Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—N.D. Ohio: Gas station owners denied injunction against station operators, (Aug 16, 2024)

By Thomas K. Lauletta, J.D.

The owners failed to prove that they were likely to succeed on their underlying Lanham Act claim and failed to prove irreparable harm.

The federal district court in Toledo, Ohio denied several gas station owners a preliminary injunction to stop the alleged violations of the Lanham Act by the gas station operators through their continued use of Sunoco brand and trademarks. The court denied the injunction because the owners failed to establish a likelihood of success on their underlying Lanham Act claims, or a showing that they suffered irreparable harm (Ridi Holland LLC v. North Holland Sylvania Road Center, LLC, No. 3:23-cv-02334-JGC (N.D. Ohio Aug. 13, 2024)).

The Operators are the gas station lessees who operate the stations at issue. The Owners are the gas station lessors who own and supply petroleum products to the stations at issue. The Owners include six Georgia limited liability companies with their principal places of business in Gwinnett County, Georgia. The Operators sued the Owners in an Ohio state court seeking a declaratory judgment that their lease renewals were effective and alleging breach of contract. Thereafter, the Owners removed the case to federal court and brought counterclaims against two of the Operators, alleging breaches of contract, related tort claims, and violations of the Lanham Act and Ohio’s Deceptive. The instant case relates to the Owners’ motion for a preliminary injunction in connection with their Lanham Act claim.

In 2009, the Owners purchased from Sunoco the four gas station sites at issue in this case. A condition of each of these sales was that the Owners agree to a Distributorship Agreement requiring them to supply Sunoco branded motor fuels, for a term of at least fifteen years. Each sale agreement also gave Sunoco the right to repurchase the property if, at any time during the fifteen-year period after the sale, the Owners terminated their Distributor Agreement with Sunoco or discontinued to supply Sunoco branded motor fuel to the four gas stations for any reason.

In 2013, the Owners and Operators entered new leases for the four sites at issue here. Each of the four leases provided for an initial lease term running to January 31, 2018. Each lease also provided the Operators with an option to renew for two additional five-year terms. To renew the leases, the Operators were required to give the Owners written notice no less than 365 days prior to the expiration of the lease. Because the Owners’ separate agreements with Sunoco required the Owners to supply Sunoco products to the leased sites, these provisions functioned in practice as restrictions on the Operators’ use of the Sunoco brand, trademarks, and related trade dress.

On December 28, 2016, the Operators timely provided the Owners notice of renewal for three of the four sites by a written notice and an email message. After negotiations, the parties renewed the lease for the fourth gas station. On May 27, 2024, the Operators sent an email to the Owners an email stating their intention to exercise the renewal. Unlike their first renewal, the Operators did not send a written notice of renewal, as required by their leases.

On February 9, 2022, nine days after the expiration of the second renewal notice period on January 31, the Owners provided the Operators with notices of lease expiration for each of the sites. These notices clearly informed the Operators that, from the Owners’ perspective, the Operators had no right to continue to occupy the premises and operate the gas stations.

On January 30,2024, the Owners sent the Operators written demands for possession of each of the sites. These terminations became effective on October 18, 2024, at which time the Owners stopped supplying the Operators with Sunoco fuel.

To continue to run their gas stations, the Operators obtained fuel from suppliers other than Sunoco. The Operators also partially concealed the sites’ Sunoco branding and trade dress. This effort included in some instances covering Sunoco’s trademarks with the Operators’ own proprietary branding.

In the instant action, the Owners moved for preliminary injunction based on the Operators’ alleged violations of the Lanham Act by their continued use of the Sunoco brand and trademarks.

The court noted that the Owners’ motion for a preliminary injunction was based on the Operators’ alleged violations of the Lanham Act. To analyze this, the court looked to whether the Owners have shown both a likelihood of success on the merits of their underlying Lanham Act claim, and that they suffered irreparable harm.

Likelihood of success. The court stated that the issue to be resolved was the effect of the Operators’ failure to comply with the requirement that lease renewals be made in writing. In its analysis of the issue, the court looked at the possible application of the rule stated in Ward v. Washington Distributors, Inc. In Ward, an Ohio court gave equitable relief to a lessee who had failed to comply with the lease requirements regarding renewal notice timing. The Supreme Court of Ohio has recognized that there has been a conflict of law on this issue but has yet to publish an opinion clarifying the application of Ward.

The court noted that the Operators made repeated and substantial investments in the four gas stations on the understanding that they would remain in those sites through the end of the second lease term. Based on the record of the case the court concluded that the Owners were aware of the Operators’ desire and intent to remain as lessees through January 31, 2024. Based on the lack of clarity in Ohio law regarding the application of Ward, the court stated that this factor in the preliminary injunction analysis does not clearly demand issuance of an injunction.

Irreparable harm. Because the court had substantial doubt as to whether the Owners were likely to succeed on the merits of their Lanham Act claims, the court concluded that Owners were not entitled to presumption of irreparable harm. Further, any harm that the Owners experienced was self-inflicted. Their unilateral stopping of gas supplies to the Operators was the cause of any harms falling on the Owners. Further militating against the Owners’ claims of irreparable harm was the fact that they delayed seeking this preliminary injunction for more than a month after they stopped the Sunoco gas shipment to the Operators.

The Case is No. 3:23-cv-02334-JGC.

Judge: Carr, J.

Attorneys: J. Mark Trimble (Rohrbacher Trimble & Zimmerman) for Ridi Holland LLC, Ridi Moline LLC, Ridi Suder LLC, Ridi Byrne LLC, S and G Stores LLC and Dergham Ridi. Samantha S. Galecki (Miller, Canfield, Paddock & Stone) for North Holland Sylvania Road Center, LLC, Moline Martin Center Road, LLC, Suder Avenue Center, LLC, Hill Avenue Center, LLC, Sunstar Petroleum, LLC and Majors Management, LLC.

Companies: Ridi Holland LLC; Ridi Moline LLC; Ridi Suder LLC; Ridi Byrne LLC; S and G Stores LLC; North Holland Sylvania Road Center, LLC; Moline Martin Center Road, LLC; Suder Avenue Center, LLC; Hill Avenue Center, LLC; Sunstar Petroleum, LLC; Majors Management, LLC

Cases: FranchisingDistribution OhioNews