*1 476 question of whether favor of the defendant on II address the now Count of
We (the claims). complaint extraordinary circumstances exist allow federal The deci- dismissing that the Count I of complaint of the state claims such sion retention of discre- be an abuse vacated and matter remanded to the dismissal here would Cooley suggests. proceedings. district for further court tion Cooley’s law claims is clear that state It running extinguished by of
would applicable Pennsylvania of limi- statute
tations, prejudice to a matter of extreme addition,
Cooley. In this case removed Cooley’s system contrary federal SLATKY, John, Appellant, plaintiff over his choice of forum as v. objection. If to the liti- fairness strenuous COMPANY, AMOCO OIL Gibbs, Appellee, proper gant is consideration under Ser- vice Station America, Dealers injustice Inc., supra, compelling we find that a Amicus Curiae. if this dismissed result matter were support in toto.3 We find for our here No. 86-5102. in decisions of other courts of conclusion Appeals, United States Court of Smith, appeal, namely Pharo v. F.2d Third Circuit. (5th Cir.1980) (that complaining party’s state claims are time-barred a Argued Aug. 1986. retaining jurisdiction) favor of factor Reargued May Banc 1987. v. National O’Brien Continental Illinois Sept. 30, Decided 1987. Co., and Trust (7th Bank 593 F.2d Cir.1979) (plaintiff’s pendent not fore- claim passage required
closed of time claim).
dispose federal therefore hold that the district court its discretion in failing
abused consider Cooley’s the time-bar of state claims
compelled jurisdiction retention over light original
them of his of forum choice applicable the absence of transfer
provision Pennsylvania under law.
V. above, the reasons
For stated we will grant summary judgment
affirm 1447(c) Reiterating gives yet by Pennsylvania Weaver Bank. which courts, to be construed has not, only authority the district court to re- limited solving does assist in Coo- court, questioned to state mand she whether the ley's since this action was not dilemma filed precedent set forth in be extended Weavercould wrong improperly nor court was it removed authorize the to law district court to transfer a state court, point Cooley from the state concedes. pendent. claim to which it could been have Judge Pennsylvania’s post- Sloviter then noted certainly applicable In a situation nor amendment Weaver of 42 Pa.C.S.A. here, analogous we cautioned that dismissal is statute, preservation permit transfer relevant and will be drastic measure utilized claims filed in federal court without the ne- justly extreme cases where it is merited. Poulis cessity By transfer enactment of order. Co., (3d v. Insurance 747 F.2d State Farm amendment, hardship litigants who have Cir.1984). obviously there is no correla While inadvertently wrong filed their actions in the tion between dismissal of a claim and retention by permitting court overcome them to claim, reasoning jurisdiction over a the same transfer dismissed actions on their own ac- prevent a dismissal in Poults ar which would 5103, bestowing cord. This revision to § litigant, retaining jurisdiction gues in favor here. right impact to transfer to the *2 Pa., Weisberg (argued), Harrisburg,
Joel appellant. Daskal, Dimitri Washington, D.C., G. amicus curiae. & Guernsey (argued),
John A. DeStefano Pa., E. Marguerite Guernsey, Philadelphia, Ill., McDermed, Chicago, Corp., appellee. fuel, refiners, principally oil
Argued Aug. motor 1986. franchisees, principally gas their retail sta- BECKER, MANSMANN, Before many of whom lease operators, tion TEITELBAUM, Judges, Circuit stations from the distributors. Evidence at Judge.* District Congressional hearings that dis- indicated 4,May Reargued In Banc using the had been threat ter- tributors GIBBONS, SEITZ, WEIS, *3 Before compel or mination nonrenewal HIGGINBOTHAM, SLOVITER, comply chisees distributor’s BECKER, and STAPLETON 731, marketing policies. S.Rep. No. See Judges. MANSMANN, Circuit 17-19, Cong., reprinted 95th 2d Sess. BECKER, OPINION Circuit OP THE COURT Judge. addition, Congress found that franchisors [1978] 875-77 U.S.Code (hereinafter Cong. “Senate & Ad.News Report”). 873, of the Petroleum Under Title I Market- superior bargaining power had used their Act, (“PMPA”), ing Practices 15 U.S.C. gain of threat termination to an 2801-06, company oil terminates §§ advantage disputes. in contract unfair Id. permissi- or fails to renew franchise for a In passing PMPA, Congress deter- purpose ble unrelated to the fran- mined that franchisees had a “reasonable must make a chisee’s misconduct “bona expectation that “the ]” rela- [franchise] fide offer” to the to sell franchisee the tionship will a continuing one.” Senate by the leased used franchisee in Report 18, at Cong. U.S.Code & Ad.News 2802(b)(2)(E)(iii)(I); his business. 2802- §§ 1978, at 876. The goal PMPA’s (b)(3)(D)(iii)(I). appeal judg- This from the tect a franchisee’s expecta- “reasonable court, F.Supp. ment of the district tion” continuing of the franchise relation- trial, following bench favor of ship while at the same time insuring that appellee against Oil Company distributors “adequate have flexibility ... franchisees, appellant one of its John to respond to changing market conditions Slatky, requires us to decide what preferences.” consumer Senate Re- provision requires “bona fide offer” the oil port Cong. U.S.Code & Ad.News (hereinafter “distributor”) company to do 1978, at 877. accomplish To pur- these and in manner what courts should scruti- poses, the PMPA principally works by lim- nize in determining the distributor’s offer iting grounds on which distributors its bona fides. may terminate or fail to renew a franchise. The district court found Amoco sin- 15 U.S.C. provides 2802. The PMPA § also cerely price, believed its offer derived from requirements, various notification some of practices, its internal business at fair guarantee a franchisee opportuni- market value and that the offer had a ty improper correct conduct with proce- reasonable basis fact because its which he charged. has been See §§ reasonable, dures notwithstanding were higher substantially ofMost for termination or than apprais- the estimate of nonrenewal involve some form of fran- Slatky ers retained and Amoco itself. chisee example, misconduct. For a distrib- We conclude district court erred in may utor terminate for a franchisee’s fail- failing to insist that the offer be objectively pay ure to sums due under the franchise reasonable, i.e., approach that it fair mar- agreement, 2802(b)(2)(C)(incorporat- see § ket value. therefore reverse and re- 2802(c)(8)), or for a franchisee’s § proceedings. mand for further “fraud or criminal misconduct ... relevant Statutory I. The Scheme operation” the property, 2802(b)(2)(C)(incorporating 2802(c)(1)). regulates generally § Title I the PMPA § A distributor fail to renew because relationship between distributors * Teitelbaum, sylvania, I. sitting by designation. Honorable Hubert United States Judge District for the Western District Penn- complaints" ployees agents. 2802(b)(2)(E)(ii), See fide customer § “bona numerous Second, operations 2802(b)(3)(D)(ii). the franchisee’s distributor about 2802(b)(3)(B),or because see either make a fide property, must “bona offer” to operate failure to or, franchisee’s applicable, provide sell the if manner,” safe, clean, healthful "in a right the franchisee a of first refusal on an 2802(b)(3)(C). see § 2802(b)(2) offer made another. See §§ (E)(iii)(I); 2802(b)(3)(D)(i).2 meaning flexibility, To distributors' assure requirement fide offer” the “bona under termination permits also the Act subsection, distribu- nonrenewal of certain or nonrenewal long as a fran- 2802(b)(3)(D)(i), principal decisions. So is the tor business issue offered at least has received been chisee this case. year agreement, distrib-
a three a fran- or fail to renew utor terminate History II. and Procedural Facts “in faith agreement if decides chise *4 years, Slatky For several an Amoco was to business” the normal course of and in franchisee, leasing gasoline a station in geographic the relevant withdraw York, May, In 2802(b)(2)(E).1 Pennsylvania. follow- market area. See § Slatky’s year in which sales volume a franchisees, addition, a three-year for decline, started to Amoco determined not to agree- may fail to renew the distributor Slatky’s ground renew franchise on the property who leases a ment of franchisee uneconomical de- renewal be if deter- the distributor from the distributor changes spite any or reasonable additions in the normal “in faith and mines relationship to which to franchise course of business: Slatky might agree. gave proper Amoco (I) marketing prem- to convert the leased notice, it and because based nonrenewal to a use other than the sale or distri- ises 2802(b)(3)(D)(i)(IV), proceeded, in a on § fuel, bution of motor 28, 1985, letter dated June to offer to sell alter, to, replace (II) materially to add or $306,300.00 Slatky the station without premises, such underground pumps. tanks (III) premises, sell such testimony Amoco at reveals that arrived (IV) of the franchise rela- that renewal process. through two-step tionship likely to be uneconomical to despite any franchisor [distributor] First, Melvin employee Amoco’s O’Dell changes or reasonable addi- reasonable early May, the land alone in evaluated provisions the franchise tions to the appraisal three 1985. O’Dell based his acceptable which comparable properties, had allegedly chisee.” He years sold several before. testi- been 2802(b)(3)(D)(i). however, fied, no he made effort “compa- his about these verify information terminates or Whenever distributor reports on other rables” or to find other relationship for renew a franchise fails to testified that properties. O’Dell further purposes, one of these comparable property that he his best requirements. other he must meet several had been understated land later found First, may not terminate the distributor suitable as a area and that was not proper- in order to convert the 40% fail to renew comparison of its loca- management by its own em- basis ty to direct Congress Report disparity provided an incentive to distributors explained that the 1. The Senate length. provide of at least franchises power bargaining “as increased shorter fran- frequent periods renewal inter- and more chise termination, has a franchisor 2. In the case Report at U.S. vals are utilized.” Senate property option: sell the he third By Cong. & Admin.News at Code of- and have that franchisor franchisor another fer the franchisee a permitting or nonrenewals terminations agreement compa- who had of franchisees business reasons has with other franchisor rable to those the franchises, year or were offered three obtained (E)(iii)(II). 2802(b)(2) See § other franchisees. analysis, ap- challenge Based on this O’Dell tion.3 for nonrenewal but $155,000. praised of the land at the value claimed that $306,300 Amoco’soffer of not a bona fide offer because it was not at appraisal, Following the land another fair market value. Two apprais- certified Bogdanowicz, employee, Charles ers hired Slatky valued the performed appraisal prop- of the an initial $158,200 respectively at (including pumps erty improvements. Bogdanowicz had no tanks) $145,000 (not including experience appraisal formal but had built pumps tanks). An parts stations for Amoco several praisal eventually commissioned Amoco Pennsylvania. replace- He estimated the litigation for this appraised improvements, including ment cost of the $221,000 including also not pumps and lines, $121,300. tanks and to be tanks. estimates, Based on these two trial, After a bench the district court held O’Brien, manager, Eugene real estate rec- that Amoco obligation had fulfilled its $276,300 ommended a to the dis- make a bona fide offer. accept- The court manager, Although trict Lemuel Warfield. general ed as a requirement standard the disagree he did conclu- that the offer be “sincere and have a rea- up appraisal, sions used to come with sonable basis in fact.”5 The court found Warfield sent a note back to O’Brien stat- sincerity standard met because Amoco ing, they today “costs as are and the im- “general” procedure followed its provements property, that we have on the determining selling price appraisal would believe the would be more *5 and because it price believed its offer to be $350,000, reasonable at less tanks and at fair market value. The court also found lines.” Warfield asked O’Brien to review that Amoco’s offer had a reasonable basis figure, passed request O’Brien this because, although fact appraiser its to O’Dell.4 appraisal followed techniques, formal appraisal O’Dell then reviewed his “the used them were reason- up $185,000, came with a land value of able” and hence the “offer was not arbi- $30,000 higher than the first estimate. trarily made.” The district court made no Warfield, a letter to O’Brien stated that finding whether actually ap- offer figure this new was “about as far as we proached value, fair market Slatky as go.” think it should Warfield then offered claimed required, the statute or whether $306,300 to sell the Slatky station to for the offer was a reasonable estimate of fair ($185,000 $121,300 for plus the land for the appeal market value. This followed. improvements), explicitly stating that this figure did pumps. not cover the tanks and III. Subjective Amoco’s Good Slatky After complaint filed his in this Faith Standard case, Warfield Slatky explain- sent a letter ing that the exclusion A. of the tanks and pumps was offering prop- mistaken and principal Amoco’s contention is that we erty $256,300plus $50,000 for the tanks interpret should the term “bona fide” to pumps. require that a distributor make its offer
Slatky’s
damages
suit seeks
only
subjective
and an in-
good faith. Amoco
junction ordering
proper- grounds
Amoco
sell
argument
analogy
on an
be-
ty to him at fair market value. He did not
tween the distributor’s determination of an
Testimony
Slatky’s
Cir.1985),
3.
provision
indicated that
in which we dealt with the
price
compa-
the claimed sales
rable
for the next most
permitting
in the PMPA
nonrenewal of a fran-
property
could not be verified.
chise because of “bona fide customer com-
2802(b)(3)(B).
plaints.”
15 U.S.C.
We inter-
4. Warfield had earlier told
Slatky
he con-
preted the term bona fide there to mean "sin-
$500,000.
sidered the
worth
having
cere and
a reasonable basis in fact.” 778
5. The
F.2d at 1008.
district court
took this standard from
(3d
Corp.,
Robertson v. Mobil Oil
have it too” if we were to B. merits of the the business distributor’s judgment also to the but distribu- Apart its analogy between tor’s sense of the fairness its offer of provision bona fide offer and the decision compensation. franchise, not to renew a Amoco claims subjective good that a faith standard Second, assuming the even correct general consistent purposes with the analogy ness of the between nonrenewal According Amoco, statute. the statute decisions, decisions and offer Amoco only seeks prevent “arbitrary and dis procedural confuses restrictions with sub criminatory” terminations and nonrenewals ones. stantive The substantive restriction leaving while otherwise un distributor on the nonrenewal decision comes from the pursue fettered discretion its own eco limitation on the distributor’s By requiring nomic only self-interest. “good renewal. The faith and normal faith, good distributor an offer in make requirement course of business” is essen claims, prevent can courts discrimi tially procedural direction to the courts natory allowing conduct while otherwise judge about how whether distributor distributors to act accordance with their has abided the substantive restrictions self-interest. only and failed to renew because of one of statutorily permissible Thus, reading reasons. This require- statute’s ments, challenge what the court in a decides Congress’s trivializes goals. nonrenewal decision is not whether the dis Distributors have no reason to mis- according tributor determined not to renew treat simple out of spite, franchisees to some Congress elusive notion of faith but did not attribute such moti- it sincerely whether made a decision to sell vation to Report them. The Senate makes accomplish or to alter it or to “arbitrary clear that the and discriminato- some purpose permitted ry” other business un terminations and nonrenewals Con- der the Report gress statute. Senate stop See at wished to were those at aimed Cong. U.S.Code forcing & Ad.News at accept marketing the franchisee to (“good preclude faith test practices is meant sham not set out agree- determinations”). 12-19, 36-37, ment. Report Senate at U.S. Cong. 873-877, Code & Ad.News suggestion that the statute Obviously, Congress 894-896. found that requires a distributor to determine an offer using power distributors had been “good procedural faith” takes this *7 over franchisees to further their own self- judicial scrutiny standard of and turns it remedying interest. In “disparity this in into a substantive restriction on the distrib- bargaining power” by limiting requirement utor’s behavior. a mere But nonrenewal, for Congress termination and to make an offer “in faith” is essen- protected the franchisee’s interests tially Failing suggest without content. to curbing those of the distributor. Senate sincerely decide, what a distributor must it Report 18, Cong. U.S.Code & Ad.News suggests only floating good- kind of some 1978, at 876. ephemeral, will. Because it is so a fran- virtually chisee would never provisions quite be able to Other also re- explicitly show its absence. Even if we were to strict a distributor’s self-interest in favor accept analogy particular, between the Congress offer franchisees. In price terminating proscribed decision and a decision not to renew a a distributor from franchise, we adopt failing would therefore a franchise for to renew “good only purpose transferring faith” as standard a standard of a to direct judicial scrutiny. management In to employees. order decide wheth- its own See 2802(b)(2)(E)(ii), 2802(b)(3)(D)(ii). er the distributor made the § §
483
student,”
Congress’
variously
a
fide
8
part
for
“bona
U.S.
in
address
provisions
These
1101(a)(15)(F)(i),
engaging
for a father with
were
C.
a
major distributors
§
that
fear
independents
parent-child relationship”
“bona fide
pricing
drive
with
predatory
to
in
1101(b)(1)(D),
child,
for
Cong.Rec.
8 U.S.C.
a “bona
S12761-62
out of business. See
§
(statement
vessel,
5, 1978)
of Sen.
fide member of the crew” of
8
May
ed.
(daily
1287,
employees
or for
provisions also reflect U.S.C.
of a “bona
Durkin).
§
But these
major
incorporated nonprofit
distribu-
fide United States
Congress’ concern
1430(c).
organization,”
own stations
8 U.S.C.
While
operate their
§
desire to
tors’
of those
fit
purposes
franchisees to
who claim to
into
pressing
their
in
resulted
categories may
to
See
rent.
these
be relevant
a de-
increases
or face stiff
sell out
fides,
termination of their bona
H10,385
April
(daily ed.
the status
123
Cong.Rec.
Conte). By
turn at
(statement
Rep.
of each would seem to
least sub-
1977)
stantially
objectively
interest
verifiable charac-
franchisee’s
tecting
way
from the
teristics.
continuing to
a livelihood
earn
Congress limited the
property,
occupational qualifications
Bona fide
for
shift to more
ability of the distributor
exceptions to
employment, which serve as
management.
profitable direct
laws,
see
employment
our
discrimination
illustrate,
2000e-2(e),
specific
U.S.C.
U.S.C.
work
provisions
§
these
As
similarly.
qualification
For a
passing
PMPA indicated
very
act
fide,
employer
not
advanced
must show
rejection of
view
Congress’s
necessary
support
the facts must
gasoline retailers that remedi-
but
major
by the
inability
necessity” and the
unnecessary
its “reasonable
legislation was
al
accomplish
purpose through
the same
franchisees
of distributors and
interests
v.
means. See Dothard
discriminatory
See, e.g., Senate Hear-
less
harmony.
were
321, 329,
Rawlinson, 433 U.S.
97 S.Ct.
(statement of Ken-
supra, at 319-22
ings,
2720, 2726,
(1977) (interpret-
these establish that someone). franchisee but With such a phrase gains meaning fide” “bona from desire, however, the distributor would set its statutory context. must therefore That, an offer at fair market value. meaning derive the fide offers to by definition, highest willing is the sell under the PMPA statute’s buyer pay, and an offer at fair mar legislative purpose. protects ket value the franchisee’s reason expectation being able able make a discussed, As overriding we have living property. with the franchise purpose of Title of the PMPA is to tect the expectation franchisee’s reasonable B. continuing relationship. the franchise Because of adjust Having requirement, the distributor’s need to we must stated conditions, changing now in what courts should decide manner *9 Congress permitted to end the scrutinize distributor’s offer to deter- distributors
485 price rep- its require- distributor believed complies with the file it whether mine Corp., fair market value. Even if the v. Mobil Oil resented ment. Robertson (3d Cir.1985), belief, we de- have that sincere 1008 distributor did F.2d however, fide” the context also determine courts should fined “bona nonrenewal permitting objectively rea- provision PMPA whether the estimate customer i.e., of “bona fide approached a franchise the offer sonable. whether having a mean “sincere complaints” to fair market value.7 similarly in fact.” We reasonable basis Congress’s decision not guided by are here V. The Need Remand market val- the term “fair actually to use case, disagreement In this our fide, term bona but instead ue” The district the district court narrow. That degree of deference. suggests some sincerely court found that Amoco believed recognition indicates, believe, choice we Slatky at fair market value. its offer be in- always almost 'value’ that “the word pointed has to considerable evidence that prediction, guess, a conjecture, a volves contrary finding, partic might support a v. Corp. Hess Com- prophecy.” Amerada apparently sloppy appraisal meth ular (3d Cir.1975) missioner, F.2d pressures placed apprais ods and to on the cases). “[Tjhere is uni- no other (quoting department by manager, al the district Le of fair market val- index versally infallible Warfield, higher resulted in a muel that range prices There be ue.” Id. However, finding price. court’s the district being fair market claims to with reasonable sincerity on the of Amoco’s belief is not to mandate that courts Were we value. clearly erroneous. the distributor’s offer determine whether value, distribu- at fair market actually was The district court also found that comfortably that rest rarely tors could “procedures” by em used the Amoco eventually be determined their offer would reasonable, ployees were this value. the court to fair market by be finding, apparently judgment it risked a reasonable basis in the offer had hand, scrutiny a standard of On the other following of reasonable fact.8 The mere on the distrib- simply focused whether necessarily procedures, does not represent fair its offer utor believed To deter in a reasonable estimate. leave the franchisee result market value would reasonable, through the estimate was injury sloppiness mere mine whether open to specific might prove diffi- the district court must focus error. Such a focus also always their valua apply, for intentions are used cult to facts discern, we deal from them. especially when and the inferences made difficult tion the intentions of individuals but not with presented that the land Slatky evidence organizations. in- appraisal based on out-of-date the im- comparables and that appropriate therefore that courts believe lo- provements appraisal represent did not in a should scrutinize the distributor’s offer Slatky presented also testi- cal costs. adopted that we in Rob manner similar to appraisers that disa- mony first if Courts should determine ertson. cedures used F.Supp. them were reasonable.” we have held that sincere belief 7. While context, (as defined) objective are essen- at 1226. In the reference reasonableness pears techniques appraisal. in the determination of the to refer broader tial elements offer, thereby cetainly do not exclude the It does not refer to the actual choice of fides possibility them, comparables, there be other relevant or the the measurements example, approaching relating comparable an offer fair factors. For one to another. formula hedged might value with unreason- of "reasonable- court's standard The district able conditions of sale. suggested that court unclear. The ness” is also long so as the procedures were reasonable Exactly the district court meant what arbitrarily Id. We do made.” “was not appraiser’s "procedures" reference to whenever is reasonable an offer not believe that full reads: context is unclear. The sentence arbitrary. offer must be A reasonable Bogdanowicz is not "Although Mr. O’Delland Mr. did value. approaches fair market appraisal techniques, the one apply formal *10 i.e., appraisal evaluations of that the franchisor’s usual markedly with the greed Indeed, appraiser, practices produced price Amoco’s own which the fran- Amoco. preparation, val- reasonably hired for trial apparently represented chisor believed the $31,000 less than the property. ued the value The burden would The district by Amoco. offered amount then shift to the franchisee to raise a tri- specific these have evaluated regard court should able issue of fact with to the fran- apparent face of an challenges. In the good chisor’s faith. appraisals that
congruence independent considerably too Amoco’s estimate I. obligation to state an high, the court had Congress Amoco estimate I found the enacted Title of the PMPA to clearly why it remedy disparity bargaining power objectively reasonable.9 petroleum which enabled franchisor to court failed to find Because the district right to terminate obtain a franchise (in addition to a objective reasonableness relationship for minor contract violations offered to belief that changes in circumstances. Evidence at value), judg- at fair market franchisee Congressional hearings demonstrated that court will be ment of the district reversed prospect franchisors used the of nonrenew- proceed- remanded for further and the case compel comply al to franchisees to with opinion. ings with this The dis- consistent marketing policies, franchisor’s and frus- to make further fact trict court will have expectations trated the reasonable renewal findings. it to the discretion of We leave through arbitrary of franchisees and dis- reopen the district court whether to criminatory cancellations. generally See record. Cong., 17-19, S.Rep. No. 95th 2d Sess. MANSMANN, Cong. Judge, dissenting. reprinted in 1978 U.S.Code & Ad. Circuit (the Report”). News 875-77 “Senate respectfully disagree I dissent. strengthen bargaining posi- In order to regarding majority’s position what evi- franchisees, Congress tion of drafted Title dentiary a franchisor must meet to burden prohibit terminating I to a franchisor from fide, establish that an offer bona failing agreement to renew a franchise what evidence a franchisee introduce except specified on in the statute. in order to raise a triable issue of fact on requires The statute also written notice of fides of an offer to sell the the franchisor’s intent to terminate or fail puts good premises. chise The statute 2804(a). to renew. 15 U.S.C. § issue, faith of the franchisor at property. market value of the franchise legislative history of the PMPA rec- certified, opinion of a Reliance inde- ognizes legislative purpose to an essential pendent competent appraiser would be evi- provide statutory grounds for termination good of the franchisor’s faith in dence ar- nonrenewal which would not be “so However, riving offering price. at its noth- meaningful deny as franchisees broad supports majority’s in the statute protections arbitrary or discriminato- that, case, every indepen- intimation pre- ry terminations and nonrenewals or appraisal required part of dent renewal fulfillment of the reasonable vent evidentiary franchisor’s initial burden and expectations of the franchisees.” Senate required district court is make Cong. & Ad. Report at U.S.Code determination of fair mar- Yet, competing legislative News at ket value. legitimate expressed for “the concern was able to termi- a franchisor to be needs of I believe that once the franchisor has or not renew a franchise nate a franchise that it has arrived at its offer- established relationship based certain actions ing price in accordance with its usual 19, 1978 U.S.Code praisal Id. at practices, it is entitled to an infer- the franchisee.” faith, Congress also Cong. Ad.News at 877. ence that the offer was made & suggest appropriate. 9. We do not one valuation method is *11 statute, requirements of of the 15 U.S.C. importance particular recognized the flexibility so that fran- 2804. providing “adequate § mar- changes may initiate chisors dispute statutory The section here changing respond to to
keting activities that once a franchisor has made an vides prefer- consumer conditions and economic determination to renew a Id. ences.” agreement in accordance with the or grounds termination statutory The statute and has notified the of franchisee attempt to Congress' reflect nonrenewal renew, its decision not to the franchisor competing among these a balance strike must make to the franchisee a “bona fide either Permissible concerns. or offer” to sell otherwise transfer the specific or nonrenewal include termination marketing franchisor’s interest in the franchisee, of conduct the of courses premises grant right or of first refusal of bankruptcy, and fraud or such as events by 15 made another. U.S.C. parties, or the fran- of the agreement 2802(b)(2)(E)(iii),(b)(3)(D)(iii). §§ to withdraw determination chisor’s agreed parties places the PMPA that geographic 15 U.S.C. area. See proving upon the franchisor the burden 2802(b)(2)(A)-(E). com- Customer §§ compliance statutory require- with operate the franchisee to plaints, failure of including ments the fact that its offer was sanitary man- franchise in safe parties stipulated fide.” “bona that agree ner, parties to failure to ground Slatky’s Amoco’s for nonrenewal of agree- changes in the franchise reasonable permitted franchise was a business decision grounds for nonrenewal. ment are also 2802(b)(3)(AHQ. A the statute and that the franchisor 15 U.S.C. See §§ if complied requirements a franchise fail to renew with the notice chisor also “in 2802(b)(3)(D)(iii) decides “in faith” he the statute. Section to convert the requiring course of business” provision normal fide applicable a bona use, materially to another to alter premises offer, parted parties company over and the or premises, premises, to sell the applied of “bona fide” to be the definition 15 U.S.C. is uneconomical. the franchise here. 2802(b)(3)(D). trial, court a bench the district After prima under the To facie case establish seeking In judgment for Amoco.1 rendered PMPA, provisions of the enforcement legal to the correct standard to ascertain need establish termi- franchisee relied on our deci- apply, the district court agree- of a franchise or nonrenewal nation Corp., 778 sion in Robertson v. Mobil Oil 2805(c). The franchisor ment. U.S.C. § Cir.1985), (3d finding F.2d going forward then has burden Slatky was bona fide. Amoco’s offer affirmative de- to establish evidence in the con- defined bona fide Robertson the termination nonrenewal fense that PMPA, of the section text of a different Id. permitted under the statute. 2802(b)(3)(B) allows termi- namely § the decision not to renew based When of a franchise based nation or nonrenewal judgments permit- upon one of the business complaints. customer on “bona fide” (b)(3)(D), 2802(b)(2)(E) ted under § complaint as “sin- bona fide there defined a in defense must also establish franchisor having a basis fact.” reasonable cere and pur- not for the the determination was Id. at 1008. converting premises opera- pose Amo- court concluded The district agents of the fran- by employees or tion man- in a reasonable account, co’s was reached own for the franchisor’s chisor business, by ner, (b)(3)(D)(ii), normal course 2802(b)(2)(E)(ii) in the U.S.C. § any prop- appraise who employees complied with the notice Amoco’s it has and that pending quo outcome damages maintain the status Amoco had counterclaimed 1. trial, judgment in possession plaintiffs ser- entered district court caused expiration beyond date. plaintiff the lease counterclaim. vice station Relying on the favor parties’ pretrial stipulation on the sell, erty buy, or lease Robertson, Amoco intends able basis fact.” 778 F.2d at procedures normally present and who followed Our task is to determine precisely evaluating any proper- used for what our Robertson definition re- quires in the ty for sale. The court found that “al- context of offers to sell leased marketing premises though manager] pursuant real estate [Amoco’s 2802(b)(3)(D)(iii)of reappraise the re- the PMPA. requested land which valuation, higher there is no sulted in a purpose The avowed of Title I of the *12 directed to increase evidence that he was PMPA “is the establishment of minimum upon The court relied these appraisal.” his governing Federal standards the termi- findings concluding that the offer in had a nation and nonrenewal of franchise rela- in The reasonable basis fact. district court tionships for the sale of by motor fuel finding regarding made no of fact whether supplier franchisor or of such fuel.” Sen- approached the fair the offer market value 15, Report ate 1978 Cong. U.S.Code & marketing premises of the as determined Congress implemented Ad.News at 873. by appraisal, independent an but the court objective primarily by its delineating clear- found the offer to be sincere in that the ly grounds on which the franchisors property was offered at what Amoco be- may terminate or refuse renewal of an lieved was the fair market value. The existing franchise. See 15 U.S.C. 2802. § argument rejected plaintiff court above, As discussed the remedial scheme of in that order for franchisor to meet its attempts the statute to balance the fran- statutory obligation proving a bona fide bargaining chisee’s relative lack of power PMPA, offer under the the franchisor must expectations reasonable renewal equals demonstrate that its offer against legitimate property rights and proaches a fair market value as determined economic interests of the franchisor. See by independent appraiser. an Report Senate at 18-19. appeal, plaintiff argues On that the agree I majority protection with the finding district court erred in first requires of the franchisee that the fran- Amoco’svaluation were reason- chisor though truly behave as it wished able, second, applying legal stan- Thus, sell the premises. franchise consist- require independent dard which did not an Robertson, ent with for an offer to be bona consideration of the fair market value of appraisal upon fide the which it is based marketing premises. must have a reasonable basis fact. I disagree majority’s with the regard- view Our statutory review cases of con- concept role the what of “market plenary.
struction is val- Chrysler Credit ue” play should Corp. the court’s determina- v. First National Bank Trust Com- tion of the franchisor pany 200, (3d has con- Washington, 746 F.2d 202 whether formed to the Cir.1984); bona fide offer. Minerals, Universal Inc. v. C.A. Co., Hughes 98, (3d & 669 F.2d 101-02 majority implies The that a franchisor Cir.1981). Findings of fact should stand may not proof meet its burden of to estab- clearly unless Leeper erroneous. See v. lish the bona fide offer element its de- States, (3d United 756 F.2d 308 Cir. affirmatively establishing, fense without 1985). addition, offering price “objec- that its reasonable,” tively degree measured
II. “approaches] to which the offer fair mar- legisla- Neither the statute itself nor the ket indepen- value” as determined history tive provides of the PMPA appraiser us with dent the district court. explicit definition of majority requires “bona fide.” In The effectively the fran- Robertson we arrived at a definition of chisor to introduce evidence that relied particular bona fide statutory upon suited to the opinion independent apprais- of an context of the namely, arriving offering price. that Con- er in at its The PMPA— gress intended “bona fide” majority require customer com- would then further plaints to be “sincere and a reason- the district court de- make an hav[e]
489
range of
renew
acceptable
fair
a franchise. Under the
termination
PMPA,
requirement to
premises.
prop-
offer the
for the
market values
erty
triggered by
in the PMPA
sale
basis
for
disagree.
I find no
objective
evi-
majority’s
reliance
chisor’s
nonre-
imposing
2802(b)(3)(D),
set forth in
dentiary standard.
newal
regarding
economic decisions
involve
mar-
must
process
statutory construction
strategy
keting
or recommitment of re-
plain
mean
first
in the
instance
look
nothing
sources. There is
in the
statute
National
ing of
terms. See
a statute’s
compliance
indicate
with
(3d
Larson, 760 F.2d
Freight v.
2802(b)(3)(D)(iii)
anything
demands
more
902, 106
Cir.),
denied,
U.S.
S.Ct.
cert.
required
compliance
than what is
with
(1985).
“The common
L.Ed.2d
trigger
applicability.
the sections which
fide, consistent
legal definition of bona
governing
those economicde-
standard
definition,
non-legal
with
‘[i]n
they
good
is that
“in
faith
cisions
made
faith;
openly,
sincerely
honestly,
and in the
normal course
business.”
real,
actual, genuine,
and not
*13
”
2802(b)(3)(D)(IMIV).
Robertson,
§§
at
778 F.2d
feigned.’
(5th
Dictionary
ed.
Black’s Law
quoting
may reasonably
through
assume that
context,
1979).
legal
term
the
bona
In a
procedures
ordinary
its
valuation
a fran-
exclusively
subjective
fide looks almost
selling price
chisor
determine a
will
which
example,
pur
fide
good
For
bona
faith.
considers to be market value
that the
value, a
chaser,
fide holder for
bona
a bona
result,
will,
valuation
as a
have a reason-
possessor
fide
mortgagee
fide
or a bona
able
in
basis
fact.
illegal
property may
party
be
transac
ordinary
proce-
The fact that
business
yet exempt
liability
tions
expressly required
are not
dures
subjective good
taken in
faith
action was
language of the section under consideration
prior
superior
irrespective of
or
another’s
in the
does not mean that a decision
ordi-
right
property.
to the
Additional
claim of
nary
course of business
not evidence a
2802(b)(3)(D)(iii)requires
ly, nothing in
§
bona fide offer. The absence of the ex-
sell, transfer, or as
franchisor to offer to
procedures
press requirement of normal
sign
marketing
its interest
the leased
suggests
merely
that other courses of con-
price
approxi
premises for
which in fact
duct,
e.g., the use of outside
pre
must
mates fair market value. We
practice,
even if not the franchisor’s usual
sume,
accordingly,
Congress,
pre
good
could evidence
faith as well.
I find
offer
scribing a bona fide
did not necessar
requires
nothing in the
PMPA which
equate
ily
the franchisor’s
intend
in the
franchisor to offer its interest
mar-
enforcing
faith
court’s
current franchisee at
keting premises to a
determination
fair market value.
price
less
any
than
which
express statutory language governs
No
from a
expect
chisor
to receive
third
would
may inform
what evidence
the bona fides
2802(b)(3)(D)(iii)
party purchaser. Section
concept
of an
I believe the
of a bona
offer.
(II)
might
contemplates that the franchisor
2802(b)(3)(D)(iii)
fide offer as utilized
marketing
actively solicit bids
good faith, i.e.,
contemplates subjective
price
public
premises
given
at a
purpose
undertaken without motive or
large.
requires only
The
that the
section
franchisee,
against
discriminate
which
franchisee a
franchisor must
“offer[]
through
objectively
be
evidenced
offer,
right
made
of first refusal ...
procedure
use of the franchisor’s normal
another, to
franchisor’s
purchase such
posi-
appraising property
sale.
premises.”
interest in such
2802(b)(3)(D)(iii)
statutory
tion of
in the
would be
purposes of the statute
suggests
remedial scheme
that the fran-
offer to sell
by defining a bona fide
served
offering price
chisor’s decision as to an
operative mar-
fully
subject
as an offer
sell
should
to a standard of
be
intent
the same as
keting premises,
offer is
governs
which
similar to that which
economic de-
make to
may support
franchisor
terminations which
a decision
buyer
being
a with reasonable claims to
fair
and based
any prospective
marketing premises
Consequently,
ar- value.
a test of Amoco’s
of the
valuation
require
bona fides cannot
more than
through the normal
that it
rived at
informing
opinion
its
relied on a
as to
franchisor
well-founded
used
i.e.,
any
property,
of its market value of the franchise
price to
decision at what
therefore,
reasonably
Initially,
whether Amoco
believed its of-
property for sale.
value,
evidentiary bur-
fer to
at fair market
carry the
the standard
franchisor need
applied by
arrived at
the district court. This
show that the franchisor
conclu-
den to
fully comports
Congressional
price through the normal
sion
with the
asking
buying
expressed
in the
procedures employed
aims
the overall scheme and
praisal
property.
legislative history
PMPA.
selling
of its
Such
presumptively satisfy our
showing would
Co.,
Slatky cites Tobias v. Shell Oil
requirement of a sincere offer
Robertson
(4th Cir.1986),
F.2d 1172
and Brownstein v.
reasonably
in fact.
based
Co.,
F.Supp.
Arco Petroleum Products
(E.D.Pa.1985),
squarely holding
If
met its initial evidentia- 312
the franchisor
burden,
ry
approach
the franchisee could then intro-
a “bona fide offer” must
fair
any arbitrary
plaintiff,
duce evidence of
discrimi- market value. The
mis-
natory
places
from the
variation
franchisor’s nor-
his reliance on these authorities.
practices.
Brownstein,
Slatky
plaintiff
mal
If as
com-
attacked the
plains,
really
franchisor did not
desire
of Arco’s offer to sell him the
fides
premises
selling
premises
and inflated the
per-
to sell the
at a
sixteen
sale,
prevent a
appraiser
franchisee could cent above the value Arco’s
offer,
*14
challenge
assigned
the
fides
the
property.
of
for
Arco
Since
could
example,
introducing
by
why
evidence to contro- not
apprais-
demonstrate
it inflated its
supporting
appraisal,
figures,
the facts
the
vert
the
er’s
the district court held that the
them,
conformity
inferences drawn from
unex- offer was not in
with the offer-
plained
appraisers’ figures
inflation of the
general practice
or’s
selling property,
arriving
offering
price.
at an
and was therefore not bona fide.
Id. at
analysis.
316. This result conforms to our
III.
We note that the district court stated
part company
majority’s sug-
I
with
that:
gestion
independent
that the mere fact that
Even had Arco demonstrated that
opinion
arrived at a different
of
procedures by which it arrived at the
property
the value of the
an
raises
issue of
offering price were consistent with those
fact as to the bona fides of the franchisor’s
cases,
utilized
non-PMPA-restricted
offer.
am not convinced that it would have sat-
Act____
merely
Market value is
opin
a matter of
isfied the strictures of the
[A]
subject
ion until
property actually
proper reading
compels
of the Act
changes
Corp.
hands. Amerada Hess
v.
conclusion that for an offer to be bona
Commissioner,
75,
(3d Cir.),
517 F.2d
83
fide—that
is actual —it must meet or
denied,
1037,
574,
cert.
423
very nearly approach
U.S.
96 S.Ct.
46
what the offeror
(1975).2
412
L.Ed.2d
the majority
As
rec
believes to be the fair market value of
ognizes,
range
prices
there
a
property
of
[footnote omitted].
”
Commissioner,
Corp.
conjecture,
guess, prediction,
prophecy.’
In Amerada Hess
v.
a
83,
cited the
Corp.,
citing
classic formulation of fair market val-
Amerada Hess
517 F.2d at
An
Commissioner,
314,
(2d
ue: "'the
at which the
drews v.
Cir.),
135 F.2d
317
change
denied,
willing buyer
hands
between
and a
cert.
320 U.S.
88
64 S.Ct.
seller,
willing
being
(1943),
any compul-
quoting
neither
under
L.Ed. 444
Commissioner v. Mar
shall,
buy
having
(2d Cir.1942).
sion to
knowledge
or sell and both
reasonable
F.2d
125
946
Further
” Id.,
more,
citing
universally
of relevant facts.’
United
"there is no
infallible index of
546, 551,
Cartwright,
Corp.,
States v.
411 U.S.
S.Ct.
fair
market value.” Amerada Hess
1713, 1716,
(1973), quoting
supposedly objective
by Amoco’s O’Dell, rep- capital the Melvin investment IV. prepared the area who resentative Applying legal the standard enunciated value, the testified that he appraisal of land by found the above to the facts as district capital representa- had been a investment court, I would hold Amoco’s offer Amoco years for 25 of his 33 with and tive premises sell the was “bona fide.” in spent years the first 8 with Amoco properly found district court the fran- positions. His estate related other real bona fide chisor’s offer to be because the past responsibilities for the duties and opinion sell, offeror at its arrived the value buy, lease and years have been to Pennsylvania of the in accordance with nor- properties in appraise Amoco mal offered to adjoining and sell the He testified the states. and four plaintiff training, at a numerous on-the-job based to extensive upon appraisal. my li- view the trial and a real estate appraisal seminars roughly appraisals testimony performs the court had discretion credit He cense. he relies employees respect year. of a Factors of Amoco’s to Amo- in the course comparable arriving determination good they co’s faith in at what include on offering market area evaluation perceived price. to be fair sales the being appraised simply by introducing this burden to the site evidence in relation them location, appraisals. Something size, per- of lower more geographic accessibili- as to required zoning, and traffic vol- suasive would be than evidence ty, appeal, overall appraisers inspections that other were of a different makes on-site ume. He subject opinion. properties and the comparable
property. majority’s analysis, Under the an inde- pendent Bogdanowicz, appraised appraisal of market value who would
Charles been, only way good his to determine improvements, had at the time of faith. upon opinion employed by qualified Amoco for 13 Reliance of a testimony, spent independent appraiser persuasive last 5 of were as a would be years, the which project engineer. capacity In this he de- evidence of a franchisor’s faith but it certainly not signs facilities to be constructed various would be conclusive. The requires him properties, job opinions appraisers and the improvements, se- reasonableness of the to estimate cost franchisor’s reliance bids, purchase equipment subject testing cure service them would be facilities, supervise scrutiny and, station construction cross-examination as with and, month, approximately appraise employee appraisers, twice a the district court improvements equip- weight give station would have to service decide what opinions. ment. Warfield, D.C., Washington, majority
Lemuel also insists that the district manager, specific district testified that based on court must focus on the facts used gallons subject the number of sold at the the Amoco in their evaluation purchase Amoco could not a re- and the inferences made from them. i.e., placement property, potential agree, only with the but to the extent that the fran- pump many gallons, building produce for the chisee is able to evidence to raise assigned by and land value an issue of only placed fact. The fact praisers. plaintiff He testified that Amoco would issue here was that O'Dell’s pay original appraisal have to close to half a milliondollars to of land value had been Nevertheless, replace property. on a based considerable underestimation of despite protest his only square footage which resulted in a principal compa- appraisal closer property, Turkey land value and an rable Hill Market site. $30,000, O’Dell, opinion increase of his figures corrected the profitable appraisal station was more for Amoco his second and testified that he than reflected the offer was not taken had determined that the underestimation arriving into change consideration at the offer- his estimate of the value Thus, price. subject property evidence of of the because even with regarding record square footage Turkey matter of “value to the additional Amoco” was that income from Hill considerably alternative site was smaller than the *16 uses was by premises Amoco in set- adapted considered and was not to ting offering price. its many as uses.
I would hold that the majority franchisor’s evi- The holds that where the fran- of a through dence arrived at its chisor introduces evidence of appraisal procedures by experts appraisals usual considerably and which are lower qualified testify offer, who are to as to the value than the franchisor’s the district of the clearly why raised an inference that the court must state it finds the offering franchisor believed it objectively the franchisor’s offer to reason- be premises Since, admits, to the price. majority franchisee at a fair able. as the proof good faith, precise This inference satisfied the burden of franchisor’s and not the good as to the franchisor’s property, faith defense market value of the is the ulti- plaintiff issue, unless the statutory to raise an I able mate do not believe the good issue of fact as to the franchisor’s franchisee issue of fact raises a triable faith. do not believe the simply by introducing franchisee met evidence of lower weight Something persuasive credibility and of O’Dell’s more testi- appraisals. mony, subject properly other within the discre- that required than evidence be would figure. tion of the trial court. different appraisers arrived example, suggests also place majority The im- might, for plaintiff The provements’ appraisal represent of- did not in issue lo- good faith the franchisor’s Bogdanowicz, however, cal costs. that the testified persuasive evidence fering experience from his with new construction its usual not follow chisor did , Delaware, Pennsylvania, Jersey, or in New employ its usual criteria particularly in competent Maryland, Harrisburg, and were not witnesses franchisor’s prop- he conclude that the concerning the value construc- testify Harrisburg i.e., figures developed by the costs in the area are com- tion erty, that the adjustments parable Philadelphia area where he franchisor’s speculation, during had done most of his construction figures based their were years. If conjecture. employees did the last three guess, or some of the factors or consider not know arguments by the plaintiff The made and appraisers, they by certified ordinarily used majority adopted by the are essence chal- details may asked to relate the lenges used the methods the Amoco experience justified training and suspicions appraisers. Whatever the ma- ignored. disregarding the factors them might faith, good have as jority to Amoco’s argument appraisal is that the majority seizes there no evidence is The inappropri- speculative. supporting and The facts used out-of-date Amoco's that O’Dell unchallenged, making appraisal virtually his land value were and comparables ate However, intro- is plaintiff there no evidence that conclusions appraisal. comparables that better drawn that data were incorrect. Nor duced no evidence expert there fact to Plaintiff’s testified is basis assume were available. independent appraiser known could comparable was site value fran- that his best Turkey accurately Mini-Mart which O’Dell chise more than could as the Hill comparable. present The owner. The fact that the principal used as his also experts praisers employed testified on cross- were the defendant plaintiff’s both weight there were no recent also affect their testimo- examination that Nevertheless, weight ny. questions sta- sales of use as service as factfinder, credibility are tion in the for the area. simply not remand on the basis of suspect majority also finds the fact speculation. our own O’Brien, receiving after that Mr. O’Dell’s $155,000, admit requested land estimate of Even cases where facts will first opinion, province property. than one it that O’Dell reevaluate of more among current traffic volume of the factfinder to choose them. O’Dell then secured case, however, figures subject property each In this such a choice not determining necessary. zon- is to comparable, the current The defendant’s burden good support studying prove resi- faith. If the data will status each marketing opinion encompassing areas the franchisor’s the value of dential comparables property, may not of all three and the sub- the franchisor have areas value, proved ject property; thereupon proved he his but has increased $185,000. This is true even if the facts appraisal land faith. opin- reasonably support will also another plaintiff fail- also faulted O’Dell for *17 as to market value. ion comparables rely he selected However, specifically court found that personally. O’Dell testified that The district procedures are prior he outlined O’Brien was familiar with work in the valuation appraiser, thorough found him to and those followed Amoco be buy, exacting relying any property intends to sell and was comfortable addition, court found that comparable proper- his or lease. In selection arguments go customary plaintiff’s only to case Amoco did follow its ties. The this arriving at an offer- clearly Slatky. The record ing price to appraisers ca- that Amoco’s were
indicates intelligent opinion de- forming an
pable of adequate knowledge of the from an
rived controversy kind of
nature and The district court noted
and of its value. precisely showed
that Amoco’s respective ap- they
how arrived at found
praisals. The court that the district sincerely its offer to
franchisor believed majority agrees
at fair market value. finding clearly erroneous. findings necessary sup- were
No further
port that the offer was the conclusion bona
fide.
The facts found the district court
support the decision that Amoco has ful- statutory obligation
filled its to make a marketing prem- fide offer to sell the Therefore, Slatky.
ises to I would affirm judgment of the district court.
Donald H. HAYDO and Patricia A. wife,
Haydo, Appellants, his
v. MINING,
AMERIKOHL INC.
No. 86-3767.
United Appeals, States Court of
Third Circuit.
Argued June 1987.
Decided Oct.