District Court Holds that Free Assignment Contract Provision Controls Exxon Dispute
(July 2010) By Carrie A. Scrufari, Summer Associate
For more information, contact Paul Farquharson.
Duncan Servs. v. ExxonMobil Oil Corp.,
Civil Action No. A W-09-2486 (Federal District Court for the District of Maryland, July 12, 2010) available
here.
The United States District Court for the District of
Maryland granted Defendants' Motions to Dismiss and denied Plaintiffs' Motion
for Reconsideration in a case where sixty-five franchises of ExxonMobil Oil
Corporation, ExxonMobil Corporation, White Oak Petroleum, and GTY MD Leasing
Inc. (collectively, "Defendants") filed suit, alleging violations of the
Petroleum Marketing Practices Act ("PMPA") and breach of contract. Plaintiffs
were all franchisees of Exxon who filed suit after Exxon reassigned the
franchises.
Two groups of Plaintiffs filed suit – those whose
franchises were assigned to Defendant White Oak, and those whose franchises had
not yet been reassigned at the time of filing. All the Defendants moved to
dismiss all claims filed against them, and the Court ruled in favor of the
Defendants.
The Court dismissed Plaintiffs' PMPA claims because Exxon's
reassignment of the franchises to White Oak did not terminate the franchises or
result in nonrenewal of the franchise relationships. See 15 U.S.C. § 2805 (c).
The PMPA only prohibits conduct that would forcefully end a franchise. Thus, the
PMPA permits changes in the franchisor-franchisee relationship so long as those
changes do not actually or constructively terminate the franchise. Because the
assignment of the franchises to White Oak did not terminate the franchise
relationship, the Court found Defendants had not violated the PMPA.
In addition to dismissing the PMPA count of the Complaint,
the Court similarly dismissed Plaintiffs' breach of contract claim. The Court
relied on the actual contract language, which provided that the parties agreed
to make the franchises freely assignable. When Plaintiffs submitted to those
contract terms, the Court reasoned they submitted to the risks of changes in
fuel price, course of dealing, or changes in lease status if they were
reassigned. Moreover, the Plaintiffs did not allege violations of contractual
obligations sufficient to result in a breach of contract because the Franchise
Agreement contained an open price fuel clause stating that fuel prices were
subject to change without notice.
The Plaintiffs also attempted to hold Defendants White Oak
and GTY vicariously liable for Exxon's alleged violation of the PMPA by alleging
civil conspiracy. Yet, the Court also dismissed Plaintiffs' allegations that the
Defendants engaged in a civil conspiracy to violate the PMPA. Because the Court
already held Exxon did not violate the PMPA and that Exxon did not breach the
franchise contract, the Court ruled there was no basis to find White Oak or GTY
vicariously liable. Thus, the Court granted Defendants' Motion to Dismiss with
respect to the civil conspiracy claims.
Next, the Court also denied Plaintiffs' remedy claim for
imposition of a constructive trust on the properties White Oak leased from GTY.
Since Plaintiffs failed to show Defendants were unjustly enriched by the
franchise reassignment, there was no basis to award a constructive trust.
Lastly, the Court denied Plaintiffs' Motion for
Reconsideration. The second group of Plaintiffs moved for reconsideration after
learning the identity of the party to whom they would be reassigned. Yet, the
mere identity of the party to whom Exxon would reassign the franchises is
insufficient to warrant reconsideration. See Hutchinson v. Stanton, 994 F.2d
1076, 1081 (4th Cir. 2002) (holding reconsideration is only appropriate to
accommodate new changes in the law, to account for new evidence not previously
available at trial, or to correct a clear error of law or injustice). While it
is true that Plaintiffs did not know to whom they would be reassigned at the
time of the Complaint, knowledge of the assignee still does not result in
constructive termination of the franchise agreement. Therefore, new evidence
regarding the assignee's identity does not have any bearing on the Court's
previous decision that reassignment was permissible.
Thus, the Court dismissed all of Plaintiffs' claims.