paid any rent nor sold any Sun gasoline since the summer of 1995.
B. The Remsen Avenue Station
Beginning in 1990, Zipper also began operating another Sun franchise on Remsen Avenue. He contends that he was promised that his Remsen rent would be lowered, which promise was not fulfilled. In addition, Zipper contends that in 1993, he was coerced into participating in a marketing scheme known as "Zero Pool Margin," which effectively eliminated his operating profits.
Zipper alleges that he was told by Sun in July 1993 that it would not charge Zipper less money for his Remsen station rent than it was currently charging him. Relying on this statement, on July 26, 1993, Zipper entered into an agreement with Sun to release both parties' obligations with respect to the Remsen station. After the cancellation agreement was signed, Sun offered the franchise to Musa Yanni for about one-half of Zipper's rent.
C. The Commencement Of This Action And The Pending Motion
In August 1995, Zipper commenced this action, in which he seeks (i) an injunction preventing Sun from terminating the Flatlands Avenue franchise and requiring the resumption of franchise operations; (ii) damages for breach of contract with respect to both franchise agreements; (iii) damages for alleged fraudulent misrepresentations with respect to both franchise agreements; and (iv) a declaratory judgment modifying the rental provisions in both franchise agreements.
Defendant now moves for partial summary judgment. With respect to the Flatlands Avenue station, defendant seeks (i) the rejection of plaintiff's statutory claims; (ii) a declaration that its termination of the franchise was valid; and (iii) an injunction to compel plaintiff to vacate the station premises. Plaintiff responds that Sun lacked adequate grounds for termination under the PMPA, and that Sun's notice of termination was insufficient under the PMPA. I conclude that although defendant had the requisite statutory grounds for termination, it failed to supply plaintiff with adequate notice of termination; thus, the termination was invalid under the PMPA.
With respect to the Remsen Avenue station, defendant moves for summary judgment on the plaintiff's breach of contract and fraud claims, alleging that such claims were released by the cancellation agreement executed by both parties on July 30, 1993. Plaintiff does not contest the terms of the cancellation agreement, but instead attacks it on the grounds of fraud and duress. Since plaintiff's claims of fraud and duress are legally insufficient, defendant's motion with respect to the Remsen station claims is granted.
A. The Summary Judgment Standard
Summary judgment should be granted where "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c). The burden is upon the moving party to demonstrate that no genuine issue of material fact exists, and all ambiguities must be resolved and all inferences drawn in favor of the non-moving party. Gallo v. Prudential Residential Services, Limited Partnership, 22 F.3d 1219, 1223 (2d Cir. 1994).
To survive a summary judgment motion, a plaintiff must make a showing sufficient to establish the existence of the elements essential to its case. Mount Vernon Fire Ins. v. Creative Housing, 797 F. Supp. 176, 179 (E.D.N.Y. 1992). When no rational juror could find in favor of the non-moving party because the evidence to support its case is so slight or non-existent on a material element, there is no genuine issue of material fact and a grant of summary judgment is proper. Gallo, 22 F.3d at 1224.
B. The Petroleum Marketing Practices Act
The PMPA tinkers with the economic relationship between petroleum companies and their franchise station operators. Congress perceived a "David versus Goliath aspect of the relationship between the small retailer franchisee and the giant petroleum company franchisor, and aimed at making that relationship more equal." Darling v. Mobil Oil Corp., 864 F.2d 981, 982 (2d Cir. 1989). As the Second Circuit has noted, "the overriding purpose of the PMPA is to provide 'protection for franchisees from arbitrary or discriminatory termination or non-renewal of their franchises.'" Mobil Oil Corp. v. Karbowski, 879 F.2d 1052, 1055 (2d Cir. 1989) (quoting S.Rep. No. 731, 95th Cong., 2d Sess. 15, reprinted in 1978 U.S.Code Cong. & Admin. News 873, 874 ("Senate Report"). "Such protection was needed to curtail the widespread abuse by petroleum franchisors of their ability to terminate franchises." Karbowski, 879 F.2d at 1055. This goal is balanced against the "legitimate needs of a franchisor to be able to terminate a franchise . . . based upon certain acts of the franchisee." Id. (quoting Senate Report at 877). The result of this balancing is that petroleum companies may properly terminate franchises only for certain enumerated reasons. Id. ; 15 U.S.C. § 2802(a). Also, even if there is a valid ground for termination, such action may be taken only when the notification requirements of the PMPA are met. 15 U.S.C. §§ 2802(b)(1)(A) and 2804.
C. The Flatlands Avenue Station
Defendant claims that its termination of the franchise agreement covering the Flatlands Avenue station is justified on four statutory grounds: (i) a "failure by the franchisee to comply with any provision of the franchise, which provision is both reasonable and of material significance to the franchise relationship" (15 U.S.C. § 2802(b)(2)(A)); (ii) a "failure by the franchisee to exert good faith efforts to carry out the provisions of the franchise" (15 U.S.C. § 2802(b)(2)(B)); (iii) a "failure by the franchisee to pay to the franchisor in a timely manner when due all sums to which the franchisor is legally entitled" (15 U.S.C. § 2802(b)(2)(c) and (c)(8)); and (iv) a "failure by the franchisee to operate the marketing premises for 7 consecutive days." 15 U.S.C. § 2802(b)(2)(c) and (c)(9)(A). Defendant's first and third contentions, which are both based on plaintiff's failure to pay amounts due for rent, gasoline and other products, provide adequate justification for Sun's termination of the Flatlands franchise.
Defendant's first ground, a failure to comply with a material provision of the franchise agreement, requires a determination of the reasonableness of the agreement's provisions. The Second Circuit has provided that an objective standard governs that determination, i.e., that the allegedly violated provision must be objectively reasonable, "taking into consideration all the relevant facts and circumstances." Darling v. Mobil Oil Corp., 864 F.2d 981, 991 (2d Cir. 1989).
The parties do not dispute that the payment obligations at issue here are a reasonable and material part of the franchise agreement. Although plaintiff's explanation for his lack of funds is sympathetic, it does not negate his undisputed failure to comply with a material provision of the franchise agreement. Therefore, defendant has demonstrated that it had statutory grounds, pursuant to section 2802(b)(2)(A), to terminate plaintiff's franchise.
Similarly, plaintiff's failure to pay for rent, gasoline and other products justified the termination of the Flatlands Avenue franchise on the third statutory ground advanced by defendant -- the failure of the franchisee, in a timely manner, to pay all sums to which the franchisor was legally entitled. 15 U.S.C. § 2802(c)(8). Although some courts "scrutinize the reasonableness of terminations even when an event enumerated in § 2802(c) has occurred," Marathon Petroleum Co. v. Pendleton, 889 F.2d 1509, 1512 (6th Cir.1989); Sun Refining and Marketing Co. v. Rago, 741 F.2d 670, 673 (3d Cir. 1984), the Second Circuit has rejected that approach. Russo v. Texaco, Inc., 808 F.2d 221, 225 (2d Cir. 1986) (finding that Section 2802(c) provides grounds for termination that are "conclusively presumed to be reasonable as a matter of law"). My inquiry is thus restricted to determining whether plaintiff paid all sums due to defendant in a timely manner. It is undisputed that he did not.
Plaintiff asserts that the termination was unjustified because (i) the amount of money that he owed to Sun was unclear; and (ii) Sun was not "legally entitled" to any funds. These arguments have no merit. Although the exact amount of money that plaintiff owed to defendant is unclear, it is somewhere between $ 29,000 (plaintiff's estimate at oral argument) and $ 67,000 (defendant's highest estimate). The dispute over the amount does not alter the undisputed fact that plaintiff was in serious arrears. The contention that Sun was not "legally entitled" to any funds is frivolous, and it is irreconcilable with plaintiff's admission that he owes Sun at least $ 29,000.
Defendant's other purported justifications for its termination of the Flatlands Avenue franchise are insufficient. Although it argues that there was a "failure by the franchisee to exert good faith efforts to carry out the provisions of the franchise," see 15 U.S.C. § 2802(b)(2)(B), Sun has made no such showing. To the contrary, viewed in the light most favorable to plaintiff, the evidence demonstrates that plaintiff consistently made all payments to defendant except when extraordinary circumstances prevented him from doing so. Even then, plaintiff offered to pay down his arrears and to pay cash for future gas sales, which offer was refused by Sun. Moreover, even if there were evidence that plaintiff failed to make such good faith efforts, defendant still failed to give plaintiff notice and an opportunity to cure, which are required conditions of termination on this ground. 15 U.S.C. § 2802(b)(2)(B); see Crown Central Petroleum Corp. v. Waldman, 515 F. Supp. 477, 482 (M.D.Pa. 1981), aff'd, 676 F.2d 684 (3d Cir. 1982).
Defendant's final argument in support of its termination rests on plaintiff's failure to supply petroleum products for a period of seven consecutive days. However, according to plaintiff, the only reason that he did not sell gasoline for those seven days is because defendant refused to supply any, even though plaintiff offered to pay down his arrears and to pay cash for gasoline purchases. Thus, plaintiff never willfully refused to sell Sun's gasoline to its customers. Defendant's response that it did not sell gasoline to plaintiff because he was in arrears makes clear that its real complaint is plaintiff's failure to make payments due to Sun, not his failure to sell Sun gasoline.
1. The Notification Requirement
A valid termination under the PMPA must comply with the notice requirements in section 2804. 15 U.S.C. § 2802(b)(1)(A). Since the notices of termination that defendant provided to Zipper on July 27, 1995, and August 1, 1995, do not satisfy the requirements of the Act, defendant's termination of plaintiff's Flatlands Avenue franchise was in contravention of the PMPA.
Section 2804 of the PMPA provides, in pertinent part:
(a) Prior to termination of any franchise . . . the franchisor shall furnish notification of such termination . . . to the franchisee who is a party to such franchise or such franchise relationship . . .
(2) except as provided in subsection (b) of this section, not less than 90 days prior to the date on which such termination takes effect.