Mariniello v. Shell Oil Co.
| Citation | 511 F.2d 853 |
| Decision Date | 14 February 1975 |
| Docket Number | No. 74--1385,74--1385 |
| Parties | William MARINIELLO t/a J & B Shell Station, Inc., Appellant, v. SHELL OIL COMPANY, a corporation of the State of Delaware, authorized to transact business in the State of New Jersey, Frank Marinello and Jerry Ferrara, Defendants on Counterclaim, James E. Gerlock et al., Defendants on Counterclaim of Frank Marinello. |
| Court | United States Courts of Appeals. United States Court of Appeals (3rd Circuit) |
Joseph R. Mariniello, Fort Lee, N.J., on the brief, Fierro, Fierro & Mariniello, Fort Lee, N.J., for appellant.
William Simon, Michael W. Graney, Michael M. Levy, Richard G. White, Howrey, Simon, Baker & Murchison, Washington, D.C., Andrew S. Polito, Michael D. Loprete, Mattson, Madden, Polito & Loprete, Newark, N.J., for appellee.
Lewis G. Rudnick, Jerome L. Fels, Allen J. Ginsburg, Rudnick, Wolfe, Snyderman & Foreman, Chicago, Ill., Philip F. Zeidman, Arthur I. Cantor, Robert G. Heiss, Brownstein, Zeidman, Schomer & Chase, Washington, D.C., Jerome Gilson, Hume, Clement, Brinks, Willian, Olds & Cook Ltd., Chicago, Ill., for International Franchise Association, amicus curiae.
Jerry S. Cohen, Herbert E. Milstein, Michael D. Hausfeld, Washington, D.C., for National Congress of Petroleum Retailers, amicus curiae.
Before KALODNER, ALDISERT and ADAMS, Circuit Judges.
The issue for resolution in this case is whether the decision of the New Jersey Supreme Court in Shell Oil Co. v. Marinello, 1 which the plaintiff seeks to apply here, is violative of the United States Constitution. The district court determined that the New Jersey decision, which protected franchisees from termination without cause, subverted the purposes of the federal Lanham Act, and held that under the Supremacy Clause the state decision could not survive. 2 We conclude that the Supremacy Clause was not violated, and remand.
Mariniello began to operate a gas station as a franchisee of Shell in 1960. The franchise relationship was established by two documents: a real estate lease for gas station premises controlled by Shell, and an agreement granting the dealer, inter alia, the right to purchase Shell products and to use the Shell trademark. 3
Until 1969, the lease and dealer contracts were renewed annually. In 1969, a three-year lease and a three-year dealership agreement were executed. The two contracts were signed the same day and ran for identical periods. The new lease provided that Shell could terminate at will upon its expiration, 4 and the dealer agreement permitted termination at any time with ten days notice. In conformity with their provisions, Shell notified Mariniello in 1972 that neither the lease nor dealer agreement would be renewed. Mariniello protested and refused to relinquish the premises.
Mariniello brought suit in the New Jersey state court. He requested continuance of his dealership and lease, and sought damages and an injunction against Shell for discriminatory practices. On Shell's motion, based on diversity jurisdiction, the case was removed to the federal court for the District of New Jersey. 28 U.S.C. §§ 1332, 1441(a).
After the removal, Shell, in a counterclaim, prayed for possession of the premises, for damages, and for an injunction predicated on Sherman Act violations by gas station operators, including plaintiff and plaintiff's brother, Frank Marinello. Shell's motion for partial summary judgment on its claim for possession of the station was granted by the district court, premised on its interpretation of relevant New Jersey law. 5
In 1973 the Supreme Court of New Jersey, in Shell Oil Co. v. Marinello, a case involving plaintiff's brother, determined that clauses in franchise agreements permitting termination at will were unenforceable as a matter of state public policy. Moreover, the New Jersey Supreme Court held, where a lease and dealership agreement constitute integral parts of a franchise:
. . . public policy requires that there be read into the existing lease and dealer agreement, and all future lease and dealer agreements which may be negotiated in good faith between the parties, the restriction that (a franchisor) not have the unilateral right to terminate, cancel or fail to renew the franchise, including the lease, in absence of a showing that (the franchisee) has failed to substantially perform his obligations under the lease and dealer agreement, i.e., for good cause . . .. 6
Although the recently enacted New Jersey Franchise Practices Act 7 had established a good cause standard for termination of franchise agreements entered into, renewed or amended after its effective date, the Act did not apply to dealership contracts in force before that date, including the contracts in question here. The requirement of good cause in Shell was based on New Jersey common law. While the New Jersey Supreme Court took cognizance of the Act, it held that the Act was 'not directly control(ing).' 8 However, the New Jersey Supreme Court observed that the statute codified the extant public policy of the state.
Shortly after the decision by the New Jersey Supreme Court, Mariniello returned to the district court and moved to vacate the earlier partial summary judgment that had been entered against him, claiming that that judgment was based on an unwarranted interpretation of New Jersey law. The district court entertained Mariniello's motion but, by opinion filed January 11, 1974, declined to disturb the summary judgment.
Conceding that the decision of the New Jersey Supreme Court would be applicable to the case before it, the district court concluded that the state court holding violated the Supremacy Clause 9 of the Constitution because it conflicted with the Lanham Act, 10 and was therefore of no effect. The Lanham Act provides a national system for registration of trademarks used in interstate commerce, and grants a registered trademark holder the exclusive right to determine the use of its mark by others. The district court reasoned that the Shell case, by curtailing the power of the franchisor to reserve a contractual right to terminate a dealership and lease, 'destroy(ed) the right of an owner of a federally registered trademark to grant a license of that mark for a specific, definite term.' 11 The district court declared that both the Lanham Act and state law, as set forth in Shell, 12
In light of its determination that the New Jersey Shell case did not control because of the Supremacy Clause, the district court found it unnecessary to reach a number of constitutional objections pressed by defendant Shell. 13
Mariniello here appeals the judgment of the district court that granted Shell possession of the station premises. 14
When a state law 15 is attacked as violative of the Supremacy Clause, a federal court must determine whether the state law 'stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.' 16 Justice Brennan stated for the Court in Florida Lime and Avocado Growers, Inc. v. Paul:
(F)ederal regulation of a field of commerce should not be deemed preemptive of state regulatory power in the absence of persuasive reasons--either that the nature of the regulated subject matter permits no other conclusion, or that the Congress has unmistakably so ordained. 17
We have concluded that under the cases the New Jersey common law, announced in Shell, is not invalid under the Supremacy Clause by reason of the federal Lanham Act.
In recent times, the Supreme Court has employed the Supremacy Clause sparingly to strike down state law. Even where extensive federal regulatory schemes have been enacted, if there is no express Congressional language of preemption, states have been allowed to act in the interstices of the federal regulatory matrix. 18 Also, states may require more stringent standards than those designed by Congress, 19 and may otherwise adopt law affecting the subject of a federal statute, 20 so long as the federal purpose is not undermined. The contention by Shell that New Jersey is prohibited by the mere existence of the Lanham Act from all lawmaking relating to trademarks is consequently unpersuasive.
Accordingly, Shell can succeed in its Supremacy Clause claim only if it can demonstrate either express preemption by Congress or an incongruity between the state law and the purposes of the federal law. We have been directed to no Congressional manifestation of intent comprehensively to control all aspects of the trademark field, so as to preclude a state from legislating or adjudicating in this area. In an attempt to establish its contention of explicit preemption, Shell refers the court to the section of the Lanham Act dealing with definitions and intent, 21 and Shell maintains that this section evidences an unambiguous Congressional plan to occupy the field to the exclusion of local law. We cannot agree. Despite the adoption of a uniform federal registration scheme, local trademarks may be enforced by statute or common law unless conflict develops with a national trademark. 22
The question thus becomes whether, as contended by Shell and decided below, the federal system of trademark registration is compromised by the New Jersey rule.
The Senate report accompanying the Lanham Act stated:
The purpose underlying any trademark statute is twofold. One is to protect the public so it may be confident that . . . it will get the product which it asks for and wants to get. Secondly, where the owner of a trade-mark has spent energy, time, and money in presenting to the public the product, he is protected in his investment from its misappropriation by pirates and cheats. 23
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