Doebereiner v. Sohio Oil Co., 88-5352

• Decision Date: 10 August 1989
• Docket Number: No. 88-5352,88-5352
• Citation: 880 F.2d 329
• Parties: George C. DOEBEREINER, Plaintiff-Appellant, v. SOHIO OIL COMPANY, d/b/a B.P. Oil Company, Gulf Products Division, Defendant-Appellee.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 329

880 F.2d 329

George C. DOEBEREINER, Plaintiff-Appellant, v. SOHIO OIL COMPANY, d/b/a B.P. Oil Company, Gulf Products

Division, Defendant-Appellee.

No. 88-5352.

United States Court of Appeals, Eleventh Circuit.

Aug. 10, 1989.

Richard B. Warren, Fleming, Haile & Shaw, P.A., North Palm Beach, Fla., Richard W. Farrell, Farrell & Barr, Stamford, Conn., for plaintiff-appellant.

Eben G. Crawford, Squire, Sanders & Dempsey, Miami, Fla., for defendant-appellee.

Appeal from the United States District Court for the Southern District of Florida.

Before VANCE and COX, Circuit Judges, and DYER, Senior Circuit Judge.

PER CURIAM:

George C. Doebereiner appeals the district court's denial of his request for a preliminary injunction under the Petroleum Marketing Practices Act (PMPA), 15 U.S.C.A. Secs. 2801-41 (1982). See Doebereiner v. Sohio Oil Co., 683 F.Supp. 791 (S.D.Fla.1988). We affirm.

I.

Sohio Oil Company, d/b/a B.P. Oil Company, Gulf Products Division, (Gulf) is a major gasoline distributor selling its products through service stations operated by franchisees. Generally, these stations are owned or leased by Gulf and then leased or subleased to its franchisees. George Doebereiner has leased the service station at the intersection of Northlake Boulevard and Interstate 95 in Palm Beach Gardens, Florida since 1978. On March 25, 1986, he executed a new franchise agreement with Gulf covering the three year period beginning April 1, 1986. This new agreement, unlike its predecessor, contained a clause requiring Doebereiner to operate the station from 6 a.m. to midnight, seven days a week.

Maintaining competitive hours is an important element of Gulf's business philosophy. A Gulf customer who frequently finds his preferred station closed likely will purchase his gasoline elsewhere. Gulf determines the hours of operation for its franchisees by considering, among other factors, the location of the station and the hours of operation of competing stations. Doebereiner's station is located at a busy intersection near I-95; it is the first station off the interstate. Several of his nearby competitors who operate stations under franchise agreements with rivals of Gulf, moreover, are required by their franchisors to remain open from 6 a.m. until midnight. These considerations led Gulf to establish the hours reflected in Doebereiner's most recent franchise agreement. Not all Gulf franchisees in south Florida are required to maintain these same hours, however. Each station's hours depends on the outcome of the analysis described above.

Doebereiner initially was dissatisfied with the hours provision of the new franchise agreement. He expressed his concerns to Norm Graziani, Gulf's district manager in Miami. In response to Doebereiner's concerns, Graziani wrote a letter assuring Doebereiner that "if after a reasonable period of time a dealer believes that the contractual hours have not proved to be mutually beneficial we are always willing to review these hours for their appropriateness." Thereafter, Doebereiner, his worries apparently abated, acknowledged his agreement with the hours provision by signing the franchise agreement.

Doebereiner admits that he repeatedly violated the hours provision of the franchise agreement. Between April, 1986 and December, 1986, Doebereiner's station normally was opened 7 a.m. to 10 p.m. weekdays, with shorter hours maintained on weekends. Gulf twice sent Doebereiner letters warning him that he was violating the hours provision of the franchise agreement.

In December, 1986, Doebereiner unilaterally reduced the station's hours of operation even more due to a decrease in gasoline sales caused by road construction near the station. Graziani questioned Doebereiner about this reduction in hours and agreed that the station could be closed at 10 p.m. until the construction was completed. Doebereiner was told, however, that thereafter he would have to comply with the hours provision of the franchise agreement.

Construction was completed in August, 1987. Nevertheless, Doebereiner continued to close the station at 10 p.m. Via a letter dated August 24, 1987, Graziani warned Doebereiner that further violations of the hours provision would result in termination of the franchise agreement.

These warnings apparently went unheeded. A Gulf investigation revealed that Doebereiner's station was closed no later than 10 p.m. every night during the week beginning October 12, 1987. These failures to comply with the hours provision prompted Graziani to terminate the franchise agreement. On October 30, 1987, Doebereiner was notified that the franchise was terminated pursuant to the Petroleum Marketing Practices Act, Sec. 102(b)(2)(A), 15 U.S.C.A. Sec. 2802(b)(2)(A). He thereafter filed this lawsuit alleging that Gulf had violated the PMPA by illegally terminating the franchise agreement.

Doebereiner objects to the hours provision of the franchise agreement primarily because it is unprofitable to operate the station between 10 p.m. and midnight. Doebereiner's wife, who maintains the station's financial records, testified at the preliminary injunction hearing that the station loses approximately $30 per night when it stays open after 10 p.m. Security concerns, moreover, were a motivation for Doebereiner's failure to comply with the franchise agreement. Though he requested computerized tanks and a security drawer, Gulf has not supplied that equipment. Doebereiner believes that Gulf is insisting on compliance with the hours provision and refusing to supply equipment that would increase security so that it can oust him and shift to direct management.

II.

The legislative history of the PMPA reveals that the Act was designed to protect franchisees from arbitrary or discriminatory termination or nonrenewal. S.Rep. No. 731, 95th Cong., 2d Sess. 15, reprinted in 1978 U.S.Code Cong. & Admin.News 873, 874 (Senate Report ). Congress sought to equalize the obvious disparity in bargaining power between major oil companies and service station operators. Senate Report at 875-77. ¹ It recognized, however, that franchisors have a legitimate need to terminate or refuse to renew a franchise for violations of the franchise agreement which undermine the entire relationship. Senate Report at 876. ² To attain these often conflicting goals, Congress specifically set forth the permissible grounds for termination or nonrenewal of franchise relationships, and bestowed on federal courts jurisdiction to remedy violations of the Act.

Section 2802(b)(1)(B) ³ provides that a termination must be based on one of the grounds set forth in Sec. 2802(b)(2). Thus, a franchise may be terminated after proper notice ⁴ for, inter alia, "[a] failure by the franchisee to comply with any provision of the franchise, which provision is both reasonable and of material significance to the franchise relationship...." 15 U.S.C. Sec. 2802(b)(2)(A). Doebereiner, relying primarily on a recent decision of the Second Circuit ⁵ and a post hoc statement by the congressional committee that recommended passage of the PMPA, ⁶ argues that the standard for determining reasonableness and materiality is one that requires close scrutiny of all the circumstances surrounding the failure to comply. Stated otherwise, Doebereiner urges the court to apply an objective standard, determining whether the franchise provision was reasonable at the time of the failure to comply from the perspective of a disinterested observer. See Darling, 864 F.2d at 989. Gulf, on the other hand, like the court below, insists that whether a franchise provision is reasonable and material under Sec. 2802(b)(2)(A) is not a wholly objective determination. See Doebereiner, 683 F.Supp. at 794.

III.

The PMPA provides that a franchisee may bring an action to prevent termination of the franchise if the franchisor has failed to comply with the requirements of Sec. 2802(b)(2)(A). 15 U.S.C.A. Sec. 2805(a). In any such action, the franchisee may obtain preliminary injunctive relief if he shows that "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 there exist sufficiently serious questions going to the merits to make such questions a fair ground for litigation." 15 U.S.C.A. Sec. 2805(b)(2)(A). The court, moreover, must determine that "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." 15 U.S.C.A. Sec. 2805(b)(2)(B). If the franchisee meets his burden, and his hardships, on balance, are greater, then the mandatory language of the statute requires that the court grant preliminary relief. See 15 U.S.C.A. Sec. 2805(b)(2).

The PMPA thus sets a standard for preliminary injunctive relief that is more liberal than that which is generally applied outside the PMPA. Khorenian v. Union Oil Co., 761 F.2d 533, 535 (9th Cir.1985). In contrast to Rule 65 of the Federal Rules of Civil Procedure, the PMPA does not require the franchisee to make a showing of irreparable harm or that the injunction, if issued, would not be adverse to the public interest. See id.; Walters v. Chevron U.S.A., Inc., 476 F.Supp. 353, 355 (N.D.Ga.1979), aff'd, 615 F.2d 1135 (5th Cir.1980); Senate Report at 899. Rather, the franchisee need only show sufficiently serious questions providing a fair ground for litigation. This phrase has been interpreted as a requirement that the franchisee prove "a reasonable chance of success on the merits." Khorenian, 761 F.2d at 535; Moody v. Amoco Oil Co., 734 F.2d 1200, 1216 (7th Cir.1984).

IV.

The issue which we must resolve, broadly stated, is whether the district court erred in denying Doebereiner's request for preliminary injunctive relief. In reviewing the district court's judgment on this issue, we reverse, as in any preliminary injunction...