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Seventh Circuit Court Reiterates Broad Deference to a District Court’s Determination of Whether a Franchisee is Entitled to Injunctive Relief under the Petroleum Marketing Practices Act
By Daniel Garner on January 13, 2014 at 2:53 PM

Emmanuel Joseph was a franchised gasoline retailer for Chicago-area fuel distributor Sasafrasnet, LLC, who operated a BP-branded gasoline station in Chicago. In November 2010, Sasafrasnet notified Mr. Joseph that it was going to terminate his franchise under the Petroleum Marketing Practices Act (“PMPA”) because, on three separate occasions, it had been unable to electronically debit Mr. Joseph’s account to pay for fuel deliveries because his bank account did not have sufficient funds. Mr. Joseph filed suit and sought a preliminary injunction under the PMPA to enjoin Sasafrasnet from terminating him, but the district court denied the motion.

Mr. Joseph appealed to the Seventh Circuit. The court remanded the case to the district court because it found that it had failed to analyze under the PMPA whether (1) Mr. Joseph’s failure to ensure that sufficient funds were in his bank account was merely a technical failure or was unimportant to the franchise relationship; and (2) the failure was beyond his reasonable control.

On remand, the district court again found against Mr. Joseph, stating that having non-sufficient funds (“NSF”) to pay for motor fuel was not merely a technical failure when, as here, there were multiple instances of late payments of substantial amounts of money. The district court also found that at least two of Mr. Joseph’s NSFs were “failures” within the meaning of the PMPA because the circumstances were entirely within his control as he failed to give notice to Sasafrasnet that he had changed accounts and failed to ensure a smooth transition between his old and new account. Mr. Joseph again appealed to the Seventh Circuit, arguing that the failures were insignificant.

The Seventh Circuit affirmed the district court’s denial of Mr. Joseph’s request for preliminary injunction. See Joseph v. Sasafrasnet, LLC, --- F.3d ----, No. 13-1202, 2013 WL 5911137 (7th Cir. 2013). The opinion is noteworthy largely because the court gave broad deference to the district court’s determination of whether the NSFs were important violations or were beyond the franchisee’s reasonable control. Indeed, the court conducted no independent review of Mr. Joseph’s arguments for why the NSFs were unimportant or beyond his control, instead finding that its role was only to determine whether the district court analyzed the key questions and made any “clear error.”

Because the Seventh Circuit showed no willingness to review the factual basis for the district court’s ruling, the case stands as a strong reminder that any request for injunctive relief under the PMPA remains almost entirely within the district court’s discretion. The Seventh Circuit will not conduct any independent analysis of the facts, so long as the district court analyzes whether the basis for the termination was more than a merely technical or unimportant failure or was beyond the franchisee’s control, and that decision is not so clearly in error that it constitutes a “clear abuse of discretion.”

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