Hanes v. Mid-America Petroleum, Inc., 83-0330-CV-W-1.

• Decision Date: 22 December 1983
• Docket Number: No. 83-0330-CV-W-1.,83-0330-CV-W-1.
• Citation: 577 F. Supp. 637
• Parties: Jack C. HANES, et al., Plaintiffs, v. MID-AMERICA PETROLEUM, INC., Defendant.
• Court: U.S. District Court — Western District of Missouri

577 F. Supp. 637

Jack C. HANES, et al., Plaintiffs, v. MID-AMERICA PETROLEUM, INC., Defendant.

No. 83-0330-CV-W-1.

United States District Court, W.D. Missouri, W.D.

December 22, 1983.

John B. Gage, II, Gage & Tucker, Kansas City, Mo., for plaintiffs.

Jerome W. Seigfreid, Seigfreid, Runge, Leonatti & Pohlmeyer, Mexico, Mo., for defendant.

MEMORANDUM AND ORDER

JOHN W. OLIVER, Senior District Judge.

I.

This case pends on cross motions for summary judgment on the separated issue of defendant's liability under the Petroleum Marketing Practices Act (PMPA), 15 U.S.C. § 2801, et seq.

On March 24, 1983, plaintiffs filed their complaint in this case along with an application for temporary restraining order and injunction. As is our usual procedure, we refused to grant an ex parte temporary restraining order, contacted counsel for both sides, and, after receiving an agreement that the status quo would be maintained, set the case for a conference. On March 29, 1983, after a conference with the parties, we entered an order in maintenance of the status quo and directed further proceedings including an order "that the hearing on plaintiffs' motion for temporary restraining order and preliminary injunction and plaintiffs' prayer for permanent injunction be consolidated and conducted after the parties have completed all discovery on the issues involved in said requests for injunctive relief."

On August 19, 1983, the Court again met with the parties and it was agreed that the issue of liability under the provisions of the PMPA should be separated pursuant to Rule 42(b), Fed.R.Civ.P. Accordingly, a Rule 42(b) order was entered separating the issue of liability under the PMPA and setting that separated issue for trial. That order also provided that the parties prepare and file a stipulation of all undisputed facts and, if appropriate, to file cross motions for summary judgment on the issue of liability under the PMPA, so that, if possible, that issue could be determined without the necessity of an additional trial.

Both parties have filed a motion for summary judgment pursuant to the provisions of Rule 56, Fed.R.Civ.P., along with suggestions in support of their respective motions. The parties have also filed suggestions in opposition to the opposing party's motion. Plaintiff has filed a reply to defendant's suggestions in opposition. The record in this case includes certain depositions, affidavits and exhibits relied upon by the parties.

II.

Subchapter I of the Petroleum Marketing Practices Act, titled "Franchise Protection," 15 U.S.C. §§ 2801-06, sets minimum federal standards for the termination or non-renewal of franchise relationships¹ for the sale of motor fuel. That Title was established to protect franchisees² from arbitrary or discriminatory termination or non-renewal of their franchises. S.Rep. No. 731, 95th Cong., 2d Sess. reprinted in 1978 U.S.Code Cong. & Adm.News 873, 874.

The Act is a complex piece of legislation which basically requires that, before a franchisor³ may terminate a franchise or fail to renew a franchise relationship, the franchisor must (1) be able to point to a bona fide ground for termination as spelled out in the PMPA and (2) give adequate notice to the franchisee under the PMPA. 15 U.S.C. § 2802(b)(1).

The PMPA defines the term "franchise" as "any contract:"⁴

(iv) between a distributor and a retailer, under which a refiner or distributor (as the case may be) authorizes or permits a retailer or distributor to use, in connection with the sale, consignment, or distribution of motor fuel, a trademark which is owned or controlled by such refiner or by a refiner which supplies motor fuel to the distributor which authorizes or permit such use. 15 U.S.C. § 2801(1)(A)⁵

III.

A.

In their complaint, the plaintiffs allege that a franchise existed between plaintiffs and defendant under one of two alternative theories. In paragraph 1 of Count I, plaintiffs allege that "on August 21, 1981, defendant, by and through its employee, agent and Vice President, Pat Duff, entered into an oral agreement with plaintiff Jack C. Hanes under which defendant, a distributor of Shell Oil Company products, authorized and permitted plaintiffs to use, in connection with the sale of motor fuel, the Shell trademark ... and agreed to sell plaintiffs Shell motor fuel products for sale under said trademark with the understanding that said Shell products would be the only motor fuel products sold by plaintiffs during the term of a lease to be entered into between plaintiffs and defendant."

In paragraph 2 of that Count, plaintiffs allege that "in December, 1981, plaintiffs Jack R. Hanes and Wilma M. Hanes, individually and as agents for plaintiff Jack C. Hanes, entered into a contract with defendant Mid-America Petroleum, Inc., which authorized plaintiffs to occupy leased marketing premises located at Interstate 70 and Route J, Nelson, Missouri, which premises were to be employed in connection with the sale of motor fuel supplied by Shell Oil Company and distributed by Mid-America Petroleum, Inc."

Plaintiffs further allege that, on or around November 9, 1982, defendant removed the Shell signs installed on the premises and removed all motor fuel from the underground pumps located on said premises; that this was done without any notification and without proper grounds; and defendant thereby terminated plaintiffs' franchise in violation of the provisions of 15 U.S.C. § 2804.

B.

The files and records before the Court establish a number of undisputed facts: Defendant Mid-America Petroleum, Inc., is a jobber for Shell Oil Company and as such was authorized by Shell to permit the resale of motor fuel products by others under the Shell Oil Company trademark (Stip. ¶ 3). Although Shell is the primary refinery utilized by defendant for the purchase of motor fuel to sell, consign, or distribute to others, defendant does utilize certain other refiners (Taylor Dep. p. 15; Stip. ¶ 4).

The subject property in Nelson, Missouri is owned by Arlene Moll. Under a lease, defendant rents the premises from Arlene Moll for $750.00 per month. The lease provides that defendant lessee may, without the consent of the lessor, sublet or assign the lease (Def. Suggestions in Support, Exh. A).

Under some oral arrangement or agreement with defendant's Vice President Clint J. (Pat) Duff, plaintiff Jack C. Hanes entered the service station premises in August of 1981. Jack C. Hanes in an affidavit states that he and Clint J. Duff agreed in late August, 1981 that Hanes would operate the station for the purpose of retail sale of Shell Oil Company petroleum products under the Shell trademark, pay defendant two hundred and fifty Dollars ($250) per month rent for the station, and purchase Shell Oil Company petroleum products from defendant. (Jack C. Hanes Aff. ¶ 3).

Clint J. Duff died on August 16, 1982 and, during discovery, defendant asserted the Missouri Dead Man's Statute in relation to any oral agreement that might have existed. It is, however, undisputed that Duff, in his position with defendant, had the responsibility of running Mid-America Petroleum. His duties entailed overseeing the collection of moneys from dealers, taking orders from dealers for petroleum products and negotiating dealer contracts (Evans Dep. pp. 58-9). No other employee, agent or representative of defendant is currently aware of any oral contract between defendant and plaintiffs concerning the occupancy of the service station premises or the distribution of motor fuel products for sale from that station. Defendant "assumes" that Hanes entered the premises on August of 1981 under some oral arrangement with Duff (Def's Suggestions in Support at 1) and concedes that "unquestionably there was an arrangement" (Def's Suggestions in Opposition at 1).

It is undisputed that from September 14, 1981 to October 8, 1982 defendant sold and delivered motor fuel products to plaintiffs at the service station premises (Stip. ¶ 1). The service station was operated during that period of time under the Shell trademark, plaintiffs were required to pay defendant for the products and submit a $250 monthly rental payment to defendant (Evans Dep. Exhs. # 2-11).

Plaintiffs began operation of the station without any written agreement or lease. In November or December of 1981, Jack C. Hanes received a proposed lease from defendant (Jack C. Hanes Aff. ¶ 6). In early December, 1981, one Jerome Taylor delivered another copy of the proposed lease to Jack C. Hanes but the copy of that lease bore Taylor's signature. It is undisputed that at the time Jerome Taylor delivered the copy of the lease to Jack C. Hanes, Taylor was not an employee of defendant and that he delivered the copy of the lease to Hanes simply as a favor to Duff who was ill at the time.

The lease with Taylor's signature was dated December 1, 1981; stated that the term of the lease was from December 1, 1981 to December 1, 1982; provided for a $250.00 monthly rental; had provisions for the payment for gas delivered by defendant to the premises; had "NONE" written in the space for security deposit; and had lines drawn through the blanks reserved for the hours lessee would be required to keep the station open. The copy of that lease signed by Taylor was never signed by any of the plaintiffs (Complaint, Exh. A).

On December 20, 1981, Jack C. Hanes' mother and father, plaintiffs Wilma M. Hanes and Jack R. Hanes, signed the other copy of the lease. The signature of Clint J. Duff appeared on that lease (Stip. ¶¶ 11 and 16, Exh. B). The form of that lease was identical to the form of the lease signed by Jerome Taylor. More spaces, however, were left blank. The form contained certain typewritten provisions and was entitled "ONE YEAR PROBATIONARY DEALER LEASE." The lease states in part:

THIS IS A LEASE dated 12-1, 1981, between Mid-America Petroleum, Inc., a Missouri corporation, with offices at Washington, Missouri ("MAP"), and Jack Haines,

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