State Oil Co. v. Khan, No. 93 C 1372.

• Citation: 839 F. Supp. 543
• Decision Date: 03 December 1993
• Docket Number: No. 93 C 1372.
• Parties: STATE OIL COMPANY, Plaintiff, v. Barkat (Bob) U. KHAN, Defendant.
• Court: U.S. District Court — Northern District of Illinois

839 F. Supp. 543

STATE OIL COMPANY, Plaintiff, v. Barkat (Bob) U. KHAN, Defendant.

No. 93 C 1372.

United States District Court, N.D. Illinois, E.D.

December 3, 1993.

John C. Baumgartner, Churchill, Baumgartner & Phillips, Ltd., Grayslake, IL, for plaintiff.

Gregory James Ellis, Law Offices of Gregory J. Ellis, Oak Brook, IL, for defendant.

OPINION AND ORDER

NORGLE, District Judge:

This matter comes before the court on defendant/counter-plaintiff Barkat (Bob) U. Khan's ("Khan") motion for summary judgment. For reasons stated below, the court finds that subject matter jurisdiction is lacking and thus sua sponte remands this case to the Circuit Court of DuPage County. In light of this court's lack of jurisdiction, the court does not render a decision as to Khan's motion for summary judgment.

FACTS

Khan was a franchised dealer of plaintiff/counter-defendant State Oil Company ("State Oil") and operated a gasoline service station in Addison, Illinois since January of 1992. As part of his business, Khan purchased Unocol 76 branded motor fuel from State Oil and sold the fuel under the Unocol 76 trademark. Khan paid $100,000 in cash for the supply agreement. Khan also executed and delivered to State Oil a promissory note in the amount of $105,336.31 along with a security agreement to secure the note. The monthly payments on the promissory note were $3,200.

The franchise agreement with State Oil also provided for monthly lease payments based in part on projected gasoline sales. The initial amount of monthly payments that Khan was obligated to pay pursuant to the franchise agreement, however, proved not to reflect the actual gasoline sales of Khan's service station. By agreement of the parties, the lease was thus reduced to $6,500 per month during 1992 and then $6,800 per month for the first six months of 1993. The lease payments were due on the first day of each month.

Sales continued to prove poor for Khan around the end of 1992. Khan failed to make his rental payment for January 1, 1993 as well as the payment on the promissory note due January 1, 1993. Khan was unable to pay because he lacked sufficient funds for the payments. Khan informed State Oil of his general lack of money and further mentioned that he also lacked funds for the purchase of replacement merchandise, which he had to charge to a credit card. As a consequence of Khan's failure to pay and his statements, State Oil sent a notice of termination to Khan on January 27, 1993 stating that the franchise agreement would be terminated effective February 2, 1993.

On February 8, 1993, State Oil filed a forcible entry and detainer action in DuPage County under 735 ILCS 5/9-101 et seq. for possession of the premises. State Oil also filed an action in state court to collect on the promissory note. Khan removed the forcible entry and detainer action to this court pursuant to 28 U.S.C. § 1441, asserting that the termination of service station franchises is regulated by the Petroleum Marketing Practices Act ("PMPA"), 15 U.S.C. § 2801 et seq. State Oil subsequently filed a motion for summary judgment which this court denied on May 12, 1993. In denying State Oil's motion by minute order, this court's strong language indicated that the five-day notice of termination may have been defective.¹ After the court denied State Oil's motion for summary judgment, State Oil issued a second notice of termination dated May 21, 1993 which provided ninety-days notice.

Khan filed a counterclaim seeking damages pursuant to 15 U.S.C. § 2805(a). Khan alleges State Oil violated the PMPA because its initial notice failed to give ninety-days notice before the effective date of the termination and because State Oil took action in state court to appoint a receiver to take over Khan's service station as part of State Oil's action on the promissory note. State Oil's failure to comply with the PMPA in effectuating a termination of the franchise would give rise to civil liability. 15 U.S.C. § 2805(a). Khan's motion thus seeks summary judgment on his counterclaim on two grounds. First, Khan maintains that State Oil did not comply with all of the notice requirements of the PMPA in its January 21, 1993 notice of termination when it terminated Khan's franchise, primarily claiming it would not have been unreasonable under the circumstances for State Oil to provide ninety-days notice before the effective date of the termination. Khan claims secondly that State Oil's appointment of a receiver through the state court constitutes a wrongful termination of the franchise because it deprived Khan the ability to cure the default.² Khan seeks a judgment and order declaring that State Oil's actions violate the PMPA.

Nonetheless, after briefing on Khan's motion for summary judgment was complete, the court discerned a problem with its subject matter jurisdiction. The court informed the parties of its concern and instructed counsel to research the issue. In open court on November 24, 1993, the parties informed the court of their respective positions regarding federal jurisdiction and State Oil submitted a written memorandum setting forth its argument. After reviewing the arguments of counsel and the relevant case law, the court concludes that it does not possess jurisdiction.

DISCUSSION

The court has reviewed the jurisdictional question sua sponte pursuant to its general duty to jealously guard the federal courts' limited jurisdiction. See Wisconsin Knife Works v. National Metal Crafters, 781 F.2d 1280, 1282 (7th Cir.1986) ("The first thing a federal judge should do when a complaint is filed is check to see that federal jurisdiction is properly alleged"). The court must be completely satisfied that it has subject matter jurisdiction before hearing a case on the merits. 28 U.S.C. § 1447(c) requires district courts to "remain vigilant to ensure the presence of jurisdiction...." See In re Shell Oil Co., 966 F.2d 1130, 1133 (7th Cir.1992). The district court is therefore required to remand a case if it appears, at any time before final judgment, that the district court lacks jurisdiction. 28 U.S.C. § 1447(c).³

Federal district courts possess original jurisdiction over actions "arising under the Constitution, laws, or treaties of the United States." 28 U.S.C. § 1331. The removal of a case based on a federal question is governed by the well-pleaded complaint rule. That rule provides that federal question jurisdiction exists only when the federal question is presented on the face of the plaintiff's properly pleaded complaint. Burda v. M. Ecker Co., 954 F.2d 434, 438 (7th Cir.1992) (citing Caterpillar Inc. v. Williams, 482 U.S. 386, 392, 107 S.Ct. 2425, 2429, 96 L.Ed.2d 318 (1987)). A defendant must establish that at least one count of the plaintiff's complaint "arises under" federal law in order to secure a proper removal. Lepucki v. Van Wormer, 765 F.2d 86, 89 (7th Cir.), cert. denied, 474 U.S. 827, 106 S.Ct. 86, 88 L.Ed.2d 71 (1985). That is, a right or immunity created by the laws of the United States must constitute an essential element of the plaintiff's cause of action. Gully v. First National Bank, 299 U.S. 109, 112, 57 S.Ct. 96, 97, 81 L.Ed. 70 (1936). Any doubt regarding jurisdiction must be resolved in favor of remand and the party seeking removal bears the burden of establishing federal jurisdiction. Doe v. Allied-Signal, Inc., 985 F.2d 908, 911 (7th Cir. 1993). Thus, the propriety of removal depends on whether the suit, as the plaintiff framed or easily could have framed it in the complaint, would fall within the purview of this court's jurisdiction at the time of removal. Federal Deposit Ins. Corp. v. Elefant, 790 F.2d 661, 667 (7th Cir.1986) (citing Franchise Tax Board v. Construction Laborers Vacation Trust, 463 U.S. 1, 103 S.Ct. 2841, 77 L.Ed.2d 420 (1983)).

A district court may not preside over a case if "the only federal question posed is raised by a defense argument, even if the plaintiff anticipated the defense argument and even if both parties concede the federal question is the only real issue in the case." Doe, 985 F.2d at 911 (citing Caterpillar Inc. v. Williams, 482 U.S. 386, 393, 107 S.Ct. 2425, 2430, 96 L.Ed.2d 318 (1987)). This is true even if the defense is that the state-law claim is preempted by federal statute. Franchise Tax Board v. Construction Laborers Vacation Trust, 463 U.S. 1, 12, 103 S.Ct. 2841, 2847-48, 77 L.Ed.2d 420 (1983). A plaintiff is entitled to avoid federal court even where federal questions are implicit in the state law claim, as long as the plaintiff is not artfully pleading his case in order to forum shop and avoid federal court. Doe, 985 F.2d at 911; see Burda, 954 F.2d at 438 (removal justified were plaintiff artfully pleaded state-law cause of action). Similarly, the district court cannot maintain jurisdiction merely because the defendant files a counterclaim based on federal law subsequent to removal. Elefant, 790 F.2d at 667; see Takeda v. Northwestern National Life Ins. Co., 765 F.2d 815, 822 (9th Cir.1985) (filing of counterclaim based on federal law does not make suit removable).

The PMPA is undoubtedly a federal statute that regulates petroleum service station franchises. For instance, the PMPA lists the specific reasons for which a franchisor may legitimately terminate a service station franchise. Among those reasons is a franchisee's failure to pay, in a timely manner, all sums to which a franchisor is legally entitled when those sums are due. 15 U.S.C. § 2802(c)(8); Baker v. Amoco Oil Co., 956 F.2d 639, 641 (7th Cir.1992).⁴ Additionally, the PMPA requires a service station franchisor to provide at least ninety-days written notice in order to successfully terminate a franchise. 15 U.S.C. § 2804(b)(1); California Petroleum Distribs., Inc. v. Chevron U.S.A., Inc., 589 F.Supp. 282, 289 (E.D.N.Y.1984). A shorter time period is allowed if it would not be reasonable to require ninety-days notice under the circumstances, in which event the...