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CLARKE v. AMERADA HESS CORP.

July 15, 1980

Philip CLARKE, on behalf of himself and all others similarly situated, Intervenor-Plaintiff,
v.
AMERADA HESS CORPORATION, Defendant



The opinion of the court was delivered by: CANNELLA

MEMORANDUM AND ORDER

After a bench trial of Count 2 of the complaint, the Court finds for the defendant, and dismisses Count 2.

 Upon the joint application of counsel for the intervenor-plaintiff and class representative, and counsel for the defendant, and after a hearing held on November 12, 1979, the Court approves the proposed settlement of Counts 1 and 3 of the complaint. Fed. R. Civ. P. 23(e).

 Motion by counsel for the intervenor-plaintiff and class representative, for fees and costs in connection with the settlement of Count 3 of the complaint, is granted.

 These are the Court's findings of fact and conclusions of law. Fed. R. Civ. P. 52(a).

 BACKGROUND

 The following facts are undisputed. Defendant in this action, Amerada Hess Corporation ("Hess") is a well-known multinational oil company, which, among its many activities, refines and markets gasoline under the trademark and trade name "Hess." This case is about Hess's marketing structure for the retail sale of its gasoline.

 "Hess" gasoline stations, while not unique, differ from most other gasoline stations in that they sell only gasoline and a small variety of other automotive products, and provide no repair or maintenance services. Hess maintains close control over the architectural and decorative design of the buildings, arrangement of pump islands, landscaping, lighting and signs at its stations, as well as over the quality and reliability of station personnel. Indeed, in the geographical areas in which they are located, the physical appearance of and type of service offered by Hess stations are virtually identical.

 One of the means of maintaining such consistency has been a strict policy whereby Hess owns all of its retail stations in fee, or else holds them under long-term leases. This is not to say that Hess operates them all with salaried employees. But unlike many other franchisors, it has no franchisees who own or have long-term leasehold interests in the land, buildings, or fixtures needed to run their businesses. For every single one of its gas stations, Hess owns not only the land and the buildings, but all of the pumps, tanks, wiring, plumbing and pavement.

 Approximately half of Hess's stations are "company managed," that is, the manager and workers at such stations are employees who receive their compensation directly from Hess. The remainder are operated by "independent" dealers, who lease the stations and purchase their inventory of gasoline and other automotive products from Hess at wholesale. These independent dealers receive no salary or other compensation from Hess, and must rely exclusively on profits from retail sales. They make their own decisions about retailing pricing, personnel, and local advertising, within broad limits established by their dealership agreements with Hess.

 Under the typical Hess lease, rent is calculated as a percentage of gasoline sold, so that the higher volume stations command the higher rents. Besides rent, the dealer must pay state and local property, license, and user taxes and fees, and must also maintain liability and property damage insurance at or above a minimum set by the lease. Additionally, the dealer is responsible for care and maintenance of the station, and repair and replacement of the heating system and minor equipment such as light bulbs, faucets, pump nozzles, office furniture and shrubbery. Hess is responsible for most major maintenance and repair.

 Pursuant to the dealership agreement with Hess, *fn1" the dealer agrees to acknowledge Hess's ownership of its trademarks, to maintain the station and provide service in accordance with Hess policies, to sell under Hess trademarks only Hess's products, and not to alter the station in any way that would affect its distinctive design. Moreover, the dealer agrees not to use the station for anything other than a "gasoline filling station."

 When first establishing an independent dealership at a particular location, Hess does not "sell" a franchise. The dealer pays no money for the business opportunity, either at the outset, or thereafter in the form of a franchise fee, license royalty, or other type of assessment. While the dealer is obligated to deposit a sum of money with Hess (called a collateral deposit in the agreements), this is to protect Hess against the dealer's default on his contractual obligations. The deposit accrues interest, and upon termination of the dealership agreements, Hess refunds it to the dealer unless it claims losses as a result of the dealer's wrongful conduct.

 Generally, the dealership agreements are for a renewable fixed term, usually a month. As a rule, however, Hess's policy has been to renew them automatically.

 The complaint in this action, brought on behalf of all Hess independent dealers, contains three claims. The parties have agreed to stay the first claim pending resolution of a related suit in the Eastern District of Pennsylvania, and have agreed to a settlement of the third claim charging a price-fixing conspiracy to require Hess dealers to honor Diner's Club credit cards. What is now before the Court, therefore, is the parties' joint application for approval of the settlement pursuant to Fed. R. Civ. P. 23(e), as well as resolution of the second claim of the complaint, which charges that certain clauses in the dealership agreements prohibiting assignment of the dealership by the dealer violate section 1 of the Sherman Act, 15 U.S.C. § 1. Jurisdiction is based on the antitrust laws. 15 U.S.C. § 15.

 FINDINGS

 The second claim of the complaint was tried to the Court without a jury on December 19 and 20, 1978. On the basis of the evidence adduced at trial, the Court makes the following findings:

 1. Hess's dealership agreements negotiated before 1976 generally contained a clause that permitted a dealer to assign his rights and interests under the agreement ("contractual dealership rights"), so long as the dealer obtained Hess's approval. All Hess dealership agreements negotiated ...


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