Opinion ID: 781619
Heading Depth: 2
Heading Rank: 1

Heading: The Purported Termination on the Ground of Image Violations

Text: 58 In support of its contention that the district court erred in ruling that its Termination Letter was inadequate to terminate the franchise on the ground of image violations, Motiva argues that that letter was adequate under the PMPA to give Ceraso notice of why the franchise was being terminated and of his rights under that statute. We find Motiva's contentions unpersuasive, and we note as well a fundamental procedural reason given by the district court for refusing to rule the termination valid on the basis of image violations. 59
60 In its Posttrial Decision, prior to beginning the discussion section, the district court stated that [t]he only substantive ground for termination ... set forth in defendants' compliance with the Trial Preparation order, ... and thus relied on in the termination of the Lease and Sale Agreement, is a violation of laws or regulations. Posttrial Decision at 6 (emphasis added). This statement indicates that the court did not regard Motiva as urging it to uphold the attempted termination of Ceraso's franchise on the ground of image violations. Given the contents of the parties' Joint Trial Memorandum (JTM), discussed below, we see no error in the view of the district court that it was not being asked to rule that termination was proper on the basis of image violations. 61 The JTM set forth in detail the parties' respective proposed findings of fact and conclusions of law. In that document, the parties stipulated to the contents of the September 18 Letter and of Motiva's Termination Letter. However, Motiva's only proposed finding relating to image stated that 62 [t]he Sales Agreement between Ceraso and Motiva, in section 16(b) and Exhibit A thereto, section 1, sets forth minimum standards for maintaining the premises in an unobstructed and uncluttered state and permits termination for a breach of those standards in section 28(m). These provisions gave Motiva grounds to terminate Ceraso for cluttering the premises with numerous stored cars. 63 (JTM at 59, ¶ 2 (emphasis added).) While stating that the Lease gave Motiva grounds to terminate for image violations, this proposed finding stopped short of requesting a finding that Motiva had in fact terminated Ceraso's franchise on that basis. Ceraso's response to this proposed finding was not only that he disagree[d] with Motiva's characterization of the Lease Terms, but also that in light of Termination Letter, the only relevant issue is Ceraso's compliance with the Regulation. Id. The JTM contained no other proposed finding suggesting that Motiva in fact terminated the franchise on the basis of image violations. 64 Motiva's Claims of Law section provided no indication that Motiva sought to have its attempted termination upheld on the basis of image violations. There were paragraphs in that section dealing with termination for failure to comply with applicable laws. For example, Motiva asked the court to rule that the PMPA allows a franchisor to terminate for the knowing failure of the franchisee to comply with the Federal, State, or local laws or regulations relevant to the operation of the marketing premises (JTM at 69, ¶ 5 (internal quotation marks omitted)), and that 65 [t]he PMPA expressly provides that the franchisor is authorized to terminate a franchisee — and that such termination is conclusively presumed to be reasonable as a matter of law — where: (1) the franchisee is provided notice in accordance with § 2804; and (2) the basis for the termination is the knowing failure of the franchisee to comply with the Federal, State, or local laws or regulations relevant to the operation of the marketing premises 66 (JTM at 70, ¶ 7). There was no similar proposition of law with regard to termination for image violations. 67 In addition, in responding to a number of Ceraso's JTM assertions, to which a Motiva claim of termination on the ground of image violations would have been relevant if Motiva relied on that ground, Motiva's responses made no mention of image violations. For example, in response to Ceraso's assertion that he was making efforts to settle the Town's charges of zoning violations, Motiva stated that those attempts were irrelevant because a franchisee has no right to cure such a violation after it has received notice of termination. (JTM at 72, ¶ 9.) Motiva advanced no argument that Ceraso's attempts to cure zoning violations were irrelevant because his franchise had also been terminated for other reasons, to wit, violation of the image provisions. 68 Similarly, Motiva did not dispute Ceraso's assertion that [t]he principal factual issue in dispute [wa]s whether Ceraso violated Section 27.4.8.5 (JTM at 45, part A6). If Motiva had sought to have the court uphold its termination on the basis of image violations, the claim of image violations plainly would have presented equally important factual issues. 69 In response to Ceraso's proposed conclusion of law that [t]he only allowable ground for termination which could be relevant on these facts is found at 15 U.S.C. § 2802(b)(2)(c)(11) [ sic ], a section that deals with violations of law, Motiva disagree[d], stating that further grounds are found for breach of the sales and lease agreements at § 2802(b)(2)(A). (JTM at 22, ¶ 4.) However, as described in Part I.A. above, those agreements required Ceraso to, inter alia, comply with laws and regulations. Motiva did not cite any specific section or sections of the agreements to which it referred, and there was no indication in this response that Motiva referred to the agreements' image violation provisions. If Motiva sought a ruling that it had properly terminated Ceraso's franchise on the basis of image violations, it was incumbent on Motiva to respond to such Ceraso assertions with specific, informative references to the alleged image violations. There were no such references. 70 Finally, as noted in Part I.C. above, Motiva's Termination Letter, in referring to a prior demand that Ceraso rectify identified image violations, cited only a nonexistent letter of September 27, 2000, and did not cite the letter dated September 18, 2000, which had listed image violations. As discussed in Part II.A.2. below, the PMPA requires that a franchisee be given clear notice of the ground asserted for termination of his franchise. In order to have the court rule that its Termination Letter properly terminated Ceraso's franchise on the basis of image violations, Motiva would have needed a ruling that the Termination Letter's reference to the nonexistent September 27, 2000 letter was a sufficiently clear reference to the letter dated September 18. In response to Ceraso's proposed findings that the Termination Letter referred to a September 27, 2000 letter that Ceraso never received and that never existed, Motiva stated only that the reference to September 27 was a typographical error that was first discovered on October 28, 2001, making it unlikely that it caused Ceraso any real confusion or that he relied on the typo in any way to his detriment (JTM at 20-21, ¶¶ 43, 44, 45). Motiva did not include in its own proposed findings of fact or conclusions of law a request that the court find the reference to September 27 to be a sufficiently clear reference to September 18 to give valid notice to a PMPA franchisee. Indeed, even Motiva's objection, quoted above, referred to the typographical error's discovery in the passive voice and did not actually assert that Ceraso had made or been informed of the discovery or that he so understood the Termination Letter. 71 In sum, one paragraph of Motiva's proposed findings of fact indicates that Motiva could have terminated the franchise on account of image violations; but nothing in the JTM either requested a finding that it did terminate on that ground, or requested a conclusion that such a termination was permissible under the PMPA, or responded to any of Ceraso's challenges to the zoning-related basis for termination by invoking, as an alternative basis for termination, the alleged image violations. We cannot conclude that the district court erred in finding that, in light of the contents of the JTM, the only ground for termination it was asked to adjudicate was Ceraso's alleged violation of laws or regulations. 72
73 Further, to the extent that the district court may have intended to rule that there was an alternative basis for refusing to find that Motiva had terminated Ceraso's franchise for image violations, see Posttrial Decision at 6 n. 3 ([t]he termination letter is not regarded as validly invoking any basis for termination other than the alleged zoning violation (emphasis added)), we are unpersuaded that that ruling was erroneous. 74 Under the PMPA, to the extent pertinent to this appeal, proper grounds for a franchisor's termination of a franchise include a failure by the franchisee 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), and a knowing failure of the franchisee to comply with Federal, State, or local laws or regulations relevant to the operation of the marketing premises, id. § 2802(c)(11); see id. § 2802(b)(2)(C)(i). See generally Russo v. Texaco, Inc., 808 F.2d 221, 225 (2d Cir.1986) (termination for any of the reasons enumerated in 15 U.S.C. §§ 2802(c)(1)-(12) is conclusively presumed to be reasonable as a matter of law). 75 In order to effect a valid termination, the franchisor must give the franchisee written notice of termination by personal delivery or certified mail, see 15 U.S.C. §§ 2804(c)(1) and (2), which must include a statement of intention to terminate the franchise or not to renew the franchise relationship, together with the reasons therefor,  id. § 2804(c)(3)(A) (emphasis added). [T]here must be strict compliance with the notice provisions of the PMPA. Escobar v. Mobil Oil Corp., 678 F.2d 398, 400 n. 2 (2d Cir.1982); see, e.g., Thompson v. Kerr-McGee Refining Corp., 660 F.2d 1380, 1390 (10th Cir.1981); Mobil Oil Corp. v. Clark, 652 F.2d 2, 3 (8th Cir.1981). The franchisor has the burden of showing that termination was justified and properly executed. See 15 U.S.C. § 2805(c). 76 In the present case, the court stated that the PMPA's requirement that a notice state the reasons for termination were not satisfied by the Motiva Termination Letter's reference to a nonexistent letter in order to provide notice of a criticism that had been communicated to Ceraso only in a letter to which the Termination Letter made no reference. We cannot conclude that this assessment was erroneous in this case. Ceraso did not testify at trial, and we have been pointed to no evidentiary basis for a finding that he knew that September 27 meant September 18. 77 Further, even had the Termination Letter cited the September 18 letter, rather than the nonexistent September 27 letter, the paragraph numbered three — the only paragraph of the Termination Letter that mentioned image — was ambiguous. That paragraph set out as a reason for termination 78 [y]our failure to exert good faith efforts to carry out the provisions of the franchise, namely your continued practice of parking too many vehicles on the marketing premises after the Town's demands and following Motiva's September 27, 2000 letter to you also demanding that you comply therewith and correct other identified image violations at the station. 79 (Termination Letter at 1, ¶ 3 (emphases added).) The Town's demands, of course, related only to alleged zoning violations, and, as phrased, this paragraph could be interpreted as mentioning prior correspondence complaining of image violations only as pinpointing the time following which Ceraso made no effort to reduce the number of vehicles on the marketing premises, rather than asserting image violations as a ground in itself for the termination. Certainly we cannot conclude as a matter of law that the third numbered paragraph as written was sufficient to inform Ceraso that one reason for the termination notice was weeds, or unkempt, unswept, and obstructed bays, or unregistered vehicles. 80 In sum, the district court did not err in holding that, even if image-based termination were an issue in the case notwithstanding Motiva's failure to articulate that issue in the JTM, Motiva's Termination Letter was inadequate to give Ceraso notice of termination on that ground. 81