1

United States Court of Appeals

Fifth Circuit

FILED

August 18, 2003

Charles R. Fulbruge III

Clerk

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

__________________________

No. 02-21028

__________________________

 ABRAMS SHELL; TOWN CENTER SHELL; PALM SPRINGS SHELL; LORNA

RATONELL; FOUAD DAGHER; HOUDA, INC.; and GARNERVILLE SHELL, on

behalf of themselves and those similarly situated

Plaintiffs-Appellants,

versus

SHELL OIL COMPANY; EQUILON ENTERPRISES, LLC; MOTIVA ENTERPRISES, LLC;

EQUIVA SERVICES, LLC,

Defendants-Appellees.

___________________________________________________

Appeal from the United States District Court

For the Southern District of Texas

___________________________________________________

Before WIENER, CLEMENT, and PRADO, Circuit Judges. 

EDITH BROWN CLEMENT, Circuit Judge:

Plaintiffs are independent lessee-dealers of Shell-branded gasoline stations who contend that

Defendants violated the Petroleum Marketing Practices Act (“PMPA”), 15 U.S.C. § 2801 et seq.

(2003), by presenting a new set of franchise agreements in a “take it or leave it” manner. The district

court found that the PMPA does not permit claimsfor constructive termination, so the court granted

Defendants’ motion to dismiss for failure to state a claim under FED. R. CIV. P. 12(b)(6). Plaintiffs

appeal. We AFFIRM.
1

 Shell and Texaco, Inc. (“Texaco”) formed Equilon, and Shell, Texaco, and Saudi

Refining, Inc. (“Saudi”) formed Motiva.

2

 It appears that Shell recently acquired its joint venture partners’ shares in Equilon and

Motiva, so Shell now owns Equilon, Motiva, and consequently Equiva. This change in corporate

ownership has no impact on this case because the events in dispute occurred long before any of

the recent share acquisitions. 

3

 Independent lessee-dealers in California became franchisees of Equilon, and independent

lessee-dealers in Texas and New York became franchisees of Motiva. 

2

I. FACTS AND PROCEEDINGS

A. Factual Background

Until 1998, Shell Oil Company (“Shell”) entered into franchises directly with independent

lessee-dealers throughout the country. In 1998, Shell formed two joint ventures with other

companies: Equilon Enterprises LLC (“Equilon”) and Motiva Enterprises LLC (“Motiva”).1 Equilon

and Motiva later formed a separate company, Equiva Services LLC (“Equiva”), to handle their

overhead, administrative, and legal matters.2

Shell and its partners transferred their refining and marketing assets, including all service

station assets and associated petroleum franchises, to Equilon and Motiva. The assets were divided

geographically, withEquilonreceiving assetsin the westernUnited States andMotiva receiving assets

on the East Coast and the GulfCoast.3 All ofthe independent lessee-dealers continued doing business

under the Shell brand.

There are two agreements required to establish a petroleum franchise: (1) a Retail Facility

Lease covering the lease of the service station premises; and (2) a Retail Sales Agreement providing
4

 These two agreements are normally supplemented by a third one: a trademark agreement

providing for the use of a brand name (e.g., Shell) by the franchisee.

5

 The existing franchise agreements consisted of the different agreements that had

governed the relationships between Shell and its franchisees, Texaco and its franchisees, and

Saudi and its franchisees until the assignment of the respective franchise agreements to Equilon

and Motiva.

6

 The revised set of agreements was developed by Equilon and Motiva in conjunction with

Equiva.

7

 The Plaintiffs also object to the content of the New Agreements. Specifically, Plaintiffs

allege that the New Agreements contain unlawful waivers; forfeitures; penalties; limitations of

liability; reductions of the applicable statute of limitations governing claims against Equilon,

Motiva, and Equiva; unconscionable penalties in the form of liquidated damages; commercially

unreasonable and excessive transfer fees; and unreasonable restraints on alienation of the

franchisee’s interest in the franchise in the form of a unilateral consent clause giving Equilon,

Motiva, or Equiva the unilateral right to approve or disapprove of a proposed sale or conveyance

of the franchisee’s interest in the franchise. However, Plaintiffs’ brief clearly focuses not on the

content of the New Agreements, but rather on the manner in which they were presented to

Plaintiffs.

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for the sale of gasoline.4In 1999, Equilon and Motiva sought to replace the existing franchise

agreements5 with a uniform set of franchise agreements6 (“New Agreements”). Apparently, certain

independent lessee-dealers found the New Agreements to be so objectionable that several lawsuits,

including this one, were quickly filed. 

Inthis case, Plaintiffsare independent lessee-dealers operating Shell-branded gasoline stations

in three states (California, New York, and Texas) and up to five federal judicial districts (the Central

and Southern Districts of California, the Southern District of New York, and the Eastern and

NorthernDistricts ofTexas). Shell, Equilon, Motiva, and Equiva (collectively, “Defendants”) allhave

their headquarters and principal places of business in Houston, Texas. 

Plaintiffs allege that Defendants violated the PMPA by presenting the New Agreements in a

“take it or leave it” manner to Plaintiffs.7 The cover letter to the New Agreements stated, “If you do
8

 The quoted language is found in a cover letter from Equilon to one Plaintiff. Given the

uniform nature of the New Agreements, we will assume that all of the Plaintiffs received the same

cover letter from Equilon and Motiva.

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not sign and return the Lease and other enclosed documents in a timely manner, be advised that

Equilon will issue without further warning a non-rescindable notice of non-renewal pursuant to the

terms of the [PMPA].”8 Sales consultants for one or more of Defendants allegedly indicated to

Plaintiffs that the New Agreements had to be signed “as is,” without making any changes to the

agreements. 

Plaintiffs allege that the purpose of the New Agreements is either: (1) to prevent renewal of

the franchise relationship, (2) to create conditionsjustifying termination of the franchise relationship,

and/or (3) to convert Plaintiffs’ stations into company-operated stations run by Equilon, Motiva,

and/or Equiva. 

Although Plaintiffs did not like the content of the New Agreements or the manner in which

theywere presented, Plaintiffs apparently signed the New Agreements and continue to operate Shellbranded gasoline service stations. 

B. Procedural History

Plaintiffs originally filed their suit in the U.S. District Court for the Central District of

California (“California district court”). Defendants filed three motions to dismiss in the California

district court: a motion to dismiss and/or transfer based on improper venue; a motion to dismiss for

lack of proper personal jurisdiction; and a motion to dismiss Shell and Equiva for failure to state a

claim under Rule 12(b)(6). The California district court granted the motion to transfer to the U.S.
9

 The California district court concluded that under the specific PMPA venue provision

contained in 15 U.S.C. § 2805(a), venue did not lie in the California district court and that the

Texas district court was the only proper venue for Plaintiffs’ PMPA claim. 

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District Court for the Southern District of Texas (“Texas district court”) based on improper venue.9

Defendants then filed a motion to dismiss for failure to state a claim under FED. R. CIV. P.

12(b)(6) in the Texas district court, arguing: (1) Plaintiffs did not allege any actual termination or

non-renewal of the franchise relationship, thus they could not invoke the protection of the PMPA;

and (2) Shell and Equiva are not franchisors within the meaning of the PMPA. The Texas district

court granted the motion to dismiss, finding that the PMPA only covers actual terminations, not

constructive terminations. The Texas district court did not reach the issue of whether Shell and

Equiva are franchisors within the meaning of the PMPA. Plaintiffs appeal. 

II. STANDARD OF REVIEW

This Court reviews dismissals for failure to state a claim de novo. Campbell v. City of San

Antonio, 43 F.3d 973, 975 (5th Cir. 1995). “Conclusory allegations or legal conclusions

masquerading as factual conclusions will not suffice to prevent a motion to dismiss.”

Fernandez-Montes v. Allied Pilots Ass'n, 987 F.2d 278, 284 (5th Cir. 1993). 

“We review all questions concerning venue under the abuse of discretion standard.” United

States v. Lipscomb, 299 F.3d 303, 338 (5th Cir. 2002). 

III. DISCUSSION

A. Constructive Termination/Nonrenewal

Defendants never act ually terminated or refused to renew their franchise agreements with

Plaintiffs. Indeed, Plaintiffssigned the New Agreements and continue to operate as franchisees. For

this reason, Plaintiffs only allege that their franchise agreements were constructively terminated or
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nonrenewed.

It is important to distinguish between claims for constructive termination and claims for

constructive nonrenewal. To differentiate between these claims, it is necessary to examine how the

PMPA distinguishes between termination and nonrenewal. First, the PMPA distinguishes between

terminations of franchises and nonrenewals of franchise relationships. 15 U.S.C. § 2802(a). This

distinction is meaningful: a franchise consists of “specific rights or obligations under the franchise

agreement,” but the term “franchise relationship” refers to the actual “relationship between the

parties.” Bridges Enters., Inc. v. Exxon Co., U.S.A., 820 F.2d 123, 124 n.3 (5th Cir. 1987); Beachler

v. Amoco Oil Co., 112 F.3d 902, 905 n.1 (7th Cir. 1997) (“The renewal provisions of the [PMPA]

address the renewal of the relationship between the parties rather than the specific rights or

obligations of the parties under the franchise agreement.”).

Second, the grounds upon which a franchise may be terminated are not coextensive with the

grounds for nonrenewal of a franchise relationship. See 15 U.S.C. § 2802(b)(1)(B) (indicating that

terminations may be based upon any ground listed in § 2802(b)(2), but nonrenewals may be based

upon any ground listed in § 2802(b)(2) and (3)); Bridges Enters., 820 F.2d at 124 (“The PMPA lists

ten grounds on which a franchise or franchise relationship may be ended; five are available either to

terminate or nonrenew, five can be invoked only to nonrenew.”). 

Third, termination occurs “prior to the conclusion of the term, or the expiration date, stated

in the franchise.” 15 U.S.C. § 2802(a). In contrast, nonrenewal can only take place “at the conclusion

of the term, or on the expiration date, stated in the relevant franchise.” 15 U.S.C. § 2801(14)(A);

Meghani v. Shell Oil Co., 115 F. Supp. 2d 747, 753 (S.D. Tex. 2000). In other words, termination
10 Where the franchise agreement does not specify a term of duration or an expiration date,

nonrenewal can happen at any time. 15 U.S.C. § 2801(14)(B). 

11 5TH CIR. R. 47.5.3 became effective on October 17, 1995.

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can happen at any time, but nonrenewal typically occurs within a narrower temporal context.10

The Fifth Circuit has not yet decided in a published case whether to recognize claims for

constructive termination under the PMPA. See, e.g., April Mktg. & Distrib. Corp. v. Diamond

Shamrock Ref. & Mktg. Co., 103 F.3d 28, 29 (5th Cir. 1997) (“This circuit has not recognized a

cause of action for ‘constructive termination’ under the PMPA.”). However, in McGinnis v. Star

Enter., No. 93-1234, 8 F.3d 20 (December 21, 1993) (unpublished), the Court held that “the plain

meaning of the [PMPA] does not provide for ‘constructive termination.’” Id. at 9. The Court noted

in particular that the plaintiff in McGinnis had “continued as a franchisee at all times relevant to this

action [and] present[ed] no summary judgment evidence that [showed that the defendant] unilaterally

cancelled the franchise agreement or that [the plaintiff] was forced to sign the cancellation

agreement.” Id. at 9-10.

Under 5TH CIR. R. 47.5.3, “[u]npublished opinions issued before January 1, 1996, are

precedent.”11 Therefore, the Court is bound by its decision in McGinnis, unless the language in that

case regarding constructive termination claims under the PMPA was mere dicta. In April Mktg., the

Court indicated that the ratio decidendi of McGinnis was the broad conclusion that “each of

plaintiffs’ claimsis either barred by the release clause or lacks adequate evidence to survive summary

judgment.” April Mktg., 103 F.3d at 29 n.2 (quoting McGinnis, No. 93-1234, at 10). The Court also

implied that the language regarding constructive termination claims under the PMPA was mere dicta.

Id. Even though McGinnis seemingly disallowed constructive termination claims under any
12 In Meghani, the district court asserted that the language in April Mktg. regarding

constructive termination claims under the PMPA was dicta, but this characterization appears to be

incorrect. 115 F. Supp. 2d at 757-58. Although the Court declined to decide whether constructive

termination claims should be recognized under the PMPA, the Court specified which allegations

were necessary to support a constructive termination claim under the PMPA. See discussion

infra.

13 This approach is largely consistent with the decisions of our sister circuits, though most

circuits have only considered constructive termination claims in cases where the franchisor

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circumstances, theCourt inApril Mktg. explicitlydiscussed the circumstancesinwhicha constructive

termination claim would be recognized. Id. at 29-31; McGinnis, No. 93-1234, at 9-10. 

A close reading of McGinnis indicates that its language regarding constructive termination

claims is indeed dicta. The core issue in McGinnis was whether the plaintiff’s claims were barred by

the settlement agreement and release that had resolved the parties’ prior dispute. McGinnis, No.

93-1234, at 3-5. The plaintifffailed to allege or provide evidence of any wrongful conduct occurring

after the date of the settlement agreement, so the Court found that the plaintiff’s claims were barred

by the release. Id. at 8-9. The conduct underlying the constructive termination claim was the same

conduct underlying the other claims made by the plaintiff, thus the Court’s conclusion that the

plaintiff’s claims were barred vitiated the need to discuss the merits of the plaintiff’s constructive

termination claim. Id. at 3-5. For this reason, the Court will consider the language in McGinnis to

be dicta, and thus persuasive rather than binding.12

In April Mktg., the Court, though declining to decide whether the PMPA permitted

constructive termination claims, indicated that it would only recognize such a claim if the plaintiffs

alleged a breach of the franchise, which “consists of three core components: a contract to use the

refiner’s trademark, a contract for the supply of motor fuel to be sold under the trademark, and a

lease of the premises at which the motor fuel issold.”13 April Mktg., 103 F.3d at 30 n.3. Plaintiffs do
assigned the franchise agreement to a third party. See, e.g., Shukla v. BP Exploration & Oil, 115

F.3d 849, 859-68 (11th Cir. 1997); Chestnut Hill Gulf, Inc. v. Cumberland Farms, Inc., 940 F.2d

744, 750-52 (1st Cir. 1991); May-Som Gulf, Inc. v. Chevron U.S.A., Inc., 869 F.2d 917, 918-19

(6th Cir.1989); Barnes v. Gulf Oil Corp., 795 F.2d 358, 362-64 (4th Cir.1986). In such cases, a

constructive termination claim also exists where the assignment violates applicable state law. See,

e.g., Shukla, 115 F.3d at 852-53; Chestnut Hill, 940 F.2d at 750-51; May-Som Gulf, Inc. v.

Chevron U.S.A., Inc., 869 F.2d at 922; Barnes, 795 F.2d at 362 (explaining that violations of

state law are relevant because “as a general rule, assignability of franchises is a matter left to State

law”) (quoting S. Rep. No. 731, 95th Cong., 2d Sess. 17, 23-24, reprinted in 1978 U.S. Code

Cong. & Ad. News 873, 876). Plaintiffs do not allege that Shell (or another party) constructively

terminated the existing franchise agreements by assigning them to a third party (e.g., Equilon),

thus the Court will not examine whether the assignment of the existing franchise agreements

violated applicable state law.

14 It is unclear whether the plaintiffs in Meghani asserted a claim of constructive

nonrenewal. The district court noted that the plaintiffs did not distinguish between constructive

termination and constructive nonrenewal, and the court only referred to constructive termination

in its opinion. 115 F. Supp. 2d at 755 n.25. On the other hand, the court stated in a footnote that

the plaintiffs intended to raise both claims. Id. at 756 n.29.

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not allege that Defendants breached any of the three core components constituting the respective

franchises; therefore, Plaintiffs’ allegations do not amount to a cognizable claim for constructive

termination under the PMPA. April Mktg., 103 F.3d at 30-31 (“[W]e conclude that a franchisor’s

actions, if those actions do not breach the franchise, cannot be considered a ‘termination’ within the

meaning of the PMPA.”); Fresher v. Shell Oil Co., 846 F.2d 45, 46-47 (9th Cir. 1988) (same). 

The Fifth Circuit has not yet decided whether to recognize claims of constructive nonrenewal

under the PMPA. Indeed, it appears that no court in this Circuit has previously considered a claim

of constructive nonrenewal under the PMPA.14 Most circuits seem to agree on the test that should

be applied to claims of constructive nonrenewal: “when a franchisee alleges that a franchisor has

‘failed to renew’ the parties’ franchise relationship, . . . it must demonstrate that at least one of the

three essential components of a petroleumfranchise has been discontinued.” Dersch Energies v. Shell

Oil Co., 314 F.3d 846, 864-65 (7th Cir. 2003). 
15 Although the tests for constructive termination claims and constructive nonrenewal

claims are similar, the Court notes that they are not identical. For example, the terminology

differs: the constructive termination test focuses on the franchise, and the constructive nonrenewal

test focuses on the franchise relationship. In addition, plaintiffs can argue that the assignment of a

franchise agreement violated applicable state law, and thereby constructively terminated the

agreement. See supra note 14. However, plaintiffs can not base their constructive nonrenewal

claims on the assertion that the assignment of a franchise agreement violated applicable state law.

Dersch Energies, 314 F.3d at 860.

16 The Court recognizes that the Ninth Circuit adopted a different test for constructive

nonrenewal claims in Pro Sales, Inc. v. Texaco, U.S.A., 792 F.2d 1394, 1399 (9th Cir. 1986)

(“[A] franchisee who signs a successor contract under protest and promptly seeks to invoke its

rights under the PMPA . . . has not ‘renewed’ the franchise relationship so as to bar relief under

the PMPA.”). In Dersch Energies, the Seventh Circuit rejected the Pro Sales approach based on a

“franchisee’s ability to obtain an injunction under the PMPA” in cases of nonrenewal. Dersch

Energies, 314 F.3d at 865. We reject the Pro Sales approach on the same basis.

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In Dersch Energies, Shell presented the plaintiffs with new franchise agreements in a “take

it or leave it” manner, and the plaintiffssigned the new agreements. Id. at 859-60. The plaintiffs based

their constructive nonrenewal claim on the manner in which the agreements were presented. Id. at

860. However, the Seventh Circuit held that “[b]ecause [the plaintiff] [did] not argue that the

defendants’ alleged violation of [the PMPA] resulted in the nonrenewal of a lease of retail premises,

motor fuelsupply contract, or the contract to use the Shell trademark in connection with retailsales,

it cannot demonstrate the nonrenewalofitsfranchise relationship within the meaning ofthe PMPA.”15

Id. 

We find the Seventh Circuit’s reasoning in Dersch Energiesto be especially persuasive, thus

we apply the same logic to this case.16 Plaintiffs have not provided any evidence that Defendants

failed to renew the relevant agreements; therefore, Plaintiffs have not shown a breach in the franchise

relationship. Id.

B. Transfer 
17 Defendants concede that Equilon and Motiva are franchisors. Plaintiffs argue that Shell

and Equiva are also franchisors under the PMPA. We need not reach this issue because all

Defendants are located in the same judicial district.

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The PMPA contains a specific venue provision that authorizes a franchisee to bring suit in

either of two different venues: (1) the district in which the franchisor has its principal place of

business, or (2) the district in which the franchisee is doing business. 15 U.S.C. § 2805(a). 

Either some or all of Defendants are franchisors. All Defendants have their headquarters and

principal places of business in Houston, Texas, which is located in the Southern District of Texas.17

Therefore, venue is proper in the Southern District of Texas. Id.

Plaintiffs are located in three different states and up to five judicial districts, thus there is no

single district in which all Plaintiffs are doing business. This Court has not yet addressed whether, in

order for venue to be proper under the PMPA, all named plaintiffsin a class action must be located

in the district where they file suit. The California district court held:

Notwithstanding the relaxationofvenue and personaljurisdictionrequirements as to unnamed

members of a plaintiff class, it is by now well settled that these requirements to suit must be

satisfied for each and every named plaintiff for the suit to go forward. 

Abrams Shell v. Shell Oil Co., 165 F. Supp. 2d 1096, 1107 n.5 (C.D. Cal. 2001). The leading case

on this issue explains why all named plaintiffsin a class action must satisfy the venue requirements:

The central function of venue generally is to regulate the forum in which a party may appear

or may force another party to appear personally, in a suit in which the court would otherwise

have jurisdiction. In the ordinary case, the party has been brought personally before the court,

by service of process or by filing the action, and the only question is whether the court sits

in the proper district (as defined by the venue statutes) to hear the case. Venue is therefore

intimately connected to and predicated upon the personal appearance of the party. Because

class actions do not necessarily require the presence of a class member before the court for

an adjudication of his/her rights and liabilities, venue restrictions are not determinative of the

ability of the court to hear the action with respect to all members of the class. As most courts

have held, the relevant venue question in such circumstances is whether venue is proper as

among the parties who have in fact been brought personally before the court as named
12

parties to the action, the parties representing and in effect standing in for the absent class

members.

United States v. Trucking Employers, Inc., 72 F.R.D. 98, 100 (D.D.C. 1976) (emphasis added). 

District courts in the Fifth Circuit have consistently held that all named plaintiffs to a class

action must satisfy the venue requirements. See, e.g., Bywaters v. United States, 196 F.R.D. 458,

464-65 (E.D. Tex. 2000) (“[T]he relevant venue question in a class action is whether venue is proper

as to the parties representing, and ‘in effect standing in for the absent class members.’”); Johnson v.

United States, 208 F.R.D. 148, 167 (N.D. Tex. 2001) (“Here, the plaintiffs have limited the class to

those plaintiffswho reside in theWesternDistrict ofTexasin order to avoid the venue issue.”). Based

on this caselaw, we hold that venue is not proper in the Central District of California because all the

named plaintiffs are not located there.

Under the PMPA, venue was only proper in the Southern District of Texas; therefore, it was

not abuse of discretion for the California district court to transfer the case.

IV. CONCLUSION

Based on the foregoing reasons, the Court AFFIRMS the judgment of the district court.