Amicus Curiae Brief — Virginia Gasoline Marketers & Automotive Repair Ass'n v. Mobil Oil Corp.

PREG oul, 8.

EIEED

JAN 23 1995

n" “fe 4 1 ise ©. #res

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ae

No. 94 - 1000 ‘

IN THE SUPREME COURT OF

THE UNITED STATES

OCTOBER TERM, 1994

VIRGINIA GASOLINE MARKETERS COUNCIL,

Petitioner

Ve

MOBIL OIL CORPORATION,

Respondent

PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

AMICUS CURIAE BRIEF

OF SERVICE STATION DEALERS OF AMERICA

IN SUPPORT OF PETITIONER

Dimitri G. Daskalopoulos

The Daskal Law Group

700 13th St. N.W.

Suite 950

Washington, D.C. 20005

(202) 434-4545

(301)261-8880

Counsel of Record for Amicus Curiae

QUESTIONS PRESENTED FOR REVIEW

1. Whether rules’. of implied

preemption, such as a holding that a

federal law “occupies the field" has

any application where the _ statute

contains an express preemption

provision ?

2. Whether the Petroleum Marketing

Practices Act, 15 USC 2801 et. seq.

gives petroleum franchisors the right

to be free of state regulation of the

substance of franchise agreements by

reason of federal preemption, or

whether the view of other Courts such

as the First Circuit and the dissent

that the statute does not give such

protection is the correct view ?

3. Whether the 4th Circuit erred in

applying preemption decisions under

the Airline Deregulation Act and the

Employment Retirement Security Act to

the Petroleum Marketing Practices Act

provisions, which expressly use a

different preemption test ?

4. Whether Virginia law governs the

relationship between Virginia based

Mobil Oil Corporation and Virginia

dealers; or whether the Petroleum

Marketing Practices Act demands the

creation of a body of federal common

law to govern motor fuel franchises ?

TABLE OF CONTENTS

Questions Presented. i

Table of Contents... ii

Table of Authorities iii

Interest of Amicus and

Summary of Argument... 1

ARGUMENT....... 21

I. Background of the PMPA

tenheeasae

II. Structure of the PMPA

ree 2 |

III. The Preemption Provision and Its

Legislative History

coun

IV. Express vs. Implied Preemption

Analysis

svedl

V. The First Circuit and other Courts

Correctly Interpret The PMPA

Preemption Provision..... 34

VI. The 4th Circuit Majority Erred in

Applying the "Related To" Test of

ERISA to the PMPA......... 38

V. The PMPA Does Not Create. Federal

en EO nce ccccees esseaee OO

CONCLUSION ........ cecccccece 40

TABLE OF AUTHORITIES

CASES

California v. ARC America,

490 U.S. 93 (1989)... 43

Campbell v. Hussey

368 U.S. 297 (1961)....9

Cippolone v. The Liggett Group,

510 U.S. » 442 &.CO. 2608. .32,33

Darling v. Mobil Oil Corp.

864 F.2d 981 (2nd Cir. 1989)...37,38

Esso Standard Oil Company v. Dept. of

Consumer Affairs,

793 F.2d 431 (lst Cir. 1985)

34,35, 36,37,38

Jiminez v. BP Oil Co.;

853 F.2d 268 (4th Cir. 1988)....3,4

Lippo v. Mobil Oil Corp.

776 F.2d 706, (7th Cir. 1985)... 14

Morales v. Trans World Airlines,

510 U.S. ,112 S.Ct. 2031 (1992)... 12

O'Melveny and Myers v. FDIC,

512 US__, 129 L.Ed 2d 67 (1994)

ere, rere ee Tee rerey? | Pe yre

Shaw v. Delta Airlines

463 U.S. GS (1985) secese 11, 12

Slatky v. Amoco Oil Co.,

830 F.2d 476(3rd Cir.in banc 1987)

were ey |

Wingard v. Exxon Co. USA,

819 F.Supp 473 (D. S.C. 1993)

STATUTES & LEGISLATIVE HISTORY

Te << So pearerper By

15 UBC 2002 (Bisesecccss 5

15 USC 2802 (b)(2)(a) .-.8

15 USC 2802 (b)(2)(C)....7

15 USC 2802(c) (11)......-7

Te 2 ag pEeeee

te. > ere =

1978 U.S.Code Cong. & Ad. News 873

cneceseetenenconces Ben gateae

Cong. Record

April 5, 1977 p. 10378,83 .....

25,26

Hearings on HR13000 before the

Subcommittee on Energy and Power of

the Committee on Interstate and

Foreign Power (94th Cong., 2d Sess.),

oeteee oes 608 00656446 6640046086688 FER

Public Law No. 103-371(1994)

ooee 13,415,200

VA. CODE ANN. 59.1-21.14..... 23

VA. CODE ANN. 59-1.21.15...... 24

MISCELLANEOUS

1994 National Petroleum News Factbook.

WrerTrTreorcre rer TT 2

"Judicial Interpretation of the

Petroleum Marketing Practices:

Conflict and Diversity." 32 Emory

L.J.273 (1983) -ccccccccccel -

L.Tribe, American Constitutional Law ,

2nd Ed 1986..cecee skeennaes or |

INTEREST OF THE AMICUS

AND _ SUMMARY OF ARGUMENT

In the seventeen (17 years) since

its enactment, and through 1994

amendments, the statute which governs

franchise terminations and non-

renewals in an industry that affects

the daily life of almost’ every

American, the Petroleum Marketing

Practices Act, has gone without review

by this Court. Lower courts continue

to engage in a struggle, a struggle

that led one commentator to call her

law review article "Judicial

Interpretation of the Petroleum

Marketing Practices: Conflict and

Diversity.” 32 Emory L.J.273.

Nowhere has this conflict been

. Paes

more keenly felt that in the area of

federal preemption; where the rules

are determined by where you live and

work.

This is an industry that

registered over $ 120 billion dollars

in sales last year; with over 50% of

that total being registered through

the 50,000 plus independent service

station dealers represented by the

SSDA. See generally, 1994 National

Petroleum News Factbook. It is a

highly visible industry that dots the

major intersections throughout’ the

country. While the Court has found

time to hear cases dealing with the

minutia of other statutes; gasoline

retailers have had to continue to deal

with the conflict that only this Court

Ue noray vodaers Se 4

can resolve.

The tension is seen in the two

opinions under review, which cite the

same cases from other jurisdictions

for support of their diametrically

opposing views. Indeed, the author of

the 4th Circuit opinion expressly

relied on a previous decision he had

authored, Jiminez v. BP Oil Co.; 853

F.2d 268 (4th Cir. 1988); in which he

noted that the 4th Circuit panel took

a much more expansive view of federal

preemption than other Circuits.(" if

this Court reads the preemption

section of the PMPA as narrowly as

those Courts did (the 2nd and 6th

Circuits, Jiminez might be correct in

arguing that the goodwill provision of

the Maryland Act must be spared from

preemption...) 853 F.2d @ 273, 274

nl.

The 4th Circuit majority view of

the scope of the preemption provision

irreconcilably conflicts with

decisions not only of the 2nd and 6th

Circuits, as it candidly acknowledged

in Jiminez; it also strongly and

irreconcilably conflicts with on point

decisions of the First Circuit; and

decisions of the 7th and 9th Circuits,

which hold that state contract law,

not federal common law will apply to

motor fuel franchises.

The real world effect is that

those of us who counsel the hundreds

of thousands of men and women who work

in this industry cannot give our

clients good advice as to what the

Ss OE 40 SG toa linas Reig

governing law is.

In addition, the Courts’ use

different preemption tests; with some

applying implied preemption

principals; as the 4th Circuit did

here. These principals should have no

application in light of the limited,

express preemption provision of the

statute.

This issue has been touched upon

in Freightliner Corp. v. Myrick,

scheduled for argument this term. The

SSDA and its members have a powerful

interest in seeing consistent

preemption analysis.

The federal statute simply

prohibits all terminations and non-

renewals of motor fuel franchises as a

general rule. 15 USC 2802 (a).

It then specifies exceptions to

the general rule; 15 USC 2802(b); that

a franchisor must prove exist as an

affirmative defense; 15 USC 2805.

The Act contains an express and

carefully circumscribed preemption

provision, 15 USC 2806 which states

that

To the extent a provision of the Act

applies to a termination or non-

renewal, a state may not adopt enforce

or continue in effect any provision of

any law or regulation, with respect to

the termination or non-renewal at

issue, unless the provision is the

same _as the applicable provision of

the PMPA.

We believe the key provisions are

"To the extent"; "with respect to the

Piette. Deca sRi i iat tient si

termination or non-renewal" and "the

same as”.

PMPA preempts state law only IF

it applies, and then only

"to the extent” it applies. The

"extent" to which it applies is to set

a broad legal standard. State law-

tells us what meets the PMPA standard.

For example, 15 USC 2802(b) (2) (c)

allows termination upon the occurrence

of an event making termination

reasonable. 15 USC 2802(c) (11)

provides that one such event is a

failure by the franchisee to comply

with state and local laws.

There is a critical distinction

between substituting a state law

termination standard, such -as "good

cause" for the PMPA termination

standard, and the application of state

law to the PMPA standards.

For example, PMPA allows

termination where there is a "failure"

by the franchisee to comply with a

reasonable and material "provision of

the franchise". 15 USC 2802(a)

We agree that a franchisee could

not defeat a termination action based

upon a claim that though the PMPA

termination standard is meet, the

termination cannot go forward because

state law imposes a "good cause”

termination standard that is not meet.

On the other hand, franchise

agreements are creatures of state law.

If under the state law that governs

the underlying agreement law;

something does not qualify as a

a ES le, Rae dota EA

"provision of the franchise", in the

first place, then the PMPA standard

is not met.

This decision holds that state

law is to be totally ignored, in spite

of the express provisions in the 1978

Act and the 1994 Amendments

incorporating state law into the PMPA.

This is why the issue of the

appropriateness of application of

implied preemption where the statute

has an express preemption provision is

of such concern and interest to the

SSDA.

Under "field preemption"

principals, applied by the 4th Circuit

in this case, all state law is ousted,

whether or not it is consistent with

or identical to the federal

regulation. See, e.g. Campbell _ v.

Hussey 368 U.S. 297 (1961).

The express provisions of this

statute allow for consistent and

identical state regulation. For the

second time, a 4th Circuit panel has

applied the idea that PMPA “occupies

the field" of termination and non-

renewal; and rejected the holding of a

sister Circuit in a case on all fours.

Next, the PMPA preempts only

state laws "with respect to

termination". The term “with respect

to" connotes specificity and was used

by Congress in order to limit the

reach of the PMPA preemption

provision. The 4th Circuit read this

term broadly based upon the much more

general term "related to” found in

10

ERISA and the Airline Deregulation

Act.

Unlike ERISA, the preemptive

scope of PMPA is limited to the

specific subject matter covered by the

Act. In particular, we would direct

the Courts' attention to the analysis

in Shaw v. Delta Airlines 463 U.S. 85,

at 96, 97, and especially page 98 (103

S.Ct. 2900) where the Court rejected

the idea that ERISA preemption was

limited to the specific subject

matters covered by the statute.

In Shaw, the Court held the term

“related to" was used in ERISA in its

broad sense, and thus, the ERISA

preemption provision could not _ be

limited only to state laws

specifically designed to affect

11

employee benefit plans. Id.

Moreover, the Court further noted

that given the legislative history,

the ERISA provision could not be

limited to the subject matter relating

to the specific subject matter covered

by ERISA. The original ERISA bill

contained a preemption clause that was

limited to the specific subject

matters covered by ERISA; just as the

PMPA provision is limited. The limited

ERISA preemption provision did not

survive the conference committee. Id.

@ n.17,18,19.

That is why ERISA, and_ the

Airline Deregulation Act as

interpreted in Morales v. Trans World

Airlines, 112 S.Ct. 2031, (a decision

that relies heavily on Shaw, 112 S.Ct.

12

at 2036, 2037, and in turn was heavily

relied upon by the 4th Circuit)

preempt broadly, unlike PMPA.

This opinion rewrites the

carefully circumscribed PMPA

preemption provision to read like that

of ERISA or the ADA.

The PMPA, as repealed, and

reenacted by this opinion now reads:

"This Act shall preempt any and

all State laws insofar as they may

now, or hereinafter relate to

termination or non-renewal."

The lengthy, convoluted PMPA

language does not say that or mean

that.

Finally, SSDA vigorously contends

that state laws that regulate the

content of petroleum industry

13

franchise agreements are not only the

same as the PMPA - they are one and

the same therefore they are not

preempted.

The PMPA fails to address the

issue of the content of franchise

agreements. Last term, in O'Melveny

and Myers v. FDIC, 512 US___, 129 L.Ed

2d 67 (1994); the Court held that

matters left unaddressed in a federal

statute are presumably left subject to

state law. 129 L.Ed 2d @ 74.

The panel majority, by wiping out

the Virginia law, would force the

creation of federal common law rules,

thus conflicting with the law of other

Circuits such as the 7th, which

correctly apply state law. See, e.g.,

Lippo v. Mobil Oil Corp. 776 F.2d 706,

14

712 (7th Cir. 1985).

Franchise agreements, other

contracts and corporations are

creatures of state law, not federal

common law. Our view that the PMPA

term "provisions of the franchise"

must be viewed against the backdrop of

the state law that gave birth to the

underlying contractual agreements is

supported by the 1994 Amendments,

Public Law 103-371.

The Amendments amend the failure

definition, 15 USC 2801(13), to

prohibit franchise terminations based

upon provisions of the franchise which

are illegal or unenforceable under the

law of any State; and add an anti-

waiver provision, amending 15 ‘USC 2805

to provide that the law governing the

15

franchise agreement will be the law of

the franchisees home state.

Finally, it is important to note

that this case arises in the context

of a declaratory judgment where there

were no terminations or non-renewals.

The PMPA preempts only where it

actually "applies to a termination or

non-renewal". This opinion would

apparently find preemption in all

contexts; a holding that is clearly

wrong.

We have tried in this summary to

present a brief and straight forward

analysis based upon the plain language

of the statute.

The conflict and diversity which

this Court needs to address stem in

large part from application of implied

16

le tla ie ail

preemption tests; and from Courts

assigning different weight to

different statutory goals in applying

those tests.

PMPA simply sets forth uniform

federal termination standards which

state law cannot replace; but can be

applied to. This "uniformity" is in no

way disserved by application of state

law to the PMPA standards.

The disservice to the law, to the

industry, and to the motoring public

comes when in the name of "uniformity"

Courts misapply implied preemption and

threaten to leave us awash in federal

common law, exactly what this Court

proscribed in O'Melveny & Myers, 112

L.Ed 2d @ 76.

The SSDA was the prime mover of

17

the 1978 Act; and would have violently

opposed an ERISA type preemption that

was not limited to the specific

subject matter covered by the federal

act.

As elegantly set forth in the

dissent, and discussed in detail

supra, ANY state law that regulates

the content of a franchise agreement,

would be preempted under the expansive

reading of preemption given by the 4th

Circuit, irrespective of the context

of the case.

Mobil argued below, and may argue

here, that some laws would escape

preemption, but fails to identify

such, and more importantly, fails to

identify any principled distinction

upon which such a finding would rest.

18

The majority held that a state

law regulating the content of a

petroleum industry franchise could not

escape preemption based upon the

argument that it is "the same as" the

applicable provision of the PMPA,

because the PMPA is silent on this

issue.

Thus, under their view, any law

that says anything, such as a state

antitrust law that bars exclusive

dealing provisions could be preempted

because it is not "the same as" the

applicable PMPA provision. This is

Clearly wrong.

For if the state law is stricken

down, a vacuum occurs that can only be

filled by creation of federal common

law.

19

The problem is graphically

illustrated by the facts of this case;

where Virginia law is held to be null

and void with respect to the franchise

agreements between er Virginia

corporation and Virginia dealers.

This is not a situation this

vital industry can tolerate. We must

know what law governs.

Again, we believe that the 1994

Amendments to the Act; which were

enacted after this decision was

rendered make clear that the governing

law is not federal common law, rather

it is the law of the franchisee's home

state, and at a minimum, the case

should be remanded for reconsideration

in light of the 1994 Amendments.

Nevertheless, in the interest of

20

industry efficiency and judicial

economy; the time has come - indeed it

is long overdue for this Court to at

last consider the Petroleum Marketing

Practices Act and the scope of its

preemption provision.

This is the single most watched,

and most important case that has come

down the "PMPA Pike".

It is so important that the SSDA

was granted leave to engage and oral

argument before the 4th Circuit; and

we will respectfully request that the

same privilege be granted from this

Court.

This is truly the one PMPA case

that the Court must hear.

ARGUMENT

I. BACKGROUND OF THE PMPA

21

During the 1970's; both Congress

and state legislatures conducted

extensive hearings into reports of a

pattern oof abuse by major oil

companies of their franchise

relationships with service station

dealers.

Several states reacted to this

pattern of abuse by enacting laws

governing the entire "lifecycle" of

the petroleum product franchise

relationship from pre-sale disclosure,

to course of dealing and course of

performance, and ending with

termination and non-renewal. Other

state laws were more limited in that

they simply regulated grounds for and

notice of termination and/or

nonrenewal. These laws used a variety

22

[indies with ehanan:

of termination standards, such as good

cause, objective reasonableness, and

subjective good faith. Several

contained “laundry lists" of what

constituted "good cause", and the

notice provisions varied from state to

state.

In enacting the PMPA in 1978,

Congress took this limited approach to

regulating the franchise relationship.

Other states went further by

specifying what substantive provisions

could be included in the franchise

agreements.

In 1975 Virginia enacted

legislation that not only specified

grounds for and notice of termination

(See VA. CODE ANN. 59.1-21:14) and

substantive franchise terms (See VA.

23

CODE ' ANN. 59-1.21.15), but also

mandated disclosure of certain items

to prospective franchisees (See VA.

CODE ANN. 59.1-21.15). However, many

other states had not acted, prompting

a call for federal legislation.

Oil companies such as _ Mobil

argued that legislation regulating

petroleum industry franchises was not

necessary:

"Title I is allegedly designed to

protect franchised dealers from bad

marketing practices. The language of

the bill, however, can only protect

the small percentage of dealers that

are failures as businessmen or unable

or unwilling to provide their

customers with value for services

rendered. This provision would

provide this type of retailer with a

degree of security unknown to all

other retailers and would be an

invitation to abuse the franchise. As

such, this bill is anti-consumer and

no benefit to the 98% or so of service

station dealers who ar successful and

satisfied with their contractual

rights. There must be literally

24

thousands of dealers across’ the

country who would support that view

and be willing to testify." {Hearings

on HR13000 before the Subcommittee on

Energy and Power of the Committee on

Interstate and Foreign Power (94th

Cong., 2d Sess.), Statement of Mobil

Oil Corp. at p. 396] (hereinafter

"House Hearings on HR 13000, su ra.").

These arguments proved unavailing:

"(Tjhe very act of passing the PMPA

indicated Congress’ rejection of the

view advanced by the major gasoline

retailers that remedial legislation

was unnecessary because the interests

of distributors and franchisees were

in harmony."

Slatky v. Amoco Oil Corp., 830 F.2d

476 at 483 (3rd Cir. en banc, 1987).

The explicitly stated purpose of

the Act was to "provide for the

protection of franchised distributors

and retailers of motor fuel .. . and

to prevent deterioration of

competition in gasoline marketing."

(123 Cong.Rec. 4/5/77, p. H10378,

ao

pes

5

Statement of Rep. John Dingell (the

primary author of PMPA)).

As a result, the Circuits have

uniformly held that the PMPA's primary

purpose is protection of franchisees.

This in turn requires a narrow

construction of the expressly limited

preemption provision.

Those courts which have broadly

construed the preemption provision

have usually relied on the idea that

the state law is preempted because it

restricted "franchisor flexibility",

and thus conflicts with a goal or

objective of the federal law.

This flexibility was largely

unchecked prior to the passage of

PMPA. The passage of the PMPA limited

the flexibility of franchisors such as

26

Mobil. It was not the intent of

Congress to allow the remaining

flexibility to subvert the primary

purpose of the Act, franchise

protection. Id.

II. The Structure of the PMPA

The principal substantive

requirement of the Act is set forth in

Section 102(a): a general prohibition

on termination of any franchise or

nonrenewal of the franchise

relationship (the ongoing business

relationship, past, present and

future, between the dealer and the oil

company. 15 U.S.C. 2802(a)

As stated in the Senate Report:

"([Tjermination is an extreme remedy.

It is fundamentally punitive-and not

compensatory in nature." S. Rep. 95-

27

732, p- 18 (95th Cong., 2d Sess.),

repr., U.S. Code Cong. & Ad. News 873,

876 (1978).

Section 102(b) sets out’ the

exceptions to the general rule. 15

U.S.C. 2802(b), 2803. The Senate

Report’ states: "EXCEPTIONS are

provided in subsection (b) of 102 and

in section 103." S.Rep. supra at 33,

U.S. Code Cong. & Ad. News at 891

(1978).

All the PMPA does is set forth a

general prohibition on all

terminations or non-renewals; and then

set forth affirmative defenses. The

construction of the PMPA urged by

Mobil would have the exceptions

swallow the rule, and thus, violate

the rules of statutory construction.

28

i easeaeeeeerereeeiinieaiaaitaiimmeeael

III. The Language and Legislative

History

15 U.S.C. 2806(a) states:

"To the extent that any provision of

this subchapter applies to the

termination (oc the furnishing of

notification with respect thereto) of

any franchise, or to the nonrenewal

(or the furnishing of notification

with respect thereto) of any franchise

relationship, no State or any

political subdivision thereof may

adopt, enforce or continue in effect

any provision of any law or regulation

(including any remedy or penalty

applicable to any violation thereof )

with respect to termination (or the

furnishing of notification with

respect thereto) of any such franchise

or to the nonrenewal (or the

furnishing of notification with

respect thereto) of any such franchise

relationship unless such provision of

such law or regulation is the same as

the applicable provision of this

subchapter." (emphasis added).

This preemption is limited in

scope because the PMPA is limited in

scope.

That Congress intended a limited

29

preemption is beyond dispute.

The Committee Reports explain: "

Needed is a single, uniform set of

rules governing the grounds’ for

termination and non-renewal of motor

fuel franchises, and the notice which

franchisors must provide franchisees

prior to the termination of a

franchise or non-renewal of a

franchise relationship...the

preemption provisions of the

legislation ARE LIMITED TO state

provisions of state law dealing with

termination or _non-renewal of

franchise relationships. " Sen. Report

# 95-731, reprinted in 1978 U.S. Code,

Cong. & Ad. News 873.

The writ should be_- granted

because the majority, unlike other

30

Courts, fails to heed these limits.

IV. EXPRESS v. IMPLIED PREEMPTION

Rules of implied preemption, such

as a holding that state law may

present an obstacle to Congressional

goals, or that Congress has occupied a

field so as to leave no room for state

regulation have no place in preemption

analysis under the PMPA.

"The governing federal statute may,

however, restrict its own preemptive

scope...When this is the case it seems

quite improper for a court even to ask

whether a challenged state law which

clearly purports to require no such

thing nonetheless "conflicts" in some

more nebulous sense with the federal

statute or its objectives. To engage

in such a broader inquiry is to forget

31

that preemption is ultimately a matter

of construing a federal statute, when

that statute contains its own

preemption or anti-preemption

provision, a court that fails to give

that provision dispositive effect and

instead applies its own preemption

criteria is illegitimately

disregarding the source of its own

authority, and regardless of where its

preemption inquiry leads _ it, is

pursuing a fundamentally lawless

path." L.Tribe, American

Constitutional Law , 2nd Ed 1988 @ 482

n.B.

In Cippolone _v. The Liggett

Group, 510 U.S. , 112 S.Ct. 2666,

the Court held that the preemptive

scope of the Federal Cigarette

32

Labeling and Advertising Act was

"governed entirely by the express

language of each Act. When Congress

has considered the issue of

preemption, and has included in the

enacting legislation a _ provision

explicitly addressing that issue, and

when that provision provided a

reliable indicium of Congressional

intent with respect to state

authority, there is no need to infer

congressional intent to preempt state

laws from the substantive provisions

of the legislation. Such reasoning is

a variant of the familiar principal of

expressio unius est exclusio alterius

: Congress' enactment of a provision

defining the pre-emptive reach of the

statute implies that matters beyond

that reach are not preempted." 112

S.Ct. @ 2618.

We believe that the petition

should be granted in order to clarify

when, if ever, implied preemption

should apply.

All statutes have competing goals, and

application of "conflict preemption"

instead of straight forward statutory

construction leads to irreconcilable

33

results.

The place for statutory goals is

to aid in the construction of language

that is not clear, not to be an ends

in themselves.

With respect to the PMPA, the

analysis of the First Circuit in Esso

Standard Oil Company v. Dept. of

Consumer Affairs, 793 F.2d 431 (lst

Cir. 1985) supports the _ limited

express preemption view.

"Indeed, the discussion in the House

of Representatives prior to passage of

the PMPA reflects an emphasis on

protecting the rights of powerless

franchisees, and it would have been

contrary to that primary objective of

PMPA for Congress to have desired that

the bill actually reduce protection

for franchisees by preempting all

substantive state regulation... .

One member of Congress made a point

that the preemption of PMPA would be

minimal and would “not preempt the

heart’ of the state statute currently

in effect in his home state of

Minnesota.” 793 F.2d at 435.

34

sistema

IV. THE SCOPE OF PREEMPTION IS SET OUT

CORRECTLY BY THE FIRST CIRCUIT AND

OTHER COURTS

In Esso Standard, the provision

at issue was a regulation of the

Commonwealth of Puerto Rico which

allowed a franchisee and franchisor,

if unable to agree on a rent, to

petition the State Department of

Consumer Affairs to set a rent, which

in no case could exceed ten percent

(10%) of the market value of the

property. 793 F.2d at 433.

Franchisors claimed the regulation was

preempted because PMPA allowed them to

charge any rent they wanted, subject

only to the good faith, normal course

of business constraint, where as the

regulation capped rents. 793 F.2d at

433, 434.

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The question presented by the

case was whether the balance struck by

PMPA in the areas of termination and

nonrenewal gave the franchisors a

substantive right to be free of state

regulation of the elements of the

franchise agreement. 793 F.2d at 434.

"We do not believe it gives such

protection." Id.

The list Circuit, unlike the

4th, found no authority to support the

proposition that the PMPA granted a

franchisor a right to determine

franchise provisions free of all state

regulation. 793 F.2d at 435.

Respondent claimed below that the

lst and 4th Circuit rulings do not

conflict relying on out of context

reading of this statement:

36

"That is any law that would give a

franchisee a cause of action to

contest a termination when _ that

termination would otherwise be valid

under the PMPA, would be preempted by

the PMPA." 793 F.2d @ 434.

The faulty assumption they make

is that these terminations, based on

contract provisions that are illegal

or unenforceable would "otherwise be

valid" under the PMPA.

If the contract of the franchise upon

which termination is purportedly based

is illegal or unenforceable under

state law; then it does not qualify as

a “provision of the franchise" under

the PMPA, and the termination is not

valid under PMPA. The First Circuit

went on:

"In this case before us, however, a

franchisor remains free to terminate

or non-renew a franchise if it does

not wish to accept the rent

37

established by DOCA.” 793 F.2d @ 434 .

( THIS IS PRECISELY OUR POINT -

TERMINATIONS MAY GO FORWARD IF BASED

UPON CONTRACT PROVISIONS THAT ARE

LEGAL AND ENFORCEABLE UNDER STATE

LAW). Compare, Darling v. Mobil Oil

Corp. 864 F.2d 981 (2nd Cir. 1989);

(state law regulating grounds for

termination preempted where it

prohibited termination based upon

VALID franchise provision).

: The Commonwealth's rent control

regulation gives neither franchisees

or franchisors rights or

responsibilities in the specific area

of termination or non-renewal greater

than those granted by the PMPA.

Rather than governing termination

or nonrenewals, Regulation 2758

controls a substantive element of the

franchise agreement. There is NO

indication from either the language or

legislative history that Congress

intended to preempt all state

regulation of specific components of

the franchise agreement.” 793 F.2d @

435.

Mobil's argument, raised

extensively in their opposition to the

petition for rehearing below, that

there is no conflict in the cases, is

plainly wrong. The petition must be

38

granted to resolve this conflict.

V. The 4th Circuit Erred in Relying On

the "Related To" Preemption Cases

We extensively addressed the

error of applying the ERISA and ADA

preemption cases in our summary; and

believe that this error by the 4th

Circuit is sufficient in and of itself

to justify granting the writ.

VI. PMPA DOES NOT CREATE FEDERAL

COMMON LAW

If Virginia law does not govern

the substance of these franchise

agreements; then federal common law is

all that is left, because of the

PMPA's silence.

As most recently held in

O'Melveny and Myers v. FDIC; 512

U.S. ; 129 L.Ed.2d 67, 73, there

39

is no such thing as federal common

law; and a concern for uniformity of

law is not sufficient to create such

federal common law. Id.@ 76.

The effect of the 4th Circuit

ruling would be to force the creation

of such. a body of law, in

contravention of this Courts’ most

recent rulings.

This issue also is sufficient to

justify granting the writ.

CONCLUSION

The majority opinion finds the

state law preempted due to a

hypothetical conflict exists between

the PMPA provisions that allow for

franchise termination or non-renewal

under based upon “provisions of the

franchise ".

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The 4th Circuit majority erred

in failing to recognize that the term

"provisions of the franchise" must be

defined by reference to the state law

governing the underlying agreement.

The applicable provisions of the PMPA

and the state law challenged here are

not only the "same as" they are one

and the same, as reinforced by the

1994 Amendments.

The silence of the PMPA

evidences Congressional intent to

leave the matter to state law.

For if Virginia law does not

govern the underlying relationship,

between Fairfax, Virginia based Mobil,

and Virginia dealers, what does ?

If allowed to stand, the majority

opinion would require the creation of

41

a body of federal common law to

regulate petroleum franchises.

Overburdened judges and law clerks

would be required to take on gasoline

dealers as wards of the courts and

engage in active supervision of the

petroleum marketing industry pursuant

to this federal common law, because as

Chief Judge Ervin correctly notes any

state law that affects the substance

of the franchise agreements must be

struck down under the 4th Circuit

approach, in any context.

The panel majority would find

preemption in this action for a

declaratory judgment, and sweeps the

Virginia laws away in all

circumstances based on a hypothetical

effect on possible future termination

42

actions. This rationale would apply to

statutes such as antitrust and trade

regulation laws, that are not

preempted by their federal

counterparts. California Vv. ARC

America, 490 U.S. 93 (1989). Compare,

Wingard v. Exxon Co. USA, 819 F.Supp

473 (D. S.C. 1993) (state law not

preempted as franchisees were in full

compliance and could not be subjected

to termination, PMPA preempts only “to

the extent” it actually applies to a

termination or non-renewal).

The key question is what is the

applicable law that governs’ the

content of petroleum industry

franchise agreements.

We contend it is state law. This

is an issue that can only be resolved

by this Court, by granting the writ.

Respectfully submitted,

Dita bag yes a ee

Dimitri G. Daskalopoulos

DATED: Jan. 23rd , 1995

CERTIFICATE OF SERVICE

I hereby certify that on this 23rd

day of January, 1995, I served a copy

of the attached Amicus Brief and Brief

by mailing copies thereof, U.S. Mail,

lst Class postage prepaid to:

Thomas G. Slater

Hunton & Williams

951 E. Byrd St.

Richmond, Va. 23219

Counsel for Respondent Mobil Oil

Corp.

AND to

Richard M. Bing, & Gerald M. Bowen,

Esq.

8260 Greensboro Dr.- Suite 125

Mc Lean, Va. 22101

Counsel for Petitioner Virginia

Gasoline Marketers Council

And to

Peter Messitt and Eric Fiske

Attorney General's Office

101 N. 8th St.

Richmond, Va. 22219

a |

La w ark brooid >

Dimitri G. Daskalopoulos

45