Gasoline Station Franchisee's Abandonment Of His Business Is Not An Unlawful Termination Under The PMPA
AL'S SERVICE CENTER v. BP PRODUCTS NORTH AMERICA (March 26, 2010)
Al's Service Center was a gasoline service station and a franchisee of BP Products North America. In 2002, the State of Illinois decided to condemn a portion of the service station property. Although the portion of the premises subject to condemnation was small, the impact on the property was large. It would affect two of the five entrances and increase congestion. BP notified Al's of its intent to terminate the franchise relationship when the condemnation occurred. The condemnation went forward in June of 2005. Al's franchise contracts expired a month later -- BP asked Al’s to vacate the premises. Notwithstanding the condemnation, the expiration of the agreements, and BP's request to vacate, the parties continued to do business as usual. In the summer of 2006, Al's alleges that at BP failed to deliver gasoline for a period of twelve days. Later that same summer, Al’s asked BP to replace its roadside sign that that state had removed during construction. BP refused. Al's eventually abandoned its business in May 2008. It brought suit against BP for compensatory and punitive damages under both the Petroleum Marketing Practices Act and state law. The district court granted summary judgment to BP after denying Al’s request to add the state law claims. Al’s appeals.
In their opinion, Judges Posner, Rovner, and Sykes affirmed. The Court addressed the PMPA claims. Under the PMPA, a dealer is protected from termination of his franchise under certain circumstances. The Court looked for the termination. It concluded that the franchise was not terminated by the 2003 letter (there was no change in the relationship), it was not terminated by the demand to vacate the premises after the actual condemnation (although the Court concluded that BP could have terminated at that time), it was not terminated by the alleged supply interruption (although it may have been a breach of contract), and it was not terminated by the refusal to replace the sign (it did not meet the Mac’s Shell test for constructive termination). Thus, the Court concluded that the franchise came to an end when Al’s abandoned the premises on its own volition – not a violation of the PMPA. The Court also concluded that the lower court correctly refused to allow the state law claim amendments.
Salik Rao operated as a BP gasoline service station dealer in the Chicago area. For 10 years beginning in the early 1990s, Rao gave over $100,000 worth of cash and gifts to a BP sales manager. In return, the sales manager performed many favors for Rao, to his great benefit. In 2003, Rao reported this improper activity to BP. However, he characterized it as extortion on the part of the sales manager. BP begin an investigation which ultimately led to the termination of the sales manager in November of 2003. BP continued its investigation, seeking to confirm the extortion. Although Rao promised to cooperate, he never met with BP after November of 2003 and affirmatively withdrew his pledge of cooperation in June of 2004. BP notified Rao in October 2004 that it was terminating its franchise relationship with him because of his improper activity. Rao brought suit under the Petroleum Marketing Practices Act ("PMPA"), as well as RICO, fraud, breach of contract and extortion. The court dismissed the counts based on RICO, fraud and breach of contract and granted summary judgment on the PMPA claim. Rao appeals.