from the marketing of motor fuel under a franchise."
The Act in 15 U.S.C. § 2801(1) defines a "franchise" in terms
of three elements, namely, a contract to use the refiner's
trademark, a contract for supply of fuel to be sold under the
mark, and a lease of premises for sale of the fuel. See Barnes
v. Gulf Oil Corp., 795 F.2d 358, 360 (4th Cir. 1986). So long
as the franchisee retains the right to enforce these
obligations and responsibilities, there has been no failure to
renew the franchise relationship. The fact that these
obligations and responsibilities have been assumed by some one
other than the franchisor does not mean there is no franchise.
Plaintiffs have neither alleged nor presented evidence that
the assignment compromised any of the three elements defined
by the Act to constitute plaintiffs' "franchises." Cumberland
purchased the stations leased by plaintiffs, who continue to
occupy them under either the terms of their leases with
Chevron or renewal leases. Cumberland acquired the right to
use the Gulf trademark with an option to renew indefinitely.
Plaintiffs conduct their business under the Gulf trademark,
with the benefit of the Gulf and Chevron credit card system.
Plaintiffs continue to purchase Gulf brand gasoline, with
supply still guaranteed from Chevron's Philadelphia refinery
and Cumberland's other sources.
The provisions of 15 U.S.C. § 2806(b) make it clear that the
mere making of an assignment valid under state law does not
accomplish a "termination" of the franchise or "failure to
renew" the franchise relationship. That section provides, in
pertinent part, that "nothing" in the Act "prohibits any
transfer or assignment of any franchise" as authorized by the
franchise or by state law. It is fatuous to suppose that
legislation including this provision had as its purpose to make
every assignment of a franchise a "termination" or "failure to
Of course, the assignee, in this case Cumberland, is not as
a result of the assignment free to flout the Act. Should
Cumberland terminate a franchise or fail to renew a franchise
relationship, plaintiffs retain their statutory rights.
Moreover, the terms of the Act suggest that Congress did not
design it to prohibit petroleum companies from making all
large scale assignments of assets such as the one at issue.
May-Som Gulf, 869 F.2d at 921-22; Florham Park III, opinion at
10; Russo v. Texaco, Inc., 630 F. Supp. 682, 683 (E.D.N Y
This court concludes that, provided the assignment is valid
under applicable state law, the Act does not make the
assignment a termination of a franchise or a failure to renew
a franchise relationship.
The United States District Court for the District of
Connecticut reached the same result in Ackley v. Gulf Oil
Corp., 726 F. Supp. 353 (D.Conn. 1989) (hereinafter "Ackley")
and the Court of Appeals affirmed "substantially" for the
reasons given by the District Court. Ackley v. Gulf Oil Corp.,
889 F.2d 1280 (2d Cir. 1989), cert. denied, ___ U.S. ___, 110
S.Ct. 1811, 108 L.Ed.2d 941 (1990). Similar holdings were made
in May-Som Gulf and Florham Park III.
An assignment invalid under state law may be regarded as a
constructive termination under the Act. Such a purported
assignment might infringe the franchisee's rights under the
Act. See Barnes v. Gulf Oil Corp., 795 F.2d 358, 363 (4th Cir.
1986). But plaintiffs have not alleged illegality under New
York law. New York permits assignment of contractual rights and
delegation of contractual duties, except where the contract
calls for personal services, or prohibits assignment, or where
assignment materially alters the rights and duties of the other
party. Smith v. Craig, 211 N.Y. 456, 461, 105 N.E. 798 (1914).
Plaintiffs have not argued any such exception applies to their
leases and supply agreements.
A lease agreement, such as the service station leases here,
is freely assignable incidental to the sale of the leased
property, absent some restriction in the lease. Reltron Corp.
v. Voxakis Enterprises, 57 A.D.2d 134, 137-8, 395 N.Y.S.2d 276,
(4th Dep't 1977). Plaintiffs allege no such restriction.
The element of plaintiffs' franchises that comprises the
supply agreements for gasoline is governed by New York's
version of section 2-210 of the Uniform Commercial Code, which
provides in relevant part:
(1) A party may perform his duty through a
delegate unless otherwise agreed or unless the
other party has a substantial interest in having
his original promisor perform or control the acts
required by the contract. (. . .)
(2) Unless otherwise agreed all rights of either
seller or buyer can be assigned except where the
assignment would materially change the duty of
the other party, or increase materially the
burden or risk imposed on him by his contract, or
impair materially his chance of obtaining return
N YU.C.C. § 2-210.
As noted above, plaintiffs have neither alleged that
Chevron's duties under the supply agreements were personal nor
nondelegable by agreement. See May-Som Gulf, 869 F.2d at 924.
Nor have plaintiffs provided any evidence that the assignment
has materially changed their duties, increased their burdens,
or impaired their chance of receiving return performance.
Plaintiffs have alleged that (1) Cumberland is more
interested in maximizing the value of its acquired real estate
than in maintaining unprofitable stations, and has converted
several stations not involved in this suit into convenience
food stores; (2) Cumberland's president opined he would change
or drop the Gulf trademark if by doing so he could sell more
gasoline; (3) the gasoline pricing formula for
Cumberland-operated stations is different and historically
somewhat lower than that used for dealer-operated stations;
(4) the new franchise leases give Cumberland the right of
first refusal if a franchisee wishes to assign his franchise,
and involve higher rents than the old franchises; and (5) some
stations have used a combined Cumberland-Gulf logo.
These and similar allegations have been considered and found
wanting by the courts in the supervening decisions of
Ackley, May-Som Gulf, and Florham Park III. Missing from the
present record is any evidence that these circumstances have
harmed or may harm the plaintiffs. To the extent that they are
speculative, such allegations are insufficient to raise an
issue of material fact. Ackley, 726 F. Supp. at 363. As
mentioned above, should Cumberland wilfully terminate the Gulf
trademark, or improperly terminate plaintiffs' leases,
plaintiffs at that moment will have a claim under the Act. Id.
Changes made by Cumberland that were within Chevron's
prerogative to make are likewise insufficient to show a burden
or impairment flowing from the assignment at issue. The
franchise agreements establish no fixed or comparative price
of gasoline to be sold to dealers. See Ackley, 726 F. Supp. at
364, May-Som Gulf, 869 F.2d at 924. Changes that Cumberland
subsequently instituted in renewal leases are not relevant to
the question whether the initial assignment materially
increased plaintiffs' burdens or risks. Ancillary issues
concerning Cumberland's supposed deficiencies in support
services, such as training, advertising, or promotion, are
likewise irrelevant as plaintiffs have shown no contractual
right to these services. They are not part of a franchise under
the Act. May-Som Gulf, 869 F.2d at 925.
The court finds plaintiffs' other arguments without merit
for the reasons given in Ackley and May-Som Gulf. Plaintiffs
have failed to raise an issue of material fact as to whether
the assignment violated either plaintiffs' franchises under
the Act or New York law.
The court need not address defendants' alternative argument
that they have complied with the market withdrawal provisions
of the Act.
State Law Claim
No federal issue remains. The court therefore declines to
consider the pendent claim under New York's General Business
Law. United Mine Workers v. Gibbs, 383 U.S. 715, 726, 86 S.Ct.
1130, 1139, 16 L.Ed.2d 218 (1966).
The court's order of June 5, 1989 is vacated and defendants'
motion for summary judgment is granted.
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