Kesselman v. Gulf Oil Corp., Civ. A. No. 79-3136.

• Decision Date: 08 November 1979
• Docket Number: Civ. A. No. 79-3136.
• Citation: 479 F. Supp. 800
• Parties: Arnold KESSELMAN v. GULF OIL CORPORATION.
• Court: U.S. District Court — Eastern District of Pennsylvania

479 F. Supp. 800

Arnold KESSELMAN v. GULF OIL CORPORATION.

Civ. A. No. 79-3136.

United States District Court, E. D. Pennsylvania.

November 8, 1979.

Norman P. Zarwin, Zarwin, Baum, Arangio & Ross, P. C., Philadelphia, Pa., for plaintiff.

John T. Clary, Clary, Mimnaugh & McGonigle, P. C., Philadelphia, Pa., for defendant.

MEMORANDUM

RAYMOND J. BRODERICK, District Judge.

The plaintiff, Arnold Kesselman, operates a gasoline service station as a lessee of Gulf Oil Corporation. Kesselman instituted this action against Gulf under the Petroleum Marketing Practices Act, 15 U.S.C.A. § 2801 et seq. (PMPA), and alleges that Gulf violated the PMPA when it failed to renew the plaintiff's lease agreement with Gulf. Before this Court is a motion by the plaintiff for a preliminary injunction that would order Gulf to maintain its relationship with the plaintiff until after a trial on the merits in this case. For the reasons hereinafter set forth, the plaintiff's motion for a preliminary injunction will be denied.

The evidence presented at the hearing held in connection with this motion shows that the plaintiff has operated a Gulf service station in Cornwells Heights, Bensalem Township, Bucks County, Pennsylvania since 1972 pursuant to a service station lease with Gulf. Gulf leases the ground on which the plaintiff's service station is situated from a third party. On April 3, 1977, the plaintiff entered into a service station lease with Gulf, which lease by its terms expired on April 2, 1978. The monthly rent under this lease was $460. This lease was renewed for the period between April 3, 1978 and April 2, 1979 at a rent of $530 per month. The lease contained a hold over clause which stated that

any holding over by Lessee at the end of this lease or at the end of any renewal or extension period without having first renewed or extended this lease in writing, shall not be considered as a renewal or extension of this lease for any period longer than one month.

Sometime in February or early in March of 1979, Gulf's representative contacted the plaintiff and reminded him that his lease was due to expire on April 2, 1979. In March, a new lease was sent to the plaintiff by Gulf. This new lease covered the period from April 3, 1979 to July 31, 1981, and provided for a rent of $670 per month for the first year of the lease and $800 per month for the remaining fifteen months of the lease. The plaintiff did not execute the new lease, claiming that the service station did not justify the increases in the monthly rental. Negotiations between the parties continued through April and into early May, but no agreement was reached. Gulf offered to reduce the rental figures to $650 and $780 per month, respectively, but the plaintiff would not accept and offered to pay no more than $550 per month and $570 per month, respectively. Gulf notified the plaintiff by a letter dated May 11, 1979 that, upon receipt of this letter, his lease was extended for ninety days under the then existing rental. This letter also contained the following notice:

2. Gulf Oil Company—U. S. hereby gives you formal notice as required by the Petroleum Marketing Practices Act that Gulf will not renew its lease and other related agreements with you effective at the end of the above-mentioned ninety day period. Upon our receipt of the signed U.S. Postal Service Receipt, Gulf will immediately confirm to you in writing the effective date of the lease expiration.

3. Gulf finds it must take the above action pursuant to Section 102(b)(3)(A) of the PMPA because our failure to agree on an acceptable rental increase was not the result of Gulf's insistence on such increase for the purpose of preventing a renewal but was, in fact, the result of your failure to agree to a term which was offered in good faith and in the normal course of business and which involved efforts on Gulf's part to compromise and negotiate the rental increase.

Attached is a summary of the PMPA which has been prepared by the Secretary of Energy.

Gulf sent the plaintiff a letter on May 16, 1979 that stated that the U.S. Postal Service receipt had been signed by the plaintiff on May 14, 1979, and that the lease would therefore expire on August 11, 1979 and would not be renewed after that date. The plaintiff filed suit in this Court on August 24, 1979.

The PMPA was enacted in 1978 in order to establish "minimum Federal standards governing the . . . nonrenewal of franchise relationships for the sale of motor fuel by the franchisor or supplier of such fuel." 1978 U.S.Code Cong. & Admin. News 873, 873.¹ Congress recognized the disparity of bargaining power that often exists between a franchisor and a franchisee, and therefore prohibited a franchisor from not renewing a franchise "unless the . . . nonrenewal is based upon a ground specified or described in the legislation and is executed in accordance with the notice requirements of the legislation." Id. at 874. Section 2802 of the PMPA states that a franchisor must renew a franchise relationship unless "(A) the notification requirements of section 2804 of this title are met; and (B) such . . . nonrenewal is based upon a ground described in . . . Section 2802(b)(3)." 15 U.S.C.A. § 2802(b)(1).

It is well established in this Circuit that in order to obtain a preliminary injunction, the moving party must demonstrate (1) a reasonable probability of eventual success in the litigation, and (2) that the movant will be irreparably injured pendente lite if relief is not granted. While the burden rests upon the moving party to make the above two requisite showings, the district court must take into account whenever relevant (3) the possibility of harm to other interested persons from the grant or denial of the injunction, and (4) the public interest. Constructor's Association of Western Pennsylvania v. Kreps, 573 F.2d 811, 815 (3d Cir. 1978); Oburn v. Shapp, 521 F.2d 142, 147 (3d Cir. 1975). The district court has broad discretion since its task involves weighing the benefits and burden that granting or denying the injunction will have on each of the parties and the public. Penn Galvanizing Company v. Lukens Steel Co., 468 F.2d 1021, 1023 (3d Cir. 1972); North Penn Oil and Tire Co. v. Phillips Petroleum Co., 358 F.Supp. 908, 919 (E.D.Pa.1973).

Congress, in enacting the PMPA, specifically provided in the act a different test for determining whether to issue a preliminary injunction. Section 2805(b)(2) states that the court shall grant a preliminary injunction if

(A) the franchisee shows—

(i) the franchise of which he is a party has been terminated or the franchise relationship of which he is a party has not been renewed, and

(ii) there exist sufficiently serious questions going to the merits to make such questions a fair ground for litigation; and

(B) the court determines that, on balance, the hardships imposed upon the franchisor by the issuance of such preliminary injunctive relief will be less than the hardship which would be imposed upon such franchisee if such preliminary injunctive relief were not granted.

The legislative history of the PMPA indicates that it was the intent of Congress, in enacting this statutory standard, to make it easier for a franchisee to obtain a preliminary injunction. The cases that have construed section 2805(b)(2) have not required a demonstration of irreparable injury, but have only balanced the hardships between the franchisor and the franchisee. Gilderhus v. Amoco Oil Co., 470 F.Supp. 1302 (D.Minn.1979); Saad v. Shell Oil Co., 460 F.Supp. 114 (E.D.Mich.1978). We will not undertake this balancing test since we find that in this case there are no "sufficiently serious questions going to the merits."

The plaintiff initially contends that the notification requirements of section 2804 were not satisfied because Gulf did not provide the plaintiff with the statutory notice of its intention to not renew, as provided in section 2804(a) of the PMPA, prior to April 2, 1979. Section 2804(a) provides:

(a) Prior to termination of any franchise or nonrenewal of any franchise relationship, the franchisor shall furnish notification of such termination or such nonrenewal to the franchisee who is a party to such franchise or such franchise

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