Mac's Shell Service v. Shell Oil Products Co.

PETITIONER: Mac's Shell Service et al.
RESPONDENT: Shell Oil Products Co. et al.
LOCATION: Shell Oil Products

DOCKET NO.: 08-240
DECIDED BY: Roberts Court (2009-2010)
LOWER COURT: United States Court of Appeals for the First Circuit

CITATION: 559 US 175 (2010)
GRANTED: Jun 15, 2009
ARGUED: Jan 19, 2010
DECIDED: Mar 02, 2010

ADVOCATES:
David O'Neil - Assistant to the Solicitor General, Department of Justice, for the United States, as amicus curiae
John F Farraher Jr - on behalf of mac's shell service, inc., et al.
Jeffrey A. Lamken - for the Shell Oil Products Company

Facts of the case

Gas station franchisees won a verdict against franchisor Motiva in the Massachusetts federal district court for violations of the Petroleum Marketing Practices Act. The franchisees argued that new leases that changed the way rent was calculated and which amounted to increased rents were made in bad faith and meant to drive them out of business. They claimed that the new lease terms amounted to "constructive nonrenewal," prohibited by the PMPA, even though they signed the agreements. On appeal, the U.S. Court of Appeals for the First Circuit reversed in part, holding that the PMPA did not support a claim for constructive nonrenewal under the circumstances in the case. It reasoned that the PMPA requires franchisees faced with objectionable contract terms to refrain from ratifying those terms by executing the contract, as the franchisees did in this case.

Question

Does the PMPA encompass a claim for "constructive nonrenewal" of franchisee's lease when: i) franchisees filed suit prior to receiving new lease agreements that violated the act, ii) lease agreements were presented on a take-it-or-leave-it basis, iii) franchisor stated it would terminate the leases unless franchisees signed the new agreements, and iv) franchisees signed lease agreements under protest and pursued their legal claims against the franchisor?

Media for Mac's Shell Service v. Shell Oil Products Co.

Audio Transcription for Oral Argument - January 19, 2010 in Mac's Shell Service v. Shell Oil Products Co.

Audio Transcription for Opinion Announcement - March 02, 2010 in Mac's Shell Service v. Shell Oil Products Co.

John G. Roberts, Jr.:

Justice Alito has our opinion this morning in case 08-240, Mac's Shell Service versus Shell Oil Products and the consolidated case.

Samuel A. Alito, Jr.:

Now these consolidated cases come to us on writs of certiorari to the United States Court of Appeals for the First Circuit.

The Petroleum Marketing Practices Act limits the circumstances in which petroleum franchisors can terminate a franchise or fail to renew a franchise relationship.

In this action Service Station franchisees brought suit, alleging that a petroleum franchisor had violated the act by constructively terminating their franchises and by constructingly failing to renew their franchise relationships.

Significantly, the franchisees asserted these claims, even though the conduct of which they complained had not compelled any of them to abandon their franchise operations, and even though they had been offered and had accepted renewal agreements.

For reasons set out in our opinion, we conclude that a franchisee cannot maintain a claim for constructive termination under the Petroleum Marketing Practices Act when the franchisor's allegedly wrongful conduct did not compel the franchisee to abandon one or more of the statutory elements of its franchise.

In addition, we conclude that a franchisee who signs and operates under a renewal agreement with a franchisor cannot thereafter recover for unlawful non-renewal.

We, therefore, reverse in part, affirm in part and remand the case for further proceedings.

The opinion is unanimous.