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WISSER CO. v. TEXACO

July 9, 1981

THE WISSER COMPANY, Plaintiff, against TEXACO, INC., Defendant.


The opinion of the court was delivered by: CARTER

CARTER, District Judge

Plaintiff Wisser Company ("Wisser") has brought this action under the Petroleum Marketing Practices Act ("PMPA"), 15 U.S.C. § 2801 et seq., to enjoin defendant Texaco Inc. ("Texaco") from ceasing to supply it with Texaco oil. Wisser, which in turn supplies refined oil to area service stations under the Texaco brand name, has moved for a preliminary injunction to prevent Texaco from cutting off supplies on June 30, 1981, as is currently planned. Texaco has agreed to maintain the status quo pending court determination of this motion.

 STATEMENT OF FACTS

 On June 25, 1969, Wisser and Texaco entered into a distributorship agreement of three years' duration *fn1" according to which Texaco was to deliver certain amounts to gasoline and motor fuels to specific identified service stations that were owned, controlled to leased by Wisser to third parties. On F5bruary 5, 1972, Texaco informed Wisser that it was terminating the agreement effective May 5, 1972. However, on May 5, 1972, the parties entered into a letter agreement that extended Wisser's supplies of Texaco oil until December 31, 1972. The letter also recited that Wisser's and Texaco's business relationship would be terminated on December 31, 1972, that no claims or litigation would result from such termination, except as specifically provided for in the agreement, and that the agreement "shall not be deemed a waiver of Texaco's notice of termination to Wisser dated March 29, 1972 or a renewal of the Agreements referred to therein." (Agreement of May 5, 1972, P4).However, following this "termination" Texaco and Wisser extended their business relationship by a series of agreement addenda dated October 20, 1972, July 24, 1973, August 30, 1974, December 30, 1974, October 7, 1975, February 9, 1976, September 30, 1976, March 3, 1977, May 4, 1978, January 2, 1979, August 3, 1979, January 15, 1980, June 17, 1980, and January 5, 1981. The October 20, 1972 agreement addendum recited that "by October 1, 1973 there will be no further supply of Texaco products;" and the July 24, 1973 addendum stated that "by April, 1, 1974 there will be no further supply of Texaco products."

 During January, 1974 while the Wisser-Texaco relationship was being continued by a series of approximately six-month extensions, the Department of Energy's Mandatory Petroleum Allocation Regulations, 10 C.F.R. § 211, took effect and prohibited Texaco from cutting off supplies to Wisser or its other distributors. Each addendum from August 30, 1974, onward contained the following language:

 Wisser will be supplied by Texaco with its products until [the applicable termination date], with the understanding that said supply will be subject to the Federal Energy Administration Petroleum Regulations [the Mandatory Allocation Regulations] insofar as they are in effect and may be applicable.If said Regulations are still in effect as of [the above termination date], and, under their normal application Texaco would otherwise be required to continue furnishing Wisser with product, it is not the intention of the parties that this agreement will supersede the regulations.In such event it is contemplated that during [the period immediately preceding the above termination date], this Agreement will be reviewed and extended for a short period of time to be fixed by Texaco, Inc....

 It is further understood and agreed that in the event the Federal Energy Office Petroleum Regulations are rescinded or discontinued, Wisser will phase out their purchases so that their monthly volume will not exceed 700,000 gallons, and by [the applicable termination date] there will be no further supply of Texaco products.

 Late in January, 1981, the President revoked the Mandatory Allocation Regulations in their entirety. Texaco now asserts that but for the Mandatory Allocation Regulations it would have terminated the relationship with Wisser long ago. On February 18, 1981, it served notice of its intention to terminate on June 30 in accordance with the January 5 addendum. Wisser seeks in this action to prevent the proposed termination on June 30.

 DETERMINATION

 The initial question is whether the PMPA's proscriptions against termination and non-renewal of franchises and franchise relationships, 15 U.S.C. §§ 2801-2805, apply to the Wisser-Texaco distribution arrangement.

 Texaco denies that any franchise or franchise relationship presently exists but concedes that a franchise existed between 1969 and 1972 by virtue of the distributorship agreement then in force. It contends, however, that the franchise was terminated in 1972 and not reinstated by either the May 5, 1972 letter agreement or any of its subsequent addenda. The gist of Texaco's position is that its renewals of Wisser's gasoline supply were always intended to be temporary and not to establish or continue a franchise within the meaning of the PMPA, and that the longevity of its relationship with Wisser has been the result of coercion by the federal government. Texaco argues that since franchises are contractual in nature, government-induced compulsion to continue supplying gasoline cannot create a franchise.

 It is clear that the relatively short renewal intervals of Wisser's supply, generally being around six months each, do not negate the existence of a franchise relationship. Some courts have found such a relationship on the basis of nothing more than a month-to-month tenancy established by state law. See Brach v. Amoco Oil Company, slip op., 80 Civ. 4197 (N.D.. Ill. October 24, 1980); Munno v. Amoco Oil Company, 488 F. Supp. 1114 (D. Conn. 1980). Moreover, the legislative history of the PMPA demonstrates that Congress was especially concerned with the potentially coercive effects of oil companies using short renewal intervals coupled with impending threats of termination. *fn2" Given these expressions of concern, it is most unlikely that Congress would have intended the terms "franchise" and "franchise relationship" to exclude supply arrangements supported by frequent and ostensibly temporary renewals.

 Texaco's more substantial argument is based on the alleged involuntariness of its role in supplying Wisser with gasoline. The fact that Texaco now seeks to terminate supplies to Wisser is persuasive evidence that its role has become involuntary. However, it is difficult to pinpoint exactly when their consensual relationship expired. Beginning May 5, 1972, each agreement purported to set a final termination date to the business relationship. However, three such agreements were signed, each with a different final termination date, before there was any indication of government compulsion to continue supplies. It appears likely that sometime between January 15, 1974, when Mandatory Allocation Controls became effective, and February 18, 1981, when the notice of termination was served, the relationship ceased being a voluntary contractual one.

 However, if this happened after June 19, 1978, the effective date of the PMPA, Texaco's argument is clearly of no avail. The PMPA allows non-renewal of a franchise relationship only if one of several specific criteria is met, and a franchisor's desire to terminate in accordance with previously announced intentions is not one of the criteria. *fn3" see 15 U.S.C. §§ 2802(b). Although the Act does not apply to franchise relationships terminated prior to June 19, 1978, Ted's Tire Service, Inc. v. Chevron U.S.A., Inc., 470 F. Supp. 163 (D. Conn. 1979), if supplies have actually ceased by that date, *fn4" it does apply to franchise relationships terminated after the effective date of the Act.

 Nevertheless, even if Texaco could demonstrate that its continuation of supplies to Wisser after June 19, 1978 was due solely to the Mandatory Allocation Controls, the Act would apply. Careful examination of the PMPA's language and legislative history shows the Wisser-Texaco relationship to be a "franchise relationship" within the meaning of the Act regardless of whether Texaco's role was voluntary and contractually-based at the time Act went into effect. *fn5"

 There is no dispute that Wisser's activities in relation to Texaco have continued largely as they were under the 1969 franchise agreement, and that these activities would constitute a franchise relationship under the PMPA, unless there were some exception for relationships which had become noncontractual and has been perpetuated only by the Mandatory Allocation Controls. Wisser arranges for distribution of Texaco gasoline to a number of service stations, buys Texaco gasoline and resells it to service stations which in turn market it under the Texaco trademark. The PMPA includes jobbers within its definition of franchisee, and in fact includes all parties engaged in the ...


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