C.K. Smith & Co., Inc. v. Motiva Enterprises, LLC
| Decision Date | 21 December 2000 |
| Docket Number | No. Civ.A. 98-40173NMG.,Civ.A. 98-40173NMG. |
| Citation | 126 F.Supp.2d 34 |
| Court | U.S. District Court — District of Massachusetts |
| Parties | C.K. SMITH & CO., INC., Plaintiff, v. MOTIVA ENTERPRISES, LLC, Defendant. |
Mary Ellen McDonough, Sherin & Lodgen, Thomas Paul Gorman, Sherin and Lodgen LLP, Boston, MA, for Plaintiff.
Richard E. Powers, William J. Fidurko, Zizik, Lasalle & Powers, P.C., Weelesley, MA, for Defendant.
This case arises from the termination and nonrenewal of a lease for the operation by plaintiff, C.K. Smith & Co., Inc. ("C.K.Smith"), of a Texaco franchise retail gasoline station in Randolph, Massachusetts. C.K. Smith has filed this action against defendant, Motiva Enterprises, LLC ("Motiva"), arguing that Motiva's predecessor in interest, Star Enterprise ("Star"), improperly terminated and failed to renew the C.K. Smith franchise and lease under the Petroleum Marketing Practices Act ("the PMPA"), 15 U.S.C. §§ 2801 et seq. Pending before this Court is C.K. Smith's motion for summary judgment (Docket No. 36) and Motiva's cross motion for summary judgment (Docket No. 44).
C.K. Smith has been doing business with Star for more than 45 years as a wholesale gasoline dealer and since 1989 as a retail gas station franchisee in Randolph, Massachusetts. On July 27, 1989, C.K. Smith and Star entered into a lease-franchise agreement for a term running from August 1, 1989 through July 31, 1992. The lease provided, inter alia, that notices from Star to C.K. Smith would be sent to C.K. Smith's headquarters in Worcester, Massachusetts.
In 1992, when the lease was renewed for another three-year term, Star changed its notice policy to provide that all notices would be sent to the franchisee's address, in this case to the gas station in Randolph. That year and in 1995, the lease was routinely renewed.
On March 25, 1998, Star sent a new lease and sales agreement package ("the Renewal Lease") to C.K. Smith at the gas station in Randolph. C.K. Smith claims that no one in management ever received that package because a former C.K. Smith employee misplaced it on a bathroom shelf at the Randolph station. As of April 24, 1998, Star had not received an executed Renewal Lease from C.K. Smith. On that date, Star gave written notice to C.K. Smith at the Randolph address, pursuant to Star's new general notice policy, that it would not renew the C.K. Smith lease when it expired on July 31, 1998. Star cited C.K. Smith's failure to agree to changes or additions to the provisions in the Renewal Lease as the reason for non-renewal. The notice also stated that Star's nonrenewal would be rescinded if C.K. Smith entered into a mutually-approved lease and sales agreement.
On June 24, 1998, Judith Smith, President of C.K. Smith, met with Star representatives, including John Molloy ("Molloy"), at the Randolph station to discuss certain maintenance issues and the Renewal Lease in general. The parties disagree as to what occurred at the meeting. C.K. Smith claims that Judith Smith told Molloy that she wished to review a Star document called the Freedom Five Hundred Manual before signing the Renewal Lease, but that she was not rejecting the terms of the Renewal Lease. C.K. Smith alleges that, in fact, it intended to sign the Renewal Lease all along. Star contends, however, that in response to Molloy's inquiry about whether C.K. Smith intended to sign the Renewal Lease, Judith Smith replied that she was not sure, but that she would let him know in the future.
C.K. Smith offers no explanation of whether Judith Smith ever followed up with Molloy concerning the Renewal Lease. Star claims that on or about July 16, 1998, Molloy telephoned C.K. Smith to report that he had not heard from Judith Smith regarding the Renewal Lease and that he never heard from her in response to that call.
As of Friday, July 31, 1998, the expiration date of the then current lease, the parties had not entered into a renewed lease and sales agreement. On Tuesday, August 4, 1998, Molloy called Judith Smith to inquire when C.K. Smith would vacate the premises. Judith Smith advised Molloy that C.K. Smith wished to continue as a franchisee and was willing to execute the renewal lease (presumably without amendment). She followed up the call with a letter confirming the same. C.K. Smith attempted to renew the lease and sales agreement throughout August 1998, but Star refused to accept the renewal, noting that C.K. Smith's lease had expired and demanding that it vacate the premises in Randolph.
On August 10, 1998, even as it continued its effort to renew, C.K. Smith filed the instant action, claiming that Star's refusal to renew the lease violated the PMPA. It sought injunctive relief 1) to enjoin Star from terminating the C.K. Smith franchise and lease, and 2) to compel Star to continue to provide gasoline and to perform all other terms of the unsigned Renewal Lease. This Court issued a preliminary injunction on August 13, 1998 ordering that business continue in the normal course and that Star perform the duties provided in the unsigned Renewal Lease.
The role of summary judgment is "to pierce the pleadings and to assess the proof in order to see whether there is a genuine need for trial." Mesnick v. General Elec. Co., 950 F.2d 816, 822 (1st Cir. 1991) (quoting Garside v. Osco Drug, Inc., 895 F.2d 46, 50 (1st Cir.1990)). The burden is upon the moving party to show, based upon the pleadings, discovery and affidavits, "that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). A genuine issue of material fact exists only where the party opposing summary judgment provides evidence "such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Once the moving party has satisfied its burden, the burden shifts to the nonmoving party to set forth specific facts showing that there is a genuine, triable issue. Celotex Corp. v. Catrett, 477 U.S. 317, 324, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The Court must view the entire record in the light most hospitable to the nonmoving party and indulge all reasonable inferences in that party's favor. O'Connor v. Steeves, 994 F.2d 905, 907 (1st Cir.1993). If after viewing the record in the nonmoving party's favor, the Court determines that no genuine issue of material fact exists, summary judgment is appropriate.
The PMPA was enacted to set minimum federal standards governing the termination and nonrenewal of franchise relationships for the sale of motor fuel. Chestnut Hill Gulf, Inc. v. Cumberland Farms, Inc., 940 F.2d 744, 746 (1st Cir.1991) (citing S.Rep. No. 731, 95th Cong., 2d Sess. 15, reprinted in 1978 U.S.C.C.A.N. 873, 873); Desfosses v. Wallace Energy, Inc., 836 F.2d 22, 25 (1st Cir.1987). Congress recognized that petroleum franchisors were liable to abuse franchisees by terminating franchises for arbitrary or even discriminatory reasons. Chestnut Hill, 940 F.2d at 746. The Act was
designed to prevent franchisors from terminating or failing to renew franchise agreements for technical or minor contract violations or compelling franchisees to comply with franchisors' marketing policies.
Id. (citation omitted).
The cornerstone of the PMPA is 15 U.S.C. § 2802, which precludes franchisors from terminating any franchise or failing to renew any franchise relationship unless notification requirements are met and the termination or nonrenewal is based on specified grounds. Section 2802 provides:
(a) Except as provided in subsection (b) of this section ..., no franchisor engaged in the sale, consignment, or distribution of motor fuel in commerce may —
(1) terminate any franchise (entered into or renewed on or after June 19, 1978) prior to the conclusion of the term, or the expiration date, stated in the franchise; or
(2) fail to renew any franchise relationship (without regard to the date on which the relevant franchise was entered into or renewed).
Section 2802(a) makes a significant distinction between a "franchise" and the "franchise relationship". The term "franchise" refers to any number of contracts between a retailer/distributor and a supplier of motor fuel. 15 U.S.C. § 2801(1). Section 2802(a)(1) prohibits a franchisor from terminating a franchise before it expires.
The term "franchise relationship" refers to
the respective motor fuel marketing or distribution obligations and responsibilities of a franchisor and a franchisee which result from the marketing of motor fuel under a franchise.
15 U.S.C. § 2801(2). The legal entity of the "franchise relationship" was created by Congress
"to avoid any contention that because the `franchise' does not exist [after it expires,] there is nothing to renew," and to clarify that the PMPA "contemplates changes in the specific provisions of the franchise agreement at the time of renewal."
DuFresne's Auto Service, Inc. v. Shell Oil Co., 992 F.2d 920, 926 n. 4 (9th Cir.1993) (quoting S.Rep. No. 731, 95th Cong., 2d Sess. 30, reprinted in 1978 U.S.C.C.A.N. 873, 888). Thus, when a "franchise" expires, the "franchise relationship" between the parties continues and it is that relationship which the franchisor is obligated to renew under § 2802(a)(2) unless the requirements of § 2802(b)(1) are met.
C.K. Smith alleges that Star violated § 2802(a)(2) by failing to renew the "franchise relationship" with C.K. Smith after the C.K. Smith franchise expired on July 31, 1998.1 After reviewing the record in the light most favorable to C.K. Smith, as well as the relevant provisions of the PMPA, the Court finds that Star was justified in allowing the C.K. Smith lease to expire according to its terms and then declining to renew the "franchise relationship" ...
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C.K. Smith & Co v. Motiva Enterprises
...a renewal lease in a timely manner contravened the PMPA.1 The district court rejected these importunings, see C.K. Smith & Co. v. Motiva Enters., 126 F. Supp. 2d 34 (D. Mass. 2000), and so do we. The PMPA does not provide any relief for a franchisee who negligently fails to execute renewal ......