Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION NEWS: Gas station owner claims bad faith for failure to renew franchise, (Aug 22, 2016)

By Linda O’Brien, J.D., LL.M.

A gas station owner’s lease and franchise agreements were not renewed by the franchisor for the purpose of forcing him to agree to commercially unreasonable terms and to convert the leased premises to a company-owned operation, according to a complaint filed in the federal district court in Seattle, Washington, against Pacwest Energy (Smith v. Pacwest Energy, LLC, August 19, 2016).

Kenneth Smith, doing business as Lander Street Shell, has leased a gas station property in Seattle for the operation of a motor fuel service station business since 1990 under various lease and franchise agreements with gasoline refiners/distributors.

The complaint states that, in November 2010, Smith entered into a retail facility lease and franchise agreement with energy producer and marketer Pacwest Energy regarding the station property. Both agreements were for a term of five years. Following the expiration of the agreements in October 2015, the lease and franchise agreements continued on a month-to-month basis for six consecutive months.

Subsequently, Pacwest informed Smith that his franchise would not be renewed for a new term. Pacwest only offered Smith a month-to-month tenancy if he agreed to an increase in monthly rent from $9,250 per month to $20,000 per month, and agreed to perform certain improvements to the premises at a cost of $315,000. Smith did not agree to the conditions demanded by Pacwest, the complaint alleges.

Smith claims that the rent increase and site improvements were excessive, commercially unreasonable, and would effectively eliminate his goodwill in his franchise if it were continued under those terms. The plaintiff also claims that Pacwest’s failure to renew his franchise was not made in good faith and was solely for the purpose of forcing him to give up the franchise so Pacwest could convert the premises to a company operated station.

The plaintiff asserts claims for violations of the Petroleum Marketing Practices Act and Washington’s Gasoline Dealer Bill of Rights Act, Franchise Investment Protection Act, and Consumer Protection Act. The action seeks injunctive relief, damages, costs of suit, attorney fees, and any other just and proper relief.

The case is No. 2:16-cv-01317.

Attorneys: Harry B. Platis (Platis Law Firm) and Thomas P. Bleau (Bleau Fox, A.P.L.C.) for Kenneth J. Smith.

Companies: Pacwest Energy, LLC

News: FranchisingDistribution WashingtonNews