Monday, November 9, 2009

Duncan Services, Inc. v. ExxonMobil Oil Corporation (Maryland U.S.D.C.)

Filed: November 6, 2009
Opinion by Judge Alexander Williams, Jr.

Held: Plaintiffs' speculation regarding an anticipated assignment of their franchise contracts does not give rise to a cause of action for violations of the Petroleum Marketing Practices Act (the "PMPA") 58 U.S.C. §§2801-2806 or a breach of contract.

Facts: Sixty-five ExxonMobil motor fuel franchisees brought suit against ExxonMobil Oil Corporation, its affiliate ExxonMobil Corporation and two other entities to whom ExxonMobil had recently assigned some of its franchise contracts. This opinion involves the defendants' motion to dismiss claims brought by approximately fifty-five of the plaintiff franchisees whose franchise contracts had not yet been assigned by ExxonMobil (the "Non-White Oak Transaction Plaintiffs").

The Non-White Oak Transaction Plaintiffs claimed that ExxonMobil violated the PMPA through their "imminent" assignment of their franchise contracts. Additionally, the Non-White Oak Transaction Plaintiffs allege that the potential assignment of their franchise contracts would violate Maryland contract law.

Analysis: Under the PMPA a distributor may not terminate or fail to renew a franchise unless the termination or nonrenewal is based on one of the enumerated statutory grounds. The franchisee has the burden of showing that the franchise has been terminated through either actual or constructive termination. An assignment of a franchise agreement that is invalid under state law constitutes a constructive termination of a franchise in violation of PMPA.

Here, because the franchise contracts had not been assigned nor had the plaintiffs received a notice of the assignment of their franchise contracts, there was no basis for the plaintiffs to allege that the defendants had violated PMPA. The court held "Given the fact-specific nature of the inquiry into constructive termination, it is impossible for the Court to enter that inquiry absent at least the minimal information of to whom the contracts will be assigned and a definitive statement of intent to assign the franchises."

Additionally, the court held that the plaintiffs could not succeed on a breach of contract theory because they had not demonstrated that an actual breach of contract had occurred. Without an actual assignment of the franchise contracts the plaintiffs could not allege a breach.

Further, because the plaintiffs could not show either the termination of the franchise or existence of sufficiently serious questions going to the merits, the Court refused to grant a preliminary injunction or temporary restraining order blocking any assignment by ExxonMobile of the franchise rights.

The full opinion is available in PDF.

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