Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—2d Cir.: Fuel distributor entitled to terminate franchise for outstanding payments, (Nov 3, 2014)

By Greg Hammond, J.D.

NY Fuel Distributors, LLC properly terminated its franchise agreement with Yonkers Central Ave. Snack Mart, Inc., after Yonkers payments to NY Fuel Distributors fell into arrears, the U.S. Court of Appeals in New York City has decided. In affirming the lower court’s order denying preliminary injunction to Yonkers, the appellate court determined that a franchisee’s failure to pay all sums a franchisor is legally entitled to, is an enumerated ground for termination under the Petroleum Marketing Practices Act (PMPA) (Yonkers Central Ave. Snack Mart, Inc. v. NY Fuel Distributors, LLC, October 31, 2014, Per Curiam).

Yonkers appealed a district court’s October 3, 2013 order, denying the company preliminary injunction that would bar termination of its agreement with NY Fuel. According to the appellate court, the primary issue in this case was whether NY Fuel could terminate its agreement under the PMPA, after Yonkers fell into arrears.

The PMPA states that a court “shall” grant preliminary injunction if a franchisee shows: (1) the franchise of which he is a party has been terminated; (2) there exists sufficiently serious questions going to the merits to make such questions a fair ground for litigation; and (3) the court determines that, on balance, the hardships imposed upon the franchisor by the issuance of such preliminary injunctive relief will be less than the hardship which would be imposed upon such franchisee if such preliminary injunctive relief were not granted.

The court ultimately determined that the lower court did not abuse its discretion, as failure “by the franchisee to pay to the franchisor in a timely manner when due all sums to which the franchisor is legally entitled” is an enumerated ground for termination under the PMPA. Because there was no dispute that Yonkers’ payments were in arrears, NY Fuel was entitled to terminate the relationship. As such, the lower court’s decision denying preliminary injunction was affirmed.

The case number is 13-3841-cv.

Attorneys: John J. Morgan (Barr & Morgan) for Yonkers Central Ave. Snack Mart, Inc. Jonathan D. Kraut and Neil Torczyner (Harfenist Kraut & Perlstein LLP) for NY Fuel Distributors, LLC.

Companies: Yonkers Central Ave. Snack Mart, Inc.; NY Fuel Distributors, LLC

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