Shah v. Racetrac Petroleum, Inc.

275 F. Supp. 2d 920, 2001 U.S. Dist. LEXIS 25335, 2001 WL 34125805
CourtDistrict Court, E.D. Tennessee
DecidedJuly 31, 2001
Docket2:99-cv-00410
StatusPublished

This text of 275 F. Supp. 2d 920 (Shah v. Racetrac Petroleum, Inc.) is published on Counsel Stack Legal Research, covering District Court, E.D. Tennessee primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Shah v. Racetrac Petroleum, Inc., 275 F. Supp. 2d 920, 2001 U.S. Dist. LEXIS 25335, 2001 WL 34125805 (E.D. Tenn. 2001).

Opinion

MEMORANDUM OPINION

JARVIS, District Judge.

In this diversity action 1 , plaintiffs Sid-dharth and Daksha Shah (“plaintiffs” or “the Shahs”), husband and wife, d/b/a Yera’s Raceway, seek $579,000 in compensatory damages and $15 million in punitive damages from defendant Racetrac Petroleum, Inc. (“RPI”), arising from the termination of the parties’ business relationship regarding a convenience store known as Raceway 773 located at 2003 E. Broadway in Maryville, Tennessee. It is undisputed that RPI utilized the 30-day termination clause of the contract documents to end, at that time, the parties’ almost 14-month long business relationship and that it did so in order to sell Raceway 773 to Downey Oil Company, Inc. (“Downey Oil”). The Shahs primarily contend that they were told by RPI representatives that RPI would never terminate a relationship with a contract operator except for a serious failure to perform. Given these representations, the Shahs allege, in their second amended complaint (“complaint”), 2 the following state law causes of action:

(1) Breach of contract, including the implied covenant of good faith and fair dealing;
*923 (2) Promissory estoppel;
(3) Promissory fraud; and
(4) Fraudulent or negligent misrepresentation.

The Shahs also allege that RPI has violated the Tennessee Petroleum Trade Practices Act (TPTPA), Tennessee Code Annotated §§ 47-25-601, et seq., and the Tennessee Consumer Protection Act (TCPA), Tennessee Code Annotated §§ 47-18-101, et seq. 3

This matter is presently before the court on the following motions filed by RPI:

(1) Motion to dismiss or, in the alternative, for summary judgment [Doc. 14];
(2) Motion for summary judgment on punitive damages [Doc. 38]; and
(3) Motion for summary judgment on limiting damage proof [Doc. 58].

The issues raised have been exceptionally well briefed by the parties [see Docs. 15, 20, 31, 39, 56, 59, 60, 61, 62, and 65]. 4 The court also heard oral argument on some of these issues on August 1, 2000. For the reasons that follow, RPFs motion for summary judgment will be granted, and this case will be dismissed. Consequently, RPI’s remaining motions will be denied as moot.

I.

Facts

The facts of this case will be viewed in the light most favorable to the Shahs. In late 1994, the Shahs became interested in purchasing a business for investment purposes. One of the businesses considered and investigated by the Shahs was Raceway 773, then operated by Clyde and Gloria Holt. The Holts indicated they would sell that business, including certain interi- or improvements, inventory, and goodwill, for $90,000. 5

*924 The Shahs first learned that Raceway 773 was for sale from Bhanu Mehta, who was also considering its purchase. In his preliminary investigation of Raceway 773, Mr. Mehta examined both the lease and the contract under which the Holts rented and operated Raceway 773 with RPI. After examining those documents, Mr. Mehta discovered that each instrument contained a 30-day termination clause. Mr. Mehta asked Mr. Holt about the termination clause, and Mr. Holt informed him that RPI would not terminate the lease or the contract as long as the operator made rental payments on a timely basis and operated the business in a satisfactory manner. Mr. Mehta also inquired about the termination clauses from other RPI operators and was likewise informed by them that RPI would not terminate the lease or contract as long as the operator paid the rent on time and maintained the business in a satisfactory manner.

In December 1994, the Shahs personally examined the lease between the Holts and RPI regarding Raceway 773. Like Mr. Mehta, the Shahs expressed concern to Mr. Holt over investing money in a business from which they could be removed upon 30 days notice. In response, Mr. Holt informed the Shahs that, “As long as you perform to [RPI’s] satisfaction they never kick anybody out.” [See Doc. 19, Ex. A, p. 35 (Siddharth Shah dep.) ]. The Shahs also inquired about the termination clause with RPI’s district manager at that time, J.D. Main 6 . According to Mr. Shah’s testimony, Mr. Main advised him that, “‘Racetrac [sic] policy is that they will not kick any dealer out as long as they perform satisfactorily.’” [See id., p. 77].

Additionally, the Shahs spoke with the soon-to-be district manager for RPI, James Smith. Mr. Shah again expressed his concern over the 30-day termination clause and stated that any money invested into Raceway 773 would be “very high risk if Racetrac [could] kick me out within 30 days [of] me [sic] purchasing the store.” [See id., p. 49]. According to Mr. Shah, Mr. Smith responded:

Racetrac operates their business as a family. Racetrac never kick [sic] any dealer out from that business as long as it perform [sic] satisfactorily.

[See id., p. 50].

Nevertheless, Mr. Shah was concerned and requested a five or ten-year lease instead of RPI’s standard one-year lease. [See id., p. 66], According to Mr. Shah’s testimony, Mr. Smith advised him verbatim as follows:

Racetrac will not permit any changes into [sic] this agreement.... Don’t worry about it, Mr. Shah, you will not have any problem if you perform right.

[See id.]. Mr. Smith also counseled the Shahs to check with other RPI operators regarding RPI’s reputation. The Shahs did so and received similar assurances from those operators, such as Nayan Shah. The Shahs began to move forward with the transaction to buy Raceway 773 and completed a credit report in January 1995.

On February 7, 1995, the Shahs purchased the business from the Holts. In doing so, the Shahs executed a confirmation of purchase and sale agreement with the Holts, paying them a total purchase price of $81,172.59. 7 Regarding the transaction with RPI, the Shahs executed a document package including, but not limit *925 ed to, a lease and contract, each containing the 30-day termination clause. Prior to executing these documents, Mr. Shah once again expressed concern about the termination clause to Mr. Smith, who assured him again that, “If you perform right we will not kick you out.” [See id., p. 62],

After the execution of the document package between RPI and the Shahs, Mr. Smith telephoned the general manager of RPI stores, Floyd Philpot. Mr. Smith introduced the Shahs to Mr. Philpot, and Mr.

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Bluebook (online)
275 F. Supp. 2d 920, 2001 U.S. Dist. LEXIS 25335, 2001 WL 34125805, Counsel Stack Legal Research, https://law.counselstack.com/opinion/shah-v-racetrac-petroleum-inc-tned-2001.