Rogue Valley Stations, Inc. v. Birk Oil Co., Civ. No. 83-199-PA.
| Decision Date | 15 July 1983 |
| Docket Number | Civ. No. 83-199-PA. |
| Citation | 568 F. Supp. 337 |
| Parties | ROGUE VALLEY STATIONS, INC., Plaintiff, v. BIRK OIL COMPANY, INC., an Oregon Corporation, Shell Oil Company, a Delaware corporation, and William C. Cornitius, Inc., a California corporation, Defendants. |
| Court | U.S. District Court — District of Oregon |
COPYRIGHT MATERIAL OMITTED
Mark A. LaMantia, David S. Shannon, Shannon, Johnson & Kromer, P.C., Portland, Or., Stuart Foster, Foster & Purdy, Medford, Or., for plaintiff.
John D. Burns, William N. Mehlhaf, Burns & Mehlhaf, Portland, Or., J.M. Esquivel, Houston, Tex., for defendant Shell Oil Co.
Carl M. Brophy, Douglass H. Schmor, Brophy, Wilson & Duhaime, Medford, Or., for defendant William C. Cornitius, Inc.
Plaintiff Rogue Valley Stations, Inc. ("Rogue Valley") brings this action against three defendants: Birk Oil Company, Inc. ("Birk"), Shell Oil Company ("Shell"), and William C. Cornitius, Inc. ("Cornitius"). Plaintiff is a "jobber-dealer," that is, a retailer of gasoline, leasing a service station at 2001 Biddle Road, Medford, Oregon. Defendants Birk and Cornitius are or have been "jobbers," that is, distributors of gasoline purchased from a refiner, and have supplied plaintiff. Shell is a refiner of gasoline and has sold to Birk and Cornitius. Plaintiff's immediate objective is to restrain Shell from taking possession of the Biddle Road station. At its heart, this case poses the question whether the notice and termination requirements of the Petroleum Marketing Practices Act, Pub.L. No. 95-297, 92 Stat. 322 (1978), 15 U.S.C. §§ 2801-41, apply to a refiner who has never had a franchise relationship with a retailer. I conclude the Act does not apply, and find for the defendants.
On February 8, 1983, Rogue Valley filed a complaint for injunction under the PMPA against Birk and Shell together with a motion for temporary restraining order and order to show cause. Plaintiff's action was prompted by Shell's filing of complaint for forcible entry and detainer against it in District Court in Jackson County, Oregon. On February 11, 1983, Shell filed a motion to dismiss. On February 14, 1983, I heard the motions and temporarily enjoined Shell from attempting to retake possession of the subject premises pending an expedited trial. Pursuant to the parties' stipulation and my order, the hearing on plaintiff's motion for preliminary injunction was consolidated with the trial of the liability issue on the merits. The damages issue was separated for subsequent trial. On March 7, 1983, Rogue Valley filed its first amended complaint and named Cornitius as a party defendant. The matter was tried to the court on April 20-22, 1983.
Subchapter I of the Petroleum Marketing Practices Act, titled "Franchise Protection," 15 U.S.C. §§ 2801-06, sets minimum federal standards for the termination or nonrenewal of franchise relationships for the sale of motor fuel.
The Act is a complex piece of legislation which creates a new concept called a "franchise relationship," that is, an entity separate from, but defined by, the "franchise," or contractual arrangements existing between the parties. The Act then prohibits a franchisor from either terminating a franchisee or failing to renew a franchise relationship, except under carefully defined conditions, and then, only for the specific grounds permitted by the Act.
Frisard v. Texaco, Inc., 460 F.Supp. 1094, 1097 (E.D.La.1978).
The primary purpose of the Act is to protect petroleum franchisees from over-bearing and discriminatory termination practices by franchisors. Gilderhus v. Amoco Oil Co., 470 F.Supp. 1302, 1303 (D.Minn, 1979); S.Rep. No. 731, 95th Cong., 2d Sess. 41, reprinted in 1978 U.S.Code Cong. & Ad. News 873, 887. "The Act does not provide a franchisee with total protection against termination but only with protection against unreasonable or arbitrary termination." Humboldt Oil Co. Inc., v. Exxon Co., 695 F.2d 386, 389 (9th Cir.1982).1
Brach v. Amoco Oil Co., 677 F.2d 1213, 1220 (7th Cir.1982). See Brown v. American Petrofina Marketing, Inc., 555 F.Supp. 1327, 1330-31 (M.D.Fla.1983). With this policy in mind, Congress prohibited franchisors from terminating or failing to renew franchise agreements, see 15 U.S.C. § 2802(a), except for certain reasons specified in the Act, see id. at §§ 2802(b), 2803, and upon proper notice to the franchisee, see id. at § 2804.
Refiner (Shell) controls premises (2001 Biddle Road) on which it constructs a service station. Refiner leases the station to a jobber (Cornitius, later replaced by Birk). Jobber subleases the station to a jobber-dealer, that is, retailer (Rogue Valley). Jobber (Birk) files for bankruptcy. Refiner acts to evict retailer. Does retailer have recourse under the Act?
Rogue Valley is an Oregon corporation in good standing and has operated a Shell branded service station in Medford, Oregon, since January, 1978.
Birk is an Oregon corporation which operated as a Shell jobber in the Medford area beginning on December 15, 1980. Birk has not made an appearance in this litigation. Birk filed a bankruptcy petition prior to commencement of this case. On February 10, 1983, its bankruptcy counsel indicated to this court that Birk did not intend to appear in this proceeding. (Letter, exhibit 129).
Shell is a Delaware corporation with its principal place of business in Houston, Texas. Shell refines motor fuel. It is qualified to do and is doing business in Oregon.
Cornitius is a California corporation doing business in Oregon. From about 1972 to December 15, 1980, Cornitius operated as a Shell jobber in the Medford area.
The material factual findings I made at trial will be specified in the "Discussion." The parties stipulated to the following facts.
On November 30, 1967, Shell entered into a lease of unimproved real property at 2001 Biddle Road, Medford, Oregon, with the owners thereof, Alton M. and Agnes L. Anderson. Thereafter, Shell constructed a conventional two-bay ranch-style service station for the retail sale of gasoline and other related petroleum products and accessories. The lease, as amended December 12, 1968, provided for an initial term of May 17, 1968 to October 17, 1983, and included optional extensions of five years each (exhibits 101-105).
After completion of construction in 1968, Shell directly delivered petroleum products to its branded stations in the Medford area, including the Biddle Road station, through a Shell distributor who operated on a commission basis. Beginning in 1971, the distributor was Cornitius. Sometime later, apparently in 1972, Cornitius was converted from a Shell distributor to a Shell branded jobber, who purchased motor fuel from Shell for resale. Shell and Cornitius also entered into a separate Jobber Lease (sublease) of the Biddle Road property (exhibits 38/109), which has since been operated as a Shell branded station. In the July 1, 1980 Shell-Cornitius Jobber Lease (exhibits 12/110), paragraph seven states that Cornitius shall not assign the lease without Shell's prior written consent.
On January 1, 1978, Cornitius and Rogue Valley entered into a Dealer Lease (exhibits 37/107) and Dealer Agreement (exhibits 37/108) by virtue of which Rogue Valley undertook the operation of the Biddle Road station as the dealer. The Dealer Lease and Dealer Agreement each had terms of January 1, 1978 to June 30, 1981.
Prior to the termination of these contracts, however, Cornitius sold its Shell jobbership and certain of its assets to Birk (exhibits 152-165). After an initial one-year Jobber Lease (sublease) of the subject premises (exhibits 10/117), Shell and Birk entered into a subsequent Jobber Lease of the Biddle Road station (exhibit 118). The lease provided that its term "shall be a primary period beginning on December 15, 1981 and ending on December 14, 1982."
On September 30, 1981, Birk and Rogue Valley entered into a Dealer Lease Agreement (exhibits 41/120) and Dealer Product Sales Agreement (exhibit 121). The term of these contracts was from July 1, 1981 to June 30, 1986. Pursuant to the contracts, Rogue Valley continued to operate the Biddle Road station as the dealer.
On January 21, 1983, John Biladeau, Shell's Northwest District manager, met with Maynard Hadley and Frank Adler, Rogue Valley's president and vice-president respectively, and advised them that Birk's underlying lease with Shell had expired on December 14, 1982. He indicated that Shell wished Rogue Valley to vacate the premises. (Shell has decided not to extend Birk's jobbership and lease because of the serious financial difficulties Birk was experiencing.) On February 7, 1983, Shell filed against Rogue Valley in state court a forcible entry and unlawful detainer action.
Plaintiff has filed six claims for relief: franchisor-franchisee...
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