Opinion ID: 495233
Heading Depth: 1
Heading Rank: 4

Heading: The Role of Fair Market Value

Text: 34 Having rejected Amoco's proffered definition of a bona fide offer, we must now derive the correct one. The starting point of all statutory analysis is the words of the statute themselves. Our review of the many statutes in which Congress has used the term bona fide reveals that while Congress uses the phrase in contexts in which good faith intent helps reveal and may even help determine genuineness, the term is also used to convey an objective notion of actuality. 6 For example, immigration statutes provide special privileges variously for a bona fide student, 8 U.S.C. Sec. 1101(a)(15)(F)(i), for a father with a bona fide parent-child relationship with a child, 8 U.S.C. Sec. 1101(b)(1)(D), for a bona fide member of the crew of a vessel, 8 U.S.C. Sec. 1287, or for employees of a bona fide United States incorporated nonprofit organization, 8 U.S.C. Sec. 1430(c). While the purposes of those who claim to fit into these categories may be relevant to a determination of their bona fides, the status of each would seem to turn at least substantially on objectively verifiable characteristics. 35 Bona fide occupational qualifications for employment, which serve as exceptions to our employment discrimination laws, see 29 U.S.C. Sec. 621, 42 U.S.C. Sec. 2000e-2(e), work similarly. For a qualification to be bona fide, an employer must show not only that it is necessary but the facts must support its reasonable necessity and the inability to accomplish the same purpose through a less discriminatory means. See Dothard v. Rawlinson, 433 U.S. 321, 329, 97 S.Ct. 2720, 2726, 53 L.Ed.2d 786 (1977) (interpreting Title VII); Western Air Lines v. Criswell, 472 U.S. 400, 105 S.Ct. 2743, 2751-53, 86 L.Ed.2d 321 (1985) (interpreting Age Discrimination in Employment Act). 36 A review of the fourteen code sections that use the phrase bona fide offer does not provide a definite meaning. Some refer to a bona fide offer of employment, providing for special relocation benefits to those who have accepted such an offer under certain circumstances, see 29 U.S.C. Sec. 1653; 19 U.S.C. Sec. 2298(b), or denying benefits to those who have rejected them, see 42 U.S.C. Sec. 607(b). In these contexts, Congress does not appear to use the phrase in connection with any notion of price level. 37 In many other contexts, however, Congress uses the phrase bona fide offer in tandem with some specified notion of market value. See, e.g., 16 U.S.C. Sec. 544f(o ) (conservation area rules limiting use of property do not apply to unpurchased land for which owner has made bona fide offer to sell to government; offer shall not be considered bona fide if owner refuses consideration equal to the fair market value); 45 U.S.C. Sec. 748(e) (in complicated statutory scheme governing abandonment of rail-line by bankrupt railroad company, company must sell if it receives bona fide offer for 75% of appraised value of line); 10 U.S.C. Sec. 9512(e)(2)(D) (Secretary of Defense may reimburse private owner of aircraft modified to be able to serve as cargo plane if needed by government if resale of plane pursuant to bona fide, arm's length transaction made to the highest bidder is for a price less than fair market value of non-modified plane). We acknowledge that the coupling of bona fide offer with some particular statement of value could suggest that bona fide conveys a solely independent meaning. We believe, however, that we read these statutes more fairly by deducing that Congress generally intends the bona fides of an offer to be determined in accordance with some level of fair market value. 38 Section 3604 of Title 42 U.S.C., which does not explicitly define bona fide in some relation to fair market value, supports this view. That section makes it illegal to refuse to sell or rent after the making of a bona fide offer ... a dwelling to any person because of race, color, religion, sex, or national origin. Because a property owner who refused to rent or sell a property because of a below-market price would not engage in discrimination, an offer that did not meet the market price would assumedly not be a bona fide offer. 39 Notwithstanding the helpful guidance of these sections, they primarily establish that the phrase bona fide gains meaning from its statutory context. We must therefore derive the meaning of bona fide offers to sell under the PMPA from that statute's legislative purpose. 40 As we have discussed, the overriding purpose of Title I of the PMPA is to protect the franchisee's reasonable expectation of continuing the franchise relationship. Because of the distributor's need to adjust to changing market conditions, however, Congress permitted distributors to end the franchise relationship for legitimate business reasons. Yet in doing so, distributors still deprived franchisees of their reasonable expectations. The bona fide offer provision therefore serves as a second, and distinct, layer of protection, assuring the franchisee an opportunity to continue to earn a livelihood from the property while permitting the distributor to end the franchise relationship. 41 Permitting the distributor to set an offer price as high as it wished would not provide this second layer of protection because the distributor's business plans may lead it to wish to retain the property. Distributors would set offer prices that compensated them fully for the loss of their business plans. Alternatively, distributors would set an even higher price if they thought the franchisee would pay it. The special desire of a franchisee to maintain the property with which he has worked is exactly what produces the distributor's general bargaining advantage. Either price, a price reflecting the distributor's desire to pursue its business plans or a price reflecting the franchisor's special commitment to the property, might fail to compensate the franchisee for the loss of his reasonable expectation of renewal. 42 To protect the interests of franchisees, we believe that the statute effectively requires the distributor to set an offer price ignoring both its own alternative business plans and the special needs of a franchisee to hold on to the property. Rather, the statute requires the distributor to make an offer as if it actually wanted to sell the property (not necessarily to the franchisee but to someone). With such a desire, however, the distributor would set an offer price at fair market value. That, by definition, is the highest price a willing buyer would pay, and an offer at fair market value protects the franchisee's reasonable expectation of being able to make a living with the franchise property.
43 Having stated this requirement, we must now decide in what manner courts should scrutinize the distributor's offer to determine whether it complies with the requirement. In Robertson v. Mobil Oil Corp., 778 F.2d 1005, 1008 (3d Cir.1985), we defined bona fide in the context of the PMPA provision permitting nonrenewal of a franchise because of bona fide customer complaints to mean sincere and having a reasonable basis in fact. We similarly here are guided by Congress's decision not actually to use the term fair market value but instead the term bona fide, which suggests some degree of deference. That choice indicates, we believe, a recognition that the word 'value' almost always involves a conjecture, a guess, a prediction, a prophecy. Amerada Hess Corp. v. Commissioner, 517 F.2d 75, 83 (3d Cir.1975) (quoting other cases). [T]here is no universally infallible index of fair market value. Id. There may be a range of prices with reasonable claims to being fair market value. Were we to mandate that courts determine whether the distributor's offer actually was at fair market value, distributors could rarely rest comfortably that their offer would eventually be determined by the court to be fair market value. 44 On the other hand, a standard of scrutiny that simply focused on whether the distributor believed its offer to represent fair market value would leave the franchisee open to injury through sloppiness or mere error. Such a focus might also prove difficult to apply, for intentions are always difficult to discern, especially when we deal not with the intentions of individuals but of organizations. 45 We therefore believe that courts should scrutinize the distributor's offer in a manner similar to that we adopted in Robertson. Courts should determine first if the distributor believed its offer price represented fair market value. Even if the distributor did have that sincere belief, however, courts should also determine whether the estimate was objectively reasonable. i.e., whether the offer approached fair market value. 7