Escobar v. Mobil Oil Corp., Civ. No. B-80-513.

• Decision Date: 17 September 1981
• Docket Number: Civ. No. B-80-513.
• Citation: 522 F. Supp. 593
• Parties: Luis ESCOBAR, d/b/a Tropical Service Center v. MOBIL OIL CORPORATION.
• Court: U.S. District Court — District of Connecticut

522 F. Supp. 593

Luis ESCOBAR, d/b/a Tropical Service Center v. MOBIL OIL CORPORATION.

Civ. No. B-80-513.

United States District Court, D. Connecticut.

September 17, 1981.

Thor L. Crone, Abate, Fox & Farrell, Stamford, Conn., for plaintiff.

John Crosskey, Kenneth W. Ritt, Day, Berry & Howard, Stamford, Conn., for defendant.

MEMORANDUM OF DECISION

ELLEN B. BURNS, District Judge.

This is an action commenced in Connecticut Superior Court on November 12, 1980, and removed to this Court by the defendant on November 21, 1980, pursuant to 28 U.S.C. § 1441. The complaint alleges that defendant breached certain common law duties owed plaintiff and violated several state and federal statutes, including the Petroleum Marketing Practices Act, Pub. L.No. 95-297, tit. I, 92 Stat. 322 (1978), codified in 15 U.S.C. §§ 2801-2806 (Supp. II 1978) (the Act). As relief, plaintiff seeks damages and a variety of equitable orders, including a preliminary injunction restraining defendant from terminating its business relationship with plaintiff, which is commonly known as a "franchise." See 15 U.S.C. § 2801(1)(A)-(1)(B). This Court held an evidentiary hearing on plaintiff's motion for a preliminary injunction and, because plaintiff has proved that defendant failed to comply with the notice provisions of the Act, the motion for a preliminary injunction is granted.

I.

Plaintiff Luis Escobar operates a gasoline station in Norwalk, Connecticut. Since 1973, plaintiff and defendant Mobil Oil Corporation have been parties to a series of franchise agreements whereby plaintiff markets gasoline and other petroleum products under defendant's trademark.¹ Each of the franchise agreement packages includes a retail dealer contract, a service station lease, a security agreement and various riders and schedules, such as a "Mobil" trademark sign rental agreement.

Plaintiff and defendant executed one such franchise agreement on June 30, 1977. Both the lease and retail dealer contract had three-year terms which were to expire on February 28, 1980. Under the 1977 retail dealer contract, plaintiff agreed to purchase at least 148,575 gallons of gasoline, but not more than 297,149 gallons per year. According to the terms of the service station lease, plaintiff paid 2.25 cents for each gallon of gasoline delivered into his storage tanks, but not less than $350 per month.

The contract and the lease contain a number of other provisions. The lease, for example, allocates maintenance obligations between the parties. In pertinent part, paragraph 6 provides that "in order to contribute to the health, safety and comfort of the motoring public and to promote cleanliness and good appearance of the general community, ... tenant agrees to keep the premises in clean, orderly and well-lighted condition, free of trash, junk and debris, and ... to dispose of all wastes such as waste oil, used tires, batteries and other refuse...."

The supplemental agreement which is a part of the '77 franchise package included detailed standards for service station appearance. Paragraph I(g) provides that "the drive areas will be kept clear of obstructions and cars will not be parked in areas other than those designated by Mobil for parking...." Paragraph I(h) provides that "unregistered cars will not be retained on the station property for more than 48 hours."

Article 4(A) of the supplemental agreement recites that "the duties and obligations set forth in the package are agreed by the parties to be material to the relationship between Mobil and Dealer." Failure to meet any obligation was also agreed to be an event of default which could trigger termination of the franchise. The testimony of Mobil marketing representative John McNally indicated that Mobil prepares the franchise packages.

On November 20, 1979, McNally visited plaintiff's service station. He brought with him at least one copy of a proposed franchise agreement package which was intended to cover the next three years. Plaintiff wanted to review the package and McNally, who did not want to leave the original documents with plaintiff, left a copy, requiring plaintiff to sign a receipt for it.

McNally returned to the station December 12, 1979, to discuss the renewal package. At this meeting, plaintiff expressed dissatisfaction with the terms of the renewal package, especially the rental price. McNally left the station, taking plaintiff's copy of the documents with him.

On January 2, 1980, McNally left the franchise renewal package with plaintiff once again. McNally also hand delivered a letter to plaintiff that day which extended the 1977 lease ninety days, to May 29, 1980. The letter related that the purpose of the extension was to afford time for negotiation of a new agreement. Plaintiff signed the ninety day letter "acknowledged and accepted" on January 10, 1980. The letter was signed for Mobil by E. W. Rucci, district manager.

On February 11, 1980, Mobil mailed plaintiff a letter stating that Mobil would not renew the 1977 lease, and terminating "said Lease and Contract effective May 29th, 1980." The letter gave plaintiff ninety days to make a decision on the outstanding lease proposal. Like the January 2 letter, this one was also signed by Rucci.

The proposed franchise renewal agreement included a higher monthly rental than the '77 agreement. The proposed rental increase was calculated in two parts. Under the agreement, the service station dealer was to pay 1.6 cents per delivered gallon of gasoline, but at least $384 per month. Added to this was a $700 monthly charge "for use of the non-motor fuel facilities," which was to be collected at 13.5 cents per delivered gallon. This $700 charge is called the alternate profit center, or APC, rent. The franchise agreement recites that the APC rent is calculated on historical use of the non-motor fuel facilities, such as automobile repair.

There were other differences in the terms of the renewal package. For example, paragraph 14 of the retail dealer contract, which had no counterpart in the 1977 contract, substantially restated the non-renewal and termination provisions of the Petroleum Marketing Practices Act, 15 U.S.C. § 2802(b)(1), (b)(2), (b)(3), which had become effective during the term of the '77 lease. See also 43 Fed.Reg. 38,743 (1978). The quantity of gasoline to be purchased under the retail dealer agreement reflected change in applicable laws and regulations. Paragraph 11 of the service station lease, like paragraph 14 of the retail dealer contract, limited the grounds for termination and non-renewal to those permissible under the Petroleum Marketing Practices Act.

While negotiations with Mobil continued during January, 1980, plaintiff was negotiating for the sale of his business with Dean Price of Wilton, Connecticut. Plaintiff agreed to sell the station to Price for $75,000, but the sale was never concluded.

Mr. Price testified that he was quite interested in purchasing plaintiff's station and, to that end, had put down one per cent of the purchase price as a binder. Mr. Price met more than once with John McNally, with whom he discussed the planned sale. Mr. Price testified that Mr. McNally attempted to dissuade him from purchasing the station. According to Price, McNally said, "the station is not worth what you're paying" and made statements impugning plaintiff's treatment of prior business associates and otherwise derogating plaintiff's character. Mr. McNally admitted telling Mr. Price that the sales price was too high, but added that this statement was made in the course of a conversation concerning allocation of gasoline; McNally testified that his complete statement had been, "the station is not worth what you intend to pay without an increase in allocation." Mr. McNally denied ever telling Mr. Price that plaintiff had treated business partners unfairly or that Mr. Price should wait a couple of months before acting on the planned sale, since Mobil intended to evict plaintiff, whom it considered a "headache." Mr. Price ultimately decided not to go through with the planned sale.

On March 20, 1980, Mr. McNally once again visited plaintiff's service station. According to plaintiff, McNally forced him to sign the various documents in the renewal package and refused to discuss the rental increase, saying that it could be gone over "later." Plaintiff also testified that McNally said, "If you don't sign, you'll have nothing to sell," and that if he did not sell the business, the lease could be renegotiated. Plaintiff signed, because, he testified, had he not signed he would not have been able to sell his business to Price. Mr. McNally agreed that he told plaintiff to sign the renewal documents or he would have nothing to sell, but denied that he told plaintiff to sign with the understanding the franchise terms would be discussed later. Mr. Price corroborated plaintiff's version of the March 20, 1980, meeting; Mr. McNally testified that only Miguel Escobar, plaintiff's brother, was present, and that Mr. Price was not. In this connection, it is relevant that Miguel Escobar, not Mr. Price, witnessed the franchise renewal package.

The relationship between plaintiff and Mobil continued to deteriorate after March 20. There were three principal areas of disagreement. One was plaintiff's failure to purchase gasoline; one was plaintiff's refusal to pay any rent after May, 1980, and less rent than Mobil demanded for March, April and May, 1980; the third was plaintiff's storage of unregistered motor vehicles and junk automobiles in the station parking lot.

Starting in 1979, plaintiff had failed to purchase gasoline regularly. Plaintiff testified that Mobil refused to sell him gasoline in the amounts he wanted, i.e., "part-loads." He testified that purchasing a full load would have been too expensive for him, since a full load could have cost as much as $13,000. All the Mobil employees who testified indicated that it was Mobil policy not to sell...