Johnson v. Mobil Oil Corp., 82 Civ. 6056 (LBS).

• Decision Date: 10 December 1982
• Docket Number: No. 82 Civ. 6056 (LBS).,82 Civ. 6056 (LBS).
• Citation: 553 F. Supp. 195
• Parties: Robert JOHNSON, d/b/a 62nd & York Service Center, Inc., Plaintiff, v. MOBIL OIL CORPORATION and Station Managers, Inc., Defendants.
• Court: U.S. District Court — Southern District of New York

553 F. Supp. 195

Robert JOHNSON, d/b/a 62nd & York Service Center, Inc., Plaintiff, v. MOBIL OIL CORPORATION and Station Managers, Inc., Defendants.

No. 82 Civ. 6056 (LBS).

United States District Court, S.D. New York.

December 10, 1982.

Reisman, Peirez & Reisman, Garden City, N.Y., for plaintiff; David Peirez, Brian Tanenbaum, Garden City, of counsel.

Donovan Leisure Newton & Irvine, for defendants; Kenneth E. Newman, Gary S. Jacobson, Gregory S. Mertz, New York City, of counsel.

OPINION

SAND, District Judge.

Plaintiff Robert Johnson has operated a Mobil Oil Corporation (Mobil) full-service gasoline station in New York City from 1972 to the present. On September 9, 1982, defendant Station Managers, Inc. (SMI), a wholly-owned Mobil subsidiary, notified Johnson that it intended to terminate its business relationship with him pursuant to the contract between the parties. SMI asked that Johnson vacate the station by September 15, 1982.

Johnson now seeks to enjoin SMI and Mobil from taking any further actions to remove him as the operator of the service station on the grounds that they have failed to comply with the requirements of the Petroleum Marketing Practices Act ("PMPA" or the "Act"), 15 U.S.C. Secs. 2801-2841, and the New York motor fuel franchise act, New York General Business Law, Secs. 199-a through 199-d (McKinney Supp.1981).¹

The PMPA, as well as its state law counterpart, provides procedural and substantive protections to franchised service station operators, including notice of termination and termination only for cause. Defendants have filed a cross-motion for partial summary judgment with respect to plaintiff's claims under the PMPA and the New York franchise act. Defendants also seek a declaration that plaintiff's termination was lawful and an injunction requiring him to vacate the station.

The current contract between Johnson and SMI is terminable at the will of either party at any time. Defendants' position, quite simply, is that the relationship between Johnson and SMI is governed by the strict terms of the contract. According to defendants, Johnson is an employee of SMI with regard to the sale of motor fuel, not an independent franchisee, and therefore does not qualify for the added protections of the PMPA and the New York franchise act. Plaintiff contends, by contrast, that his status with respect to SMI and Mobil is that of an independent businessman and franchisee, entitled to the full procedural and substantive protections of both the federal and state franchise laws.

At the request of the plaintiff and with defendants' consent an evidentiary hearing was held before the Court limited to the question of the applicability of the PMPA and the New York franchise act to this case. The parties agreed that on these issues the hearing and findings of the Court would be conclusive for all purposes in their litigation, i.e., that they would not be limited to the pending motions for preliminary or summary relief. The following constitutes the Court's findings of fact and conclusions of law pursuant to Fed.R.Civ.P. 52(a).

Facts

The plaintiff, Robert Johnson, has operated a Mobil service station located at 62nd and York Avenue in New York City since 1972. The station is one of the largest and highest-volume Mobil stations in the area and is considered by Mobil to be one of its "model" stations. The business relationship between Johnson and the defendants during this period has been governed by three contracts, signed in 1972, 1974 and 1980 respectively. The parties to each of these contracts were Johnson and Station Managers, Inc., a wholly-owned Mobil subsidiary. Of the over 300 dealer-operated stations in New York City, only three are operated as SMI stations.

Under the terms of the 1980 contract, Johnson is paid a fixed monthly salary of $600. He receives in addition a monthly commission of ½ cent per gallon based on the volume of motor fuel sold in excess of 60,000 gallons per month.² Johnson's commission is based solely on volume, and does not vary with motor fuel price, which is set by SMI.

Plaintiff also operates a full-service automotive repair business at the station pursuant to the contract. The equipment necessary to operate the repair service is owned by Mobil and loaned to Johnson without charge in accordance with an Equipment Loan Agreement. Tires, batteries and other accessories are delivered to Johnson by Mobil without charge for sale to the public under the Mobil trademark. Johnson receives a commission on the sale of these items pursuant to a number of agreements with SMI entered into between 1972 and the present.

Johnson is responsible for hiring all employees necessary to operate both the motor fuel and repair aspects of the service station. He sets their salaries and determines their hours of work. Under the contract, Mobil furnishes Johnson with a "labor budget," which is its estimate of the wages necessary to operate the motor fuel sales aspects of the station's operation. All expenditures for personnel that exceed this budget must be furnished by Johnson. All personnel working at the station are SMI employees in the sense that SMI issues the salary checks for all employees, including Johnson. It withholds all federal, state and local taxes and social security, and pays workmen's compensation premiums. Johnson reimburses SMI for all employee salary payments, including taxes and fringe benefits, to the extent they exceed the labor budget.

Each day Johnson remits to Mobil an amount in accordance with the previous day's receipts from the sale of motor fuel. Cash proceeds are remitted in the form of a certified check drawn on Johnson's own business account. Credit slips are remitted to reflect sales made by Mobil credit cards.

Mobil determines the grades of motor fuel that will be sold at the station and the price at which they will be sold. All motor fuel sales taxes are collected by Johnson as part of the gasoline sales price and remitted to Mobil. Mobil then remits the tax to the proper taxing authority.

With respect to the maintenance of the station, Mobil pays for general restroom supplies, station supplies such as paint, postage and stationery, and all utilities; Johnson selects the suppliers. Daily cash shortages, shortages for product variation, and "runaways" (where a customer drives off without paying for gasoline) are, as a rule, reimbursed by Mobil. In some instances Johnson absorbs such losses. Johnson is responsible for routine maintenance of station equipment. Mobil bears the cost of major equipment repairs and maintenance.

Johnson reports all SMI income as salaried income on his tax returns. He reports income from the repair aspects of the station's operation as independent business income. All unreimbursed expenses are deducted by him as business losses.

Discussion

It is clear that Johnson's status with respect to Mobil and SMI is of a hybrid nature, not easily classified as either that of an employee or an independent businessman. The first question we must address, therefore, is whether a person of Johnson's status — regardless of the label we attach to it — was meant to be afforded the benefits and protections of the PMPA.

The Second Circuit has recently instructed us that in interpreting the scope and applicability of the PMPA, the "starting point" must be the language of the statute itself. Checkrite Petroleum, Inc. v. Amoco Oil Co., 678 F.2d 5, 7 (2d Cir.), cert. denied, ___ U.S. ___, 103 S.Ct. 74, 74 L.Ed.2d 73 (1982) (citing Lewis v. United States, 445 U.S. 55, 60, 100 S.Ct. 915, 918, 63 L.Ed.2d 198 (1980)). The statute provides, in relevant part, that:

The term `franchisee' means a retailer or distributor (as the case may be) who is authorized or permitted, under a franchise, to use a trademark in connection with the sale, consignment, or distribution of motor fuel.

15 U.S.C. Sec. 2801(4). The statute provides further that "the term `retailer' means any person who purchases motor fuel for the sale to the general public for ultimate consumption." 15 U.S.C. Sec. 2801(7). The term "distributor" includes any person who "receives motor fuel on consignment" but not if such person "is an employee of, or merely serves as a common carrier providing transportation services for the supplier." 15 U.S.C. Sec. 2801(6).

The defendants argue that Johnson fails to fall within the plain language of the statute. First, they argue that in order to be a franchisee entitled to the protection of the Act, the plaintiff must be either a retailer or a distributor as defined in the Act. Johnson is not a retailer, Mobil argues, because he does not purchase motor fuel for sale to the public. Johnson merely remits to Mobil the retail proceeds from the prior day's sale of motor fuel. Nor is Johnson a distributor under the Act, according to Mobil, because he does not receive motor fuel on consignment and because he is an employee expressly excluded from coverage under the Act. Mobil relies on Checkrite for the proposition that where the plaintiff fails to satisfy these "unambiguous statutory definitions of `franchisee,'" 678 F.2d at 8, the Act does not apply.

The plaintiff argues that he is a retailer under the Act because he does in fact "purchase" motor fuel for sale to the public on a credit basis. According to the plaintiff, the remitting each day of an amount equal to the prior day's retail gasoline sales is simply a variation of the "load-to-load" credit purchase arrangement Mobil maintains with other independent dealers. Under the load-to-load plan, an independent dealer pays Mobil for each load when the next load is delivered.

The testimony presented at the hearing makes clear, however, that Johnson's arrangement differs quite significantly from a load-to-load arrangement or any other credit arrangement Mobil maintains with its dealers. Dealers must pay for motor fuel on a C.O.D. basis or when the next load is delivered, regardless of how much fuel...