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Four S Shell, LLC v. PMG, LLC

United States District Court, D. New Jersey

July 11, 2019

Four S Shell, LLC, Plaintiff,
PMG, LLC, Defendant.


          PETER G. SHERIDAN, U.S.D.J.

         This matter comes before the Court on a motion by Defendant for summary judgment. This Court has federal question jurisdiction, 28 U.S.C. § 1331, under the Petroleum Marketing Practices Act (PMPA), 15 U.S.C. § 2802, which regulates a franchisor's termination of a franchise relationship. Plaintiff - having been denied injunctive relief - seeks compensatory damages, consequential damages, and attorney fees and expenses. [1] Because Defendant bears the burden of proof in actions under the PMPA; the bulk of defendant's evidence is testimonial and thus subject to credibility determinations; and there remain disputes as to material facts, the Court finds summary judgment inappropriate with respect to Plaintiff's PMPA claim. However, Plaintiffs state law claims are preempted and therefore are dismissed.


         Plaintiff, Four S Shell, LLC, is a New Jersey limited liability company, that formerly operated a motor fuel service station (the "station") located on Route 1 South in North Brunswick, New Jersey (the "Property"). (Defendant's Statement of Undisputed Material Facts ("DSUMF"), ECF No. 48-1 at ¶¶ 1, 2). Shilpa Sathu is its owner and principal. (Declaration of Bruce Rosen ("Rosen Decl."), Ex. 6, Deposition of Shilpa Sathu ("Sathu Dep.") at 13:3 to 11). Defendant PMG is a Virginia limited liability company with its principal offices in Woodbridge, Virginia. (DSUMF at ¶ 3). Defendant PMG is in the business of, inter alia, distributing branded motor fuels (including Shell branded fuels) to fuel service stations for retail sale. (DSUMF at ¶ 4).[2] Some of the stations to which PMG distributes branded fuels are operated as franchises, with PMG serving as the franchisor and a station operator serving as the franchisee. (Id.; see Rosen Decl., Ex. 13, Deposition of James Deakin at 7:22 to 8:10).

         PMG owns or leases approximately 60 to 80 fuel stations in New Jersey. (DSUMF at ¶ 5; Rosen Decl., Ex. 1, October 24, 2016 Transcript ("October 24 Transcript") at 10:14 to 19). There are also more than a hundred other stations in New Jersey to which PMG supplies fuel but does not own or lease. (Id.). Overall, PMG conducts business at sites from Delaware to Maine. (DSUMF at ¶ 5; Deakin Dep. at 7:11 to 12). The majority of the stations owned or leased by PMG in New Jersey are operated by franchisees. (DSUMF at ¶ 6; Plaintiff's Counter Statement of Undisputed Material Facts ("PCSUMF") at ¶ 6). Approximately only 20 to 25 stations in New Jersey are operated by a commission agent. (October 24 Transcript at 11:11-11:13). Here, PMG is the owner of the property. (DSUMF at ¶ 7). Plaintiff leases the property from PMG and operates the station as PMG's franchisee pursuant to the franchise agreement between them. (Id.).


         Plaintiff filed its Verified Complaint on September 19, 2016, (ECF No. 1), and an accompanying Ex Parte Order to Show Cause, (ECF No. 4). The same day the Verified Complaint was filed, the Court entered an order scheduling a preliminary injunction hearing. (ECF No. 7).

         The parties appeared before this Court on September 29, 2016. In addition to argument, the Court heard testimony from Sathu and Kamalpreet Singh (Plaintiff's employee). (ECF No. 16). After the hearing, the Court entered an Order: (1) granting temporary restraints maintaining the status quo; (2) enjoining termination of the franchise agreement between Plaintiff and PMG at least until October 24, 2016; and (3) scheduling a second hearing for October 24, 2016. (ECF Doc. No. 15).

         The parties returned to Court for a second hearing before Judge Sheridan on October 24, 2016. The Court heard testimony from Deakin and McGee. At the conclusion of the hearing, the Court concluded there was "really no dispute, but that PMG has acted in good faith and has complied with the requirements of the statute." (Id. at 152:13-15 (emphasis added)). It is Plaintiff's position that the observations as set forth in this Transcript were made without the benefit of full discovery and are no longer supported. (See PSOF at ¶ 19).

         Plaintiff alleges that the rent amounts included in the renewal terms were excessively high and that PMG proposed the changed rent amounts in bad faith as part of an effort to retake possession of the station. (Id. at ¶ 99). PMG maintains that: (1) the rent amounts included in the proposed renewal terms were not excessively high and instead simply reflect actual market value; (2) the rent amounts were determined according to the same rent calculation process that PMG employs while setting renewal terms for all of its properties; (3) the rent amounts provided in the expiring franchise agreement were set artificially low in response to severe mismanagement of the station and damage to its value by a previous franchisee; and (4) that PMG specifically advised Plaintiff before it assumed the franchise agreement that the rent at that time was artificially low and would be increased substantially at the expiration of the franchise term.


         Summary judgment is appropriate under Federal Rule of Civil Procedure 56(c) when the moving party demonstrates that there is no genuine issue of material fact and the evidence establishes the moving party's entitlement to judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). A factual dispute is genuine if a reasonable jury could return a verdict for the non-movant, and it is material if, under the substantive law, it would affect the outcome of the suit. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). In considering a motion for summary judgment, a district court may not make credibility determinations or engage in any weighing of the evidence; instead, the non-moving party's evidence "is to be believed and all justifiable inferences are to be drawn in [her] favor." Marino v. Indus. Crating Co., 358 F.3d 241, 247 (3d Cir. 2004) (quoting Anderson, 477 U.S. at 255).

         Once the moving party has satisfied its initial burden, the party opposing the motion must establish that a genuine issue as to a material fact exists. Jersey Cent. Power & Light Co. v. Lacey Twp., 772 F.2d 1103, 1109 (3d Cir. 1985). The party opposing the motion for summary judgment cannot rest on mere allegations and instead must present actual evidence that creates a genuine issue as to a material fact for trial. Anderson, 477 U.S. at 248; Siegel Transfer, Inc. v. Carrier Express, Inc., 54 F.3d 1125, 1130-31 (3d Cir. 1995). "[Unsupported allegations ... and pleadings are insufficient to repel summary judgment." Schoch v. First Fidelity Bancorp., 912 F.2d 654, 657 (3d Cir. 1990); see also Fed. R. Civ. P. 56(e) (requiring nonmoving party to "set forth specific facts showing that there is a genuine issue for trial"). Moreover, only disputes over facts that might affect the outcome of the lawsuit under governing law will preclude the entry of summary judgment. Anderson, 477 U.S. at 247-48. If a court determines, "after drawing all inferences in favor of [the non-moving party], and making all credibility determinations in [her] favor" that no reasonable jury could find for [her], summary judgment is appropriate. Alevras v. Tacopina, 226 Fed.Appx. 222, 227 (3d Cir. 2007).

         "The [PMPA] limits the circumstances in which franchisors may 'terminate' a service-station franchise or 'fail to renew' a franchise relationship." Mac's Shell Service v. Shell Oil Products Co.,559 U.S. 175, 177 (2010). "[A] franchisee may bring suit in federal court against any franchisor that fails to comply with the [PMPA's] restrictions on terminations and nonrenewals. Successful franchisees can benefit from a wide range of remedies, including compensatory damages, reasonable ...

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