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GRECO v. MOBIL OIL CORP.

November 20, 1984

JOSEPH GRECO, PLAINTIFF,
v.
MOBIL OIL CORPORATION, A CORPORATION, AND FIRST AMERICAN SERVICE CORPORATION, A CORPORATION, DEFENDANTS.



The opinion of the court was delivered by: Leighton, District Judge.

Memorandum

This is a suit brought by Joseph Greco against Mobil Oil Corporation and First American Service Corporation seeking injunctive relief from Mobil's termination of a gasoline station franchise, and enjoining First American from taking possession of the gasoline station premises. Greco alleges that Mobil's conduct seeking to terminate the franchise violates the Petroleum Marketing Practices Act (PMPA), 15 U.S.C. § 2801, et seq.; the jurisdiction of this court being founded on 15 U.S.C. § 2805(a) and (b).

The cause is before the court on plaintiff's motion for a preliminary injunction. After hearing the parties on oral and written submissions, and after receiving evidence consisting of the testimony of witnesses and exhibits, this court concludes that under the provisions of § 2805(b)(2) of PMPA, Greco's motion for a preliminary injunction should be granted. Accordingly, as will be stated in the court's preliminary injunction order, defendant Mobil shall refrain, until further order of this court, from interfering with, altering, or discontinuing in any manner, the normal and usual business arrangements which plaintiff has enjoyed under the Retail Dealer Contract and Service Station Lease dated July 6, 1981. All services which have been terminated by defendant Mobil shall be resumed immediately; and defendant First American Service will be enjoined, until further order of this court, from in any way taking action to assume possession of the retail gasoline service station located at 1590 Lee Street, DesPlaines, Illinois. The following are the facts and the principles of law that compel this court to its conclusions.

I

Sometime near the end of 1982, Mobil decided to divest a number of service stations, including Greco's. During 1983, Greco learned of Mobil's intentions; and in conversations with representatives of the corporation, he learned that Mobil was willing to sell the gasoline station to him. However, no offer to sell was ever made by Mobil. Nonetheless, Greco obtained a $171,000 appraisal of the property during the summer of 1983. During the first part of 1984, he contacted the resale marketing manager for Mobil, and in the presence of other corporation representatives, discussed possible purchase of the filling station.

On February 15, 1984, Mobil wrote Greco a letter; the subject was "Notification of Non-Renewal of Service Station No. 15210." Mobil stated that "The reason for this non-renewal is as follows: Mobil has determined, in good faith and in the normal course of business, to sell the premises." The letter went on to say that "[w]ithin the next 90 days, Mobil will be in contact with you concerning your rights pursuant to Federal Law with respect to the purchase of the premises." Then, during the early spring of 1984, Mobil representatives discussed with Greco his interest in purchasing the gasoline station. They told Greco that the corporation was interested in selling the premises to him. A curbside appraisal was made to determine the approximate amount that Greco would have to pay for the station; the real estate was appraised at $185,000, and to the recollection of Mobil representatives, certain of the filling station equipment was appraised at around $19,000. Thereafter, Mobil had an MIA appraisal of the property which determined it had a value of $285,000. Sometime around March 15, 1984, Mobil received from First American an offer to purchase the land on which Greco's filling station was located for $285,000; Mobil accepted the offer and entered into a contract, setting the closing of the transaction for a day after October 31, 1984, when Greco's interest in the gasoline station was to expire with the end of his franchise term. Mobil and First American intend to proceed with the sale promptly, in accordance with the terms of their contract.

On April 16, 1984, Mobil wrote Greco, telling him that "In accordance with the provisions of the Petroleum Marketing Practices Act," it was granting him "a Right of First Refusal regarding the [filling station] on the same terms and conditions, as the attached Third Party Offer dated March 15, 1984, which was made by First American Service Corporation to Mobil Oil Corporation." The attachment was a contract by which First American agreed with Mobil to buy the site of Greco's filling station for the sum of $285,000; no personal property or gasoline station equipment was included in the sale. Greco was given forty-five days to exercise the offer. He did not reply to Mobil's letter. In this suit, and to support his motion for preliminary injunctive relief, Greco contends that the right of first refusal of the First American offer did not discharge Mobil's obligation under PMPA to have made him a bona fide offer to purchase the franchised premises because First American was only offering to purchase the land on which the filling station is located. Greco argues that the provisions of PMPA require that Mobil, his franchisor, in good faith, offer to sell him the franchised premises, including the personal property and equipment listed on Schedule A to his service station lease; that is, the underground tanks, dispensers, island light frames, and pumps. Greco insists that since Mobil has not complied with the provisions of PMPA and made him a bona fide offer under which he could purchase the franchised premises, he is entitled to preliminary injunctive relief restraining termination of his franchise by Mobil, and enjoining First American for interfering with his possession of the gasoline station.

II

Congress enacted the PMPA in an effort to protect "franchisees from arbitrary or discriminatory termination or non-renewal of their franchises." S.Rep. No. 95-731, 95th Cong., 2d Sess. 15, reprinted in 1978 U.S.Code Cong. & Ad.News 873, 874. The Act provides a "single, uniform set of rules governing the grounds for termination and non-renewal of motor fuel marketing premises." Id. at 19, U.S.Code Cong. & Ad. News at 877. When reviewing a question under the PMPA, the court is guided by the principle that as a "remedial legislation, the Act must be given a liberal construction consistent with its overriding purpose to protect franchisees." Brach v. Amoco Oil Co., 677 F.2d 1213, 1221 (7th Cir. 1982). A review of the applicable statutory provisions of the Act are essential to an evaluation of the issues raised in this action.

The PMPA prohibits the termination or nonrenewal of a franchise except on the basis of certain specifically enumerated reasons and upon the completion by the franchisor of certain notification requirements. Section 2802 sets forth the conditions and grounds on which a franchisor may terminate or not renew a franchise. As one ground, Section 2802(b)(3)(D)(i)(III) provides that a franchisor has a right not to renew a franchise if there is a "determination made by the franchisor in good faith and in the normal course of business" to sell the premises. However, in addition to the franchisor's obligation to make a determination in good faith and in the normal course of business to sell, Section 2802(b)(3)(D)(iii), requires a that:

  in the case of leased marketing premises such
  franchisor, during the 90-day period after
  notification was given pursuant to section 2804
  of this title, either —
    (1) made a bona fide offer to sell, transfer,
    or assign to the franchisee such franchisor's
    interest in such premises; or
    (2) if applicable, offered the franchisee a
    right of first refusal of at least 45-days
    duration of an offer, made by another, to
    purchase such ...

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