Wednesday, March 3, 2010

SCOTUS decides Mac's Shell case

Yesterday, the U.S. Supreme Court decided Mac's Shell Serv., Inc. v. Shell Oil Prods. Co., No. 08-240.  Service station franchisees sued under the Petroleum Marketing Practices Act, 15 U.S.C. 2802, 2804, claiming a "constructive termination" of their franchises.  From the Syllabus:

The Petroleum Marketing Practices Act (Act) limits the circumstances in which franchisors may "terminate" a service-station franchise or "fail to renew" a franchise relationship. 15 U. S. C. §§2802, 2804. Typically, the franchisor leases the service station to the franchisee and permits the franchisee to use the franchisor's trademark and purchase the franchisor's fuel for resale. §2801(1). As relevant here, service-station franchisees (dealers) filed suit under the Act, alleging that a petroleum franchisor and its assignee had constructively "terminate[d]" their franchises and constructively "fail[ed] to renew" their franchise relationships by substantially changing the rental terms that the dealers had enjoyed for years, increasing costs for many of them. The dealers asserted these claims even though they had not been compelled to abandon their franchises, and even though they had been offered and had accepted renewal agreements.

Justice Alito wrote the opinion for a unanimous Court, which held:

1. A franchisee cannot recover for constructive termination under the Act if the franchisor's allegedly wrongful conduct did not compel the franchisee to abandon its franchise. Pp. 6-15. . . .

2. A franchisee who signs and operates under a renewal agreement with a franchisor may not maintain a constructive nonrenewal claim under the Act.

The case turned more on contract and franchise law, but it also may be of interest to land users to the extent that it touches on real property leases and oil and gas law . . . plus service stations are often a big issue in zoning.  Lots more info is available on this SCOTUS Wiki by Shira Liu of Stanford Law School.

Matt Festa

Caselaw, Contracts, Landlord-Tenant, Oil & Gas | Permalink

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