[between the corporations] that the separate personalities . . . no longer exist; and second,
circumstances must be such that adherence to the fiction of separate corporate existence would
sanction a fraud or promote injustice.” Worth, 276 F.3d at 260 (quoting Van Dorn Co. v. Future

Chem. and Oil Corp., 753 F.2d 565, 569-70 (7th Cir. 1985)) (internal quotation marks omitted).

Defendants argue that Puthusserill has not adequately alleged that Shell and Equiva are
the alter egos of Fquilon. They contend that Puthusscrill must allege “ultimate facts” and
“specific facts” that would establish that they are Equilon’s alter egos, Shell and Equiva misstatc
the federal pleading standard. A complaint “cannot be dismissed on the ground that it is
conclusory or fails to allege facts. The federal rules require . . . only that the complaint state a
claim, not that it plead the facts that if rue would establish . . . that the claim was valid.” Higgs

y, Carver, 286 F.3d 437, 439 (7th Cir. 2002).

As Shell and Equiva acknowledge in their brief, Puthusserill has alleged that the three
defendants have “engaged in conduct inconsistent with the maintenance of separate and distinct
identities . . . including . . . commingling of corporate revenues and funds, using corporate
revenues and funds to pay the expenses and debts of the other corporate Defendants, failing to
keep separate and/or adequate corporate records, and to hold regular meetings, and using
multiple corporate entitics to perpetuate a fraud against Plaintiffs and the general public.”
Compl. 14. Puthusserill also alleges that adherence to the fiction of corporate separateness
would sanction a fraud or promote injustice. /d. 415. These allegations satisfy both parts of the
affiliate liability test, and, at this stage, we must accept these allegations as true. As such, they
are sufficient to state a PMPA claim against Shell and Equiva under an “alter ego” theory. Shell

and Equiva’s motion to dismiss count 1 against them is therefore denicd.

13



deadline, but (hey signed the renewal agreements under protest.

Defendants have moved to dismiss counts | through 6 of plaintiffs’ complaint. Ina
separately filed motion, defendants Shel! and Equiva have moved to dismiss counts 1 through 5
on different grounds. For the reasons stated below, we grant defendants’ motions to dismiss as to
the renewed plaintifl’s and grant them in part and deny them in part as to Puthusserill.

DISCUSSION

When considering a motion to dismiss, the Court reads the complaint liberally, granting
the motion only if "it appears beyond doubt that the plaintiff can prove no sct of facts in support
of his claim which would entitled him to relief." Conley v. Gibson, 355 USS. 41, 45-46 (1957).
We address in turn defendants’ arguments as to cach count of plaintiffs’ complaint.

A Count 1: PMPA

Defendants submit that count 1 should be dismissed because the renewed plaintiffs are
unable to stale a claim against them under the Petroleum Marketing Practices Aci (PMPA), 15
U.S.C, §§ 2801-2841. The PMPA regulates the termination and nonrenewal of petroleum
franchise relationships, protecting franchisees from arbitrary or discriminatory termination or
nonrenewal. ‘The Act prohibits a franchisor from terminating a franchise during the term of a
franchise agreement or not renewing it at the end of a term, unless the termination ot nonrencwal
is based on specified grounds and mects the Act’s notice requirements. Id. § 2802(a). The
Seventh Circuit has identified three concerns that the PMPA was intended to address:

that franchisee independence may be undermined by the use of actual or

threatened termination or nonrenewal to compel compliance with franchisor

marketing policies; that gross disparity of bargaining power may result in

franchise agreements thal amount to contracts of adhesion; and that termination or
nonrenewal may disrupt the reasonable expectations of the parties that the

4



corporate identity of one corporation and treat it as the alter ego of another if two requirements
ate met: “first, there must be such unity of intercst and ownership that the separate personalities
of the corporation and the individual [or other corporation] no longer exist, and second,
circumstances must be such that adherence to the fiction of separate corporate existence would
sanction a fraud or promote injustice.” Van Dorn, 753 F.2d at 569-70 (7th Cir. 1985) (quoting
Macaluso y, Jenkins, 95 Il). App. 3d 461, 464, 420 N.E.2d 251, 255 (1981)) (alterations in
original), As stated above, Puthusserill’s allegations satisfy both parts of the affiliate liability test

and are therefore sufficicnt for count 4 to survive a motion to dismiss.
3. Count 6: Illinois Deceptive Trade Practices Act

Puthusserill alleges that defendants violated the Illinois Deceptive Trade Practices Act,
815 ILCS 510/1-7, which was intended to cover “conduct involving either misleading (rade
identification or false or deceptive advertising,” Prefatory Note, 815 ILCS 510. Puthusserill
cites various misrepresentations, failures to disclose, and other activities that he claims create “a
likelihood of confusion or misunderstanding.” Compl. 133. Among these are defendants’ plan
to eliminate franchisees and convert franchised stations into company operated stations; their
failure to disclose the availability of a rent challenge mechanism; and their charging of excessive
rents and fees. Section 510/2 lays out the types of conduct that violate the Act. Even after
scouring the comments following this provision, it is not clear to this Court how defendants’
conduct falls within any of the provision’s subsections. We suspect it is unclear to defendants as
well. Puthusscrill’s laundry list of allegations is therefore insufficient to put defendants on notice
as to how to respond to the charges. Cf Jiggs, 286 F.2d at 439 (stating that plaintiffs do not
have to plead facts or legal theories, but that plaintiff's complaint “would be insufficient” if

17



make them actionable. This does not mean, however, that a franchisee must first go out of
business in order to obtain relief from improper nonrenewal. A franchisee presented with a
renewal agreement so coercive that it suggests that the franchisor’s ulterior motive is to prevent
renewal can refuse the agreement. Tf the franchisor is unwilling to renew, it must notify the
franchisee of nonrenewal nincty days before the nonrenewal is to take effect. 15 U.S.C. §
2804(a). During this ninety-day interim, the franchisee may scck a preliminary mjunction to
prevent enforcement of the nonrenewal. Under the protection of an injunction, the franchisee
can continuc operating its business on the terms of (he previous agreement while the merits of its
action against the franchisor are resolved. The availability of injunctive relief ensures that a
franchisee need not go out of business before seeking relief from improper nonrencwal. As the
Seventh Circuit has stated, “Congress’ remedial purpose in enacting the PMPA is reflected in the

provision providing for preliminary injunctive relief.” Beachler, 112 F.3d at 905.

Our determination that this is the remedy Congress intended for threats is consistent with
and reinforced by the reduced burden for obtaining a preliminary injunction under the Act. Jd. §
2805(b)(2). As the Seventh Circuit has cmphasized, a franchisee is “entitled to a preliminary
injunction under the Act based upon a lesser showing than would be required in the ordinary
case” under Federal Rule of Civil Procedure 65. Beachler, 112 F.3d at 905. Under the Act, a

district court “is required to grant,” éd., a preliminary injunction ift

(A) the franchisee shows —
(i)... the franchise relationship of which he is a party has not been renewed, and

(ii) there exist sufficicntly serious questions going to the merits to make such
questions a fair ground for litigation; and

(B) the court determines that, on balance, the hardships imposed upon the franchisor by
the issuance of such preliminary injunctive relief will be less than the hardship which

9



The renewed plaintiffs accordingly ask the Court to recognize a cause of action for
constructive termination under the PMPA.? They contend that “(he circumstances surrounding
presentation of the renewal franchise agreements under which [the renewed] Plaintiffs are
currently operating” constitute a violation of the Act. Pls.’ Resp. to Defs.’ Mot. to Dismiss
Counts | Through VI, at 2. They contend defendants violated the Act because the changes and
additions were not made in good faith or the normal course of business but rather were offered
for the purpose of preventing plaintiffs from renewing their franchises. The renewed plaintiffs
also contend that defendants violated the Act by presenting the renewal agreements on a take-it-
or-Icave-it basis, so that they werc coerced into accepting illegal and unconscionable terms under

the threat of certaim nonrenewal.

Because the Seventh Circuit has not spoken directly on this matter, we must determine
whethcr, if presented with the opportunity to do so, it would recognize a cause of action for
constructive termination under the PMPA. The Seventh Circuit has provided some general
guidance for interpreting this statute. As remedial legislation, “the PMPA must be given a

”

‘liberal construction consistent with its overriding purpose to protect franchisces.”” Beachler,
112 F.3d at 904 (quoting Brach, 677 F.2d at 1221). However, the court has also cautioned that
because the PMPA diminishes franchisors’ property rights, it “should not be interpreted to reach

beyond its original language and purpose.” Jd, (quoting May-Som Gulf, Ine. v. Chevron U.S.A.,

2Pjaintiffs do not use the term “constructive termination” in their complaint. But it is
clcar from their response to defendants’ motion that it is under such a theory that they hope to
proceed. As they do not distinguish between the concepts of constructive termination and
constructive nonrenewal, we refer to constructive termination to encompass both concepts.

6



franchise relationship will be a continuing one.

Reachler v. Amoco Oil Co., 112 F.3d 902, 904 (7th Cir. 1997) (quoting Brach v. Amoco Oil Co.,
677 F.2d 1213, 1216 (7th Cir. 1982) (citing S. Rep. No. 95-731, at 17-19 (1978), reprinted in
1978 US.C.C.A.N 873, 875-77)).

To effectuate these objectives, the PMPA confers on franchisees a causc of action for
damages or injunctive relief if a franchisor terminates or fails to renew a franchise for
impermissible reasons. 15 U.S.C. § 2805(a), (b). A franchisor may decline to renew a franchise
if the franchisce refuses to agree to changes or additions in the renewal agreement. But a failure
to agree can form the basis for nonrenewal only ift

(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

Gi) such failure is not the result of the franchisor’s insistence upon such changes or

additions for the purpose of converting the leased marketing premises to operation

by employees or agents of the franchisor for the benefit of the franchisor or

otherwise preventing the renewal of the franchise relationship.
Id. § 2802(b)(3)(A).

To maintain a cause of action under the statute, “the franchisee station owner has the
initial burden of showing that the franchise has been terminated or not renewed.” Duff v.
Marathon Petroleum Co., 51 F.3d 741, 744 (7th Cir, 1995); 15 U.S.C. § 2805(c). Plaintiffs must
therefore allege either a termination or nonrenewal of the franchise relationship in order to state a
claim under the PMPA. See id. Defendants maintain that the renewed plaintiffs’ PMPA claims
should be dismissed because they do not, and cannot, allege a termination or nonrenewal.

Defendants argue that because the renewed plaintiffs accepted the renewal terms and are

currently operating their stations under franchise agrecments, they cannot state a claim undcr the


defendant “would not have known how to respond” to the charges). Defendants’ motion to

dismiss count 6 is therefore granted.
CONCLUSION

For the foregoing reasons, defendants’ motions to dismiss [Docket item nos. 9-1, 10-1]
are granted in part. Count 1 is dismissed as to plaintiffs Jet, JL Quick, TVA, and JT for failure to
state a claim, and the remaining claims made by these plainti [fs are dismisscd pursuant to 28
ULS.C. § 1367(c)(3). Counts 2, 3, and 6 are dismissed as to plaintiff Puthusserill, with leave to
amend on or before December 10, 2002. The motions to dismiss are otherwise denied as to

Puthusserill. Defendants are directed to answer, on or before December 3, 2002, Puthusserill’s

(WAMU,

MATTHEW F, KENNEYLY
United States District Judge

claims that were not dismissed.

Date: November 22, 2002

18



of the franchise relationship, éd. § 2801(17), and the Act’s legislative history makes clear that
“termination” refers to the cancellation of a franchise “during the term of the franchise
agreement,” 8. Rep. No, 95-731, at 15. The plain language of the statute contemplates an actual
ending of the franchise relationship and therefore does not support a cause of action for

constructive termination.

We turn, then, to whether the PMPA permits an implied cause of action for constructive
termination. We conclude that it does not. In reaching this determination, we rely on the
availability of adequate relief under the Act’s literal terms coupled with the Seventh Circuit’s
admonition that we must not interpret the PMPA to “reach beyond its original language.”

Beachler, 112 F.3d at 905.

Given the PMPA’s “overriding purpose to protect franchisees,” Brach, 677 F.2d at 1221,
our determination might be otherwise if the literal terms of the Act did not provide adequate
relicf for franchisces presented with coercive renewal agreements on a take-it-or-leavc-it basis,
short of sacrificing their established business. For Congress was clearly concerned not just about
actual terminations and nonrenewals but also about ¢hreatened terminations and nonrenewals. S.
Rep. No. 95-731, at 18 (“[T'Jhe prospect of non-renewal of the franchise relationship hangs over
the relationship and may manifest itself during the franchise term as a means by which the
franchisor may compel the franchisee to comply with the franchisor’s marketing policies. ... The
prospect of non-renewal for arbitrary or discriminatory grounds threatens the independence of the

franchisee as a competitive influence in the marketplace.”).

But even though Congress contemplated the danger of such threats, it did not expressly



‘Minute Oraey Form (06/97)

United States District Court, Northern District of Ilinois

c of Assignes Sitting f Other
sar Magra ude Matthew F. Kennelly “than signed Jude
CASE NUMBER 02 C 2289 DATE 11/22/2002
CASE Jet, Inc., et al vs. Shell Oil Co., et al
TITLE

[In the following box (a) indicate the party filing the motion, e.g, plaintiff, defendant, 3rd party plaintiff, and (b) state briefly (he nature

MoTION: of the motion being presented]

DOCKET ENTRY;

qa) qa Filed motion of [ use listing in “Motion” box above.]

(2) Oo Brief in support of motion duc

(3) Oo Answer brief to motion due___. Reply to answer brief due__—_

(4) oO Ruling/Hearingon___—_—ssetfor____att

(3) ao Status hearing[held/continued to] [set for/re-set for]on._——ssetfor__— at.

(6) Oo Pretrial conference[held/continued to] [set for/re-sct for]on__—sset for at.
e) im Trial[set for/re-set for]on__— ss at__

(8) Oo [Bench/Jury trial] [Hearing] held/continued toa

(9) o This case is dismissed [with/without] prejudice and without costs[by/agrcement/pursuant to]

OOFRCP4(m) ClLocalRule 41.1 COFRCP41(a\1) CFRCP41(a)(2).

ao) «ff [Other dacket entry] Enter Memorandum Opinion and Order: Defendants’ motions to dismiss (9-1,
10-1) are granted in part and denied in part. Counts 2,3, and 6 are dismissed as to plaintiff Puthusserill,
with leave to amend on or before December 10, 2002. Defendants are directed to answer, on or before
December 3, 2002 Puthusserill’s claims that were not dismissed.

dl) {For further detail see order attached to the original minute order.]

No notices required, advised in open court. Document

Number

No notices required
umber of nticer

2 5 20pe

date doe!

uv | Noticcs mailed by judge's staff. 0
Notified counsel by telephone. i V

Docketing to mail notices.

Mail AQ 450 form.

—

MNO2 al

Copy to judge/magistrate judge moe
Bi Kd 22 Aon zo
oe

UT UF Unliel igh received in

central Clerk’s Office smuiling deputy initials

Me

ulsia’s'n
5

AL

Unto mailed wotiee
courtroom

GL deputy's

aL
initials



Because Puthusserill has met his “initial burden of showing that [his] franchise has been
terminated or not renewed,” he can maintain a cause of action against Equilon, his dircct

franchisor. Duff, 51 F.3d at 744.

The question remains whether he can state a claim against Shell and Equiva. Shell and
Equiva contend that they arc not proper defendants because they are not “franchisors” under the
PMPA. They contend that to stale a claim under the Act, a plaintiff must have a direct franchise
relationship with the defendant. Shell states that it ceased being Puthusserill’s franchisor in 1998
when it assigned its franchise agreements to Equilon. Equiva submits that it has never been a
scrvice station franchisor, but is rather an administrative services company that has never been a

party to a [franchise agreement with Puthusserill.

Puthusserill makes two arguments in response. First, he contends that the PMPA’s
definition of “franchisor” is broad enough to encompass Shell and Equiva even though they may
not have been in a dircct franchise relationship with him. The PMPA defines a franchisor as “a
refiner or distributor... who authorizes or permits, under a franchise, a retailer or distributor to
use a trademark in connection with the sale, consignment, or distribution of motor fuel.” 15
U.S.C. § 2801(3). ‘The statute gocs on to define “refiner” as “any person engaged in the refining
of crude oil to produce motor fuel, and includes any affiliate of such person.” Jd. § 2801(5)
(emphasis added). An “affiliate” is, in tum, defined as “any person who (other than by means of
a franchise) controls, is controlled by, or is under common control with, any other person.” Jd. §

2801(15).

The complaint alleges that at Equilon’s inception, Shell owned fifty-six percent of

11



would be imposed upon such franchisee if such preliminary injunctive relief were not
granted.

15 U.S.C. § 2805(b)(2). A franchisee that has becn given notice of nonrenewal thus need only
prove “a reasonable chance of success on the merits” of a PMPA claim and that “the balance of
hardships tips in its favor.” Reachler, 112 F.3d at 905. A franchisee “need not also cstablish that
it would be irreparably harmed in the absence of an injunction.” /d. By lowering the required
showing, the Act’s remedial scheme prevents nonrenewal from taking place until a franchisee’s

causc can be heard on the merits.

This remedy may not be perfect in the renewed plaintiffs’ eyes. But the PMPA reflects a
balancing of compcting interests. To recognize an implied cause of action for constructive
termination when Congress has both contemplated threatened termination and provided an
adequate remedy for it “would upset the balance the PMPA seeks to achieve through competing
rights granted to franchisees and franchisors, respectively.” Meghani v. Shell Oil Co., 115 F.
Supp. 2d 747, 758 (S.D. Tex. 2000); of Beachler, 112 F.3d at 907 (holding that a franchisor’s
assignment of its franchisc agreements does not constitute a termination or nonrenewal under the
PMPA unless the assignment breaches an “essential component of the statutory franchise or

violates statc [assignment] law”). Count 1 is therefore dismissed as to the renewed plaintiffs.

Plaintiff Puthusserill is a different story. The complaint alleges that Puthusserill refused
to sign the agreement as presented and requested that certain terms be altered. Because he did
not sign the agreement without modification before the stated deadline, Equiva, on behalf of
Equilon, sent him a notice of nonrenewal based on his failure to agree to the new terms. We

infer from the allegations that as a result Puthusserill no longer operates a Shell-brand franchise.

10



Inc., 869 F.2d 917, 921 (Gth Cir. 1989)) (internal quotation marks omitted). Discussing the Act’s
legislative history, the Seventh Circuit has said “Congress was seeking to strike a balance
between the necd to protect franchisees and the need to preserve for franchisors ‘adequate
flexibility so that [they] may initiate changes in their marketing activitics to respond to changing
market conditions and consumer preferences.” Jd. (quoting S. Rep. No. 95-731, at 19) (alteration
in original). The PMPA therefore does not require that all the provisions of a franchise
agreement be continued when (hat agreement is renewed; franchisors are free, within the
limitations imposed by § 2802(b)(3)(A), to introduce, and insist upon, changes to the franchise
relationship. This is true cven if franchisees find these changes disadvantageous, Likewise, the
PMPA provides a remedy for franchisees if they suffer nonrenewal for refusing terms that violate

the Act.

Keeping in mind the Seventh Circuit’s admonition that the PMPA is a “product of
compromise,” we consider the renewed plaintiffs’ constructive termination argument. Jd, at 905
(quoting Hilo v. Exxon Corp., 997 F.2d 641, 645 (9th Cir. 1993)) (internal quotation marks
omitted). We begin with the plain language of the statute itself. Lewis v. United States, 445 U.S.
55, 60 (1980) (“[I]n any case concerning the interpretation of a statute the ‘starting point’ must
be the language of the statute itself”); U.S. v. Mayo, 721 F.2d 1084, 1092 (7th Cir. 1983).
“Absent a clearly expressed legislative intention to the contrary, that language must ordinarily be
regarded as conclusive.” Consumer Prods. Safety Comm'n v. GTE Sylvania, Inc., 447 US. 102,
108 (1980). The PMPA defines “nonrenewal” as “a failure to reinstate, continue, or extend the

franchise relationship . . . at the conclusion of the term, or on the expiration date, stated in the

relevant franchise.” 15 U.S.C. § 2801(14)(A). “Termination” is defined to include cancellation



illegal and unconscionable provisions designed to undermine plaintiffs’ ability to remain
competitive and diminish the value of plaintiffs’ franchises, The agreements allegedly contained
unlawful waivers, forfeitures, limitations of Hability, and reductions of the applicable statute of
limitations governing claims against defendants. They also contained allegedly unconscionable
penalties in the form of liquidated damages, commercially unreasonable rent increases, excessive
transfer and maintenance [ees, discriminatory pricing mechanisms, and an increase in dealer tank
wagon prices, Plaintiffs claim that defendants also attempted unreasonably to restrain plaintiffs’
ability to sell their interest in the franchises through a provision expressly reserving to Equilon
the right to withhold consent of any proposed sale.

Plaintiffs allege that defendants did not propose these changes to the franchise
relationship in good faith or in the normal course of business. Rather, they claim, defendants had
the ulterior motive of preventing the franchises’ renewal. Plaintiffs claim the agreements were
part of a deliberate plan to convert franchised stations into company operated stations and to
reduce the number of franchises in competition with company operated stations. According to
plaintiffs, defendants intentionally drafted these renewal agreements so plaintiffs would elect not
to renew their franchises, allowing defendants to avoid millions of dollars in buy-out costs.

Nor were the renewal terms negotiable. According to plaintiffs, defendants presented the
agreements on a takc-it-or-leave-it basis. Plaintiffs were informed that unlcss the renewal
agreements were accepted “as is” within sixty days, their franchiscs would not be renewed.

Plaintiff Puthusserill objected to several of the new provisions and attempted to negotiate

some of them with Equilon, Becausc he did not execute the agreement by the sixty-day deadlinc,

Equilon and Equiva sent Puthusserill a notice of nonrenewal. The other plaintiffs met the



B. State Law Claims

Having dismissed the renewed plaintiffs’ PMPA claims, their only remaining claims are
state law claims, A federal court may, at its discretion, decline to exercise supplemental
jurisdiction over state law claims that remain after dismissal of the claims over which the court
originally had subject-matter jurisdiction. 28 U.S.C. § 1367(c)(3). We decline to exercise
supplemental jurisdiction over the renewed plaintiffs’ state law claims. No prejudice will result

from requiring the renewed plaintiffs to pursue their state claims in state court.

Counts 2 through 6 are therefore dismissed as to the renewed plaintiffs. Count 5 is
dismissed in its entirety, as Puthusserill is not a party to that charge. Although not at issue in
defendants’ present motions, counts 7, 8, and 9 — alleging violations of state law and praying for
declaratory relief — are also dismissed as to the renewed plaintiffs. We therefore analyze

defendants’ arguments for dismissal of the remaining claims only with regard to Puthusserill.
a Count 2: Common Law Fraud

Puthusserill has alleged that unnamed Equilon representatives fraudulently misled him
into thinking that he could not challenge the rent increase contained in the franchise renewal
agreement, He states that Equilon representatives failed to disclose the availability of an “interim
rent challenge” and misrepresented that he could do nothing to obtain relief from the increased
rent. He claims these measures were intended to compel him to accept the increased rent without

challenge.

Defendants move to dismiss Puthusserill’s fraud claim for failure to comply with the

pleading requirements of Federal Rule of Civil Procedure 9(b). Rule 9(b) requires that fraud

14



businesses are ‘franchises’ under the act.” Defs.” Mot. to Dismiss Counts I Through VI of Pls.’
Compl., at 8. They contend that “[s]uch conclusory allegations without supporting factual
assertions are insufficient to support their claims under the Franchise Act.” Jd. They assert that
to state a claim, Puthusserill must allege facts that establish the existence of each and every
element of the Act’s definition of “franchise.”

Defendants are incorrect. A plaintiff need not allege each ‘element’ of a ‘cause of
action.’” Bd. of Trs., Sheet Metal Workers’ Nat'l Pension Fund v. Elite Erectors, Inc., 212 F.3d
1031, 1038 (7th Cir. 2000). A complaint need only specify the “bare minimum facts necessary
to put the defendant on notice of the claim so that he can file an answer.” Higgs, 286 F3d at 439

(citing Beanstalk Group, Inc. vy. AM Gen.Corp., 283 F.3d 856, 863 (7th Cir. 2002)). Puthusserill

has met this minimal standard.

Defendants Shell and Equiva make the alternative argument that Puthusscrill cannot state
aclaim against them under the Franchise Disclosure Act because it was Equilon, not they, who
was Puthusserill’s franchisor. Because Equilon was the actual parly to his franchise agreement,
if Puthusserill is to proceed against Shell and Equiva, it must be on an alter ego theory.
Defendants make the same argument as they did in regard to the PMPA, namely that Puthussenll
has not alleged the “ultimate facts” and “specific facts” necessary to adequatcly plead alter ego.

Defs.’ Mot. to Dismiss Counts I Through V of Pls.’ Compl., at 5, 6.

Under Illinois law, a corporation is “separate and distinct as a legal entity from . . . other
corporations with which it may be affiliated.” Main Bank of Chi. v. Baker, 86 Ill. 2d 188, 204,

427 N.E.2d 94, 101 (1981). Like the Seventh Circuit, Minois courts will disregard the separate

16



franchisees. Plaintiffs Jet, Inc., JL Quick, Inc., TVA Corporation, and JT Enterprises of Chicago
are current franchisees operating their stations in Illinois under franchise agrecments with
defendant Equilon. For purposes of simplicity and for reasons that will become apparent below,
we refer to the current franchisees collectively as the “renewed plaintiffs.” The other plaintiff,
John Puthusserill, operated a Shell gas station under a franchise agreement until August 2001.
On a motion to dismiss, we accept the plaintiffs’ allegations as true, Hishon v, King & Spalding,
467 U.S. 69, 73 (1984), and construe any ambiguities in the complaint in plaintiffs’ favor,
Thompson v. Ill. Dep’t of Prof’! Regulation, 300 F.3d 750, 753 (7th Cir. 2002).

The three defendants arc Shell Oil Company (Shell), Equilon Enterprises LLC (Equilon),
and Equiva Services LI.C (Equiva). Shell is a well-known company engaged in the business of
producing and distributing petroleum products. Shell was the original party to plaintiffs’ initial
franchise agreements. In 1998, Shell assigned these franchise agreements to Equilon. Equilon
began as a joint venture betwecn Shell and Texaco, another oil company, to combine their
refining and marketing operations in the westem United Stales, At Equilon’s inception, Shell
owned fifty-six percent of the company, and it recently acquired the balance of Texaco’s interest.
The third defendant, Equiva, is an administrative support services company. It is owned jointly
by Equilon and another company that is itself owned in large part by Shcll. Plaintiffs allege that
each defendant is the alter ego of the others and that it is appropriate to pierce the corporate veil
and hold each defendant liable for the actions of the others.

At the heart of this dispute are franchise renewal agreements, consisting of a retail sales
agreement and a retail facility lease, that Equilon presented to plaintiffs. Plaintiffs contend that

these agreements differed substantially from previous ones. The renewals, they claim, contained



IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

JET, INC., d/b/a GARFIELD SHELL; JL
QUICK, INC., d/b/a SHELL FOOD MART;
TVA CORPORATION d/b/a ROBERT
ROAD SHELL; JT ENTERPRISES OF
CHICAGO, INC., d/b/a RIDGELAND
SHELL; JOHN PUTHUSSERILL d/b/a
HICKORY SHELL FOOD MART,

Plaintiffs,

DOCKETED

vs, Case No. 02 C 2289 NOW 2 5 tin,
SHELL OIL COMPANY; EQUILON
ENTERPRISES, LLC, d/b/a SHELL OLL
PRODUCTS US; EQUIVA SERVICES,
LLC,

wee we eS SS Se SE Se SS eee ere

Defendants.
MEMORANDUM OPINION AND ORDER
MATTHEW I’, KENNELLY, District Judge:

Plaintiffs have filed suit against defendants, alleging violations of the Petrolcum
Marketing Practices Act, common law fraud, and violations of the Illinois Franchise Disclosure
Act and Uniform Deceptive Trade Practices Act. Defendants have moved to dismiss counts |
through 6 of plaintiffs’ complaint.’ For the reasons stated below, defendants’ motion is granted
in part and denied in part.

FACTS

‘The plaintiffs in this case are four actual and one former Shell-brand gasoline station

‘Plaintiffs’ complaint contains three other counts, but they are not at issue in defendants’
motions to dismiss. Counts 7 and 8 allege interference with prospective economic advantage and
violations of the Illinois Uniform Commercial Code, respectively. Count 9 sccks declaratory
relief,

a



Equilon and that it has recently acquired full ownership, and therefore control, of Equilon.
Compl. {¥] 8, 10. Puthusserill also alleges that Equiva is largely controlled by Equilon and Shell.
Puthusserill submits that Shell and Equiva are consequently Equilon’s affiliates and thus
franchisors under the Act. Although control is necessary for an affiliate to be considered a
“franchisor” under the PMPA, it is not sufficient. Control may make the affiliate a refiner under
the act, but, to be a franchisor, a refiner must “authorize[] or permit[], under a franchise, a retailer
or distributor to use a trademark in connection with the sale, consignment, or distribution of
motor fuel.” 15 U.S.C. § 2801(3). The complaint contains no allegations that it was either Shell
or Equiva that authorized Puthusserill to use the Shell trademark in relation to his sale of

gasoline. His contention that they fit within the PMPA’s definition of franchisor therefore fails.

Puthusserill’s second argument is that Shel] and Equiva may be liable under the PMPA as
the alter egos of Equilon. In Papa v. Katy Industries, Inc., 166 F.3d 937 (7th Cir. 1999), the
Seventh Circuit articulated the test for affiliate liability under a federal statute. Id, al 940-41
(articulating the test in the Title VII context but stating “we cannot think of a good reason why
the legal principles goveming affiliate liability should vary from statute to statute, unless the
statute, or the particular policy that animates the statute, ordains a particular test”); Worth v. Tyer,
276 F.3d 249, 260 (7th Cir. 2001) (“{ T]he principles governing affiliate liability should apply
‘across the full range of American law.”” (quoting Papa, 166 F.3d at 941)). A corporate entity
can be liable as an affiliate under a federal statute if it forfeits its limited liability. Worth, 276
F.3d at 259. ‘The most “common way for an affiliated corporation to forfeit its limited ability,”
id., is where the “the traditional conditions [are] present for ‘piercing the corporate veil,” Papa,

166 F.3d at 940, Such conditions exist if, first, “there [is] such unity of interest and ownership

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claims be pleaded with particularity. A plaintiff must “allege the who, what, where, and when of
the alleged fraud.” Ackerman v. Northwestern Mut. Life Ins. Co., 172 F.3d 467, 469 (7th Cir.
1999). We agree that Puthusserill fails to do so. The complaint does not “give the dates on
which any of the fraudulent representations or omissions were made,” nor does it “reveal what
exactly each agent said to [the] plaintiff.” /d. We therefore dismiss count 2 of Puthusserill’s

complaint.
2. Counts 3 & 4: Illinois Franchise Disclosure Act

All defendants move to dismiss Puthusserill’s claims under the Tllinois Franchise
Disclosure Act, 815 ILCS 705/1-705/44. One of Puthusserill’s claims is that defendants cngaged
in fraudulent practices in connection with the offer or sale of a franchise in violation of 815
ILCS 705/6. Defendants assert, and Puthusserill does not dispute, that this count must be
pleaded with the particularity required by Federal Rule of Civil Procedure 9(b). Defendants
argue that Puthusscrill has not met this burden. For the reasons discussed above, we agree,

Count 3 of Puthusserill’s complaint is therefore dismissed.

Puthusserill’s remaining claim under the Act (count 4) is that defendants charged
different prices to different dealers within his geographic marketing area for the same motor
fuels. He claims that this conduct constituted unlawful discrimination in violation of 815 [LCS
705/18. Defendants, including Equilon, argue that Puthusserill does not state a claim under the
Act because he has not adequately alleged the existence of a franchise relationship: “Plaintiffs do
not allege any facts whatsoever to establish their standing under the Franchise Act. Plaintiffs

conclusorily state that they are ‘franchisees,’ that Defendants are “franchisors,’ and their

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