Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—N.D. Okla.: Petroleum distributor's post-termination action did not invoke PMPA, (Feb 12, 2016)

By Edward L. Puzzo, J.D.

A petroleum distributor's action seeking monetary damages from a petroleum retailer following termination was in the nature of a collection action, so it did not arise under the federal Petroleum Marketing Practices Act, and consequently the federal court had no subject matter jurisdiction over the dispute, according to the federal district court in Tulsa, Oklahoma (AVP Metro Petroleum, LLC v. Sepahvand, February 9, 2016, Rice, J.).

In 2007, plaintiff AVP Metro Petroleum, a petroleum distributor, entered into a motor fuel marketing agreement with defendant Morad Sepahvand, doing business as Moe's Mart, an owner-operator of a gas station and convenience store.

AVP Metro alleged that in 2014, Sepahvand's bank returned two ACH payments Sepahvand had made to it—in payment for delivered petroleum and to make a payment on a promissory note—because Sepahvand's account had been closed. Soon thereafter, AVP Metro alleged, it sent a termination notice to Sepahvand, and demanded accelerated full payment on the note.

AVP Metro subsequently filed a breach of contract lawsuit in state court. Sepahvand counterclaimed, alleging that the termination was not done in compliance with the Petroleum Marketing Practices Act (PMPA), and removed the case to federal district court, where AVP Metro moved for summary judgment.

Subject matter jurisdiction. The federal district court stated that, before addressing the merits of the dispute, it first had to determine sua sponte whether it has subject matter jurisdiction. It determined it did not.

The court noted that plaintiff's complaint did not specifically cite the PMPA, the federal law intended to protect franchisees against arbitrary and discriminatory terminations or nonrenewals of motor fuel franchise agreements. It was the defendant's notice of removal to federal court that asserted that the PMPA governed the parties' contractual agreement and asserted that plaintiff's claim therefore arose under the PMPA.

The court characterized plaintiff's claim as merely a collection action. Although the PMPA provided defendant with certain rights regarding the motor fuel marketing agreement, it does not govern plaintiff's attempt to collect the unpaid amount defendant owes under the terms of the agreement and accompanying note, the court explained. Therefore, the court ruled, the claim did not arise under the PMPA and there was no basis for subject matter jurisdiction. The federal court therefore remanded the dispute back to state court.

The case is Civil Action No. 4:14-cv-00616-CVE-PJC.

Attorneys: Adam Grant Schwabe (Kivell Rayment & Francis) for AVP Metro Petroleum LLC. James Osby Goodwin (Goodwin & Goodwin) for Morad Sepahvand d/b/a Moe's Mart.

Companies: AVP Metro Petroleum, LLC

Cases: FranchisingDistribution OklahomaNews