Dersch Energies, Inc. v. Shell Oil Co.

• Decision Date: 26 December 2002
• Docket Number: No. 01-2495.,01-2495.
• Citation: 314 F.3d 846
• Parties: DERSCH ENERGIES, INC., Plaintiff-Appellant, v. SHELL OIL COMPANY and Equilon Enterprises, Inc., Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

314 F.3d 846

DERSCH ENERGIES, INC., Plaintiff-Appellant, v. SHELL OIL COMPANY and Equilon Enterprises, Inc., Defendants-Appellees.

No. 01-2495.

United States Court of Appeals, Seventh Circuit.

Argued November 30, 2001.

Decided December 26, 2002.

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William L. Taylor (argued), Taylor & Powell, Alexandria, VA, for Plaintiff-Appellant.

William J. Becker, Heyl, Royster, Voelker & Allen, Edwardsville, IL, Douglas C. Crone (argued), Tribler, Orpett & Crone, Chicago, IL, for Defendants-Appellees.

Before FLAUM, Chief Judge, and CUDAHY and MANION, Circuit Judges.

MANION, Circuit Judge.

Dersch Energies, Inc. purchases Shell Oil Company products and resells them to retail distributors. In December 1997, Dersch began negotiating with Shell the renewal of their franchise relationship, which was set to expire in the fall of 1998. Throughout the negotiation process, Dersch expressed concerns to Shell about several contract provisions that it deemed objectionable. After ten months of negotiations, Shell (now operating as Equilon Enterprises, L.L.C. due to a merger) informed Dersch that unless it signed the proposed franchise agreement within the next few days, Shell/Equilon would issue a formal notice of nonrenewal of the parties' franchise relationship. Dersch signed the new franchise agreement "under protest," and, approximately one year later, filed an action for declaratory relief against Shell and Equilon, seeking a declaration of the corporation's rights under the agreement pursuant to the Petroleum Marketing Practices Act, 15 U.S.C. §§ 2801-2806. After some procedural wrangling, the parties filed cross-motions for summary judgment. The district court granted the defendants' motion, and Dersch filed a timely motion to alter or amend the judgment, which the court denied. Dersch appeals the district court's decisions granting the defendants' motion for summary judgment and denying its motions for summary judgment and to alter or amend the judgment. We affirm.

I.

Dersch Energies, Inc. ("Dersch") is a family-owned motor fuel reselling business that has purchased and sold Shell-branded motor fuels for over fifty years. In its role as middleman, Dersch sells Shell-branded motor fuels in portions of southeastern Illinois and southwestern Indiana. On average, Dersch purchases over ten million gallons of Shell-branded motor fuels annually which it then sells to service stations and other agricultural, commercial, and industrial businesses. Since 1951, Dersch has purchased motor fuels from Shell Oil Co. ("Shell") pursuant to a series of supply or "jobber" contracts (drafted by Shell), the last of which became effective on January 1, 1982, and was to remain in effect until December 31, 1984 ("1982 Contract"). The 1982 Contract provided for year-to-year renewals at the expiration of the initial three-year term, unless terminated by either party within ninety days of the annual renewal date. The parties operated under these annual renewals until September 1998, when a new franchise agreement was entered into by the parties.

In 1997, to ensure national uniformity, Shell decided to revise its existing franchise agreements with jobbers and wholesalers.¹ In December 1997, Shell sent a new franchise agreement ("Renewal Agreement") for Dersch to sign. In the accompanying correspondence, Shell highlighted the differences between the Renewal Agreement and the 1982 Contract, and informed Dersch that the 1982 Contract was set to expire on March 31, 1998. Shell also advised Dersch that it had until December 22, 1997, to execute the Renewal Agreement.

On February 25, 1998, Ken Zumdome, Shell's area manager for Dersch's territory, sent a facsimile message to John Dersch, Dersch's president, and Thomas Dersch, John Dersch's son and Dersch's vice president, advising them that a "[n]ew jobber contract was sent to you before Christmas. You are the only jobber who has not returned [the contract]. Every jobber in the country has this new contract in effect. Please return ASAP." On March 4, 1998, John Dersch responded by advising Shell, in writing, that the 1982 Contract was not set to expire until December 1998. On May 29, 1998, Shell notified Dersch that "Shell wants all jobbers on their new contract. You are the only jobber not signed. Our legal [department] says you have the right to hold off signing until ... December 31, 1998. If you do not return the contract prior to that, your contract with Shell will terminate."

On July 15, 1998, representatives from both parties met to discuss the terms and conditions of the proposed Renewal Agreement. During the course of the meeting, Thomas Dersch voiced concerns over the Renewal Agreement's: (1) indemnification provisions; (2) release of claims provisions; (3) assignment provisions; (4) pricing provision; and (5) description of Dersch's new defined territory. He also told the Shell representatives that he considered the corresponding security and personal guaranty agreements — that Shell was seeking to require Dersch to execute in conjunction with the Renewal Agreement—to be "onerous." Two days after the meeting, Dersch received a facsimile from Zumdome advising that Shell would not require Dersch to execute the new security or personal guaranty agreements, but noting that the Renewal Agreement would now require an addendum reflecting the fact that Shell had joined with Texaco, Inc. ("Texaco") to form Equilon Enterprises, L.L.C. ("Equilon") and acknowledging that Equilon would be Dersch's new supplier-franchisor under the Renewal Agreement.²

In mid-August 1998, Dersch received a slightly revised version of the Renewal Agreement from Shell, along with a letter that, after mistakenly asserting that the 1982 Contract had expired on August 3, 1998, advised Dersch that "the appropriate documents must be executed and returned to Shell not later than August 3, 1998." According to Dersch, it did not respond to this letter because it believed, based on Shell's prior correspondence, that it had until December 31, 1998, to execute the Renewal Agreement.

On or about September 29, 1998, John Dersch received a telephone call from Zumdome, informing him that if Dersch did not sign and forward the Renewal Agreement to Shell/Equilon in the next two to three days, he was under instructions to issue an official notice of nonrenewal of Dersch's franchise relationship on October 1, 1998, to be effective January 1, 1999.³ Zumdome advised Dersch that the non-renewal would not be rescinded, and read excerpts from the notice that had already been prepared by the companies' attorneys. Thomas Dersch then requested that Zumdome send him a copy of the proposed notice of non-renewal via facsimi-Zumdome complied with this request, faxing Dersch a copy of the proposed notice that same day. After reviewing the proposed notice of non-renewal, Dersch executed the Renewal Agreement "under protest," and typed the following underneath each of his signatures or initials: "[d]espite my objections to this agreement, I have been threatened with the loss of my franchise if I do not sign it at this time. Accordingly, I am signing it under protest and reserve all rights to challenge it." Equilon signed the Renewal Agreement the next day on September 30, 1998.

On September 21, 1999, after operating under the Renewal Agreement for almost one-year, Dersch filed an action for declaratory relief, pursuant to 15 U.S.C. § 2805(e) and 28 U.S.C. § 2201, requesting a declaration of its rights under the Renewal Agreement pursuant to the Petroleum Marketing Practices Act ("PMPA"). Specifically, Dersch sought a declaration that Shell and Equilon (collectively "Equilon" or the defendants) violated 15 U.S.C. § 2805(f)(1) by conditioning the renewal of the parties' franchise relationship on Dersch releasing claims and waiving rights that it had under both federal and state law.

In its complaint, Dersch alleged that the defendants, by threatening to discontinue the parties' franchise relationship, forced it to release or waive six state law rights, three of which are at issue on appeal. First, Dersch claimed that the indemnity provision of the Renewal Agreement, i.e., Article 11.1, required it to waive its right to contribution from joint tortfeasors in violation of 735 ILCS § 5/2-1117(a).⁴ Second, Dersch averred that the change of delivery provisions, i.e., Articles 5.1 and 5.4, violated Ind.Code § 23-2-2.7-1(3) because they allowed the defendants to "change the delivery point for product sold to Dersch from the point of origin (i.e., the fuel terminal) to the destination, and back, at its option."⁵ Third, Dersch maintained that the joint and several liability provision and the personal obligations and provisions clause, i.e., Articles 21.2 and 21.3 respectively, subverted the limitations on personal liability for corporate officers and directors under both the laws of Illinois and Indiana. See, e.g., Davis v. Haas & Haas, Inc., 296 Ill.App.3d 369, 230 Ill.Dec. 619, 694 N.E.2d 588, 590 (1998) (holding that "[a] corporation is a legal entity which exists separate and distinct from its shareholders, directors and officers. Accordingly, shareholders, directors and officers are generally not liable for a corporation's obligations.") (internal citations omitted); State of Indiana, Civil Rights Comm'n v. County Line Park, Inc., 718 N.E.2d 768, 772 (Ind.Ct.App.1999) (same). These contract provisions will hereinafter be referred to collectively as the "Disputed Provisions."

On December 9, 1999, the defendants moved to dismiss Dersch's complaint, arguing that there was no actual, justiciable controversy that would permit the district court to exercise subject matter jurisdiction, and claiming that the litigation was not ripe because Dersch's complaint only raised potential, not actual, violations of § 2805(f)(1). As such, the defendants asserted that the district court was being asked to improperly...