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LLC v. LGP Realty Holdings, LP

United States District Court, N.D. Illinois, Eastern Division

October 27, 2017

CATCH 26, LLC, an Illinois Limited Liability Company, GAS CAP FUELS, LLC, an Illinois Limited Liability Company, and GRAYSLAKE STOP & SHOP, LLC, an Illinois Limited Liability Company, Plaintiffs,
v.
LGP REALTY HOLDINGS, LP, a Delaware Limited Partnership, as successor by assignment from PT, LLC, BAPA, LLC and STATE OIL COMPANY and LEHIGH GAS WHOLESALE, LLC, a Delaware Limited Liability Company, Defendants.

          MEMORANDUM OPINION AND ORDER

          SHARON JOHNSON COLEMAN, UNITED STATES DISTRICT COURT JUDGE.

         The plaintiffs' motion for a preliminary injunction and expedited discovery [2] is granted in part and denied in part. A preliminary injunction is issued with respect to the Ingleside location, but denied with respect to the Grayslake and Woodstock locations. The terms of the injunction are set forth in a separate order.

         Background

         The following are the general facts of this case, as established by the evidence and testimony presently before this Court. Plaintiff Grayslake Stop & Shop LLC has operated a gas station and convenience store in Grayslake, Illinois since 2003 (“the Grayslake location”). Plaintiff Gas Cap Fuels, LLC has operated a gas station and convenience store in Ingleside, Illinois since 2013 (“the Ingleside location”). Plaintiff Catch 26, LLC has operated a gas station and convenience store in Woodstock, Illinois since 2014 (“the Woodstock location”). Defendant LGP Realty Holdings, LP leases the Woodstock and Grayslake locations to the plaintiffs and is the title holder to the Ingleside location, which is being purchased through an installment agreement. At the times relevant to this suit, the Woodstock and Grayslake locations sold unbranded fuel and the Ingleside location sold Marathon branded fuel, all of which was exclusively supplied by Lehigh Gas Wholesale, LP pursuant to supply agreements executed with each location.

         On July 5, 2017, the Woodstock location had an open balance of $6, 564.80 for rent, real estate taxes, and repair charges. It is disputed whether the repair charges were properly included in that balance. On July 5, 2017, the Woodstock location's pre-authorized account was debited for that balance, but there were insufficient funds to satisfy the draft and it was returned. As a result, Lehigh Gas Wholesale, LP placed the Woodstock location on a delivery hold. While the hold was in effect, the Woodstock location purchased fuel from another supplier. At the time of the default, LGP owed a credit of approximately $16, 405.29 to the plaintiffs for excess escrow payments.

         On August 4, 2017, the Grayslake location had an open balance for motor fuel receivables totaling $40, 562.44. The location's pre-authorized account was debited for the amount of $33, 736.24, but there were insufficient funds and the draft bounced. Accordingly, the Grayslake location was placed on a delivery hold on August 8, 2017. While the hold was in effect, the Grayslake location purchased fuel from another supplier. At the time of the default, LGP owed a credit of approximately $11, 384.72 to the plaintiffs for excess escrow payments.

         On August 5, 2017, the Ingleside location had an open balance of $17, 208.90, which included real estate taxes, a monthly installment payment, and a new POS system required by Marathon. The Ingleside location's pre-authorized account was debited for the then-outstanding balance, but the transaction was rejected due to a dispute over the cost of the POS system (which the parties seem to agree was a valid dispute). On August 10, 2017, the Ingleside location was placed on a delivery hold. While that hold was in effect, the Ingleside location purchased fuel from another supplier. At the time of the default, LGP owed a credit of approximately $12, 441.58 to the plaintiffs for excess escrow payments.

         Although the plaintiff gas stations were placed on hold, the defendants continued to make EFT transfers out of their bank accounts. The plaintiffs accordingly directed their banks to no longer permit such transfers. On August 14, 2017, the plaintiffs were provided with a written notice that the defendants were terminating the Ingleside, Woodstock, and Grayslake Supply Agreements, the Woodstock and Grayslake Leases, and the Ingleside Installment Agreement, effective August 25, 2017. The plaintiffs subsequently filed this action, and moved this Court for injunctive relief under the Petroleum Marketing Practices Act (PMPA). The Court ordered that the parties maintain the status quo while the pending motion was briefed, argued, and taken under advisement.

         Just prior to the preliminary injunction hearing, the defendants filed a motion to dismiss. Because that motion questions the applicability of the PMPA in this action, this Court provided the parties with the opportunity to file supplemental briefing on that issue prior to ruling on the plaintiffs' motion for a preliminary injunction under the PMPA.

         Legal Standard

         The PMPA provides that a court must grant a preliminary injunction upon a showing that the franchise has been terminated or not renewed, there is a sufficiently serious question going to the merits as to make the question a fair ground for litigation, and the balance of hardships favors granted the injunction. 15 U.S.C. § 2805(b)(2). Accordingly, a franchisee need only establish a reasonable chance of success on the merits, not a “strong or reasonable likelihood” of success. Moody v. Amoco Oil Co., 734 F.2d 1200, 1216 (7th Cir. 1984).

         Discussion

         The defendants contend, in their motion to dismiss, that the PMPA does not apply to the Grayslake and Woodstock locations. Because the plaintiffs are seeking statutory relief under the PMPA, this Court must address the threshold issue of whether the PMPA applies before it can proceed to consider the relevant factors under section 2805.

         Broadly speaking, the PMPA protects the interests of franchisees by regulating when and how gas station franchises can be terminated. Under section ...


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