Opinion ID: 764207
Heading Depth: 2
Heading Rank: 3

Heading: The Franchise Offers

Text: 41 The Simmons Group and the Raether Group claim that Union Oil violated the PMPA because Tosco did not make a nondiscriminatory offer of new franchises to them. See 15 U.S.C. § 2802(b)(2)(E)(iii)(II). Again, we disagree. 42 Section 2802(b)(2)(E)(iii)(II) allows a franchisor making a market withdrawal to sell, assign, or transfer the premises and the franchise to another franchisor who will offer a nondiscriminatory franchise to the franchisee. Again, subsection II requires the old and new franchisors to act in a manner consistent with the overriding purpose of ... the PMPA ... to protect the franchisee's reasonable expectation of continuing the franchise relationship. See Ellis, 969 F.2d at 788. 43 Pursuant to the requirements of the PMPA, a franchisor may sell its franchise to another franchisor so long as the purchasing party offers, in good faith, a franchise to the franchisee on terms and conditions which are not discriminatory to the franchisee as compared to franchises then currently being offered by such other person or franchises then in effect and with respect to which such other person is the franchisor. § 2802(b)(2)(E)(iii)(II). The terms of a franchisee's new franchise agreement need not be identical to those of every other franchise agreement; [a] franchisor must be free to offer different terms at different franchise locations. Ewing v. Amoco Oil Co., 823 F.2d 1432, 1438 (10th Cir.1987). The PMPA ... only requires that the franchise terms be similar, i.e., not discriminatory, to other franchises currently in effect or currently being offered by the purchasing franchisor. Southern Nevada Shell Dealers Ass'n v. Shell Oil Co., 725 F.Supp. 1104, 1109 (D.Nev.1989); see also Avramidis v. Arco Petroleum Prods. Co., 798 F.2d 12, 13-14 (1st Cir.1986). 44 The good faith requirement looks to whether the franchisor's actions are designed to conceal selective discrimination against individual franchises, Southern Nevada Shell Dealers, 725 F.Supp. at 1109, but avoid[s] judicial scrutiny of the business judgment itself. Id., citing Siecko v. Amerada Hess Corp., 569 F.Supp. 768, 772 (E.D.Pa.1983). In the context of grounds for nonrenewal under § 2802(b)(3)(A) of the PMPA, courts have similarly sought to inquire into good faith without engaging in judicial second-guessing of 'the economic impact of an otherwise legitimate business decision by the franchisor. So long as the franchisor does not have a discriminatory motive or use the altered terms as a pretext to avoid renewal, the franchisor has met the burden required by the PMPA for determining good faith.'  Valentine, 789 F.2d at 1392 (citation omitted). 45 Neither Group disputes that the franchise agreements offered by Tosco were essentially the same for each of their members, or that they mirrored those which the franchisees had with Union Oil. They claim, however, that the PMPA requires that the franchises Tosco offered to the former Union Oil franchisees be compared to the franchises ... in effect and with respect to which [Tosco] is the franchisor, which means, they argue, that the new 76 franchise agreements must be compared to Tosco's existing franchise agreements. Specifically these California franchisees seek to be compared with Tosco's BP franchisees, all of whom are outside of California. The district court did not resolve the comparison issue, but concluded that, even if the 76 franchise agreements were compared to the BP agreements, the differences between them would not amount to discrimination against the 76 franchisees. We agree with that approach and limit our consideration accordingly. 46 The sole salient difference between the franchise agreements that the franchisees address in this appeal is the provision for a yearly increase in rent in the 76 agreements, while the BP agreements have a fixed rent throughout the lease term. The franchisees offer no evidence of discriminatory motive in this difference, pointing only to the fact that Tosco reviewed its BP franchise agreements when deciding what agreements to offer its new 76 franchisees. They portentously observe that this means the different rent provisions cannot be dismissed as a mistake or accident, and assert that [t]his is compelling evidence of bad faith. Of course, the mere fact that a decision was intentional does not evidence bad faith. All the more so here, where what Tosco decided to do was offer its new franchisees precisely the agreement terms they were accustomed to, rather than alter them. Indeed, it is hard to see how use of the 76 franchise terms, which the franchisees had been living with for years, became evidence of bad faith when offered by Tosco, the new owner of 76 Products. The mere fact that the amount of rent might differ from one place to another does not show discrimination. See Southern Nevada Shell Dealers, 725 F.Supp. at 1109. Especially is that true where, as here, the complaining group members are all located in California, whereas the agreements to which they wish to be compared refer to franchisees in other states, who were accustomed to a different leasing regime. 47 Because the franchisees have not demonstrated any lack of good faith in Tosco's offer of franchises to them, and cannot show that they have been treated in a discriminatory fashion, the district court did not err.