Thompson v. Amoco Oil Co., 87-3283.
| Decision Date | 07 February 1989 |
| Docket Number | No. 87-3283.,87-3283. |
| Citation | 705 F. Supp. 1349 |
| Parties | Ronald THOMPSON, Plaintiff, v. AMOCO OIL COMPANY, Defendant. |
| Court | U.S. District Court — Central District of Illinois |
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Fred B. Moore, Bloomington, Ill., Gary E. Persian, Minneapolis, Minn., for plaintiff.
Edward Huntley, Springfield, Ill., Gayle G. Stratmann, David M. Harris, St. Louis, Mo., for defendant.
This is an action under the Petroleum Marketing Practices Act (hereinafter PMPA), 15 U.S.C. § 2801 et seq.
Plaintiff seeks a judicial determination that the notice sent by Defendant advising Plaintiff that his Amoco oil dealer lease would be terminated and nonrenewed is ineffective for failing to comply with the PMPA. The cause is currently before the Court following a two-day bench trial, and submission of supplemental briefs by the parties.
The Court has previously ruled from the bench in favor of Plaintiff upon Defendant's affirmative defense under § 2802(b)(2)(A) of the PMPA; we now hold in favor of Plaintiff as well upon Defendant's affirmative defense under § 2802(b)(2)(C).
Thompson entered into a franchise relationship with Amoco on November 1, 1984, with respect to Amoco Station Number 5279, at U.S. 51 and Raab Road, in Normal, Illinois. The franchise relationship was evidenced by a lease agreement and Thompson has managed the station ever since that time. Sometime after entering into the relationship, however, Thompson moved away from the Normal area and took up residence in Lake of the Ozarks, Missouri — some 300 miles from Normal.
Amoco officials learned of Thompson's move sometime before fall of 1986, and they were not pleased. Amoco has had a traditional policy of requiring franchisees to be physically present upon the franchised premises. In fact, Amoco attempted to memorialize this policy by including a clause in the lease contract requiring the franchisee "to devote his personal attention upon the Premises to managing the business activities of the gasoline sales facility." Amoco officials met with Thompson to discuss this policy with him; Thompson, however, refused to acknowledge that Clause 15(f) required his physical presence at the station, nor did he recall ever having been told of the policy. Therefore, Thompson refused to return to the Normal area; instead, he stayed in Missouri, where he currently engages in substantial business activities.
Amoco officials remained unsatisfied, and so on June 3, 1987, they sent to Mr. Thompson a letter informing him that Amoco was terminating and nonrenewing the lease in question. The letter was sent to comply with the notice provisions of the PMPA, 15 U.S.C. § 2804. Amoco informed Thompson that it was terminating and nonrenewing the contract because Thompson "failed to devote his personal attention upon the premises to manage the business activities of the gasoline sales facility as required by his Dealer Lease with Amoco, in that he has permanently moved out of Illinois," thereby breaching Clause 15(f) of the contract; in addition, Amoco stated that "an event has occurred which is relevant to the franchise relationship and as a result of which termination of the franchise or nonrenewal of the franchise relationship is reasonable."
In response to the nonrenewal and termination letter, Plaintiff filed the instant complaint on July 22, 1987. The complaint seeks declaratory and injunctive relief, and in addition requests costs, fees, and exemplary damages for willful disregard of PMPA requirements. Plaintiff also sought a preliminary injunction; before a hearing could be held, however, the parties agreed to maintain the status quo pending final resolution of Plaintiff's cause of action. The present trial followed.
Under the PMPA, the franchisee (here, Thompson) may bring a civil action against the franchisor upon violation of the provisions of the PMPA. 15 U.S.C. § 2805(a). In such an action, the franchisee has the initial burden of proving that the franchise was terminated or nonrenewed. Thereupon the burden shifts to the franchisor to show that it has an affirmative defense that the termination was permitted under § 2802(b) or 2803 of the PMPA. 15 U.S.C. § 2805(c). Here, the parties have stipulated that Plaintiff has made out a prima facie case, and so the burden shifted to Amoco to prove that the letter terminating and nonrenewing the lease in question was permitted under the PMPA. The defenses identified by Amoco are those found in § 2802(b)(2)(A) and (C).
The Petroleum Marketing Practices Act is remedial legislation intended "to strike a balance between the interests of the participants in a petroleum marketing franchise relationship." Brach v. Amoco Oil Co., 677 F.2d 1213, 1220 (7th Cir.1982). The PMPA was intended to equalize the bargaining power between the franchisor and the franchisee in such relationships; previously, the franchisor, in a far superior bargaining position to that of the franchisee, was often able to win contractual concessions which at times bordered upon the unconscionable. Although PMPA has this as a general purpose, "the one thing the Act is clearly intended to prevent is the appropriation of hard-earned good will which occurs when a franchisor arbitrarily takes over a business that the franchisee has turned into a successful going concern." Id.
To accomplish these goals, the PMPA establishes as a general rule that termination or nonrenewal of a franchise or franchise relationship is prohibited. § 2802(a). In certain circumstances, however, the franchisor may escape this general prohibition and may terminate or nonrenew the relationship. See generally Annotation, Termination or Nonrenewal of Franchise to Sell Motor Fuel in Commerce Under Petroleum Marketing Practices Act (15 USCS §§ 2801 et seq.), 53 A.L.R.Fed. 348 (1981). The grounds for termination or nonrenewal are set out in § 2802(b)(2), and in pertinent part include a failure of the franchisee to abide by reasonable and materially significant terms of the franchise agreement, and "the occurrence of an event which is relevant to the franchise relationship and as a result of which termination of the franchise or nonrenewal of the franchise relationship is reasonable." § 2802(b)(2)(A) and (C). Furthermore, those events upon the occurrence of which termination or nonrenewal is permitted under § 2802(b)(2)(C) are defined in § 2802(c) by means of a nonexhaustive list. This list includes such franchisee actions as criminal misconduct, declaration of bankruptcy, or continuing severe physical or mental disability; also included are such unavoidable events occurring to the franchisor as loss of the right to grant use of trademarks, condemnation of the property in question, or loss of the franchisor's right to lease the property.
Finally, even if a permitted reason for nonrenewal or termination exists under § 2802(b)(2), the franchisor must still comply with the PMPA's notification requirements. Section 2804 of the act requires that notification be made by sending a certified letter to the franchisee informing him of the intent to terminate or not renew, the effective date of termination or nonrenewal, and the reasons for the decision to terminate or nonrenew. In addition, the affirmative defenses found in § 2802(b)(2) also contain their own notification requirements; for instance, the reasons for the termination or nonrenewal must have become known to the franchisor no more than 120 days before the franchisor notified the franchisee of the termination or nonrenewal.
The PMPA contains its own enforcement provisions, allowing wronged franchisees to bring civil actions against franchisors. 15 U.S.C. § 2805. Such civil actions may entitle the franchisee to recover actual damages, exemplary damages where appropriate, attorney and witness fees and any appropriate equitable relief including declaratory judgment, mandatory or prohibitive injunctive relief, and interim equitable relief.
As previously noted, Amoco has raised two affirmative defenses under the PMPA to this action — Amoco contends that Thompson violated a provision of the lease (§ 2802(b)(2)(A)) and claims that an "event" has occurred making termination or nonrenewal reasonable (§ 2802(b)(2)(C)). As previously noted, this Court has already ruled from the bench that the first of these defenses must be decided in Plaintiff's favor. The lease clause in question, 15(f), is undeniably ambiguous. It requires a franchisee "to devote his personal attention upon the Premises to managing the business activities of the gasoline sales facility." As we made clear in our previous ruling, "devote his personal attention upon the Premises" encompasses a large range of possible attention, anywhere from residence on the premises and full-time exclusive employment there, to situations such as the present. Amoco, despite its policy of "personal attention upon the Premises," does allow franchisees to manage more than one facility; in fact, Thompson is a multiple-location franchisee himself. It is thus obvious that "personal attention upon the Premises" does not require that a franchisee devote his exclusive attention to one franchise location. Hence, Clause 15(f) cannot be said to require actual physical presence upon the premises. In addition, the facts introduced at trial clearly indicated that Thompson was never apprised of Amoco's policy, and so had no reason to interpret Clause 15(f) to require his actual physical presence at the station. For these reasons, this Court found that Thompson did not fail "to comply with any provision of the franchise," § 2802(b)(2)(A), and so Amoco's affirmative defense on that ground has failed.
As this Court made clear from our ruling from the bench, Amoco's remaining affirmative defense raises a close call. Furthermore, the PMPA is a relatively arcane area of the law, with little precedent on this particular question. We therefore...
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