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Wisser Co. v. MOBIL Oil Corp.

decided: March 1, 1984.

THE WISSER COMPANY, INC., PLAINTIFF-APPELLANT,
v.
MOBIL OIL CORPORATION, DEFENDANT-APPELLEE



Appeal from judgment of United States District Court for the Southern District of New York, Vincent L. Broderick, J., denying appellant's motion under the Petroleum Marketing Practices Act (PMPA), 15 U.S.C. § 2801 et seq., for preliminary injunction to restrain appellee from terminating appellant's franchise and removing operating equipment from premises. Appellant argues, inter alia, that it was entitled under franchise agreement and PMPA to notice and opportunity to cure.

Feinberg, Chief Judge, Van Graafeiland and Kearse, Circuit Judges.

Author: Feinberg

FEINBERG, Chief Judge:

The questions before us are whether termination of a gasoline station franchise pursuant to sections 102(b)(2)(A) and 102(b)(2)(C) of the Petroleum Marketing Practices Act (PMPA), 15 U.S.C. § 2801 et seq., requires notice and an opportunity to cure before notice of termination can be given, and whether on the facts of this case a forthwith termination was unreasonable. For reasons given below, we believe that the answer to both questions is no, and we affirm the judgment of the district court.

I.

The subject of this litigation is an automobile service station owned by plaintiff-appellant The Wisser Company, Inc. (Wisser) in Elwood, New York, and until recently operated under the Mobil trademark pursuant to a franchise agreement with defendant-appellee Mobil Oil Corporation (Mobil). The franchise agreement included a "retail dealter contract" (the contract) and subsidiary contracts providing, among other things, for Mobil to lease an eight-foot sign to Wisser and to loan it a storage tank and pumps.

Mobil alleges that a decrease in Wisser's purchases of gasoline from Mobil beginning in October 1982 made it suspicious that Wisser was purchasing gasoline from other suppliers and selling it to the public through Mobil pumps as Mobil gasoline (misbranding). According to affidavits submitted by Mobil to the district court, Mobil representatives on several occasions discussed their suspicion with William Wisser, an officer of appellant, who denied offering misbranded gasoline for sale at the station. Subsequently, on April 30, 1983, a private investigator hired by Mobil to monitor the station confirmed the misbranding; the investigator observed and photographed a non-Mobil gasoline delivery to the station, and also observed that the station at that time was clearly identified as a Mobil station and that there were no signs identifying the gasoline being sold as anything other than Mobil brand. Consequently, by letter dated June 27, 1983, Mobil notified Wisser that it was terminating the contract and the franchise relationship effective immediately because of misbranding, citing paragraph 6 of the contract and various sections of the PMPA, 15 U.S.C. §§ 2802(b)(2)(A), 2802(b)(2)(B),*fn1 2802(b)(2)(C), 2802(c)(10) and 2802(c)(11). Also, pursuant to the equipment loan agreement, Mobil requested Wisser to arrange to return immediately the equipment loaned to it.

In July, Wisser brought an action in the United States District Court for the Southern District of New York seeking injunctive relief. After a hearing on Wisser's motion for a preliminary injunction, at which Mr. Wisser and a representative of Mobil testified, Judge Vincent L. Broderick delivered an oral opinion from the bench denying the motion. We are informed that after the district court's decision, Mobil stopped supplying Wisser and removed its operating equipment and trademarks from the premises.

While it is easier for a franchisee to obtain a preliminary injunction under the PMPA than in the usual case, under 15 U.S.C. § 2805(b)(2) Wisser still had to show "sufficiently serious questions going to the merits to make such questions a fair ground for litigation" and the court had to determine that the hardship to Wisser of denying the injunctive relief exceeded the hardship to Mobil of granting it. The district court was inconclusive on the existence of such serious questions, stating "there may be fair grounds for litigation with respect to the merits of the action," but it held that the balance of harships favored Mobil. The court did find, however, a probability that Mobil would be able to prove that Wisser was selling misbranded gasoline and that Mobil would succeed on the mertis. Wisser appeals from the denial of preliminary injunctive relief.

II.

It is significant that Wisser nowhere denies, and indeed admits, that it was selling non-Mobil gasoline through the pumps loaned to it by Mobil. It claims, however, that when selling such gasoline, it took adequate steps to so advise the public by posted signs and by oral statements to individual customers. Wisser argues that with such precautions the franchise contract permits it to sell non-Mobil products, including gasoline. We do not need to reach this contention because on this record the district court's finding that Mobil probably would be able to show at trial that Wisser was "passing off" the non-Mobil gasoline as Mobil gasoline is not clearly erroneous; indeed, it is supported by substantial evidence. That such conduct is a ground for termination of the franchise under the contract and under the PMPA cannot seriously be disputed. It is a violation of a provision of the contract that is both "reasonable" and "material" within the meaning of 15 U.S.C. § 2802(b)(2)(A), and it is specifically identified as "an event . . . relevant to the franchise relationship" and justifying termination within the meaning of 15 U.S.C. §§ 2802(b)(2)(C), 2802(c)(10) and 2802(c)(11), all of which are reproduced in the margin.*fn2 See Di Napoli v. Exxon Corp., 549 F. Supp. 449, 452 (D.N.J. 1982); Itin Oil Co. v. Mobil Oil Corp., 527 F. Supp. 898 (E.D.Mich. 1981); Haynes v. Exxon Co., U.S.A., 512 F. Supp. 543 (E.D.Tenn. 1981). Although Wisser raises a plethora of arguments in this court, the only issues warranting discussion are whether the contract of the PMPA required notice of default and an opportunity to cure and whether they required advance notice of termination, thus rendering ineffective a forthwith notice.

The principal franchise contract, the retail dealer contract, consists of a printed form with various typewritten riders. Several of the printed paragraphs contain handwritten deletions and alterations, which are separately initialed by the parties.

Appellant argues that, even if it had sold non-Mobil gasoline through the Mobil pumps without adequate identification, the rider to para. 12 of the contract required notice of default and 20 days in which to cure before, in absence of cure, Mobil could send a second notice terminating the franchise. Appellant contends that this typewritten rider supersedes the language of printed para. 6, under which Mobil has "the right to immediately terminate" the contract for violations of para. 6, including misbranding. The relevant portions of printed paras. 6 and 12 and their respective typewritten riders are reproduced in the margin.*fn3

Appellant's interpretation does not withstand an examination of the language and the structure of the contract. Printed para. 12 provides for termination "on notice" for defaults generally, and printed para. 6 dispenses with notice for certain defaults, including the "use [of] Seller's trademarks or brand names in connection with the storage, handling, dispensing or sale of any . . . substituted products." The typewritten rider to para. 12 expands it to require notice of default and a 20-day opportunity to cure before notice of termination can be given. The typewritten rider to para. 6 adds to it express permission to sell non-Mobil products, but not to misbrand. The rider does not modify or eliminate Mobil's right granted in printed para. 6 to terminate immediately for misbranding. The structure of the printed contract is thereby preserved: Para. 12 and its rider require notice and opportunity to cure for defaults generally; para. 6 and its rider ...


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