Court Opinion

ID: 6932019
Source: CourtListenerOpinion
Date Created: 2022-07-24 00:07:56.155898+00
Date Added: 2024-06-11T16:07:14.117147
License: Public Domain

ERVIN, Chief Judge,
dissenting:
I agree with the majority that the Lanham Act does not preempt Virginia’s petroleum franchise provisions. We part ways, however, because I do not agree that the Petroleum Marketing Practices Act, 15 U.S.C. § 2801 et seq. (PMPA), through the operation of the Supremacy Clause, U.S. Const, art. VI, § 2, preempts these Virginia laws. Accordingly, I dissent.
I.
“Where a state statute conflicts with or frustrates federal law, the former must give way.” CSX Transportation, Inc. v. Easterwood, — U.S. -, -, 113 S.Ct. 1732, 1737, 123 L.Ed.2d 387, 396 (1993).
In the interest of avoiding unintended encroachment on the authority of the States, however, a court interpreting a federal statute pertaining to a subject traditionally governed by state law will be reluctant to find pre-emption. Thus, preemption will not lie unless it is “the clear and manifest purpose of Congress.”
Id. at-, 113 S.Ct. at 1737, 123 L.Ed.2d at 396 (quoting Rice v. Santa Fe Elevator Corp., 331 U.S. 218, 230, 67 S.Ct. 1146, 1152, 91 L.Ed. 1447 (1947)); accord Cipollone v. Liggett Group, Inc., — U.S.-,-, 112 S.Ct. 2608, 2617-18, 120 L.Ed.2d 407, 422 (1992) (plurality opinion). Indeed, the plurality in Cipollone indicated as well that when construing a preemption provision the outer boundaries of which are unclear, it is appropriate to adopt a narrower reading of the provision to avoid inadvertently trammeling upon state sovereignty and curtailing a legitimate exercise of state power when Congress had no such intention. — U.S. at- -, 112 S.Ct. at 2618-19, 120 L.Ed.2d at 424.1
*228A.
Congress enacted the PMPA in 1978. The statute contains three subchapters, only the first of which, titled “Franchise Protection,” is at issue here. According to the Senate report accompanying the bill, “[t]he purpose of title I of H.R. 130 is the establishment of minimum Federal standards governing the termination and nonrenewal of franchise relationships for the sale of motor fuel by the franchisor or supplier of such fuel.” S.Rep. No. 731, 95th Cong., 2d Sess. 15, reprinted in 1978 U.S.C.C.A.N. 873, 873.
The PMPA has an explicit preemption provision:
To the extent that any provision of this subchapter applies to the termination (or the furnishing of notification with respect thereto) of any franchise, or to the nonre-newal (or the furnishing of notification with respect thereto) of any franchise relationship, no State or any political subdivision thereof may adopt, enforce, or continue in effect any provision of any law or regulation (including any remedy or penalty applicable to any violation thereof) with respect to termination (or the furnishing of notification with respect thereto) of any such franchise or to the nonrenewal (or the furnishing of notification with respect thereto) of any such franchise relationship unless such provision of such law or regulation is the same as the applicable provision of this subehapter.
15 U.S.C. § 2806(a). Thus, as the majority rightly indicates, this provision voids any state or local law that is not “the same as” any “applicable provision of this subchapter.” However, this only applies to the extent that the state law differs with any provision of the subchapter that applies to the termination of a franchise, to the nonrenewal of a franchise relationship, or the furnishing of notice relating to either action.
As I read it, when the preemption provision nullifies “any provision of any law or regulation ... with respect to termination ... of any such franchise or to the nonre-newal ... of any such franchise relationship” it reflects a desire by Congress to eliminate inconsistent state statutes that govern the ending of such contracts and relationships, both in terms of the actual mechanisms of the termination as well as the notice necessary to effectuate such termination. Unlike the majority, I expressly do not think that the statute intended to void any state law provision that indirectly affects the termination or nonrenewal of the relationship by directly affecting the substance of the franchise contract itself, since such an approach sweeps too widely, more widely than the majority intimates in its opinion. In short, while Congress regulated the “end-game” scenarios of petroleum franchise agreements, it did not intend to affect the content of these contractual relationships, which are longstanding creatures of state law. I think that both a careful analysis of the statute itself, as well as an analysis of the submerged dangers of the majority opinion, reveal the correctness of this approach.
B.
As noted above, the preemption provision requires us to begin by examining “any provision of this subchapter [that] applies to the termination (or the furnishing of notification ■with respect thereto) of any franchise, or to the nonrenewal (or the furnishing of notification with respect thereto) of any franchise relationship,” for it is only state provisions that are not “the same as the applicable provisions]” that are vitiated. This makes eminent sense, since in the general case, where there is an explicit preemption provision, we can expect that Congress intends the scope of that provision to hew closely to the substantive provisions of the statute and not to unnecessarily preempt, and thus create a vacuum in, areas in which Congress has not actually legislated. The result is that the outline of the statute almost always describes the circumference of its own preemption provision.
While it will come as no surprise that the Congressional enactment is dense reading of the most unpleasant kind, it is necessary to provide a brief overview of the statute that is *229being used to void the state law in question. Title I of the PMPA has three substantive provisions. All three deal exclusively with the allowability of and procedural issues related to the termination and nonrenewal of a franchise or franchise relationship. Section 2802(a) acts as a general prohibition against termination or nonrenewal of franchises except as allowed by § 2802(b) or § 2803. Section 2802(b) begins by requiring, for either terminations or nonrenewals, notice from the franchisor that conforms to strict rules, and then sets forth the rules with which terminations or nonrenewals must comply. Thus, § 2802(b)(2) lists grounds for termination or nonrenewal of a franchise, which include failure by the franchisee to comply with any reasonable and materially significant provision of the franchise, provided certain notice is given; a failure by the franchisee to exert good faith efforts to carry out the provisions of the franchise, provided certain warnings are given first; and an agreement in writing between the franchisor and franchisee to terminate or not renew, among other reasons. 15 U.S.C. § 2802(b)(2).
Section 2802(b)(3) lists grounds for nonre-newal of the franchise relationship, including the failure of the parties to agree to changes or additions to the provisions of the franchise, provided the failure to agree is not a sham and such changes are determined to be necessary in good faith; the receipt of numerous customer complaints; and the failure to operate the premises in a clean, safe manner, among other reasons. Id. § 2802(b)(3).
Section 2803 acts as an exception to the requirements of § 2802 for franchise relationships involving “trial” or “interim” franchises, with extensive definitions as to which franchises fall within the scope of its exception. Finally, as noted above, Section 2804 governs the type and timing of notice required in advance of termination or nonre-newal.
This brief overview of the provisions of the PMPA indicates that the Act has a unitary focus on the architecture of the ending of franchises and franchise relationships. It thus prohibits any termination at all, except those that comply with its detailed provisions, and lists under what circumstances the relationship can be ended through termination or nonrenewal. It also provides strict rules concerning the notification requirements when the end is near.
What is conspicuously absent is any language governing the substance of the franchise agreement itself. The closest it comes is in § 2802(b)(2)(A), where it states that one ground for terminating or not renewing the franchise relationship is “[a] failure by the franchisee to comply with any provision of the franchise, which provision is both reasonable and of material significance to the franchise relationship.” 15 U.S.C. § 2802(b)(2)(A). But even this subsection is neutral concerning the substance of the provisions that will justify termination. Contrary to Mobil’s suggested approach, it merely states that, if some provision of the agreement is being cited as the basis for termination, it had better be a “reasonable” and materially significant one or else the inference is that it is pretextual, and thus prohibited.
Understanding that the operative provisions of the PMPA govern not the substantive contents of the franchise relationship or of a particular franchise contract, but only the reasons and circumstances under which such a relationship or contract can be abandoned, a rereading of the preemption provision makes clear the narrowness of its scope. By its terms, it only preempts “any provision of any law or regulation ... with respect to termination” or nonrenewal or the notice related thereto that is not “the same as the applicable provision” of the subchapter. Given that the only effect of the federal law’s provisions is upon the contours of the relationship, but not upon its content, the limitation of the preemption provision to knocking out only those state laws not “the same as” the federal law clearly demonstrates that state laws that concern the substantive provisions that either must or may be included in the contract relationship are untouched by the PMPA.
Under this approach, state and federal law interact harmoniously to provide explicit governance of each part of the contractual relationship. Thus, states remain free to establish and develop the law governing the substance of petroleum franchises, an area of contract law historically governed by the *230states, while federal law is interjected only to impose uniformity upon the terms and conditions for the ending of that relationship. A practical glance at these relationships explains the logic of this burden-sharing: while the substance of the relationships is left to the states to regulate in conformity with their local needs and circumstances, the widespread abusive manipulation by a small number of national and multi-national oil companies of the terminations of “uppity” small franchisees to maintain their dominance justified a federal solution to a pervasive problem.2 While federal law addresses a common problem, state law is not discarded in toto; rather, it retains its historic place within the federal scheme as the origin of the substantive law of the franchise relationship.
Prior treatment of the PMPA by this Circuit does not contradict this understanding of the statute. In Jimenez v. BP Oil, Inc., 853 F.2d 268, 273 (4th Cir.1988), cert. denied, 490 U.S. 1011, 109 S.Ct. 1654, 104 L.Ed.2d 168 (1989), we struck down a Maryland statute that required a franchisor to make goodwill payments upon termination of a franchise without consent of the franchisee. And justly so, since such a law interferes with the PMPA’s careful regulation of the dos and don’ts of termination or nonrenewal; the congruity in purpose between the PMPA and the Maryland statute was apparent. In contrast, the Virginia statutes considered here relate not to the mechanics or terms of termination or nonrenewal, but rather address the substantive content of the contractual agreements themselves.
C.
My greatest concern with the majority opinion stems not from what it says, but rather from what it suggests by implication. Each of the Virginia provisions is struck down because it “narrows the grounds for termination available to franchisors operating in Virginia.” Ante, at 224. Because these provisions add or subtract from a ground upon which termination can be predicated, it “relates to” termination.
But certainly this reaches too far. For under this theory, any '■hunges in state law, not just those particular to the petroleum franchise scenario, that affect the substance of these contract relationships must be struck down (at least as to petroleum franchisees) because they narrow the grounds for termination. There are numerous areas of state law that control a franchise agreement, all of which are subject to this same analytic structure, and thus eligible for limitation. Unfortunately, it is impossible to state with precision which of them are nullified under the majority’s approach to this case, because the best we know is that any change in the law that deviates from the status quo ante by altering the grounds for termination, i.e., any change in substantive state law of whatever origin that either an oil company or franchisee does not like, is struck down under this reading of the statute.
“The goal of the framers of the PMPA was to create a uniform system of franchise termination, not a uniform system of contract law.” O’Shea v. Amoco Oil Co., 886 F.2d 584, 593 (3d Cir.1989). As the First Circuit has noted, “[t]he primary objective of the PMPA was to protect franchisees from arbitrary and discriminatory termination.” Esso Standard Oil Co. v. Department of Consumer Affairs, 793 F.2d 431, 434 (1st Cir.1986).
*231The question presented by this ease is whether the balance struck by the PMPA in the area of termination and nonrenewal also impliedly gives franchisors a substantive right to be free of state regulation of all elements of the franchise agreement. We do not believe it gives such protection.
Id. A franchise agreement is not an empty vessel; it is a legal relationship formed by and entered into against a backdrop of state law. I do not think that the limited, procedural provisions of the PMPA divested states of their governance of this area of law. This conviction is all the stronger because of the presumption against preemption with which we begin, which is an essential element of our federal system of government. Accordingly, I dissent.3

. As this court recently stated:
[I]n deciphering congressional intent, we are guided by principles of federalism. Where “the regulated conduct touched interests so deeply rooted in local feeling and responsibility, ... in the absence of compelling congressional direction, [the court] could not infer that Congress had deprived the States of the power to act.” San Diego Bldg. Trades Council v. *228Garmon, 359 U.S. 236, 244, 79 S.Ct. 773, 779, 3 L.Ed.2d 775 (1959).
Feikema v. Texaco, Inc., 16 F.3d 1408, 1413 (4th Cir.1994).

. The legislative history of the PMPA explains that one of its principal goals was to "remedy[ ] the disparity in bargaining power between franchisors and franchisees.” It goes on to note:
In recent years the friction between franchisors and franchisees in marketing of motor fuels has become so great that it has threatened adverse impacts upon the Nation’s motor fuel distribution and marketing system. Numerous States have initiated various legislative actions to address these petroleum product franchising problems. These actions have, unfortunately, resulted in an uneven patchwork of rules governing franchise relationships, which differ from State to State.
Needed is a single, uniform set of rules governing the grounds for termination and non-renewal of motor fuel marketing franchises and the notice which franchisors must provide franchisees prior to termination of a franchise or non-renewal of a franchise relationship. Such a set of rules would clearly define the rights and obligations of the parties to the franchise relationship in the crucial area of termination of a franchise or non-renewal of the franchise relationship.
S. Rep. No. 731, 95th Cong., 2d Sess. 18-19, 1978 U.S.C.C.A.N. at 877 (emphasis supplied).

. Mobil’s brief raises numerous additional theories to invalidate Virginia's laws, none of which are addressed on their merits in the majority opinion. I do not address them here, except to indicate that I believe each is largely unconvincing, and that I would sustain the statutes from the various federal and state constitutional challenges brought against them.