Jet, Inc. v. Shell Oil Co., 03-4268.

• Decision Date: 24 August 2004
• Docket Number: No. 03-4268.,03-4268.
• Citation: 381 F.3d 627
• Parties: JET, INC., d/b/a Garfield Shell, d/b/a Shell Food Mart, TVA Corporation, d/b/a Robert Road Shell, et al., Plaintiffs-Appellants, v. SHELL OIL COMPANY, Equilon Enterprises, d/b/a Shell Oil Products U.S. and Equiva Services, Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

381 F.3d 627

JET, INC., d/b/a Garfield Shell, d/b/a Shell Food Mart, TVA Corporation, d/b/a Robert Road Shell, et al., Plaintiffs-Appellants, v. SHELL OIL COMPANY, Equilon Enterprises, d/b/a Shell Oil Products U.S. and Equiva Services, Defendants-Appellees.

No. 03-4268.

United States Court of Appeals, Seventh Circuit.

Submitted May 24, 2004.

Decided August 24, 2004.

Appeal from the United States District Court, 2002 WL 31641627, Kennelly, J.

Timothy J. Coffey (submitted), Glen Ellyn, IL, Thomas P. Bleau, Bleau, Fox & Fong, Los Angeles, CA, for Plaintiffs-Appellants.

David M. Harris, Dawn M. Johnson, Greensfelder, Hemker & Gale, St. Louis, MO, for Defendants-Appellees.

Before RIPPLE, MANION, and EVANS, Circuit Judges.

MANION, Circuit Judge.

Several independent franchisees of Shell-branded filling stations ("the franchisees") alleged that Shell Oil Company, Equilon Enterprises, Incorporated, and Equiva Services, LLC, violated 15 U.S.C. § 2805(f), a provision of the Petroleum Marketing Practices Act ("PMPA"), by presenting them with a new set of franchise agreements in a "take it or leave it manner" and thus committing wrongful nonrenewal under the PMPA. The franchisees also alleged, however, that they actually had renewed their franchise agreements. The district court concluded that the PMPA does not permit claims for constructive nonrenewal and therefore dismissed the claim under Federal Rule of Civil Procedure 12(b)(6). We affirm.

I.

Because of this case's procedural posture, we assume that the complaint's allegations are true. The relevant facts are few. The franchisees originally had franchise agreements with Shell. In 1998, Shell assigned those agreements to Equilon. Shell and Equilon both use another entity, Equiva, to provide administrative support. The franchisees allege that all three companies are alter egos and have named all three as defendants.

Equilon provided the franchisees with new franchise agreements that, in the franchisees' view, contained illegal and unconscionable provisions, including "unlawful waivers, forfeitures, penalties, limitations of liability, reductions of the applicable statute of limitations ..., unconscionable penalties in the form of liquidated damages, commercially unreasonable and excessive transfer fees and unreasonable restraints on alienation of the franchisee's interest in the franchise in the form of a unilateral consent clause giving Equilon or Equiva the unilateral right to approve or disapprove of a proposed sale or conveyance of the franchisee's interest in the franchises." According to the franchisees, Equilon's ulterior (and unlawful) motive was to prevent them from renewing their franchises.

The terms of the new agreements were not negotiable: Equilon stated in the cover letter accompanying the new agreements that, "[i]f you do not sign and return the Lease and other enclosed documents in a timely manner, be advised that Equilon will issue without further warning a non-rescindable notice of nonrenewal pursuant to the terms of the Petroleum Marketing Practices Act."¹ The franchisees signed the new franchise agreements "under protest," thus renewing their contracts, but nonetheless sued in the district court under what they term a theory of "constructive nonrenewal." Pursuant to Rule 12(b)(6), the district court granted a motion to dismiss their claim, reasoning that a claim for constructive nonrenewal may not lie under the PMPA.²

II.

We review de novo the district court's grant of a motion to dismiss under Rule 12(b)(6). E.g., Flannery v. Recording Indus. Ass'n of Am., 354 F.3d 632, 637 (7th Cir.2004). Accepting all well-pleaded allegations in the complaint as true and drawing all reasonable inferences in favor of the plaintiffs, we ask whether there is any possible interpretation of the complaint under which it could state a claim. Id.

The PMPA prohibits a franchisor from discontinuing a franchise relationship unless it does so on the basis of one of several statutorily enumerated grounds and meets the PMPA's notification requirements. Dersch Energies, Inc. v. Shell Oil Co., 314 F.3d 846, 856 (7th Cir.2002). A franchisee may bring an action for wrongful nonrenewal under the PMPA provided, among other things, that it meets the threshold requirement of showing that its franchise agreement was not renewed within the meaning of 28 U.S.C. § 2805(c). Id.; Chestnut Hill Gulf v. Cumberland Farms, 940 F.2d 744, 748 (1st Cir.1991).³

In November 2002, the district court dismissed the franchisees' claim of wrongful nonrenewal on the ground that it failed this threshold test. The court reasoned that, (1) because the franchisees alleged that they had renewed their franchise agreements (albeit "under protest"), they were asserting a claim for constructive, as opposed to actual, nonrenewal, and (2) relief under § 2805(f) could not be granted for a claim of constructive nonrenewal. Thus did the district court foreshadow our opinion one month later in Dersch, in which the plaintiff had likewise signed a renewal agreement "under protest" and in which we rejected the theory of constructive nonrenewal as "untenable." Dersch, 314 F.3d at 860; accord Abrams v. Shell Oil Co., 343 F.3d 482, 489 (5th Cir.2003). But see Pro Sales, Inc. v. Texaco, U.S.A., 792 F.2d 1394, 1399 (9th Cir.1986). We stated that,

[w]hile it is true that § 2805(f)(1) was enacted to address the disparity of bargaining power existing between franchisors and franchise[es] outside the termination/nonrenewal context, i.e., during the negotiation process for entering into or renewing a franchise relationship, there is nothing in the PMPA suggesting that Congress intended for franchisees to sue franchisors under the Act's remedial provisions for violations of § 2805(f)(1) when a termination or nonrenewal is not at issue.

Dersch, 314 F.3d at 860.

On appeal, the franchisees first ask us to reconsider our holding in Dersch. They encourage us to follow the reasoning of Pro Sales, which we expressly rejected in Dersch. The franchisees do not, however, present any developed argument in favor of the Pro Sales approach, and they present no argument at all that we have not already rejected. Because the franchisees have done nothing to undermine our confidence in the detailed analysis upon which we decided Dersch, we decline to revisit the holding of that case.

The franchisees next attempt to distinguish Dersch, arguing that this case is somehow different because, here, Equilon expressed in writing an intent not to renew unless the franchisees signed the new franchise agreements. In so arguing, the franchisees rely on footnote 20 of Dersch, in which we stated that a formal expression of the intent not to renew, or an actual nonrenewal, could justify a claim for wrongful nonrenewal. See Dersch, 314 F.3d at 866 n. 20.

The franchisees misplace their reliance on Dersch. To explain why, we must first examine the purpose of a notice of the intent not to renew. Before a franchisor may elect not to renew a franchise contract, § 2804 of the PMPA mandates that it must issue a notice of nonrenewal to the franchisee 90 days in advance. Id. at 862. The function of this requirement is to give the franchisee a chance to seek injunctive relief under the PMPA and to avoid the harmful effects of a wrongful nonrenewal. Id. at 862-63, 865. In Dersch, we made clear that, where the franchisor jumps the gun and actually causes nonrenewal...