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Gto Investments, Inc v. Buchanan Energy and Exxonmobil Oil Corporation

March 5, 2012


The opinion of the court was delivered by: Judge Joan B. Gottschal


Plaintiff GTO Investments, Inc. ("GTO") moves for a preliminary injunction under the relevant provisions of the Petroleum Management Practices Act (the "PMPA"), 15 U.S.C. § 2801 et seq. For the reasons stated below, the court grants preliminary injunctive relief to GTO.


GTO operates a Mobil-branded gas station in Itasca, Illinois. In 2006, GTO entered into a franchise agreement with Mobil (the "Lease"), which Mobil assigned to Buchanan when Buchanan acquired various gas station properties from Mobil in December 2010. Because the Lease was set to expire on March 31, 2011, Buchanan, in April 2011, sent GTO a new dealer lease and supply agreement (the "Proposed Lease") that would become effective April 1, 2011 and terminate on March 21, 2014. GTO refused to sign the Proposed Lease because it objected to various terms pertaining to rent, gasoline pricing, and other aspects of the franchisor-franchisee relationship. As a result, GTO continues to operate the gas station under the original Lease.

On November 2, 2011, Buchanan provided GTO with notice that its franchise would be non-renewed effective February 7, 2012 based on GTO's failure to sign the Proposed Lease.*fn1 On January 27, 2012, Buchanan wrote GTO reminding it that the non-renewal would take effect on February 7, 2012, and that GTO needed to vacate the premises by that date. Shortly thereafter, on February 3, 2012, GTO filed a motion for a temporary restraining order ("TRO") and a preliminary injunction under the PMPA. The TRO was granted on February 7, 2012 and this court extended the TRO pending this ruling on GTO's preliminary injunction motion.


Under the PMPA, "the court shall grant an injunction" where a franchisee demonstrates that (i) the franchise "has not been renewed"; (ii) "there exist sufficiently serious questions going to the merits to make such questions a fair ground for litigation"; and (iii) "the court determines that, on balance, the hardships imposed upon the franchisor by the issuance of such preliminary injunctive relief will be less than the hardship which would be imposed upon such franchisee if such preliminary injunctive relief were not granted." 15 U.S.C. § 2805(b)(2). Upon "receiv[ing] notice of non-renewal, [the franchisee] can seek a preliminary injunction under [this] relaxed injunctive standard, maintaining the status quo while a court determines the lawfulness of the proposed changes" to an agreement. Mac's Shell Serv., Inc. v. Shell Oil Prods. Co. LLC, 130 S.Ct. 1251, 1263 (citing 15 U.S.C. § 2805(b)(2)).


In this case, there is no dispute that GTO has received notice of non-renewal. The court, therefore, is left with two questions. First, the court must ask are whether GTO has raised "sufficiently serious questions going to the merits to make such questions a fair ground for litigation," 15 U.S.C. § 2805(b)(2). To prevail on this issue, GTO "need only prove 'a reasonable chance of success on the merits' of its claim of a PMPA violation . . . .'" Beachler v. Amoco Oil Co., 112 F.3d 902, 905 (7th Cir. 1997) (quoting Moody v. Amoco Oil Co., 734 F.2d 1200, 1216 (7th Cir. 1984)). Second, the court must assess whether "the balance of hardships tips in [GTO's] favor." Beachler, 112 F.3d at 905. As discussed below, GTO prevails on each of these questions.

A. Whether GTO Has a "Reasonable Chance of Success on the Merits"

Buchanan chose not to renew GTO because GTO refused to sign the Proposed Lease. This refusal could provide a legitimate ground for non-renewal under the PMPA. See 15 U.S.C. § 2802(b)(3)(A). Nevertheless, GTO can establish a PMPA violation if it demonstrates (i) that the terms imposed on GTO by the Proposed Lease were not "made by [Buchanan] in good faith and in the normal course of business," id. § 2802(b)(3)(A)(i); or (ii) that Buchanan's new terms were a pretext for non-renewal. See id. § 2802(b)(3)(A)(ii); Lippo v. Mobil Oil Corp., 802 F.2d 975, 977 (7th Cir. 1986) (noting that the PMPA requires that proposed changes be "made in good faith, in the normal course of business, and not as a pretext for non-renewal").

1. Evidence Suggesting Buchanan's Bad Faith in Proposing its New Terms

GTO argues that Buchanan imposed the Proposed Lease terms in bad faith. In its brief, GTO claims that "[t]he unreasonable, arbitrary and unconscionable changes in the [Proposed Lease] being imposed upon GTO by Buchanan are not in good faith or in the normal course of business, but rather for the purpose of preventing renewal and/or allowing Buchanan the ability to more easily convert the leased marketing premises to company owned or operated stations at Buchanan's discretion." (Pl.'s Mem. in Supp. at 10, ECF No. 35.) There are several terms that GTO argues were proposed by Buchanan in bad faith. For example, the Proposed Lease contains unspecified rent amounts for years two and three of the lease, does not have provisions allowing dealers to challenge proposed rent amounts and, in GTO's view, imposes anticompetitive fuel pricing policies.*fn2 Of course, general allegations, standing alone, do not enable this court to grant a preliminary injunction. GTO must provide evidence showing that it has a reasonable chance of succeeding on its claim. See Beachler, 112 F.3d at 905. The relevant evidence provided by GTO is discussed below.

Unspecified Rent Amounts Under the Proposed Lease The Proposed Lease, which did not set rent amounts for the second and third years of the lease, was offered to GTO on a take it or leave it basis. As the court noted in its February 16, 2012 order, "Oshana has averred that Kevin Kendrick of Buchanan told him that [the unspecified rent amounts] 'could be $20,000 or $30,000 or $40,000, it is up to us. Take it or leave it.'" (See Order at 2, ECF No. 55 (quoting Oshana Aff. ¶ 23).) The court agrees with Buchanan that a "take it or leave it" offer, if made in good faith, would not justify relief for GTO. See Santiago-Sepulveda v. Esso Standard Oil Co., 638 F. Supp. 2d 193, 199 (D.P.R. 2009) (noting that offering an agreement on a "take it or leave it" basis can be a business decision that is "devoid of bad faith"). However, if an agreement is presented in this manner, and that agreement contains coercive terms, relief would be justified. See Jet, Inc. v. Shell Oil Co., No. 02 C 2289, 2002 WL 31641627, at *4 (N.D. Ill. Nov. 22, 2002) (suggesting that the PMPA "provide[s] . . . relief for franchisees presented with coercive renewal agreements on a take-it-or-leave-it basis" (emphasis added)). Here, Kendrick's "take it or leave it" statement is illustrative of the coercive ...

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