Court Opinion

ID: 51810
Source: CourtListenerOpinion
Date Created: 2010-04-26 01:09:00+00
Date Added: 2024-06-11T17:19:09.838336
License: Public Domain

IN THE UNITED STATES COURT OF APPEALS
                    FOR THE FIFTH CIRCUIT   United States Court of Appeals
                                                                                     Fifth Circuit
                                                                                 F I L E D
                                                                                September 5, 2007
                                       No. 06-31097
                                                                              Charles R. Fulbruge III
                                                                                      Clerk
MUNIBUDDIN YOUSUF; YOUSUF INC, doing business as Read Road Shell

                                                   Plaintiffs-Appellants
v.

MOTIVA ENTERPRISES LLC

                                                   Defendant-Appellee

                    Appeal from the United States District Court
                 for the Eastern District of Louisiana, New Orleans
                              USDC No. 2:04-CV-2787

Before KING, GARZA, and BENAVIDES, Circuit Judges.
PER CURIAM:*
       Plaintiffs-appellants Munibuddin Yousuf and Yousuf, Inc. (collectively
“Yousuf”) leased and operated a Shell service station in New Orleans from 1992
to 2005 pursuant to franchise contracts with defendant-appellee Motiva
Enterprises, L.L.C. (“Motiva”).1 In September 2004, Motiva notified Yousuf that
it was terminating their franchise relationship effective December 15, 2004
because of Yousuf’s alleged failure to meet Motiva’s image standards during

       *
         Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR.
R. 47.5.4.
       1
           Motiva is a joint venture of Shell Oil Company and Saudi Refining, Inc.
                                  No. 06-31097

recent inspections of the service station. Yousuf filed suit against Motiva in
October 2004, challenging the termination under the Petroleum Marketing
Practices Act (“PMPA”), 15 U.S.C. §§ 2801-2841, and state law causes of action.
Yousuf promptly filed a motion for a temporary restraining order (“TRO”) and
a preliminary injunction in accordance with § 2805 of the PMPA, which provides
for such relief within a 90-day period after the franchiser gives formal
notification of termination or nonrenewal.
      At the TRO conference on November 22, 2004, the parties announced that
they had executed a “Stipulated Standstill Agreement” (the “standstill
agreement”) under which the parties extended their franchise agreements “to
maintain the status quo in order to permit Plaintiffs to continue to occupy and
conduct business at the Service Station Property . . . pending the district court’s
ruling on the preliminary injunction.” The district court adopted the agreement
as an order of the court. As discovery progressed, the parties reached another
agreement, and on December 22, 2004 they filed a joint stipulation and motion
for the entry of a consent judgment on Yousuf’s preliminary injunction motion.
In accordance with the stipulation and motion, the district court issued a
preliminary injunction ordering that the franchise agreements continue in force
until judgment is rendered on Yousuf’s claim for a permanent injunction and
reflecting that “on motion of the parties, the Court ma[de] no findings of fact or
conclusions of law pursuant to F.R.C.P. Rule 52 in connection with plaintiffs’
motion for preliminary injunction, such findings and conclusions being waived
by the parties and deferred until the Court enters judgment on plaintiffs’ claim
for permanent injunction.”
      Before a jury could hear Yousuf’s case, however, Hurricane Katrina
effectively destroyed the station. Recognizing that further litigation over the
September 2004 termination was now purposeless, Motiva rescinded its notice
of termination in November 2005 and eventually terminated Yousuf’s franchise

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                                         No. 06-31097

under the premises-destruction provisions of the PMPA, 15 U.S.C. § 2802(c)(7),
and the franchise agreements. Yousuf moved to dismiss all of his substantive
claims as moot and, based on his “success in obtaining the standstill agreement
and later the preliminary injunction, and Motiva’s subsequent rescission of the
termination,”2 sought attorney’s fees and costs under 15 U.S.C. § 2805(d). The
district court denied the motion for attorney’s fees and costs and granted the
motion to dismiss the remaining claims. Yousuf appeals.3
       Section 2805(d)(1) of the PMPA contains a fee-shifting provision specifying
that a franchisee who prevails in an action brought under § 2805(a) may be
entitled to reasonable attorney’s fees. Although the PMPA does not define
“prevailing party,” we are guided by the extensive case law interpreting that
concept, which appears in a number of statutes. See Buckhannon Bd. & Care
Home, Inc. v. W. Va. Dep’t Health & Human Res., 532 U.S. 598, 603 n.4 (2001).
Our court has held that “to be deemed a ‘prevailing party,’ at a minimum, a
plaintiff must receive some relief on the merits of his claim.” Energy Mgmt.
Corp. v. City of Shreveport, 467 F.3d 471, 482 (5th Cir. 2006) (citing Walker v.
City of Mesquite, 313 F.3d 246, 249 (5th Cir. 2002)) (some internal quotation
marks omitted); see also Buckhannon, 532 U.S. at 603. In addition, we have
“determined that for a party to qualify as a prevailing party it must (1) obtain
actual relief, such as an enforceable judgment or a consent decree; (2) that
materially alters the legal relationship between the parties; and (3) modifies the
defendant's behavior in a way that directly benefits the plaintiff at the time of
the judgment or settlement.” Energy Mgmt., 467 F.3d at 482 (citing Walker, 313

       2
          Yousuf clarifies in his reply brief that Motiva’s “unilateral act of purportedly
withdrawing the termination notice three months after Hurricane Katrina . . . is not the basis
for [Yousuf’s] entitlement to fee award. The preliminary injunction is.”
       3
           “[T]he characterization of prevailing-party status for awards under fee-shifting
statutes . . . is a legal question subject to de novo review.” Bailey v. Mississippi, 407 F.3d 684,
687 (5th Cir. 2005).

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                                       No. 06-31097

F.3d at 249) (internal quotation marks omitted). The Supreme Court has also
rejected the “catalyst theory” previously applied by many circuits, making clear
that “[a] defendant’s voluntary change in conduct, although perhaps
accomplishing what the plaintiff sought to achieve by the lawsuit, lacks the
necessary judicial imprimatur on the change” to establish prevailing party
status. Buckhannon, 532 U.S. at 605.
       In Planned Parenthood of Houston & Southeast Texas v. Sanchez, a case
in which providers of family planning and abortion services obtained a
preliminary injunction against the impending enforcement of a Texas statute
that prohibited state distribution of federal family planning funds to elective-
abortion providers, we recently examined the approaches taken by other circuits
in identifying the circumstances, if any, under which a preliminary injunction
may support an award of attorney’s fees. 480 F.3d 734, 740 (5th Cir. 2007). As
we discussed, several circuits have determined that a preliminary injunction
that merely preserves the status quo temporarily will not confer “prevailing
party” status on a party; instead, the preliminary injunction must (i) reflect a
merits-based decision on an issue involved in the case, see, e.g., John T. v. Del.
County Intermediate Unit, 318 F.3d 545, 558-59 (3d Cir. 2003); Dubuc v. Green
Oak Twp., 312 F.3d 736, 753 (6th Cir. 2002); Taylor v. City of Fort Lauderdale,
810 F.2d 1551, 1558 (11th Cir. 1987)4; (ii) constitute substantive, indefeasible
relief akin to final relief on the merits because, for example, “the party’s claim
[for a] permanent injunction is rendered moot by the impact of the preliminary

       4
         As we noted in Planned Parenthood, 480 F.3d at 740 n.2, Taylor is a pre-Buckhannon
case, but the Eleventh Circuit reaffirmed its holdings in Wyner v. Struhs, 179 Fed. Appx. 566,
568 (11th Cir. 2006), rev’d on other grounds, Sole v. Wyner, 127 S. Ct. 2188 (2007). Though
the Supreme Court reversed Wyner v. Struhs, it did so because the party that obtained the
preliminary injunction ultimately lost on the merits as the case developed. Sole, 127 S. Ct. at
2196. The Court “express[ed] no view on whether, in the absence of a final decision on the
merits of a claim for permanent injunctive relief, success in gaining a preliminary injunction
may sometimes warrant an award of counsel fees.” Id.

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                                    No. 06-31097

injunction,” N. Cheyenne Tribe v. Jackson, 433 F.3d 1083, 1086 (8th Cir. 2006);
see also, e.g., Dupuy v. Samuels, 423 F.3d 714, 719, 723 (7th Cir. 2005); (iii) grant
the party concrete and irreversible relief in a merits-based decision that
vindicates the party’s claim and is not appealed by the opposing party, see, e.g.,
Select Milk Producers, Inc. v. Johanns, 400 F.3d 939, 947-48 (D.C. Cir. 2005);
or (iv) incorporate some combination of these factors.5 See Planned Parenthood,
480 F.3d at 740-41. We also noted that “[t]he Ninth Circuit has . . . taken a
relatively generous approach, at least in principle, stating that a ‘preliminary
injunction issued by a judge carries all the “judicial imprimatur” necessary to
satisfy Buckhannon,’” but that the circuit has recognized an exception where
“the plaintiff scores an early victory by securing a preliminary injunction, then
loses on the merits as the case plays out.” Id. at 741 (quoting Watson v. County
of Riverside, 300 F.3d 1092, 1096 (9th Cir. 2002)). The Supreme Court recently
applied this exception to deny prevailing party status without addressing when,
if ever, success in gaining a preliminary injunction may serve to create a
prevailing party. See Sole v. Wyner, 127 S. Ct. 2188, 2196 (2007). Finally, the
Fourth Circuit has indicated that a preliminary injunction might never serve as
the basis for prevailing party status, explaining that “the merits inquiry in the
preliminary injunction context is necessarily abbreviated” and is balanced with
other considerations, such as the likelihood of irreparable harm. Smyth v.
Rivero, 282 F.3d 268, 276 (4th Cir. 2002).
      In Planned Parenthood, we had no need to choose among these approaches
because the preliminary injunction issued in that case failed to confer prevailing
party status on the plaintiffs under any approach. 480 F.3d at 741. We
similarly have no need to choose among these approaches here. Neither the

      5
          We do not address whether the cited circuits fall into more than one of these
categories.

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                                  No. 06-31097

preliminary injunction nor the court-ordered standstill agreement (which
effectively functioned as a temporary restraining order) did anything more than
temporarily preserve the status quo, maintaining the parties’ preexisting
franchise relationship until the legal issues surrounding the approaching
termination of that relationship could be addressed on the merits. Cf. Dersch
Energies, Inc. v. Shell Oil Co., 314 F.3d 846, 862-63 (7th Cir. 2002)
(characterizing PMPA injunctive relief, sought by a plaintiff to forestall the
impending termination of his franchise, as the district court’s remedy “to
preserve the status quo between the parties during the pendency of the litigation
(i.e., the existing terms of the franchise relationship)”). While Yousuf argues
that the orders did more than preserve the status quo by delaying the contract
termination date set by Motiva, Planned Parenthood held in a comparable
situation that a preliminary injunction delaying the enforcement of a state law,
“thereby maintaining the flow of federal funds to Plaintiffs,” merely preserved
the status quo. 480 F.3d at 741. Moreover, this is not a situation in which a
court order substantially achieves a litigation goal and is thus akin to final
relief. Although Yousuf’s claims became moot after the grant of the preliminary
injunction, the reason they were moot was not because the court orders were so
successful for Yousuf that they rendered any further relief unnecessary, but
rather because of the unrelated impact of Hurricane Katrina, which eliminated
any hope that Yousuf would be able to keep the franchise contracts in effect.
      We recognize that Motiva did not appeal the orders and that the orders
bore the district court’s imprimatur. However, even the broadest circuit court
approach incorporates the Supreme Court’s requirement that a prevailing party
“succeed[] on any significant issue in litigation which achieve[s] some of the
benefit [he] sought in bringing suit,” Tex. State Teachers Ass’n v. Garland Indep.
Sch. Dist., 489 U.S. 782, 791-92 (1989) (internal quotation marks omitted),
thereby “receiv[ing] at least some relief on the merits of his claim,” Buckhannon,

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                                       No. 06-31097

532 U.S. at 603-04 (internal quotation marks omitted). See, e.g., Carbonell v.
INS, 429 F.3d 894, 900 & n.5 (9th Cir. 2005). As noted earlier, our circuit also
requires that, at a minimum, a party must obtain some relief on the merits of his
claim to be considered a prevailing party. See Energy Mgmt., 467 F.3d at 482.
Here, the district court did not engage in any consideration of the merits of
Yousuf’s claim, even to a minimal degree6; to the contrary, the district court
explicitly disclaimed that it made any findings of fact or conclusions of law in its
order granting the preliminary injunction, as the parties agreed to the order and
“waived . . . and deferred” all merits analysis until the entry of judgment on
Yousuf’s claim for a permanent injunction. The standstill agreement does not
reflect any merits consideration by the district court either, but instead merely
“maintain[ed] the status quo . . . pending the district court’s ruling on the
preliminary injunction.”
       Our conclusion is also not altered by the fact that both parties consented
to the agreements underlying the court orders. As Yousuf points out, the
Supreme Court has determined that a “settlement agreement[] enforced through
a consent decree” may be sufficient to entitle a party to attorney’s fees. See
Buckhannon, 532 U.S. at 604. But in such a situation, the decree substitutes for
formal relief on the merits, essentially vindicating the merits of the party’s
claims by achieving some of the benefit he sought to obtain on the merits before
the court. Cf. Maher v. Gagne, 448 U.S. 122, 129 (1980) (approving the use of
settlement agreements as the basis for awards of attorney’s fees while relying,
in part, on a Senate Report’s statement that “for purposes of the award of
counsel fees, parties may be considered to have prevailed when they vindicate
rights through a consent judgment or without formally obtaining relief” (citing

       6
         In Watson, by contrast, the Ninth Circuit noted that the district court “analyz[ed] the
merits of Watson’s claim” before granting the preliminary injunction at issue. 300 F.3d at
1094.

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                                  No. 06-31097

S. REP. NO. 94-1011, at 5 (1976), reprinted in 1976 U.S.C.C.A.N. 5908, 5912)).
Even assuming, arguendo, that a court-adopted agreement between opposing
parties may substitute for a typical preliminary injunction to support prevailing
party status, the orders to which the parties consented here were issued in place
of a court-crafted preliminary injunction that would have been granted on a
diminished analysis of the merits. “The PMPA sets a more indulgent standard
for relief than does the traditional Rule 65 preliminary injunction,” in that it
requires neither a showing of irreparable injury nor a substantial likelihood of
success on the merits. Bridges Enters., Inc. v. Exxon Co., U.S.A., 820 F.2d 123,
124 (5th Cir. 1987); 15 U.S.C. § 2805(b)(2). Instead, the franchisee may obtain
a preliminary injunction by showing that “(i) the franchise of which he is a party
has been terminated or the franchise relationship of which he is a party has not
been renewed, and (ii) there exist sufficiently serious questions going to the
merits to make such questions a fair ground for litigation,” as long as the court
determines that the balance of hardships favors the franchisee. 15 U.S.C.
§ 2805(b)(2). Some courts have restated the second prong as requiring the
franchisee to show “a reasonable chance of success on the merits,” see, e.g.,
Beachler v. Amoco Oil Co., 112 F.3d 902, 905 (7th Cir. 1997), while other courts
appear to have interpreted the provision more literally, looking to the
seriousness of the questions raised by the franchisee, see, e.g., Ewing v. Amoco
Oil Co., 823 F.2d 1432, 1436 (10th Cir. 1987). Regardless of the interpretation,
we conclude that Motiva’s consent to forgo this undeniably lenient inquiry,
through orders that resolved no merits-based issues but instead “waived . . . and
deferred” any court findings of fact and conclusions of law until entry of
judgment on Yousuf’s claim for a permanent injunction, did not serve to
vindicate Yousuf’s claims on the merits or otherwise serve as an adequate

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                                         No. 06-31097

substitute for formal, merits-based relief such that Yousuf is entitled to
attorney’s fees.7
       For the foregoing reasons, we AFFIRM.

       7
          Ketterle v. B.P. Oil, Inc., 909 F.2d 425 (11th Cir. 1990), in which the Eleventh Circuit
found that a plaintiff was entitled to attorney’s fees based on a PMPA preliminary injunction,
is not to the contrary. Though the defendant in Ketterle argued that the lax PMPA standard
for a preliminary injunction does not relate to the merits of the action, the court did not
address the argument, looking only at whether the PMPA standard required a “colorable
claim.” Id. at 430. Under the precedent followed by the court, a plaintiff bringing a “colorable
claim” could be entitled to attorney’s fees “if the defendant simply complie[d] with the plaintiff’s
demands and moot[ed] the case for reasons that ha[d] nothing to do with the potential merit
of the suit.” Dunn v. Fla. Bar, 889 F.2d 1010, 1015 (11th Cir. 1989) (quoting Hennigan v.
Ouachita Parish Sch. Bd., 749 F.2d 1148, 1153 (5th Cir. 1985)). In this case, unlike Ketterle,
Motiva did not comply with Yousuf’s demands after the preliminary injunction issued; instead,
the case was mooted by an unrelated event that allowed Motiva to terminate the parties’
contracts on another ground. Moreover, Ketterle was a pre-Buckhannon case that appears to
have applied the “catalyst theory” rejected in Buckhannon. See Buckhannon, 532 U.S. at 605.

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