Franchising & Distribution Law Blog

Noting its earlier ruling in the case at the preliminary injunction stage, the court reconsidered the PMPA issues raised by the plaintiffs to challenge the termination of their supply agreements, presented with “further nuance” at the motion to dismiss stage. The court rejected all three arguments made by the plaintiffs attempting to apply the PMPA to the two unbranded stations.

First, the plaintiffs attempted to invoke the PMPA by arguing that their supply agreements for the two unbranded stations addressed issues of branding. Specifically, the plaintiffs pointed to the following provisions that they contended extended a right to use a trademark:

• a contractual requirement to “maintain all signs and advertising related to the gasoline brand being dispensed”;
• advertising fees;
• indemnity to the supplier whose logo or signage was used; and
• provisions that failure to comply with branding requirements would be grounds for termination.

The court rejected this contention and found that, although the provisions anticipated the use of trademarks, they did not actually confer any right to use a trademark or require that the sale of fuel occur under a trademark—as confirmed by the plaintiff’s failure to identify any specific trademark. As a result, the two locations could not constitute a “franchise” under the PMPA and, thus, were not subject to the termination requirements of the PMPA.

Second, the plaintiffs argued that their supplier admitted that the PMPA applied to the unbranded stations. The plaintiffs pointed to a provision in their supply agreements providing that “[t]he parties specifically acknowledge and agree that the franchise relationship (as defined in the Petroleum Marketing Practices Act, 15 USC §2801 et seq.) created by this Agreement between the Retailer and the Supplier is necessarily contingent upon the Retailer’s ability to maintain possession of the Premises.” The court rejected that the provision demonstrated a mutual intent for the PMPA to apply.

Third, the plaintiffs argued that a cross-default provision in the supply agreements rendered all three stations subject to the PMPA because the third station was undisputedly subject to the PMPA. Again rejecting the plaintiff’s argument, the court found that the cross-default provision did not extend application of the PMPA because it did not provide for automatic termination. Suggesting that had the agreements provided for automatic termination, they could extend application of the PMPA, the court cited an earlier decision from the Northern District of Illinois holding that where the termination of a premises lease and motor fuel franchise agreement would automatically terminate a separate mini-market franchise agreement, the PMPA could govern the mini-market agreement as well.

The court did not grant the motion to dismiss entirely because it could not determine from the face of the complaint whether the termination notice to the third station was valid under the PMPA.

The case is Catch 26, LLC v. LGP Realty Holdings, LP (N.D. Ill. April 17, 2018).