T he H o no rable J. R o nni e G reer, U ni t ed Stat es D i st ri ct Jud ge f o r t he E ast ern D i st ri ct of T enness ee, s i t t i ng * b y de si gnat i o n. NO T R EC OM M EN DE D F OR F UL L- TEX T P UB LIC AT ION F ile Nam e: 10a0613n.06 Case No. 09- 1514 UN ITED STA TES C OU RT OF AP P EA LS F OR THE SI XT H C IR CU IT F AIRLANE CAR WA SH, INC., et al., P lai nt iffs- App e lle e s,
v. KN IGHT ENTERPRISES , INC., Defendan t-Appellant.

_______________________________________ ) ) ) ) ) ) ) ) ) ) ) ) ON AP P EA L F RO M THE UNITED STAT ES DIS TRICT COURT F OR THE E ASTERN DISTRICT OF MICHIG AN

BEFORE: BATCHELDER, Chief Judge; WHITE , Circuit J u d ge; and GREER , District * Judge. ALICE M. BATCHEL DER, Chief Ju dge. Def endant- Appellant Knig ht Enterprises, Inc. (“K night” ) appe als the district court’ s g rant of attorney fee s to Pl aintiffs-Appe llees Fa irlane Car Wash, I nc., PJ J Enterpr ises, L L C, J ohn Masoura s, and James Ma souras (collec tively “Plaintiffs” or “F airlane ”) unde r the Petroleum Ma rketingPractice s Act, 15 U.S .C. §§ 2801 et seq. . Be cause we find that Knig ht Enterprises, Inc. wa ived this is s u e b y not raising it before the district court, we AF F I RM. Furthe r, we awa rd to P la int if

fs the a tto rn e y

fe e s r e a so na

bly inc ur re d in de fe nd ingthi s
a pp e a l.09-1514 , Fa ir lan e v . K nig ht

2 I. F a ir lane Car Wa sh , Inc . is a com bi nati on g a s st a tio n, c ar w a sh , a

nd c on ve nie nc e sto re in Dea rborn, Michig an. The gas station lot is owned by PJ J Enterpr ises, L L C, which — when the contra ct at issue in this lit igation was enter ed into

—was owne d by brothers John and J ames Masoura s but is now wholly owned by

J ohn Masoura s. Knig ht Enterpris es , I nc. is a g asoline distributor, known in the industry as a w holes al e “j o b b er.” Fa irlane a nd Knig ht entere d into an Ag ree ment on J uly

3, 2003, wher eby

Knig ht would provide bra nded g as for Fa irlane to sell, along with pumps and other equipment. The contra ct provided for two pr icing methods, and allowe d eac h side to chang e the pricing structure from one me thod to the other once . Under the first method, the

“ Pos te d Ra c k D e a l,” F a ir lane wo uld purc ha se the g a s f ro m K nig ht at a se t ma rg in o ve r t

he loc a l r a te with a re bate f

or sales ove r a c erta in threshold each m o nth. Fair lane would then se t its own price and sell the g as. Unde r the sec ond method, the “F ive Cent Marg in Deal,” Knig ht would pay Fa irlane five c ents for e ach g allon sold, and Knig ht would retain title and set the price. Fr om the outset, the pa rt ie s p ro c eeded un der the F ive Ce nt M arg in D e a l, a nd ne ith e r s ide e ve r e xer c ise d th e op tio n to chang e the pr icing structure
. The re latio n s hip betwee n Knig ht and Fa irlane, w hich Fa irlane c hara cter izes as

“ e xpe ri me nta l,” wa s n ot h armon io us . In 2 00 5, Kn ig ht s ue d F a ir lane in M ic hig an s tate c ourt to
re c ov e r c re dit- c ard

fe e s. Kn ig ht w on

on su mma ry dis po sit ion , b ut t

he c a se wa s su

bs e qu e ntl y
reve rsed in par

t and re manded by

the Michig an Supreme Court. Kni gh t E nte rs. v. Fairlane Car W a sh, Inc. , 7 5 6 N
. W. 2 d 8 8 , 8 8 ( M ic h
. 2 0 0 8 )
. O n O c to b e r 1 9 , 2 0 0 6 , s h o rtl y a f te r b e in g g rante d summary dispositi on in that state proce eding , Knig ht sent an aud itor to Fairla ne to demand09-1514 , Fa ir lan e v . K nig ht

3 i m m ed iate pay

ment for the pr evious day ’s sales. F airlane cut three chec ks for the pr evious day ’s cash sa les, and tende red $ 1 , 0 3 5 i n cash f or the c urre nt day ’s sales. [ Id. ] Kn ig ht h a d p re vio us ly
a c c e pte d c he c ks , b ut o n th is o c c a sio n it dir e c te d th e a

ud ito r t o rej ect the c he c ks and de mand c a sh
or ca shier’s c hecks instea d. Fa irlane c ould not comply , but did deposit the ch ec k s i n Knig ht’s
a c c o u n t
. T h e c h e c k s c l e ar e d t h e n e x td ay. Fa irlane r an out of g as the followingday , October 20, and re quested d el i v er y . Knig ht ref used, cla iming a br eac h of its cre dit policies. The part ies exchang ed a se ries of le tters and
acc usations, and Fa irlane e ventually rebr anded the station and obtained g as elsewhere
. Fa i rl an e filed this s uit on J anuar y 9, 2007, alleg ing br eac h of contra ct and violation of the Petroleum Marke ting Practice s Act (“PMPA”), 15 U .S.C. §§ 2801 et seq . Fa irlane r equeste d, among other re medies, attorne y

fee s as authorized by

the PMPA. Knight counte rcla imed for br eac h of contra ct. The d istrict court g rante d summary judgme nt to Fairla

ne on both claims, finding the questions “inextricably

linked.” The court he ld that Fair lane ha d not brea ched the contra ct, but that Knig ht had both brea ched the contra ct and violated the PMP A. The case proce eded to a jury trial on the question of whe ther Knig ht’s brea ch and violation of the PMP A prox i m at ely cause d Fa irlane’ s damag es, and the jury found for Fa irlane a

nd J ohn Masoura s in the amount of $11,800. At a subseque nt benc h trial, the cour t found no exemplary

damag es due unde r the PMPA. The district court then de nied Knig ht’s motions for return o f proper ty and re lief fr om judgment a nd g rante d Fa irlane’ s motion for attorney fee s under the PMPA in the amount of $79,545.09-1514 , Fa ir lan e v . K nig ht

4 Knig ht timely

appea led. While Knight’s Notice of Appe al was more ex tensive, i n its briefs on appea l, Knight a

rg ues only that the PMP A is ina pplicable and the attorney fee s should, therefor e, not have be en aw arde d. II. A. Sub jec t-m atte r Jurisdiction Knig ht’s “Statement of Subject Matter Jurisdiction and Appellate Jurisdiction” at the outset of its opening brief e x plicit l y cl ai ms that the district court had jurisdiction bec ause the action “per tained to an a lleg ed viol ation of t he P etroleum Marketing Practice s Act.” K night a rg ues at the
c los e of its re ply br ie f, ho we ve r, tha

t th e dis tr ic t c ourt

la c ke d s ub

je c t- matte r j ur isd ic tio n b e c a us e Fa irlane “ all but conce d[ed] ” that the PMPA applies only if its terms are incorporated into the
c on tr a c t. A lth ou gh Kni ght cha lle ng e s su bje c t- matte r j ur isd ic tio n f or the fi rs t ti me on

a pp e a l, objections to subject-matter jurisdiction cannot be waived and must be addre ssed by a fe dera l court
a t e v e r y s ta g e o f p r o c e e d in g . See , e.g. , Sinochem I nt’l. Co. v. Malaysia Int’l Shipping Corp. , 549 U.S. 422, 430–31 (2007) (“ [A] fede ral c ourt g ener ally may not rule on the mer its of a case without first deter mining that it has jurisdiction o v e r th e categ ory

of cla im in sui t (subject-matter jurisdiction)
and the pa rt ie s . . . .” ); A n d

r u s v . Ch a r le

s to n e S to n e P r ods. Co. , 436 U.S. 604, 607 n.6 (1978) (“ Al tho ug h th e qu e sti on

of the Di str ict Co ur

t’ s su bje c t- matte r j ur isd ic tio n w a s n ot r a ise d in thi s Court or appa

rently in either c ourt below, we have a n obligation to consider t h e question sua sp on te .”). B eca

use the pa

rties ar e all Michig an citizens, there is no diver sity jurisdiction. The PMP A, there fore , would be the only source of fe dera l jurisdiction.09-1514 , Fa ir lan e v . K nig ht

5 The P M P A provides for fede ral jurisdiction “[i] f a f ranc hisor fails to comply with the require ments of sec tion 2802, 2803, or 2807 of this title.” 15 U.S.C. § 2805(a) . The Supreme Court has held that subjec t-matter jurisdiction

‘is not defe ated . .
. by the pos sibili ty that the averments m ight f ail to state a c ause of action on which pe titioners could actua lly rec over.’ Rather , t h e d i strict court ha s jurisdiction if ‘the rig ht of the petitioners to re cover under the ir complaint will be sustained if the Constituti on and laws of the United States are g iven one construc tion and wi ll b e de fe a te d if

the y are g ive n a

no the r, ’ u nle ss t he c la im ‘ c le arl y

a pp e ars to be immateria l and made solely for the purpose of obta ining jurisdiction or whe re suc h a cla im is wholl y

insubstantial and frivolous.’ Steel Co. v. Citizens for a Better Env’t , 523 U.S. 83, 89 (1998) (quotingBell v. Hood , 327 U.S. 678, 682–83, 685 (1946)) (omission in orig inal) (inter nal citations omitted). Fa irlane’ s complaint alleg es that K nig ht v iol a te d 15 U. S.C. § 2 80 2. Kn ig ht d oe s n ot p oin t to any on -p oin t U nit e d St a te s Su pr e me Court or Sixth Cir c uit c a se that w ou ld r e nd e r t he c la ims of

a pla int if f i n F a ir lane ’s po sit ion

“ wh oll y ins ub sta nti a l and fr ivo lou s. ” I ns te a d, “ the ri g ht o f [Pl a int if fs ] to r e c ov e r u

nd e r t he ir c omp la int

wi ll be sustained if the [P MPA is] g iven one c onstruction and will be defeated i f [it i s] given anothe r.” See Ste el Co. , 523 U.S. at 89. Fur thermore , it is not clea

r th at Fa i rl ane ma de any conce ssion reg ardingthe applica

bility of the PMPA. The dist rict court was c orre ct in exercising subject-matter jurisdiction over the c ase. B. M oo tn e ss Fa irlane a rg ues that this appea l is moot b ec au s e Kn i g ht appea led only the district court’s PMP A hol d ing a

nd did not appeal the br eac h of contra ct holding. B eca use the c ourt did not dif fe re n t i at e between the two ba ses for the judgme nt, Fair lane c ontends, “Knig ht will st ill owe09-1514 , Fa ir lan e v . K nig ht

6 Fa irlane the exact same amount of money ” re g ardle ss of our ruling o n ap p ea l
. Knig ht does not dispute t h i s as to the jury awa rd. Instead, Knig ht points t o the nea rly $80,000 in attorney s’ fe es
awa rded to F airlane afte r trial , ar guing that these fe es we re a war ded pursua

nt to the PMP A, and there fore a fa

vorable outcome bef

ore this cour

t will null ify

that awa rd. Article I I Irestric ts the j u ri s d iction of fede ral c ourts to actual c ases a nd controve rsies. An active c ontroversy

must continue throug h eac h stag e of the proce eding s. Da vi s v. F ed . Election Comm’n , _ U.S. _, 128 S. C t. 2759, 2768 (2008) (“ To quali fy as a c ase f it for fe dera l-court adjudication, an a ctual contr oversy must be ext ant at all stag es of r eview, not mer ely at the time the complaint is filed.” (inter nal quotation marks and c itation omit ted)). Al tho ug h th e ir

or ig ina l bri e f wa s not expl ic it on the matte r, Kn ig ht’ s N oti c e of Ap pe a l di d inc lud e the jud g me nt f

or a tto rn e y s’ fe e s. I n fa c t, it app e ars that the se fe e s ar e wh a t this ap pe a l is a ll about. The di strict court’s a war d of fe es wa s based wholly on the statutory

mandate pa ssed by Con g re ss i n th e PMPA , wh ic h state s th a t th e pr e va ili ngfr anc his e e “ sh a ll b e e nti tle d” to r e a so na ble attorney fee s unless the court e x erc ises its discretion otherwise. 15 U.S.C. § 2805(d)( 1). The district court did not exercise that discretion, and awa rded Fairla

ne $79,545 in fee s. Be cause the attorne y fee s were awa

rded enti rely

under the PMP A, if Knig ht were to preva il in thi s appea l that awar d
wo uld be va c a te d. Th e re fo re the re is an act ual contr ov e rs y , th is m a tte r i s n ot m oo t and we re ta in jur isd ic tio n o ve r i t. C. Waiver F a ir lane argue s th a t K

nig ht h a s wa ive d its c ha lle ng e to the PMPA ’s a pp lic a bil ity be c a

us e it failed to ra ise the issue bef ore the district court. F or the re asons stated be low, we a g ree .09-1514 , Fa ir lan e v . K nig ht

7 “In g ener al, issues not prese nted t o t h e district cour t but raised for

the first time on appe al
are not properly

befor e the c ourt.” Foster v. Barilow , 6 F.3d 405, 407 ( 6th Cir. 1993) (interna l qu otatio n ma

rk s, a lte ratio n a

nd c itatio n omi tte d)
. Th re e po lic ie s und e rl ie thi s r ule . T he fi rs t is to
ease appellate revie w “‘by having the di strict court first consider the matter.’” Scottsdale Ins. Co.

v . F low e rs , 5 1 3 F. 3 d

5 4 6 , 5 5 2 (6 t h C i r. 2 0 0 8 ) ( qu o t i n g Foster , 6 F .3 d at 40 9) . T he se c on d is to “ensur e[] fairne ss to liti g ants by preve nting surpr ise issues from appe aringon appea l.” Sc ott sd ale , 513 F.3d at 552. And the third is to promote “‘judicial e co n o m y an d the finality of judg ments.’” Taft Broad. Co. v. United States , 9 2 9 F. 2 d 2 4 0 , 2 4 4 (6 t h C i r. 1 9 9 1 ) ( q u o t i n g Sigmon Fuel Co. v. Tenn. Valley Auth. , 754 F.2d 162, 164 ( 6th Cir. 1985)). We have r ecog nized ex ceptions to this ge nera l rule in “e x ceptional c ases or particula r circ umstances or when the rule would produce a plain miscarr iag e of justice.” Sc ott sd ale , 513 F.3d at 552 (interna l quotation marks and citation omi t t ed ). Discre tion to hear the issue r ests with the
c ourt , a nd the e xer c ise of

that di sc re tio n is g uid e d b y su c h f a c tor s a s: ‘1 ) w he the r t

he iss ue ne wl y

ra ise d o n a

pp e a l is a qu e sti on of law, or wh e the r i t require s or nec essitates a de termination of facts; 2) whether the proper resolution of the new issue is c lear

bey ond dou b t ; 3) whe ther fa ilure to take up the issue for the first time on appea l will result in a miscarria g e of jus t i ce or a de nial of substantial jus tic e ; and 4) the pa

rt ie s’ ri g ht und e r our

jud ic ia l sy ste m to have the iss ue s in the ir suit considered by

both a district judge and an a ppellate c ourt.’ Id. (q u o t i n g Friendly Farms v . Reliance Ins. Co. , 79 F.3d 541, 545 ( 6th Cir. 1996)). Stated another way , this Court m ay

rea ch an issue that is “‘pre sented with sufficie nt clar ity and complete ness’” for the cour t to decide the issue. Foster , 6 F. 3 d at 4 0 7 (q u o t i n g P i n n ey Do ck & Transp. Co. v. Pe nn Cent. Corp. , 838 F.2d 1445, 1461 ( 6th Cir. 1988)). This usually applies “where the i ssue i s one of09-1514 , Fa ir lan e v . K nig ht

8 law, and f urther de velopment of the r ecor d is unnece ssary .” Id. F ina lly , th is C ourt “ may hear an iss ue fo r the fi rs t ti me on

a pp e a l if do ingso wo uld

se rv e an o ve ra

rc hin g purp os e oth e r t

ha n s imp ly
rea ching the cor

rec t result in this case.” In re Mo rri s , 260 F.3d 654, 664 ( 6th Cir. 2001). “Such an
over- arc hing pur

pose may exis t where the state of the law is unce rtain.” Foster , 6 F.3d at 408. These e x ceptions, howe ver, a re “ narr ow,” a

nd we have ra

rely exercised suc h discretion. Id.
a t 40 7; Sc ott

sd ale , 513 F.3d at 552. “Instead, we have ge nera lly focuse d on whether the issue was proper ly raised be fore the district court.” Sc ott sd ale , 513 F.3d at 553. I n Foster , the plaintiffs sued their landlord for

housing discr imination under the Fa ir Housing Act. Foster , 6 F.3d at 406. The landlords pre vailed at t ri al an d moved for attorney fee s and expenses pursua n t t o 42 U.S.C. § 3613(c)(2)
. Id. at 406–07. The pla intiffs did not reply , and the district court gra

nted the motion su a s

po nte . Id. at 407. Plaintiffs appea led, ar g uing that the district court e rre d by

awa rding attorney s fee s and costs without m ak i n g the re quired findingthat the plaintiff’s ca se was frivolous, g roundless or unr easona ble. We aff

irmed the district cour

t’s awa rd, fi nd ing the iss ue wa ive d. Th e iss ue wa s “ no t de ve lop e d wi th su ff ic ie nt c lari ty

and c omp le te ne ss i n the district court . . . [and] further de velopment of the r ecor d would be nec essar y ” to decide the issue. Id. (interna l quotation marks omi tted). We noted t hat i n the t y pe of case wher e the issue was ne ver broug ht before the district court, “the [defendants] ha d no rea son to buttress their motion” to rebut the new a rg ument. Id. at 408. We also declined to addre ss the issue under the “over -ar ching purpose” exception. Id. at 408–09. Although plaintiffs argued that this Circuit had never construed the meaningof “pr evailing party” in the F air HousingAct, the Court found that there was not “muc h uncer tainty in the state of09-1514 , Fa ir lan e v . K nig ht

9 the law” on that issue. Id. at 408. Given Cong ress’ directives and a re cent Supre me Court case on the decision, the state of the la w was “ rea sonably

cer tain.” Id. Th e pla int if

fs ’ c a se , th e re fo re , d id not fall within that ex ception. Th e iss ue be fo re us is i n th e same mol d. F a ir lane a lle g e d v iol a tio ns of the PMPAand

in i ts complaint expressly

reque sted attorney

fee s und er that act. Surprising ly , Knig ht never raised the PMPA ’s a

pp lic a bil ity be fo re the dis tr ic t c ourt , d e sp ite the ob vio us de fe ns ive fo rc e of the argume nt. There fore , this case f

alls square ly within the gene ral rule. To avoid the g ener al rule’ s eff ect, Knig ht argues that this issue falls into our rec ogn i z ed ex ceptions. F irst, Knight c laims this i s an “ex ce p t i o n al ci rc u m s t an ce ” b ec au s e t h e d i s t ri ct co u rt gra n t eds u m m ary j u d gm en to n the PMPA iss ue
su a s po nte , and this is the first time K night c ould present this issue. Second, Knig ht argues that the issue is “a na

rrow le g al question t hat re quires no fur ther fa ctual deve lopment.” Fina lly , Knig ht argues that re solution of this issue would serve the over arc hing pur pose of pr eventingbad pre cede nt from g oing unc orre cted. [ Id. ] Th is i ssu e do e s n ot f

a ll i nto the na

rr owand ra re ly -e xer c ise d e x ception s. F ir st, de sp ite its pr ote statio ns to the c on tr ary , Kn ig ht c ou ld have ra ise d thi s iss ue be fo re the dis tr ic t c ourt . K nig ht, having been se rved w ith Fairla ne’s c omplaint , which spec ifically relies on the a

pplicability

of the PMPA , ha d ev e ry inc e nti ve to make thi s ar g ume nt in its an sw e r an d sta te me nt o f d e fe ns e s and its motion for summary

judgme nt, to name only

two opportunities. I nstead, Knight, t he drafter of the
c on tr a c t th a t in c lud e d th e PMPAlanguag e , n e ve r g a ve the dis tr ic t c ourt a re a so n to do ub t it s
a pp lic a bil ity . Ch ara c te ri zingthe dis tr ic t c ourt ’s ru lin g a s su a s po ntedo e s n ot a lte r t

he se fa c ts.09-1514 , Fa ir lan e v . K nig ht

10 Se c on d, it i s n ot c le ar t

hat th is i s p ur e ly

a le gal is su e th at w ou ld n ot r e qu ir e fu rt he r f a c tfinding . To rule on the me rits, we would h av e t o consider a section of the PMPA we ha ve not construed b ef

o re , ru l e on the possible ef fec t of the contra ct’s alter nate pa y ment options on the statut e ’s a pp lic a bil ity , a nd de c ide the op e n que sti on of wh e the r the pa rt ie s inc or

po rate d th e statut e into the contrac t. Decidingthese diff icult questions, particularly the t h i rd , would require further fac tual development. See Foster , 6 F .3 d at 40 8 ( no tin g that “ the [de fe ndant s] had no re a so n to buttress their motion” to rebut plaintiffs unr aised a rg ument). Finally , resolving this issue would not se rve a ny overa rchingpurpose be y ond the re solution of thi s p art icular c a se . T he dis tr ic t c ourt ’s op ini on s d o n ot d e c ide wh e the r o r n ot F a ir lane is a fra nchisee beca

use neither

party contested the PMP A’s applica bility befor e that cour

t. There is no langua g e in t

he or de rs that c ou ld l e a d o the r d ist ri c t c ourt s a str ay . K

nig ht do es no t argue tha

t th is instance is distinguishable from the circumstance s in Foster , wher e the Court found the lang uag e of the statut e su ff

ic ie ntl y c le ar d e sp ite thi s Ci rc uit ’s ne ve r h a vin g c on str ue d it
. I n short, resolution of t his issue would “re quire .
. . a determination of fa cts,” a nd is not “clea

r bey ond doubt”; failure to take the issue up would not “re sult in a mi scar riag e of justi ce or

a denia l of substantial justice”; fina lly , our re solution of the issue would not vindicate the par ties’ rig ht under
our judicial sy stem to ha

ve their issues “conside red by both a district judg e and an appe llate cour t.” Knig ht waived this issue, the only issue on appea l, and there fore we ne ed not addr ess Fa irlane’s estoppel ar g ument or the mer its of t he P MPA question. There being no rema ining c halleng e to the dis tr ic t c ourt ’s jud g me nt, we a ff ir m.09-1514 , Fa ir lan e v . K nig ht

11 D. Attor ney F ees B e c a us e Kn ig ht h a s e nti re ly

wa ive d it s r ig ht t o c ha lle ng e the a pp lic a bil ity of the PMPAto t h e r e l a t i o n s h i p b e t w e e nt h e p art i e s , F a i r l an e i s t h e p r e v a i l i n g p art y h e r e , an d i s e n t i t l e d t o a t t o r n e ys fe e s und e r 1 5 U .S. C. § 28 05 (d )( 1) un le ss w e e xer c ise our d isc re tio n to awa rd on ly no min a l f

e e s:
I f t he fr anc his e e pr e va ils in a ny a c tio n . . . , suc h f

ra nc his e e sh a ll b e e nti tle d .
. . (C ) to r e a s o n a

b le a tt o r n e y . . . f

e e s to b e p a id b y th e f

r an c h is o r , u n le s s the court deter mines that only

nominal damag es are to be awa rded to suc h fra

nchisee , in which case the cour

t, in its discretion, nee d not direct that such f ees be p ai d by

the fra nchisor. 15 U.S.C. § 2805(d)(1). Fa irlane’ s appellate brief r equests attorney fee s for the defe nse of this appe al. Knig ht has not provided a

ny rea son why

we should exercise our discre tion to deny an aw ard of

fee s, and we find none. We there fore find that pu rsuant to 15 U.S.C. § 2805(d)(1) , Plaintiffs shall be awa rded
re a so na ble a tto rn e y

fe e s f or de fe nd ingthi s a

pp e a l. III . For the fore g oing r easons, we AF F IRM the district court’s judgme nt a nd awa rd of attorne y fe e s, and we ho ld t

hat Pla int if

fs are entitle d to a tto rn e y fe e s f or the de fe ns e of

thi s a pp e a l. Acc ording ly , Pl ai n t i ffs are dire cted to submit to thi s Court within 10 day s of entry of this order a statement deta iling the r easona ble fe es incurr ed in this appea l supported by the nec essar

y documentation.