Source: http://nj.findacase.com/research/wfrmDocViewer.aspx/xq/fac.19910221_0000023.DNJ.htm/qx
Timestamp: 2017-03-27 14:55:06
Document Index: 362471310

Matched Legal Cases: ['§ 2801', '§ 1331', '§ 2802', '§ 2802', '§ 2802', '§ 2803', '§ 2802', '§ 2802', '§ 2801', '§ 2802']

| GLENSIDE WEST CORP. v. EXXON CO.
GLENSIDE WEST CORP. v. EXXON CO.
GLENSIDE WEST CORPORATION, PLAINTIFF,v.EXXON COMPANY, U.S.A., A DIVISION OF EXXON CORPORATION, DEFENDANT. EXXON COMPANY, U.S.A., A DIVISION OF EXXON CORPORATION, COUNTERCLAIMANT, V. GLENSIDE WEST CORPORATION, COUNTERDEFENDANT.
This is a claim brought by plaintiff Glenside West
Corporation ("Glenside") against Exxon Company, U.S.A., a
Division of Exxon Corporation ("Exxon"), and counterclaims
brought by Exxon against Glenside arising out of the decision
by Exxon to terminate the retail motor fuel service station
franchise of Glenside (Glenside and Exxon are collectively
referred to as the "Parties"). Jurisdiction is alleged pursuant
to the Petroleum Marketing Practices Act (the "PMPA"),
15 U.S.C. § 2801 et seq., and 28 U.S.C. § 1331 and 1337.*fn1
Exxon moves to dismiss various counts of the Amended
Complaint pursuant to Fed.R.Civ.P. 12(b)(6) and to strike the
affirmative defenses of Glenside to its counterclaims pursuant
to Fed.R.Civ.P. 12(f).*fn2 For the reasons which follow, the
motions are granted in part and denied in part.*fn3
Glenside, through its president and sole shareholder Robert
E. Lee, Jr. ("Lee"), entered into a franchise relationship with
Exxon sometime around April 1985 for the operation of an Exxon
retail motor fuel service station (the "Service Station")
located at 2591 U.S. Route 22, Scotch Plains, New Jersey.
Amended Complaint at 5-6. The franchise relationship was based
on a lease agreement (the "Lease Agreement") and retail sales
agreement (the "Sales Agreement") between the Parties which
authorized Glenside to use Exxon's trade mark in connection
with the sale, consignment or distribution of motor oil (the
"Lease Agreement" and "Sales Agreement" are collectively
referred to as the "Franchise Agreement"). Amended Complaint at
6. The Parties renewed the Franchise Agreement on or about 27
September 1987 for the period 1 January 1988 to 1 January 1991.
Amended Complaint at 8.
Glenside alleges a number of conflicts arose with Exxon
during the course of the franchise relationship. Glenside
alleges that while the Franchise Agreement permitted the
performance of automotive repair and towing services, agents
and employees of Exxon continuously insisted beginning in
January 1988 that Glenside abandon its repair and towing
services and limit its operations to the sale of motor fuel
and related products. Amended Complaint at 9. In addition,
agents and employees of Exxon allegedly continuously harassed
Glenside by claiming that its repair and towing services
"constituted a decline in retail performance, a nuisance and a
failure of [Glenside] to maintain clean and healthful
facilities, and that a continuation of said automotive repair
and towing service constituted a strain in the franchise
relationship and [Glenside] would be deemed uncooperative in
said franchise relationship to its detriment." Amended
Complaint at 9-10.
Glenside also alleges Exxon agents and employees repeatedly
misrepresented to Glenside's employees that the franchise
relationship would end because the landowner refused to renew
the lease or sell the Service Station property to Exxon and
that they should therefore seek other employment. Amended
Complaint at 10-11. Glenside contends that, in fact, Exxon "was
ultimately successful in its attempts to purchase said premises
and did, indeed, purchase said premises from the landowner or
its heirs, successors and assigns." Amended Complaint at 8.
Finally, Glenside alleges the Sales Agreement obliged Exxon
to provide Glenside "with only those goods, inventory and
services necessary to adequately, properly and successfully
operate a retail motor fuel station operation. . . ." Amended
Complaint at 14. Glenside alleges it purchased inventory based
on the representations of Exxon's "business counselors" that
such inventory was marketable and essential to successful
performance, when in fact much of the inventory remained
"unsold, unmarketable and otherwise inappropriate for
[Glenside's] retail motor fuel service station operation."
Amended Complaint at 15.
Glenside alleges that prior to October 1989, it was a
"longstanding" practice between Glenside and Exxon for Glenside
to pay its monthly rental fees to the Exxon sales
representative who regularly visited the Service Station.
Amended Complaint at 3. Glenside alleges the sales
representative did not make his customary visits in October and
November 1989, and did not provide Glenside with the address to
which rental payments should be mailed. Id. Glenside alleges it
was for that reason that it failed to make its rental payments
for these months. Id.
Glenside also states that while Lee*fn5 never "seriously
threatened personal injury or damage to anyone associated with
Exxon or Exxon's property," he had a long-standing
argumentative relationship with an Exxon sales representative
arising out of ongoing problems in obtaining gas supplies from
Exxon. Id. Glenside acknowledges "these ongoing problems did
contribute to one inappropriately emotional outburst during a
telephone conversation with the secretary to [Exxon's] retail
district manager. However [Lee] has since apologized for that
isolated incident." Id.
On or around 4 January 1990, Glenside received notice from
Exxon of Exxon's intention to terminate and not renew the
Franchise Agreement effective 15 April 1990. Amended Complaint
at 2. Glenside states Exxon claimed it was basing its decision
to terminate on Glenside's failure to make timely rental
payments for October and November 1989 and on Lee's alleged
threat to cause damage to Exxon's property and injury to its
personnel. Amended Complaint at 2-3.
On 3 April 1990, Glenside filed its Complaint for Preliminary
and Permanent Injunction, seeking to enjoin Exxon from
terminating the Franchise Agreement. See Complaint for
Preliminary and Permanent Injunction (the "Complaint").
On 30 April 1990, Exxon answered the Complaint and asserted
three counterclaims against Glenside. See Answer and
Counterclaim. In Count I (the "First Counterclaim"), Exxon
alleges the failure of Glenside to make timely rental payments
for the months September 1988 and April, October and November
1989 and threats by Glenside against Exxon's personnel and
property constitute grounds for termination and nonrenewal
pursuant to 15 U.S.C. § 2802(b)(2)(A), 2802(b)(2)(B) and/or
2802(b)(2)(C) and 2802(c)(8).*fn6 In Count II (the "Second
Counterclaim"), Exxon alleges it will be entitled to possess
the Service Station on 15 June 1990. In Count III (the "Third
Counterclaim"), Exxon alleges Glenside owes Exxon in excess of
$3,500 for rent and other items. Exxon seeks declaratory relief
that its termination and nonrenewal of the Franchise Agreement
were lawful under the PMPA, injunctive relief enjoining
Glenside from continuing to occupy and refusing to vacate the
Service Station, a judgment against Glenside for the amounts
due and owing, and legal costs and attorneys' fees.
Glenside filed its Answer to Counterclaim on 22 June 1990. It
filed an Amended Answer to Counterclaim on 10 August 1990 (the
"Amended Answer"). In the Amended Answer, Glenside asserted two
affirmative defenses to Exxon's counterclaims. As its first
affirmative defense (the "First Affirmative Defense"), Glenside
alleges Exxon was a fiduciary to Glenside and exerted undue
influence over Glenside to induce it to purchase inventory,
change and restructure business activities and relationships
and otherwise conduct business in a manner to which Glenside
would not otherwise have consented. Glenside alleges: "As a
result of said undue influence, [Glenside] was and is forced
into an unnatural transaction that unfairly enriches [Exxon] at
the expense of [Glenside]." Amended Answer at 5. As its second
affirmative defense (the "Second Affirmative Defense"),
Glenside alleges it is entitled to cure its alleged deficient
performance of the terms of the Franchise Agreement, stating:
[Glenside], as incapacitated party, now has the
election to ratify its prior promise by remedying
said alleged "deficient" performance or avoiding
enforcement of its contractual obligations.
Plaintiff herein affirmatively elects to ratify
its prior promise by remedying its "deficient"
performance, and indeed, has already corrected
said alleged "deficient" performance, in good
faith, which remedied performance does not rise to
the level of reasonable or material significance
the franchise relationship as contemplated by [the
PMPA], amount to a failure to exercise good faith
efforts, to carry out the provisions of said
franchise relationship or constitute events which
are relevant to the franchise permitting
reasonable termination pursuant to [the PMPA].
On 31 May 1990, Glenside withdrew its request for a
preliminary injunction. It filed the Amended Complaint, which
is the subject of the instant motion to dismiss, on 10 August
1990. See Amended Complaint.
The Amended Complaint contains twelve counts. Count One
alleges Exxon seeks to terminate the Franchise Agreement with
Glenside in violation of the PMPA, 15 U.S.C. § 2802. Count Two
alleges Exxon seeks to terminate the Franchise Agreement for an
improper motive, in order to operate the retail service station
directly without reliance on a franchise arrangement. In Count
Three, Glenside complains that agents and employees of Exxon
continuously harassed Glenside by insisting that it abandon its
automotive repair and towing services. In Count Four, Glenside
complains that its employees were continuously harassed by
Exxon's employees and agents, who misrepresented to them that
they should seek other employment because Exxon may be unable
to renew the lease or to purchase the Service Station property.
Count Five incorporates the allegations of the prior four
counts and states Exxon engaged in such conduct with malice. In
Count Six, Glenside alleges Exxon seeks to terminate the
Franchise Agreement for an improper motive in order to prevent
Glenside from assigning the Franchise Agreement to a third
party or to forestall the necessity of exercising its right of
first refusal in the event Glenside sought to assign such
agreement. In Count Seven, Glenside alleges Exxon's "business
counselors" were negligent in the advice they gave Glenside as
to what inventory to purchase. Count Eight alleges Exxon
breached an implied covenant to uphold its image with the
public by virtue of highly publicized oil spills with which
Exxon was associated. In Count Nine, Glenside alleges Exxon
promised a reduction in Glenside's monthly rent in
consideration for a reduction in Glenside's retail motor fuel
prices and that Glenside suffered harm from the reduction made
in its retail motor fuel prices. In Count Ten, Glenside alleges
Exxon's "business counselors" represented to Glenside Exxon
would make a reduction in Glenside's monthly rent in
prices in reckless disregard of the truth. In Count Eleven,
Glenside demands an accounting of monies owing and credits due
between Glenside and Exxon. Finally, in Count Twelve, Glenside
alleges it suffered severe emotional distress as a result of
the extreme and outrageous conduct of Exxon in divulging
details of "[Glenside's] business and finances, franchise
relationship with defendant and personal life," Amended
Complaint at 22, to an individual who approached Lee in late
1987 with an offer to purchase assignment of Glenside's
Exxon filed its Answer to Amended Complaint and Counterclaims
on 31 August 1990. The counterclaims asserted therein reiterate
the counterclaims asserted in the Answer and Counterclaim filed
30 April 1990. In addition, on 28 December 1990, with the
consent of Glenside, Exxon supplemented its counterclaims to
allege in Count One Glenside failed to make timely payment of
rent for the months August, September, October, November and
Exxon now moves to dismiss Counts Two, Five, Six, Eight,
Eleven and Twelve of the Amended Complaint.*fn7 Exxon also
moves to strike the affirmative defenses of Glenside. For the
reasons which follow, Exxon's motions are granted in part and
A court may dismiss a complaint for failure to state a claim
where it appears beyond doubt that no relief could be granted
under any set of facts which could be proved consistent with
the allegations. Hishon v. King & Spalding, 467 U.S. 69, 73,
104 S.Ct. 2229, 2232, 81 L.Ed.2d 59 (1984); Conley v. Gibson,
355 U.S. 41, 45-46, 78 S.Ct. 99, 101-102, 2 L.Ed.2d 80 (1957);
Markowitz v. Northeast Land Co., 906 F.2d 100, 103 (3d
Cir.1990); Ransom v. Marrazzo, 848 F.2d 398, 401 (3d Cir.1988).
In deciding such a motion under Rule 12(b)(6) of the Federal
Rules of Civil Procedure, all allegations in the complaint must
be taken as true and viewed in the light most favorable to the
plaintiff. Gomez, 446 U.S. at 636 n. 3, 100 S.Ct. at 1921 n. 3;
Markowitz, 906 F.2d at 103; Melikian v. Corradetti,
791 F.2d 274, 277 (3d Cir.1986); Robb v. Philadelphia, 733 F.2d 286, 290
(3d Cir.1984).
Congress enacted the PMPA in 1978 "in recognition of the
'disparity of bargaining power which exists between the
franchisor and the franchisee' in the gasoline industry."
Rodgers v. Sun Refining and Marketing Co., 772 F.2d 1154, 1158
(3d Cir.1985) (quoting Sun Refining and Marketing Co. v. Rago,
741 F.2d 670, 672 (3d Cir.1984)). Congress recognized
franchisors "risk losing completely the return from their prior
investments, and potentially their livelihood, if their
franchise agreements are terminated," and that franchisors
"used their superior bargaining power and the threat of
termination to gain an unfair advantage in contract disputes."
O'Shea v. Amoco Oil Co., 886 F.2d 584, 587 (3d Cir.1989)
(citing Slatky v. Amoco Oil Co., 830 F.2d 476, 478 (3d
Cir.1987)). The PMPA was intended to protect franchisees from
exploitation by large petroleum companies. O'Shea, 886 F.2d at
587 (citing S.Rep. 731, 95th Cong.2d Sess. 17-18, reprinted in
1978 U.S.Code & Admin.News, 873, 875-77).
The PMPA accomplishes this purpose primarily by limiting the
grounds on which distributors may terminate or fail to renew
the franchise. 15 U.S.C. § 2802.*fn8 Other than as provided
therein, the PMPA makes it illegal for a franchisor to
terminate or to refuse to renew a franchise. 15 U.S.C. § 2803(a).
As exceptions to this general rule, the PMPA provides
two grounds on which a franchisor may terminate or fail to
renew a franchise due to failure to perform on the part of the
franchisee.*fn9 First, the franchisor may terminate or fail to
renew a franchise when the franchisee fails to "comply with any
provision of the franchise, which provision is both reasonable
and of material significance to the franchise relationship."
15 U.S.C. § 2802(b)(2)(A). Second, the franchisor may terminate or
fail to renew a franchise for the franchisee's failure to make
a good faith effort to carry out any provision of the contract
"without consideration of the reasonableness of the term as
long as the franchisee is given an opportunity to comply with
the term in question." O'Shea 886 F.2d at 595 (citing Mobil Oil
Corp. v. Karbowski, 879 F.2d 1052, 1054 (2d Cir.1989));
15 U.S.C. § 2802(b)(2)(B).
The Third Circuit has recently limited the instances in which
subsection (b)(2)(B) will justify a termination:
Although section 2802(b)(2)(B) does not
explicitly state a materiality requirement, we
nonetheless believe that a franchisor could not
justify terminating a franchisee pursuant to the
section for failing to exercise good faith in
carrying out immaterial provisions of the
franchise agreement. Congress clearly stated its
purpose to prevent "arbitrary or discriminatory"
terminations. Senate Report at 15, 1978 U.S.Code
Cong. & Admin.News,
874. If franchisors could terminate franchisees
when they fail to comply with immaterial terms,
this purpose would be frustrated, because, by
definition, a franchisor can have no legitimate
reason to terminate a franchise for violating
immaterial contract provisions.
In addition, in construing whether the franchisee has failed
to perform the terms of the franchise agreement in the sense
intended by either subsection (b)(2)(A) or (b)(2)(B), reference
must be made to 15 U.S.C. § 2801(13), in which "failure" is
defined. Sun Refining & Marketing Co. v. Rago, 741 F.2d 670,
673 (3d Cir.1984). Under this subsection, the term "failure"
(A) any failure which is only technical or
unimportant to the franchise relationship; or
(B) any failure for a cause beyond the reasonable
control of the franchisee.
Finally, termination or nonrenewal of a franchise agreement
is permitted upon "the occurrence of an event which is relevant
to the franchise relationship and as a result of which
termination of the franchise or non-renewal of the franchise
relationship is reasonable. . . ." 15 U.S.C. § 2802(b)(2)(C).
The PMPA provides a nonexhaustive list of examples of such
occurrences, including fraud or criminal conduct by the
franchisee "relevant to the operation of the marketing
premises" and ...