Zipper v. Sun Co., Inc.
| Decision Date | 05 November 1996 |
| Docket Number | No. 95-CV-3515 (JG).,95-CV-3515 (JG). |
| Citation | 947 F.Supp. 62 |
| Parties | Saul ZIPPER, Plaintiff, v. SUN COMPANY, INC., Defendant. |
| Court | U.S. District Court — Eastern District of New York |
Maurice H. Blum, New York City, for Plaintiff.
Peter F. Tamigi, Carole A. Burns & Associates, Mineola, NY, for Defendant.
Plaintiff Saul Zipper asserts claims under Title I of the Petroleum Marketing Practices Act ("the PMPA"), 15 U.S.C. § 2801 et seq., and related claims for breach of contract, fraudulent misrepresentation and declaratory judgment. He seeks damages and an order voiding the cancellations of two petroleum franchise stations in Brooklyn, one on Flatlands Avenue and one on Remsen Avenue. Sun Company, Inc. (R & M) ("defendant" or "Sun"), in its answer, submitted 19 affirmative defenses and 6 counterclaims, most of which are not germane to the present motion. Defendant now moves for partial summary judgment. It seeks a declaration that the termination of the Flatlands Avenue franchise agreement was valid, and an order requiring plaintiff to surrender the station to Sun. Sun also seeks an order dismissing the claims related to the Remsen Avenue station on the ground that those claims have been released. The Defendant's motion is denied with respect to the termination of the Flatlands Avenue franchise and granted with respect to the claims arising out of the Remsen Avenue franchise.
In 1985 or 1986, Zipper and Sun entered into the first of four franchise agreements regarding Zipper's operation of a Sun franchise on Flatlands Avenue. Zipper contends that, during his management of the Flatlands station, Sun promised to renovate the premises and to reduce his rent costs. He further alleges that neither promise was kept; instead, as early as 1994, Sun began developing renovation plans for the station, which it submitted to the City Planning Department without Zipper's consent. Additionally, there is some dispute as to whether, in 1995, Sun commenced negotiations with outside parties to take over the Flatlands station.
On May 30, 1995, Zipper was robbed of approximately $10,000. On the next day, a check given to Zipper from one of his customers bounced. As a result, beginning in early June 1995, three of Zipper's checks to Sun, for rent, gasoline and other products, bounced. In addition, Zipper stopped selling gasoline to the public, although his station remained open. Zipper maintains that his failure to sell gasoline was based upon Sun's refusal to accept cash payments for gasoline purchases. Sun counters that it did not sell gasoline to Zipper because his account was seriously in arrears.
By letter dated July 27, 1995, Sun advised Zipper that it was terminating his franchise at the Flatlands station "effective immediately," and that Sun intended to enter the Flatlands premises on Friday, August 4, 1995. Sun informed Zipper that its termination was based upon various breaches of the franchise agreement and the PMPA, including a failure to sell gasoline for 7 consecutive days and a failure to timely pay Sun all sums to which it was entitled. The letter stated that Zipper owed Sun $35,000.
By letter dated August 1, 1995, Sun revised the amount owed by Zipper to $67,000. Zipper currently remains in possession of the Flatlands station, although he has neither paid any rent nor sold any Sun gasoline since the summer of 1995.
Beginning in 1990, Zipper also began operating another Sun franchise on Remsen Avenue. He contends that he was promised that his Remsen rent would be lowered, which promise was not fulfilled. In addition, Zipper contends that in 1993, he was coerced into participating in a marketing scheme known as "Zero Pool Margin," which effectively eliminated his operating profits.
Zipper alleges that he was told by Sun in July 1993 that it would not charge Zipper less money for his Remsen station rent than it was currently charging him. Relying on this statement, on July 26, 1993, Zipper entered into an agreement with Sun to release both parties' obligations with respect to the Remsen station. After the cancellation agreement was signed, Sun offered the franchise to Musa Yanni for about one-half of Zipper's rent.
In August 1995, Zipper commenced this action, in which he seeks (i) an injunction preventing Sun from terminating the Flatlands Avenue franchise and requiring the resumption of franchise operations; (ii) damages for breach of contract with respect to both franchise agreements; (iii) damages for alleged fraudulent misrepresentations with respect to both franchise agreements; and (iv) a declaratory judgment modifying the rental provisions in both franchise agreements.
Defendant now moves for partial summary judgment. With respect to the Flatlands Avenue station, defendant seeks (i) the rejection of plaintiff's statutory claims; (ii) a declaration that its termination of the franchise was valid; and (iii) an injunction to compel plaintiff to vacate the station premises. Plaintiff responds that Sun lacked adequate grounds for termination under the PMPA, and that Sun's notice of termination was insufficient under the PMPA. I conclude that although defendant had the requisite statutory grounds for termination, it failed to supply plaintiff with adequate notice of termination; thus, the termination was invalid under the PMPA.
With respect to the Remsen Avenue station, defendant moves for summary judgment on the plaintiff's breach of contract and fraud claims, alleging that such claims were released by the cancellation agreement executed by both parties on July 30, 1993. Plaintiff does not contest the terms of the cancellation agreement, but instead attacks it on the grounds of fraud and duress. Since plaintiff's claims of fraud and duress are legally insufficient, defendant's motion with respect to the Remsen station claims is granted.
Summary judgment should be granted where "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). The burden is upon the moving party to demonstrate that no genuine issue of material fact exists, and all ambiguities must be resolved and all inferences drawn in favor of the non-moving party. Gallo v. Prudential Residential Services, Limited Partnership, 22 F.3d 1219, 1223 (2d Cir.1994).
To survive a summary judgment motion, a plaintiff must make a showing sufficient to establish the existence of the elements essential to its case. Mount Vernon Fire Ins. v. Creative Housing, 797 F.Supp. 176, 179 (E.D.N.Y.1992). When no rational juror could find in favor of the non-moving party because the evidence to support its case is so slight or non-existent on a material element, there is no genuine issue of material fact and a grant of summary judgment is proper. Gallo, 22 F.3d at 1224.
The PMPA tinkers with the economic relationship between petroleum companies and their franchise station operators. Congress perceived a "David versus Goliath aspect of the relationship between the small retailer franchisee and the giant petroleum company franchisor, and aimed at making that relationship more equal." Darling v. Mobil Oil Corp., 864 F.2d 981, 982 (2d Cir. 1989). As the Second Circuit has noted, "[t]he overriding purpose of the PMPA is to provide `protection for franchisees from arbitrary or discriminatory termination or non-renewal of their franchises.'" Mobil Oil Corp. v. Karbowski, 879 F.2d 1052, 1055 (2d Cir.1989) (quoting S.Rep. No. 731, 95th Cong., 2d Sess. 15, reprinted in 1978 U.S.Code Cong. & Admin.News 873, 874 ("Senate Report")). "Such protection was needed to curtail the widespread abuse by petroleum franchisors of their ability to terminate franchises." Karbowski, 879 F.2d at 1055. This goal is balanced against the "legitimate needs of a franchisor to be able to terminate a franchise ... based upon certain acts of the franchisee." Id. (quoting Senate Report at 877). The result of this balancing is that petroleum companies may properly terminate franchises only for certain enumerated reasons. Id.; 15 U.S.C. § 2802(a). Also, even if there is a valid ground for termination, such action may be taken only when the notification requirements of the PMPA are met. 15 U.S.C. §§ 2802(b)(1)(A) and 2804.
Defendant claims that its termination of the franchise agreement covering the Flatlands Avenue station is justified on four statutory grounds: (i) a "failure by the franchisee to comply with any provision of the franchise, which provision is both reasonable and of material significance to the franchise relationship" (15 U.S.C. § 2802(b)(2)(A)); (ii) a "failure by the franchisee to exert good faith efforts to carry out the provisions of the franchise" (15 U.S.C. § 2802(b)(2)(B)); (iii) a "failure by the franchisee to pay to the franchisor in a timely manner when due all sums to which the franchisor is legally entitled" (15 U.S.C. § 2802(b)(2)(C) and (c)(8)); and (iv) a "failure by the franchisee to operate the marketing premises for 7 consecutive days." 15 U.S.C. § 2802(b)(2)(C) and (c)(9)(A). Defendant's first and third contentions, which are both based on plaintiff's failure to pay amounts due for rent, gasoline and other products, provide adequate justification for Sun's termination of the Flatlands franchise.
Defendant's first ground, a failure to comply with a material provision of the franchise agreement, requires a determination of the reasonableness of the agreement's provisions. The Second Circuit has provided that an objective standard...
To continue reading
Request your trial
-
Koylum, Inc. v. Peksen Realty Corp.
...R.L. Vallee, Inc. 993 F.Supp. 236, 239 (D.Vt. 1998) (franchisee's misbranding allowed for immediate termination); Zipper v. Sun Co., Inc., 947 F.Supp. 62, 68 (E.D.N.Y. 1996) (Wisser upheld the immediate termination of a franchise agreement where the franchisee was misbranding gasoline); She......
-
Dedvukaj v. Equilon Enterprises, L.L.C.
...of such notification is reasonably practicable." 15 U.S.C. § 2804(b)(1)(A). The court notes the case of Zipper v. Sun Company, Inc., 947 F.Supp. 62, 69 (E.D.N.Y.1996), in which Eastern District of New York found that immediate notice was not reasonable, where the franchisee had offered to p......
-
Gun Hill Rd. Serv. Station, Inc. v. ExxonMobil Oil Corp.
...affidavit by Issa dated January 4, 2013. 4. At oral argument, defendant's counsel placed considerable emphasis on Zipper v. Sun Co., 947 F. Supp. 62 (E.D.N.Y. 1996). (Tr. 41.) In considering termination for failure to pay sums due under 15 U.S.C. § 2802(c)(8), that court determined, without......
-
In re Ramreddy, Inc.
...notice required for noncompliance with "minimum gasoline purchase" requirements of PMPA franchise agreement); Zipper v. Sun Co., Inc., 947 F.Supp. 62, 68-69 (E.D.N.Y.1996) (ninety (90) days notice required for monetary default in absence of realistic fear that substantial delinquencies woul......