Barnes v. Gulf Oil Corp., 86-2137
| Decision Date | 28 July 1987 |
| Docket Number | No. 86-2137,86-2137 |
| Citation | 824 F.2d 300 |
| Parties | Evelyn L. BARNES, t/a Triangle Gulf, Plaintiff-Appellant, v. GULF OIL CORPORATION; Anderson Oil Company; Vernon H. Anderson; Betty W. Anderson, Defendants-Appellees, Service Station Dealers of America, Inc., Amicus Curiae. |
| Court | U.S. Court of Appeals — Fourth Circuit |
Richard McPhail Bing (Ronald M. Pearce, Pearce & Bing, Richmond, Va., on brief), for plaintiff-appellant.
Dimitri Daskal, for amicus curiae Service Station Dealers of America, Inc. Randall S. Henderson, Robert S. Bassman (Douglas B. Mitchell, Bassman, Mitchell & Alfano, Washington, D.C., Waller T. Dudley, Boothe, Pritchard & Dudley, Alexandria, Va., on brief), for defendant-appellee.
Before WINTER, Chief Judge, PHILLIPS, Circuit Judge, and YOUNG, United States District Judge for the District of Maryland, at Baltimore.
In a previous appeal, we reversed the dismissal of the complaint of Evelyn Barnes, t/a Triangle Gulf, against Gulf Oil Corporation (Gulf), Anderson Oil Company, Inc. (Anderson Oil), Vernon H. Anderson and Betty W. Anderson, ruling that it alleged a cause of action under the Petroleum Marketing Practices Act (PMPA), 15 U.S.C. Secs. 2801 et seq. Barnes v. Gulf Oil Corporation, 795 F.2d 358 (4 Cir.1986) (Barnes I ). We remanded the case for further proceedings. On remand, Barnes moved for a preliminary injunction to prevent Gulf from terminating or declining to renew her franchise. The district court denied relief and Barnes appeals.
Because we conclude both that the district court improperly applied the requirements of PMPA in denying interim injunctive relief and that Barnes is entitled to a preliminary injunction, we again reverse. We remand the case with instructions to grant a preliminary injunction and to conduct further proceedings as described herein.
The facts alleged by plaintiff are set forth more fully in our prior opinion. For present purposes we note only that Evelyn Barnes began operating the Triangle Gulf service station in September 1979, pursuant to franchise and lease agreements with Gulf Oil Corp. Her assumption of operational duties followed the death of her husband who, prior to 1979, had been a Gulf dealer for seven years. On May 6, 1985, Gulf assigned its interest in the franchise to Anderson Oil. At the same time, Gulf sold the service station premises to Vernon and Betty Anderson, subject to Barnes' right of occupancy as provided in the franchise agreement. Both of these transactions occurred without notice to Barnes, and without providing her with the opportunity to acquire these interests herself.
Barnes filed suit, alleging that Gulf's assignment was an unjustifiable termination of the franchise, in violation of PMPA. The "termination" resulted, according to Barnes, because of the increased cost of gasoline that accompanied the change in supplier. In the alternative, Barnes argued that the assignment was invalid under state law, thus constituting a constructive termination of the franchise. Barnes also claimed that Gulf's failure to give her notice and to afford her an opportunity to purchase the premises violated Secs. 2802(b)(3)(D) and 2804 of PMPA.
The district court granted defendants' motions to dismiss, ruling that the assignment and sale did not terminate the franchise, and that the assignment was not invalid. Both the franchise and lease agreements that Barnes had made with Gulf expired in August 1985. By letter dated November 11, 1985, Anderson Oil notified Barnes that, due to the parties' failure to reach agreement on certain modifications to the franchise relationship as it had existed between Barnes and Gulf Oil, Barnes' franchise would be nonrenewed effective February 17, 1986. The district court entered an injunction pending appeal, which restrained Anderson Oil's ability to act upon the notice of nonrenewal. The injunction expired, by its terms, upon entry of our order vacating the district court's dismissal of Barnes' complaint.
In Barnes I, reversing the dismissal of Barnes' complaint, we ruled that the assignment of a franchise that increases a retailer's gasoline cost over the stipulated franchise price furnishes a cause of action against the refiner under PMPA. 795 F.2d at 358, 359. We also ruled that if Barnes could prove at trial that the assignment violated state law, this too would constitute an unjustified termination of the franchise. Id. at 363-64.
On remand to the district court, Barnes moved for a preliminary injunction under Sec. 2805(b)(2). That section states:
(2) Except as provided in paragraph (3), in any action under subsection (a) of this section, the court shall grant a preliminary injunction if--
(A) the franchisee shows--
(i) the franchise of which he is a party has been terminated or the franchise relationship of which he is a party has not been renewed, and
(ii) there exist sufficiently serious questions going to the merits to make such questions a fair ground for litigation; and
(B) the court determines that, on balance, the hardships imposed upon the franchisor by the issuance of such preliminary injunctive relief will be less than the hardship which would be imposed upon such franchisee if such preliminary injunctive relief were not granted.
For purposes of the ruling on the motion for preliminary injunction, defendants have conceded that the first two statutory requirements are satisfied. They thus concede both the existence of a termination and the existence of serious questions giving rise to a fair ground for litigation. They contest only plaintiff's claim that the balance of hardships is in plaintiff's favor.
The district court denied the injunction after balancing the Andersons' hardships against those of Barnes:
There is no greater hardship on Mrs. Barnes than on the Andersons. Indeed, I am inclined to think that the Andersons are undergoing a greater hardship than Mrs. Barnes; certainly Mrs. Barnes is undergoing no hardship that cannot be readily remedied in damages.
As a preliminary matter, we note that the district court frequently referred to the burden on the "Andersons" in assessing the balance of hardships attending the grant or denial of an injunction. It is difficult to tell whether this reflects merely an imprecision in language or a belief that the Andersons, individually, could properly claim franchisor status. In either case, some clarification is in order. Although it is conceivable that Anderson Oil, as assignee of Gulf's franchise agreement with Barnes, could claim to qualify as a franchisor under the terms of PMPA--a claim which we ultimately reject, see infra--we see no basis on which Vernon and Betty Anderson may make a similar claim. The Andersons, individually, purchased from Gulf the premises on which the service station was located. They did not, however, obtain any interest in the franchise agreement with Barnes. Absent such an interest, they can make no claim to franchisor status under the Act. See 15 U.S.C. Sec. 2801. Accordingly, we treat the district court decision as if it had properly factored into its balancing only the hardships that Anderson Oil would face in the event an injunction were granted. 1
In order to balance the relative hardships of franchisor and franchisee, as required by Sec. 2805(b)(2)(B), the "franchisor" must first be identified. Although the district court assumed that Anderson Oil was the franchisor, we think that that assumption is incorrect.
The statute, 15 U.S.C. Sec. 2801(3), defines "franchisor" as a "refiner or distributor ... who authorizes or permits, under a franchise, a retailer or distributor to use a trademark in connection with the sale, consignment, or distribution of motor fuel." Section 2801(1)(B)(iii) defines "franchise" to include "the unexpired portion of any franchise ... which is transferred or assigned as authorized by the provisions of such franchise or by any applicable provision of State law...."
On its face, the assignment of Gulf's franchise interest to Anderson Oil appears to fall within these provisions and qualify Anderson Oil as a franchisor. However, Barnes argues that the assignment violated Virginia law, and we have previously held that "an assignment that is unauthorized by state law is prohibited and that the unexpired portion of a franchise that has been invalidly assigned is no longer a franchise as defined by the Act." Barnes I, 795 F.2d at 363. Thus, if Barnes can prove a violation of state law, the assignment to Anderson Oil was void and never provided Anderson Oil with any interest in the franchise. Similarly, proof that Barnes' franchise with Gulf was unjustifiably, and thus invalidly, terminated would also deprive Anderson Oil of its claim to legitimate franchisor status.
The essence of this lawsuit is Barnes' claim that Gulf illegally terminated its franchise agreement with Barnes by improperly assigning its interest to Anderson Oil. The manifest purpose of the litigation is to avoid the need to deal with Anderson Oil, a party with whom Barnes has no consensual relationship. When it is conceded that the validity of the assignment presents a serious question, it would be anomalous, and contrary to the purpose and spirit of PMPA, to allow Gulf to extricate itself from this lawsuit by resorting to the very procedural maneuver--the assignment--whose validity is challenged in the suit. It would, in effect, presuppose resolution of the ultimate issue in the case, and create a major loophole in PMPA. We do not believe that Congress has sanctioned such a result, nor will we. 2
Barnes I readily and unambiguously concluded that only Gulf was the franchisor for purposes of interpreting and applying the Act. This is clear from the language of that opinion:
[W]e conclude that Barnes's remedy is not confined to an action against Anderson. We agree with Hodge [Hodge v. Texaco, Inc., No. 81-228-RE (D.Ore. June 4,...
To continue reading
Request your trial
-
Beachler v. Amoco Oil Co.
...105 S.Ct. 386, 83 L.Ed.2d 321 (1984); see also Sun Ref. and Mktg. Co. v. Rago, 741 F.2d 670, 672 (3d Cir.1984); Barnes v. Gulf Oil Corp., 824 F.2d 300, 306-07 (4th Cir.1987); Khorenian v. Union Oil Co., 761 F.2d 533, 535-36 (9th Cir.1985). Under section 2805(b)(2), a district court is requi......
-
Hannon v. Exxon Co., U.S.A.
...360 (4th Cir.1986)(quoting S.Rep. No. 731, 95th Cong., 2d Sess. 17, reprinted in 1978 U.S.C.C.A.N. 873, 874), appeal after remand, 824 F.2d 300 (4th Cir.1987)(reversing district court's denial of a preliminary injunction). Congress sought to "balance the need to protect franchisees and the ......
-
Shukla v. BP Exploration & Oil, Inc.
...917, 922-25 (6th Cir.1989); Barnes v. Gulf Oil Corp., 795 F.2d 358 (4th Cir.1986) ("Barnes I "), on appeal after remand, 824 F.2d 300 (4th Cir.1987) ("Barnes II "). Cf. April Marketing & Distributing Corp. v. Diamond Shamrock Refining and Marketing Co., 103 F.3d 28 (5th Cir.1997) (declining......
-
Alexander v. Exxon Co., U.S.A.
...the standard for preliminary injunctions was intentionally drawn to facilitate the grant of injunctive relief. Barnes v. Gulf Oil Corp., 824 F.2d 300, 306 (4th Cir.1987); see also Khorenian v. Union Oil Co. of Cal., 761 F.2d 533, 535 (9th Cir.1985) (preliminary injunction test has been rela......