689 F.3d 683
7th Cir.2012Background
- Emmanuel Joseph operates a BP service station franchise in Chicago; Sasafrasnet, LLC is the franchisor/landlord under a DLSA that also functions as a supply contract.
- Sasafrasnet notified Joseph on Nov 1, 2010 of a ninety-day termination, which Joseph sought to enjoin under the PMPA.
- The DLSA allows termination after repeated NSF EFTs; Sasafrasnet required prepayment and later shifted to EFTs with penalties for NSFs.
- In 2010, Joseph had multiple NSF EFTs, largely tied to bank issues and notices from Sasafrasnet about penalties and prepay terms.
- The district court denied preliminary relief finding late payments per se justify termination; the court entered an injunction pending appeal with conditions.
- The Seventh Circuit reverses and remands to allow district court explicit findings on the PMPA’s “failure” and “timely” payment standards under 2801(13) and 2802(c), and to consider related issues.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether 2802(c)(8) creates a per se basis to terminate | Joseph argues §2802(c)(8) requires independent reasonableness review | Sasafrasnet contends §2802(c)(8) is per se reasonable | Per se basis affirmed; remand for 2801(13) analysis |
| Whether district court must make explicit findings on the 'failure' definition | Joseph asserts no explicit 2801(13) analysis was made | Sasafrasnet relies on 2802(c)(8) while disputing 2801(13) relevance | Remanded to consider the elements of 'failure' under 2801(13) |
| Which NSFs are within the franchisor’s reasonable control and timing | Joseph argues some NSFs were mutual or not timely by industry standards | Sasafrasnet argues NSFs were timely or due to Joseph’s control | Remanded to evaluate July 2010 NSFs and control under 2801(13) analysis |
| Effect of May 2010 penalty/notice and prior amendments to DLSA | Joseph claims the May 2010 letter amended terms and limits penalties | DLSA authorizes penalties and termination independent of consent | DLSA language supports penalties and termination rights; remand for complete PMPA analysis |
| Potential separate ground for termination via mystery shopper result | Joseph contends only PMPA §2802(c)(8) at issue; other grounds unresolved | Mystery shopper basis could support termination independently | Remand may require consideration of this alternate basis on remand |
Key Cases Cited
- Hinkleman v. Shell Oil Co., 962 F.2d 372 (4th Cir. 1992) (per se reasonable basis for termination under PMPA §2802(c))
- Lugar v. Texaco, Inc., 755 F.2d 53 (3d Cir. 1985) (limited reasonableness incorporated into 2802(c) analysis)
- Clinkscales v. Chevron U.S.A., Inc., 831 F.2d 1565 (11th Cir. 1987) (timeliness and industry practice considerations in PMPA)
- Rago, Sun Refining & Marketing Co. v. Rago, 741 F.2d 670 (3d Cir. 1984) (contextual consideration of timely payments and industry practice)
- Al's Serv. Ctr. v. BP Prods. N. Am., Inc., 599 F.3d 720 (7th Cir. 2010) (courts’ general PMPA interpretation and per se grounds)
- Moody v. Amoco Oil Co., 734 F.2d 1200 (7th Cir. 1984) (low threshold for preliminary injunction under PMPA)
- Brach v. Amoco Oil Co., 677 F.2d 1213 (7th Cir. 1982) (timeliness and lateness as PMPA grounds)