Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—D.P.R.: Puerto Rico gasoline distributor temporarily restrained from terminating franchise, (Dec 11, 2025)

By Kenneth H. Ryesky, M.B.A., J.D.

Franchisor failed to obtain an independent appraisal before offering to sell gas station real estate to franchisee at a price substantially higher than the valuation by the franchisee's independent appraiser.

The federal district court in San Juan, Puerto Rico has temporarily enjoined a wholesale gasoline distributor from terminating its franchise agreement with a gas station operator. The franchisee had been leasing the premises from the franchisor for many years. The franchisor sought to convert all of its franchises to dealer-owned, dealer-operated arrangements. Following negotiations, the wholesaler and retailer failed to reach an agreement for the gas station retailer to purchase the real property upon which the business was located, and the wholesaler served notice of termination. The temporary injunction was granted under the provisions of the Petroleum Marketing Practices Act, which mandate the granting of injunction relief to franchisees on a broader basis than for other types of injunctions (Isla Verde Service Station, Inc. v. Puerto Rico Energy, LLC, No. 3:25-cv-01655-MAJ-GLS (D.P.R. Dec. 10, 2025)).

Background. Puerto Rico Energy, LLC (PRE) imports gasoline to Puerto Rico and distributes it to service stations on the island. PRE's has had a franchise agreement with Isla Verde Service Station Inc. (Isla Verde) in effect for approximately 11 years, the latest of which expired in May 2024. Following the expiry of the last contract, the franchise relationship has continued on a month-to-month basis per the terms of the last franchise agreement. The franchise agreement provides that Isla Verde operate the service station, purchase branded gasoline from PRE, and pay rent to PRE for use of the premises which PRE owns.

Shortly before the last franchise contract expired, PRE decided to change its franchise arrangements to a "dealer-owned, dealer-operated" model, under which Isla Verde would be required to purchase the real property on which its service station is located. PRE and Isla Verde began negotiations for transition to PRE's envisioned new business model in March 2024. Following the exchanges of offers and counteroffers, PRE's "final offer" was rejected by Isla Verde.

On September 24, 2025, PRE served notice upon Isla Verde that the month-to-month franchise relationship by which the parties had abided since May 2024 would terminate on December 23, 2025. PRE proposed to Isla Verde an "exit offer" whereby PRE would purchase Isla Verde's assets for a specified dollar amount. Isla Verde rejected that offer, maintaining that it was unreasonable in light of more reasonable "exit offers" allegedly made to other franchisees by PRE. On December 8, 2025, Isla Verde, having filed a complaint in federal district court three days earlier, moved for a Temporary Restraining Order to enjoin PRE from terminating or selling the franchise.

Petroleum marketing franchises – serious questions. The judge found that there were sufficiently serious questions to warrant granting the TRO. With certain exceptions the Petroleum Marketing Practices Act [15 U.S.C. § 2801 et seq.] mandates that courts issue preliminary injunctions if a franchisee in a franchise relationship shows that the franchise relationship has been or is in danger of being terminated, and "there exist sufficiently serious questions going to the merits to make such questions a fair ground for litigation" [15 U.S.C. § 2805(b)(2)(A)]. There being no question that Isla Verde was in a precarious franchise relationship with PRE, the court found that there was indeed fair ground for litigation under the statute.

PRE's purported reason for terminating the franchise agreement was Isla Verde's failure to agree to changes in the contractual provisions of the franchise agreement. This is not a valid reason if the franchisor's purpose in imposing such changes is to convert leased premises to premises operated "by employees or agents of the franchisor for the benefit of the franchisor or otherwise preventing the renewal of the franchise relationship [15 U.S.C. § 2802(b)(3)(A)(ii)]. Whether PRE's termination notice was motivated by such an improper motive was a serious question within the meaning of the PMPA statute.

There also was a serious question as to whether the offer made by PRE to sell, transfer or assign its interest in the leased premises to Isla Verde [15 U.S.C. § 2802(b)(3)(D)(iii)]. Here, Isla Verde had engaged an independent appraiser to value the property, while PRE allegedly had not obtained any independent appraiser to substantiate its claimed valuation that was greater than Isla Verde's by 70 percent. Isla Verde also alleged that PRE had previously engaged in discussions with real estate brokers and/or other third party potential buyers without offering Isla Verde a right of first refusal. This was also a serious question within the meaning of the PMPA statute.

Injunctive relief – balance of the hardships. The district court judge found that the balance of the potential hardships favored granting the injunctive relief. Here, the service station had been the mainstay of the family that owned Isla Verde and operated the business for half of a century, and Isla Verde would permanently lose the franchise along with its high value goodwill asset if the temporary restraining order were not issued. PRE, on the other hand, had operative franchises with hundreds of other gasoline retailers, and any losses incurred by the restraints imposed would be comparatively minor. Moreover, PRE will continue to receive its rent and gasoline purchase receipts for the duration of the injunction.

The Case is No. 3:25-cv-01655-MAJ-GLS.

Judge: Antongiorgi-Jordan, M.

Attorneys: Harold D. Vicente (Vicente & Cuebas) for Isla Verde Service Station Inc. Anibal Jose Nunez Gonzalez (Nunez Gonzalez Law Firm) for Puerto Rico Energy LLC.

Companies: Isla Verde Service Station Inc.; Puerto Rico Energy LLC

Cases: FranchisingDistribution PuertoRicoNews GCNNews