Ackley v. Gulf Oil Corp., Civ. No. B-86-402 (EBB)

• Citation: 726 F. Supp. 353
• Decision Date: 05 May 1989
• Docket Number: B-87-370 (EBB) and B-87-716 (EBB).,Civ. No. B-86-402 (EBB)
• Court: U.S. District Court — District of Connecticut
• Parties: Frank ACKLEY d/b/a Village Square Chevron, et al. v. GULF OIL CORPORATION, Chevron U.S.A., Inc. and Cumberland Farms, Inc. ROBERT A. COHN/R.A.C. CAR SERVICE, INC. v. GULF OIL CORPORATION, Chevron U.S.A., Inc., and Cumberland Farms, Inc.

726 F. Supp. 353

Frank ACKLEY d/b/a Village Square Chevron, et al.
v.
GULF OIL CORPORATION, Chevron U.S.A., Inc. and Cumberland Farms, Inc.
ROBERT A. COHN/R.A.C. CAR SERVICE, INC.
v.
GULF OIL CORPORATION, Chevron U.S.A., Inc., and Cumberland Farms, Inc.

Civ. Nos. B-86-402 (EBB), B-87-370 (EBB) and B-87-716 (EBB).

United States District Court, D. Connecticut.

May 5, 1989.

726 F. Supp. 354

COPYRIGHT MATERIAL OMITTED

726 F. Supp. 355

Richard W. Farrell, Carl T. Holt, John J. LaCava, Albert J. Barr, Tara Reilly, Farrell & Barr, Stamford, Conn., for plaintiffs

Francis J. Sailer, Pillsbury, Madison & Sutro, Washington, D.C., Bruce W. McDiarmid, Robert P. Taylor, W. Jeffry Schmidt, Pillsbury, Madison & Sutro, San Francisco, Cal., pro hac vice for Gulf Oil Corp., and Chevron U.S.A., Inc.

Paul D. Sanson, James B. Pomeroy, Shipman & Goodwin, Mark P. Anderson, Hartford, Conn., for Cumberland Farms.

Richard M. Reynolds, Scott P. Moser, Day, Berry & Howard, James Sicilian, Steven M. Greenspan, Hartford, Conn., for Gulf Oil & Chevron.

Michael D. Sherman, Gerard P. Fox, Collier, Shannon, Rill & Scott, Washington, D.C., pro hac vice.

Mark G. Howard, Associate Gen. Counsel, Cumberland Farms, Inc., Canton, Mass., pro hac vice for Cumberland Farms, Inc.

James Ziogas, Jr., Ruggiero, Ziogas & Allaire, Bristol, Conn., for Williamson Auto Electric.

RULING ON CROSS-MOTIONS FOR SUMMARY JUDGMENT

ELLEN B. BURNS, Chief Judge.

Plaintiffs, seventeen Gulf Service station dealers, bring these actions challenging the transfer of their service station franchises from Chevron to Cumberland Farms. In their complaints in the three above-captioned consolidated cases, plaintiffs allege violations of the Petroleum Marketing Practices Act ("PMPA"), 15 U.S.C. §§ 2801-2806, the Connecticut Petroleum Franchise Act ("CPFA"), C.G.S. §§ 42-133j to 42-133n, and the Connecticut Unfair Trade Practices Act ("CUTPA"), C.G.S. § 42-110 et seq. Jurisdiction rests upon 15 U.S.C. § 2805(a) and 28 U.S.C. §§ 1331, 1332, 1337, 2201 and 2202.

Pending before the court are cross-motions for summary judgment. For the reasons set forth below, plaintiffs' motion are denied and defendants' motions are granted on all counts.

I.

In 1984 Chevron U.S.A., Inc. ("Chevron") acquired the assets of Gulf Oil Corporation ("Gulf") for a purchase price of $13.2 billion. As a result of the acquisition, Chevron owned the seventeen service stations leased by the plaintiffs in the present action and contracted a corporate debt exceeding $15 billion. To reduce the accumulated debt Chevron initiated several studies to determine which of its assets, including those acquired from Gulf, might be appropriate candidates for sale. In the fall of 1985, Chevron solicited bids for the purchase of its retail operations in the ten New England and mid-Atlantic states.

726 F. Supp. 356

Cumberland Farms, Inc. ("Cumberland") submitted the successful bid.¹

On December 19, 1985, Chevron and Cumberland executed an Asset Purchase Agreement ("Purchase Agreement") pursuant to which Chevron agreed to sell, transfer and assign to Cumberland its real property and leasehold interests in approximately 500 retail gasoline service stations, including all of its stations in Connecticut, 20 petroleum product distribution terminals, 320 tanker trucks and other vehicles, various warehouses and related Chevron and Gulf inventories and supply contracts for approximately 300 independent Chevron and Gulf jobbers² and dealers in the northeast market ("Chevron sale" or "Chevron transaction").³ The sale was allegedly structured to protect the continuity of dealer leases and supply contracts under the Gulf and Chevron trademarks. Section 2.5 of the Purchase Agreement expressly required Cumberland to assume all of Chevron's contractual commitments, including its trademark agreements, dealer leases and fuel supply agreements. Section 8.6 of the Agreement further required Cumberland, as franchise agreements came up for renewal, to "offer in good faith ... a new `franchise' on terms and conditions which are not discriminatory" to each current dealer.⁴

Chevron and Cumberland also entered into several ancillary agreements related to the Purchase Agreement, two of which deserve comment. First, Chevron and Cumberland executed licensing agreements for the Gulf and Chevron trademarks. Cumberland purchased the right to use and authorize the use of the Gulf trademark, design and indicia for a period of 15½ years, at no royalty. Thereafter, Cumberland has the option to renew its Gulf trademark license for an unlimited additional period at an annual royalty of one million dollars. Cumberland also purchased the right to use the Chevron trademark for a "reasonable transition period." According to the agreement, franchisees were given the right to continue the use of the Chevron trademark for the longer of the remainder of the term of their existing franchise agreements or two years.⁵

Second, Chevron and Cumberland executed an ancillary product sales agreement whereby Chevron agreed to supply Cumberland Farms with the entire gasoline output of Chevron's Philadelphia refinery. This supply, along with purchases under an output agreement with a Canadian refinery and purchases on the New York Harbor Spot Market, satisfy substantially all of Cumberland's needs for fuel in the northeast market.

On February 14, 1986, after the Purchase Agreement was signed but before the transaction closed on May 31, 1986, Chevron notified all affected Gulf and Chevron branded dealers in the northeast market, including the plaintiffs, of the sale to Cumberland. The notice clearly evidenced that the transaction had been planned as an assignment, and explained to the dealers that:

All of Chevron's agreements with Chevron and Gulf jobbers and dealers in the

726 F. Supp. 357

10-state area will be assigned to Cumberland Farms. Cumberland Farms will assume all of Chevron's obligations to its Chevron and Gulf jobbers and dealers under those agreements. (Plaintiffs' Ex. B)

The letter further advised dealers that:

Chevron does not believe that the sale to Cumberland Farms of Chevron's marketing assets in the Northeast and the assignment to and assumption by Cumberland Farms of Chevron's jobber and dealer agreements in that area triggers the PMPA or represents a termination or nonrenewal of your Dealer Contract of Sale, Service Station Lease (if any) and related agreements with Chevron ("dealer agreements"). Your dealer agreements with Chevron will be transferred to another supplier who will honor all of the terms and conditions of those agreements and will have the right to continue to authorize you to utilize the Gulf trademarks and brand name. You will retain all of your rights under the PMPA against Cumberland Farms, your new supplier.

On the chance, however, that someone might later claim that this transfer involves a termination or nonrenewal that is subject to the PMPA, we are taking the precaution of giving you formal notice of nonrenewal of your dealer agreements in accordance with the PMPA. We wish to repeat that in fact your agreements with Chevron will continue in full force and effect and will be renewed by Cumberland Farms—unless Cumberland Farms independently has grounds under the PMPA to terminate or not to renew those agreements. (Plaintiffs' Ex. B)

The February 14, 1986, notice indicated that existing franchise agreements between individual dealers and Chevron would expire as of the later of (i) 180 days after receipt of the notice, or (ii) the stated expiration date of the current term of each agreement. On March 10, 1986, Chevron sent to all Gulf and Chevron dealers in Connecticut a second notice which modified the first notice in one respect. Specifically, the March 10, 1986, notice stated that the existing franchise agreements would expire one year after receipt of the notice or the stated expiration date of each agreement, whichever was later. The March 10, 1986, notice was also sent to the governor of the State of Connecticut.

The sale of Chevron's northeast marketing assets to Cumberland closed at midnight on May 31, 1986, for a purchase price of $250 million.⁶ Beginning in February, 1987, and pursuant to the terms of the assignment, Cumberland sent franchise renewal documents to the dealers whose Chevron leases were soon to expire. Many of the proposed lease agreements contained substantial rent increases. According to the plaintiffs, the renewal documents imposed significantly increased burdens and responsibilities. Plaintiffs also challenge the presentation of the renewal documents as untimely.⁷ Each of the dealers signed the new Cumberland Farms leases under protest, reserving his rights under federal and state law.

II.

A. Background

Presently pending before the court are cross-motions for summary judgment on claims asserted by the plaintiffs in three consolidated cases. Ackley, et al. v. Gulf Oil Corporation, et al., B-86-402 (EBB) ("Ackley I"), relates generally to the transfer of the franchises from Chevron to Cumberland. Plaintiffs' complaint contains four counts, the first three of which allege that: (1) defendants failed to provide plaintiffs a right of first refusal to purchase the properties under 15 U.S.C.

726 F. Supp. 358

§ 2802(b)(2)(E)(iii) of the PMPA; (2) defendants improperly terminated or nonrenewed the plaintiffs' franchises under the PMPA; and (3) defendants' actions violate CUTPA. Count Four sets forth a general demand for relief. Plaintiffs have moved for summary judgment on the first, second and fourth counts of their complaint. Defendants have moved for summary judgment on all counts, claiming that judgment should be granted in their favor because

(a) the PMPA does not apply to the transaction since no termination or nonrenewal occurred, but rather a valid assignment took place;

(b) alternatively, the PMPA requirements for a market withdrawal were satisfied,

and

(c) defendants' actions did not violate CUTPA.

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