United Food Mart, Inc. v. Motiva Enterprises, LLC

• Decision Date: 29 September 2005
• Docket Number: No. 04-60539 CIV.,04-60539 CIV.
• Parties: UNITED FOOD MART, INC. d/b/a Lakes Shell and United Food Mart # 2, Inc. d/b/a Turnpike Shell, Plaintiffs, v. MOTIVA ENTERPRISES, LLC, Defendant.
• Court: U.S. District Court — Southern District of Florida

457 F.Supp.2d 1329

UNITED FOOD MART, INC. d/b/a Lakes Shell and United Food Mart # 2, Inc. d/b/a Turnpike Shell, Plaintiffs, v. MOTIVA ENTERPRISES, LLC, Defendant.

No. 04-60539 CIV.

United States District Court, S.D. Florida, Miami Division.

September 29, 2005.

Jason Scott Coupal, Jason S. Coupal, Los Angeles, CA, William S. Isenberg, Isenberg & Associates, Fort Lauderdale, FL, for Plaintiffs.

Carlo A. Rodriguez, Christina T. Ng, Laurie Uustal Mathews, Samuel Alberto Danon, Hunton & Williams, Miami, FL, for Defendant.

ORDER GRANTING SUMMARY JUDGMENT FOR DEFENDANT

ALTONAGA, District Judge.

THIS CAUSE came before the Court on Defendant, Motiva Enterprises, LLC's ("Motiva['s]") Motion for Summary Judgment, filed on May 31, 2005 [D.E. 58]. The Court heard oral argument on August 12, 2005 and has considered the parties' written submissions, pertinent portions of the record, and the applicable law.

On July 12, 2004, Plaintiffs, United Food Mart, Inc. d/b/a Lakes Shell ("Lakes Shell") and United Food Mart #2, Inc. d/b/a Turnpike Shell ("Turnpike Shell"), filed an Amended Complaint, alleging breach of contract and violation of the Florida Motor Fuel Marketing Practices Act ("FMFMPA"). Plaintiffs, who operate gasoline service stations under the "Shell" brand name, claim that Motiva, their fuel supplier, charged discriminatory prices for motor fuel under the parties' Retail Sales Agreements. Motiva now moves for summary judgment, arguing, among other things, that 1) its fuel prices fell within the range of prices charged by other refiners in the relevant geographic market and was applied uniformly to similarly-situated customers, 2) the statute of limitations bars Plaintiffs' FMFMPA claim, and 3) Plaintiffs have failed to come forward with evidence showing that their service stations were in the same "relevant geographic market" as nearby Shell stations, which Motiva allegedly favored.

I. BACKGROUND

Lakes Shell and Turnpike Shell are Florida corporations which operate gasoline service stations (the "Lakes Station" and "Turnpike Station," respectively) in Broward County, Florida. Muhammad Rahman is the president and majority shareholder of both corporations. Motiva is a Delaware limited liability company with its principal place of business in Houston, Texas. It leases and supplies gasoline service stations under the "Shell" brand name, including the Lakes Station and Turnpike Station.

Lakes Shell originally entered into a Retail Sales Agreement and Retail Facility Lease with Motiva in December 1999, and Turnpike Shell executed similar franchise agreements in August 2001. Under the terms of their Retail Sales Agreements, Plaintiffs promised to purchase certain quantities of gasoline from Motiva and pay "the price in effect at the time loading commences at the Plant for the place of delivery." (Retail Sales Agreements [D.E. 60 Exs. 2, 4, 6] § 3(a).) The "price in effect" that Motiva charged Plaintiffs was the "dealer tank wagon" (or "DTW") price. According to Arthur Driscoll, Motiva's Retail Sales Manager for South Florida, Motiva set its DTW price according to a "zone" system: Motiva, like other oil companies, sets its DTW prices according to the specific dealers' competitive market or zone.

Motiva's specific proprietary system is known as its "trade area pricing" system. Each different competitive zone is known as a "DRC" and the number of dealers in a particular zone, the shape of a zone and the number of zones in a particular area can vary. Zones can be very small; some contain only one Shell dealer.

(Driscoll Decl. 5/31/05 [D.E. 60 Ex. 1] ¶ 6.)

Under the terms of their Retail Sales Agreements, Plaintiffs were also required to maintain certain levels of quality, described as "Brand Standards":

Brand Standards are guidelines relating to the image, operations, and appearance of the stations that franchisees are contractually required to fulfill. The purpose of these Brand Standards is to ensure that Shell maintains a consistent brand image and superior customer service throughout its network of dealers, in order to increase loyalty of current customers, attract new customers and improve business performance. Provisions requiring dealers to comply with Brand Standards are standard in all Retail Sales Agreements.

(Weir Decl. [D.E. 60 Ex. 8] ¶ 3.)

According to James Weir, Shell Oil Products U.S.A.'s Channels Manager, Motiva's sales representatives evaluate stations for compliance with Brand Standards and "uniformly apply the same objective criteria" to all of their inspections. (Id. ¶ 5.) Mr. Weir testified that "as of the first quarter of 2004, 92.4% of all Shell branded retail stations nationwide came within compliance of the Brand Standards." (Id. ¶ 9.)

Mr. Rahman testified that soon after he acquired the Lakes and Turnpike Stations, sales of gasoline, convenience store items, and carwashes increased at both stations. (Rahman Decl. [D.E. 71] ¶ ¶ 3-4.) By mid-2001, however, Mr. Rahman noticed that gasoline prices at a nearby Shell-branded station (the "Broward Shell") "were far less than gas prices of surrounding businesses in the area, including Lakes and Turnpike Shell." (Id. ¶ 5.) A few months later, Mr. Rahman observed the Broward Shell selling gasoline "5 to 10 cents less" than his DTW prices. (Id. ¶ 7.)

Mr. Rahman inquired about the low prices that he observed at the Broward Shell. According to Mr. Rahman, two Motiva representatives, Jennifer Garnett and Scott Howard, told Mr. Rahman that the Broward Shell's owner had "a deal" with Motiva such that he could buy fuel at lower prices than other dealers. (Id. ¶ ¶ 6-7.) Mr. Rahman stated that Mr. Howard disclosed to him that because of this deal, "Broward Shell sales have doubled from previous years." (Id. ¶ 7.) According to Mr. Rahman, another Motiva representative, Norman Forster, Jr., told him that "a penny or two less on gas prices really does not make a difference." (Id. ¶ 6.)

In March 2002, Mr. Rahman observed another Shell-branded station (the "Lexymart Shell") begin to sell gasoline below his DTW prices. (Id. ¶ 8.) Mr. Rahman testified that because the Broward Shell and Lexymart Shell were selling gasoline at such low prices in the same area as the Lakes and Turnpike Stations, the overall sales at his stations "decreased by half," and he began to suffer financial losses. (Id.) According to Mr. Rahman, Plaintiffs' minority shareholders "walked out of the business because they did not want to put their money in the business any longer." ¹ (Id.)

In response to continued complaints about the price of gasoline at neighboring stations, Mr. Rahman states that Motiva representatives offered to mutually terminate his franchise agreements. (Id. ¶ 10.) In 2003, according to Mr. Rahman, Franke Nixon prepared a mutual termination letter, which Mr. Rahman refused to sign. (Id. 1111.) Furthermore, Mr. Rahman states that Mr. Forster twice threatened to require cash-on-delivery for Plaintiffs' fuel purchases. (Id. It 10.) According to Mr. Rahman, at one point "he went ahead to do a COD, but later cancelled it on a condition that I would withdraw my complaints and due to my financial situation I had to comply." (Id.)

Mr. Rahman testified that from 2000 to 2002, the Lakes and Turnpike Stations always received passing scores on their quality inspections, but as a result of his complaints about gasoline prices, Motiva representatives started to give his stations low Brand Standards scores. (Id. II12-13.) According to Mr. Driscoll, Lakes Shell failed quality inspections on June 24, 2003, July 29, 2003, September 15, 2003, and October 1, 2003. (Driscoll Deck 9/8/05 [D.E. 60 Ex. 9] 1110.) Similarly, Turnpike Shell received failing quality inspection scores on June 3, 2003, June 19, 2003, June 26, 2003, July 9, 2003, and August 1, 2003. (Id.)

Mr. Rahman blames Motiva for his stations' failure to meet the required quality levels:

When problems occurred with gas quality and appliances within the store, I asked Shell [personnel] for help several times without receiving any type of response.... I paid Shell $1800.00 per gas station every month for maintenance services, which they failed to provide .... I was left helpless because Shell did not provide the maintenance services, which in turn caused me to fail these inspections.

(Rahman Decl. ¶ 27.) Mr. Rahman also states that Motiva changed its maintenance contractors several times from 2002 to 2004 and that these contractors "were incompetent." (Id. ¶ 28.) Finally, Mr. Rahman testified that he was unable to sell gasoline "innumerable times" because Motiva's computer systems and pumps were down, and starting in 2002, Motiva was late in delivering gasoline "numerous times" yet failed to compensate him. (Id.)

On November 12, 2003, Motiva sent Lakes Shell and Turnpike Shell warning letters, indicating that they had failed their most recent inspections and that continued violations of the Brand Standards would result in termination or non-renewal of their franchises. (Driscoll Decl. 9/8/04 ¶ 11.) On December 12, 2003, Motiva inspected both stations again, and once again both stations received failing scores. (Id ¶ 12.) Motiva then sent Plaintiffs a second warning letter on February 27, 2004, indicating that Motiva had decided to inspect the stations again in March 2004. (Id. ¶ 13.) On March 9, 2004, Motiva inspected Plaintiffs' stations, and, once again, they received failing scores. (Id. ¶ 14.)

On April 27, 2004, Plaintiffs commenced this action, alleging that Motiva engaged in discriminatory pricing in violation of the FMFMPA and breached the Retail Sales Agreements by setting the DTW prices in bad faith. Plaintiffs claim that Motiva ran them out of business in order to take over their stations. On May 12, 2004, Motiva sent Plaintiffs written notices that their supply agreements and leases would be terminated on August 20, 2004 due to continued violations of the Brand Standards. (Id ¶ 15.) On August 16, 2004, P...