Glenside West Corp. v. Exxon Co., USA

Decision Date21 February 1991
Docket NumberCiv. A. No. 90-1333 (AJL).
CourtU.S. District Court — District of New Jersey


William M. Boyle, Rinaldo and Rinaldo, Elizabeth, N.J., for plaintiff/counterdefendant.

James Crawford Orr, Wilson, Elser, Moskowitz, Edelman & Dicker, Newark, N.J., Stuart H. Harris, Howrey & Simon, Washington, D.C., William R. Hurt, Exxon Co., U.S.A., Houston, Tex., for defendant/counterclaimant.


LECHNER, District Judge.

This is a claim brought by plaintiff Glenside West Corporation ("Glenside") against Exxon Company, U.S.A., a Division of Exxon Corporation ("Exxon"), and counterclaims brought by Exxon against Glenside arising out of the decision by Exxon to terminate the retail motor fuel service station franchise of Glenside (Glenside and Exxon are collectively referred to as the "Parties"). Jurisdiction is alleged pursuant to the Petroleum Marketing Practices Act (the "PMPA"), 15 U.S.C. §§ 2801 et seq., and 28 U.S.C. §§ 1331 and 1337.1

Exxon moves to dismiss various counts of the Amended Complaint pursuant to Fed.R.Civ.P. 12(b)(6) and to strike the affirmative defenses of Glenside to its counterclaims pursuant to Fed.R.Civ.P. 12(f).2 For the reasons which follow, the motions are granted in part and denied in part.3


Glenside, through its president and sole shareholder Robert E. Lee, Jr. ("Lee"), entered into a franchise relationship with Exxon sometime around April 1985 for the operation of an Exxon retail motor fuel service station (the "Service Station") located at 2591 U.S. Route 22, Scotch Plains, New Jersey. Amended Complaint at 5-6. The franchise relationship was based on a lease agreement (the "Lease Agreement") and retail sales agreement (the "Sales Agreement") between the Parties which authorized Glenside to use Exxon's trade mark in connection with the sale, consignment or distribution of motor oil (the "Lease Agreement" and "Sales Agreement" are collectively referred to as the "Franchise Agreement"). Amended Complaint at 6. The Parties renewed the Franchise Agreement on or about 27 September 1987 for the period 1 January 1988 to 1 January 1991. Amended Complaint at 8.

Glenside alleges a number of conflicts arose with Exxon during the course of the franchise relationship. Glenside alleges that while the Franchise Agreement permitted the performance of automotive repair and towing services, agents and employees of Exxon continuously insisted beginning in January 1988 that Glenside abandon its repair and towing services and limit its operations to the sale of motor fuel and related products. Amended Complaint at 9. In addition, agents and employees of Exxon allegedly continuously harassed Glenside by claiming that its repair and towing services "constituted a decline in retail performance, a nuisance and a failure of Glenside to maintain clean and healthful facilities, and that a continuation of said automotive repair and towing service constituted a strain in the franchise relationship and Glenside would be deemed uncooperative in said franchise relationship to its detriment." Amended Complaint at 9-10.

Glenside also alleges Exxon agents and employees repeatedly misrepresented to Glenside's employees that the franchise relationship would end because the landowner refused to renew the lease or sell the Service Station property to Exxon and that they should therefore seek other employment. Amended Complaint at 10-11. Glenside contends that, in fact, Exxon "was ultimately successful in its attempts to purchase said premises and did, indeed, purchase said premises from the landowner or its heirs, successors and assigns." Amended Complaint at 8.

Finally, Glenside alleges the Sales Agreement obliged Exxon to provide Glenside "with only those goods, inventory and services necessary to adequately, properly and successfully operate a retail motor fuel station operation...." Amended Complaint at 14. Glenside alleges it purchased inventory based on the representations of Exxon's "business counselors" that such inventory was marketable and essential to successful performance, when in fact much of the inventory remained "unsold, unmarketable and otherwise inappropriate for Glenside's retail motor fuel service station operation." Amended Complaint at 15.

Glenside alleges that prior to October 1989, it was a "longstanding" practice between Glenside and Exxon for Glenside to pay its monthly rental fees to the Exxon sales representative who regularly visited the Service Station. Amended Complaint at 3. Glenside alleges the sales representative did not make his customary visits in October and November 1989, and did not provide Glenside with the address to which rental payments should be mailed. Id. Glenside alleges it was for that reason that it failed to make its rental payments for these months. Id.

Glenside also states that while Lee5 never "seriously threatened personal injury or damage to anyone associated with Exxon or Exxon's property," he had a long-standing argumentative relationship with an Exxon sales representative arising out of ongoing problems in obtaining gas supplies from Exxon. Id. Glenside acknowledges "these ongoing problems did contribute to one inappropriately emotional outburst during a telephone conversation with the secretary to Exxon's retail district manager. However Lee has since apologized for that isolated incident." Id.

On or around 4 January 1990, Glenside received notice from Exxon of Exxon's intention to terminate and not renew the Franchise Agreement effective 15 April 1990. Amended Complaint at 2. Glenside states Exxon claimed it was basing its decision to terminate on Glenside's failure to make timely rental payments for October and November 1989 and on Lee's alleged threat to cause damage to Exxon's property and injury to its personnel. Amended Complaint at 2-3.

On 3 April 1990, Glenside filed its Complaint for Preliminary and Permanent Injunction, seeking to enjoin Exxon from terminating the Franchise Agreement. See Complaint for Preliminary and Permanent Injunction (the "Complaint").

On 30 April 1990, Exxon answered the Complaint and asserted three counterclaims against Glenside. See Answer and Counterclaim. In Count I (the "First Counterclaim"), Exxon alleges the failure of Glenside to make timely rental payments for the months September 1988 and April, October and November 1989 and threats by Glenside against Exxon's personnel and property constitute grounds for termination and nonrenewal pursuant to 15 U.S.C. §§ 2802(b)(2)(A), 2802(b)(2)(B) and/or 2802(b)(2)(C) and 2802(c)(8).6 In Count II (the "Second Counterclaim"), Exxon alleges it will be entitled to possess the Service Station on 15 June 1990. In Count III (the "Third Counterclaim"), Exxon alleges Glenside owes Exxon in excess of $3,500 for rent and other items. Exxon seeks declaratory relief that its termination and nonrenewal of the Franchise Agreement were lawful under the PMPA, injunctive relief enjoining Glenside from continuing to occupy and refusing to vacate the Service Station, a judgment against Glenside for the amounts due and owing, and legal costs and attorneys' fees.

Glenside filed its Answer to Counterclaim on 22 June 1990. It filed an Amended Answer to Counterclaim on 10 August 1990 (the "Amended Answer"). In the Amended Answer, Glenside asserted two affirmative defenses to Exxon's counterclaims. As its first affirmative defense (the "First Affirmative Defense"), Glenside alleges Exxon was a fiduciary to Glenside and exerted undue influence over Glenside to induce it to purchase inventory, change and restructure business activities and relationships and otherwise conduct business in a manner to which Glenside would not otherwise have consented. Glenside alleges: "As a result of said undue influence, Glenside was and is forced into an unnatural transaction that unfairly enriches Exxon at the expense of Glenside." Amended Answer at 5. As its second affirmative defense (the "Second Affirmative Defense"), Glenside alleges it is entitled to cure its alleged deficient performance of the terms of the Franchise Agreement, stating:

Glenside, as incapacitated party, now has the election to ratify its prior promise by remedying said alleged "deficient" performance or avoiding enforcement of its contractual obligations. Plaintiff herein affirmatively elects to ratify its prior promise by remedying its "deficient" performance, and indeed, has already corrected said alleged "deficient" performance, in good faith, which remedied performance does not rise to the level of reasonable or material significance to the franchise relationship as contemplated by the PMPA, amount to a failure to exercise good faith efforts, to carry out the provisions of said franchise relationship or constitute events which are relevant to the franchise permitting reasonable termination pursuant to the PMPA.

Amended Answer at 6-7.

On 31 May 1990, Glenside withdrew its request for a preliminary injunction. It filed the Amended Complaint, which is the subject of the instant motion to dismiss, on 10 August 1990. See Amended Complaint.

The Amended Complaint contains twelve counts. Count One alleges Exxon seeks to terminate the Franchise Agreement with Glenside in violation of the PMPA, 15 U.S.C. § 2802. Count Two alleges Exxon seeks to terminate the Franchise Agreement for an improper motive, in order to operate the retail service station directly without reliance on a franchise arrangement. In Count Three, Glenside complains that agents and employees of Exxon continuously harassed Glenside by insisting that it abandon its automotive repair and towing services. In Count Four, Glenside complains that its employees were continuously harassed by...

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