Court Opinion

ID: 156335
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Date Created: 2010-08-14 04:36:54+00
Date Added: 2024-06-11T12:29:20.914792
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UNITED STATES COURT OF APPEALS

                                     TENTH CIRCUIT

 BRAD RHODES,

        Plaintiff-Appellant,
 v.                                                              No. 97-3066
 AMOCO OIL COMPANY,

        Defendant-Appellee.

                                       ORDER
                                  Filed June 5, 1998
                        ___________________________________

Before BALDOCK, HOLLOWAY, and MURPHY, Circuit Judges.
                 ___________________________________

       Appellee’s petition for rehearing is denied. The court hereby directs the Clerk to

make the following change to the opinion filed herein on May 13, 1998: On page 12, the

sixteenth line of text begins a new paragraph; in the first sentence of that paragraph, which

begins on line 16 and ends on line 17, the words “also a certified appraiser” are to be deleted.

The following words are to be added in place of the deleted words: “who is president of a

real estate services company.”

                                            Entered for the Court

                                            Patrick Fisher
                                            Clerk
                                                                         F I L E D
                                                                   United States Court of Appeals
                                                                           Tenth Circuit

                                                                          MAY 13 1998
                                     PUBLISH

                     UNITED STATES COURT OF APPEALS                    PATRICK FISHER
                                                                               Clerk
                                 TENTH CIRCUIT

 BRAD RHODES,

       Plaintiff-Appellant,
 v.                                                      No. 97-3066
 AMOCO OIL COMPANY,

       Defendant-Appellee.

          APPEAL FROM THE UNITED STATES DISTRICT COURT
                   FOR THE DISTRICT OF KANSAS
                       (D.C. No. 95-1224-MLB)
                         (955 F. Supp. 1288)

Christopher A. McElgunn (Gary M. Austerman and Robert D. Wiechman, with him on the
brief), of Klenda, Mitchell, Austerman & Zuercher, L.L.C., Wichita, Kansas, for
Plaintiff-Appellant.

William J. Noble, Amoco Corporation (Joseph W. Kennedy of Morris, Laing, Evans, Brock
& Kennedy, Chartered, Wichita, Kansas, with him on the brief), Chicago, Illinois, for
Defendant-Appellee.

Before BALDOCK, HOLLOWAY, and MURPHY, Circuit Judges.

HOLLOWAY, Circuit Judge.

                                                            F I L E D
       Plaintiff-appellant Brad Rhodes (Rhodes or plaintiff) brings this appeal from the

district court’s final order granting summary judgment to defendant Amoco Oil Company

(Amoco or defendant). Rhodes v. Amoco Oil Co., 955 F. Supp. 1288 (D. Kan. 1997).

Jurisdiction in the district court was asserted under the Petroleum Marketing Practices Act

(the PMPA), 15 U.S.C. §§ 2801-2841. Our jurisdiction arises under 28 U.S.C. § 1291.

                                               I

       The facts are set out in the district court’s opinion. A brief overview will suffice to

provide the background for our discussion of the issues raised on appeal. Rhodes operated

a service station in Derby, Kansas, just outside Wichita, as lessee and franchisee of Amoco.

In 1993, Amoco decided to sell all of its retail stations in the Wichita area. Amoco retained

a certified appraiser, David Hopkins, to appraise all of its properties in the Wichita area,

including that leased by plaintiff. Hopkins initially appraised the property leased by Rhodes

at $180,477. Based on that appraisal, Amoco offered to sell the property to plaintiff for

$180,000.

       Plaintiff declined that offer and hired his own appraiser, Roger Turner, who like

Hopkins was independent, experienced, and a certified appraiser. Turner appraised the

property at $77,500.1 Plaintiff then made a counteroffer of $77,000 to purchase the station.

       In his detailed opinion, the district judge stated that Turner’s appraisal placed a fair
       1

market value of $115,000 on the property. 955 F. Supp. at 1289. As Rhodes pointed out in
a motion for reconsideration, this statement was understandable but significantly flawed.
Turner’s appraisal did in fact state that amount. But the parties have agreed at all times that

                                              2
Thereafter, the parties continued to negotiate, with Amoco several times extending Rhodes’s

lease so that the negotiations could continue. These dealings are described in the district

court’s opinion, 955 F. Supp. at 1289-90, and need not concern us now. For our purposes,

we should focus only on Amoco’s final offer. Amoco eventually asked Hopkins to update

his appraisal of the property, and Hopkins’ second appraisal concluded that the fair market

value of the property was $132,000. Amoco then offered the property to Rhodes at that price

on February 24, 1995. Rhodes made a final counteroffer of $90,000, which Amoco rejected.

       Rhodes then commenced this action on April 28, 1995. His complaint alleges that the

action arises under the PMPA, 15 U.S.C. §§ 2801-2806, and that there was a violation of the

act due to lack of compliance with the requirements of 15 U.S.C. § 2802(b) as to proper

notification of grounds for nonrenewal; that Amoco had not made, during the required

90-day period after notification of nonrenewal, a bona fide offer to sell, transfer or assign to

plaintiff Amoco’s interest in the Leased Marketing Premises; that Amoco’s revised offer to

sell for $132,000 in its February 24, 1995, offer to Mr. Rhodes was an admission, like earlier

admissions, that the earlier offers were not bona fide offers and that Amoco’s admissions

establish that Amoco violated the PMPA by failing to make a bona fide offer within the

90-day period after giving notice of nonrenewal. App. 7-9. Plaintiff prayed, inter alia, for

both Turner’s and Hopkins’ appraisals must be adjusted to exclude the value of car wash
equipment owned by Rhodes. In this opinion we will refer in all instances to the value of any
appraisal as adjusted to reflect only the value of Amoco’s property. In an unpublished order
denying plaintiff’s motion for reconsideration, the district judge stated that his conclusions
were unaffected by this correction to his findings.

                                               3
preliminary and permanent injunctive relief, declaratory relief, and damages under the PMPA

provisions. Id. at 10-11.

       Holding that Amoco’s February 1995 offer of $132,000 satisfied Amoco’s statutory

duty to make a “bona fide” offer to sell the property to its franchisee, Rhodes, the district

court granted a motion by Amoco for summary judgment. On review of summary judgments,

we “examine the record to determine if any genuine issue of material fact was in dispute” and

if not, whether the substantive law was correctly applied; and when applying this standard

of review, “we examine the factual record and reasonable inferences therefrom in the light

most favorable to the party opposing summary judgment.” Applied Genetics v. First

Affiliated Securities, 912 F.2d 1238, 1241 (10th Cir. 1990). Under this standard, we

conclude that on this record the summary judgment must be reversed.

                                             II

       Congress has seen fit to regulate the relationships between franchisors such as Amoco

and their franchisees through the PMPA. The PMPA affords protection to franchisees

because “Congress found that [franchisors] had been using their power over franchisees to

further their own self-interest.” Slatky v. Amoco Oil Co., 830 F.2d 476, 482 (3d Cir. 1987)

(en banc). In remedying the disparity in bargaining power of the parties, “Congress protected

the franchisee’s interests by curbing those of the [franchisor]. Senate Report at 18, U.S.

Code Cong. Ad. News 1978, at 876.” Id.

       The statute creates two basic mechanisms to protect the franchisees. First, the statute

                                              4
proscribes termination or nonrenewal of franchises except on specified grounds. 15 U.S.C.

§ 2802(b)(3); see generally Slatky, 830 F.2d at 478-79. This limitation generally prohibits

“the arbitrary and discriminatory termination or nonrenewal of a franchise.” Sandlin v.

Texaco Refining and Marketing, Inc., 900 F.2d 1479, 1480 (10th Cir. 1990). This first facet

of the PMPA’s protection of the franchisee concerns whether the franchisor made the

“substantive decision [for termination or nonrenewal] in good faith and the normal course

of business . . . .” Sandlin, 900 F.2d at 1481. This first inquiry “tests the honest commercial

judgment of the franchisor,” id., and here courts look to the franchisor’s intent by a good

faith test, “a subjective test,” id. at 1481 (quoting Svela v. Union Oil Co. of California, 807

F.2d 1494, 1501 (9th Cir. 1987) (emphasis added)). This part of the PMPA does not concern

us here; Rhodes has never contended that the initial decision not to renew his franchise

agreement was made in bad faith or for other than permissible reasons.

       We are concerned on this appeal only with the second protective mechanism afforded

by the PMPA -- that the franchisor make “a bona fide offer to sell, transfer or assign” its

interest in the premises to the franchisee. 15 U.S.C. § 2802(b)(3)(D)(iii)(I).2 In connection

with this second protective mechanism requiring a bona fide offer, this court has pointed out

that

       [t]he bona fide offer provision therefore serves as a second, and distinct, layer

      This bona fide offer requirement applies where an oil company terminates or fails to
       2

renew a franchise for a permissible business purpose unrelated to the franchisee’s
misconduct. Slatky, 830 F.2d at 478.

                                              5
       of protection, assuring the franchisee an opportunity to continue to earn a
       livelihood from the property while permitting the distributor to end the
       franchise relationship.

Sandlin, 900 F.2d at 1481 (quoting Slatky, 830 F.2d at 484.

       As we held in Sandlin, “we use an objective test to decide whether an offer is

bona fide.” Sandlin, 900 F.2d at 1481 (emphasis added). It is important to keep in mind that

this appeal does not concern a subjective question of good faith concerning the commercial

decision on termination or nonrenewal. In fact, “[e]vidence of the first [the subjective

nonrenewal decision] is not evidence of the second [the objective bona fide offer] . . . .” Id.

(emphasis added).

       Furthermore, we are concerned only with Amoco’s final February 1995 offer to sell

the property to Rhodes for $132,000. In the district court, Rhodes took the position that

Amoco’s initial offer was not bona fide, apparently because Amoco later made a lower offer,

and that its final offer was outside the 90-day time period established by the PMPA. Rhodes,

955 F. Supp. at 1290. The district court rejected that argument, and on this appeal Rhodes

does not question that holding. Thus, we focus only on whether Amoco’s final $132,000

offer was bona fide as that term has been construed under the PMPA.

       In considering Congress’ intent in using the term “bona fide” in this context, we find

helpful guidance in Slatky, an opinion which was found instructive by our earlier panel in

Sandlin. In particular, we take heed of the Third Circuit’s insight that the use of this term,

rather than a mandate that the franchisor offer the property to the franchisee at fair market

                                              6
value, reflects a legislative judgment that the latter standard would be overly strict. In Slatky,

the court said:

       We . . . are guided by Congress’s decision not actually to use the term ‘fair
       market value’ but instead the term bona fide, which suggests some degree of
       deference. That choice indicates, we believe, a recognition that “the word
       ‘value’ almost always involves a conjecture, a guess, a prediction, a prophecy.”
       Amerada Hess Corp. v. Commissioner, 517 F.2d 75, 83 (3d Cir. 1975)
       (quoting other cases). “[T]here is no universally infallible index of fair market
       value.” Id. There may be a range of prices with reasonable claims to being
       fair market value. Were we to mandate that courts determine whether the
       distributor’s offer actually was at fair market value, distributors could rarely
       rest comfortably that their offer would eventually be determined by the court
       to be fair market value.

Slatky, 830 F.2d at 485. The Slatky court went on to hold that district courts should

determine whether the franchisor’s offer “approached fair market value.” Id.

       We agree with this reasoning. Thus, we do not fault the district court here for not

trying to quantify precisely the fair market value of the subject property. There are

countervailing considerations as well, however, and we also find helpful this insight from

Slatky: “On the other hand, a standard of scrutiny that simply focused on whether the

distributor believed its offer to represent fair market value would leave the franchisee open

to injury through sloppiness or mere error.” Id. (emphasis added). Thus, we hold that the

franchisor is not automatically entitled to immunity from having its offer scrutinized and

from that offer’s bona fides being tested against other evidence as to what “approached the

fair market value.” Hence the franchisor may not avoid the raising of a genuine issue of fact

concerning his offer, and may not obtain a summary judgment merely because he has based

                                                7
the offer in question on the results of an independent appraisal. That approach would not

protect the franchisee in a case, which we would hope would be the unusual one, in which

the appraisal is flawed “through sloppiness or mere error.”

       We wish to emphasize, however, that we do not hold that summary judgment for the

franchisor can never be proper, and that jury trial must always be had, whenever the parties

each produce an appraisal and the appraisals do not arrive at identical conclusions on value.

Indeed, Sandlin provides a clear example of a case in which judgment was proper for the

franchisor in spite of a difference between the parties’ appraisals, because the difference

between the two was relatively small and the franchisor’s offer was between the two.3 Hence

it was decided, on the record facts in Sandlin, to hold as a matter of law that the offer was

bona fide.

       In sum, in reviewing the summary judgment granted to Amoco here, we must

determine if there is a genuine issue of material fact whether Amoco’s February 1995 offer

at $132,000 was bona fide, considering the circumstances objectively. Thus considering this

record, we are convinced that the evidence and reasonable inferences therefrom do reveal

such a factual issue concerning that offer.

       In the first place, the magnitude of the difference between the Hopkins appraisal, on

       In Sandlin, we reversed a judgment for the franchisee after a jury trial, holding that
       3

there was no evidence from which the jury could have found that the franchisor’s offer was
not bona fide, and remanded with instructions to enter judgment for the franchisor. 900 F.2d
at 1482-83.

                                              8
which the $132,000 offer was based, and the Turner appraisal cannot be ignored in reviewing

this summary judgment. Mr. Turner’s appraisal, prepared at the request of plaintiff Rhodes,

was for $77,500. The lowest appraisal obtained by Amoco from Mr. Hopkins was $132,000.

Amoco’s lowest appraised value is thus some 70% higher than the Turner appraisal obtained

by plaintiff.4

       4
         The dissent, p. 8, observes that “the PMPA speaks in terms of offers, not appraisals”
and concludes that we should examine not the difference between the estimates of fair market
value provided by the two appraisers, but the difference between the parties’ offers. The
PMPA has nothing to say about offers made by a franchisee. We are examining only the
offer of Amoco to determine if it is objectively bona fide. The dissent agrees that the
criterion is whether the offer approaches fair market value. On this record the parties’
appraisals provide substantial evidence on that question. In pursuing that inquiry on this
record, however, it is unsound to take Rhodes’ offer of $90,000 as binding on him as a
measure of fair market value.
        Fair market value is generally defined as the price at which a sale would take place
“between a willing buyer and a willing seller, neither being under any compulsion to buy or
sell and both having reasonable knowledge of the relevant facts.”            Brownstein v. Arco
Petroleum Products Co., 604 F. Supp. 312, 315 n.3 (E.D. Pa. 1985) (emphasis added)
(quoting Black’s Law Dictionary 537 (5th ed. 1979)). The dissent implicitly assumes that
the buyer here was under no compulsion to buy. It is surely wrong to make that assumption
on summary judgment. The record indicates that Rhodes had operated the station at this
location since 1984. Rhodes, 955 F. Supp. at 1289. If we were to draw any inference from
this fact, mindful of our duty to make reasonable inferences in favor of the nonmovant on
summary judgment, we would infer that Rhodes had acquired goodwill in his business and
that the goodwill was tied, at least in part, to operation of the business at its existing location.
The familiar definition of fair market value assumes a hypothetical buyer who is willing to
buy, but not a buyer who already has a vested interest to protect and is under pressure from
the franchisor’s nonrenewal. No doubt that is why another circuit has observed that under
the PMPA a bona fide offer “would not include the value of the franchisee’s own goodwill
or [the franchisor’s] franchise value of the station.” Ellis v. Mobil Oil, 969 F.2d 784, 788
(9th Cir. 1992). Further, Congress recognized that nonrenewal of a franchise can have a
“punitive” character because “[t]he reasonable expectations of the franchisee . . . are
destroyed.” S. Rep. No. 95-731 (1978), reprinted in 1978 U.S.C.C.A.N. 873, 876. Hence
the franchisee’s offer cannot be presumed to be unaffected by coercion, particularly on

                                                 9
       Viewing this “factual record and reasonable inferences therefrom in the light most

favorable to the party opposing summary judgment,” Applied Genetics, 912 F.2d at 1241,

the appraisal of Rhodes’ expert, Turner, must be considered as evidence showing an accurate

estimate of fair market value. It is important to note that Amoco offered no criticism of the

Turner appraisal in its motion for summary judgment and supporting papers. Instead, Amoco

emphasized the process by which it made various earlier offers to Rhodes, suggesting that

they prove the bona fides of its offer at issue. That evidence about earlier offers is not

persuasive. Under the objective standard enunciated in Sandlin, the only issue here is

whether a genuine issue of material fact was raised concerning whether Amoco’s final

$132,000 offer was bona fide.

       While “there may be a range of prices with reasonable claims to being fair market

value,” Slatky, 830 F.2d at 485, the evidence here clearly raises factual issues on the

bona fide offer question. Amoco has provided nothing other than the Hopkins appraisal

which would cast doubt on the analysis and conclusion reached by Turner. Amoco has

provided no evidence as to the degree of discrepancy between the two appraisals in question

which could be considered “normal” or reasonable.

       The discrepancy here between Hopkins’ $132,000 appraisal and Amoco’s offer based

on it, and the Turner appraisal of $77,500, is in stark contrast to the facts in Sandlin. The

highest estimate there was $233,535, and the lowest was $200,000, a difference of about

summary judgment.

                                             10
17%. The appraisals in Sandlin must actually be viewed as having less variation than that,

however, because the lowest excluded tanks and equipment, while the highest included them.

900 F.2d at 1482 n.2. While we did not indicate what the permissible differential was in

Sandlin, it was nowhere close to the 70% variation we are faced with in the instant case.5

And the $216,000 offer in question in Sandlin fell well between the two estimates there.

       Moreover, there is no response addressing plaintiff’s other evidence. These specific

points were developed by Mr. Turner in his affidavit, offered by Rhodes, each of which

identifies asserted deficiencies in the 1995 Hopkins appraisal submitted by Amoco:

       1. Although the primary structure of the service station was erected in 1953
       and the car wash bay was added in 1975, Mr. Hopkins concluded, without
       explanation or documentation, that the “effective age” of the property was 15
       to 18 years.

       2. Hopkins did not account for the trend of declining sales at plaintiff’s
       location over recent years, nor did he take into account the declining profit
       margins of retail service stations generally.

       3. Hopkins did not consider the impact of two new, major competitors in the
       immediate vicinity of the subject property and their influence on traffic
       patterns.

       5
        On remand the district court in Slatky received evidence to the effect that appraisers
attempt to get within 5% of the anticipated actual selling price; that selling prices can vary
from 25% over to 25% under offering price; that properties are often sold at 15% to 20%
over the appraised price; that two appraisers attempting to estimate fair market value should
reach results within 10% to 15% of each other; and that the expected variation between
appraisals could be greater when using the replacement cost approach. Slatky v. Amoco Oil
Co., No. 85-1122 (M.D. Pa. May 10, 1989) (order denying motion for reconsideration of
order granting injunctive relief). (This order was placed in the district court record in an
appendix submitted with defendant’s memorandum in support of its motion for summary
judgment, and it also is included in our record on appeal. App. at 246-47.)

                                             11
       4. In evaluating sales of comparable properties, Hopkins made adjustments to
       the sales prices on three properties without proper explanation or
       documentation.

       5. In applying the cost approach, Hopkins used a replacement cost of $80 per
       square foot, while Turner recommended, based on his information and
       experience, a figure of about $58 per square foot.

       6. Depreciation estimates given by Hopkins were mere opinion without
       supporting data.

       7. Hopkins’ cost approach reflects a lack of understanding of the changing
       business climate.

       8. In using the sales comparison approach, Hopkins used the other sales in the
       area by Amoco, without adjustment for the fact that all of the buyers were
       “under duress” because of their relationships with Amoco; none of these sales
       should have been considered normal, arms’ length transactions.

App. at 282-85.

       Plaintiff Rhodes also submitted an affidavit from Mr. Steve Martens, who is president

of a real estate services company. A checklist was attached and incorporated in Martens’

affidavit, which also identified a number of alleged deficiencies in the Hopkins appraisal.

Among other things, Mr. Martens questioned why Mr. Hopkins had relied only upon the cost

approach of estimating the market value. The standard procedure, he explains, is to prepare

estimates using the cost approach, the income approach, and the comparable sales approach,

before selecting the estimate which best represents fair market value. Mr. Martens concluded

that the Hopkins appraisal was not acceptable. App. at 286-87, 293-94.6

       6
        After having noted Sandlin and the objective nature of the scrutiny of the franchisor’s
offer, the district judge proceeded to hold that plaintiff’s evidence, which we have just

                                              12
       In sum, considering the record evidence before us in the light favorable to Rhodes,

as we must in reviewing this summary judgment, we hold that there is a genuine issue of

material fact whether Amoco’s $132,000 offer in question was bona fide under the PMPA

requirement. Accordingly, we reverse the summary disposition of that controlling factual

issue without trial.

       REVERSED and REMANDED for further proceedings consistent with this opinion.

summarized, had “little, if any, probative value, on the bona fides of Amoco’s offers”
because the evidence was not communicated to Amoco until after suit had been filed. 955
F. Supp. at 1293. Thus, the district judge apparently disregarded plaintiff’s evidence
submitted in opposition to the motion for summary judgment because the judge somehow felt
that the evidence should have been disclosed to the defendant during the pre-litigation
negotiations. We find no support for such a requirement in the principles Sandlin. In spite
                                                                          of
of his acknowledgment of Sandlin, the judge seems to have analyzed the issue in terms of
Amoco’s subjective good faith. As we have noted, the proper test is an objective analysis
whether the final offer of Amoco was bona fide. In this analysis , whether the plaintiff’s
evidence was communicated to Amoco before commencement of the lawsuit could have no
bearing.

                                            13
97-3066, Rhodes v. Amoco Oil Co.

BALDOCK, Circuit Judge, dissenting.

       In enacting the Petroleum Marketing Practices Act, Pub. L. No. 95-297, 92 Stat. 322

(1978) (codified as amended at 15 U.S.C. §§ 2801-2841) (hereinafter PMPA), “Congress did

not intend to intrude courts into the marketplace.” Sandlin v. Texaco Refining and

Marketing, Inc., 900 F.2d 1479, 1481 (10th Cir. 1990). Rather, Congress enacted the PMPA

“to equalize the . . . disparity in bargaining power” between gasoline station franchisors and

franchisees. Doebereiner v. Sohio Oil Co., 880 F.2d 329, 331 (11th Cir. 1989) (citing S.

Rep. No. 95-731 (1978), reprinted in 1978 U.S.C.C.A.N. 873), amended on rehearing, 893

F.2d 1275 (11th Cir. 1990). Regrettably, this court’s opinion thwarts the intent of Congress

by effectively tipping the bargaining scales in favor of the franchisee, and thrusting courts

(at least in this circuit) into the franchise relationship.

       To be sure, the question of whether a franchisor’s offer to sell is “bona fide” as

required by the PMPA, see 15 U.S.C. § 2802(b)(3)(D), addresses the fairness of the

franchisor’s treatment of the franchisee under an objective standard. See Sandlin, 900 F.2d

at 1481. By requiring a “bona fide offer to sell,” Congress undoubtedly intended to protect

the franchisee from an unreasonably high offer price which would preclude the franchisee’s

purchase of the business and frustrate the franchisee’s expectation of continuing the franchise

relationship. See id. at 1482 (defining fair market value as “the highest price a willing buyer

would pay”) (emphasis added). Yet there can be little doubt that Congress’ did not use the

term “bona fide,” with its notions of subjective good faith, see Roberts v. Amoco Oil Co.,
740 F.2d 602, 607 (8th Cir. 1984), to place the franchisor at an obvious disadvantage.

Rather, Congress’ use of the term “bona fide” suggests that courts afford “some degree of

deference” to a franchisor’s valuation of its property. Slatky v. Amoco Oil Co.,

830 F.2d 476, 485 (3d Cir. 1987) (en banc) (emphasis added). Otherwise, the PMPA would

afford no protection to the franchisor’s legitimate property rights and economic interests.

While in this case the court’s opinion gives lip service to Amoco’s legitimate rights and

interests, it effectively ignores them. Surely this was not Congress’ intent.

       This court’s decision turns solely upon the disparity between Amoco’s final

independent appraisal of $132,000 and Rhodes’ independent appraisal of $77,500. Twenty-

three years of law practice taught me, however, that independent appraisers will typically

appraise the value of property consistent with their clients’ wishes, using the method of

appraisal which most benefits their clients’ interests. This is so because “the word ‘value’

almost always involves conjecture, a guess, a prediction, a prophecy.” Amerada Hess Corp.,

v. Commissioner, 517 F.2d 75, 83 (3d Cir. 1975) (internal quotations omitted). “[T]here is

no universally infallible index of fair market value. All valuation is necessarily an

approximation.” Id. After today, I can envision few cases in this circuit where a disgruntled

franchisee will be unable to generate an appraisal sufficiently disparate from the franchisor’s

to require a jury trial, despite the ongoing objective good faith efforts of the franchisor to

reach an agreement. Thus, a franchisor will “rarely rest comfortably” that its offer to sell is

“bona fide.” Slatky, 830 F.2d at 485. Because I believe based on the law and facts of this

                                              2
case that the appraisers’ difference of opinion alone is insufficient to require a jury

determination as to whether Amoco’s offer to sell was “bona fide,” I would affirm the district

court’s grant of summary judgment to Amoco. Accordingly, I dissent.

                                              I.

       The relevant facts are undisputed and are set forth in detail in the district court’s

opinion. Rhodes v. Amoco Oil Co., 955 F. Supp. 1288, 1289-90 (D. Kan. 1997). This court,

however, chooses to ignore most of those facts, namely all of those facts relating to the

parties’ negotiations over the course of eleven months, focusing instead “only on Amoco’s

final offer.” Because this court’s opinion brushes aside as of no “concern” and “not

persuasive,” facts which bear directly upon the question of whether Amoco’s offer to Rhodes

was “bona fide,” I shall briefly summarize them here.

       Rhodes acknowledges that in the Spring of 1993, Amoco, in compliance with the

PMPA, made a good faith decision in the normal course of business to sell all of its service

stations in the Wichita metropolitan area. Amoco retained David Hopkins, an experienced

certified independent appraiser, to appraise the Wichita area stations. In accordance with the

Uniform Standards of Professional Appraisal Practice, Hopkins prepared fair market value

appraisals based on the highest and best use for each of Amoco’s dealer-operated service

stations in the Wichita area. Hopkins initially appraised the subject property at $180,477.

Relying upon Hopkins’ appraisal, Amoco offered to sell the property to Rhodes in the Spring

of 1994 for $180,000.

                                              3
       Dissatisfied with Amoco’s offer, Rhodes hired his own appraiser, Roger Turner, who,

like Hopkins, is an experienced certified independent appraiser. Using the sales comparison

approach, Turner appraised the fair market value of Amoco’s property at $77,500. Based

upon Turner’s appraisal, Rhodes made a counteroffer to Amoco in the Summer of 1994 of

$77,000.      Rhodes also requested that Amoco extend his lease one month pending

negotiations. Amoco agreed to extend the lease, but, within the month, rejected Rhodes’

counteroffer as based upon a “flawed” appraisal. Amoco, however, lowered its initial offer

of $180,000 to $158,000, while also proposing several alternative sale structures. During this

same period, Amoco continued to extend the lease to accommodate Rhodes.

       In the Fall of 1994, Rhodes wrote Amoco and asserted “several problems” with

Hopkins’ initial appraisal. In response, Amoco advised Rhodes that it would secure a revised

appraisal from Hopkins early the next year. At the same time, Amoco again extended

Rhodes’ lease. In February 1995, Amoco submitted to Rhodes a revised appraisal and new

offer to sell--this time for $132,000. Rhodes rejected Amoco’s new offer, and instead

offered to purchase the property for $90,000. When Amoco rejected Rhodes’ counteroffer

and refused to extend the lease beyond April 1995, Rhodes filed suit. Relying on the

foregoing facts, the district court held that Amoco’s $132,000 offer was “objectively

reasonable as a reflection of fair market value,” and granted its motion for summary

judgment. Rhodes, 955 F. Supp. at 1293.7

       7
           Under 15 U.S.C. § 2802(b)(3)(D), a franchisor is required to tender a bona fide offer
                                                                                   (continued...)

                                                4
                                              II.

       This court correctly observes that an objective standard governs the determination of

whether a franchisor’s offer to sell is bona fide under the PMPA. See Sandlin, 900 F.2d at

1481. In Sandlin, we set aside a jury verdict in favor of the franchisee in part because the

franchisor’s offer to sell fell within the range of independent appraisals. We held that there

was “no evidence to be found from which the jury could conclude that . . . [the franchisor’s]

written offer to sell the premises for $216,000 was not bona fide.” Id. at 1482. We stated

that an offer is objectively reasonable and thus bona fide where it is “a reflection of fair

market value.” Id. We defined fair market value as “the highest price a willing buyer would

pay.” Id.

       In other words, “the objective reasonableness test does not measure whether the

franchisor’s offer was actually at fair market value but rather whether the offer approached

       (...continued)
       7

to sell the premises within 90 days after notifying the franchisee of nonrenewal. In the
district court, Plaintiff asserted that Defendant’s first offer of $180,000 made within the
90-day period was not bona fide. Because of the parties’ ongoing negotiations, the court
rejected Plaintiff’s argument:

       Plaintiff’s argument, if valid, would mean that if a franchisor and franchisee
       cannot agree on a selling price within the 90-day period, but instead continue
       negotiations, then the franchisor’s initial offer will be deemed not bona fide as
       a matter of law. Congress could not have intended such an absurd result . . .
       .

Rhodes, 955 F. Supp. at 1290. On appeal, Plaintiff has abandoned his argument that
Defendant’s initial offer of $180,000 was not bona fide, and now asserts only that
Defendant’s final offer of $132,000 was not bona fide.

                                              5
fair market value.” LCA Corp. v. Shell Oil Co., 916 F.2d 434, 439 (8th Cir. 1990) (emphasis

added); accord Ellis v. Mobil Oil, 969 F.2d 784, 787 (9th Cir. 1992) (To be objectively

reasonable, franchisor’s offer must “approach fair market value.”); Slatky, 830 F.2d at 485

(same). In Slatky, the Third Circuit explained:

       There may be a range of prices with reasonable claims to being fair market
       value. Were we to mandate that courts determine whether the distributor’s
       offer actually was at fair market value, distributors could rarely rest
       comfortably that their offer would eventually be determined by the court to be
       fair market value.

Id.8

       Thus, because Congress in enacting the PMPA sought to balance the competing

interests of the franchisor and franchisee, an offer is bona fide under the PMPA if it falls

within the “range of prices with reasonable claims to being fair market value.” Id.

Consistent with congressional intent, this approach is designed to guarantee an offer price

to the franchisee based upon the realities of the marketplace and protect the franchisee’s

expectation of continuing the franchise relationship, while preserving the franchisor’s

legitimate property rights and economic interests. See S. Rep. No. 95-731, at 18-19 (1978),

       8
          In Slatky, Amoco’s in-house appraisers valued the service station property with
improvements at $276,300. Slatky’s appraiser, however, valued the same property at
$158,200. Amoco offered to sell the property with improvements to Slatky for $306,000. At
bench trial, even Amoco’s independent appraiser valued the property at $31,000 less than
Amoco’s offer. “In the face of an apparent congruence of independent appraisers that
Amoco’s estimate was considerably too high,” the appellate court remanded the case so the
district court could state precisely why it had found that Amoco’s offer was objectively
reasonable. 830 F.2d at 486.

                                             6
reprinted in 1978 U.S.C.C.A.N. 873, 876-77. Moreover, it relieves the fact finder from the

exacting task of placing a precise value upon the property--a task which would amount

largely to impermissible guesswork.

       Unfortunately, this court’s opinion does little to further these aims. Admittedly, a

difference of opinion between independent appraisers is an important factor which a court

must consider in determining whether a particular offer is bona fide under the PMPA. See

LCA Corp., 916 F.2d at 439 (whether an offer is bona fide must be decided on a case-by-case

basis). The dispute in this case, however, involves little more than a swearing match between

independent appraisers over the proper method by which to determine the fair market value

of the service station property.

       The court’s opinion infers that Amoco retained some fly-by-night appraiser whose

appraisal is flawed “through sloppiness or mere error.” I take issue with that inference.

Rhodes stipulated that Amoco’s appraiser has appraised more than 3,000 petroleum

marketing properties over eighteen years and performed appraisal services for more than 100

different clients including major oil companies, smaller oil companies, and jobbers. As I have

explained, an appraisal is necessarily an estimate of the fair market value of property. Like

so many legal concepts, experts do not disagree on the definition of fair market value.

Problems arise only when those experts attempt to apply that definition to a particular case.

Disagreement among appraisers is the norm. See Stephen J. Alfred, Fair Market Value

Concept, 14 Case W. Res. L. Rev. 173, 175 (1963).

                                              7
       Even accepting that Rhodes final offer of $90,000 was within the “range of prices

with reasonable claims to being fair market value,” I find no evidence in the record from

which a jury could conclude that Amoco’s $132,000 offer was not also within that range.

Over the course of eleven months and at least seven lease extensions, Amoco made three

offers to sell the property to Rhodes in the respective amounts of $180,000, 158,000, and

$132,000. Amoco also apparently proposed alternative sale structures to Rhodes in an

attempt to reach an agreement. During that same period, Rhodes made two counteroffers in

the amounts of $77,000 and $90,000. Unfortunately, the parties could not reach an

agreement.

       This court’s opinion makes much ado over the 70% difference between Amoco’s

$132,000 appraisal and Rhodes $77,500 appraisal. The court’s analysis is misguided for two

reasons. First, the PMPA speaks in terms of offers, not appraisals. Rhodes countered

Amoco’s final offer of $132,000 with an offer of $90,000, yielding a difference of 46%, not

70%. Second, one need not have a degree in statistics to understand that where the appraised

value of property is relatively low, as in this case, a slight difference in appraised value will

yield a relatively large percentage difference. Conversely, where the appraised value of

property is relatively high, a large difference in appraised value will yield a relatively small

percentage difference. Thus, analyzing the problem in terms of the “magnitude of the

difference” is misleading. For instance, if one appraiser valued a piece of property at

$680,000 and another appraiser valued the same property at $400,000, the percentage

                                               8
difference in the appraisals would still be 70%. Yet, when compared with the difference

between $132,000 and $77,500, the difference between $680,000 and $400,000 gives one

much more reason to pause.

       Despite the implications of the court’s opinion, the PMPA does not require that the

parties reach agreement, or that the franchisor meet the franchisee’s price. Rather, the PMPA

requires only that the franchisor make “a bona fide offer to sell” to the franchisee. The

parties’ appraisers, both using widely accepted techniques for calculating a property’s fair

market value, reached disparate values. A difference of opinion, however, does not alone

create a material issue of fact for trial. Sandlin, 900 F.2d at 1482. The evidence before the

district court clearly demonstrated that Amoco’s asking price viewed objectively fell within

the “range of prices with reasonable claims to being fair market value.” Therefore, there is

no genuine issue of material fact which prevented the district court from granting Amoco’s

motion for summary judgment. In this case, Amoco complied with the PMPA. Accordingly,

I would affirm the judgment of the district court.

                                             9