By Philip Ashley
The Petroleum Marketing Practices Act was enacted by Congress to address abuses in the termination or non-renewal of the franchisee relationship between independent franchisees and their franchisor oil companies. Since then, some circuit courts of appeal have expanded the application of the PMPA beyond what Congress intended. The U.S. Supreme Court ended this practice with its decision in Mac's Shell Service Inc., v. Shell Oil Products.
In this Emerging Issues Analysis, Philip Ashley, a law professor at DePaul University College of Law in Chicago, writes:
"Oil companies often choose to sell their petroleum products to the public through independent franchisees. The contractual franchise relationship thus established always includes, at a minimum, an agreement that the franchisor will license use of its trademarks to the franchisee, will sell its branded gasoline to the franchisee for resale and will lease the service station premises to the franchisee if the franchise doesn't own their own facility. Because each of these factors is essential to the franchise relationship, the breach of any of them would destroy the entire agreement.
Prior to 1978, termination or nonrenewal of independent gas station franchisee contracts was strictly as matter for state courts. Congress eventually responded to widespread complaints by franchisees, claiming that their termination or nonrenewal was arbitrary by enacting the PMPA (15 U.S.C. §2801, et. seq.). Judge Posner, writing for the Seventh Circuit on the need for federal protection of petroleum franchisees noted, 'The best theory for why such a law is needed is that "a franchised dealer in effects invests in the franchisor's trademarks and as a result creates goodwill for the franchisor which the latter might on occasion be tempted to appropriate by terminating the franchise."' Al's Service Center v. BP Products North America, 599 F.3d 720 (7d Cir. 2010), quoting Draeger Oil Co. v. Uno-Ven Co., 314 F.3d 299 (7d. Cir 2002). . . .
"The Plaintiffs in this case are a group of Shell franchisees in Massachusetts who sued Shell and Motiva, a joint-venture between Shell, and two other oil companies, that handles petroleum distribution and marketing in the eastern United States and Gulf Coast."
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