Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION NEWS: Supreme Court asked to review Second Circuit’s handling of PMPA case, (Jul 24, 2013)

By Peter Reap, J.D., LL.M.

Gasoline station franchisor Lehigh Gas Corporation filed a petition for certiorari on July 17, asking the U.S. Supreme Court to review a decision of the Second Circuit holding that the franchisor’s failure to provide notice of termination to a “trial franchise” violated the federal Petroleum Marketing Practices Act (PMPA), justifying an award of compensatory damages, punitive damages, attorney fees, and costs of suit. As a result of the Second Circuit’s decision, an award of nearly $142,000 in compensatory damages and $30,000 in punitive damages was upheld (Lehigh Gas Corp. v. Jimico Enterprises, Inc., Dkt. No. 13-88).

In order to prevent arbitrary action by franchisors against franchisees, the PMPA sets out precise notice requirements that must be followed prior to any termination. Unless it would be unreasonable, the franchisor must provide notice at least 90 days prior to terminating a franchise. Such notice must be in writing, posted by certified mail or personally delivered to the franchisee, and must contain a statement of the reasons for termination, the effective date of termination, and a summary of the provisions of the PMPA.

Section 2805 of the PMPA expressly provides a private right of action for enforcement of the statute against a franchisor that fails to comply with §2802 (the Franchise relationship), §2803 (Trial and interim franchises), and §2807 (Prohibition on restriction of renewable fuel pumps). Lehigh argued to the Second Circuit that the statute’s failure to expressly identify §2804 (Notification of termination or nonrenewal) meant that franchisees have no right of action for franchisors’ failure to comply with the statute’s notice requirements. Lehigh’s argument was contradicted by a plain reading of the statute and by controlling precedent, the Second Circuit held.

In its petition, Lehigh contends that the refusal to dismiss the trial franchisee’s claims conflicted with the Supreme Court’s 2010 decision in Mac’s Shell Service, Inc. v. Shell Oil Prods. Co., 559 U.S. 175, as well as the statutory scheme and intent of the PMPA and specifically, 15 U.S.C. §2805, which only provides for a private right of action for violations of 15 U.S.C. §§2802, 2803, and 2807. The question presented is “whether a franchisee may maintain a civil action and/or recover monetary damages for a violation of 15 U.S.C. §2804 when the franchisor was not found to have violated any other provision of the PMPA.”

Attorneys: Urs Broderick Furrer (Harriton & Furrer) for Lehigh Gas Corporation.

Companies: Lehigh Gas Corp.; Jimico Enterprises, Inc.

News: FranchisingDistribution