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September 13, 1993

LITTLE TOR AUTO CENTER, et al., Plaintiffs,

The opinion of the court was delivered by: VINCENT L. BRODERICK



 This case, over which this court has jurisdiction under 28 USC 1331 and 1337, was brought under the Petroleum Marketing Act, 15 USC 2801 et seq. (the "Act" or "Petroleum Act") and involves the question of the conditions, if any, under which a major oil company can terminate a franchisee it suspects of selling, from pumps carrying its name, gasoline derived from other vendors.

 Prior to the commencement of this action the parties conducted negotiations for some time. Plaintiffs then initiated this suit. They contemporaneously sought interim relief barring defendant ("Exxon") from terminating plaintiffs' Exxon franchise. Exxon was contacted and an agreement was reached on April 29, 1993 which I adopted as an interim court order barring termination of plaintiffs' pending determination of plaintiff's motion for a preliminary injunction pursuant to Fed.R.Civ.P. 65 to enjoin such termination.

 Suits of this kind present the need to reconcile statutory objectives of protecting the investments of gas station franchisees against arbitrary cutoffs with the need of both fuel vendors and consumers to rely on trademarks on gasoline pumps as indicia of those responsible for their contents. Objectives underlying the Lanham Trademark Act (15 USC 1051 et seq) and the national policy of promoting open markets sought by the Commerce Clause and by the Sherman Act (15 USC 1 et seq), as well as the provisions and objectives of the Petroleum Act are involved.

 To fulfill these varying purposes in a context such as this, I must assure that a fuel vendor can protect its trademarks and terminate franchisees who deliberately violate them, at the same time I must not permit use of trademark enforcement as an excuse for termination for other, arbitrary, reasons. Absent any significant indication of trademark infringement, to permit an unjustified termination would be contrary to the mandates of the Petroleum Act. If, as here, there is persuasive evidence of abuse of the franchisor's name through sale of other products under that name, courts cannot permit litigation to be used to perpetuate such conduct or to force a franchisor to deal with a franchisee violating its trademarks.

 There is no indication that the franchisor sought to bar open, accurately labelled, sale of competing fuels. There is thus no potential adverse impact on competition in the marketplace due to the requirements imposed by the franchisor which might lead to unenforceability of restrictive provisions or to affirmative antitrust problems in this case. *fn1" The open marketplace is also harmed if non-performing distributors or franchisees who do not fulfill their function in the marketplace or who engage in harmful deceptive practices such as trademark infringement are frozen in place, effectively precluding availability of their territories to new entrants. See generally J. Palamountain, The Politics of Distribution (1955). Presumably in part for this reason, Congress included breach of reasonable and non-anticompetitive provisions of franchise agreements, as well as trademark infringement, among grounds for termination of a gas station franchise.

 Plaintiffs have moved for a preliminary injunction seeking the relief originally requested by order to show cause; Exxon has cross-moved for a preliminary injunction barring the plaintiffs from using Exxon trademarks, ejecting plaintiffs from the leased premises and for other relief. I deny both motions. *fn2"


 The test for granting a preliminary injunction has been often restated; its core has changed little in recent decades. In order to secure a preliminary injunction, a movant must, barring circumstances not involved here, establish (a) irreparable harm and (b) either (1) likelihood of success on the merits, or (2) fair ground for litigation and a balance of hardships tipping decisively in favor of the movant. ICN Pharmaceuticals, Inc. v. Khan, 2 F.3d 484, 1993 U.S. App. LEXIS 21649, (2d Cir. 1993), slip op at 5605; Plaza Health Lab, 878 F.2d 577, 580 (2d Cir 1989); Jackson Dairy v. HP Hood & Sons, 596 F.2d 70, 72 (2d Cir 1979); Triebwasser & Katz v. AT&T, 535 F.2d 1356 (2d Cir 1976); see Silberman, Injunctions by the Numbers: Less Than the Sum of Its Parts, 63 Chi-Kent L Rev 279 (1987).

 I do not find that plaintiffs have established either likelihood of success on the merits or a balance of hardships tipping decisively in their favor.


 Exxon's principal ground for termination of plaintiffs' Exxon franchise was use of Exxon trademarks to sell other gasoline. Under 15 USC 2802(b)(2)(C) and 2802(c)(10), "willful mislabelling or misbranding of motor fuels or other trademark violations" are ...

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