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Avtar Heir v. Delaware River Port Authority

July 25, 2002

AVTAR HEIR AND H&G PETROLEUM, CORP., PLAINTIFFS,
v.
DELAWARE RIVER PORT AUTHORITY, DEFENDANT.



The opinion of the court was delivered by: Irenas, District Judge

OPINION

Presently before the Court are Defendant Delaware River Port Authority's Motion for Summary Judgment and Plaintiffs Avtar Heir and H&G Petroleum Corp.'s Motion for Partial Summary Judgment. The dispute between the parties arises out of the Delaware River Port Authority's exercise of the power of eminent domain to take possession of a parcel of land on which Plaintiffs operated a franchised service station. Specifically, Plaintiffs claim an entitlement, under the Takings Clause of the Fifth Amendment to the United States Constitution, to "just compensation" for the loss of their franchised business as a result of the condemnation of the property upon which that business was situated. As is discussed below, because Plaintiffs failed to raise the claims asserted in the instant action in a prior proceeding in the New Jersey Superior Court, because the relief Plaintiffs seek is barred by the terms of their franchise agreement, and because the actions of the Defendant did not constitute a taking of any constitutionally-protected property possessed by Plaintiffs, Defendant's motion will be granted.

I.

In November, 1990, Plaintiff Avtar Heir entered into a Franchise Agreement with the Mobil Oil Corporation in which Heir was granted the right to operate a branded service station and convenience store, upon property owned by Mobil, at 1836 Admiral Wilson Boulevard in Camden, New Jersey. This agreement was renewed three times, the final renewal occurring on August 19, 1997 and covering the period from January 1, 1998 until December 31, 2000. Under the terms of the Franchise Agreement, which incorporated a separate OG&L Lease Agreement ("Lease Agreement"), Heir leased the property owned by Mobil (known as the "Marketing Premises") and agreed to purchase certain minimum quantities of gasoline and, in return, was entitled to use of Mobil's trademarks and products. In addition, under the terms of the Franchise Agreement, Heir was permitted to establish a corporate entity to oversee operation of the marketing premises. Accordingly, Heir formed Plaintiff H&G Petroleum Corp. in November 1990. *fn1

In early 2000, Mobil merged with Exxon Corp. and sold the Marketing Premises and Franchise Agreement to Tosco Marketing Corp. ("Tosco"). As a result of this transaction, all of Mobil's rights and obligations under the Franchise Agreement and the OG&L Lease were assigned to Tosco.

On April 28, 2000, the Delaware River Port Authority ("DRPA"), a public corporate entity created by the Commonwealth of Pennsylvania and the State of New Jersey, and exercising the power of eminent domain pursuant to N.J.S.A. 32:3-6, initiated condemnation proceedings in the New Jersey Superior Court against the Marketing Premises. As the occupier of the targeted premises, H&G was notified of the proposed taking pursuant to N.J.S.A. 20:3-10. *fn2 Pursuant to the terms of Avtar Heir's Franchise and Lease Agreements with Tosco, and the applicable law governing the parties' relationship, the condemnation of the business premises was an event giving rise to a right of termination in either party. Specifically, § 14.2 of the Franchise Agreement provided that "either party may terminate this Agreement... if any federal, state or local governmental action results in the adoption or imposition of Laws that (a) significantly alter the reasonable expectations of the parties at the time of entering into this Agreement." (See Stip. of Facts, Ex. B at 28). This language tracks that of the Petroleum Marketing Practices Act ("PMPA"), 15 U.S.C. § 2801, et seq., the terms of which governed Heir's relationship with Mobil and Tosco. Generally, the PMPA forbids termination of the franchise relationship absent good cause. See 15 U.S.C. § 2802(a). However, under the PMPA, the condemnation of the marketing premises by the power of eminent domain is an event "relevant to the franchise relationship and as a result of which termination of the franchise is reasonable." 15 U.S.C. § 2802(c)(5). Thus, upon notice of the DRPA's condemnation, Tosco was empowered to terminate, at its discretion, its franchise relationship with Heir. *fn3

On January 27, 2000, counsel for Plaintiffs wrote to the DRPA seeking assistance in negotiating with Tosco for the establishment of a franchise at a new location, as "our client's business is not one which can be moved to a different location because it is a franchised Mobil Oil Service Station which may, under the Franchise Agreement, only be operated from a single premises... unless some sort of arrangement can be made for Mobil Oil Corp. to transfer the franchise to another premises." (Stip. of Facts, Ex. C). On February 23, 2000, counsel for the DRPA responded to Heir's request, indicating that it was "willing to help in any way that it can to relocate entities which have been affected by [the condemnation]." (Id., Ex. D). *fn4 On March 24, 2000, Plaintiffs' counsel wrote to Mobil, informing it of the noticed condemnation and requesting the right to relocate Plaintiffs' franchise to a new location. (Id., Ex. F). In addition, counsel informed Mobil of his position that Plaintiffs were entitled under the Agreement to a portion of any condemnation award made by the DRPA. (Id.). On May 9, 2000, Tosco responded to Plaintiffs' request, indicating its inclination not to offer Heir another Mobil franchise and, on June 30, 2000, provided Plaintiffs with a formal Notice of Termination of the Franchise Agreement, effective July 7, 2000. (Id., Ex. L).

In May 2000, H&G filed an Answer and Cross-claim in the Superior Court action, asserting that, pursuant to the Lease and Franchise Agreements, they were entitled to the portion of any condemnation award or settlement attributable to the "goodwill" of the business located on the condemned premises. On June 28, 2000, a commissioner's hearing, pursuant to N.J.S.A. 20:3-12, was held. At the hearing, as Mobil's (now Tosco's) agreements with Heir provided that Tosco possessed the "right to settle or dispute any condemnation proceedings in its sole discretion" (see Lease, Pl. Ex. B at § 3.4), Tosco entered into a settlement agreement, pursuant to which the sum of $852,000 would be paid for the condemned property. On September 7, 2001, a hearing to approve and apportion the settlement between Tosco and DRPA was held before the Honorable Francis J. Orlando of the New Jersey Superior Court. At this hearing, H&G was heard on its cross-claim that it was entitled to apportionment of the settlement proceeds. H&G did not explicitly assert a claim under the Fifth Amendment or § 1983 at the September hearing, nor did it argue that it was constitutionally entitled to an award for the loss of the goodwill of its business; instead, H&G limited its claim to an entitlement pursuant to the terms of the Franchise Agreement and the PMPA. (See Transcript of Sept. 7, 2001 Hearing, Ex. A to Romanini Cert.).

Ultimately, Judge Orlando concluded that Plaintiffs were not entitled to any compensation for the loss of their business goodwill, as no award for such losses was included in the sum paid by the DRPA to Tosco. In reaching this conclusion, Judge Orlando relied on the terms of the parties' various agreements and the provisions of the PMPA. Specifically, he concluded that the provision of the Lease which provides that "Franchise Dealer [Heir] has no interest whatsoever in... sums [paid as a result of condemnation] except that Franchise Dealer may receive any sum payable by the condemning authority for loss of goodwill by Franchise Dealer" (see Lease, § 3.4) was clear and that it provided for an award of goodwill to the Plaintiffs only where a portion of the sum paid by the condemning authority was intended for such purpose. (See Transcript at 23-24). Further, Judge Orlando concluded that neither the PMPA nor New Jersey law required such an award to be made. (Id.). Accordingly, the full amount of the condemnation award, less $10,000 for moving and storage of business inventory, was awarded to Tosco. (See id.; Pl. Stmt. of Mat. Facts at § 14).

Plaintiffs did not appeal. Instead, they filed this action on November 1, 2001, alleging that the denial of compensation for the value of their franchise constituted an unlawful taking without just compensation in violation of the Fifth and Fourteenth Amendments to the Constitution and 42 U.S.C. § 1983. On April 17, 2002, the parties filed the instant motions for summary judgment. This Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1331.

II.

"[S]ummary judgment is proper `if 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 judgment as a matter of law.'" Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986) (quoting Fed. R. Civ. P. 56(c)). In deciding a motion for summary judgment, because the role of the court is not "to weigh the evidence and determine the truth of the matter, but to determine whether there is a genuine issue for trial," Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986), the Court must construe the facts and inferences in the light most favorable to the non-moving party. Pollock v. American Tel. & Tel. Long Lines, 794 F.2d 860, 864 (3d Cir. 1986). Further, "a party opposing a properly supported motion for summary judgment may not rest upon the mere allegations or denials of his pleading, but . . . must set forth specific facts showing that there is a genuine issue for trial." Id. at 248 (citation omitted).

III.

The Fifth Amendment to the United States Constitution prohibits the "taking" of "private property... for public use, without just compensation." U.S. Const. amend. V. This guarantee, the Supreme Court has stated, "is designed to bar Government from forcing some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole." Penn Central Transportation Co. v. City of New York, 438 U.S. 104, 123 (1978) (citing Armstrong v. United States, 364 U.S. 40, 49 (1960)). In this case, Plaintiffs allege that the loss Avtar Heir's franchise and the loss of H&G's existing business as a result of the DRPA's condemnation of the Marketing Premises constituted a taking for which just compensation is owed. (See Pl. Br. in Opp. at 24).

In response to Plaintiffs' claims, the DRPA offers two basic arguments. First, the DRPA argues that, regardless of the nature of the interests at issue in this action, Plaintiffs' claims are barred in this Court by New Jersey's entire controversy doctrine and the principles of claim preclusion. Second, Defendant contends that Plaintiffs' claims for the loss of their franchise and business are barred by the express terms of the franchise and lease agreements with Tosco and that, in any event, the condemnation of the ...


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