The RI Lawyers Weekly Sidebar Blog has posted that the U.S. Supreme Court has upheld in part and overturned in part a decision of the 1st U.S. Circuit Court of Appeals in a case stemming from a dispute between an oil company and eight gas station operators who claimed the oil company tried to drive them out of business.
The suit, Mac’s Shell Service Inc. et al. v. Shell Oil Products, was filed under the Petroleum Marketing Practices Act, a statute that limits the circumstances in which franchisors can terminate a service-station franchise or fail to renew it.
The service-station franchisees claimed that a the gas company franchisor and its assignee had essentially terminated their franchises by 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 hadn’t been forced to abandon their franchises, and even though they had been offered and had accepted renewal agreements.
In the U.S. District Court, a jury found against the franchisor and assignee and denied their requests for judgment as a matter of law.
The First Circuit affirmed with respect to certain constructive termination claims, deciding that the Petroleum Marketing Practices Act does not require a franchisee to abandon its franchise to recover for such termination and holding that a mere breach of contract by an assignee of a franchise agreement can amount to constructive termination if the breach resulted in a material change that effectively ended the lease.
At the same time, however, the court reversed as to constructive nonrenewal claims, finding that such claims can’t be maintained once a franchisee signs and operates under a renewal agreement.
The case was appealed to the U.S. Supreme Court, which reversed the 1st Circuit as to the constructive termination claims.