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Jimico Enterprises, Inc. v. Lehigh Gas Corp.

July 27, 2010

JIMICO ENTERPRISES, INC.; AND BROWNSON ENTERPRISES, INC., PLAINTIFFS,
v.
LEHIGH GAS CORPORATION, DEFENDANT.
LEHIGH GAS CORPORATION, COUNTER-CLAIMANT.
v.
BROWNSON ENTERPRISES, INC.; AND PETER BROWNSON, COUNTER-DEFENDANTS,



The opinion of the court was delivered by: Hon. Glenn T. Suddaby, United States District Judge

MEMORANDUM DECISION and ORDER

Currently before the Court in this action brought pursuant to, inter alia, The Petroleum Marketing Practices Act ("PMPA"), 15 U.S.C. § 2805, is a motion for partial summary judgment filed by Lehigh Gas Corporation ("Defendant") (Dkt. No. 42), and a cross-motion for partial summary judgment filed by Jimico Enterprises, Inc. and Brownson Enterprises, Inc. ("Plaintiffs") (Dkt. Nos. 44). For the reasons set forth below, Defendant's motion is granted in part and denied in part, and Plaintiffs' cross-motion for summary judgment on liability regarding Defendant's improper notice is granted and a hearing on damages will be scheduled by the Court.

I. RELEVANT BACKGROUND

A. Plaintiffs' Claims

Generally, liberally construed, Plaintiffs' Complaint alleges that Defendant violated the PMPA and breached the agreement that it had with Plaintiffs. More specifically, Plaintiffs allege as follows: (1) because Defendant obtained a license from ExxonMobil to operate as the franchisor of Mobil stations, including Plaintiffs, Defendant became the successor in interest to ExxonMobil for all purposes with respect to franchise relationships; (2) because Plaintiffs were existing franchisees, pursuant to their franchise relationship with ExxonMobil, it was unlawful for Defendant to "refus[e] to extend to Plaintiffs a renewed three year franchise agreement" (and instead proffer a Temporary Franchise Agreement ["TFA"]); (3) because the TFA that Plaintiffs signed was invalid, and because Defendant made assurances to Plaintiffs "that their TFA' s would be renewed by full term leases upon expiration," it was unlawful for Defendant to terminate its franchise relationship with Plaintiffs within one year of Plaintiffs signing the TFAs; and (4) even if the TFAs were valid, and Defendant was therefore allowed to terminate its trial franchise relationship with Plaintiffs within one year of Plaintiffs signing the TFAs, Defendant did not provide Plaintiffs with the statutorily required notice before terminating its relationship with Plaintiffs. (Id.) Based on these allegations, Plaintiffs assert the following two claims: (1) violation of the PMPA; and (2) breach of contract.

B. Defendant's Counterclaims Against Brownson Enterprises, Inc., and Peter Brownson

Generally, liberally construed, Defendant's Counterclaim alleges that, on or about May 25, 2006, Plaintiff Brownson Enterprises, Inc. ("Plaintiff Brownson") and Peter Brownson, individually, signed a TFA, a Key Individual Guaranty, and a Shareholder Guaranty, in which Plaintiff Brownson promised to fully and satisfactorily perform all of its obligations under the TFA, and Peter Brownson guaranteed such performance. (Dkt. Nos. 21, 22.) The Counterclaim further alleges that, following the termination of the TFA, Plaintiff Brownson owed Defendant $89,153.27, which it has failed and refused to pay despite demands from Defendant. (Id.) Based on these allegations, Defendant asserts the following four claims: (1) breach of contract; (2) unjust enrichment; (3) breach of key individual guaranty; and (4) breach of shareholder guarantee. (Id.)

C. Defendant's Motion and Plaintiffs' Cross-Motion

Generally, in support of its motion for partial summary judgment, Defendant argues that, because its agreements with Plaintiffs were valid TFAs, it had the right to terminate the franchise relationship under the PMPA. (See generally Dkt. No. 42, Attach. 7 [Def.'s Memo. of Law].)*fn1

In Plaintiffs' response to Defendant's motion for partial summary judgment (and their cross-motion for partial summary judgment), they argue as follows: (1) the doctrines of promissory, equitable, and judicial estoppel render the agreements to be long term in nature (and not TFAs); (2) Defendant fraudulently induced Plaintiffs to sign the TFAs, and therefore parole evidence of oral representations is admissible; and (3) regardless of whether the agreements were long-term agreements or TFAs, Defendant violated the notice requirements of the PMPA, which requires the Court to rule that Plaintiffs are entitled to the termination related rights of full PMPA franchises. (See generally Dkt. No. 45 [Plfs.' Response Memo. of Law].)

In its reply (and response in opposition to Plaintiffs' motion), Defendant argues as follows: (1) Plaintiffs' Rule 7.1 Statement contains improper argument, fails to provide record citations, and therefore should be disregarded; (2) Plaintiffs' estoppel arguments are inapplicable; (3) Plaintiffs' fraudulent inducement argument must be disregarded because (a) Plaintiffs failed to plead fraud with specificity, and (b) Plaintiffs failed to satisfy the basic elements of fraud; (4) the PMPA provides that franchisors may terminate franchisees with less than ninety days notice, and therefore Lehigh provided Plaintiffs with sufficient notice of termination; and (5) the TFAs should not be treated as full franchise agreements based on improper notice. (See generally Dkt. No. 52 [Def.'s Reply Memo. of Law].)

In their reply to Defendant's opposition to their motion for partial summary judgment, Plaintiffs argue as follows: (1) Defendant has failed to raise a genuine issue of material fact regarding its violation of the notice requirements under the PMPA; (2) as a result of its violation of the notice requirements, Plaintiffs are entitled to the termination related rights of full PMPA franchises; and (3) Plaintiffs' Rule 7.1 Statement should not be disregarded. (See generally Dkt. No. 54 [Plfs.' Reply Memo. of Law].)

D. Undisputed Material Facts

The following is a general summary of material facts that are undisputed by the parties.(Compare Dkt. No. 42, Attach. 6 [Def.'s Rule 7.1 Statement] with Dkt. No. 46 [Plf.'s Rule 7.1 Response] and Dkt No. 52, Attach. 3.)

Defendant Lehigh is an independent distributor of branded petroleum products in several states, including New York. Lehigh has agreements with various refineries, pursuant to which Lehigh supplies the refineries' gasoline to independent franchisees who, in turn, operate retail service stations and sell the gasoline to the public. Exxon gasoline is one the brands that Lehigh is authorized to carry. Lehigh has been a franchisor and distributor of gasoline to branded gas stations on the New York State Thruway (the "Thruway") since 2006.

Plaintiff Jimico is a New York corporation founded in 1988. Jimico's president is James Dammen. During the time of the events giving rise to this action, Jimico operated the following three gasoline service stations on the Thruway: (1) the station at the Seneca Area of the Thruway headed westbound ("Seneca Station"); (2) the station at the Angola Area of the Thruway headed eastbound ("Angola East Station"); and (3) the station at the Angola Area of the Thruway headed westbound ("Angola West Station").*fn2

Plaintiff Brownson is a New York corporation founded in 1974. Plaintiff Brownson's president is Peter Brownson. During the time of the events giving rise to this action, Plaintiff Brownson operated the following two gasoline service stations on the Thruway: (1) the station at the New Baltimore Area of the Thruway headed northbound ("New Baltimore North"); and (2) the station at the New Baltimore Area of the Thruway headed southbound ("New Baltimore South").*fn3

In May 2006, Sunoco won a bid to assume responsibility for the numerous fuel stations on the Thruway. However, Sunoco was subsequently unable to negotiate a contract with the relevant government agencies. As a result, Defendant Lehigh, as the second-lowest bidder, was permitted to negotiate with the Thruway to serve as franchisor to the thirteen (13) stations that did not market Sunoco fuel. Lehigh's contract was awarded on a temporary basis, subject to the approval of the New York State Comptroller ("the Comptroller").

Later in May 2006, Lehigh approached some of the franchisees of the thirteen (13) referenced stations, which sold Mobil-branded fuel, to obtain a commitment from them to operate as Lehigh franchisees. When Ed Miller and Lin Bauder, representatives of Lehigh, visited with James Dammen at the Seneca Station, they told Mr. Dammen that they intended "[t]o keep the dealers on the Thruway for as long as Lehigh themselves had a contract with the Thruway."

On or about May 22, 2006, Lehigh mailed Brownson and Jimico a letter inviting them to a meeting in Binghamton, New York (the "Binghamton Meeting"). The letter informed Plaintiffs that agreements they would be offered by Defendant were "Temporary Agreements" that would be "closely related" to the long-term agreements Plaintiffs had (at that time) with ExxonMobil. The letter also stated that the Trial Franchise and Lease Agreements would be for a four-month period, which would give Lehigh and the franchisees "the opportunity to become acquainted and understand each other's business practices[, and afford Lehigh] . . . the time to prepare full term contracts."

The Binghamton Meeting was held on May 25, 2006. The presidents of Brownson and Jimico attended the meeting. Officials of ExxonMobil also attended, and participated in, the meeting.

At the meeting, Lehigh conducted a slide show. One of the slides showed Lehigh's "Mission Statement," which was to "[p]rovide the highest level of customer satisfaction in the markets we serve and partner with our Dealers for long term, mutually ...


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