the statutory requirements. We address these claims seriatim.

A. Whether the Contracts Were for a Term of Three Years

Plaintiffs initially assert that the agreements they had with Exxon were not contracts for three years. Notwithstanding the fact that the documents both plaintiffs signed stated on their face that they were for a three-year term, plaintiffs argue that the agreements were only for a term of two years, ten months, and three days--a period non-inclusive of the retroactive provisions. Furthermore, they assert, the parties were not in agreement as to all of the material terms to be incorporated into the contemplated future contract, such as the amount and cost of the fuel to be delivered. Thus, plaintiffs claim they had no way of knowing whether they were bound by the terms of the previous contract or by new terms. We disagree.

Plaintiffs cite to legislative history of the PMPA, which reiterates that the overriding purpose of the law is to protect franchisees and prevent the " 'leverage effect' over franchisees who do not have the protection of long term contracts." In this case, there is nothing to indicate the use of such leverage. There is no evidence to support plaintiffs' statements that the three years in the contract were "unilaterally inserted by the franchisor at the time that a franchise...