# Petition for Writ of Certiorari — Abadjian v. Gulf Oil Corp.

> Briefs, arguments, decisions, and more.

URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385002_0318%3A1

## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition for Writ of Certiorari
- **Published:** January 1, 1988
- **Citation:** 488 U.S. 997

## Text

Supreme Court, U.S.

88-674. FILED

Olt 15 1988

JOSEPH F. SPANIOL, JR.

No.

CLERK

In The

Supreme Court of the United States
October Term, 1988

7%
bg

JACK ABADJIAN, MARK BALL,
JOSEPH BROWN, JOHN EGHENIAN,
BRAD MAY, NASSIR MAZAREI,
DONALD PROUSE, AL ROSENSTEIN,
ARAM SHISHMANIAN, JOE SMIDERLE
and STEPHEN WEBBER,

Petitioners,
Vs.

GULF OIL CORPORATION, a
Pennsylvania corporation,
THRIFTY OIL CORPORATION, a
California corporation

Respondents.

y™
_

PETITION FOR WRIT OF CERTIORARI TO THE
COURT OF APPEAL OF THE STATE OF CALIFORNIA,
SECOND APPELLATE DISTRICT, DIVISION TWO

,%
7

KENNETH P. ROBERTS

A PROFESSIONAL LAW CORPORATION
5850 Canoga Avenue, Suite 400
Woodland Hills, CA 91367
(818) 888-3553

Attorney for Petitioners

COCKLE LAW BRIEF PRINTING CO,, (800) 225-6964
OR CALL COLLECT (402) 342-2831

— vr, —

. Seo =

a

:
= =

-
—=
mo

Oy

QUESTIONS PRESENTED

1. Do State Courts enjoy concurrent ‘1risdiction to
enforce rights created by the Petroleum Marketing Prac-
tices Act, 15 United States Code § 2801 —- 2806 as sup-
ported by the language and decisional history of the
statute or, do federal courts hold exclusive jurisdiction
over PMPA actions as announced by the district court in
Rustom v. Atlantic Richfield Company, 618 F. Supp. 210
(C.D. CA 1985) a decision based upon analogizing the
jurisdictional language of the Petroleum Marketing Prac-
tices Act to the jurisdictional language in Title VII of the
Civil Rights Act?

2. May a state court of appeal disregard a remand
order and subsequent ruling of the circuit court on
appeal, in reversing the trial courts decision for Peti-
tioner, based only on its collateral determination that the
state court lacked jurisdiction, in contravention of both
the opinion of the district court and the prohibition of 28
U.S.C. § 1447(d)?

ii

PARTIES TO THE PROCEEDING BELOW

Petitioners, JACK ABADJIAN, MARK BALL, JOSEPH
BROWN, JOHN EGHENIAN, BRAD MAY, NASSIR
MAZAREI, DONALD PROUSE, AL ROSENSTEIN,
ARAM SHISHMANIAN, JOE SMIDERLE and STEPHEN
WEBBER, and Defendants, GULF OIL CORPORATION,
GULF OIL REAL ESTATE DEVELOPMENT CORPORA-
TION, a wholly owned subsidiary of GULF OIL CORPO-
RATION, assorted individual employees of GULF, AND
THRIFTY OIL CORPORATION were all parties to the
action below.

Although all Petitioners met the definition of ‘fran-
chisee’, only Respondent Mobil Oil Corporation met the
definition of ‘franchisor’ and accordingly, they are the ex-
clusive parties to the issues presented to this Court. How-
ever, the interrelatedness of Petitioner’s claims against
Thrifty Oil Corporation as well as Gulf, have prompted
Petitioners inclusion of Thrifty herein, although admit-
tedly as merely an interested part.

iii

TABLE OF CONTENTS

Page
tc kg uo beens 6 a Ww .e'e a'ea-eiae i
Parties to the Proceeding Below .................... ii
IE ree 1
NY ale esd acc dn aver ssuwewesenesbaeiees 3
te hn cc 5b Kad Awa 6 os O04 48 n0 0 8s 4
Statutory Provisions Involved...................... 6
SES PT EEEE EERE ESCCRE REE TS 7
A. Facts and Lower Court Proceedings ........... 7
B. GULF’s Assertion of the Exclusive Federal Juris-
ES OP ee rs Lee eee eee Tee 10

C. The Court of Appeal’s Reversal Based Only
Upon the Issue of Jurisdiction In Contravention
a Seer er eer 12

meeonme Tor Cramting the Writ... ..........0..0000s: 14

I. Congress Intended that botin the State and Federal
Courts have Jurisdiction over PMPA Claims...... 14

II. Remand Orders are binding decisions on the
Courts of California as to the forum in which the
action is to be litigated

EE SOS aU ON aN

iv

TABLE OF AUTHORITIES

Page
CASES
Bates v. Chevron U.S.A., Inc., 151 G.App. 544, 260
ee ee SE co 2 Gh Wok cee ene ceca Loe ee aes 12
Bsales v. Texaco, Inc. 516 F.Supp. 655 (N.J. 1981) ...... 1
Brach v. Amoco Oil Co., 677 F2d 1213, 1220-1221
SEN cus ob sain sce Gus eee aR ee a ee ee 1

Browning v. Navarro, 743 F.2d 1069 (5th Cir. 1984) ....28

California ARCO Distributors, Inc. v. Atlantic Rich-
field Co., 158 Cal.App.3d 349, 204 Cal.Rptr. 743,

ks ok is wae eae Oe es eee cance: 11, 16, 18
Chandler v. O’Brien, 445 F.2d 1045, (Tenth Circuit

1971) cest. denied 405 US. 9664 .........ccsceccens 13
Cianci v. Superior Court, 40 Cal.3d 903, 710 P.2d 375

5. a eee Baas BO 9 aha rai Bag eee de Ch ly ph A SoM age 1, Ti, 38, 19
DeCosta’s Automotive, Inc. v. Birchwood Plaza Shell,

Inc., 482 N.Y.S. 2d 832 106 A.D. 484 (1984)........ 12
Dowd Box Co. v. Courtney, 368 U.S. 502; 82 S.Ct.

ee Re ies ca ks eh EMER aa eek 20
Emerson v. J.F. Shay Co., 76 Cal.App.3d 579, 589

fe rE nM OAL ie in ota 24
Frankard v. Amoco Oil Co., 342 N.W.2d 247 (1983)

BO EE BPE oo vcd he kek de ladsans ie 12
Guilderhus v. Amoco Oil Co., 470 F.Supp. 1302, 1304

ee en MPO aoe oes Seebeck saat he rere eee 23
Gulf Offshore Co. v. Mobil Oil Corp., 453 U.S. 473,

eto ee Oe | | A eS BE 2, 19
Johnson v. Mobil Oil Corp., 528 A.2d 155, 364

pg ee Ss rer Ere re tre y ee

TABLE OF AUTHORITIES-—Continued

Page
Kunzi v. Pan American World Airway, Inc., 833 F.2d,
$203. Gh CRE TPs nay a eeas ckwneereenie eee 14
Lambert Run Coal Company v. Baltimore and Ohio
Railroad Company, 258 U.S. 377; 42 S.Ct. 349
CIDE 0. vane ceeveecvuyen cede eee eee keene eee es 27
Lanham v. Amoco Oil Co., 481 F.Supp. 405 (D. Md.
is | PPro yer rrr rT ry Terr ry rier ih EE oe 12
Los Angeles Memorial Colliseum Commission v.
National Football League, 634 F.2d 1197, 1201 (9th
Che. TROP oie cic sedeccs sense ee ee 23
Missouri Pacific Railroad Co. v. Fitzgerald, 160 U.S.
556, 16 SAA. BOP CBGO) .. 6 oc ch enous inei ieee) 26, 27
Moody v. Amoco Oil Company, 734 F.2d 1200, 1216
(Fie Gig BSG i oda enschede ene eae 23
Niakan v. Samaan 199 Cal.App.3d 716, 245
Cal Rote. 26 CIGGB). . oc scccaescnunineacns 2, 4, 12, 16
Rath Packing Co. v. Becker, 530 F.2d 1295 (9th Cir.
WFD) os onc cnccdadacannsvetae deus a oul ae eee 26
Ricco v. Shell Oil Corporation, 434 A.2d 1151, 180
N.j. Samer. S99 CUP). 3 oie ocs ss xcktaesneurboneens 12
Roberts v. Amoco Oil Co., 740 F.2d 602 (8th Cir.
TODD) oo oe akcse dunce debpveua need dkere eee 15
Rustom v. Atlantic Richfield Co., 618 F.Supp. 210
CCD. CA WORD osc ca cetandannsepee eee passim
Ted’s Tire Service, Inc. v. Chevron U.S.A. Inc., 470
F.Supp. 163 (D. Conn. 1979) ...... 2; 3, th, 72. 38

Thermatron Products, Inc. v. Hermansdorfer, 423 U.S.
343; 96 S.Ct. 584 (1976)

vi

TABLE OF AUTHORITIES-Continued

Page
Valenzuela v. Kraft, Inc., 739 F.2d 434 (9th Cir. 1984)

oe encceneéatee shumeee Renn n a eee Eee 17, 18, 21, 22, 24
Walters v. Chevron U.S.A., Inc., 269 S.E.2d 495, 154

G.App. G36 CGD oss cccvniasnsvuenene ae 12
STATUTES
28 U.S.C. § 1447(c) (Procedure after removal gen-

CUREIY). oc cc ecndcdecscvieneuen esvepeweneenueeaeen me 8
28 USL. § 16D) «oc siscaccncaveuceee eee passim
15 U.S.C. § 2801 et seq., (Petroleum Marketing

PUOCMORS ACE oicccsccusesehvueedtegereeeee passim
13 UBC. @ SOR. sc cesctcsenpesecicio eee 20
15 USC. § SR occ ccc endenegstiesvas eee 6
15 UGC. § SRGRGGRE: «0 <ccnstusseecnesuuee ere 23
1S UGA. § BeeO ses cosnecsscecessseesss sue 6, 19
1S USC. § GRO os. on cscksscncauusse cee 20, 24
RULEs
United States Supreme Court Rules:

RO E71) 2s. ccaceneshecnuts sumnkeenswetiveeeeeeee 4
PURE BF 1GED. so 0 vod dened nnnasaeeue wayne 4

REPORTS

Senate Report No. 731, 95th Cong., 2nd Sess. 15,
reprinted in [1978] U.S. CODE CONG. & AD.
NEWS G76 cccccdcccccvaguaepceeewsveneere 1, 16, 22

Petitioner respectfully petitions this Court for issu-
ance of its Writ of Certiorari as follows:

Lp
vv

INTRODUCTION

The Federal Petroleum Marketing Practices Act
(hereinafter “PMPA”), 15 United States Code § 2801, et
seq., was enacted June 19, 1978, to establish “minimum
federal standards governing the termination and non-
renewal of franchise relationships for the sale of motor
fuel by the franchisor or supplier of fuel.” S.Rep. No. 731,
95th Cong., 2d Sess. 15, reprinted in 1978 U.S. CODE
CONG. & AD. NEWS 873. Congress was concerned “with
the disparity of bargaining power between distributors
and retailers of motor fuel. With this remedial purpose in
mind, Congress sought to limit the circumstances in
which a distributor could terminate a franchise relation-
ship with the retailer.” Bsales v. Texaco, Inc., 516 F. Supp.
655, 661 (D. N.J. 1981). As the Seventh Circuit Court of
Appeals has concluded:

“... [A]s remedial legislation, the Act must be given

a liberal construction consistent with its overriding

purpose to protect the franchisees. [citations]” (Brach

v. Amoco Oil Co., 677 F.2d 1213, 1220-1221 (1982).)

When analysing whether federal courts have exclu-
sive jurisdiction over a claim brought under a federal law,
one begins with the presumption that concurrent state
and federal jurisdiction exists. Recently the California
Supreme Court followed this presumption in Cianci v.
Superior Court, 40 Cal.3d 903, 710 P.2d 375 (1985), finding
concurrent jurisdiction to exist in actions involving the
Federal Racketeer Influenced and Corrupt Practices Act,
wherein it stated:

““Concurrent jurisdiction has been a common phe-
nomenon in our judicial history, and exclusive fed-
eral court jurisdiction over cases arising under

1

2

federal law has been the exception rather than the

rule.’ (Citation omitted). Accordingly, ‘[iJn consider-

ing the propriety of state court jurisdiction over any
particular federal claim, [we] begin with the presump-
tion that state courts enjoy concurrent jurisdiction.

(Citations omitted) (emphasis added).” (Id. at page

919).

In Gulf Offshore Co. v. Mobil Oil Corp., 453 U.S. 473,
101 S.Ct. 2870, (1981), this Court said:

“The general principal of state court jurisdiction over

cases arising under federal law is straight forward:

state courts may assume subject-matter jurisdiction
over a federal cause of action absent provision by

Congress to the contrary or disabling incapability between

the federal claim and state court adjudication.”

(emphasis added) (Id. at pages 477-478).

The Court in Johnson v. Mobil Oil Corporation, 364
Pa.Super. 275, 528 A.2d 155, 163-164 (1987) gives perhaps
the most thorough analysis of the issue as applied to the
PMPA and concludes:

“. . . We perceive no incompatibility between state

court jurisdiction and promoting Congress’ intent to

protect the needs of both franchisees and franchisors,
to remedy disparity in bargaining power and to pre-
vent arbitrary or discriminatory termination or non-

renewal. For the foregoing reasons, we find that a

state court enjoys concurrent jurisdiction over claims

under the PMPA.” (528 A.2d at 164).

The State of California in Niakan v. Samaan, 199
Cal.App.3d 716; 245 Cal.Rptr. 24 (1988) has recently taken
the opposite position, holding that federal courts have
exclusive jurisdiction to enforce the PMPA. There is no
federal circuit Court of Appeal opinion on this issue and
the federal district courts are divided with the decision
upon which Niakan rests, Rustom v. Atlantic Richfield Com-
pany, 618 F.Supp. 210 (C.D. CA 1985) finding exclusive
federal court jurisdiction, and Ted’s Tire Service, Inc. v.
Chevron U.S.A. Inc., 470 F.Supp. 163 (D. Conn. 1979) find-
ing concurrent state court jurisdiction. Every prior court

2

to consider this issue has determined that concurrent
jurisdiction exists; at least seven other states having con-
sidered the issue, exercising jurisdiction over the PMPA
in reported decisions.

The first issue presented by this Petition is whether

state courts enjoy concurrent jurisdiction to enforce rights
created by the PMPA.

Title 28 of the United States Code § 1447(d) provides
in pertinent part:
“An order remanding the case to the state court from

which it was removed is not reviewable on appeal or
otherwise... ”

As hereafter discussed, in the trial court below, the
case at bar was removed not once, but twice by Defen-
dants to federal court. On both occasions, the federal
court remanded the action for adjudication of the dealer’s
PMPA claims in state court and the Ninth Circuit Court of
Appeal dismissed Defendant’s appeal citing this Court’s
Opinion in Thermatron Products, Inc. v. Hermansdorfer, 423
U.S. 343; 96 S.Ct. 584 (1976).

The second issue presented by this Petition is
whether a state court of appeals is precluded from enter-
taining questions concerning the proper jurisdiction for
actions brought under a federal statute when a federal
court has chosen rightly or wrongly, to remand the case
after removal for adjudication of Petitioner’s PMPA
claims in state court.

a
v

OPINIONS BELOW

The Opinion of the Court of Appeal of the State of
California, Second Appellate District, Division Two, is
printed in Appendix A hereto; the Court of Appeal
declining to publish said Opinion. Also appended nereto,

+
is the Opinion of the United States District Court, Central
District of California.
A Petition for Hearing to the California Supreme
Court was denied on July 20, 1988, with Justice Mosk
dissenting.

La
4

JURISDICTION

The jurisdiction of this Court is invoked upon the
following grounds:

On May 8, 1988, the Court of Appeal of the State of
California, Second Appellate District, Division Two, filed
its Opinion in this case reversing Summary Judgment for
Petitioner on PMPA grounds, having determined that the
federal courts hold exclusive jurisdiction over PMPA
causes of action. The applicable portion of the Court of
Appeal Opinion is set forth in Appendix A, pages 4
through 5, attached hereto.

On July 20, 1988, the California Supreme Court filed
its Order Denying Dealer’s Petition for Review in the
California Supreme Court, and this Petition has been
filed within 90 days of that date.

Jurisdiction for review exists pursuant to United
States Supreme Court Rules, Rule 17.1(b) and 17.1(c) by
reason of a conflict amongst both state courts and federal
courts upon a federal issue, and by reason that the con-
flict presented relates to an important question of federal
law which has not been, but should be, settled by this
Court. The exclusive federal jurisdiction holdings of the
California Court of Appeals here, and in Niakan v. Sam-
aan, 199 Cal.App.3d 716, supra, and Rustom v. Atlantic
Richfield Co., supra, 619 F.Supp. 210 directly confiict with
the state and federal court holdings of Johnson v. Mobil Oil

5

(PA. Super.), supra, 528 A.2d 155, 163-164, Ted’s Tire Ser-
vice Inc. v. Chevron U.S.A. Inc., supra, 470 F.Supp. 163, and
the exercise of jurisdiction by at least seven other states.

Because opposite conclusions have been reached in
published decisions upon the issue of whether concurrent
or exclusive federal jurisdiction exists as to actions cre-
ated by the PMPA, the validity of proceedings involving
the PMPA undertaken in state courts currently and in the
future remain open to question until such time as the
jurisdictional issue is resolved. Keeping in mind the com-
pelling need for the PMPA and its protective provisions, a
need found to exist by Congress, it is submitted that the
issue presented herein is an important question of federal
law to be settled by this Court. Moreover, this Court has
not heretofore considered any issues arising under the
PMPA. In the interest of an orderly and proper develop-
ment of the law in this area of great public importance, an
area also already under the eye of federal agencies, reso-
lution of this issue is deserving of this Court’s attention
and interpretation.

Further, remand orders pursuant to 28 U.S.C.
§ 1447(d) are not reviewable on appeal or otherwise as
has been long established by this Court. Therefore,
whether a state court is precluded from revisiting the
issue Of proper jurisdiction of the causes of action before
it presents yet another issue upon which the Decision of
the California Court of Appeal below conflicts with pre-
vious district court decisions, and additionally, the hold-
ing of this court on a federal question. In that this Court
has expressly recognized that a remand order is a binding
determination of jurisdiction whether or not that order
might be deemed erroneous by an appellate court, the
decision herein is in direct conflict and requires this
Court’s review. As set forth infra, application of 28 U.S.C.
§ 1447(d) to the possibly ambiguous or unforeseen

6

circumstances herein is deserving of this Court’s inter-
pretation and holding.

The validity of remand orders, an important mecha-
nism by which the federal courts exercise control over
their jurisdiction, will remain open to review or side-
stepping by state courts until this issue is resolved.

a
4

STATUTORY PROVISIONS INVOLVED

This case involves two statutory provisions. The
Petroleum Marketing Practices Act, 15 United States
Code § 2801-2806, the provisions of which are set forth in
Appendix G, and the Removal Statute 28 United States
Code § 1447(d), the provisions of which are set forth in
Appendix H. The jurisdictional language of the PMPA at
issue in the present Petition is contained in 15 U.S.C.
§ 2805(a) as follows:

“If a franchisor fails to comply with the requirements
of § 2802 or 2803 of this Title, the franchisee may
maintain a civil action against such franchisor. Such
action may be brought without regard to the amount in
controversy, in the district court of the United States
in any judicial district in which the principal place of
business of such franchisor is located or in which
such franchisee is doing business. Except that no
such action may be maintained unless commenced
within one year after the later of —

“(1) the date of termination of the franchise or non-
renewal of the franchise relationship; or

(2) the date the franchisor fails to comply with the
requirements of § 2802 or 2803 of this Title.”
(Emphasis Added).

The jurisdictional language of Title 28 U.S.C.
§ 1447(d) at issue in the present Petition is as follows:

ss il

7

“An order remanding a case to the State court from
which it was removed is not reviewable on Appeal or
otherwise... ”

STATEMENT OF CASE

A. Facts and Lower Court Proceedings.

In early 1979, having concluded that business was
not profitable in Southern California, Gulf announced a
plan to sell its Los Angeles division assets. Shortly there-
after, Thrifty advised Gulf of its interest in purchasing
Gulf’s Southern California service stations and by Con-
tract dated September 30, 1980, Gulf agreed to sell, and
Thrifty agreed to purchase, all of Gulf’s Los Angeles
division service stations. When Gulf and Thrifty entered
into the September 30, 1980 Contract, each Dealer occu-
pied and operated a service station owned or leased by
Gulf, pursuant to a franchise agreement which included a
lease agreement and a gasoline supply agreement with
Gulf.

Both Thrifty and Gulf recognized that the terms of
their contracts and agreements would trigger the PMPA
and therefore expressly agreed, in paragraph 18, sub-
paragraph (c), of their contracts dated September 30,
1980, that each would abide by the provisions of the
PMPA.

Consistent with its obligations under the PMPA Gulf
identified its dealers to whom a right of first refusal was
required to be given and thereafter, by letter dated
November 24, 1980, notified its Los Angeles division
dealers, stating in part:

“You will be given notification of the offer required

by the PMPA to acquire the station yourself.”

Thereafter Thrifty protested, disputing that the
PMPA gave the dealers a right to first refusal.

In August, 1981, the Petitioners filed this action
against Gulf and Thrifty alleging in their First Cause of
Action that the dealers were entitled to a declaration of
rights that (1) each dealer was a franchisee as defined in

8

15 U.S.C. § 2801; and (2) before Gulf could sell its interest
in the dealer’s service station premises to Thrifty, it must
make a bona fide offer to sell their interest to the dealers
pursuant to the PMPA.

Following the filing of the First Amended Complaint,
both Gulf and Thrifty twice unsuccessfully attempted to
remove the case to federal Court. Because the Ninth
Circuit does not permit pendent party jurisdiction, and
because there did not exist a separate and independent
controversy as to Thrifty, remand was ordered pursuant
to 28 U.S.C. § 1447(c) by the United States District Court
for the Central District of California. The District Court
Opinion, filed March 13, 1984, is attached as Appendix C.
(App. p.8).

Thrifty applied to the United States Court of
Appeals, Ninth Circuit, appealing the Decision of
Remand and Gulf filed in addition, a Petition for Writ of
Mandamus. The Ninth Circuit Court of Appeal dismissed
Defendant’s Appeal by Order dated July 3, 1984, citing
Thermatron, supra. The Circuit Court’s Minute Order is
attached as Appendix D (App. p.24). The Circuit Court
also denied the Petition for Writ of Mandamus, by Order
dated August 22, 1984, attached as Appendix E (App.
p.25).

Thereafter, the dealers moved for summary adjudica-
tion of issues on October 5, 1983. By their Motion, dealers
sought adjudication that the September 30, 1980 Agree-
ment between Defendants Gulf and Thrifty was an event
and occurrence that “triggered” notice and first refusal
rights in Gulf’s interest, be it fee or leasehold, in the
service station properties which the Dealers occupied and
operated as franchisees pursuant to the PMPA, 15 U.S.C.
§ 2801 et seq. After taking the Motions under submission,
the Court (Swearinger, J.) ruled that the Contract between

he

9

Gulf and Thrifty gave each dealer a right of first refusal,
which was required to be offered 45 days prior to the
closing date May, 1981. On December 10, 1984, the trial!
court entered its Minute Order in favor of the dealers
holding:
“The September 30, 1980 Agreement between Defen-
dants was an event and an action that gave to each
moving Plaintiff a right to first refusal to purchase
Gulf’s interest in their respective service stations.
B. Under the [PMPA] Defendant Gulf was obligated
to offer each moving Plaintiff the right as aforesaid at

least 45 days prior to the agreed upon closing date of
the Gulf sales of Thrifty (May 1981).”

The Trial Court’s Minute Order, filed December 10,
1984, is attached as Appendix F (App. p.26). The Court’s
Minute Order further stated that the Court found that
Counts 1, 6 and 7 of the dealer’s Complaint “relate to
rights under the PMPA” and further held that “PMPA
jurisdiction is not exclusively in the Federal Courts.” On
September 11, 1985, at Gulf’s request, the Trial Court
granted severance of the First Cause of Action from the
rest of the Complaint. The only issue remaining there-
under, was the purchase price to be paid by each dealer
upon the exercise of his right of first refusal. In addition,
the trial court awarded the dealers over $200,000 in costs
and attorney’s fees pursuant to statutory provisions con-
tained in the PMPA. Gulf and Thrifty appealed asserting
that the trial court lacked subject matter jurisdiction over
PMPA causes of action, and all of the proceedings in the
action were stayed pending resolution of the Appeal. The
Court of Appeal reversed, holding that the PMPA is
enforceable only in the federal courts and thus the trial
court had erred in deciding the PMPA issues. The Court
of Appeal Opinion filed May 8, 1988, is attached as
Appendix A. (App. p.1).

10

On July 20, 1988, the California Supreme Court filed
its Summary Order denying review of the Court of
Appeal Decision. A copy of the Order of the California
Supreme Court Denying Review is attached as Appendix
B (App. p.7). Both in arguing the case in the Court of
Appeal and in the Petition for Review in the California
Supreme Court, the PMPA jurisdictional issue and the
nonreviewability of Remand Orders pursuant to Title 28
U.S.C. § 1447(d) issues were raised.

B. Gulf’s Assertion of the Exclusive Federal Juris-
diction Issue.

Following the filing of the dealer’s Complaint Gulf
and Thrifty sought removal on the basis that the dealer’s
claims under the PMPA created a federal question. Fol-
lowing the remand order and the dealer’s Motion for
Summary Adjudication of Issues in October 1983, Gulf
and Thrifty again sought removal on the grounds that the
PMPA was a federal statute, but the district court (Hatter,
J.) held that the court had no jurisdiction over Thrifty
because Thrifty was not a franchisor under the PMPA and
there was no separate and independent controversy as
between Gulf and Thrifty. (602 F.Supp. 874, 881-882 (1984)
(App. C, p.16). Gulf thereafter petitioned the Ninth Cir-
cuit for a Writ of Mandate and Thrifty appealed from the
district court’s remand order. Both the Writ and Petition
were denied (App. D, E) Gulf and Thrifty did not directly
challenge the jurisdiction of the state court to hear the
PMPA violation claims until June of 1987 when they
sought relief in the California Court of Appeal, Second
Appellate District, Division Two, from the Superior Court
Order of December 10, 1984 in favor of the dealers under
the PMPA.

Until Rustom was decided, there was a uniform body
of state and federal law pronouncing the concurrent state
court and federal court jurisdiction for claims brought
under the PMPA. The only federal court decision
addressing the issue held in favor of concurrent state

_

11

court jurisdiction. That case, Ted’s Tire, 470 F. Supp. 163,
supra, one of the first cases decided under the PMPA
following its enactment in 1978, announced that service
station dealers could enforce their rights thereunder in
either a state or federal Court:

“[PMPA] stipulates that a civil action to redress a
violation of the statute ‘may be brought’ in a federal
district court; it does not state that such an action
must be instituted in federal court. 15 U.S.C. § 2805. It
has long been established, that absent any indication
that the federal courts have exclusive jurisdiction
Over a particular subject, federal laws may be

enforced in either the state of federal courts.
* * *

[T]here is nothing in the PMPA which suggests that
the Connneticut Superior Court would not have had
jurisdiction over a complaint brought under the
PMPA.” (Ted's Tire, supra, p. 2 at 165).

The California Courts agreed: Cianci, supra, (“[I]n the
PMPA (15 U.S.C. § 2801, et seq.), for example, Congress
created a private right of action without limiting jurisdic-
tion to Federal Courts”); and the California Court of
Appeal followed suit:

“{Wle are cognizant that the state courts have con-

current jurisdiction to enforce the PMPA.” (California

ARCO Distributors, Inc. v. Atlantic Richfield Corp, 158

Cal.App.3d 349, 364 (1984).

Based upon Cianci, supra, and California ARCO Dis-
tributors, Inc., supra, it has been established law in Cali-
fornia at all relevant times that state courts have
concurrent jurisdiction over the PMPA actions.

After seven years of litigation, two remand orders
and an appeal to the Ninth Circuit Court of Appeals,
throughout which it was uniformly held that this dispute
was properly within the Superior Court, judgment for the
dealers was reversed, solely upon the basis of jurisdiction.
In June, of 1987, almost six years after petitioners brought
this lawsuit, and almost two years after the opinion was

12

filed in Rustom, the first reported case to accept a conten-
tion that federal courts held exclusive jurisdiction to con-
sider claims under the PMPA, Gulf and Thrifty raised this
jurisdictional issue. The Court of Appeal reversed the
trial court, asserting that the California Superior Court
lacked subject matter jurisdiction over the PMPA issues
citing the recent California Court of Appeal decision,
Niakan, supra, a decision based solely upon Rustom with-
out further consideration or analysis of the issue (Appen-
dix A, p.4).

In contrast, the Appellate Court for the State of Penn-
sylvania after much consideration and original analysis
of the issue, rejected the Rustom decision and its logic,
instead following Ted’s Tire in its Johnson opinion. In the
ten years since the PMPA was enacted, Rustom, and
recently Niakan, are the only published decisions to hold
that federal courts have exclusive jurisdiction over PMPA
claims. Every other published opinion analysing issues
under the PMPA has found or assumed concurrent juris-
diction, including Lanham v. Amoco Oil Co., 481 F.Supp.
405 (D.Md. 1979) [remanding litigation to the State Court
forum for trial on the merits]; Johnson v. Mobil Oil Co.,
supra, [rejecting Rustom,]; Frankard v. Amoco Oil Co, 116
Wis. 2d 254, 342 N.W.2d 247 (1983); Walters v. Chevron
U.S.A., Inc., 154 G.App., 636, 269 S.E.2d 495 (1980); Bates
v. Chevron U.S.A., Inc., 151 G.App. 544, 260 S.E.2d 367
(1979); Ricco v. Shell Oil Co., 180 N.J.S. 399, 434 A.2d 1151
(1981); and DeCosta’s Automotive, Inc., v. Birchwood Plaza
Shell, Inc., 482 N.Y.S. 2d 832 (1984).

C. The Court of Appeals Reversal Based Only
Upon the Issue of Jurisdiction in Contravention of Title
28, United States Code § 1447(d).

Although the District Court had remanded this case
twice and the Ninth Circuit Court of Appeal had dis-
missed Defendant’s Appeal of Remand, and in addition

|

13

Defendant’s Petition for Writ of Mandamus, the Californ-
ia Court of Appeal reversed judgment for the dealers on
jurisdictional grounds.

Title 28 of the United States Code § 1447(d) provides:

“An order remanding a case to the state court from

which it was removed is not reviewable on appeal or

otherwise. . . .”

The effect of Title 28 United States Code § 1447(d)
was plainly stated in the often cited case of Chandler v.
O’Brien, 445 F.2d 1045 (10th Circuit 1971), cert. denied,
405 U.S. 964, as follows:

“Thus so far as the question of a forum in which a

case is to be litigated is concerned, the determination

of a federal district court that a case is not removable
and remanding it to the state court is final.”

The present action was removed not once, but on two
separate occasions to the United States district court. On
both occasions, the action was remanded because after
careful review of the issue, the United States district
court determined that there did not exist a separate and
independent controversy as to Thrifty and accordingly,
the proper forum for the dispute was in the state court.
The second remand order was directly appealed to the
Ninth Circuit Court of Appeal. That Appeal was dis-
missed, the Ninth Circuit Court of Appeal citing Ther-
matron, supra, wherein, this Court stated as follows:

“There is no doubt that in order to prevent delay in

the trial of remanded cases by protracted litigation of

jurisdictional issues (citation omitted) Congress immu-
nized from all forms of appellate review any remand order
issued on the grounds specified in § 1447(c), whether or
not that order might be deemed erroneous by an

Appellate Court.” (Emphasis Added) Thermatron,

supra, p.3 at 351.

Notwithstanding the remand orders, over seven
years after this case was first filed, the issue of jurisdic-
tion continues to be litigated.

14

Uniformly, published decisions of both the district
and circuit courts in agreement with this Court have held
that remand orders are immunized from all forms of
appellate review, whether or not the court of appeal
below considers the remand order erroneous as to the
forum in which the dispute should be litigated.

A recent Ninth Circuit Court Opinion has reaffirmed
this entire line of cases. In Kunzi v. Pan American World
Airways, Inc., 833 F.2d 1291 (9th Cir. 1987), the Ninth
Circuit Court of Appeal stated:

“Remand orders issued pursuant to 28 U.S.C.

§ 1447(c) and based on the grounds specified therein,

ie., that removal was improvident and without juris-

diction, are immune from appellate review. (citations
omitted). In such cases, 28 U.S.C. § 1447(d) acts as an
absolute bar to review by appeal or mandamus. (cita-
tion omitted). This prohibition applies even if the
district court’s jurisdictional decision was erro-

neous.” (Emphasis Added) Id. at 1293.

There are no published opinions wherein a state
court of appeal is permitted to review and reverse the
jurisdictional determination of the district court, and, in
fact, all decisions on the issue hold that such an order is
“immune” from review even if the appellate court
believed the order to be in error.

,%
-

REASONS FOR GRANTING THE WRIT

I. Congress Intended that both the State and Fed-

eral Courts have Jurisdiction over PMPA Claims.

The issue presented, whether state courts have juris-
diction to consider claims arising under the PMPA, 15
U.S.C. § 2801 et. seq. is one of great public importance in
that the PMPA affects the nations second largest industry,
the petroleum industry and provides the tens of thou-
sands of retail gasoline station franchisees such as Peti-
tioners whose very livelihood is held in the balance by
the provisions of the PMPA, some measure of protection

ee

15

from the abusive and arbitrary conduct to which the
industry has subjected franchisees. The PMPA was
enacted by Congress in 1978 to protect petroleum fran-
chisees from unfair conduct on the part of the franchisor,
and to eliminate the disparity of bargaining power
between the two.

Various published decisions have commented on the
remedial nature of the PMPA and Congress’ intent to
provide broad protection to service station franchisees
against unfair termination or non-renewal by oil com-
panies. As the Eighth Circuit noted in Roberts v. Amoco Oil
Company, 740 F.2d 602, 604 (8th Cir. 1984):

““In the nation’s second largest industry, the major
oil firms have the gasoline station dealers in virtual
bondage, hinged on the constant threat that their
short term contracts will not be renewed unless they
submit to burdensome franchisor-imposed practices.
* * *

It is generally conceded that the gasoline station
situation is almost hopeless and offers a prime exam-
ple of the worst abuses in franchising.’ ”

The Senate Report reads as follows:

“It is also important to note that often the reasonable
expectations of the parties to a motor fuel franchise
are that the relationship will be a continuing one.
This expectation by the franchisee, in particular, is
often the result of and fostered by, statements and
actions of the franchisor. As a result, non-renewal of
a motor fuel franchise relationship at the expiration
of its term can be almost as punitive as termination
of the franchise during its term. The reasonable
expectations of the franchisee, rather than any defini-
tive contract rights, are destroyed.
* * *

An essential requirement of the federal legislation is
that the grounds for termination and non-renewal
provided by the legislation not be so broad as to
deny franchisees meaningful protection from arbi-
trary or discriminatory termination and non-

16

renewals or prevent fulfillment of the reasonable
renewal expectations of franchisees.” (S. Rep. No.
731, 95th Cong., 2d Sess. 18, reprinted in 1978 U.S.
CODE CONG. & AD. NEWS 873, 874)

An announcement from this Court is necessary, at
this time, to provide effective guidance to the tens of
thousands of retail gasoline station franchisees and their
legal counsel who currently or in the future must deal
with claims under the PMPA. Pending this Court’s inter-
pretation and settlement of the jurisdictional issue,
actions brought by dealers under the provisions of the
PMPA both currently and in the future, face uncertainty.
Many states, such as Pennsylvania may continue to rely
on the language of Ted’s Tire, supra, and California ARCO
Distributors, Inc., supra, and file claims under the PMPA
in state court and expend considerable financial resources
and invest years of their lives seeking to establish their
rights under the PMPA only to face reversal and dis-
missal of their actions based only on the issue of jurisdic-
tion. Other courts, such as California, may follow Rustom,
supra, and its progeny, Niakan, supra, leaving dealers with
no forum in which to enforce rights granted them under
the PMPA in conjunction with state law claims because
district courts, such as the Ninth Circuit, do not exercise
pendent party jurisdiction.

It would seem contrary to the remedial nature of this
legislation to find that federal courts have exclusive juris-
diction thus forcing gasoline station dealers, a great por-
tion of whom are located in extremely rural areas, to hire
expensive big city attorneys in distant cities with little or
no comprehension of the franchisee’s business or the
context in which his problems arise, to represent the
dealer in federal district court regarding violations of the
PMPA. In states such as California, the result adds insult
to injury: the dealer seeking relief under both his state
causes of action and the PMPA must therefore fight his
battles in both the state and federal courts.

©
a |

17

Furthermore, should state courts be found lacking in
jurisdiction to hear claims arising under the PMPA, dis-
trict courts will be burdened by a great deal more PMPA
cases than perhaps presently contemplated. A major com-
ponent of most petroleum franchise relationships, in
addition to the gasoline supply and trademark agree-
ments is a premises lease agreement. Unlawful detainer
actions in connection therewith, are actions frequently
brought by franchisors in terminating a franchise, and
although currentiy brought in state courts, will of neces-
sity be removed to federal district court. The dealer wish-
ing to assert PMPA defenses to an unlawful detainer
action by the franchisor would be required to raise those
questions in the district court. Thus, the impact of exclu-
sive federal jurisdiction would not be limited to dealers
in that it will significantly and, it is contended, needlessly
increase the work load of district courts.

The proponents of exclusive federal court jurisdiction
Over matters arising under PMPA take their cue from a
single federal court opinion, that of Rustom, supra, in
which the district court considered the jurisdictional
issue in light of Valenzuela v. Kraft, Inc., 739 F.2d 434 (9th
Cir. 1984). As heretofore noted the appellate court’s deci-
sion below following Rustom, is inconsistent with the
express language of the statute, all other published fed-
eral and state case precedence, and the pronouncements
of both this Court and the California Court of Appeal.

The court in Valenzuela, dealing with a similarily
vague and ambiguous piece of legislation, Title VII of the
Civil Rights Act held that in the absence of an explicit
statutory directive, exclusive federal jurisdiction may be
implied from the legislative history of the federal act.
Exclusive jurisdiction over Title VII of the Civil Rights
Act was determined to exist based on implications drawn
from the statutory references to federal procedure rules

18

and trom an absence in the legislative history of any
reference to potential state court jurisdiction. (Valenzuela,
supra, 739 F.2d at 436.)

The district court in Rustom, analogizing the jurisdic-
tional language in the PMPA to that of Title VII of the
Civil Rights Act, concluded that the same factors were
present in the PMPA, in the same degree. (Rustom, supra,
p. 3 at 212-213). However, a careful analysis of the Rustom
courts reasoning reveals that it is erroneous because it
rests primarily upon the improper application of guide-
lines announced in Valenzuela to the factors present or
more accurately, absent from the PMPA.

In Valenzuela, the Ninth Circuit reasoned that federal
courts have exclusive jurisdiction over Title VII for two
reasons. First, the legislative history of Title VII refers to
enforcement in federal courts but does not refer to enfor-
cement in state courts. Second, Title VII contains refer-
ences to procedural mechanisms available only in the
federal court system. Similarly, according to Rustom, the
legislative history of the PMPA refers only to enforce-
ment of actions brought in federal court and the PMPA
incorporates substantive standards found in the Federal
Rules of Civil Procedure. A closer examination of the
PMPA reveals that the court’s reasoning in Valenzuela,
does not apply to the PMPA.

In fact, a much better analogy could be made to the
jurisdictional language of any number of other federal
acts, including the Federal Racketeer Influenced and Cor-
rupt Practices Act or the Labor Management Relations
Act of 1947. The California Supreme Court in its Decision
in Cianci, supra, reasoned that concurrent jurisdiction
exists in actions involving the Federal Racketeer Influ-
enced and Corrupt Practices Act citing and relying upon
California ARCO Distributors, Inc., and Ted’s Tire, as exam-
ples of actions involving statutes, (in each instance the

19

PMPA), wherein concurrent jurisdiction existed. The Cali-
fornia Supreme Court in Cianci, supra, said:

“ ‘Congress, . . . may confine jurisdiction to the fed-

eral courts either explicitly or implicitly. Thus, the

presumption of concurrent jurisdiction can be rebutted
by an explicit statutory directive, by unmistakeable impli-
cation from legislative history, or by clear incompatibility
between the state court jurisdiction and federal interest.’

(citation omitted). Put otherwise ‘the presumption is

that jurisdiction is concurrent, and some strong showing

of need for exclusive jurisdiction is required to overcome
that presumption.’” (Citation omitted) (emphasis

added) (Id. at page 910).

The Court in Valenzuela, began its analysis by noting
that while Title VII made affirmative references to actions
being brought in federal court without mentioning
actions brought in state court, that fact was not deter-
minative of jurisdiction. (739 F.2d at 436).

“It is black-letter law, however, that the mere grant of

jurisdiction to a federal court does not operate to

oust the state court from concurrent jurisdiction over
the cause of action.” (Gulf OffShore Corp. v. Mobil Oil

Corp., 453 U.S. 473, 479, 101 S.Ct. 2870, 2875-2876, 69

L.Ed.2d 784 (1981).

Thus, the PMPA’s enforcement provision at 2805:
“such action may be brought without regard to the
amount in controversy, in the district court... ”, cannot
provide the explicit statutory directive of exclusive juris-
diction necessary to rebutt the presumption of concurrent
jurisdiction. (Id. at 478, 101 S.Ct. at 2875).

Additionally, an examination of the PMPA reveals
that there is no statutory directive providing for exclusive
federal jurisdiction. Indeed, the statute is expressly con-
trary to any conclusion that exclusive jurisdiction exists
thereunder.

Pursuant to 15 U.S.C. § 2806, governing the relation-
ship between the statutory provisions of the PMPA, and
State and local laws, Congress expressly authorized and

20

empowered State legislatures to enact statutes which
would be “the same as” the PMPA, as they might relate to
termination and non-renewal of franchise agreements.
Specifically, 15 U.S.C. § 2806(a) provides, in part:
“To the extent that any provision of this sub-chapter
applies to the termination. . . of any franchise, or to
the non-renewal of any franchise relationship, no
state . . . may adopt, enforce or continue in effect
...any law or regulation... unless such provision of

such law relationship is the same as, the applicable
provisions of this chapter.”

Congress has expressly empowered states to enact
statutes the “same as” the PMPA and therefor authorized
petroleum termination dispute litigation in state tribu-
nals. Clearly congress intended that there exist a uniform
body of statutory law, but not that disputes be litigated
exclusively in federal court whether litigation be filed
under the PMPA or parallel state statutes. To conclude,
that the PMPA vests exclusive jurisdiction in federal
courts results in the absurd situation that state and fed-
eral courts have concurrent jurisdiction in substance but
not in form. In other words, state courts can act under
laws that are the “same as” the PMPA and must apply
federal standards, but can only do so under state legisla-
tion. Such a conclusion would frustrate the remedial pur-
poses of the PMPA and is not supported by the plain
language of the PMPA.

To the contrary, the enforcement provisions of 15
U.S.C. § 2805 et. seq., provide that a PMPA claim “may be
brought” in federal court. Use of the discretionary term
“may” is a clear legislative proclaimation that concurrent
jurisdiction shall exist. In Dowd Box Co. v. Courtney, 368
U.S. 502; 82 S.Ct. 519 (1962) the Supreme Court was asked
to decide whether the Labor Management Relations Act
of 1947 granted exclusive jurisdiction to federal courts.

21

Section 301(a) of the Act provided that actions for viola-
tions of the law “may be brought in any district court in
the United States. . . .without respect to the amount in
controversy.” The court, upon examination of the statute
stated that this language “simply gives the federal dis-
trict court jurisdiction over suits for violation of certain
unspecified types of contracts” and that “it does not state
or even suggest that federal jurisidiction shall be exclu-
sive.” It provides suits of the kind described “may” be
brought in the federal district courts, not that they must
be.” (Id. at 506).

The Court in Valenzuela, however relied on “the
absence of reference [in the legislative history] to the
state courts combined with Congress’ affirmative refer-
ences to the federal courts...” (Valenzuela, supra, p. 19 at
436.) Similarly, the Rustom Court analogized that the leg-
islative history of the PMPA “refer[s] only to the mainte-
nance of an action under the PMPA in federal court...”
(Rustom, supra, at 618 F.Supp. at 212).

However, the legislative history is in fact silent in
connection with any stated need for exclusive federal
jurisdiction over actions filed pursuant to the PMPA. A
close look at the legislative history of this Act reveals that
there are only passing references to enforcement in fed-
eral courts of PMPA claims and in fact demonstrates
there exists neither “an unmistakable implication from
legislative history” nor a “clear incompatibility between
state court jurisdiction and federal interests” in favor of
exclusive federal jurisdiction.

While the senates report of the PMPA mentions, in its
summary of major provisions, that the “provisions of
Title 15 are enforceable by private civil actions in the U.S.
District Court.” At no time does the legislative history
provide that such action “shall” or “must” be brought in
the U.S. District Court. Indeed, in the more detailed
section by section analysis of the PMPA, the senate report

22

merely refers to such actions being brought in “the
courts” whether for equitable relief or monetary
damages. 3
“The courts are authorized to grant equitable relief
necessary to remedy the effects of any violation of
the requirements of the legislation. The courts are
instructed to grant preliminary and injunctive
relief .. . the court is barred from issuing permanent
injunctive relief if...” (Emphasis Added). [S. Rep.
No. 731, 95th Cong. 2d Sess. 40, reprinted in 1978 U.S.
CODE CONG. & AD. NEWS 873, 879].
Conspicuously absent from this detailed, section by
section review, is any reference to federal or U.S. District
Courts. Instead, the generic, all encompassing term “the
courts” is used.

The second prong of the Valenzuela reasoning relied
on statutory provisions in Title VII of the Civil Rights Act
which required the Courts to apply federal procedural
rules relating to such matters as requests for injunctive
relief. It is doubtful whether Congress has the constitu-
tional power to require state courts to follow such rules.
(Valenzuela, supra, p. 19 at 436.)

For example, Title VII of the Civil Rights Act requires
preliminary injunctions to be issued “in accordance with
Rule 65 of the Federal Rules of Civil Procedure.” (739
F.2d at 435-36). Furthermore, Courts are required to hear
Title VII cases “at the earliest practicable date and to
cause such cases to be in every way expedited.” (Id. at
436). Because the Valenzuela court did not believe Con-
gress would attempt “to regulate the procedures and
priorities of the State Courts” it concluded that Title VII
contained an unmistakeable implication to vest federal
courts with exclusive jurisdiction.

Unlike Title VII, however, the PMPA does not
attempt to regulate court procedure. While the PMPA
provides that a franchisee who prevails on an action

23

thereunder is entitled to actual damages “consistent with
the Federal Rules of Civil Procedure... ” (15 U.S.C.
§ 2805(d)(1), it is unclear what that reference to the
federal rules means. Rustom gives no indication of the
meaning and there is no reported decision which con-
strues the provision. By implication, the conclusion
would be that damages are to be awarded consistent with
the Federal Rules of Civil Procedure, which state court
tribunals are clearly authorized and capable of doing.

Rustom also relies upon the fact that the PMPA
adopts the second circuit standard for granting prelimi-
nary injunctions. But adopting the standard does not
incorporate Rule 65 into the PMPA. In fact, the standard
incorporated into the PMPA departs from the standard
followed by federal courts generally and the Ninth Cir-
cuit in particular. (See: Moody v. Amoce Oil Company, 734
F.2d 1200, 1216 (7th Circuit, 1984).

The PMPA standards for injunctive relief depart from
the general equity relief standard in that the “equity
standard requires a balance of hardship ‘decidedly’ in
favor of the party seeking the injunction, while the stan-
dard in the act only requires that, on balance, the fran-
chisee suffer comparitively more hardship than the
franchisor.” (Guilderhus v. Amoco Oil Co., 470 F. Supp.
1302, 1304 (D. Mn. 1979).

Contrary to the assertion in Rustom, the Ninth Circuit
in particular, does not apply the PMPA standard for
injunctive relief. In the Ninth Circuit, a preliminary
injunction requires the showing of either (1) a combina-
tion of probable success on the merits and probability of
irreparable injury or (2) serious questions are raised and
the balance of hardship tips sharply in its favor. (See: Los
Angeles Memorial Colliseum Commission v. National Football
League, 634 F.2d 1197, 1201 (9th Cir. 1980)).

24

While Congress may not have power to require state
courts to follow the procedural rules of Title VII, it does
have the power to compel state courts to follow substan-
tive law based upon federal standards as contained in the
PMPA. (See: Emerson v. ].F. Shay Co., 76 Cal.App.3d 579,
589 (1978)).

Clearly, Congress had and did exercise the power to
require state courts to grant preliminary injunctions
based upon a federal standard and to award actual dam-
ages consistent with Federal Rules of Civil Procedure.
Those are not procedural rules, but are provided merely
as guidelines for trial courts to follow and cannot give
rise to state and federal court jurisdictional incom-
patibility such as that created by the language of the Civil
Rights Act, in Valenzuela.

The Rustom courts analogy between the jurisdictional
language of the PMPA and that of Title VII upon closer
examination is not only lacking in factual underpining,
but is illogical. While Congress might justifiably have
been concerned that the protections intended when enact-
ing the Civil Rights Act would not be enforced at the state
court level, that is, by the very states whose long history
of discrimination made necessary the legislation; when
Congress enacted the PMPA, it acted merely to protect
franchisees and end the disparity of bargaining power
between the franchisor and the franchisee. Congress also
intended to establish a uniformity of franchise termina-
tion rules as evidenced by the limited preemption lan-
guage of PMPA, 15 U.S.C. § 2806(a). To conclude
otherwise, that state courts can hear and determine dis-
putes arising out of terminations of petroleum franchises
by applying state law and federal authority, but not
under the PMPA pursuant to concurrent jurisdiction,
makes a judicial mockery out of clear legislative scheme.
That is, to insure only a uniform body of rules or laws

25

governing franchise termination, and not a requirement
that disputes be litigated only in federal courts. This
Court, should find as the Court in Johnson did:

“We perceive no incompatibility between state court
jurisdiction in promoting Congress’ intent to protect
the needs of both franchisees and franchisors, to
remedy disparity and bargaining power and to pre-
vent arbitrary or discriminitory termination or non-
renewal. For the foregoing reasons, we find that a
state court enjoys concurrent jurisdiction over claims
brought under the PMPA.” (citations omitted).

(528 A.2d 164)

II. Remand Orders are binding decisions on the
Courts of California as to the forum in which the
action is to be litigated.

The appellate decision herein, reversing the trial
court judgment in favor of Plaintiffs on purely jurisdic-
tional grounds, substitutes the appellate courts opinion
as to the proper jurisdictional forum. Therefore, this
Court’s guidance is requested to ascertain the correct
application of 28 U.S.C. § 1447(d) to this possibly ambig-
uous and unforeseen circumstance. The district court
herein, not once, but twice, denied possession of the
matter and the Ninth Circuit Court of Appeal subse-
quently dismissed an appeal citing 28 U.S.C. § 1447(d).
The petitioners thereafter, succeeded on the merits in the
state court, only to be met by reversal in the Court of
Appeal, based only on its determination that the United
States district court was the proper forum. Although it
did so without directly reversing, vacating or modifying
that decision, Petitioners herein contend that nevertheless
this constitutes a prohibited review by an appellate court
of a remand order.

26

Judge Hatter’s Order of Remand based upon “the
undisputed material facts and underlying law” (Mem-
orandum Opinion, App. D, p.15) is binding under the
principals of 28 U.S.C. § 1447(d), and is not subject to
review by appeal or otherwise, either directly or
indirectly:

“The decision of the district court that the case does

not envoke the federal jurisdiction and must be

remanded precludes further litigation of the issue of the
forum in which the removed case is to be litigated. (Cita-
tion omitted) (Rath Packing Co. v. Becker, 530 F2d

1295, at 1303 (9th Cir. 1975).)

Explaining the logic behind this rule of law, the
Court in the frequently cited case of Missouri Pacific Rail-
road Company v. Fitzgerald, 160 U.S. 556, 583, 16 S.Ct. 389
(1896) stated:

“So far as the mere question of the forum was con-
cerned, Congress was manifestly of opinion that
determination of the circuit court that jurisdiction
could not be maintained should be final, since it
would be an uncalled for hardship to subject the party
who, not having sought the jurisdiction of the circuit
court, succeeded on the merits in the state court, to the
risk of the reversal of his judgment, not because of error
supervening on the trial, but because of a disputed
question of diverse citizenship had been erroneously
decided by the circuit court... ”

(Missouri, supra, at 583)

That the proceedings in state court following a
remand order are binding upon state courts of appeal and
the highest court of the state, was further spelled out in
Missouri as follows: .

“A state court cannot be held to have decided against

a federal right when it is the circuit court, and not the

state court, which has denied its possession . . . as

under the statute a remanding order of the circuit
court is not reviewable by this Court on Appeal or
writ of error from or to that Court, so it would seem to
follow that it cannot be reviewed on writ of error to a state

27

court, the prohibition being that ‘no appeal or writ of

error from the decision of the circuit court remanding such

cause shall be allowed ...” (Missouri, supra, at 583).

The very fact that the district court specifically
assumed jurisdiction of this matter for purposes of mak-
ing conclusory findings on material issues related
directly to the court’s jurisdiction, demands a conclusion
that concurrent jurisdiction over PMPA claims exist, and
that in fact, the District Court for the Central District of
California has found concurrent jurisdiction exists as to
Petitioner’s claims. The Court of Appeals determination
to the contrary, that jurisdiction lies exclusively in the
federal courts, is therefor at odds both with the prohibi-
tion of § 1447(d) and with the specific determination by
the district court of the jurisdictional issue raised by Gulf.
The District Court’s assumption of jurisdiction could only
occur upon the basis that it found concurrent jurisdiction to
exist because “if it is determined that the removed case is one
over which the federal courts have exclusive jurisdiction, the
federal court cannot hear the action.” (Federal Practice and
Procedures, Wright, Miller, Cooper, § 3722 at p. 284). As
held by this Court in Lambert Run Coal Company v. Bal-
timore and Ohio Railroad Company, 258 U.S. 377; 42 S.Ct.
349 (1922) the federal district court must dismiss a case
that is within its exclusive jurisdiction because when the
state court from which the case is removed did not have
jurisdiction over the claims the federal court cannot
acquire any derivative jurisdiction, and therefore:

“The circuit court of appeals, in remanding the cause

to the district court, should have directed a dismissal for

want of jurisdiction...” (Id. at page 383).

The determination of the court of appeal reversing
judgment for Petitioners on jurisdictional grounds, con-
stituted a prohibited review of the order of remand. If the
Ninth Circuit Court of Appeal would not permit direct
review of the remand order and the determination that

were

28

jurisdiction was properly in the state court, clearly a
collateral review by the California Court of Appeal must
be prohibited also. Where this Court has prohibited itself
from review of a state court proceeding following
remand, including that of the highest court of the state, it
would seem to follow that a state court of appeal is
prohibited also. As annunciated in Browning v. Navarro,
743 F.2d 1069 (Sth Cir. 1984):
“The United States Supreme Court has held that an
order of a district court remanding a cause to the
state court is not reviewable by the Supreme Court
on appeal from a final judgment in the highest Court
of this state. (citations omitted).
‘Even on review in the Supreme Court of a state court
proceeding following remand the propriety of the remand,
in a non-civil rights case, cannot be questioned.” (Brown-
ing v. Navarro, supra, at 1177).

The Court of Appeals reversal of Judgment for Peti-
tioners on jurisdictional grounds although done without
directly questioning the propriety of the remand, consti-
tutes its determination collaterally that jurisdiction was
properly in the federal court, a decision petitioners con-
tend was a form of a prohibited appellate review of the
remand order.

A.
—

CONCLUSION

For the foregoing reasons, it is respectfully submitted
that this Court should grant its Writ of Certiorari to
review the Decision of the California Court of Appeal in
this case. Intervention by this Court is necessary at this
time to resolve the conflict of decisions between both the
courts of appeal and the district courts and more impor-
tantly by reason that the conflict presented relates to an
important question of federal law which has not been,

2

29

but should be settled by this Court: that is, the proper
forum for actions proceeding under the PMPA.

Moreover, it is respectfully requested that this Court
clarify that its many decisions pursuant to 28 U.S.C.
§ 1447(d) prohibiting review of a remand order are appli-
cable at the state court level, and thus orders of remand
are binding decisions upon the issue of jurisdiction.

It is respectfully submitted that the proper develop-
ment of law in this area of great public importance
requires the issue of jurisdiction under the PMPA to be
answered at this time, and further, that a state court
directly or indirectly substituting its opinicn as to the
proper forum of an action where that issue has previ-
ously been decided by a federal court erodes proper
federal control of its jurisdiction. pursuant to 1447(d) thus
requiring this courts intervention.

KENNETH P. ROBERTS
A PROFESSIONAL LAW CORPORATION

By: /s/ Kenneth P. Roberts
Kenneth P. Roberts

Dated: October 17, 1988

App. 1

APPENDIX A
NOT FOR PUBLICATION

IN THE COURT OF APPEAL OF THE
STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT
DIVISION TWO

JACK ABADJIAN, MARK BALL, ) B 016989

JOSEPH BROWN, BEN CESON, )

JOHN EGHENIAN, BRAD MAY, ) (Super. Ct. No. C
NASSIR MAZAREI, DONALD 377024 Cons.
PROUSE, AL ROSENSTEIN, with case Nos.
ARAM SHISHMANIAN, JOE C 399330, 406851,
SMIDERLE, AND STEPHEN 406852, 406854,

WEBBER, 406855, 406856,
Plaintiffs and 406857, 406858,
Respondents, 407545, 409749,

v.
GULF OIL CORPORATION,
a Pennsylvania corporation;
THRIFTY OIL CO., a
California corporation, Filed

Defendants and May 8 - 1988

)

)

)

)

)

)

)

) 410941 and 410942.)
)
)
)
)
)

Appellants. Robert M. Wilson

)
)
)
)
)
)
)
)
)
)
)
)

Court of Appeals
Second District

Clerk

BRAD MAY and

ARAM SHISHMANIAN,
Plaintiffs-Cross-
Appellants,

v.

GULF OIL CORPORATION, a

Pennsylvania corporation;

THRIFTY OIL CO.,

a California corporation,
Defendants-Cross-
Respondents.

App. 2

In this protracted dispute among two oil companies
and twelve gasoline station operators, the trial court
ruled in favor of the gas station dealers under the federal
Petroleum Marketing Practices Act, 15 U.S.C. section 2801
et seq. (hereafter “PMPA”). We reverse

The essential facts are undisputed. Prior to 1978 Gulf
Oil Corporation leased some 300 gas stations in its Los
Angeles Division to dealers, and by separate contracts
supplied them with gasoline. In July 1978, having con-
cluded that business was not profitable in Southern Cali-
fornia, Gulf determined to sell its Los Angeles Division
assets. In 1980 Thrifty Oil Company offered to buy all of
Gulf’s Los Angeles Division service stations. A letter
contract dated September 30, 1980, sealed the transaction.

Paragraph 18, subparagraph (c) of the contract stated
that Gulf and Thrifty agreed to abide by the provisions of
the PMPA, insofar as they were applicable. Thrifty and
Gulf swiftly fell into contention concerning what was due
to the dealers under the PMPA.

Gulf sent copies of a letter dated November 24, 1980,
to all of its Los Angeles Division dealers, stating in part:
“{YJou will be giver: notification and the offer required by
the Petroleum Marketing Practice Act to acquire the sta-
tion yourself.” Thrifty protested, disputing that the
PMPA gave the dealers a right of first refusal. Conse-
quently, Gulf asked Thrifty to delay the close of escrow in
order to sort out the various parties’ rights and
obligations.

In August 1981, the dealers filed this action against
Thrifty and Gulf in superior court, alleging in their first
cause of action that the proposed sale was a conspiracy to

App. 3

deny them their right of first refusal under the PMPA,
and seeking a declaration of rights. Gulf cross-com-
Dlained for declaratory relief. Thrifty sued Gulf for
breach of the purchase agreement; the court granted
Gulf’s petition to compel arbitration of Thrifty’s cross-
complaint.

After Gulf and Thrifty twice unsuccessfully
attempted to remove the case to federal court (Abadjian v.
Gulf Oil Corp. (C.D. Cal. 1984) 602 ESupp. 874, 877), the
dealers filed for summary adjudication of issues on
August 20, 1984. On December 10, 1984, the trial court
ruled in favor of the dealers: “The September 30, 1980
agreement between Defendants was an event and an
action that gave to each moving Plaintiff a right of first
refusal to purchase Gulf’s interest in their respective
service stations. [§ Under the [PMPA] Defendant Gulf
was Obligated to offer each moving plaintiff the right as
aforesaid at least 45 days prior to the agreed upon closing
date of the Gulf sale to Thrifty (May 1981).”

On September 11, 1985, the trial court granted Gulf’s
request to sever the first cause of action from the rest of
the complaint. The only remaining issue on that cause of
action was the price to be offered to each dealer for his
gas station. The parties stipulated to the facts from which
the court determined the purchase prices. Thrifty and
Gulf appealed from the resulting judgment. Thrifty also
appealed from the order compelling arbitration.

Two dealers, Brad May and Aram Shishmanian,
cross-appealed. May complained that he was entitled to
purchase all, rather than just a portion of the property
Gulf transferred to Thrifty. Shishmanian objected to being

App. 4

required to pay for improvements Gulf made to his sta-
tion after the action was filed, but before judgment.

In addition, the court awarded the dealers over
$200,000 in costs and attorney fees. Gulf appealed from
this award. All appeals were consolidated. All other pro-
ceedings in the action were stayed pending resolution of
this appeal.

Thrifty and Guif assert that the California superior
court lacked subject matter jurisdiction over the PMPA
issues, because Congress intended the federal courts to
have exclusive jurisdiction under the PMPA. They are
correct. (Niakan v. Samaan (1988) 199 Cal.App.3d 716.)
Since the PMPA is enforceable only in the federal courts,
the trial court erred in deciding the PMPA issues. This
determination disposes of most of the issues on appeal,
as well as the cross-appeals of May and Shishmanian. The
dealers will have to be satisfied with prosecuting their
state law causes of action.

The parties agree that the order granting attorney
fees has no basis other than the PMPA. (15 U.S.C. § 2805,
subd. (d)(1)(C).) Since we have held that the trial court
lacked jurisdiction under the PMPA, it follows that the
trial court lacked power to award attorney fees under the
PMPA.

Finally, Thrifty contends that the trial court erred in
compelling arbitration of its cross-complaint against Gulf.
We agree.

Article 17 of the Gulf-Thrifty contract provides
remedies for each party should the other breach the
purchase agreement. Subdivision (a) states that if Thrifty

App. 5

breaches, Gulf may retain one quarter of the earnest
money as liquidated damages, “provided, however, Guif
may elect not to accept the earnest-money deposit as
liquidated damages, and may instead, avail itself of all
rights, powers and remedies now or hereafter existing at law or
at equity, by statute or otherwise, including the right of
specific performance.” (Emphasis added.) The emphasized
portion of subdivision (a) permits Gulf to go to court to
pursue legal and equitable remedies.

Subdivision (b) states that if Gulf breaches, Thrifty
“may elect not to demand the return of the earnest money
deposit as its sole remedy for Gulf’s breach and may
instead, institute arbitration proceedings against Gulf
pursuant to paragraph 19(e) for the return of its deposit
and such damages (in an amount which shall not, in any
event, exceed One Million Dollars ($1,000,000)) as may be
attributable to such breach of the agreement by Gulf, or
at Buyer’s option avail itself of all rights, powers and
remedies now or hereafter existing at law or at equity, by
statute or otherwise, including the right to specific perfor-
mance.” (Emphasis added.)

The emphasized language in subdivision (b) is iden-
tical to the emphasized language in subdivision (a). Sub-
division (b) states that Thrifty has a choice of arbitration
or legal action if Gulf defaults, just as subdivision (a)
gives Gulf the choice of liquidated damages or legal
action if Thrifty defaults. Equity as well as symmetry and
logic demands it. Therefore, the trial court erred when it
ordered Thrifty and Gulf into arbitration. The choice was
Thrifty’s.

App. 6

The judgment is reversed and remanded with
instructions to dismiss the first cause of action. The
award of attorney fees is reversed. The order compelling
arbitration between Thrifty and Gulf is reversed. The
parties are to bear their own costs on appeal.

NOT FOR PUBLICATION

/s/ Roth, P.J.
ROTH
We concur:

/s/ Gates, J.
GATES

/s/ Fukuto, J.
FUKUTO

App. 7

APPENDIX B
ORDER DENYING REVIEW
AFTER JUDGMENT BY THE COURT OF APPEAL

2nd District, Division 2, No. B018989
S006012

IN THE SUPREME COURT
OF THE STATE OF CALIFORNIA

IN BANK

SUPREME COURT
FILED

JUL 20, 1988

Laurence P. Gill, Clerk
Deputy

ABADJIAN et al., Respondents,
v.
GULF OIL CORP. et. al., Appellants.
and related cases

Respondents’ petition for review DENIED.

Mosk, J., is of the opinion the petition should be
granted.

KAUFMAN
Acting Chief Justice

App. 8

APPENDIX C

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA

JACK ABADJIAN, MARK BALL, CV
JOSEPH BROWN, BEN CESON, 83-6686:
JOHN EGHENIAN, BRAD MAY, TJH(Px)
NASSIR MAZAREI, DONALD
PROUSE, AL ROSENSTEIN, HERB MEMO-
SCHWEIZER, ARAM SHISHMANIAN, ) RANDUM
JOE SMIDERLE, AND OPINION
STEPHEN WEBBER,
Plaintiffs, (Filed

v. March 13,

GULF OIL CORPORATION, a —

Pennsylvania corporation;

GULF OIL REAL ESTATE

DEVELOPMENT CORPORATION,

a wholly owned subsidiary of

GULF OIL CORPORATION; ROBERT

W. BALDWIN; J. ROGER KEMPLE;

TOM OTJEN; JOE MAYERS; GEORGE

WILLIAMS; OTTO MEYER; GLEN R.

JENSEN, THRIFTY OIL CO., a

California corporation; and

DOES 1 through 100, inclusive,
Defendants.

AND RELATED CROSS-CLAIMS AND
CONSOLIDATED ACTIONS

a a a a ee ee ee ee ee ee ee ee ee

This cause of action arises from the decision of Gulf
Oil Corporation (“Gulf”) to withdraw from the Southern
California gasoline market and to sell its service stations
in the area to Thrifty Oil Company (“Thrifty”). With the
exception of plaintiff Herb Schweizer,’ each plaintiff

—e llrr—“—i—SOTCS

App. 9

occupies and operates a gasoline service station under a
lease originally executed with Gulf before June, 1978.
Plaintiffs can be classified into two subgroups according
to the marketing plan they have adopted from Gulf. Some
of the plaintiffs oeprate their leased service stations
under a single supply agreement with Gulf and market
fuel purchased from the company using its trademark,
trade name and symbol.” The remaining plaintiffs operate
“unbranded” service stations pursuant to several contin-
uous supply agreements with Gulf. All these stations
were included in the service stations Gulf agreed to sell
to Thrifty.

The “unbranded” operators allegedly discontinued
their use of Gulf trademarks and symbols on the sugges-
tion of the company. Plaintiffs contend that because Gulf
had difficulty competing in the Southern California mar-
ket it decided to create a debranding program for its
independent operators. The first amended complaint
alleges that in January, 1978, Gulf called a general opera-
tors meeting which several plaintiffs attended. (See First
Amended Complaint, §14.) According to plaintiffs, Gulf
anounced a new marketing program at this meeting,
whereby branded Gulf service station operators would
debrand their stations and sell Gulf motor fuel without
the benefit of trademarks and logos. (See First Amended
Complaint, §14.) In exchange, Gulf allegedly promised
the proposed debranded operators an increased supply of
motor fuel at reduced rates, if they agreed to the new
marketing plan. Id. Consequently, several operators
agreed to adopt this plan.

Following the announced debranding program, Gulf
prepared to sell its assets in the Southern California

App. 10

market to another oil distributor. In 1979, Gulf initially
planned to see all of its assets located in the Los Angeles
Division, which covered the states of Arizona, California,
and Nevada, as part of a “package deal”. The available
package included Gulf’s asphalt plants, its Santa Fe
Springs Refinery, and more than three hundred service
stations, including the stations leased to the plaintiffs. By
September, 1980, Gulf had accepted an offer from Thrifty
covering the leased service stations (rather than the entire
“package deal”) and the parties executed a written agree-
ment (the “1980 Letter Agreement”) acknowledging the
proposed transaction.

After Gulf notified the independent operators about
the Thrifty sale, the relationship between Gulf and the
independent operators deteriorated. In August 1981,
plaintiffs filed their original complaint in state court
alleging several violations of state and federal law. Most
of the counts in the complaint were premised on state
law. The state counts involved claims for fraud, violations
of the California Franchise Investment Law, estoppel,
unfair competition and requests for declaratory and
injunctive relief arising from an alleged conspiracy
between Gulf and Thrifty to violate plaintiffs’ rights
under both state and federal law. Thrifty sought unlawful
detainer actions against the leasees as their new landlord.

The alleged federal question jurisdiction arises from
plaintiffs’ claim that the September, 1980, sales agreement
between Thrifty and Gulf terminated plaintiffs’ fran-
chises and obligated Gulf, under the provisions of the
Petroleum Marketing Practices Act (the “PMPA”), 15
U.S.C. § 2801 et. seq., to offer plaintiffs first refusal rights
before closing the Thrifty sale. In opposition, Gulf argues:

App. 11

(1) whether there is a franchise relationship with each
plaintiff, and (2) if yes, then the franchise relationship has
been assigned to Thrifty as part of the sale of assets
transaction. Thus, the defendants claim none of plaintiffs’
rights have been violated under the PMPA.

In November, 1981, defendants first petitioned for
removal to federal court asserting that the amended state
complaint alleged a federal question under the PMPA.
However, this Court remanded the entire case to state
court for the following reasons. First, the Court found
jurisdiction over Thrifty unattainable under the Act since
Thrifty is not plaintiffs’ franchisor. Secondly, the Court
found jurisdiction over the claims against Gulf could not
be maintained because it could not sever Gulf’s claims
from the nonremovable claims against Thrifty. Finally, the
Court remanded on the grounds that the Ninth Circuit
does not recognize pendent party jurisdiction. See
Aldinger v. Howard, 513 F.2d (9th Cir. 1975), aff'd. 427 US.
1 (1976).

Defendants now seek a second opportunity at
removal. This most recent removal petition, filed October
17, 1983, contends that plaintiffs’ October, 1983, filing of a
motion for summary adjudication in state court under the
PMPA justifies removal to federal court. At the subse-
quent removal hearing, the Court requested additional
information concerning the merits of defendants’ claim
that Thrifty is a franchisor as contemplated under the
Act. Defendants submit the Santa Fe Springs Refinery
Contract (“SFSR Contract”), which assigns Gulf’s rights
in supply agreements with independent dealer-operators
to Thrifty, as proof supporting their renewed claim of
federal jurisdiction of the counts relating to Thrifty. Thus,

App. 12

the Court faces a reconsideration of its earlier remand
order and addresses the issue of defendant’s timeliness in
this second removal petition.

Timeliness of the Present Removal Petition

Plaintiffs are generally considered the masters of
their complaints and free to decide the forum in which to
bring an action. However, Congress has provided a mech-
anism for a defendant to gain access to a federal tribunal
though the plaintiff brings his action in state court. Under
the removal statute, a defendant need only show that the
removal petition is timely filed and that a federal court
has original jurisdiction over the action. 28 U.S.C.
§ §1446(b) and 1446(a).

Section 1446(b) sets forth a thirty day limitation for
filing a petition once a basis for removability exists. Here,
plaintiffs assert that defendants second removal petition,
filed October 17, 1983, is untimely and should relate back
to the filing date for the original complaint, not the date
when plaintiffs filed for summary adjudication in state
court. Thus, plaintiffs argue this Court lacks jurisdiction
over the petition.

However, the statutory time limit for removal peti-
tions is merely a “formal and modal requirement”; it is
not jurisdictional. See Fristoe v. Reynolds Metal Co., 615
F2d 1209, 1212 (9th Cir. 1980); 1A Moore’s Federal Practice
and Procedure ¥ 0.168[3.-5] (1974 ed.). Even if the Court
adopted the relation back argument, plaintiffs would be
estopped from objecting to the timeliness of the removal
petition, since defendants’ present petition for removal is
based on plaintiffs’ own October 5, 1983 motion for sum-
mary adjudication of actions arising “under PMPA.” Id.

oi steeped

j

aia

App. 13

At a minimum, the court may find that plaintiffs most
recent summary judgment motion extends the time
period for defendants to file a removal petition. More-
over, the plain language of the removal statute provides
that the thirty day period commences after defendants
receive “a copy of an amended pleading, motion, order or
other paper” from which removability can be ascertained.
§ 1446(b) (emphasis added). Thus, de.endants’ petition
falls within the necessary time limitation.

Theories for Removability

In a removal action action involving multiple defen-
dants, movants can invoke several theories to support
federal jurisdiction. They can remove on the grounds that
the cause of action arises under federal law, or they can
rely on diversity of citizenship, or they can remove under
the pendent party theory. 28 U.S.C. § 1441; See also
Aldinger v. Howard, 513 F.2d 1257 (9th Cir. 1975), aff’d., 427
U.S. 1 (1976); Schroeder v. TransWorld Airlines, Inc., 702
F.2d 189, 191 (9th Cir. 1983). In the present action, diver-
sity and pendent party jurisdiction are unavailable to
these defendants. The complaint indicates that several
defendants, including Thrifty, are California residents or
citizens, thus, complete diversity does not exist as to
them. In addition, the Ninth Circuit strongly disapproves
of pendent party jurisdiction unless the parties can show
an independent ground of jurisdiction exists over the
claims against against the pendent party. See, Benson v.
U.S. Small Business Administration, 644 F.2d 1366, 1367
(9th Cir. 1981); Libby, McNeil, and Libby v. City National
Bank, 592 F.2d 504, 510 (9th Cir. 1978); Avala v. United
States, 550 F.2d 1196 (9th Cir. 1977). Therefore, this

App. 14

Court’s decision on removability turns on the federal
character of the claims against Thrifty.?

The Merits of Federal
Jurisdiction in this Case

Federal jurisdiction under the PMPA must be
decided on the merits because the jurisdictional issue and
substantive issues are so intertwined with the resolution
of crucial facts. Sun Valley Gasoline, Inc. v. Ernst Enter-
prises, Inc., 711 F.2d 138, 139 (9th Cir. 1983). In PMPA
cases, the Ninth Circuit has instructed the district courts
to avoid dismissal for lack of subject matter jurisdiction
solely on the face of the pleadings. Id. at 139-40. Relying
on the Sun Valley holding, defendants contend the Ninth
Circuit has prohibited jurisdictional fact finding under
PMPA without a trial on the merits. Thus, they argue that
by asserting a federal claim against Thrifty on the face of
their papers plaintiffs have created a jurisdictional issue
which must be resolved at trial.

This Court does not read the holding of Sun Valley as
broadly as defendants wish. In ruling on a challenge to
subject matter jurisdiction, a district court is ordinarily
free to hear evidence regarding jurisdiction before trial,
resolving factual disputes where necessary. Augustine v.
United States, 704 F.2d 1074, 1077 (9th Cir. 1983); Thornhill
Publishing Co. v. General Telephone and Electronics Corp.,
594 F.2d 730, 733 (9th Cir. 979). Courts have been careful to
distinguish between the standards of jurisdictional analysis
under motions to dismiss and jurisdictional fact finding in
summary judgment proceedings. Augustine, 704 F.2d at
733-34. In Sun Valley, the district court dismissed,
pursuant to Fed. R. Civ. P. 12(h)(3), ten counts of the

|

App. 15

complaint that alleged PMPA violations on the grounds
defendant noted the absence in the complaint of an alle-
gation regarding defendants ability to use a refiner’s
trademark, commonly referred to as “branding author-
ity.” Sun Valley, 711 F.2d at 139. Later, the court of appeals
refused to uphold the dismissal of the PMPA claims
without specific jurisdictional fact finding by the court
under the Act. Id. at 141. However, the court of appeals
left open the district court’s ability to resolve PMPA
jurisdictional questions in summary judgment proceed-
ings by noting, “[w]le do not exclude the possibility that
these claims may be suitable for Rule 56 disposition.” Id.

In an exemplary pretrial proceeding where the party
seeking dismissal prevailed, the court had an opportunity
to develop substantial evidence on the interrelated juris-
dictional and factual issues under the rigorous standards
of Rule 56. See Thornhill, 594 F.2d at 735-36 (Sherman Act
case in which Ninth Circuit affirmed summary judgment
on the issue of interstate commerce under the Act after
reviewing deposition testimony and exhibits). Similarly,
in the instant case, this Court has had an opportunity to
conduct an extensive review of the record and of matters
outside the pleadings to resolve the material issues. The
parties seeking remand will prevail on the basis of the
undisputed material facts and underlying law. However,
my decision is limited solely to the questions relating to
jurisdiction over the claims against Thrifty.

The purpose of PMPA is to establish “minimum Fed-
eral Standards governing the termination and non-
renewal of franchise relationships for the sale of motor
fuel by the franchisor or supplier of such fuel.” Checkrite
Petroleum, Inc. v. Amoco Oil Co., 678 F.2d 5, 7 (2d Cir.

App. 16

1982), quoting S. Rep. No. 95-731, 95th Cong., 2d Sess. 15,
reprinted in [1978] U.S. Code Cong. & Ad. News 873
(emphasis added). Congress enacted PMPA to protect
franchisees from arbitrary or discriminatory termination
of their franchises. S. Rep. No. 95-731, supra at 874. The
Act limits the termination of any franchise except on the
specifically enumerated grounds and upon compliance
with notice requirements. 15 U.S.C. § §2802(a), (b)(1).
Crucial elements that extend jurisdiction under the Act
are the existence of a franchise relationship and the
occurrence of an event within the regulatory scheme of
the statute. See 15 U.S.C. §2802.

The status of Gulf as plaintiffs’ initial franchisor is
undisputed. Both the branded and unbranded dealers
operated their stations under supply agreements with
Gulf which predated June, 1978. Even the unbranded
dealers sold Gulf gasoline under the company’s trade
name before the new marketing program in 1978. Thus,
the branded dealers operate under a franchise agreement
described in 15 U.S.C. §2801(1)(A); the unbranded dealers
operate under a franchise within the reach of 15 U.S.C.
§ 2801(1)(B) (ii)(II). The triggering event for PMPA juris-
diction over these dealers arose when Gulf allegedly
terminated the dealers franchises. The claims against
Thrifty arises from the same nucleus of facts. Therefore,
defendants can properly remove this action only if inde-
pendent grounds of federal jurisdiction can be estab-
lished over Thrifty.

The absence of an independent franchise agreement
between Thrifty and plaintiffs defeated defendant's first
attempt at removal. Defendants now contend that Gulf’s
assignment under the SFSR contract to Thrifty created a

App. 17

“franchise relationship” between Thrifty and plaintiffs.
However, the record lacks any evidence of a subsequent
contract between Thrifty and plaintiffs; the record lacks
any proof of a marketing plan by Thrifty for plaintiffs;
finally, the parties do not mention the existence of any
franchise fee imposed upon plaintiffs by Thrifty. All of
the above items are essentially components of a franchise
agreement. See e.g. Cal. Corp. Code §31005 (West 1977);
See also 34 Cal. Jur. 3d, Franchise, Distribution, and Dealer-
ship Contracts §1 (3d ed. 1977).

Moreover, the issue of Thrifty’s lack of Gulf trade-
mark rights is undisputed. Thrifty generally asserts that
the SFSR contract included “branding authority or trade-
mark rights”, but it points to the specific terms of that
agreement noting, “Although, in general, ‘Gulf indicia’
are excluded from the sale under paragraph 2.07 of the
SFSR Contract. . . .” See Thrifty’s Supplemental Mem-
orandum In Support of Jurisdiction at 4.4 This Gulf indi-
cia represents the trademark rights essential to finding a
valid franchise relationship. See 15 U.S.C. § §2801 (1)(B)(i)
and (2).°

In defining the “franchise relationship” under PMPA,
the Congress recognized the interrelated nature of the
leased premises with the motor fuel supply agreement in
petroleum franchises. The Senate noted:

The franchise relationship in the petroleum
industry is unusual, in fact perhaps unique, in that
the franchisor commonly not only grants a trademark
license, but often controls, and leases to the fran-
chisee, the real estate premises used by the fran-
chisee. In addition, the franchisor almost always is
the primary, even exclusive, supplier of the fran-
chisee’s principal item: motor fuel.

App. 18

S. Rep. No. 95-731, 95th Cong., 2d Sess. 17, reprinted in
1978 U.S. Code Cong. & Ad. News 873, 875. Thus, it
appears at first glance that Congress intended PMPA to
reach every motor fuel supply agreement where the sup-
plier is the primary source of fuel or the exclusive sour ..
This broad reading of the statute could bring Thrifty
within the definition of a franchisor “but for” the limiting
language noted further in the legislative history. “The
term ‘franchise’ is defined in terms of a motor fuel trade-
mark license. It should be noted that the term is applica-
ble only to the use of a trademark which is owned or
controlled by a refiner.” Supra at 888 (emphasis added).

Although the Ninth Circuit remains silent on
whether branding authority is essential to the existence
of a franchise relationship under PMPA, see Sun Valley,
711 F.2d at 141, most courts favor the express need for
granting trademark use to support a finding of a fran-
chise relationship. See Lasko v. Consumers Petroleum of
Connecticut, Inc., 547 F. Supp. 211, 219 (D. Conn. 1981)
(implying necessity of branding authority), and Blackwell
v. Power Test Corp., 540 F. Supp. 802, 807 (D.N.J. 1981)
(SAME), aff’d. mem., 688 F.2d 818 (3d Cir. 1982). Given the
emphasis placed on the use of trademark rights in PMPA
cases, only two alternative theories could possibly pro-
vide jurisdiction over Thrifty absent branding authority
by Gulf. Either the Court must find (1) a valid assignment
of the franchise relationship by Gulf to Thrifty, or (2) it
must find that Gulf and Thrifty’s sales transaction
involved a less than arms length deal between the par-
ties. See Bsales v. Texaco, Inc., 516 F. Supp. 655, 661 (D.N.J.
1981) (cited for the latter proposition).

}

App. 19

The legislative history of PMPA allows the assign-
ability of a petroleum franchise as provided by state law.
S. Rep. No. 95-731, supra at 901. In the absence of an
express agreement, the applicable California statutes
“clearly manifest a policy in favor of the free trans-
ferability of all types of property, including rights under
contracts.” Farmland Irrigation Co. v. Dopplmaier, 48 Cal.
2d 208, 222, 308 P.2d 732, 740 (1957); See Cal. Civ. Code
§14581 (West 1982); see also, Cal. Comm. Code § 2210
(West 1968). But, a closer analysis of the PMPA legisla-
tive history reveals a district court’s ability to invoke its
equitable powers and preempt state law on assignability
to comply with the overall scheme of the Act:

[T]here is an area in which Federal termination pro-
visions under this legislation and state-granted rights
of assignability of a franchise man conflict. It is
intended that the harmonizing of these competing
interests be left to judicial balancing of competing
equities on a case-by-case basis. No hard and fast
statutory rule would accomplish the desired goal of
harmonizing the competing statutory objectives as
equitably as application of general principles of
equity to specific fact situations.

S. Rep. No. 95-731, supra at 901.

Under PMPA, a franchisor’s withdrawal from a rele-
vant geographic market can amount to a termination of
non-renewal of the franchise agreement that triggers both
notice and first refusal rights for franchisors. See 15
U.S.C. §2802(b)(2)(E). The undisputed facts indicate that
Gulf intended to seel all its assets in the Los Angeles
Division and to withdraw from the highly competitive
Southern California gasoline market.? The subsequent
actions taken to see plaintiffs’ leased premises and the

; =

App. 20

Santa Fe Springs Refinery are incidental to Gulf’s stated
purpose: market withdrawal. For this Court to find that
the “package deal” involving Thrifty amounted to an
assignment of the “franchise relationship,” and not a
market withdrawal, would result in the complete circum-
vention of the Act. Thus, it is my determination view that
Thrifty cannot hold the same status as a franchisor to
these plaintiffs as held by Gulf. At most, Thrifty may
have an assignment of the leased premises under state
law if Gulf complied with PMPA in the first instance.

As a general rule, a contractual relationship between
the individual parties is a precondition for jurisdiction
under PMPA. See Bsales, 516 F. Supp. at 662 N.4. How-
ever, a second alternative theory for PMPA jurisdiction
over a noncontractual third party such as Thrifty involves
a judicially recognized, narrow exception to the franchise
relationship rule. In Bsales, the district court implied in
dicta that through an “extraordinary situation” a landlord
of premises used in a franchise operation may owe cer-
tain duties to the franchisee, even though the landlord is
not a franchisor. 516 F. Supp. at 661. The district court
noted:

{I]f the landlord and the franchisor enter into a lease
which is not the product of arm’s length negotiations
and that lease expires and is not renewed, then the
franchisee may have a cause of action [under PMPA
against both the franchisor and the landlord. Sim-
ilarly, the absence of an arm’s length relationship
between the franchisor and the landlord at the time
that an option to renew a lease is under consideration
might give the franchisee rights against both parties,
if the option is not exercised.

Id. at 661 (emphasis added)

App. 21

In Bsales, similar to the allegations in this case, plain-
tiffs alleged a conspiracy existed between the franchisor
and the landlord to deprive plaintiffs of their rights
under PMPA. The district court did not find a conspiracy
between the parties in the absence of “direct and explicit
evidence of such a conspiracy.” 516 F. Supp. at 662. The
court concluded that an inference of a conspiracy could
not be made merely by an allegation that the defendants
negotiated with their own interest in mind, absent proof
that the franchisor exercised control over the new land-
lord. Id. at 662-63. Even a party’s negotiating in bad faith
is not actionable under this theory. Id. at 663 n. 8.

The instant plaintiffs argue that defendants con-
spired to terminate their service station leases and
deprive plaintiffs’ of their first refusal right under PMPA.
(See First Amended Complaint 733b.) The only evidence
plaintiffs allege establishes a conspiracy between defen
dants Thrifty and Gulf is the SFSR contract and the
September 1980 letter agreement, but the undisputed
facts demonstrate these agreements resulted from vig-
orous negotiations to purchase Gulf’s Los Angeles Divi-
sion assets after Gulf decided to withdraw from that
market. Although Gulf and Thrifty entered into a sales
agreement that included the stations leased by plaintiffs,
this Court finds plaintiffs have offered no evidence estab-
lishing an intent by either defendant to circumvent the
Act. Nor is there any evidence that Gulf in any way
controlled Thrifty’s actions during their negotiations or
anytime afterwards. While the complaint properly
alleges, inter alia, Gulf failed to comply with the notice,
termination, and first refusal rights of plaintiffs as

é
:
baal nia

App. 22

required by PMPA, these allegations are unrelated to any
proven conspiracy between Gulf and Thrifty.

be
bd

CONCLUSION

Having decided that the claims against Thrifty do not
arise under PMPA, the Court no longer has an indepen-
dent basis of subject matter jurisdiction to entertain
plaintiffs state law claims against Thrifty. Limitations on
the Court’s power to exercise “pendent party” jurisdic-
tion and the interrelatedness of the claims against all the
defendants requires this Court to remand the entire case.
Thus, the motions of plaintiffs for remand to state court
are granted and the Court does not make any further
findings.

Date: March 9, 1984

Terry J. Hatter, Jr.
TERRY J. HATTER, JR.
United States District Judge

,%

FOOTNOTES

1. Plaintiff Herb Schweizer was one of several Gulf
dealers to whom Gulf offered a right of first refusal to
acquire its interest in the service station. Schweizer
accepted Gulf’s offer and thus has no claim against it
for noncompliance with the Petroleum Marketing
Practices Act, 15 U.S.C. §2801 et seq.

2. These plaintiffs are catagorized as “branded dealers.”
They are identified as Jack Abadjian, Brad May, and
Al Rosenstein.

witr —

App. 23

3. Since the Court has already determined that the
claims against Gulf and Thrifty are inextricably inter-
twined, removability under 28 U.S.C. §1441(c) is also
unavailable to these defendants. Section 1441(c) pro-
vides that a separate and independent federal claim

: may be joined with otherwise nonremovable state
| claims, thereby permitting removal of an entire action
to federal court.

4. In addition, Barry W. Berkett, Vice President and
Assistant Secretary of Thrifty Oil Co., testified
through deposition testimony that he was unaware of
any of the plaintiffs ever purchasing motor fuel from
Thrifty as of December 2, 1983 (Berkett deposition at
16).

5. Thrifty has not, as of December 2, 1983, granted any
of the plaintiffs the right to utilize the Gulf trademark
(Burkett deposition at 36).

6. A contract may be nonassignable if the duties
imposed upon one party is of such a personal nature
that their performance by someone else would in
effect deprive the contracting party of the benefit of
its bargain. See Dopplmaier, 48 Cal.2d at 222, 308 P.2d
at 740. It is possible that a franchise agreement
involving trademark rights is such a contract, how-
ever, the present decision rests strictly on an inter-
pretation of the federal statute invc ved in this case
leaving questions of franchise agreement assign-
ability to the state court for its resolution.

7. See I. Roger Kemple’s deposition testimony at 78-79;
99-100.

4
3
a _— rd Le

App. 24

APPENDIX D
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT

JACK ABADJIAN, et al., ) No. 84-5831

Plaintiffs-Appellees, )
) DC# CV 83-6686 TJH

VS. ) Central California
THRIFTY OIL COMPANY, ‘eae
Defendant/ Appellant,

)
GULF OIL CORPORATION, a) jun" 3, 1984
Pennsylvania corporation, et al., ) is
Defendants.
AND RELATED CROSS- )
CLAIMS AND )
CONSOLIDATED ACTIONS )

Before: KENNEDY, ALARCON and FERGUSON, Circuit
Judges

The appeal from the district court remand order is
dismissed. Thermatron Products, Inc. v. Hermansdorfer, 423
U.S. 343, 346 (1975).

App. 25

APPENDIX E
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT

GULF OIL CORPORATION, a_) No. 84-7330
Pennsylvania corporation, et al., )
Petitioners, ) DC# CV 83-6686 TJH

) Central California
vs. )

UNITED STATES DISTRICT ) ORDER
COURT FOR THE CENTRAL ) FILED
DISTRICT OF CALIFORNIA, ) Aug 22, 1984

Respondent, PHILLIP B.

)
JACK ABADJIAN, et al., ) WINBERRY
Real Parties in Interest ) Clerk, U.S. Court of
, ) Appeals

Before: ANDERSON, FARRIS and BOOCHEVER, Circuit
Judges

The petition for writ of mandate is denied. Petitioner
has not met the requirements of this circuit for extraordi-
nary relief. See Bauman v. United States District Court, 557
F.2d 650 (9th Cir. 1977)

App. 26

APPENDIX F

SUPERIOR COURT OF CALIFORNIA, COUNTY
OF LOS ANGELES

Date DECEMBER 10, 1984
HONORABLE RONALD E. SWEARINGER JUDGE

___ Deputy Sherriff __, Deputy Clerk
A.CARRASCO Court Attendant C HERNANDEZ,
Reporter

NONE (Parties and
counsel! checked if
present)

C 377 024 C/W C399330, C406851, Counsel for
C406852, C406853, C406854, Plaintiff
C406855, C406857, C406858,

C407545, C409749, C410941, Counsel for
C410942 Defendant

JACK ABADJIAN, et al
VS
GULF OIL CORPORATION, et al

NATURE OF PROCEEDINGS:
RULING ON MOTIONS FOR SUMMARY JUDGMENT

The matters having been argued and submitted and the
Court having considered the contents of the moving and
responding papers and the authorities therein cited rules
as follows:

PLAINTIFF’S MOTION:

Plaintiff’s motion is granted. The Court finds the follow-
ing issues to be without substantial controversy and are
established in favor of Plaintiffs and against Defendants;

a. The September 30, 1980 agreement between Defen-
dants was an event and an action that gave to each
moving Plaintiff a right of first refusal to purchase Gulf’s
interest in their respective service stations.

App. 27

b. Under the PMPA Defendant Gulf was obligated to
offer each moving Plaintiff the right as aforesaid at least
45 days prior to the agreed upon closing date of the Gulf
sale to Thrifty (may 1981).

GULF’S MOTION FOR SUMMARY JUDGMENT:

Gulf contends that Plaintiffs may not obtain state court
relief for alleged franchise discontinuance because relief
has not been sought under PMPA. Gulf further contends
that PMPA preempts any state law dealing with alleged
franchise termination.

Plaintiffs contend that they may obtain state court relief
on the gravamens alleged in their complaints. The Court
agrees. Counts 1, 6 and 7 relate to rights under the PMPA
and PMPA Jurisdiction is not exclusively in the Federal
Courts in the context of this proceeding.

Plaintiffs concede that to the extent that they have claims
under Section 20999.1 Business and Professions Code,
that Section has been preempted by the PMPA.

Count 2 is particulary preempted. Counts, 3, 4 and 5 are
not based on alleged franchise termination as per PMPA
but relate to other gravamen.

The moving party asks the Court to determine that the
PMPA has preempted the field, contends that plaintiffs
have taken the position that they are not proceeding
under PMPA and that certain causes of action may not be
pursued. The Court concludes that moving party is
incorrect.

Ol

App. 28

The motion is a hybrid, but the issues presented may be
decided by the Court pursuant to Beech Aircraft v. Superior
Court (1976) 61 Cal. App. 3d 501, 516.

The motion is denied.

THRIFTY’S MOTION FOR SUMMARY JUDGMENT RE
IMPAIRMENT:

Thrifty contends that if Section 20999.25, Business and
Profession Code were applied to the dispute, the obliga-
tion of the Gulf/Thrifty contract would be impaired since
the Section was not in effect when the agreement was
made.

This issue is moot since PMPA preempts Business and
Professions Code Section 20999.25 (Cal Arco Distributors
V. Atlantic Richfield) and Plaintiffs acknoledge this.

The motion is denied.

THRIFTY’S MOTION RE TERMINATION:

The motion is denied, the basis for the motion being
obviated by the Court’s ruling as to Plaintiffs’ motion.

lt is to be noted that the question of “termination” pre-
sented in the case does not relate to ordinary termination
but must be considered in the context of the Petroleum
Marketing Practices Act and the Court notes and concurs
in the finding of Judge Terry Hatter of the United States
District Court that Thrifty cannot be considered as a
successor franchisor by assignment.

Copies of this minute order are mailed Via U.S. mail

addressed as follows:

App. 29

JACK D. FUDGE

RALPH ZAREFSKY

LOUIS A. KARASIK

MARY E. TARDUNO

McCutchen, Black, Verleger & Shea
600 Wilshire Boulevard

Los Angeles, California 90017;

KENNETH P. ROBERTS, ESQUIRE
Shapiro, Laufer, Krane, Jacobson & Posell
2029 Century Park East

Suite 2600

Los Angeles, California 90067;

DONALD C. SMALTZ, ESQUIRE
Smaltz & Nelley

530 West Sixth Street

10th Floor

Los Angeles, California 90051/.

App. 30

APPENDIX G

PETROLEUM MARKETING PRACTICES ACT,
15 U.S.C. §§ 2801-2806

SUBCHAPTER I~FRANCHISE PROTECTION
§ 2801. Definitions

As used in this subchapter:

(1A) The term “franchise” means any contract-
(i) between a refiner and a distributor.
(ii) between a refiner and a retailer,

(iii) between a distributor and another distribu-
tor, or

(iv) between a distributor and a retailer,

under which a refiner or distributor (as the case may be)
authorizes or permits a retailor or distributor to use, in
connection with the sale, consignment, or distribution of
motor fuel, a trademark which is owned or controlled by
such refiner or by a refiner which supplies motor fuel to
the distributor which authorizes or permits such use.

(B) The term “franchise” includes—

(i) any contract under which a retailer or dis-
tributor (as the case may be) is authorized or permit-
ted to occupy leased marketing premises, which
premises are to be employed in connection with the
sale, consignment, or distribution of motor fuel
under a trademark which is owned or controlled by
such refiner or by a refiner which supplies motor fuel
to the distributor which authorizes or permits such
occupancy;

(ii) any contract pertaining to the supply of
motor fuel which is to be sold, consigned or distrib-
uted-

App. 31

(I) under a trademark owned or controlled by
a refiner; or

(II) under a contract which has existed con-
tinuously since May 15, 1973, and pursuant to
which, on May 15, 1973, motor fuel was sold, con-
signed or distributed under a trademark owned or
controlled on stich date by a refiner; and

(III) the unexpired portion of any franchise, as
defined by the preceding provisions of this para-
graph, which is transferred or assigned as authorized
by the provisions of such franchise or by any applica-
ble provision of State law which permits such trans-
fer or assignment without regard to any provision of
the franchise.

(2) The term “franchise relationship” means the
respective motor fuel marketing or distribution obliga-
tions and responsibilities of a franchisor and a franchisee
which result from the marketing of motor fuel under a
franchise.

(3) The term “franchisor” means a refiner of distrib-
utor (as the case may be) who authorizes or permits,
under a franchise, a retailer or distributor to use a trade-
mark in connection with the sale, consignment, or distri-
bution of motor fuel.

(4) The term “franchisee” means a retailer or dis-
tributor (as the case may be) who is authorized or permit-
ted, under a franchise, to use a trademark in connection
with the sale, consignment, or distribution of motor fuel.

(5) The term “refiner” means any person engaged in
the refining of crude oil to produce motor fuel, and
includes any affiliate of such person.

App. 32

(6) The term “distributor” means any person,
including any affiliate of such person, who-

(A) purchases motor fuel for sale, consign-
ment, or distribution to another; or

(B) receives motor fuel on consignment for
consignment or distribution to his own motor fuel
accounts or to accounts of his supplier, but shall
not include a person who is an employee of, or
merely serves as a common carrier providing trans-
portation service for, such supplier.

(7) The term “retailer” means any person who pru-
chases motor fuel for sale to the generai public for ulti-
mate consumption.

(8) The term “marketing premises” means, in the
case of any franchise, premises which, under said fran-
chise, are to be employed by the franchisee in connection
with the sale, consignment, or distribution of motor fuel.

(9) The term “leased marketing premises” means
marketing premises owned, leased, or in any way con-
trolled by a franchisor and which the franchisee is autho-
rized or permitted, under the franchise, to employ in
connection with the sale, consignment, or distribution of
motor fuel.

(10) The term “contract” means any oral or written
agreement. For supply purposes, delivery levels during
the same month of the previous year shall be prima facie
evidence of an agreement to deliver such levels.

(11) The term “trademark” means any trademark,
trade name, service mark, or other identifying symbol or
name.

,

App. 33

(12) The term “motor fuel” means gasoline and die-
sel fuel of a type distributed for use as a fuel in self-
propelled vehicles designed primarily for use on public
streets, roads, and highways.

(13) The term “failure” does not include—

(A) any failure which is only technical or
unimportant to the franchise relationship; or

(B) any failure for a cause beyond the reason-
able control of the franchisee.

(14) The terms “fail to renew” and “nonrenewal”
mean, with respect to any franchise relationship, a failure
to reinstate, continue, or extend the franchise relation-
ship-

(A) at the conclusion of the term, or on the
expiration date, stated in the relevant franchise;

(B) at any time, in the case of the relevant
franchise which does not state a term of duration
or an expiration date; or

(C) following a termination (on or after June
19, 1978) of the relevant franchise which was
entered into prior to June 19, 1978, and has not
been renewed after such date.

(15) The term “affiliate” means any person who
(other than by means of a franchise) controls, is
controlled by, or is under common control with, any
other person.

(16) The term “relevant geographic market area”
includes a State or a standard metropolitan statistical area

App. 34

as periodically established by the Office of Management
and Budget.

(17) The term “termination” includes cancellation.

(18) The term “commerce” means any trade, traffic,
transportation, exchange, or other commerce-

(A) between any State and any place outside of
such State; or

(B) which affects any trade, transportation,
exchange, or other commerce described in subpara-
graph (A).

(19) The term “State” means any State of the United
States, the District of Columbia, the Commonwealth of
Puerto Rico, the Virgin Islands, American Samoa, Guam,
and any other commonwealth, territory, or possession of
the United States.

§2802. Franchise relationship

General prohibition against termination or nonrenewal

(a) Except as provided in subsection (b) of this sec-
tion and section 2803 of this title, no franchisor engaged
in the sale, consignment, or distribution of motor fuel in
commerce may-

(1) terminate any franchise (entered into or
renewed on or after June 19, 1978) prior to the con-
clusion of the term, or the expiration date, stated in
the franchise; or

(2) fail to renew any franchise relationship (with-
out regard to the date on which the relevant fran-
chise was entered into or renewed).

a

App. 35

Precondition and grounds for
termination or nonrenewal

(b)(1) Any franchisor may terminate any franchise
(entered into or renewed on or after June 19, 1978) or may
fail to renew any franchise relationship, if-

(A) the notification requirements of section
2804 of this title are met; and

(B) such termination is based upon a ground
described in paragraph (2) or such nonrenewal is
based upon a ground described in paragraph (2) or

(3).

(2) For purposes of this subsection, the following
are grounds for termination of a franchise or nonrenewal
of a franchise relationship:

(A) A failure by the franchisee to comply with
any provision of the franchise, which provision is
both reasonable and of material significance to the
franchise relationship, if the franchisor first acquired
actual or constructive knowledge of such failure-

(i) not more than 120 days prior to the date
on which notification of termination or nonrenewal is

given, if notification is given pursuant to section
2804(a) of this title; or

(ii) not more than 60 days prior to the date on
which notification of termination or nonrenewal is
given, if less than 90 days notification is is given
pursuant to section 2804(b)(1) of this title.

(B) A failure by the franchisee to exert good
faith efforts to carry out the provisions of the fran-
chise, if-

|

App. 36

(i) the franchisee was apprised by the fran-
chisor in writing of such failure and was afforded a
reasonable opportunity to exert good faith efforts to
carry out such provisions; and

(ii) such failure thereafter continued within
the period which began not more than 180 days
before the date notification of termination or non-
renewal was given pursuant to section 2804 of this
title.

(C) The occurrence of an event which is rele-
vant to the franchise relationship and as a result of
which termination of the franchise or nonrenewal of
the franchise relationship is reasonable, if such event
occurs during the period the franchise is in effect and
the franchisor first acquired actual or constructive
knowledge of such occurrence-

(i) not more than 120 days prior to the date
on which notification of termination or nonrenewal is
given, if notification is given pursuant to section
2804(a) of this title; or

(ii) not more than 60 days prior to the date on
which notification of termination or nonrenewal is
given, if less than 90 days notification is given pur-
suant to section 2804(b)(1) of this title.

(D) An agreement, in writing, between the fran-
chisor and the franchisee to terminate the franchise
or not to renew the franchise relationship, if-

(i) such agreement is entered into not more
than 180 days prior to the date of such termination
or, in the case of nonrenewal, not more than 180 days

App. 37

prior to the conclusion of the term, or the expiration
date, stated in the franchise;

(ii) the franchisee is promptly provided with
a copy of such agreement, together with the sum-
mary statement described in section 2804(d) of this
title; and

(iii) within 7 days after the date on which the
franchisee is provided a copy of such agreement, tine
franchisee has not posted by certified mail a written
notice to the franchisor repudiating such agreement.

(E) In the case of any franchise entered into
prior to June 19, 1978, and in the case of any fran-
chise entered into or renewed on or after such date
(the term of which is 3 years or longer, or with
respect to which the franchisee was offered a term of
3 years or longer), a determination made by the
franchisor in good faith and in the normal course of
business to withdraw from the marketing of motor
fuel through retail outlets in the relevant geographic
market area in which the marketing premises are
located, if-

(i) such determination-

(I) was made after the date such franchise
was entered into or renewed, and

(II) was based upon the occurrence of
changes in relevant facts and circumstances after
such date;

(ii) the termination or nonrenewal is not for
the purpose of converting the premises, which are
the subject of the franchise, to operation by

| .

App. 38

employees or agents of the franchisor for such fran-
chisor’s own account; and

(iii) in the case of leased marketing premises-—

(I) the franchisor, during the 180-day
period after notification was given pursuant to sec-
tion 2804 of this title, either made a bona fide offer to
sell, transfer, or assign to the franchisee such fran-
chisor’s interest in such premises, or, if applicable,
offered the franchisee a right of first refusal of at
least 45 days duration of an offer, made by another,
to purchase such franchisor’s interest in such prem-
ises; or

(II) in the case of the sale, transfer, or
assignment to another person of the franchisor’s
interest in such premises in connection with the sale,
transfer, or assignment to such other person of the
franchisor’s interest in one or more other marketing
premises, if such other person offers, in good faith, a
franchise to the franchisee on terms and conditions
which are not discriminatory to the franchisee as
compared to franchises then currently being offered
by such other person or franchises then in effect and
with respect to which such other person is the
franchisor.

(3) For purposes of this subsection, the following
are grounds for nonrenewal of a franchise
relationship:

(A) The failure of the franchisor and the fran-
chisee to agree to changes or additions to the provi-
sions of the franchise, if-

App. 39

(i) such changes or additions are the result of
determinations made by the franchisor in good faith
and in the normal course of business; and

(ii) such failure is not the result of the fran-
chisor’s insistence upon such changes or additions
for the purpose of preventing the renewal of the
franchise relationship.

(B) The receipt of numerous bona fide customer
complaints by the franchisor concerning the fran-
chisee’s operation of the marketing premises, if-

(i) the franchisee was promptly apprised of
the existence and nature of such complaints follow-
ing receipt of such complaints by the franchisor; and

(ii) if such complaints related to the condition
of such premises or to the conduct of any employee
of such franchisee, the franchisee did not promptly
take action to cure or correct the basis of such
complaints.

(C) A failure by the franchisee to operate the
marketing premises in a clean, safe, and healthful
manner, if the franchisee failed to do so on two or
more previous occasions and the franchisor notified
the franchisee of such failures.

(D) In the case of any franchise entered into
prior to June 19, 1978, (the unexpired term of which,
on such date, is 3 years or longer) and, in the case of
any franchise entered into or renewed on or after
such date (the term of which was 3 years or longer, or
with respect to which the franchisee was offered a
term of 3 years or longer), a determination made by

App. 40

the franchisor in good faith and in the normal course
of business, if-

(i) such determination is—

(I) to convert the leased marketing premises
to a use other than the sale or distribution of motor
fuel,

(II) to materially alter, add to, or replace such
premises,

(III) to sell such premises, or

(IV) that renewal of the franchise relationship
is likely to be uneconomical to the franchisor despite
any reasonable changes or reasonable additions to
the provisions of the franchise which may be accept-
able to the franchisee;

(ii) with respect to a determination referred to
in subclause (II) or (IV), such determination is not
made for the purpose of converting the leased mar-
keting premises to operations by employees or agents
of the franchisor for such franchisor’s own account;
and

(iii) in the case of leased marketing premises
such franchisor, during the 90-day period after noti-
fication was given pursuant to section 2804 of this
title, either-

(I) made a bona fide offer to sell, transfer, or
assign to the franchisee such franchisor’s interests in
such premises; or

(II) if applicable, offered the franchisee a
right of first refusal of at least 45-days duration of an

App. 41

offer, made by another, to purchase such franchisor’s
interest in such premises.

Definition

(c) As used in subsection (b)(2)(C)-of this section,
the term “an event which is relevant to the franchise
relationship and as a result of which termination of the
franchise or nonrenewal of the franchise relationship is
reasonable” includes events such as-

(1) fraud or criminal misconduct by the fran-
chisee relevent to the operation of the marketing
premises;

(2) declaration of bankruptcy or judicial deter-
mination of insolvency of the franchisee;

(3) continuing severe physical or mental disabil-
ity of the franchisee of at least 3 months duration
which renders the franchisee unable to provide for
the continued proper operation of the marketing
premises;

(4) loss of the franchisor’s right to grant posses-
sion of the leased marketing premises through expir-
ation of an underlying lease, if the franchisee was
notified in writing, prior to the commencement of the
term of the then existing franchise-

(A) of the duration of the underlying lease, and

(B) of the fact that such underlying lease might
expire and not be renewed during the term of such
franchise (in the case of termination) or at the end of
such term (in the case of nonrenewal);

(5) condemnation or other taking, in whole or in

a

App. 42

part, of the marketing premises pursuant to the
power of eminent domain;

(6) loss of the franchisor’s right to grant the right
to use the trademark which is the subject of the
franchise, unless such loss was due to trademark
abuse, violation of Federal or State law, or other fault
or negligence of the franchisor, which such abuse,
violation, or other fault or negligence is related to
action taken in bad faith by the franchisor;

(7) destruction (other than by the franchisor) of
all or a substantial part of the marketing premises;

(8) failure by the franchisee to pay to the fran-
chisor in a timely manner when due all sums to
which the franchisor is legally entitled;

(9) failure by the franchisee to operate the mar-
keting premises for-

(A) 7 consecutive days, or

(B) such lesser period which under the facts
and circumstances constitutes an unreasonable
period of time;

(10) willful adulteration, mislabeling or mis-
branding of motor fuels or other trademark viola-
tions by the franchisee;

(11) knowing failure of the franchisee to comply
with Federal, State, or local laws or regulations rele-
vant to the operation of the marketing premises; and

(12) conviction of the franchisee of any felony
involving moral turpitude.

App. 43

Compensation, etc., for franchisee upon
condemnation or destruction of marketing premises

(d) In the case of any termination of a franchise
(entered into or renewed on or after June 19, 1978), or in
the case of any nonrenewal of a franchise relationship
(without regard to the date on which such franchise
relationship was entered into or renewed)-

(1) if such termination or nonrenewal is based
upon an event described in subsection (c)(5) of this
section, the franchisor shall fairly apportion between
the franchisor and the franchisee compensation, if
any, received by the franchisor based upon any loss
of business opportunity or good will; and

(2) if such termination or nonrenewal is based
upon an event described in subsection (c)(7) of this
section and the leased marketing premises are subse-
quently rebuilt or replaced by the franchisor and
operated under a franchise, the franchisor shall,
within a reasonable period of time, grant to the fran-
chisee a right of first refusal of the franchise under
which such premises are to be operated.

§ 2803. Trial and interim franchises
Nonapplicability of statutory nonrenewal provisions

(a) The provisions of section 2802 of this title shall
not apply to the nonrenewal of any franchise relation-
ship-

(1) under a trial franchise; or
(2) under an interim franchise.

Definitions

(b) For purposes of this section-

eo

App. 44

(1) The term “trial franchise” means any fran-
chise-

(A) which is entered into on or after June 19,
1978;

(B) the franchisee of which has not previously
been a party to a franchise with the franchisor;

(C) the initial term of which is for a period of
not more than 1 year; and

(D) which is in writing and states clearly and
conspicuously—

(i) that the franchise a trial franchise;

(ii) the duration of the initial term of the
franchise;

(iii) that the franchisor may fail to renew the
franchise relationship at the conclusion of the initial
term stated in the franchise by notifying the fran-
chisee, in accordance with the provisions of section
2804 of this title, of the franchisor’s intention not to
renew the franchise relationship; and

(iv) tha

[Text truncated at 120,000 characters. The full text is on the page linked above.]

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385002_0318%3A1. Public record. Not legal advice.