BP Products North America, Inc. v. Stanley, 669 F.3d 184

BP, a petroleum refiner/distributor, transitioned from direct sales to a jobber distribution model; Eastern Petroleum contracted to supply BP fuel and purchase BP station properties, subject to restrictions.
Stanley, an BP lessee, operated an Amoco-branded station on BP-leased property in Alexandria, Virginia, with an auto repair shop on-site.
Stanley signed a PSA with BP (Sept 2, 2005) to purchase the Property and entered into a 15-year supply agreement with Eastern; a Special Warranty Deed restricted land use to Grantor branded stations for 15 years.
The Petroleum Restriction (PR) prohibits uses inconsistent with a Grantor branded service station, and binds the property as a covenant running with the land.
Telegraph Petroleum Properties, Telegraph’s affiliate, continued to lease and operate under the Eastern arrangement until mid-2008, then ceased selling BP-branded fuel but provided services.
BP sued for breach of the PSA and deed restrictions, seeking damages, injunctive relief, and attorneys’ fees; Defendants counterclaimed for invalidity/overbreadth of the PR and for pricing issues under Va. Code § 2-305.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the Petroleum Restriction is enforceable as written	BP contends PR is valid and enforceable under Merriman; overbreadth should not defeat enforceability.	Stanley/Telegraph argue PR is overbroad and unenforceable, needing narrow interpretation or invalidation.	PR enforceable with narrow interpretation; district court erred in invalidating it.
Whether the PR prohibits non-BP branded auto repair without gasoline sales	PR may permit a non-BP auto repair shop that does not sell BP fuel; district court misread.	PR purportedly restricts any non-BP use unless tied to Grantor branded station; overbroadness questioned.	PR does not bar a non-BP auto repair shop that does not sell non-BP fuel; interpretation narrowly favors enforcement.
Whether the PR’s prohibition on selling listed petroleum products is reasonable and not injurious to the public	Prohibition serves BP’s interest in maintaining BP-branded sales; not detrimental to public.	Prohibition on certain products is overly broad and affects public interests; should be struck.	PR, though broader than strictly necessary, provides fair protection to BP and does not unduly burden the public.

Merriman v. Cover, Drayton & Leonard, 51 S.E.2d 817 (Va. 1905) (restraint must be reasonable between parties and not injurious to public)
Omniplex World Services Corp. v. U.S. Investigations Services, Inc., 618 S.E.2d 340 (Va. 2005) (employment non-compete standard; stricter approach than property restraints)
Savon Gas Stations No. Six, Inc. v. Shell Oil Co., 309 F.2d 306 (4th Cir. 1962) (covenants similar to petroleum restrictions upheld)
Eastling v. BP Prods. N. Am., Inc., 578 F.3d 831 (8th Cir. 2009) (restrictive covenants in petroleum context recognized)
Calumet Council Bldg. Corp. v. Standard Oil Co. of Ind., 167 F.2d 539 (7th Cir. 1948) (interpretation and enforcement of land-use covenants)
Staebler-Kempf Oil Co. v. Mac’s Auto Mart, Inc., 45 N.W.2d 316 (Mich. 1951) (state approach to petroleum-related restrictions)
Bayside Corp. v. Virginia Super Food Fair Stores, Inc., 128 S.E.2d 263 (Va. 1962) (public policy on enforcing covenants affecting public interests)
Providence Square Assocs., L.L.C. v. G.D.F., Inc., 211 F.3d 846 (4th Cir. 2000) (interpretation of covenants running with the land; favor restraint enforcement)
Edwards v. Bradley, 315 S.E.2d 196 (Va. 1984) (Restatement influence on property contract issues)