was "reasonable" under § 2802(b)(2)(C) of the Act.
B. Notice Requirement under The Act
As noted above, a prerequisite of a valid termination by the
franchisor is that it comply with the "notification
requirements" of 15 U.S.C. § 2804. That section in
subparagraphs (a) and (b) provides, so far as pertinent here,
that the franchisor shall furnish notification of termination
"not less than 90 days prior to the date" of termination,
except in "circumstances in which it would not be reasonable
for the franchisor to furnish" such 90 days notification. In
that event the "franchisor shall furnish notification" on "the
earliest date on which furnishing such notification is
reasonably practicable." 15 U.S.C. § 2804(b)(1)(A).
Shell did not give 90 days notice, but argues that the notice
it gave four weeks after the fire was "reasonable."
Because the Station was operating in violation of the
environmental regulations, Shell waited four weeks from the
time the fire occurred, the Station had yet to make repairs,
and the basis for termination was clear, Shell acted in good
faith, and it was "reasonable" as a matter of law to give
accelerated notice for the violation of the environmental
regulations and substantial destruction, Cf. Smoot v. Mobil
Oil Corp., 722 F. Supp. 849, 855 (D.Mass. 1989) (accelerated
notice permissible for failure to sell gasoline). In addition,
Shell gave notice at the earliest date that was "reasonably
Shell's complied with the requirements of the Act and is thus
not prevented by the Act from terminating its agreement.
II. TERMINATION UNDER THE AGREEMENT AGREEMENT
Although the Act poses no bar to termination, the Station urges
that section 5 of the Agreement, providing for a 60-day grace
period for terminations caused by the franchisee's failure to
"maintain a suitable place of business" by not using an
"architectural design, style, color scheme and layout
acceptable to and approved by Shell as being in accordance with
Shell's customary motor fuel station standards and
specifications" prohibits termination on the basis of
substantial destruction. That provision has no application
Shell did not terminate the franchise for the Station's failure
to do maintenance on the premises. Shell terminated under the
specific termination provision of the Agreement for substantial
destruction. The 60-day grace period is inapplicable.
The Station also claims that section 16 of the Agreement,
titled "Excuses For Non-Performance," which excuses performance
so long as performance is "delayed or prevented . . . by fire"
prohibits Shell from terminating the Agreement. That clause is
inapplicable. It might protect Shell or the Station from suit
by the other for breach of contract for failure to supply or
sell motor fuel during the period the Station was damaged, but
has no effect on the contract's separate termination
The Station finally argues that the damage caused by the fire
was beyond its reasonable control, and thus termination was not
proper. There is nothing in the Act limiting termination based
on substantial destruction only to those circumstances when the
franchisee caused the substantial damage. The Act provides that
some events giving grounds for termination may be excused if
"beyond the reasonable control of the franchisee."
15 U.S.C. § 2802(c)(8), 2802(c)(9), 2802(c)(11). But the event of
termination for substantial destruction is not one of them.
The franchisee and franchisor could contract to offer the
franchisee greater protections than is offered by the Act. They
have not done so with regard to the grounds at issue in this
action. For the reasons termination is permissible under the
Act, it is justified under the section 18.1 of the Agreement,
Shell's termination of the franchise was proper under the Act
and the Agreement
on the grounds that (1) the Station knowingly failed to comply
with the State Department's regulations, and (2) destruction of
a substantial part of the Station and its marketing premises.
Shell's motion for permanent injunction is granted to include
the provisions contained in the preliminary injunction
requiring the station to return Shell's trademark,
identifications, signs, and other advertising devices.
© 1992-2003 VersusLaw Inc.