The opinion of the court was delivered by: COHEN
This wrongful franchise termination action is presently before the Court on motions for summary judgment and counsel fees made on behalf of the defendant, Mobil Oil Corporation (Mobil).
The plaintiff, John Graeber, individually and trading as Graeber Service Station, brought this action in state court
to enjoin Mobil from terminating their franchise agreement or, in the alternative, to recover damages for its wrongful termination. On March 29, 1985, plaintiff obtained a temporary restraining order (TRO), in an ex parte state court proceeding, prohibiting Mobil's termination for twenty days. See New Jersey Court Rule 4:52-1(a). Thereafter, Mobil agreed to continue the restraints of the TRO on a voluntary basis and did so for at least five additional weeks.
During that time, on April 2, 1985, Mobil removed the action to this Court based on our federal question and diversity jurisdiction. See 28 U.S.C. §§ 1331 and 1332(a)(1).
On the present motion, Mobil initially sought a declaration dissolving the state court's restraints in addition to an order granting it summary judgment and counsel fees. Plaintiff then filed a cross-motion, seeking a preliminary injunction, effectively, to continue the restraints of the TRO. For reasons which shall soon become apparent, both parties' motions for preliminary, equitable relief have become moot. Thus, we write only in regard to defendant's motion for summary judgment and fees.
Finding that plaintiff's wrongful termination claim, about which there are no genuine issues of material fact, is governed exclusively by the Petroleum Marketing Practices Act (PMPA or the Act), 15 U.S.C. § 2801 et seq., and that it cannot succeed thereunder, we shall grant defendant's summary judgment motion. See Fed. R. Civ. P. 56(c). See also In Re Japanese Electronic Products, 723 F.2d 238, 257-59 (3d Cir. 1983). Finding further that plaintiff's action was not frivolous, we shall deny defendant's request for an award of counsel fees. See 15 U.S.C. § 2805(d)(3).
In varying capacities, the plaintiff had been affiliated with Mobil for approximately fifteen years when the parties executed a three year franchise agreement on July 7, 1982. Plaintiff was not represented by counsel at the time. By letter, also dated July 7, 1982 and apparently received shortly thereafter, Mobil advised plaintiff that the franchise, which was to commence on March 1, 1983, would be subject to an underlying lease of the gas station premises between Mobil and one Marie Gonserkevis. The franchise agreement, just executed by the parties, did not include any mention of Ms. Gonserkevis or the actual existence of an underlying lease. Instead, it provided, in abstract terms, that the expiration of a grounds lease would necessitate franchise termination.
Because the underlying premises lease was first executed in 1945 and renewed at five year intervals thereafter and because Mobil's letter of July 7, 1982 referred to the possibility of Mobil "los[ing] its right" to grant possession, see Exhibit F attached to the McClintock Affidavit, plaintiff perceived that his franchise would not be terminated unless Mobil was unable to renew the underlying lease. Thus, he was unpleasantly surprised when informed, by letter dated November 28, 1984, that Mobil had elected not to renew the underlying lease and that, as a result, his purportedly profitable franchise would be terminated, effective March 31, 1985 (approximately one year before scheduled expiration). Subsequently, plaintiff obtained a lease from Ms. Gonserkevis directly and the ability to trade as a Texaco station. At oral argument, plaintiff conceded that these steps have rendered his preliminary injunction motion moot
and, of course, Mobil has withdrawn its motion to dissolve the TRO issued in state court.
In pertinent part, 15 U.S.C. § 2806(a) provides:
To the extent that any provision of this subchapter applies to the termination (or the furnishing of notification with respect thereto) of any franchise, . . . no State or any political subdivision thereof may adopt, enforce, or continue in effect any provision of any law or regulation . . . with respect to termination . . . unless such provision of such law or regulation is the same as the applicable provision of this subchapter.
Consistently, courts have construed this section as preempting both statutory and common law in the wrongful franchise termination area. See, e.g., DiNapoli v. Exxon Corp., 549 F. Supp. 449, 455 (D.N.J. 1982) (New Jersey Franchise Practices Act preempted); Meyer v. Amerada Hess Corp., 541 F. Supp. 321, 332 (D.N.J. 1982) (common law preempted). Thus, to the extent that they are dependent on either state common law or the New Jersey Franchises Practices Act, the counts in plaintiff's complaint, which allege that Mobil wrongfully terminated the subject franchise, must be dismissed.
B. The Petroleum Marketing Practices Act
We are left to consider plaintiff's claims in the context of those provisions of the PMPA which "establish minimum federal standards governing the termination and nonrenewal of franchise relationships" by franchisors. See Brungardt v. Amoco Oil Co., 530 F. Supp. 744, 745 (D. Kan. 1982). The circumstances under which a franchisor may permissibly terminate a franchise are set forth in 15 U.S.C. § 2802(b)(2). Those permitting nonrenewal can be found in 15 U.S.C. § 2802(b)(3).
Congress explicitly provided a good faith requirement in most of the grounds for termination or nonrenewal which necessarily involve the exercise of business judgment by a franchisor. Thus, if a franchisor determines to withdraw from the marketing of motor fuel in a particular geographic area, thereby necessitating the termination of a franchise the term of which is three years or longer, it must, inter alia, make such a determination "in good faith and in the normal course of business." 15 U.S.C. § 2802(b)(2)(E). Similarly, a determination not to renew a franchise agreement because of the failure of the franchisor and franchisee to agree upon changes in their relationship is only permissible if the changes sought by the franchisor are demanded "in good faith and in the normal course of business" and "not for the purpose of preventing the renewal of the franchise relationship." 15 U.S.C. § 2802(b)(3)(A). Conversely, there are no explicit good faith requirements imposed on franchisors who terminate a franchise for any of the four reasons, described below, provided in § 2802(b)(2)(A) to (D). Instead, Congress attempted to protect franchisees, who typically lack any significant bargaining power, from arbitrary terminations by attaching requirements of recency and adequate notice to the § 2802(b)(2) grounds for termination.
In general terms, § 2802(b)(2) permits a franchisor to terminate a franchise by giving adequate notice, prescribed in § 2802(b)(1), of any of the following: (A) a recent failure of the franchisee to comply with a material and reasonable provision of the franchise agreement; (B) a recent and continuing failure of the franchisee to exert good faith efforts to carry out the provisions of the franchise agreement; (C) the recent occurrence of an event, included or similar to those enumerated in § 2802(c), which renders termination reasonable; or (D) a recent written agreement with the franchisee to terminate (or not renew).
In this case, Mobil seeks to terminate, pursuant to § 2802(b)(2)(C), citing, as the predicate event, its decision not to renew the underlying lease of the service station premises. The text of ...