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JOHN H. DUFF & PRAIRIE BROOK MARATHON, INC. v. MAR

April 7, 1994

JOHN H. DUFF and PRAIRIE BROOK MARATHON, INC., a corporation, Plaintiff,
v.
MARATHON PETROLEUM COMPANY, a corporation, Defendant.


MORAN


The opinion of the court was delivered by: JAMES B. MORAN

Plaintiffs John H. Duff and Prairie Brook Marathon, Inc. (collectively referred to as "Duff") bring this action against Marathon Oil Company (Marathon), alleging that Marathon brought about the termination of Duff's franchise in violation of the Petroleum Marketing Practices Act, 15 U.S.C. § 2801 et seq. Before this court is Marathon's motion for summary judgment. Federal subject matter jurisdiction is based on 28 U.S.C. § 1331. For the reasons stated below, Marathon's motion is granted.

 This action was initially filed on December 13, 1991. Duff sought injunctive relief and exemplary damages against Marathon. Marathon moved for summary judgment, which was granted by the district court in its memorandum and order of June 11, 1992. Duff moved for reconsideration and his motion was denied on June 19, 1992.

 On appeal, the Seventh Circuit vacated the district court's judgment, stating that while there may in fact be nothing to Duff's claims the district court's opinion was not "usable." Duff v. Marathon Petroleum Co., 985 F.2d 339, 341 (7th Cir. 1993). The circuit court was disturbed by the fact that the district court failed to address the key issue in the case: whether Marathon employees manipulated the numbers keyed into the computerized rental program to produce a rental amount Duff could not afford. Id. While acknowledging that the evidence presented on this issue was not of the most probative nature (Duff's own deposition), the circuit court stated that it "appeared" that Duff had raised a genuine issue of material fact. Id. It therefore remanded the case, with directions that further proceedings be conducted by a different judge. The case is now before this court and Marathon has again moved for summary judgment.

 FACTS

 Marathon owns its gas stations and leases them to dealers such as Duff. Duff leased and operated a Marathon service station located in Palatine, Illinois. He is the sole owner of the shares of Prairie Brook Marathon, Inc., the company through which the station was operated.

 Duff operated under a three-year lease from April 1981 to March 1984, a one-year lease from April 1984 to March 1985, and a three-year lease from April 1985 through March 1988. From 1981 through 1988, Duff's rent increased from $ 1,254 a month to $ 1,533 a month, for a total increase of 22% over the seven-year period, or roughly 3% per year. In 1988, his monthly rent increased to $ 2,146, a 40% increase from 1987. Marathon continued to raise the monthly rent in the following years: $ 3,160 a month in 1989 for a 47.25% increase; $ 3,579 a month in 1990 for a 13.26% increase; $ 4,441 a month in 1991 for a 24.08% increase; and $ 6,217 in 1992, for a 40% increase. Marathon's rental policy provides that the monthly rental amount is not to be raised more than 40% per year, with two exceptions. An increase of greater than 40% would be permitted if a station received capital improvements since the previous rental calculation, or if the dealer chose to pay the greater increase in order to participate in Marathon's rental rebate program. *fn1" For example, Duff's rent increased by more than 40% in 1989 because he elected to participate in the rental rebate program.

 Duff alleges that Marathon sought to terminate his franchise in retaliation for a personal injury suit he filed against Marathon in 1985. He was awarded damages of $ 148,246 in that lawsuit. Duff maintains that the rent increases were part of a scheme by Marathon to terminate his franchise. He alleges that the numbers which Marathon's employees keyed into the computer for the rental calculations were "jiggered" in order to produce a rental figure that he could not afford and, as a result, he was forced to terminate his franchise.

 In 1987, Marathon implemented a computer-driven rental formula to compute rental amounts for all of its branded lessee-dealers. The basic elements of this formula have not changed since that date and it is applied to all its branded lessee-dealers. The formula is designed to ensure that Marathon receives its desired ROI at each dealer location. *fn2" Marathon has submitted numerous documents and affidavits to help explain how this rather complicated computer program operates.

 Many components of the rental formula, known as "standard assumptions," are identical for each dealer and represent averages of overhead costs incurred by Marathon in operating each of its branded dealerships. Examples of costs treated as standard assumptions are credit card transmittal charges, salesperson expenses, maintenance expenses, per gallon profit margins and bad debt expenses. For the purposes of rental calculation, Marathon does not assess these costs for each individual location but instead uses an average of these costs across the lessee-dealer system. Standard assumptions are computed and entered into the rental program by Marathon personnel at the Brand Division headquarters located in Findlay, Ohio.

 Other components of the rental formula, entered by personnel at the district office level, are: (1) the dealer's current contract rental amount; (2) the dealer's net rental income amount; (3) the dealer's average monthly purchases of gasoline and other Marathon products over the preceding 12-month period; (4) the per gallon freight cost incurred by Marathon in delivering product to the station; (5) the historical cost of the property to Marathon; (6) the average monthly property tax expense incurred by Marathon on the property over the preceding 12-month period; and (7) the appraised value of the leased premises.

 All of the figures necessary to perform the rental calculation, with the exception of the land and building appraisal values, are obtained from a document known as the dealer's "Profit and Loss Data Sheet" (P&L sheet). P&L sheets record sales and marketing data for each Marathon dealer over a 12-month period. They are produced at the Findlay, Ohio, office, using a computer program that accesses data contained in Marathon's accounting records. Updated sheets are forwarded to district level personnel on a monthly basis.

 Marathon's real estate department is responsible for conducting land and building appraisals on a regular basis. Real estate representatives appraise all dealership properties at fair market value, taking into account the "highest and best use" of the property. After completing an appraisal of a dealership property, a real estate representative fills out a "Property Information" form. These forms are filed by administrative personnel and the appraisals are used by personnel in the tax, accounting and marketing divisions. Marathon's ...


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