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MOBIL Oil Corp. v. Karbowski

decided: July 12, 1989.

MOBIL OIL CORPORATION, PLAINTIFF-APPELLEE,
v.
THEADEOUS S. KARBOWSKI, D/B/A TED'S MOBIL SERVICE STATION, DEFENDANT-APPELLANT



Appeal from a judgment granting plaintiff-appellee's motion for summary judgment entered in the United States District Court for the District of Connecticut (Alan H. Nevas, Judge) declaring the termination of defendant's franchise to be lawful under the Petroleum Marketing Practices Act and dismissing defendant's state law counterclaims. Affirmed.

Kearse, Altimari, and Mahoney, Circuit Judges.

Author: Altimari

ALTIMARI, Circuit Judge

Defendant-appellant Theadeous S. Karbowski appeals from a judgment of the United States District Court for the District of Connecticut (Nevas, J.) granting plaintiff Mobil Oil Corporation's ("Mobil") motion for summary judgment under Fed.R.Civ.P. 56. This action arose under the Petroleum Marketing Practices Act, 15 U.S.C. §§ 2801-2841 (1982) ("PMPA"). Mobil sought to terminate its franchise agreement with Karbowski because he allegedly failed to comply with provisions of the franchise which were both reasonable and of material significance to the franchise relationship, see id. at § 2802(b)(2)(A), and failed "to exert good faith efforts to carry out the provisions of the franchise." Id. at § 2802(b)(2)(B). Mobil also asserted claims of fraud and breach of contract under Connecticut law. In response, Karbowski filed various counterclaims arising under both the PMPA and Connecticut law. The district court found that there were no issues of material fact and accordingly granted Mobil's motion for summary judgment as to its PMPA claims and dismissed all counterclaims.*fn1 On this appeal, Karbowski contends, inter alia, that the district court erroneously interpreted and applied the termination provisions of the PMPA by not considering whether the franchise provisions at issue were objectively reasonable. We agree that the district court improperly employed a subjective standard of reasonableness in its application of section 2802(b)(2)(A). For the reasons that follow, however, we find Karbowski's franchise to have been properly terminated under section 2802(b)(2)(B), and we affirm the judgment of the district court.

BACKGROUND

Defendant Karbowski, as a franchisee of Mobil, operated Ted's Mobil Service Station ("the station") at the Branford, Connecticut exit of Interstate 95. Karbowski and Mobil first entered into a franchise agreement in March 1976. The agreement has been renewed periodically since then. The instant dispute concerns adherence to terms of the renewal agreement entered into on March 29, 1985 which covered the period from April 1, 1985 to March 31, 1988.

Under the terms of the original agreement, Karbowski was not required to operate his station 24 hours per day. In the years following that agreement, the area surrounding the station underwent increased commercial development. By the time the disputed renewal agreement was entered into, both a branded truck stop/service station located across the street from Karbowski's station and a nearby unbranded service station were operating continuously.

In November 1984, Mobil conducted an evaluation of Karbowski's station in order to determine whether to retain the property. Mobil concluded that the station's proximity to round-the-clock traffic on the interstate and new commercial development in the area compelled that the franchise be renewed to operate 24 hours per day. Accordingly, the franchise renewal proposal which Mobil presented to Karbowski on November 26, 1984 specified that the station was to be operated "24 hours per day, 7 days per week."

Karbowski, through his attorney, voiced concern over rent increases and the hours of operation clause contained in the proposed renewal agreement. Nevertheless, on March 29, 1985, he signed the agreement renewing the franchise until March 31, 1988.

Karbowski never complied with the hours of operation provision of the final renewal agreement. In addition, he had not complied with a provision which required him to purchase a minimum of 31,250 gallons of gasoline from Mobil each month. On May 22, 1985, Mobil representatives met with Karbowski to discuss his failure to comply with the franchise agreement. At that meeting, Karbowski stated that he had no intention of keeping the station open 24 hours per day. Thereafter, Mobil repeatedly notified Karbowski by letter of his continuing failure to adhere to terms of the franchise agreement.

On November 15, 1985, Judy L. Schultz, the District Manager of Mobil's Westchester/Connecticut District, wrote to Karbowski. She advised him that he still had not complied with the franchise agreement and she suggested methods by which compliance could be achieved. Schultz outlined various programs offered by Mobil to increase its dealers' gasoline sales. Moreover, Schultz offered temporarily to adjust the hours of operation specified in the agreement in order to facilitate Karbowski's transition to 24-hour-per-day operation. Karbowski, however, returned the letter to Schultz after having written "Totally unexceptable [sic] Ted Karbowski. 11/18/85" over much of the second page.

Mobil continued to communicate with Karbowski concerning his refusal to operate 24 hours per day and his lack of compliance with the minimum gallonage requirement. Finally, by letter dated June 26, 1986, Mobil notified Karbowski that his franchise would be terminated on September 30, 1986. The stated grounds for termination were: (1) failure to comply with provisions which are both reasonable and of material significance to the franchise relationship, 15 U.S.C. § 2802(b)(2)(A); and (2) failure to exert good faith efforts to carry out the provisions of the franchise. Id. at § 2802(b)(2)(B).

Mobil initiated this action seeking a declaration that the termination was valid and an injunction to compel Karbowski to vacate the station premises. In response, Karbowski filed a motion for summary judgment, asserting that the termination was governed by the Connecticut Gasoline Dealers Act, Conn.Gen.Stat. §§ 42-133j to 42-133n (1987) ("Connecticut Act"). The district court denied Karbowski's motion, holding that the Connecticut Act was preempted by the PMPA. Mobil Oil Corp. v. Karbowski, 667 F. Supp. 927 (D. Conn. 1987); see also Darling v. Mobil Oil Corp., 864 F.2d 981, ...


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