Court Opinion

ID: 2970852
Source: CourtListenerOpinion
Date Created: 2015-09-22 16:23:34.974275+00
Date Added: 2024-06-11T08:37:23.400009
License: Public Domain

RECOMMENDED FOR FULL-TEXT PUBLICATION
                 Pursuant to Sixth Circuit Rule 206                      2    Shah, et al. v. Racetrac            Nos. 01-6077/6451
      ELECTRONIC CITATION: 2003 FED App. 0244P (6th Cir.)                     Petroleum Co.
                  File Name: 03a0244p.06
                                                                                            _________________
UNITED STATES COURT OF APPEALS                                                                   COUNSEL
                  FOR THE SIXTH CIRCUIT                                  ARGUED: Jay W. Mader, ARNETT, DRAPER &
                    _________________                                    HAGOOD, Knoxville, Tennessee, for Plaintiffs. Debra L.
                                                                         Fulton, FRANTZ, McCONNELL & SEYMOUR, Knoxville,
 SIDDARTH SHAH and DAKSHA X                                              Tennessee, for Defendant. ON BRIEF: Jay W. Mader,
 SHAH ,                            -                                     ARNETT, DRAPER & HAGOOD, Knoxville, Tennessee,
          Plaintiffs-Appellants/ -                                       Mark A. La Mantia, FARRELL & LA MANTIA, Raleigh,
                                   -   Nos. 01-6077/6451                 North Carolina, for Plaintiffs. Debra L. Fulton, FRANTZ,
               Cross-Appellees, -                                        McCONNELL & SEYMOUR, Knoxville, Tennessee, for
                                    >                                    Defendant.
                                   ,
            v.                     -                                                        _________________
                                   -
 RACETRAC PETROLEUM CO .,          -                                                            OPINION
           Defendant-Appellee/ -                                                            _________________
               Cross-Appellant. -
                                   -                                       CLAY, Circuit Judge. Plaintiffs Siddarth and Daksha Shah
                                  N                                      appeal from an order awarding summary judgment to
       Appeal from the United States District Court                      Defendant Racetrac Petroleum Company after Plaintiffs filed
    for the Eastern District of Tennessee at Knoxville.                  a complaint in diversity jurisdiction pursuant to 28 U.S.C.
     No. 99-00410—James H. Jarvis, District Judge.                       § 1332 alleging various contract causes of action and raising
                                                                         claims under the Tennessee Consumer Protection Act, Tenn.
                    Argued: March 14, 2003                               Code Ann. § 47-18-109, and the Tennessee Petroleum Trade
                                                                         Practices Act, Tenn. Code Ann. § 47-25-601. Defendant
               Decided and Filed: July 24, 2003                          cross-appeals from an order denying Defendant’s
                                                                         counterclaim for attorney’s fees. We AFFIRM the district
Before: CLAY and ROGERS, Circuit Judges; COFFMAN,                        court in part and REVERSE in part.
                  District Judge.*
                                                                                                   FACTS
                                                                           In late 1994, Plaintiffs became interested in purchasing
                                                                         Raceway 773, a gas station and convenience store located in
                                                                         Maryville, Tennessee. Defendant owned the store, exterior
        *
          The Honorab le Jennifer B. Coffman, United States District     improvements, and real property. Clyde and Gloria Holt
Judge for the E astern and W estern D istricts of Kentucky, sitting by   operated the Raceway pursuant to a lease and contract with
designation.

                                  1
Nos. 01-6077/6451                Shah, et al. v. Racetrac        3   4      Shah, et al. v. Racetrac             Nos. 01-6077/6451
                                          Petroleum Co.                     Petroleum Co.

Defendant, which operates a chain of similar stores. The                     including the Federal Petroleum Marketing Practices
Holts planned to sell their interest in the lease and contract,              Act (PMPA).
which included certain interior improvements, inventory, and
goodwill, for $90,000.                                               The termination clause in the contract had essentially the
                                                                     same terms:
   Plaintiffs learned about the offer from Bhanu Mehta, who
also considered purchasing the business from the Holts.                  E. Term of Contract and Renewal. – This Contract
Mehta had previously reviewed the lease and contract under                  shall be for a duration of (12) months from date of
which the Holts operated the store. Mehta learned that each                 execution, provided the Contractor complies with all
instrument contained a clause that arguably permitted either                the terms and conditions and covenants herein, it
party to terminate the agreement upon thirty days written                   being the intent of the parties that the term of this
notice. When Mehta asked Holt about the termination                         Contract will run concurrently with the term of the
clauses, Holt explained that as he understood them, Defendant               Lease executed as of even date herewith. Provided
would not terminate the lease or contract as long as the lessee             that there has been no default as defined in the
made timely rental payments and operated the business in a                  Contract within the existing term of the Contract,
satisfactory manner. Mehta had also inquired about the                      this Contract will be automatically renewed and the
termination clauses present in the agreements held by other                 term of the Contract extended for subsequent one
Raceway store operators. These other lessees similarly                      year terms. At any time during the initial or any
reported that Defendant would not terminate the lease or                    extended term, either party may give thirty (30) days
contract as long as the operator promptly paid rent and ran the             written notice in the form hereinafter described of its
business effectively. In December of 1994, Plaintiffs first                 intent to terminate the Contract. Any such extension
reviewed the lease and accompanying contract for Raceway                    shall be upon the same terms and conditions as
773. The termination clause in the lease read:                              stated herein.

  2.   TERM. This Lease shall be effective on the 7th day            Furthermore, highlighted above the word “CONTRACT” on
       of February, 1995, and subject to all its terms and           the document’s first page, the contract states: “THIS
       conditions shall remain in full force and effect for          CONTRACT DOES NOT CREATE A FRANCHISE
       twelve (12) months from date of execution. Upon               RELATIONSHIP UNDER STATE OR FEDERAL LAW
       termination of the lease term, this Lease will be             (See Paragraph C).” Paragraph C then states:
       automatically renewed for subsequent one-year
       terms upon the same terms and conditions, subject to              C. No Franchise. – Contractor acknowledges that this
       Lessor’s adjustments of the rental provided,                         Contract does not create, extend, or renew a
       however, that at any time during the initial or any                  franchise under any local, state, or federal law
       extended term, either party may give thirty (30) days                including the Federal Petroleum Marketing Practices
       written notice in the form hereinafter described of its              Act (PMPA). Contractor fully acknowledges that
       intent to terminate this Lease. Lessee acknowledges                  this Contract with Contractee is a separate and
       that this lease does not create, extend, or renew a                  distinct contract and is not associated with any other
       franchise under any local, state, or federal law                     agreements, contracts or franchise relationships
Nos. 01-6077/6451                Shah, et al. v. Racetrac       5   6      Shah, et al. v. Racetrac                 Nos. 01-6077/6451
                                          Petroleum Co.                    Petroleum Co.

       which may now or hereafter exist between                             same date, constitutes the entire understanding
       Contractee and Contractor. Contractor further                        between the parties and supersedes and cancels all
       acknowledges that Contractee is the retailer of the                  previous contracts between the parties with respect
       fuel facilty to be operated hereunder and that this                  to the facilities covered hereby.
       Contract does not give any rights to the Contractor
       as a fuel retailer. Contractor further acknowledges          The contract’s miscellaneous provision reiterates the
       that this Contract cancels any existing leases,              integration clause:
       agreements or other contracts, except any lease,
       agreement or contract of same date, or any ground                Z. Miscellaneous. –
       lease on the Premises between the parties, that may                 ....
       have existed between Contractee and Contractor.                     5. This Contract supersedes and cancels all
                                                                                previous contracts or arrangements between the
With respect to the title to the fuel, the contract provides:                   parties relating to the matters herein and no
                                                                                prior or subsequent stipulation, agreement or
  F. Gasoline and Payment Obligations. – Contractee                             understanding, verbal or otherwise, of the
     owns and retains all title to the fuel at the property                     parties or their agents relating to the matters
     until sold to the customer. Contractor agrees that all                     herein shall be valid or enforceable unless
     funds collected for fuel sales are the property of the                     embodied in the provisions of this Contract, or
     Contractee and further agrees to act as the agent of                       a separate instrument in writing.
     Contractee in the collection and safe keeping of all
     monies collected for sale of fuel. Contractor                  Although Plaintiffs did not read all of the contractual
     acknowledges that he owes a duty of trust to                   provisions, they certainly saw the termination clauses.1
     Contractee in the collection and safe keeping of all
     funds collected for sales and acknowledges that he                Plaintiffs expressed concern to the Holts about investing
     holds himself in such fiduciary relationship to                money in a business that they could lose upon thirty days
     Contractee. Contractor agrees to remit funds so held           notice. Clyde Holt told Plaintiffs what he told Mehta—that
     in trust to Contractee upon demand or otherwise as             Defendant would not terminate a lease as long as the tenant
     directed by Contractee in cash or by cashier’s check.          performed acceptably. Plaintiffs also questioned J.D. Main,
     . . . In addition, Contractor shall submit all books           Defendant’s district manager responsible for Racetrac 773.
     and records relating to the sale of fuel and gasoline          Main explained that “[Defendant’s] policy is that they will
     products purchased from Contractee for an audit and            not kick any dealer out as long as they perform satisfactorily.”
     taking of inventory.                                           (J.A. at 137.)

Also significant, the contract contained the following merger
provision:
  Y. Entirety. – This Contract, together with attached                       1
     exhibits, and any other lease or contract executed the                   Plaintiffs also signed a guaranty relevant to the attorney fee
                                                                    dispute discussed in detail below.
Nos. 01-6077/6451                      Shah, et al. v. Racetrac            7    8     Shah, et al. v. Racetrac                   Nos. 01-6077/6451
                                                Petroleum Co.                         Petroleum Co.

   Plaintiffs thereafter spoke with James Smith, who assumed                    Confirmation of Purchase and Sale Agreement and paid
Main’s corporate role after Main departed. Plaintiffs                           $76,172.59 to the Holts, not including $5000 they previously
explained that they could not afford to risk their money on an                  tendered as earnest money. Plaintiffs then executed the lease
investment in Racetrac 773 without assurances that Defendant                    and contract with Defendant.         Before executing the
would not terminate the lease and contract on only thirty days                  agreements with Defendant, Siddarth Shah asked about the
notice. Smith echoed the earlier representations of the Holts                   termination clauses a final time. Smith assured him that “[i]f
and Main. According to Smith, “[Defendant] operates their                       you perform right we will not kick you out.” (J.A. at 145.)
business as a family. [Defendant] never kicks any dealer out
from that business as long as it perform[s] satisfactorily.”                       After executing the documents, Smith called Floyd Philpot,
(J.A. at 137.) Furthermore, when Plaintiffs requested a five                    Defendant’s general manager. Smith introduced Plaintiffs to
or ten year lease instead of Defendant’s one year                               Philpot, who welcomed Plaintiffs to “the Racetrac family.”
automatically renewable term, Smith advised Plaintiffs that                     (J.A. at 141-42.) During his conversation with Philpot,
Defendant would not agree to changes in the agreement, but                      Siddarth Shah reiterated his concerns about the termination
counseled Plaintiffs not “to worry about it . . . you will not                  clause, and Philpot repeated the same assurances.
have any problem if you perform right.” (J.A. at 148.)
Finally, Smith recommended that Plaintiffs check with other                       At no point did Defendant inform Plaintiff that, regardless
Raceway operators about Defendant’s reputation and                              of a dealer’s performance, Defendant used the termination
practices. Plaintiffs received similar assurances to those                      clauses to terminate an operator’s rights when Defendant sold
Defendant made.2                                                                a Raceway location.3 At the time of the transaction, and

   Based on these oral assurances, Plaintiffs began to proceed
with the transaction by completing a credit report for                                  3
                                                                                          Jackie Russell, Asset Manager in Defendant’s Real Estate
Defendant. Following approval of their credit, Plaintiffs                       Department Russell, testified that Philpot must have known Defendant
executed separate closing documents with the Holts and                          planned to sell Raceway 773:
Defendant at Raceway 773 on February 7, 1995. Smith
                                                                                        Q:       Did you ever speak with Mr. Floyd Philpot
attended on Defendant’s behalf. Plaintiffs executed a                                            regarding that store being offered for sale or
                                                                                                 any stores in his region being offered for sale?

         2
           Defendant often made these repre sentations. Charles and Diane               A:       Actually, he is in the decision-making to put
Farhat operated Raceway 773 before the H olts, from March 1 990 until                            them for sale, so he would have known before
January 199 3. The Farhats operated the business pursuant to a lease and                         me.
contract containing similar termination clauses, but Smith advised Charles
Farhat that Defendant would not terminate the contract or lease as long as              ....
he timely paid rent, operated the business in a satisfactory manner, and
did not abuse the premises. Lalit N. Desai considered operating a                       Q:       So if a Raceway is going up for sale, he
Raceway store in Athens, Tennessee, in 1994. When he asked Ma in about                           know s abo ut it?
the termination clauses, Main informed him that Defendant would not
terminate the lease or contra ct as long as he maintained the premises, p aid           A:       Yes.
rent on time, and otherw ise ran the business app ropriately.
Nos. 01-6077/6451                         Shah, et al. v. Racetrac      9   10   Shah, et al. v. Racetrac             Nos. 01-6077/6451
                                                   Petroleum Co.                 Petroleum Co.

unbeknownst to Plaintiffs, Defendant was already trying to                     On February 10, 1995, three days after the closing, Jackie
sell Raceway 773.4                                                          Russell, Asset Manager in Defendant’s Real Estate
                                                                            Department, mailed a bid package of Raceway stores
  Sometime in 1992 and again in 1994, Defendant contacted                   (including Raceway 773) to Worth L. Thompson of Fast
members of the Tennessee Oil Marketers Association to                       Petroleum. In her cover letter to Thompson, Russell
ascertain whether other oil companies were interested in                    instructed him that when “visiting the stores please use
purchasing some of Defendant’s properties, including                        discretion as our field employees or our Contract operators
Raceway 773. In November of 1995, representatives from                      are not aware of this offering.” (J.A. at 211.) To receive the
Downey Oil Co., Inc., contacted Defendant and inquired                      offer at all, Fast Petroleum had to execute a Confidentiality
about purchasing Raceway 773.                                               Agreement with Defendant. Philpot made the ultimate
                                                                            decision on Defendant’s behalf to keep a store’s offering
                                                                            hidden from its operators.
(J.A. at 205, 50.)
                                                                              After becoming operators, and with Defendant’s approval,
                                                                            Plaintiffs continued to invest money in the business. They
         4
             In his deposition Smith testified:
                                                                            installed a surveillance system, improved the coolers,
                                                                            increased inventory, and cut an overhang wall. Smith advised
         Q:          W hat was your und erstand ing of how                  Plaintiffs in May and December of 1995 that they had a
                     procedurally [Defendant] would sell a store            satisfactory performance history and that they did not need to
                     when there’s an operator in it?                        worry about Defendant terminating them. Smith also
         A:          The thirty-day clause.
                                                                            encouraged Plaintiffs to continue making improvements to
                                                                            the store.
         Q:          Okay. So is it fair to say then that it was your
                     understanding that when [Defendant] wanted               In January of 1996, Smith telephoned Plaintiffs and told
                     to sell a Raceway and there was an operator in         them that Defendant received an offer for the property.
                     it, that they would use the thirty-day clause?         Although Smith did not disclose the identity of the potential
         A:          If that’s what they cho se.
                                                                            purchaser, Downey Oil proposed to purchase Raceway 773 in
                                                                            December of 1995. Smith also advised Plaintiffs that they
         Q:          But that was your understanding of                     could bid on the property, but he did not provide them with
                     historica lly how Racetrac would procedurally          specific terms or other information necessary to properly
                     implement the sale of the store?                       formulate a bid. Plaintiffs asked for information in writing,
         A:          Sure.
                                                                            but failed to receive any. As a consequence, Plaintiffs did not
                                                                            make a bid.
         Q:          And you knew that at the time when you met
                     [Plaintiffs] initially, correct?                          On March 27, 1996, Defendant provided Plaintiffs with a
                                                                            letter serving as “a thirty-day notice of cancellation as
         A:          Yeah.                                                  provided in your Lease and Contract.” (J.A. at 179.)
(J.A. at 178).
                                                                            Plaintiffs vacated the store one month later.
Nos. 01-6077/6451                Shah, et al. v. Racetrac     11    12    Shah, et al. v. Racetrac              Nos. 01-6077/6451
                                          Petroleum Co.                   Petroleum Co.

                PROCEDURAL HISTORY                                  matter under advisement and requested additional briefing on
                                                                    the claim under the Tennessee Petroleum Marketing Practices
  Plaintiffs initially filed suit in the Circuit Court for Blount   Act and the claim for fraudulent concealment and
County, Ohio on December 9, 1996. Defendant removed the             nondisclosure. On July 31, 2001, the court granted
action to federal court on April 10, 1997. On February 3,           Defendant’s Motion for Summary Judgment. Plaintiffs
1998, the parties filed a joint stipulation of dismissal without    timely filed this appeal on August 29, 2001.
prejudice pursuant to Fed. R. Civ. P. 41(a)(1).
                                                                      Relying on its counterclaim, Defendant moved the district
  Plaintiffs filed a second complaint against Defendant in the      court to award costs and attorney’s fees under Fed. R. Civ. P.
Circuit Court for Blount County, Ohio on February 2, 1999.          54, but the court denied the request on October 12, 2001.
Plaintiffs also included Downey Oil Company, Inc.                   Defendant timely appealed this order on November 6, 2001.
(“Downey Oil”), as a defendant. Defendant again removed
the action to United States District Court, but the case was                                DISCUSSION
quickly remanded back to Blount County for lack of subject
matter jurisdiction because Downey Oil is a Tennessee                  We review summary judgment de novo. Eastman Kodak
corporation and Plaintiffs reside in Tennessee. The Plaintiffs      Co. v. Image Technical Servs., Inc., 504 U.S. 451, 466 n.10
then voluntarily dismissed Downey Oil as a Defendant, re-           (1992); Johnson v. Econ. Dev. Corp., 241 F.3d 501, 509 (6th
creating diversity jurisdiction, and Defendant again removed        Cir. 2001); Buckeye Cmty. Hope Found. v. City of Cuyhaoga
the matter to federal court on July 21, 1999.                       Falls, 263 F.3d 627, 633 (6th Cir. 2001). Summary judgment
                                                                    is appropriate when there is no genuine issue of material fact,
  Plaintiffs filed a second amended complaint setting forth         thereby entitling the movant to a judgment as a matter of law.
multiple causes of action including breach of contract, breach      Kocsis v. Multi-Care Mgmt., Inc., 97 F.3d 876, 882 (6th Cir.
of the implied covenant of good faith and fair dealing,             1996). In Anderson v. Liberty Lobby, Inc., 477 U.S. 242
promissory estoppel, promissory fraud, fraudulent or                (1986), the Supreme Court explained that “[t]he mere
negligent misrepresentation (including fraudulent                   existence of a scintilla of evidence in support of the plaintiff's
concealment and nondisclosure), violation of the Tennessee          position will be insufficient; there must be evidence on which
Consumer Protection Act, and violation of the Tennessee             the jury could reasonably find for the plaintiff.” Id. at 252.
Petroleum Trade Practices Act. Plaintiffs sought $579,000 in        Thus, our “inquiry, therefore, unavoidably asks whether
compensatory damages and $15 million in punitive damages.           reasonable jurors could find by a preponderance of evidence
                                                                    that the plaintiff is entitled to a verdict.” Id.
   Defendant generally denied the allegations, raised the
Statute of Frauds as an affirmative defense, and asserted              The “mere possibility” of a factual dispute does not suffice
counterclaims for breach of contract, conversion, and               to create a triable case. Gregg v. Allen-Bradley Co., 801 F.2d
attorney’s fees. On June 5, 2000, Defendant filed a Motion          859, 863 (6th Cir.1986). To defeat summary judgment, the
to Dismiss or, in the alternative, for Summary Judgment.            plaintiff "must come forward with more persuasive evidence
                                                                    to support [his] claim than would otherwise be necessary."
  On August 1, 2000, after Plaintiffs replied, the parties          Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S.
argued the motion before the trial court. The court took the        574, 587 (1986). If the defendant successfully demonstrates,
Nos. 01-6077/6451                   Shah, et al. v. Racetrac   13   14   Shah, et al. v. Racetrac              Nos. 01-6077/6451
                                             Petroleum Co.               Petroleum Co.

after a reasonable period of discovery, that the plaintiff cannot   demonstrate that “a promise or representation was made with
produce sufficient evidence beyond the bare allegations of the      the intent not to perform.” Fowler v. Happy Goodman
complaint to support an essential element of his or her case,       Family, 575 S.W.2d 496, 499 (Tenn. 1978). Tennessee courts
summary judgment is appropriate. Celotex Corp. v. Catrett,          have found promissory fraud in several cases. See, e.g.,
477 U.S. 317, 325 (1986). When determining whether to               Brungard v. Caprice Records, 608 S.W.2d 585, 590 (Tenn Ct.
reach this conclusion, we view the evidence and draw all            App. 1980) (finding promissory fraud when defendant’s talent
reasonable inferences in the light most favorable to the non-       scout made promises to induce aspiring singer to enter into
moving party. Adickes v. S.H. Kress & Co., 398 U.S. 144,            recording contract, when evidence showed scout had no intent
157 (1970); Williams v. Int’l Paper Co., 227 F.3d 706, 710          to keep the promises); Steed Realty v. Oveisi, 823 S.W.2d
(6th Cir. 2000); Smith v. Thornburg, 136 F.3d 1070, 1074            195, 200-201 (Tenn. Ct. App. 1991) (finding promissory
(6th Cir. 1998).                                                    fraud when real estate vendor induced vendees to purchase
                                                                    property by promising to make certain improvements, when
                               I.                                   evidence demonstrated vendor never intended to make the
                                                                    improvements).
   Plaintiffs first claim that Defendant committed promissory
fraud. The Tennessee Court of Appeals set forth the elements           Significantly, the parol evidence rule does not apply to
of an action for fraud in Stacks v. Saunders, 812 S.W.2d 587        allegations of fraudulent misrepresentation inducing a party
(Tenn. Ct. App. 1990):                                              to enter a contract because under Tennessee law, promissory
                                                                    fraud sounds in tort, not in contract. Brungard, 608 S.W.2d
  (1) an intentional misrepresentation with regard to a             at 588; Steed Realty; 823 S.W.2d at 202; Haynes v.
      material fact,                                                Cumberland Builders, 546 S.W.2d 228, 231 (Tenn. Ct. App.
                                                                    1976). As this Court explained in Cincinnati Insurance Co.
  (2) knowledge of the misrepresentation [sic]                      v. Avery, No. 89-5536, 1990 WL 132245, at *3 (6th Cir. Sept.
      falsity—that the representation was made                      12, 1990) (unpublished), Tennessee law “does not require
      “knowingly or “without belief in its truth,” or               ambiguity when certain defects in the formation of the
      “recklessly” without regard to its truth or falsity,          agreement are demonstrated; parol evidence can be admitted
                                                                    to contradict or vary the terms or enlarge or diminish the
  (3) that the plaintiff reasonably relied on the                   obligation of a written instrument upon a showing of fraud.”
      misrepresentation and suffered damage, and                    (citing McMillin v. Great S. Corp., 480 S.W.2d 152, 155
  (4) that the misrepresentation relates to an existing or          (Tenn. 1972)). Thus, the many oral statements Defendant
      past fact, or if the claim is based on promissory             made to Plaintiffs are relevant here.
      fraud, then the misrepresentation must embody a                  Plaintiffs argue that Defendant fraudulently induced them
      promise of future action without the present                  to enter into the lease and contract by promising not to use the
      intention to carry out the promise.                           termination clauses for anything other than poor performance.
Id. at 592 (citations omitted). To make a showing of                Plaintiffs appear to have established a triable case under
promissory fraud within this framework, a plaintiff must            Tennessee law as outlined in Stacks, 812 S.W.2d at 592.
                                                                    First, the numerous assurances made by Smith and Main were
Nos. 01-6077/6451               Shah, et al. v. Racetrac   15    16     Shah, et al. v. Racetrac                     Nos. 01-6077/6451
                                         Petroleum Co.                  Petroleum Co.

intentional and material. See id. Second, at least Smith knew       Despite Defendant’s assertion otherwise, there is no rule
he was offering false assurances, because he knew that           that a merger clause makes reliance on oral representations
Defendant used the termination clauses to remove operators       unreasonable per se so as to necessarily defeat a fraudulent
if Defendant sold the property. See id. Third, Plaintiff         inducement or promissory fraud claim.               Watkins is
reasonably relied on the multiple, uniform statements of         distinguishable in two respects. First, the Watkins Court
Defendant’s officials and suffered damages as a consequence.     made clear that it was reaching a fact-based conclusion, not
See id.       Finally, Plaintiffs must show that “the            announcing a new per se rule. The Watkins Court wrote that,
misrepresentation . . . embod[ies] a promise of future action    “[o]n the facts of this case, we find that Watkins’s reliance on
without the present intention to carry out the promise.” Id.     Iams’s representations was unreasonable as a matter of law.
Defendant promised a future action—not to use the                . . . In this case, the reasonableness of Watkins’s reliance
termination clauses to remove operators for any reason other     depends upon the effect of the integration clause.” Id. at 612
than mismanagement—and Defendant probably had no                 (emphasis added). In Watkins, Iams evidently made only one
intention of carrying out that promise, since (as Smith knew)    misrepresentation, see id. at 609, whereas Defendant made six
Defendant regularly used the termination clauses to remove       misrepresentations to Plaintiffs in response to Plaintiffs’
operators when Defendant wished to sell the property             obvious concerns. Second, Watkins relies on Ohio law for the
associated with the lease and contract. In fact, Raceway 773     principle that one acts unreasonably by relying on prior oral
was already for sale. At the very least, a genuine issue of      representations when a contract is completely integrated.5
material fact exists as to Defendant’s intent.                   See id. at 612 (citing Bollinger, Inc. v. Mayerson, 689 N.E.2d
                                                                 62, 69 (Ohio 1996)). Promissory fraud under Tennessee law
  Defendant claims that Plaintiffs cannot meet the third         does require reasonable reliance, see, e.g., Dobbs v. Guenther,
component of the test for promissory fraud because,              846 S.W.2d 270, 274 (Tenn Ct. App. 1992), but nothing
Defendant argues, it is unreasonable per se to rely on oral      suggests the Tennessee judiciary has either adopted or would
representations when the contract contains an integration        adopt a per se rule that an integration clause makes it always
clause. Defendant relies on Watkins & Son Pet Supplies v.        unreasonable to rely on prior oral representations. See Loew
Iams Co., 254 F.3d 607 (6th Cir. 2001), in which this Court      v. Gulf Coast Dev., Inc., No. 01-A-01-9010-CH-00374, at
examined the non-renewal of a distributorship contract           1991 WL 220576, at *5 (Tenn. Ct. App. Nov. 1, 1991)
between Watkins as distributor and Iams, a pet food              (unpublished) (noting that integration clauses “should not be
manufacturer. Watkins claimed Iams represented that if           used to restrict the scope of proof” in fraud claims) (citing
Watkins became an exclusive Iams distributor, Iams would         Young v. Cooper, 203 S.W.2d 376, 382-83 (1947)).
make it the exclusive Iams distributor in Michigan when Iams
established an exclusive territory distribution system. Id. at
609. Watkins alleged that it relied on these representations,
but Iams terminated its agreement with Watkins and gave the               5
                                                                           To the extent Watkins is unclear, it is useful to consider that
exclusive contract to a competitor. Id. Watkins alleged          Watkins relies on Bollinger, Inc. v. Mayerson, 689 N.E .2d 6 2 (O hio
promissory fraud under Ohio law. Id. at 611. The Watkins-        1996), and Bollinger also never established a per se rule. See Bollinger,
Iams contract had a merger clause, however, and this Court       689 N.E.2d at 70 (“Furthe r, und er the fa cts of this case, Bollinger co uld
                                                                 not have justifiably relied on any alleged oral promise on the part of
found that it was unreasonable for Watkins to rely on Iams’      Mayerson to fund the New Comp any without limit.”) (emphasis added)).
oral statements when the contract contained a merger clause.
Nos. 01-6077/6451                      Shah, et al. v. Racetrac          17     18   Shah, et al. v. Racetrac             Nos. 01-6077/6451
                                                Petroleum Co.                        Petroleum Co.

 For these reasons, Plaintiffs have raised a genuine issue of                   recover damages even for negligent violations. Menuskin v.
material fact with respect to their promissory fraud claim.6                    Williams, 145 F.3d 755, 767-68 (6th Cir. 1998).
                                    II.                                            Plaintiffs presented evidence that Defendant fraudulently
                                                                                represented it would not invoke the termination clauses
   Related to the promissory fraud claim, Plaintiffs allege                     except for poor performance. These assurances induced
Defendant violated the Tennessee Consumer Protection Act                        Plaintiffs to sign the lease and contract with Defendant, which
(“TCPA”), Tenn. Code Ann. § 47-18-109. The TCPA grants                          violated the TCPA. See TENN. CODE ANN . § 47-18-104(27).
a private right of action to consumers who suffer a loss due to                 The misrepresentations also made the transaction
“unfair or deceptive acts or practices” as defined in the Act.                  impermissibly appear as though it “involve[d] rights,
Id. In particular, the law proscribes “[r]epresenting that a                    remedies, or obligations that it does not have or involve.” Id.
consumer transaction confers or involves rights, remedies, or                   at § 47-18-104(12).
obligations that it does not have or involve.” Id. at § 47-18-
104(12). The TCPA also prohibits “[e]ngaging in any other                          The district court rejected Plaintiffs’ TCPA claim because
act or practice which is deceptive to the consumer or to any                    the court found Defendant did not commit the prerequisite
other person.” Id. at § 47-18-104(27). The Act’s scope                          fraudulent conduct. Defendant reiterates this position on
includes “the advertising, offering for sale, lease or rental . . .             appeal. Since, as discussed above, Plaintiffs have raised a
of any goods, services, property, tangible or intangible, real,                 genuine issue of material fact as to whether Defendant
personal or mixed.” Id. at § 47-18-103(9).                                      committed promissory fraud, Plaintiffs have also raised a
                                                                                genuine issue of material fact as to whether Defendant
   Plaintiffs who successfully press allegations of promissory                  violated the TCPA.
fraud often have TCPA claims as well. See, e.g., Steed Realty
v. Oveisi, 823 S.W.2d 195, 201 (Tenn Ct. App. 1991);                                                         III.
Brungard v. Caprice Records, 608 S.W.2d 585, 589 (Tenn.
Ct. App. 1980). Moreover, this Court has held that the TCPA                       Plaintiff next argues that the doctrine of promissory
does not require deceptive intent, which means a plaintiff may                  estoppel bars Defendant from using the termination clauses
                                                                                because of the representations Philpot made after Plaintiffs
                                                                                executed the agreement. This Court recognized and applied
         6                                                                      the generally accepted definition of promissory estoppel in
           The district court made another argument that Defendant
evide ntly abandoned on appeal. The court below found it very significant       Owen of Ga., Inc. v. Shelby County, 648 F.2d 1084, 1095 (6th
that, in response to Plaintiffs’ effort to negotiate more favo rable terms,     Cir. 1981):
Smith told Plaintiffs that “[Defendant’s] policy is not to change the lease.”
(J.A. at 54.) According to the district court, this put Plaintiffs on “notice     Where one makes a promise which the promisor should
of Mr. Smith’s lack of authority to va ry the lease so that Mr. Smith’s
representations about future action by [Defendant] are not binding on
                                                                                  reasonably expect to induce action or forbearance of a
[De fendant].” (Id.) This is unpersuasive . Smith, who represented                definite and substantial character on the part of the
Defendant, only said that he would not change the lease, not that he could        promissee, and where such promise does in fact induce
not change the lease. Moreover, even reading Smith’s remark as the                such action or forbearance, it is binding if injustice can
district court did, P laintiffs could still have reasonably believed Main (or     be avoided only by enforcement of the promise.
some other corp orate official) had the authority to change the lease.
Nos. 01-6077/6451                      Shah, et al. v. Racetrac         19     20   Shah, et al. v. Racetrac              Nos. 01-6077/6451
                                                Petroleum Co.                       Petroleum Co.

(citing Foster & Creighton Co. v. Wilson Contracting Co.,                      Paschall v. Mooney, 110 F.Supp. 749, 751 (D.C.N.Y. 1953)
579 S.W.2d 422, 427 (Tenn Ct. App. 1978)).                                     (quoting Meredith v. City of Winter Haven, 320 U.S. 228,
                                                                               234-35 (1943)).
  Defendant makes the same claim it made with respect to
promissory fraud, that Plaintiffs could not have reasonably                       Although not absolutely dispositive, Tennessee case law is
relied on Philpot’s statements after the execution because the                 still very helpful.      The fact-specific nature of any
lease and contract contained an integration clause. Defendant                  “reasonableness” inquiry inherently lends itself to flexibility.
again points to Watkins for the principle that it is                           Tennessee courts have found promisees to have reasonably
unreasonable per se to rely on oral representations when the                   relied even when something suggested they should not have
contract contains an integration clause. As already explained,                 done so. See, e.g., Alden v. Presley, 637 S.W.2d 862, 863-64
Watkins, which applies Ohio law, does not stand for such a                     (Tenn. 1982) (finding promisee stated promissory estoppel
broad proposition.7 Moreover, Tennessee law has not clearly                    claim by reasonably relying on promisor’s promise even
defined when reliance is reasonable enough to support a                        though promisee continued to rely on promise with
promissory estoppel claim. Calabro v. Calabro, 15 S.W.3d                       knowledge that promisor was dead); Bank of Gleason v.
873, 879 n.4 (Tenn. Ct. App.1999) (“Courts have not reached                    Weakley Farmers Coop., Inc., No. W1999-02161-COA-R3-
a uniform standard to determine if the promisor's words and                    CV, 2000 Tenn. App. LEXIS 303, at *9 (Tenn. Ct. App.
actions justify the promisor's reliance.”); Amacher v. Brown-                  Apr. 9, 2000) (enforcing promise despite lack of agreement
Forman Corp., 826 S.W.2d 480, 482 (Tenn. Ct. App. 1991)                        regarding type or quantity of product to be supplied)
(“The courts have not worked out a uniform standard to                         (unpublished).
determine whether a defendant's words or actions justify the
plaintiffs’ reliance.”). Nevertheless,                                           Finally, when diversity jurisdiction forces us to grapple
                                                                               with an uncertain question of state law, we should approach
  the fact that the state law here involved may seem to be                     the problem with the background assumption that the state
  uncertain and that the question has not yet been answered                    judiciary would not formulate a new rule of equity that would
  by the State Court of Appeals or by an Appellate Court                       produce an unfair result. Philpot served as Defendant’s
  of the State does not relieve this court of its duty, since                  general manager. When, in response to the Plaintiffs’ direct
  jurisdiction has been properly invoked, “to decide                           query, Philpot told Plaintiffs that the termination clauses
  questions of state law whenever necessary to the                             would not be used except if Plaintiffs failed to perform
  rendition of a judgment.”                                                    satisfactorily, Philpot should have expected his assurances to
                                                                               “induce action or forbearance of a definite and substantial
                                                                               character on the part of the promisee.” Owen of Georgia,
                                                                               Inc., 648 F.2d at 427. At the very least, “there are disputes of
         7                                                                     material fact as to the alleged promises of defendant, the
           Defendant’s entire Watkin s argument hinges on one sentence,
which is somewhat misleading when removed from context: “[i]f a                plaintiff[s’] action and response thereto, and any inferences
written contract is completely integrated, it is unreasonable as a matter of
law to rely on parol representations or promises within the scope of the
contract made prior to its execution.” Watkins, 254 F.3d at 612 (em phasis
added). Philpot misled Plaintiffs about the termination clauses after
Plaintiffs executed the agreem ent.
Nos. 01-6077/6451                      Shah, et al. v. Racetrac          21     22     Shah, et al. v. Racetrac                     Nos. 01-6077/6451
                                                Petroleum Co.                          Petroleum Co.

that legitimately may be drawn therefrom.”8 Calabro, 15                         reposes a trust and confidence in the other,” and (3) “[w]here
S.W.3d at 879.                                                                  the contract or transaction is intrinsically fiduciary and calls
                                                                                for perfect good faith.” Domestic Sewing Mach. Co. v.
                                    IV.                                         Jackson, 83 Tenn. 418, 425 (1885).
   Plaintiffs claim that Defendant fraudulently concealed                         No previous fiduciary relationship existed between the
important information. As the Tennessee Supreme Court                           parties, nor was this lease and contract agreement
explained, “[t]he tort of fraudulent concealment is committed                   “intrinsically fiduciary.” See Domestic Sewing, 83 Tenn. at
when a party who has a duty to disclose a known fact or                         425. Nor were the parties in a confidential relationship.
condition fails to do so, and another party reasonably relies                   Tennessee law defines a confidential relationship as one
upon the resulting misrepresentation, thereby suffering                         created when “confidence is placed by one on the other and
injury.” Chrisman v. Hill Home Dev., Inc. 978 S.W.2d 535,                       the recipient of that confidence is the dominant personality
538-39 (Tenn.1998) (citing Simmons v. Evans, 206 S.W.2d                         with the ability because of that confidence to influence and
295, 296 (Tenn.1947)). The duty to disclose arises in three                     exercise dominion over the weaker or dominated party.”
distinct circumstances: (1) “[w]here there is a previous                        McGuirk Oil Co., Inc. v. Amoco Oil Co., 889 F.2d 734, 737-
definite fiduciary relation between the parties,” (2) “[w]here                  38 (6th Cir. 1989) (quoting Edwards v. Travelers Ins. of
it appears one or each of the parties to the contract expressly                 Hartford, 563 F.2d 105, 115 (6th Cir. 1977)). Plaintiffs and
                                                                                Defendant in the instant case reached an agreement at arms’
                                                                                length, and Defendant did not “exercise dominion” over
         8                                                                      Plaintiffs. None of the Domestic Sewing categories applies;
           Defendant never argues that the Statute of Frauds, Tenn. Code
Ann. § 29-2-101(a)(5), would interfere with the operation of promissory
                                                                                thus, Defendants did not have a duty to disclose.
estop pel. Thus, we need not address this co ncern. Security Watch, Inc.
v. Sentinel Sys., Inc., 176 F.3d 36 9, 375 (6th Cir. 1999) (noting issues not      Plaintiffs argue for a broader interpretation of Tennessee
addressed in appellate brief are deemed abandoned); United States v.            law by citing a few cases in which the Tennessee Court of
Elder, 90 F.3d 11 10, 1118 (6th Cir. 1996) (finding that issues adverted to     Appeals analyzed a fraudulent concealment claim without
by an appellant in a perfunctory manner, unaccompanied by some effort           referring to the limits Domestic Sewing imposes. See, e.g.,
at developed argumentation, are deemed waived). Tennessee’s Statute of
Frauds may, in fact, create a problem for a promissory estoppel claim.
                                                                                Garrett v. Mazda Motors of Am., 844 S.W.2d 178 (Tenn. Ct.
See S.I.B.C. v. Ford Mtr. Cred it Co., 911 S.W.2d 720, 723                      App. 1992). Despite a few outliers, federal courts considering
(Tenn.App.1995) (declining to recognize promissory esto ppe l as an             fraudulent concealment under Tennessee law have made clear
exception to the Statute of Frauds); but see Engenius Entm’t, Inc. v.           that Domestic Sewing is the governing law.9 See Aetna Cas.
Herenton, 971 S.W.2d 12, 20-21 (Tenn. App. 1997) (“Although the
statute of frauds may prevent the defendants from seeking enforcement
of an alleged oral agreement under these equitable doctrines [including                  9
promissory estoppel], the statute does not preclude [promisee] from                        W e recognize that in Simmons v. Evans, 206 S.W.2d 295, 296
recovering damages for unjust enrichment or detrimental reliance.”). In         (Tenn. 1947), the Tennessee Supreme Court held that “each party to a
any event, Plaintiffs’ part performance would exempt D efendant’s oral          contract is bo und to disclose to the other a ll he may know respecting the
promise from the Statute of Frauds. See Blasing ame v. Am . Materials,          subject matter materially affecting a correct view of it.” Subsequent
Inc., 654 S.W.2d 659, 663 (Tenn.19 83). Plaintiffs had already paid             Tennessee opinions have relied on Simmons and related decisions for the
Defendant substantial sums in rent and sp ent to m ake improvements to          proposition that each party to a contract has a duty to disclose to the other
Raceway 7 73 b ased on P hilpot’s guarantee.                                    all material knowledge of which the party is aware respecting the subject
Nos. 01-6077/6451                      Shah, et al. v. Racetrac          23     24    Shah, et al. v. Racetrac                   Nos. 01-6077/6451
                                                Petroleum Co.                         Petroleum Co.

& Sur. Co. v. FDIC, No. 90-5292, 1991 WL 23543, at *8 (6th                      “does not support an independent cause of action for failure
Cir. Feb. 26, 1991) (unpublished); French v. First Union Sec.,                  to perform or enforce in good faith.” See TENN. CODE ANN .
Inc., 209 F. Supp. 2d 818, 825 (M.D. Tenn. 2002); Morgan v.                     § 47-1-203. As one court explained, “good faith or the lack
Wellman, Inc., 165 F. Supp.2d 704, 721 (E.D. Tenn. 2001).                       of it may be an element or circumstance of recognized torts,
Thus, the district court properly granted Defendant summary                     or breaches of contracts, but it does not appear that good faith,
judgment on Plaintiffs’ fraudulent concealment and                              or the lack of it is, standing alone, an actionable tort.”
nondisclosure claim.                                                            Solomon v. First Am. Nat’l Bank, 774 S.W.2d 925, 945
                                                                                (Tenn. Ct. App. 1989). Breach of the implied covenant of
                                    V.                                          good faith and fair dealing is not an independent basis for
                                                                                relief.
   Plaintiffs next allege that Defendant breached the implied
covenant of good faith and fair dealing. In Tennessee, “there                                                     VI.
is implied in every contract a duty of good faith and fair
dealing in its performance and enforcement.” TSC Indus.,                           Plaintiffs aver that the assurances Defendant made after
Inc. v. Tomlin, 743 S.W.2d 169, 173 (Tenn. Ct. App. 1987);                      Plaintiffs executed the lease agreement constitute an oral
see also TENN. CODE ANN . § 47-1-203 (imposing an                               modification of the contract. Specifically, Philpot told
obligation of good faith and fair dealing upon parties in the                   Plaintiffs that Defendant would not use the termination
performance or enforcement of contracts). The nature of the                     clauses for any reason other than inadequate performance.
duty “depends upon the individual contract in each case.”                       Plaintiffs claim that under the agreement, as modified,
TSC Indus., 743 S.W.2d at 173.                                                  Defendant would not terminate Plaintiffs for any reason other
                                                                                than inadequate performance. When Defendant invoked the
  The official commentary to the statute creating the implied                   termination clauses to sell the property, Plaintiffs argue
covenant of good faith and fair dealing explains that the law                   Defendant breached the orally modified agreement.
                                                                                   In Tennessee, “[a]fter a written contract is made, it may be
                                                                                modified by the express words of the parties in writing, as
matter of the contra ct, other than the know ledge that one may ga in           well as by parol.”10 Galbreath v. Harris, 811 S.W.2d 88, 91
through the exercise of ordinary diligence. See, e.g., Gray v. Boyle Inv.
Co., 803 S.W .2d 6 82, 6 85 (Tenn. Ct. A pp. 1 990 ); Lonning v. Jim Walter     (Tenn Ct. App. 1991); see also Co-Operative Stores Co. v.
Hom es, 725 S.W .2d 6 82, 6 85 (Tenn. Ct. App . 198 6); Patel v. Bayliff, No.   United States Fid. & Guar. Co., 195 S.W. 177, 180 (Tenn.
W2002-00238-COA-R3-CV, 2003 WL 11 93248, at *5 (Tenn. Ct. App.                  1917). The parol evidence rule is inapplicable to evidence of
Mar. 12, 200 3) (unpublished). However, these cases ha ve gen erally been       oral modification because the rule will “permit testimony to
limited to real estate purchases, see Patel, 2003 WL 1993 248 , at *5           . . . show a subsequent modification to a written agreement.
(noting the use of the doctrine in the rea l estate context), and used car
sales, see Mazda Motors of Am., 844 S.W .2d at 181 ; Patton v. McHone,          Once admitted, this evidence does not in any way deny what
822 S.W .2d 608 , 616 n.14 (Te nn. Ct. A pp. 1 991 ). W e dec line to
anticipate that the Tennessee Supreme Court would extend the Simmons
and Lonning cases to the context of a franchise dispute. Cf. O’Neil v.                   10
Burger Chef Sys., Inc., 860 F.2d 1341, 13 46 (6th Cir. 1988) (questioning                  This is true even if the contract expressly specifies that the
the applicability of Lon ning to a suit by a franchisee alleging that the       parties may only modify the agreement in writing. Co-Operative Stores
parent of the franchiso r had not disc losed its intent to sell franchiso r).   Co. v. United States Fid. & Guar. Co., 195 S.W. 17 7, 180 (T enn. 1917).
Nos. 01-6077/6451                Shah, et al. v. Racetrac    25   26     Shah, et al. v. Racetrac                     Nos. 01-6077/6451
                                          Petroleum Co.                  Petroleum Co.

the original agreement expressed; however, it merely              Buice, 250 S.W.2d at 48. Plaintiffs altered their position to
demonstrates that parties may have exercised their right to       their detriment by installing a surveillance system, improving
modify the written agreement.” Golden Constr. Co. v.              the coolers, increasing inventory, and modifying the store’s
Greene, No. 83-286, 1987 WL 18061, at *1 (Tenn Ct. App.           layout. Plaintiffs might not have done so if they believed
Oct. 9, 1987) (unpublished); see also GRW Enters., Inc. v.        Defendant could terminate their lease and contract for reasons
Davis, 797 S.W.2d 606, 610-11 (Tenn. Ct. App. 1990).              other than poor performance.11
  Defendant suggests that any oral modification would fail          Since part performance occurred, the Statute of Frauds did
under Tennessee’s Statute of Frauds. See TENN. CODE. ANN .        not prevent Defendant from modifying the agreement after its
§ 29-2-101 (1980). The Statute of Frauds requires that parties    execution. Because Defendant invoked the termination
memoralize certain types of contracts in writing. Huffine v.      clauses without alleging that Plaintiffs mismanaged Raceway
McCampbell, 257 S.W. 80, 89 (1923). The Statute of Frauds         773, Plaintiffs have at least raised a genuine issue of material
does not apply, however, once part performance occurs.            fact as to whether an oral modification occurred and, if so,
Blasingame v. Am. Materials, Inc., 654 S.W.2d 659, 663            whether Defendant breached the revised agreement.
(Tenn.1983); Foust v. Carney, 205 Tenn. 604, 329 S.W.2d
826, 829 (1959); Buice v. Scruggs Equip. Co., 250 S.W.2d 44,                                          VII.
47 (Tenn.1952); Schnider v. Carlisle Corp., 65 S.W.3d 619,
621 (Tenn. Ct. App. 2001). The Tennessee Supreme Court               Finally, Plaintiffs claim Defendant violated the Tennessee
explained the “part performance” exception this way:              Petroleum Trade Practices Act (TPTPA), Tenn. Code Ann.
                                                                  § 47-25-601. The TPTPA regulates petroleum trade practices
  Th[e] doctrine of partial performance to take the verbal        in Tennessee. See TENN. CODE ANN . § 47-25-601. Most
  contract out of the operation of the Statute of Frauds is       relevant here, the law provides that “[a]ny vertically
  purely an equitable doctrine and is a judicial                  integrated producer engaged in a franchise agreement with a
  interpretation of the acts of the parties to prevent frauds.    dealer shall give sixty (60) days’ notice to such dealer prior to
  The acts of the appellant relied on as partial performance      termination or nonrenewal of such franchise agreement.” Id.
  had been done by him in pursuance to the averred
  contract and agreement and are clearly referable thereto.
  “The plaintiff must be able to show such acts and                        11
                                                                               The district court dispatches with Plaintiff’s breach of contract
  conduct of the defendant as the court would hold to             claim in just a few sentences: “In this case, plaintiffs do not dispute the
  amount to a representation that he proposed to stand by         fact that both the lease and the contract provide that ‘either party may give
  his agreement and not avail himself of the statute to           thirty (30) days written notice’ to terminate the initial lease or agreement
                                                                  as well as any extended lease or agreement. Nor is there any dispute that
  escape its performance; and also that the plaintiff, in         [De fendant] gave plaintiffs proper written notice of its intent to terminate
  reliance on this representation, has proceeded, either in       both the lease and the contra ct. Hence, plaintiffs do not, and cannot, point
  performance or pursuance of his contract, so far to alter       to any sp ecific provision o f either the contact or lease which was
  his position as to incur an unjust and unconscious [sic]        breached.”      (J.A. at 4 7) (em phasis add ed).        The district court
  injury and loss, in case the defendant is permitted after       misunderstands Plaintiffs’ argument. Plaintiffs are not arguing that
                                                                  Defendant breached the lease and contra ct agreement as originally
  all to rely upon the statutory defense." 49 Am. Jur., Sec.      written. Rather, Plaintiffs contend that Defendant breached the lease and
  427, page 733.                                                  contract agreem ent as orally modified.
Nos. 01-6077/6451                      Shah, et al. v. Racetrac         27     28     Shah, et al. v. Racetrac                    Nos. 01-6077/6451
                                                Petroleum Co.                         Petroleum Co.

at § 47-25-604(a)(1). Plaintiffs allege that Defendant violated                  The TPTPA defines “franchise” as follows:
this provision by affording only thirty days notice.
                                                                                 (5) (A) "Franchise" means a contract or agreement
  To receive the Act’s protection, Plaintiffs must show (1)                      between a dealer and a distributor or producer of
that Defendant is a “vertically integrated producer;” (2) that                   petroleum products or other related products which
Defendant “engaged in a franchise agreement;” and that (3)                       grants to the dealer the right and authority to sell or use
Plaintiffs qualify as a “dealer.”12                                              in connection with the sale of petroleum products, motor
                                                                                 fuel, or related products, such as tires, batteries, etc., a
  The TPTPA defines “vertically integrated producer” as “a                       petroleum trademark, trade name, service mark, or other
producer controlling all phases of petroleum production and                      identifying symbol or name.
sale from the well through distribution to dealers as defined
herein.”13 Id. at § 47-25-602(11). Although the record does                      (B) "Franchise" includes a contract or agreement under
not include information about the entire scope of Defendant’s                    which such dealer is granted authority to occupy
business operations, it appears Defendant could qualify as a                     premises owned, leased, or in any way controlled by a
“vertically integrated producer.” It is significant that the                     producer or distributor, which premises are to be
contract between Plaintiffs and Defendant states that                            employed for the sale or distribution of petroleum or
Defendant “owns and retains all title to the fuel at [Raceway                    related products under the producer or distributor's
773] until sold to the customer.” (J.A. at 87.) Neither                          petroleum trademark, trade name, service mark, or other
Defendant nor the court below contends that Defendant is not                     identifying symbol or name which is controlled by the
a “vertically integrated producer” for any reason other than                     distributor or producer.
that Defendant does not distribute to “dealers” as defined in
the TPTPA. Thus, if Plaintiffs are dealers, then Defendant                     TENN. CODE ANN . § 47-25-602. Pursuant to this definition,
can qualify as a “vertically integrated producer.”14                           the lease and contract between Plaintiffs and Defendant
                                                                               creates a franchise relationship. Plaintiffs were “granted
                                                                               authority” to “lease” premises “employed for the sale or
         12                                                                    distribution of petroleum . . . under the producer or
           The district court found that Plaintiffs did not qualify as         distributor’s petroleum trademark.” Id.
“dealers” within the meaning of the TPTP A, and did not address whether
Defendant is a “vertically integrated producer” or whether Defendant
“engaged in a franchise agreement.”
                                                                                  Defendant argues that the contract expressly provided that
                                                                               it would not create a franchise relationship. The contract did
         13
            The TP TP A sep arately d efines “ve rtical integration” as “the
                                                                               include several disclaimers purporting to guarantee that “this
ownership or co ntrol of all phase s of the production of petroleum products   contract does not create a franchise relationship under state or
including the drilling, pumping, refining, distribution, and resale of such
petroleum products by a person, firm, partne rship or corporation or from
the well to the gasoline pump.” T E N N . C ODE A N N . § 47 -25-6 02(11).

         14
                                                                               oil wells, for instance. The issue o f whether Defendant is a “vertically
            Conceiva bly, Defendant could estab lish on remand that it is      integrated producer” was briefed by the parties for the trial court, but the
not a “vertically integrated producer” for some reason other than that         trial court did not address the question in its short memorandum and
Plaintiffs do not qualify as “dealers.” Perhaps Defendant does not own         order.
Nos. 01-6077/6451                Shah, et al. v. Racetrac     29    30    Shah, et al. v. Racetrac               Nos. 01-6077/6451
                                          Petroleum Co.                   Petroleum Co.

federal law.” (J.A. at 42.) It would defeat the purpose of the        The purpose of this part is to regulate vertical integration
TPTPA (and many other statutes like it) if parties could              of the petroleum industry in Tennessee, it being the
simply “opt-out” of otherwise applicable legislation by               conclusion of the general assembly hereby expressed that
declaring that the law would not apply to their particular            vertical integration tends to operate in restraint of free
transaction. If the relationship between Plaintiffs and               trade and inhibits full and free competition and,
Defendant qualifies as a “franchise relationship” under the           therefore, tends to increase the price of petroleum and
terms of the TPTPA, which it does, how the parties describe           related products and services . . . .
their relationship is irrelevant. Petereit v. S.B. Thomas, Inc.,
853 F. Supp. 55, 60 (D. Conn. 1993), aff'd in relevant part, 63     TENN. CODE ANN . § 47-25-603(a). Since the district court
F.3d 1169 (2d Cir. 1995) (holding, when interpreting the            never made the necessary factual findings, it is unclear
Connecticut Franchise Act, that a court must determine              whether Defendant qualifies as a “vertically integrated
parties’ relationship by reality rather than disclaimers and        producer.” It is undeniable, however, that the Tennessee
labels in a contract).                                              legislature intended the TPTPA to regulate the activities of
                                                                    vertically integrated producers. As a consequence, this Court
   Tenn. Code Ann. § 47-25-602(2) defines dealer as “any            should broadly interpret the definition of dealer by including
person, firm, corporation or partnership engaged in the sale of     those operators, like Plaintiffs, who are involved in the
petroleum products to the public at retail.” The statute then       transfer of title to petroleum products. Otherwise, vertically
defines “sale at retail” as “any transfer, made in the ordinary     integrated producers could avoid the very legislation designed
course of trade or in the usual prosecution of the seller’s         to regulate their activity by simply failing to relinquish title to
business, of title to tangible personal property to the purchaser   their petroleum until it reaches the consumer—which, not
for use or consumption and/or for valuable consideration.”          coincidentally, is part of what “vertical integration” means.
TENN. CODE ANN . § 47-25-602(9). Defendant argues that
Plaintiffs cannot meet this definition because, pursuant to the       A franchise agreement existed and Plaintiffs qualify as
contract and lease agreement, Plaintiffs never had title to the     “dealers” within the meaning of the TPTPA. At this stage,
gasoline. Yet, nothing in the definition actually requires the      we lack the factual basis to conclude that no genuine issue of
dealer to hold title to the petroleum—rather, the dealer must       material fact exists as to whether Defendant is a “vertically
be involved in its “transfer.” The statute does not define          integrated producer.”
“transfer.”
                                                                                                  VIII.
  Legislative intent should guide this Court’s attempt to
apply an ambiguous statutory provision to a particular set of          Defendant counterclaimed for $60,000, including
facts. Security Ins. Co. of Hartford v. Kevin Tucker & Assoc.,      $51,354.25 for attorney’s fees and $8,645.75 for alleged
Inc., 64 F.3d 1001, 1007 (6th Cir. 1995) (“If a statute is found    breach of contract and conversion of personal property.
to be ambiguous, the ambiguity is resolved in favor of              Correspondingly, Defendant moved for an award of
upholding the statute and giving effect to legislative intent.”).   attorney’s fees under Fed. R. Civ. P. 54(d)(2)(B). The district
The Tennessee legislature made its intent clear by including        court denied the motion because it lacked supplemental
a “purpose” provision in the TPTPA:                                 jurisdiction over Defendant’s counterclaim and remanded the
                                                                    case to state court. “[I]n an effort to discourage defendant
Nos. 01-6077/6451                      Shah, et al. v. Racetrac         31     32    Shah, et al. v. Racetrac                  Nos. 01-6077/6451
                                                Petroleum Co.                        Petroleum Co.

from amending its counter-complaint in state court to increase                   The pertinent section of the guaranty provides that
the amount of attorney’s fees, and therefore the amount in                     “[g]uarantor agrees to pay all costs of collection, including
controversy, in order to again remove the matter,” the trial                   reasonable attorney’s fees and all costs of suit, in the
court also stated that Defendant’s claim for fees lacked merit.                enforcement of any right of the Lessor hereunder.”
(J.A. at 395.)                                                                 Defendant’s counterclaim for fees, however, does not involve
                                                                               Defendant’s attempt to enforce any rights under the
   Our decision to reinstate some of Plaintiffs’ claims makes                  guaranty. 16
the supplemental jurisdiction issue moot, because Plaintiff
now has a triable case worth more than the jurisdictional                                               CONCLUSION
minimum. Nevertheless, we will still consider Defendant’s
counterclaim for fees because Defendant bases its                                For the aforementioned reasons, we AFFIRM the district
counterclaim on substantive provisions of the disputed                         court’s rulings on fraudulent concealment and nondisclosure,
agreement governed by Tennessee law, which makes the                           the implied duty of good faith and fair dealing, and the
counterclaim a contract action rather than a procedural                        counterclaim for attorney’s fees, but REVERSE the district
motion. We review “a decision regarding the award of                           court’s decisions on promissory fraud, breach of contract,
attorney's fees for an abuse of discretion.” Nichols v.                        promissory estoppel, the Tennessee Consumer Protection Act,
Muskingum Coll., 318 F.3d 674, 682 (6th Cir. 2003).                            and the Tennessee Petroleum Trade Practices Act.

   In pertinent part, the attorney’s fees clause of the contract
states that “if Contractee at any time rightfully seeks to
recover possession of said premises and payment due and
Contractee is obstructed or resisted therein and any litigation
ensues, Contractors shall pay and discharge all costs and
attorney’s fees and expenses that shall arise from enforcing
the covenants of the Contract.”
  None of the causes of action involve Defendant regaining
possession of Raceway 773 or recovering payment due.
Thus, the attorney’s fees clause does not entitle Defendant to
recover for defending Plaintiffs’ claims.15
                                                                                        16
                                                                                           Defendant cites two cases, Hosier v. Crye-Leike, M2000-
                                                                               01182-COA-R3-CV, 2001 WL 799740 (Tenn. Ct. App. July 17, 2001)
                                                                               (unpublished), and Pic ‘N Pay Stores v. Jessee, No. 79, 1986 WL 2148
         15                                                                    (Tenn. Ct. Ap p. Feb. 12 ,198 6) (unpub lished). Both of these cases are
            Another well-established rule of contract construction points
                                                                               distinguishable because each involves claims in which a party to a
toward the same conclusion: “the language of the contract, where
                                                                               contract attempted to enforce its rights under the guaranty. See Hosier,
ambiguous, will be construed most strongly against the party who drew
                                                                               200 1 W L 79 997 40, at *3; Pic ‘N Pay, 198 6 W L 2148, at *1.
it.” Hanover Ins. Co. v. Haney, 425 S.W.2d 590, 592 (Tenn. 1968 ); see
also AP CO Am usem ent C o., Inc. v. Wilkins Family Rests. of Am., Inc., 673
S.W .2d 5 23, 5 28 (Tenn. Ct. A pp. 1 984 ).