Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION NEWS: Gas station franchisor sues over unauthorized transfer of franchise premises, (Oct 23, 2015)

By Linda O’Brien, J.D., LL.M.

A gasoline service station and convenience store franchisee breached its franchise agreement by assigning the franchise premises to a competing convenience store chain without authorization by the franchisor, according to a complaint filed in the federal district court in San Juan (Puma Energy Caribe, LLC v. C-Fuels, LLC, October 19, 2015).

Puma Energy Caribe, LLC, a wholesale distributor of petroleum and petroleum products, is the owner of the trade name “Puma,” used for its gasoline products and service stations.

The complaint states that in May 2013, C-Fuels (CF) entered into a franchise agreement with Puma Energy for the use of real property located in San Juan in order to operate a gasoline service station and convenience store. The franchise agreement, which was for a term of 36 months, provided that all structures and equipment used for the operation of the service station were the property of Puma Energy and the agreement could be terminated if CF failed to comply with any of its duties under such agreement. The agreement also provided that it was not transferable by either party and that Puma Energy’s written consent was required in order to perform any modifications, removal, changes, or improvements at the service station.

The service station property contains a large parking lot that was separated from the station by a fence and gate. In addition to the parking lot, there are 17 parking spaces that abut the station, which are reserved for customers of the service station and convenience store. Under the franchise agreement, the adjacent parking lot was within the control of the franchisee and could be subleased with the franchisor’s permission, the complaint alleges.

According to the complaint, the plaintiff became aware that, without permission, CF assigned the franchise agreement for the operation of the service station and convenience store located on the premises to To Go Stores, a chain of small convenience stores located throughout Puerto Rico. Subsequently, To Go (1) began advertising and marketing the “Puma” on their website, giving the wrong impression that Puma Energy has an agreement with To Go; (2) changed the service station business operating license from CF to To Go; and (3) changed the employee uniforms at the service station and convenience store to To Go uniforms instead of Puma. To Go also assigned the sublease for the adjacent parking lot to third party Suiza Dairy Corporation and installed permanent fixtures separating the 17 parking spaces within the service station, thereby depriving service station customers of their use.

The complaint also alleges that the franchise agreement is solely between Puma Energy and CF. To Go has never received any authorization from Puma Energy to use, display, or market “Puma” marks; operate the service station and convenience store; transfer the adjacent parking lot sublease; or make alterations to the 17 parking spaces. Given the material breaches of the franchise agreement, Puma Energy notified CF in May 2015 that the agreement was terminated and requested possession of the service station property. Currently, the illegal assignee To Go continues to operate the service station and convenience store without authorization and refuses to turn over possession to Puma Energy.

The plaintiff asserts claims for trademark infringement and breach of contract in violation of the Lanham Act, Trademark Dilution Revision Act, and Petroleum Marketing Practices Act. The action seeks declaratory and injunctive relief, dispossession of premises and equipment, indemnification, damages, interest, costs of suit, attorney fees, and any other just and proper relief.

The case is No. 3:15-cv-02574-JAF.

Attorneys: Alberto G. Estrella and Kenneth C. Suria (Estrella LLC) for Puma Energy Caribe, LLC.

Companies: Puma Energy Caribe, LLC; C-Fuels, LLC; To Go Stores, Inc.

News: FranchisingDistribution PuertoRicoNews