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JOC, Inc. v. Exxonmobil Oil Corp.

April 1, 2010

JOC, INC. T/A SUMMIT EXXON, ET AL. PLAINTIFFS,
v.
EXXONMOBIL OIL CORPORATION, AND EXXON MOBIL CORPORATION, DEFENDANTS.



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

NOT FOR PUBLICATION

OPINION

This matter comes before the Court upon Defendant Exxon Mobil Oil Corporation's ("Exxon") Motion to Dismiss the Complaint filed by Plaintiffs JOC Inc. t/a Summit Exxon ("JOC") and Sung Eel Chang Auto, Inc. t/a Ashwood Exxon ("Ashwood") for failure to state a claim upon which relief can be granted pursuant to Fed. R. Civ. P. 12(b)(6). This Court has reviewed the motion after oral argument being held before the Court on June 5, 2009 pursuant to Fed. R. Civ. P. 78.*fn1

I. Factual and Procedural Background

Plaintiffs are dealers who operate Exxon-branded gas station franchises in New Jersey. They purchase gasoline from Exxon under written contracts called "PMPA Agreements."*fn2 JOC has been a franchisee of Exxon since 1986. On or about September 26, 2006, JOC and Exxon renewed the Franchise Agreement governing their relationship for the period January 1, 2007 through December 31, 2009. Ashwood has been a franchisee of Exxon since 1996. On or about November 9, 2005, Ashwood and Exxon renewed the Franchise Agreement governing their relationship for the period January 1, 2007 through February 28, 2009.

Under each Plaintiff's PMPA Agreement with Exxon, Exxon exercises unilateral control over a number of key terms of the contractual relationship. For example, Exxon has the exclusive right to determine and change the wholesale gasoline price (the "dealer tank wagon" or "DTW" price) charged to Plaintiffs. Exxon also determines the quantities of gasoline that JOC and Ashwood are expected to purchase each year and the terms and conditions pursuant to which the gasoline is delivered. Both JOC and Ashwood lease their stations from Exxon, and Exxon exercises control over the terms of such leases.

With respect to DTW pricing, Exxon uses a "zone pricing" approach. Zone pricing is the practice of dividing stations into zones, and then adjusting wholesale prices in accordance with the prevailing rates of other stations in the zone. According to Plaintiffs, Exxon implements zone pricing with respect to all stations to which it supplies gasoline at DTW prices. Plaintiffs further allege that in its implementation of zone pricing, Exxon advised them that it reviews the prices being charged by non-Exxon branded stations in a given price zone, and then subtracts 14 cents per gallon from the prevailing price within that zone. They claim that Exxon expects Plaintiffs to operate on this 14-cent-margin, but that Exxon does not use the same margin in all price zones. Plaintiffs allege that Exxon's zone pricing has been implemented or applied in ways that have placed them at a financial disadvantage.*fn3

Beyond selling gasoline to franchisees like JOC and Ashwood, Exxon sells and delivers gasoline to dealer-owned and operated stations. Exxon also sells gasoline to jobbers, who distribute gasoline to stations, some of which are owned and/or operated by the jobbers, on their own and who bear the related distribution costs. Jobbers are able to purchase gasoline at the "rack" price, which is lower than the DTW prices charged to franchisees. This lower price is meant to account for the jobbers' absorption of the costs of picking up and delivering gasoline.*fn4

Exxon also supplies gasoline through inter-company transfers to stations that are owned and operated by Exxon.

In addition to the sale of gasoline, both JOC and Ashwood offer automobile repair services through service bays at each station. Plaintiffs allege, however, that their bay services have suffered due to an increase in manufacturer or dealer-provided maintenance services. They complain that their service bays have not generated sufficient revenues to justify their continued operation. In apparent recognition of this trend, Exxon has itself converted the service stations at many of its locations into "On the Run" convenience stores. JOC and Ashwood allege that they have requested permission to convert their service bays into convenience stores but that those requests have been denied.

Plaintiffs allege that they are now unable to operate at a profit or remain economically viable under their current PMPA Agreements with Exxon. They claim that Exxon's "pricing practices ... over which [Exxon] has exclusive control, are preventing JOC and Ashwood from being able to charge competitive prices and from being profitable."*fn5 Furthermore, Plaintiffs allege that Exxon has engaged in a number of actions that demonstrate bad faith in response to their financial difficulties. At a meeting with Exxon representatives in August 2006, Plaintiffs requested permission to either convert their service bays into convenience stores or purchase their stations and become independent stations rather than franchisees. Both requests were ultimately denied. Plaintiffs also allege that they applied for Rent Waivers in early 2007, but that their applications were unsuccessful.

In response to this situation, Plaintiffs filed a Complaint on September 18, 2008 in Union County Superior Court, which was removed to this Court on October 29, 2008. Plaintiffs initially asserted four claims against Exxon and Defendant Exxon Mobil Corporation: (1) breach of contract pursuant to N.J.S.A. 12A:2-305; (2) breach of the implied covenant of good faith and fair dealing; (3) breach of New Jersey's Unfair Motor Fuels Practices Act (the "UMFPA") as codified at N.J.S.A. 56:6-17, et seq.; and (4) conspiracy to discriminate against Plaintiffs in the prices charged for gasoline.

Defendant moved to dismiss the Complaint in its entirety on November 20, 2008, but the motion was stayed pending resolution of Plaintiffs' motion to remand this proceeding to state court. Plaintiffs notified the Court on December 29, 2008 that they withdrew their motion to remand and voluntarily dismissed their claims against Exxon Mobil Corporation. The Court dismissed all claims against Defendant Exxon Mobil Corporation on January 9, ...


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