Harris v. Equilon Enterprises, LLC

• Decision Date: 13 March 2000
• Docket Number: No. C-3-99-242.,C-3-99-242.
• Citation: 107 F.Supp.2d 921
• Parties: Charles W. HARRIS dba Harris Big Hill Shell, Plaintiff, v. EQUILON ENTERPRISES, LLC, Defendant.
• Court: U.S. District Court — Southern District of Ohio

Page 921

107 F.Supp.2d 921

Charles W. HARRIS dba Harris Big Hill Shell, Plaintiff, v. EQUILON ENTERPRISES, LLC, Defendant.

No. C-3-99-242.

United States District Court, S.D. Ohio, Western Division.

March 13, 2000.

Dwight A. Washington, Dayton, OH, for Plaintiff.

Randall S. Rabe, Elizabeth Scully, Baker & Hostetler, Columbus, OH, for Defendant.

DECISION AND ENTRY OVERRULING PLAINTIFF'S MOTION FOR PRELIMINARY INJUNCTION (DOC. # 2); PLAINTIFF'S MOTION FOR LEAVE TO FILE AMENDED COMPLAINT (DOC. # 19) OVERRULED; DEFENDANT'S MOTION IN LIMINE (DOC. # 6) SUSTAINED; CONFERENCE CALL SET

RICE, Chief Judge.

This litigation stems from the Defendant's non-renewal of a contract under which the Plaintiff operates a Shell gas station as a franchisee. After refusing to renew the agreement, the Defendant offered to sell the gas station to the Plaintiff, who rejected the offer and asserted that the proposed purchase price was unreasonable. The Plaintiff then filed suit against the Defendant, alleging a violation of the Petroleum Marketing Practices Act ("PMPA"), 15 U.S.C. § 2801, et seq. (Doc. # 1). In his Complaint, the Plaintiff contends that the Defendant violated the Act by failing to make a "bona fide offer" to sell him the gas station. (Id.). The Plaintiff's Complaint requests compensatory and punitive damages, as well as injunctive relief. Pending before the Court are three Motions: (1) Plaintiff's Motion for a Preliminary Injunction (Doc. # 2)¹; (2) Plaintiff's Motion for Leave to File an Amended Complaint (Doc. # 19); and (3) Defendant's Motion in Limine (Doc. # 6). After setting forth a brief overview of the facts underlying this litigation, the Court will address the foregoing Motions.

I. Factual Background²

The Plaintiff is the operator of a Shell franchise located at 3985 South Dixie Highway in Kettering, Ohio. (Tr. I at 20-21). His business includes selling fuel and operating a service station with three bays for automobile repairs. (Id. at 25). The Plaintiff obtained the Shell franchise by assignment from John Reed. (Id. at 22). Under the terms of the assignment, the Plaintiff assumed the unexpired term of Reed's auto care contracts, his motor fuel contracts, and his lease agreement. (Id. at 22-23). Those documents, which are referred to collectively by the parties as the "dealer documents," provided that neither Shell nor the Plaintiff had any obligation to renew the franchise agreement upon its May 31, 1999, expiration.

Defendant Equilon is a recently formed corporation owned by Shell, Texaco, and Star Enterprises.³ (Tr. I at 127, 135). In 1998, Equilon examined the viability of its Shell service stations nationwide and decided to relinquish a number of them. (Id. at 129). The company made this decision based upon the low volume of fuel sales at some of its sites. (Id. at 129-130). Equilon decided to relinquish the Plaintiff's station because its fuel sales did not meet the company's minimum buying requirements and its revenues were down twenty percent from 1997 to 1998. (Id. at 130-131).⁴

After deciding not to renew the Plaintiff's franchise agreement, Equilon sent him a notice in February, 1999, informing him of its decision. (Id. at 132). The company then offered to sell the Plaintiff his service station franchise for $294,712. (Tr. II at 35-36). The offer included the real estate, the service station building, site improvements, and all equipment. (Id.). The company arrived at its asking price by hiring an independent real estate appraiser to appraise the land, and by having one of its engineers place a depreciated value on the equipment, building, and site improvements. (Id.). Notably, however, Equilon's offer to the Plaintiff did not include the three existing underground fuel tanks. (Id. at 35). The tanks were twenty-nine years old at the time of its offer, and they carried only a thirty-year warranty. (Id. at 77-78). Believing that the tanks were nearing the end of their useful life, and fearing potential environmental liability, the company refused to include them in its offer to the Plaintiff. Instead, Equilon informed the Plaintiff in writing that it would assist him in obtaining new tanks through one of its suppliers. (Def.Exh. F).

The Plaintiff refused the company's offer after hiring his own real estate appraiser to determine the value of the subject property. The Plaintiff's appraiser, Greg Corbolotti, initially determined that the real estate, service station building, and site improvements had a fair market value of $250,000, if the underground fuel tanks were included. (Tr. I at 62). Without the tanks, he concluded that the fair market value would be reduced by $60,000 to $190,000. (Id. at 97). At the oral and evidentiary hearing, Corbolotti revised his estimate, based upon an error in his appraisal report, and he determined that the site had a fair market value of $264,000 with the underground tanks. (Id. at 62-63, 74, 76). Corbolotti's appraisal did not place any value on the various pieces of equipment which were included in Equilon's offer to the Plaintiff. (Id. at 76, 91-93). That equipment included, inter alia, fuel island canopies valued by Equilon at $43,992, modern gasoline dispensers valued by the company at $21,120, a nearly new fiberglass waste oil tank valued by the company at more than $10,000, and signs valued by the company at $11,100. (Def. Exh. J; Tr. II at 74).

After failing to negotiate an acceptable purchase price, the Plaintiff commenced the present litigation, asserting a claim against Equilon under the PMPA. He contends that the company has violated the Act by (1) not making a "good faith" decision to sell the subject property, and (2) not making him a "bona fide offer" to purchase the franchise.

II. Plaintiff's Motion for a Preliminary Injunction (Doc. # 2)

Congress enacted the PMPA in 1978 to protect franchisees from arbitrary or discriminatory termination or nonrenewal of their franchises. See Massey v. Exxon Corp., 942 F.2d 340, 342 (6th Cir. 1991).⁵ The Act lowers the traditional burden on a plaintiff who seeks a preliminary injunction.⁶ Corbin v. Texaco, Inc., 690 F.2d 104, 105 (6th Cir.1982). "A franchisee is entitled to a preliminary injunction under the Act based upon a lesser showing than would be required in the ordinary case under Fed.R.Civ.P. 65." Beachler v. Amoco Oil Co., 112 F.3d 902, 905 (7th Cir.1997). Under the PMPA, a franchisee may obtain injunctive relief upon a showing that: (1) the franchise has been terminated or not renewed; (2) there exist sufficiently serious questions going to the merits to make such questions a fair ground for litigation; and (3) on balance, the hardship imposed upon the franchisor by issuance of an injunction will be less than the hardship imposed upon the franchisee if injunctive relief is denied. Id., citing 15 U.S.C. § 2805(b)(2). With these standards in mind, the Court turns now to its analysis of the Plaintiff's pending Motion for a Preliminary Injunction.⁷

A. Non-renewal of the Franchise Agreement

It is undisputed that Equilon has refused to renew its franchise agreement with the Plaintiff. (Defendant's Post-Hearing Brief, Doc. # 34 at 2 n. 2). Consequently, the Plaintiff has met the first requirement for obtaining a preliminary injunction.

B. Sufficiently Serious Questions Going to the Merits

In order to enter a preliminary injunction, the Court also must find "sufficiently serious questions going to the merits to make such questions a fair ground for litigation." This requirement has been construed to mean that a plaintiff must show "a reasonable chance of success on the merits" of his PMPA claim. Beachler, 112 F.3d at 905; Doebereiner v. Sohio Oil Co., 880 F.2d 329, 333 (11th Cir.1989); Moody v. Amoco Oil Co., 734 F.2d 1200, 1216 (7th Cir.1984). The Sixth Circuit has interpreted the phrase "serious questions going to the merits" to mean questions "so serious, substantial, difficult, and doubtful as to make them a fair ground for litigation and thus for more deliberate investigation." Six Clinics Holding Corp., II v. Cafcomp Systems, Inc., 119 F.3d 393, 402 (6th Cir.1997). Before addressing the Plaintiff's ability to satisfy this standard, the Court will briefly review the substantive law underlying his claim.

"The PMPA enumerates the exclusive means by which a franchisor engaged in the sale, consignment or distribution of motor fuel may terminate or nonrenew a franchise." Clark v. BP Oil Co., 137 F.3d 386, 390 (6th Cir.1998). Under the Act, a franchisor such as Equilon ordinarily may not terminate or refuse to renew a franchise relationship. 15 U.S.C. § 2802(a). Notably, however, the PMPA carves out several exceptions to this general rule. Geib v. Amoco Oil Co., 29 F.3d 1050, 1059 (6th Cir.1994), citing 15 U.S.C. § 2802(b)(1), (2), and (3). One of those exceptions permits a franchisor to nonrenew a franchise relationship if it plans to sell the leased premises. 15 U.S.C. § 2802(b)(3)(D). In order to invoke this exception, a franchisor must satisfy certain prerequisites. First, the decision to sell the property must be made by the franchisor in good faith and in the normal course of business. Id. Second, the franchisor must make either a bona fide offer to sell the premises to the franchisee or offer the franchisee a right of first refusal. Id.

In the present case, the parties' Memoranda address both of the foregoing issues.⁸ Specifically, the Plaintiff alleges that Equilon's decision to sell the Shell station was not made in good faith and not in the normal course of business. The Plaintiff also alleges that Equilon did not make a "bona fide offer" to sell him the gas station. After reviewing the evidence presented at the hearing on this matter, however, the Court finds no sufficiently serious questions going to the merits of these issues to warrant the issuance of a preliminary injunction.

In its Memorandum, Equilon insists that its decision not to renew the Plaintiff's franchise...