Court Opinion

ID: 9490996
Source: CourtListenerOpinion
Date Created: 2023-08-05 14:00:49.366282+00
Date Added: 2024-06-11T17:51:35.137442
License: Public Domain

COLE, Circuit Judge,
dissenting.
I write separately to express my disagreement with the majority’s view that BP’s assignment of the 1992 agreement could not create a material change in the agreement’s price term in violation of Tennessee law. In my view, Clark may be able to benefit from the protections available under the PMPA upon constructive termination of a franchise agreement which can occur by, inter alia, a franchisor’s assignment of a franchise agreement in violation of state law. See May-Som, 869 F.2d at 922.
An assignment is in violation of Tennessee assignment law “where the assignment would materially change the duty of the other party or increase materially the burden or risk imposed on him by his contract, or impair materially his chance of obtaining return performance.” T.C.A. § 47-2-210(2). The Tennessee Court of Appeals has also explained that contractual rights may generally be assigned, unless, among other things, the assignment would materially change the obli-gor’s duty, materially increase the burden or risk imposed on the obligor by the contract, materially impair the obligor’s chance of obtaining return performance, or materially reduce the value of the contract to the obligor. See Petry v. Cosmopolitan Spa Int’l, Inc., 641 S.W.2d 202, 203 (Tenn.Ct.App.1982) (citing Restatement (Second) of Contracts § 317(2) (1981)).
Here, the district court was presented with a contractual price term, “BP’s price in effect at the time and place of delivery for franchised dealers,” as well as the price actually charged by Downey. The district court held that as a matter of law an assignment of a contract with such a price term could not be materially altered in violation of state assignment law because the price term also provided that “[p]rices for all products shall be subject to change without notice to Dealer.” See Clark v. BP Oil Co., 930 F.Supp. 1196, 1207 (E.D.Tenn.1996). Because of the “subject-to-ehange” provision, the district court regarded the agreement’s price term as an “open price term” which precluded the possibility of there being a material change in price. See id. at 1208. I disagree that the agreement’s price term is an unascertainable open price term which cannot, as matter of law, be altered in a materially burdensome way. See Barnes v. Gulf Oil Corp., 795 F.2d 358 (4th Cir.1986) (reversing a Fed R. Civ. P. 12(b)(6) dismissal of PMPA claim premised *397on assignment in violation of state law where agreement’s price term for gasoline was defined as “seller’s price in-effect at time and place for delivery”); cf. Beachler v. Amoco Oil Co., 112 F.3d 902, 908 & n. 5 (7th Cir. 1997) (holding that assignment imposed no materially increased burden as a matter of law where assignment expressly provided that dealers would accept the price established by an assignee in the event of an assignment). The agreement at issue specified a formula, “BP’s price at the time and place of delivery for franchised dealers.” A contract’s price term fails to produce an ascertainable price under the contract’s terms only when “the parties have specified how the price is to be determined but the method fails.” James J. White & Robert S. Summers, Uniform Commercial Code § 3-8, at p. 115 (4th ed.1995). . There is no suggestion that this agreement’s price-setting method failed. In fact, the record includes the costs produced by the BP price term over the relevant'time period. It is conceded that the BP price and the Downey price are different. The majority uses those figures in calculating the actual total cost difference paid by Clark: $2,147.85. The question presented to the district court was whether the difference in the two prices was a material difference such that the assignment constituted a contractual burden in violation of Tennessee assignment law. Clark presented evidence sufficient to create a material-fact-in-dispute on this front and accordingly should have survived the defendants’ motion for summary judgment.
Additionally, I disagree with the majority in its decision to alternatively hold that the approximately $2100 difference in cost was not a material increase in Clark’s contractual burden. The relevance of such a cost increase is made clear by Clark’s report following his visits to local Downey service stations in an affidavit presented to the district court: “[sjince Downey Oil began supplying my station, Downey has charged me a wholesale price that is greater than the retail price at the ... marts operated by Downey Oil Company, and I have personally purchased gasoline at these stations for a retail price that is less than the wholesale price Downey charged me on the same day.” The majority asserts that the increase in Clark’s costs “simply does not represent a material increase.’ ”, See p. 393 supra. In my mind, we are not in a position to make such a determination. The determination of what materially changes the duty of a party under a contract or increases a party’s contractual risk or burden depends on the nature of the contract and the circumstances. Restatement (Second) of Contracts § 317 cmt. d (1981); 1 James J. White & Robert S. Summers, Uniform Commercial Code § 3-13, at p. 200 (4th ed.1995). Such a question of fact is more appropriately left to the district court in the first instance, particularly since it is equipped to allow discovery and take expert testimony. The increase in cost might be deemed material if, for example, it substantially disadvantaged a retailer such as Clark in his competitive position for gasoline sales as well as sales of other products. Cf, e.g., Telephone Assocs. v. St. Louis County Bd., 364 N.W.2d 378, 382 (Minn.1985) (explaining that although a change in costs may seem minor, in a competitive bidding situation, contract awards are often determined by slight differences).
Where a franchisee' avoided paying a petroleum distributor the proper price for delivered gasoline, resulting in a reduction of his bill of over $2000 over approximately one and half years, we held that such a breach of the price term was material and significant, and thus the PMPA allowed the distributor to refuse to renew the franchise agreement. See Geib v. Amoco Oil Co., 29 F.3d 1050, 1055 (6th Cir.1994). In Geib, the agreement’s price term—the price in effect at the time when title to the gasoline passed from the franchisor to the dealer—did not preclude- a materiality inquiry; I would employ the same reasoning in this case and conclude that the district court erred in holding that the assignment of Clark’s agreement could not, as a matter of law, affect' a material change in his agreement’s price term. In my view, we must be careful to allow the PMPA to live out its purpose of “levelling] the playing field on which [franchisors and franchisees] interact,” Beachler, 112 F.3d at 904, and not foreclose PMPA claims which present issues of material fact; whether or not we like it, Congress has provided for protec*398tions under the PMPA when agreements are assigned in violation of state assignment law.