Carter v. Exxon Co. USA, a Div. of Exxon Corp.
Decision Date | 24 May 1999 |
Docket Number | Nos. 97-5248,97-5272,s. 97-5248 |
Citation | 177 F.3d 197 |
Parties | Richard CARTER; Carol Carter, husband and wife, d/b/a Forsum, Inc.; Forsum, Inc., Appellants, v. EXXON COMPANY USA, A DIVISION OF EXXON CORPORATION. Exxon Corporation, Defendants/Third-Party Plaintiffs, v. Petroleum Technologies, Inc., Third-Party Defendant. Richard Carter; Carol Carter, husband and wife, d/b/a Forsum, Inc.; Forsum, Inc., v. Exxon Company USA, a division of Exxon Corporation; Exxon Corporation, Defendants/Third-Party Plaintiffs, v. Petroleum Technologies, Inc., Third-Party Defendant, Exxon Corporation, Appellant. |
Court | U.S. Court of Appeals — Third Circuit |
Andrew J. Stern (Argued), David A. Yanoff, Beasley, Casey & Erbstein, Philadelphia, PA, for Appellants in No. 97-5248.
Steven J. Fram (Argued), Archer & Greiner, Haddonfield, New Jersey, for Appellant in No. 97-5272.
Before: SLOVITER, GREENBERG, Circuit Judges, and GIBSON, Senior Circuit Judge. *
Richard Carter and his wife, Carol, appeal and argue that the district court erred in granting summary judgment in favor of Exxon Company USA on their Petroleum Marketing Practices Act 1 claim and on Exxon's state law counterclaim. They also contend, with respect to their state law contract claims, that the district court erred in instructing the jury, in interpreting and analyzing for unconscionability disclaimers in their franchise agreement with Exxon, in barring recovery of any damages that accrued after their franchise agreement was not renewed, and in holding that a jury finding was not against the clear weight of the evidence. Exxon cross appeals, contending that the district court erred by applying the disclaimers to only one of the Carters' contract claims and abused its discretion by granting the Carters leave to amend their complaint. We reverse the grant of summary judgment on the Carters' Petroleum Marketing Practices Act claim and on Exxon's counterclaim. We conclude the district judge erred in instructing the jury on waiver and reverse the judgment on the Carters' state law contract claims. We affirm the district judge's holding that the contract disclaimers do not bar the Carters from recovering business loss on one of their contract claims and affirm the district judge's holding that the Carters may not recover, on their contract claim, business loss occurring after their franchise agreement was not renewed. We remand for further proceedings in accordance with this opinion.
In 1986, the Carters began operating an Exxon service station in Wrightstown, New Jersey. Carter had previously been in the trucking business, but planned to make the service station his only business. The Carters formed a corporation, Forsum, Inc., for the purpose of operating the station. Because Exxon did not own the real property where the station was located, Carter entered into a lease with Thomas and Alma Davis, the owners of the real property. From the inception of the franchise, the Carters and Exxon discussed the possibility of upgrading the station or rebuilding the station (the "hi-grade" plan), but this never materialized.
Carter renewed the franchise on July 20, 1989, effective through August 1, 1992. The renewal was memorialized in a "Sales Agreement" and a "Rental Agreement." The Sales Agreement had a provision disclaiming consequential damages, and the Rental Agreement had a provision disclaiming damages, including loss of business resulting from repairs performed on the loaned equipment.
In late September 1990, the Carters reported a leak in the "plus" tank, one of three underground gasoline storage tanks. Exxon, which owned and was responsible for the tanks, confirmed the leak and sent out a work crew to perform the repairs. On October 15, 1990, the work crew emptied the "plus" tank to test the repair. On October 18, 1990, the buoyant force of ground water forced the tank to emerge from the ground, which in turn caused the "supreme" tank to take on water. 2 During the repair of the "supreme" tank, it too emerged from the ground causing damage to the "regular" tank. After two weeks in which the Carters were left with no operational tanks, Exxon repaired the "regular" tank, but the Carters were left with only one working tank for nine months, allowing them to sell only one type of gasoline.
After the tanks surged, the Carters had several meetings with various Exxon employees including David O'Connor, business counselor for the Carters' account, Anthony Luciano, district manager for southern New Jersey, and Richard Biedrzycki, Exxon's outside counsel. In the meetings, the parties discussed several issues. Carter expressed his desire that Exxon immediately replace his tanks, keeping them at their old site, while Exxon expressed renewed interest in the "hi-grade" plan, which would involve replacing the tanks in a new site to suit the larger facility. Exxon, unable to convince Carter to agree to the "hi-grade" plan, eventually decided in mid-May to replace the tanks in their old site, and the work was completed in July 1991. In bringing all three tanks to working order, Exxon filled them with hold-down loads of gasoline.
After the tanks were replaced, the parties continued to discuss variations of the "hi-grade" plan, but also discussed a franchise renewal, a covenant not to sue for damages arising out of the tank repair, and monies Exxon claimed were due for various items, one of which was a charge for the gasoline used to refill the tanks during the repairs. The discussions took a turn for the worse after a stormy meeting on June 3, 1992, abruptly terminated by the Carters' attorney, Gerald Haughey. After meetings on June 18 and July 8, 1992, the parties still could not resolve their differences. A critical point of dispute between the parties is whether Exxon, in the course of these meetings, ever offered the Carters a franchise renewal without conditioning it on their assent to other agreements including the covenant not to sue and investment and amortization agreements related to the "hi-grade" plan.
The parties ultimately did not agree on a renewal of the franchise, and Exxon sent the Carters a termination notice in late July 1992. The Carters vacated the premises by the end of September. Exxon entered a franchise agreement for the same premises with the Davises' son-in-law, Wayne Bird. The Carters filed this lawsuit.
The Carters and Forsum asserted a violation of the Petroleum Marketing Practices Act ("Petroleum Act"), breach of contract, negligence, tortious interference with business relationship, and tortious interference with prospective economic advantage. Exxon filed a counterclaim alleging that Carter had failed to pay Exxon monies due under their franchise agreement.
The district court dismissed the Carters' Petroleum Act claims on the grounds that only Forsum had standing to sue under the Petroleum Act, and dismissed Carol Carter and Forsum's tortious interference claims. The district court granted summary judgment in favor of Exxon on the claims of violation of the Petroleum Act, negligence, interference with business relationship, and interference with prospective economic advantage. The district court also granted summary judgment, as to liability only, in favor of Exxon on its counterclaim.
The trial was bifurcated, and the case was submitted to the jury to resolve the Carters' breach of contract claim and the appropriate amount of damages on Exxon's counterclaim. The Carters' contract claim was two-fold. They alleged Exxon had breached its contractual duties by failing to make the tank repairs in a good and workmanlike manner and to make the repairs in a reasonable time. The jury returned a verdict on liability in favor of the Carters on both theories; however, the liability verdict was mitigated by the jury's finding that the Carters had waived Exxon's contractual duty to repair in a reasonable time for the period of October 18, 1990, to December 30, 1990. After the district judge made post-verdict rulings on damage issues based upon the disclaimers in the franchise agreement and accrual of damages after termination of the franchise agreement, the parties stipulated that the Carters' damages for breach of contract were $40,000 and Exxon's damages on its counterclaim were $40,000. This appeal and cross-appeal followed.
The Carters argue the district court erred in granting summary judgment on the Petroleum Act claim and in granting summary judgment on Exxon's counterclaim. They further contend that the district court's jury instruction on waiver was erroneous, that the district court erred in applying the disclaimers to bar their claim for consequential damages for breach of duty to repair in a good and workmanlike manner, that the district court erred by barring the recovery of any damages for the time period after the franchise agreement was not renewed, and that the jury's finding that ninety days was a reasonable repair period was against the clear weight of the evidence. Exxon contends that the district court erred by applying the disclaimers to only one of the Carters' contract claims. It contends the disclaimers should also bar recovery of consequential damages on the Carters' claim for breach of duty to repair in a reasonable time. It also contends the district court abused its discretion by granting the Carters leave to amend their complaint.
The Carters 3 argue that the non-renewal of their franchise agreement violated the Petroleum Act. Congress enacted the statute for the purpose of protecting franchisees, who generally have inferior bargaining power when dealing with franchisors, from unfair termination or nonrenewal of their franchises. See S.Rep. No. 95-731, at 17-19, (1978), reprinted in 1978 U.S.C.C.A.N. 873, 875-77. However, Congress also provided franchisors with some flexibility to terminate franchise...
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