Shah v. Racetrac Petroleum Co.
| Decision Date | 24 July 2003 |
| Docket Number | No. 01-6451.,No. 01-6077.,01-6077.,01-6451. |
| Parties | Siddarth SHAH and Daksha Shah, Plaintiffs-Appellants/Cross-Appellees, v. RACETRAC PETROLEUM CO., Defendant-Appellee/Cross-Appellant. |
| Court | U.S. Court of Appeals — Sixth Circuit |
Jay W. Mader, ARNETT, DRAPER & HAGOOD, Knoxville, Tennessee, for Plaintiffs. Debra L. Fulton, FRANTZ, McCONNELL & SEYMOUR, Knoxville, Tennessee, for Defendant.
ON BRIEF:
Jay W. Mader, ARNETT, DRAPER & HAGOOD, Knoxville, Tennessee, Mark A. La Mantia, FARRELL & LA MANTIA, Raleigh, North Carolina, for Plaintiffs. Debra L. Fulton, FRANTZ, McCONNELL & SEYMOUR, Knoxville, Tennessee, for Defendant.
Before: CLAY and ROGERS, Circuit Judges; COFFMAN, District Judge.*
Plaintiffs Siddarth and Daksha Shah appeal from an order awarding summary judgment to Defendant Racetrac Petroleum Company after Plaintiffs filed a complaint in diversity jurisdiction pursuant to 28 U.S.C. § 1332 alleging various contract causes of action and raising claims under the Tennessee Consumer Protection Act, Tenn.Code Ann. § 47-18-109, and the Tennessee Petroleum Trade Practices Act, Tenn.Code Ann. § 47-25-601. Defendant cross-appeals from an order denying Defendant's counterclaim for attorney's fees. We AFFIRM the district court in part and REVERSE in part.
In late 1994, Plaintiffs became interested in purchasing Raceway 773, a gas station and convenience store located in Maryville, Tennessee. Defendant owned the store, exterior improvements, and real property. Clyde and Gloria Holt operated the Raceway pursuant to a lease and contract with Defendant, which operates a chain of similar stores. The Holts planned to sell their interest in the lease and contract, which included certain interior improvements, inventory, and goodwill, for $90,000.
Plaintiffs learned about the offer from Bhanu Mehta, who also considered purchasing the business from the Holts. Mehta had previously reviewed the lease and contract under which the Holts operated the store. Mehta learned that each instrument contained a clause that arguably permitted either party to terminate the agreement upon thirty days written notice. When Mehta asked Holt about the termination clauses, Holt explained that as he understood them, Defendant would not terminate the lease or contract as long as the lessee made timely rental payments and operated the business in a satisfactory manner. Mehta had also inquired about the termination clauses present in the agreements held by other Raceway store operators. These other lessees similarly reported that Defendant would not terminate the lease or contract as long as the operator promptly paid rent and ran the business effectively. In December of 1994, Plaintiffs first reviewed the lease and accompanying contract for Raceway 773. The termination clause in the lease read:
2. TERM. This Lease shall be effective on the 7th day of February, 1995, and subject to all its terms and conditions shall remain in full force and effect for twelve (12) months from date of execution. Upon termination of the lease term, this Lease will be automatically renewed for subsequent one-year terms upon the same terms and conditions, subject to Lessor's adjustments of the rental provided, however, that at any time during the initial or any extended term, either party may give thirty (30) days written notice in the form hereinafter described of its intent to terminate this Lease. Lessee acknowledges that this lease does not create, extend, or renew a franchise under any local, state, or federal law including the Federal Petroleum Marketing Practices Act (PMPA).
The termination clause in the contract had essentially the same terms:
E. Term of Contract and Renewal. — This Contract shall be for a duration of (12) months from date of execution, provided the Contractor complies with all the terms and conditions and covenants herein, it being the intent of the parties that the term of this Contract will run concurrently with the term of the Lease executed as of even date herewith. Provided that there has been no default as defined in the Contract within the existing term of the Contract, this Contract will be automatically renewed and the term of the Contract extended for subsequent one year terms. At any time during the initial or any extended term, either party may give thirty (30) days written notice in the form hereinafter described of its intent to terminate the Contract. Any such extension shall be upon the same terms and conditions as stated herein.
Furthermore, highlighted above the word "CONTRACT" on the document's first page, the contract states: "THIS CONTRACT DOES NOT CREATE A FRANCHISE RELATIONSHIP UNDER STATE OR FEDERAL LAW (See Paragraph C)." Paragraph C then states:
C. No Franchise. — Contractor acknowledges that this Contract does not create, extend, or renew a franchise under any local, state, or federal law including the Federal Petroleum Marketing Practices Act (PMPA). Contractor fully acknowledges that this Contract with Contractee is a separate and distinct contract and is not associated with any other agreements, contracts or franchise relationships which may now or hereafter exist between Contractee and Contractor. Contractor further acknowledges that Contractee is the retailer of the fuel facilty to be operated hereunder and that this Contract does not give any rights to the Contractor as a fuel retailer. Contractor further acknowledges that this Contract cancels any existing leases, agreements or other contracts, except any lease, agreement or contract of same date, or any ground lease on the Premises between the parties, that may have existed between Contractee and Contractor.
With respect to the title to the fuel, the contract provides:
F. Gasoline and Payment Obligations. — Contractee owns and retains all title to the fuel at the property until sold to the customer. Contractor agrees that all funds collected for fuel sales are the property of the Contractee and further agrees to act as the agent of Contractee in the collection and safe keeping of all monies collected for sale of fuel. Contractor acknowledges that he owes a duty of trust to Contractee in the collection and safe keeping of all funds collected for sales and acknowledges that he holds himself in such fiduciary relationship to Contractee. Contractor agrees to remit funds so held in trust to Contractee upon demand or otherwise as directed by Contractee in cash or by cashier's check.... In addition, Contractor shall submit all books and records relating to the sale of fuel and gasoline products purchased from Contractee for an audit and taking of inventory.
Also significant, the contract contained the following merger provision:
Y. Entirety. — This Contract, together with attached exhibits, and any other lease or contract executed the same date, constitutes the entire understanding between the parties and supersedes and cancels all previous contracts between the parties with respect to the facilities covered hereby.
The contract's miscellaneous provision reiterates the integration clause:
Z. Miscellaneous. —
....
5. This Contract supersedes and cancels all previous contracts or arrangements between the parties relating to the matters herein and no prior or subsequent stipulation, agreement or understanding, verbal or otherwise, of the parties or their agents relating to the matters herein shall be valid or enforceable unless embodied in the provisions of this Contract, or a separate instrument in writing.
Although Plaintiffs did not read all of the contractual provisions, they certainly saw the termination clauses.1
Plaintiffs expressed concern to the Holts about investing money in a business that they could lose upon thirty days notice. Clyde Holt told Plaintiffs what he told Mehta — that Defendant would not terminate a lease as long as the tenant performed acceptably. Plaintiffs also questioned J.D. Main, Defendant's district manager responsible for Racetrac 773. Main explained that "[Defendant's] policy is that they will not kick any dealer out as long as they perform satisfactorily." (J.A. at 137.)
Plaintiffs thereafter spoke with James Smith, who assumed Main's corporate role after Main departed. Plaintiffs explained that they could not afford to risk their money on an investment in Racetrac 773 without assurances that Defendant would not terminate the lease and contract on only thirty days notice. Smith echoed the earlier representations of the Holts and Main. According to Smith, (J.A. at 137.) Furthermore, when Plaintiffs requested a five or ten year lease instead of Defendant's one year automatically renewable term, Smith advised Plaintiffs that Defendant would not agree to changes in the agreement, but counseled Plaintiffs not "to worry about it... you will not have any problem if you perform right." (J.A. at 148.) Finally, Smith recommended that Plaintiffs check with other Raceway operators about Defendant's reputation and practices. Plaintiffs received similar assurances to those Defendant made.2
Based on these oral assurances, Plaintiffs began to proceed with the transaction by completing a credit report for Defendant. Following approval of their credit, Plaintiffs executed separate closing documents with the Holts and Defendant at Raceway 773 on February 7, 1995. Smith attended on Defendant's behalf. Plaintiffs executed a Confirmation of Purchase and Sale Agreement and paid $76,172.59 to the Holts, not including $5000 they previously tendered as earnest money. Plaintiffs then executed the lease and contract with Defendant...
To continue reading
Request your trial
-
Butler Auto Recycling, Inc. v. Honda Motor Co. (In re Takata Airbag Prods. Liab. Litig.)
...and (3) ‘[w]here the contract or transaction is intrinsically fiduciary and calls for perfect good faith.’ " Shah v. Racetrac Petroleum Co. , 338 F.3d 557, 571 (6th Cir. 2003) (citing Domestic Sewing Mach. Co. v. Jackson, 83 Tenn. 418, 425 (1885) ). None of those three circumstances are pre......
-
Jordan v. Ibp, Inc.
...will be insufficient; there must be evidence on which the jury could reasonably find for the [nonmoving party]." Shah v. Racetrac Petroleum Co., 338 F.3d 557, 566 (6th Cir.2003) (quoting Anderson, 477 U.S. at 252, 106 S.Ct. 2505). If the evidence offered by the nonmoving party is "merely co......
-
Moeckel v. Caremark, Inc.
...will be insufficient; there must be evidence on which the jury could reasonably find for the [nonmoving party]." Shah v. Racetrac Petroleum Co., 338 F.3d 557, 566 (6th Cir.2003) (quoting Anderson, 477 U.S. at 252, 106 S.Ct. 2505). If the evidence offered by the nonmoving party is "merely co......
-
Buck Mountain Cmty. Org. v. Tennessee Valley Auth.
...will be insufficient; there must be evidence on which the jury could reasonably find for the [nonmoving party]." Shah v. Racetrac Petroleum Co., 338 F.3d 557, 566 (6th Cir.2003) (quoting Anderson, 477 U.S. at 252, 106 S.Ct. 2505). If the evidence offered by the nonmoving party is "merely co......