Saad v. Shell Oil Co.

• Decision Date: 08 November 1978
• Docket Number: Civ. A. No. 8-71919.
• Parties: Habiib SAAD, Plaintiff, v. SHELL OIL COMPANY, a Foreign Corporation, Defendant.
• Court: U.S. District Court — Western District of Michigan

460 F. Supp. 114

Habiib SAAD, Plaintiff, v. SHELL OIL COMPANY, a Foreign Corporation, Defendant.

Civ. A. No. 8-71919.

United States District Court, E. D. Michigan, S. D.

November 8, 1978.

Mark H. Cousens, Fieger, Cousens & Boesky, Southfield, Mich., for plaintiff.

Robert G. Cutler, Nancy Garlock Edmunds, Dykema, Gossett, Spencer, Goodnow & Trigg, Detroit, Mich., for defendant.

MEMORANDUM OPINION AND ORDER

JOINER, District Judge.

Habiib Saad, who holds a franchise for the retail sale of petroleum products and lease of certain premises from Shell Oil Company, has petitioned this court for a preliminary injunction to allow him to continue to operate pending the outcome of his suit charging that Shell has wrongfully failed to renew his franchise and lease.

This suit is brought under the Petroleum Marketing Practices Act which was enacted on June 19, 1978. 15 U.S.C. § 2801 et seq. The act is intended to protect the franchised retailers of motor fuel in their relationships with their franchisors and to provide a uniform set of rules to be used throughout the country. Congress sought to remedy a situation which had led to "numerous complaints by franchisees of unfair terminations or non-renewals of their franchises by franchisors for arbitrary and even discriminatory reasons." S.R. 95-731 at 17. Because of the interest in uniformity, the act specifically prohibits the enforcement of state and local laws which differ from the federal act dealing with this subject. 15 U.S.C. § 2806.

The most striking thing about the act is its procedure for dealing with a request for a preliminary injunction by a franchisee who has received notification of termination or non-renewal. The act provides that in such cases:

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.

15 U.S.C. § 2805(b)(2).

The act further provides that in all proceedings of this sort:

. . . the franchisee shall have the burden of proving . . . the non-renewal of the franchise relationship. The franchisor shall bear the burden of going forward with evidence to establish as an affirmative defense that such . . . nonrenewal was permitted under § 102(b) . . ..

Section 102(b) of the act provides that a franchisor may fail to renew any franchise relationship if the notification requirements of the act are met and the termination is based on one of the grounds for termination listed in the act. 15 U.S.C. § 2802(b)(1). One of the permissible grounds is:

A failure by the franchisee to operate the marketing premises in a clean, safe, and healthful manner, if the franchisee failed to do so on two or more previous occasions and the franchisor notified the franchisee of such failures.

15 U.S.C. § 2802(b)(3)(C).

The limited issues before the court on this request for preliminary injunctive relief are:

1. Has the franchisee (Saad) shown that the franchise has not been renewed?

2. Has the franchisee shown that there exists, based on the facts developed in the proceeding for the preliminary injunction, that there exist sufficiently serious questions going to the merits to make such questions a fair ground for litigation?

3. Does the balance of hardships fall on the franchisee or the franchisor?

It is clear from the evidence in this case that the balance of hardships falls on the franchisee and that the franchise has been shown not to have been renewed. Thus, the only real question in this case relates to whether there are sufficiently serious questions going to the merits to make such questions a fair ground for litigation.

Clearly, although Congress wanted and designed an act to protect the franchisee from overbearing franchisors, it did not desire to impose upon the courts needless litigation. The use of the terms "serious question" and "fair ground" indicates that it intended a significant showing of something that would constitute some reasonable chance of success even though it could not be shown that there was a likelihood of probability of success as is required in the ordinary preliminary injunction matter.

The test applied in the ordinary case is "Has the petitioner made a strong showing that he is likely to prevail on the merits . . .?" Virginia Petroleum Jobbers Ass'n. v. Federal Power Commission, 104 U.S.App.D.C. 106, 259 F.2d 921 (1958). Other phrases used are "strong likelihood of success", or "substantial indication of probable success". In the ordinary preliminary injunction case, the court's attention is directed at a "strong showing" and at "probabi...