Hillmen, Inc. v. Lukoil North America, LLC

985 F. Supp. 2d 657, 2013 WL 6211804, 2013 U.S. Dist. LEXIS 167466
CourtDistrict Court, E.D. Pennsylvania
DecidedNovember 22, 2013
DocketCivil Action No. 13-4239
StatusPublished
Cited by3 cases

This text of 985 F. Supp. 2d 657 (Hillmen, Inc. v. Lukoil North America, LLC) is published on Counsel Stack Legal Research, covering District Court, E.D. Pennsylvania primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Hillmen, Inc. v. Lukoil North America, LLC, 985 F. Supp. 2d 657, 2013 WL 6211804, 2013 U.S. Dist. LEXIS 167466 (E.D. Pa. 2013).

Opinion

MEMORANDUM OPINION and ORDER

NITZAI. QUIÑONES ALEJANDRO, District Judge.

INTRODUCTION

On July 23, 2013, Hillmen, Inc., (“Plaintiff’ or “Hillmen”) filed a complaint pursuant to the Petroleum Marketing Practices Act (the “PMPA”),1 against Lukoil North America, LLC, (“Defendant” or “Lukoil”) claiming that its petroleum marketing franchise agreement was wrongfully terminated. At the same time, Plaintiff filed a motion for a preliminary injunction [ECF 2], to which Defendant responded on August 22, 2013. [ECF 9].2

[660]*660On October 17, 2013, an evidentiary hearing on the preliminary injunction motion was held.3 Testimony and evidence was introduced through Zahid Khan, Plaintiffs principal, and through Jake Naggy, Defendant’s Retail Operations and Regional Sales Manager. Following the hearing, the parties submitted supplemental briefs. [ECF 18 and 19].

For the reasons stated herein, Plaintiffs motion for a preliminary injunction is denied.

FACTS

Plaintiff is a Pennsylvania corporation owned and operated by its principal and president, Zahid Khan. Defendant is alleged to be a corporation with its principal place of business in New Jersey and engaged in the business of distributing LUKOIL brand motor fuel in Pennsylvania, New York and New Jersey.

Plaintiff operated a gas station and convenience store located at 9100 Frankford Avenue, Philadelphia, Pennsylvania, (the “Station”) under the “Lukoil” trade name. Plaintiff purchased the Station from a former franchisee in December 2006 and then entered into a three-year franchise agreement (the “Franchise Agreement”) with Defendant in February 2007. The Franchise Agreement was renewed on February 1, 2010 and, again, on February 1, 2013. Under the Franchise Agreement Plaintiff, inter alia, leased the premises from Defendant, paid rent, and agreed to purchase Defendant’s motor fuel and resell it to consumers under the Lukoil trademark.

Evidence submitted with the parties’ filings and offered during the preliminary injunction hearing established that beginning in March 2007, and continuing until April 3, 2013, there were numerous occasions when Defendant sent written notices to Plaintiff that it was in breach of the Franchise Agreement; to wit:

By letter dated March 30, 2007, Plaintiff was advised that it was in default of the Franchise Agreement for failing to pay timely for the delivered motor fuel. Though Plaintiff eventually paid the then outstanding invoices, Defendant advised Plaintiff that future defaults could result in the revocation of Plaintiffs credit and being placed on “PRE-PAID status.”4 Similar default notices for failure to timely pay for motor fuel were sent on September 14, 2007, August 5, 2008, August 20, 2008, and December 9, 2008.5 By letter dated August 5, 2008, Defendant notified Plaintiff that the Station had been allowed to run out of its motor fuel inventory and issued a demand to Plaintiff to immediately purchase and market the Lukoil branded motor fuel. Defendant advised Plaintiff that its failure to comply with this directive would constitute a “substantial” violation of the Franchise Agreement. Defendant also reminded Plaintiff that the PMPA allowed Defendant to terminate the Franchise Agreement should Plaintiff fail to sell Lukoil motor fuel for seven consecutive days.6 By letter dat[661]*661ed September 9, 2008, Defendant advised Plaintiff that it was terminating the Franchise Agreement because of Plaintiffs continued failure to pay for the motor fuel.7 Apparently, the franchise Agreement was not terminated. By letter dated October 26, 2012, Defendant advised Plaintiff that it would not renew the Franchise Agreement set to expire on January 31, 2013, because Plaintiff had refused to accept a number of changes to the agreement Defendant deemed necessary and reasonable for its operations. Notwithstanding the initial disagreement over the proposed modified terms, the parties eventually came to an understanding and executed a new franchise agreement with an effective date of February 1, 2013.

Critical to this motion for preliminary injunction are the events related to the delivery of motor fuel on Tuesday, February 19, 2013, around 11:50 P.M. Mr. Khan testified that he had expected that the delivery would be made on the morning of Wednesday, February 20, 2013, but admitted that it was, in fact, delivered and accepted late Tuesday evening. Mr. Khan further testified that he had inquired of Defendant when Plaintiffs account would be debited for this delivery and, allegedly, was told that the account would be debited the following Monday, February 25, 2013. Plaintiffs account, however, was debited on the morning of Friday, February 22, 2013, which caused the payment to “bounce” for lack of insufficient funds.

Mr. Khan acknowledged that under the scheduled credit payment plan with Defendant, Plaintiff was required to pay for delivered fuel by an electronic fund transaction (“EFT”) three “business days” after a delivery was made. As to this particular delivery, Mr. Khan testified that he was under the impression that since the fuel was delivered during the late evening hours of Tuesday, February 19, 2013, the payment did not need to be made until the following Monday, February 25, 2013. On this issue, Defendant refuted Mr. Khan’s testimony with Jake Naggy, its Manager of Retail Operations. He testified that he is the person responsible for implementing Defendant’s EFT policy, which had been reiterated to all franchisees by notice dated October 16, 2012; to wit:

Please be reminded that LUKOIL North America’s payment terms for dealers who have been extended credit are that the EFT will occur on the third business day following the date of Bill of Lading (BOL). The date of BOL is the date that the load was lifted at the terminal. Please refer to www.lnallc.com for all EFT draft dates, and see below example:
BOL Day_EFT Day
Monday_Thursday
Tuesday_Friday
Wednesday Monday
Thursday_Tuesday
Friday_Wednesday
Saturday_Wednesday
Sunday_Wednesday
Note: Bank holidays will not be counted as business days.8

Mr. Naggy testified that in accordance with this schedule, for example, any fuel delivered on Tuesday must be paid for by EFT on Friday. He further testified that a business day under the policy is any 24-hour day, other than a weekend or holiday, not the “9-5 business day” espoused by Mr. Khan. It is noted, that neither the [662]*662content of the letter nor the illustrative chart draws any distinction for fuel deliveries after 5:00 P.M. (or any particular time).

Mr. Naggy’s testimony was corroborated by other documentation submitted during the hearing. In particular, Defendant offered a collection of bills of laden and invoices (Exhibit D-3) corresponding to fuel deliveries made to Plaintiff between December 21, 2012, and February 23, 2013.

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985 F. Supp. 2d 657, 2013 WL 6211804, 2013 U.S. Dist. LEXIS 167466, Counsel Stack Legal Research, https://law.counselstack.com/opinion/hillmen-inc-v-lukoil-north-america-llc-paed-2013.