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Al's Service Center v. BP ProductsNorthAmerica

March 26, 2010


Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 03 C 4508-George M. Marovich, Judge.

The opinion of the court was delivered by: Posner, Circuit Judge.


Before POSNER, ROVNER, and SYKES, Circuit Judges.

This suit under the Petroleum Marketing Practices Act, 15 U.S.C. §§ 2801 et seq., pits a defunct gas station in Oakbrook Terrace (a suburb of Chicago), called Al's Service Center, against BP, the giant oil company. Al's' owner is a coplaintiff, but we need not discuss him separately.

The suit was filed almost seven years ago and has dragged on unconscionably as a result of confused law- yering and the Job-like patience of Judge Andersen, who presided over the case until almost the end, when it was reassigned to Judge Marovich, who administered the coup de grâce.

The Petroleum Marketing Practices Act protects a franchised gas station from arbitrary termination by the franchisor. Draeger Oil Co. v. Uno-Ven Co., 314 F.3d 299, 299-300 (7th Cir. 2002); cf. Fleet Wholesale Supply Co. v. Remington Arms Co., 846 F.2d 1095, 1097 (7th Cir. 1988); James A. Brickley, Frederick H. Dark & Michael S. Weisbach, "The Economic Effects of Franchise Termination Laws," 34 J.L. & Econ. 101, 110 (1991). The best theory for why such a law is needed is that "a franchised dealer in effect invests in the franchisor's trademarks and as a result creates goodwill for the franchisor which the latter might on occasion be tempted to appropriate by terminating the franchisee." Draeger Oil Co. v. Uno-Ven Co., supra, 314 F.3d at 299. Consistent with this theory, Al's contends that BP drove it out of business so that it could open a company station on the site, though as far as we know BP has not done so.

Whether it's a sensible theory is another question; we expressed doubts in both the cases we just cited, echoing criticisms of franchise laws, such as the Petroleum Marketing Practices Act, as rank interferences with liberty of contract. Thomas M. Pitegoff, "Franchise Relationship Laws: A Minefield for Franchisors," 45 Business Lawyer 289, 309-10 (1989); Donald P. Horwitz & Walter P. Volpi, "Regulating the Franchise Relationship," 54 St. John's L. Rev. 217, 273-76 (1980). But the wisdom of the law is not our business; all that matters is that Al's was a BP franchisee within the scope and meaning of the Act and therefore BP could neither terminate the franchise except on a ground listed in the Act nor refuse to renew the franchise relationship, if it was severed, other than on one of those grounds. 15 U.S.C. §§ 2802(a)-(c).

A franchise is a set of contracts: in the case of a gas station, a set consisting of a supply contract, a lease of premises (unless the dealer owns the premises, as it did not here), and a trademark license. None of these contracts is required to be perpetual, and when one or more expires, the franchise may be said to have expired. But the franchisee can insist on renewal of the expired contract or contracts on reasonably similar terms, and thus on the continuation of the franchise relationship, unless the franchisor has some authorized ground for non-renewal. The reason the statute speaks of renewal of the "franchise relationship" rather than of the "franchise" is that "the PMPA contemplates that franchisors can respond to market demands by proposing new and different [contract] terms at the expiration of a franchise agreement." Mac's Shell Service, Inc. v. Shell Oil Products Co., 2010 WL 693684, at *10 (U.S. Mar. 2, 2010). Hence our reference, in speaking of renewal, to "reasonably similar terms."

In 2002 Al's learned that the State of Illinois intended to condemn a small slice of the gas station's property in order to widen one of the roads that run alongside it. The widening would close off two of the five entrances to the station, although the plan was later modified so that only one entrance would be eliminated and another one narrowed. But the elimination even of just that one entrance was bound to create a problem. The gas station was on a corner at which a highway intersects a side street. Most of the station's customers entered the station by one of the two entrances from the highway and, after tanking up, left by the other. With one of those entrances closed, drivers entering the station from the highway would have to either enter and leave by the same entrance, increasing congestion and the risk of an accident, or exit on the side street, which would deflect them from their intended route.

In March 2003 BP notified Al's that it would terminate the franchise 10 days before the condemnation took effect, pursuant to the provision in the Petroleum Marketing Practices Act that "the term 'an event which is relevant to the franchise relationship and as a result of which termination of the franchise or non-renewal of the franchise relationship is reasonable' includes events such as... condemnation or other taking, in whole or in part, of the marketing premises pursuant to the power of eminent domain."

15 U.S.C. § 2802(c)(5) (emphasis added).

The condemnation took place on June 27, 2005. Al's' franchise contracts (the lease, supply contract, and trademark license) expired by their terms (that is, besides as a consequence of the condemnation) the following month. BP wrote Al's, telling it to vacate the premises because the franchise had been terminated. Al's didn't do so-for years. And BP continued selling it gasoline. Indeed nothing changed in the parties' relationship until late May and early June 2006, when, according to Al's, for a period of 12 days (eight of them consecutive, including the Memorial Day weekend), BP delivered no gasoline to Al's. BP denies that there was any interruption in delivery; the district court never resolved the dispute.

Later, in the summer of 2006, as part of the widening project, the state removed Al's' tall roadside Amoco sign. (BP had acquired Amoco in 1998. Al's had been an Amoco station and it continued to use the Amoco name after the acquisition.) Al's asked BP to replace it, and offered to pay the cost of doing so, but BP refused. (That was in October.) Al's claims that without the sign it could not break even.

It never got the sign, and abandoned the business on May 1, 2008. It seeks tens of millions of dollars in compensatory and punitive damages for what it contends were BP's illegal efforts to destroy its business. It seeks these damages under both the Petroleum Marketing Practices Act and state law, though the ...

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