Marcoux v. Shell Oil Products Co. LLC

524 F.3d 33, 65 U.C.C. Rep. Serv. 2d (West) 676, 2008 U.S. App. LEXIS 8393, 2008 WL 1759157
CourtCourt of Appeals for the First Circuit
DecidedApril 18, 2008
Docket05-2771
StatusPublished
Cited by3 cases

This text of 524 F.3d 33 (Marcoux v. Shell Oil Products Co. LLC) is published on Counsel Stack Legal Research, covering Court of Appeals for the First Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Marcoux v. Shell Oil Products Co. LLC, 524 F.3d 33, 65 U.C.C. Rep. Serv. 2d (West) 676, 2008 U.S. App. LEXIS 8393, 2008 WL 1759157 (1st Cir. 2008).

Opinion

HOWARD, Circuit Judge.

Defendants-appellants Shell Oil Company, Shell Oil Products Company (collectively, “Shell”), and Motiva Enterprises appeal jury verdicts against them on several claims relating to their treatment of plaintiffs-appellees (the “Dealers”), franchisees and operators of Shell-branded service stations. Shell and Motiva (together, “the defendants”) challenge the legal basis for verdicts against them under a federal statute designed to protect franchisees, as well as the verdicts under Massachusetts state law. Additionally, they appeal the jury’s damages determinations as without sufficient basis in the evidence. We affirm in part and reverse in part.

Facts

We recite the facts in the light most favorable to the jury’s verdict. See Rodriguez-Torres v. Caribbean Forms Mfr., Inc., 399 F.3d 52, 56 (1st Cir.2005).

Shell maintained a network of franchisees in Massachusetts. Plaintiffs were eight of these franchisees. In 1998, Shell, Texaco, and Star Enterprises formed defendant Motiva, and Shell transferred the franchise relationships to that entity, assigning its rights and duties under the relevant contracts to Motiva. 1 Shortly thereafter, Motiva replaced the Variable Rent Program (“VRP”) with the Special Temporary Incentive Program (“STIP”). Each of these programs (collectively, the *38 “Subsidy”) provided for reduction of the contract rent through sales of gasoline; once the specified threshold gallonage was sold in a given month, the contract rent for the next month would be discounted by a certain amount for every gallon sold in excess of that threshold. The threshold amount and the discount amount changed from time to time. The Subsidy had been in effect since 1982; it was renewed in an annual notice to franchisees, although its terms explicitly provided for cancellation with thirty days’ notice. Various representations were made to the Dealers to the effect that the Subsidy or something like it would always exist, the contract rent was to be disregarded, and the cancellation provision was only intended to be invoked in a situation like a war or an oil embargo. Nevertheless, having given the required notice, Motiva ended the STIP on January 1, 2000, terminating the Subsidy. Without the Subsidy, the Dealers paid much more rent.

Motiva also offered new leases as the old leases expired. The new leases calculated rent differently than the old leases, resulting in a further increase in rent.

In accordance with their fuel supply contracts, the Dealers were charged a wholesale price for gasoline known as the Dealer Tank Wagon price (the “DTW price”). The fuel supply contracts were open price term contracts: the contracts were silent as to price, and one party set the price unilaterally. This price was set by the defendants, who calculated it by assessing the street prices of other competing gasoline stations in the area, and reducing those prices by the taxes levied on gasoline and an Estimated Industry Margin to approximate the wholesale price of the defendants’ competitors.

Proceedings Below

Several franchisees, along with an unincorporated association called the Shell Dealers Defense Group (the “Defense Group”), filed for injunctive and declaratory relief as well as damages on June 6, 2000. Compl., Tsaniklides v. Shell Oil Products Co., 00-CV-11295. When the Defense Group was found to lack standing, a motion was made to add its members as individual plaintiffs. In denying that motion the district court indicated in a margin order, “[PJlaintiffs may file a new case which may be deemed to be related.” The individual franchisees filed a new suit on July 27, 2001, and the original suit was voluntarily dismissed on August 10. The new suit was assigned to the same district judge. The cases of New Hampshire and Rhode Island plaintiffs in the new action were transferred to those districts. From the sixty-four Massachusetts plaintiffs in the new suit, ten plaintiffs were chosen to go forward. One of those settled on the eve of trial and another lost at summary judgment. One plaintiff of the remaining eight, Mac’s Shell Service, Inc., operated two stations that were sometimes treated as separate plaintiffs. Therefore, eight plaintiffs representing nine stations proceeded to trial.

The Dealers sued under a variety of theories. First, they contended that the Subsidy had been incorporated into the property leases, although the written leases purported to be integrated contracts under Massachusetts law. They claimed the amended contracts were then breached when Motiva eliminated the Subsidy. Under the Dealers’ theory, this breach gave rise to two distinct claims: a state cause of action for breach of contract and a claim under the PMPA that Shell had improperly terminated the franchises when Shell assigned the franchise agreements to Mo-tiva and Motiva terminated the Subsidy. Because no actual termination occurred, the Dealers proceeded under a theory of *39 “constructive termination.” Similarly, they claimed Motiva had “constructively nonrenewed” the franchise relationships in violation of the PMPA (even though the franchises were in fact renewed) because the new contracts changed the rent-calculation method and increased the rent, along with other objectionable changes. Finally, the Dealers argued that Motiva failed to set prices for gasoline in good faith, as required for open price term contracts under Massachusetts law.

The defendants unsuccessfully moved for dismissal on all constructive termination claims and the constructive nonre-newal claims of two plaintiffs on the ground that they were time-barred. They also moved for a judgment as a matter of law on all claims. Following a jury verdict against them on all claims, they properly renewed this motion. They moved as well for a new trial and to set aside the jury’s damages awards. The defendants now appeal the denial of all of these motions.

The PMPA

Congress enacted Title I of the PMPA to “remedy the disparity in bargaining power between franchisors and franchisees.” S.Rep. No. 95-731, 95th Cong., 2d Sess. 18, 1978 U.S.Code Cong. & Admin.News 873, 876; see also Four Corners Serv. Station v. Mobil Oil Corp., 51 F.3d 306, 310 (1st Cir.1995). Because franchisees claimed that this unequal power was often wielded through arbitrary or discriminatory termination or nonrenewal, or threats of termination or nonrenewal, the PMPA aimed to remove this potent weapon from the franchisors’ arsenal. S.Rep. No. 95-731, at 17, 1978 U.S.Code Cong. & Admin.News at 876 (“Numerous allegations have been made before Congressional committees investigating petroleum marketing problems that terminations and non-renewals, or threats of termination or non-renewal, have been used by franchisors to compel franchisees to comply with marketing policies of the franchisor.”); id. at 18, 1978 U.S.Code Cong. & Admin.News at 876 (“[Termination of franchise agreements during the term as a remedy for contract violations has been repeatedly utilized.”).

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524 F.3d 33, 65 U.C.C. Rep. Serv. 2d (West) 676, 2008 U.S. App. LEXIS 8393, 2008 WL 1759157, Counsel Stack Legal Research, https://law.counselstack.com/opinion/marcoux-v-shell-oil-products-co-llc-ca1-2008.