Esquivel v. Exxon Co., USA, Civ. A. No. SA-87-CA-1591.

• Decision Date: 10 November 1988
• Docket Number: Civ. A. No. SA-87-CA-1591.
• Parties: Jose ESQUIVEL, Jr. d/b/a San Pedro Exxon, Plaintiff, v. EXXON COMPANY, U.S.A., Defendant.
• Court: U.S. District Court — Western District of Texas

700 F. Supp. 890

Jose ESQUIVEL, Jr. d/b/a San Pedro Exxon, Plaintiff, v. EXXON COMPANY, U.S.A., Defendant.

Civ. A. No. SA-87-CA-1591.

United States District Court, W.D. Texas, San Antonio Division.

November 10, 1988.

Herbert W. Fortson, III, Withem & Fortson, Houston, Tex., for plaintiff.

William R. Hurt, Houston, Tex., for defendant.

ORDER

PRADO, District Judge.

On this date came on to be considered Defendant Exxon Corporation's Motion for Summary Judgment, filed in the above-styled and numbered cause on July 5, 1988; Plaintiff's Opposition to Exxon's Motion for Summary Judgment, filed on September 23, 1988; Defendant Exxon Corporation's Reply to Plaintiff's Opposition to Exxon's Motion for Summary Judgment, filed on October 14, 1988; and Defendant Exxon Corporation's Request for Hearing on Defendant Exxon Corporation's Motion for Summary Judgment, filed on the same date.

I. Introduction

On January 21, 1987, Defendant Exxon and Plaintiff Jose Esquivel, Jr. entered into a trial franchise agreement permitting Plaintiff to operate an Exxon service station. The trial franchise agreement was nonrenewed by Defendant at the conclusion of its term, January 1, 1988. Defendant nonrenewed by providing the notice required by § 104 of Title I of the Petroleum Marketing Practices Act, 15 U.S.C. §§ 2801-06 (PMPA). This notice took the form of a letter to Plaintiff dated September 21, 1987. On December 17, 1987, Plaintiff filed his complaint in this case claiming (1) Defendant did not properly nonrenew the trial franchise as required by the PMPA, (2) Defendant falsely represented to Plaintiff that his franchise would be renewed, (3) Defendant is precluded from nonrenewing the trial franchise because of its misrepresentations which constitute a modification and extension of the franchise, (4) Defendant is estopped from denying any renewal of the lease and has waived any right or reason upon which to base any nonrenewal of the franchise lease because of its misrepresentations, and (5) Defendant breached fiduciary duties it owed to Plaintiff.

Defendant has moved for summary judgment claiming (1) it validly nonrenewed Plaintiff's trial franchise under the PMPA, (2) the reasons for nonrenewal of the trial franchise were valid and legitimate, (3) Plaintiff's state common law claims are preempted by the PMPA, and (4) Defendant is entitled to summary judgment on Plaintiff's state common law claims. Federal Rule of Civil Procedure 56(c) provides that summary judgment shall be rendered in a movant's favor "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with any summary judgment affidavits, ... show 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."

II. PMPA Claim

Plaintiff's first claim is that Defendant did not properly nonrenew his trial franchise as required by the PMPA. It is undisputed that Plaintiff entered into a trial franchise with Defendant. Original Complaint, Dec. 17, 1987, ¶ 9; Retail Service Station Lease (Trial Franchise), Jan. 21, 1987 (attached as Exhibit A to Original Complaint, Dec. 17, 1987). Under the PMPA, there are two types of franchises: the regular franchise described in § 2801(1), and the trial franchise described in § 2803(b)(1). The two types of franchises are distinguished by the fact that the provisions of § 2802, strictly limiting the right of a franchiser to nonrenew a franchise relationship, do not apply to a trial franchise. 15 U.S.C. § 2803(a)(1). The only requirement for terminating a trial franchise is that proper notice be given, pursuant to § 2804, at the conclusion at the initial term of the trial franchise. 15 U.S. C. § 2803(c)(1); Freeman v. BP Oil, Inc., 855 F.2d 801, 802 (11th Cir.1988). The PMPA does not require that termination or nonrenewal of a trial franchise be conditioned on good cause reasons. See 15 U.S. C. § 2804(c)(3)(A) (notice must state intention to nonrenew or terminate trial franchise "together with the reasons therefor").

Section 2804 requires that notice be given not less than 90 days prior to termination; that it be in writing; that it be posted by certified mail or personally delivered to the franchisee; that it contain a statement of intention to terminate the franchise with the reasons therefor; that it give the date on which such termination or nonrenewal shall take effect; and that it provide a summary statement of the PMPA. 15 U.S.C. § 2804(a) and (c). Plaintiff does not contend that Defendant's notice of nonrenewal did not comply with § 2804's technical requirements. Original Complaint, Dec. 17, 1987, ¶ 6. It thus appears that, as a matter of law, Plaintiff has failed to even state a claim upon which he can recover. See Freeman, 855 F.2d at 802 ("If the franchisee was a `trial franchisee' ..., the franchiser need only have satisfied the notice requirements of section 2804 in effectuating the nonrenewal."). Plaintiff claims, however, that the reasons given in Defendant's notice were "not legitimate." While Plaintiff does not explain what he means by "not legitimate," the Court infers that Plaintiff means not truthful or false.

The reasons given by Defendant for nonrenewing Plaintiff's trial franchise were as follows:

The reason that your franchise relationship will not be renewed is our good-faith business judgment that you have failed to demonstrate sufficient fiscal and business responsibility to warrant the continuance of our relationship. The judgment is based, in part, upon the following lists of events or facts. This listing is exemplary only and is not meant to be exhaustive. However, we consider each of the listed events or facts to be of sufficient basis for not continuing our franchise relationship with you.

(1) On several occasions, Exxon has received bonafide sic customer complaints concerning your operation of the above referenced marketing premises;

(2) Exxon has not been paid in a timely fashion sums to which it is legally entitled;

(3) On at least one occasion, your station was observed by Exxon representatives to be closed during normal business hours;

(4) Your failure to exert good faith efforts to carry out the provisions of the franchise agreement between you and Exxon.

Letter to Jose Esquivel, Jr. from Foy Royder, District Manager, Exxon Company, U.S.A., Sept. 21, 1987, at 1-2 (attached as Exhibit B to Original Complaint, Dec. 17, 1987) (hereinafter Letter). In his response to Defendant's summary judgment motion, Plaintiff spends much time arguing that the reasons given for nonrenewal in Defendant's September 21, 1987 letter were false. The summary judgment evidence indicates, however, that Plaintiff admits at least one of the reasons for nonrenewal and it therefore appears that Defendant's nonrenewal was proper.

Once again, the Court notes that under § 2804(c)(3), any reason for nonrenewal will suffice to support the nonrenewal of a trial franchise. This section is "far less demanding than the grounds for nonrenewal of a regular franchise under § 2802(b)." Freeman v. B.P. Oil, Inc., 651 F.Supp. 654, 655 (M.D.Fla.1986). If the Court were to require Defendant to give a "substantial reason" for nonrenewal, "the Court would be embossing the `trial franchise' nonrenewal provisions with a good cause provision not intended by Congress." Wojciechowski v. Amoco Oil Co., 483 F.Supp. 109, 113 (E.D.Wis.1980). Valid reasons for nonrenewal of a regular franchise include the existence of customer complaints,¹ failure to timely pay amounts due under a franchise agreement,² and failure to maintain required hours of operation.³ These reasons should be applicable to termination or nonrenewal of trial franchises also since even lesser reasons have been held valid for purposes of terminating a trial franchise. E.g., Freeman, 651 F.Supp. at 655 (nonrenewal because of trial franchisee's "negative attitude" held valid).

Defendant has given several reasons in support of its decision to nonrenew Plaintiff's trial franchise. Plaintiff claims that none of these reasons is legitimate. If, however, any one of Defendant's reasons is legitimate, or true, the fact that the other reasons are somehow defective will not affect Defendant's nonrenewal. Stuart v. Exxon Co., U.S.A., 624 F.Supp. 648, 653 (N.D.Tex.1985).

At this point, a "clarification" of Defendant's reasons for nonrenewing Plaintiff's trial franchise, as the Court sees them, might be helpful. Defendant's September 21, 1987 letter indicates that there is really only one reason for nonrenewing the franchise: "our good-faith business judgment that you have failed to demonstrate sufficient fiscal and business responsibility to warrant the continuance of our relationship." Letter, at 1. The letter then lists several "events or facts" supporting Defendant's decision. The letter states, however, that "this listing is exemplary only and is not meant to be exhaustive." Id. Plaintiff views each of the events or facts as a reason for nonrenewal and disregards Defendant's statement concerning the exercise of its "good-faith business judgment." The Court shall therefore first consider the reasons as Plaintiff views them.

One of the events listed by Defendant as supporting the decision to nonrenew Plaintiff's trial franchise was that, on at least one occasion, his station was observed closed during hours it was supposed to be open. Defendant's letter does not give the date or time of the observation. The trial franchise agreement entered into by the parties provided that Plaintiff was to keep his station open not less than 18 hours a day, from 6:00 a.m. to 12:00 a.m., everyday. Retail Service Station Lease (Trial Franchise), Jan. 21, 1987, ¶ 6(a) (attached as Exhibit A to Original Complaint, Dec. 17, 1987). Plaintiff contends that the station was open on the date in question, apparently July 11, 1987, and has supplied the affidavit of a former employee indicating that the station was...