(branded and unbranded); and closing all Phillips-owned and Phillips-leased salary operated retail outlets (branded and unbranded). There is not sufficient credible evidence in this record to enable this Court to find a reasonable probability that North Penn will succeed in proving that Phillips' decision to cease the marketing of gasoline and other petroleum products in the withdrawal area and to continue in a portion of the Northeastern marketing area was prompted by a desire to avoid, evade or violate the antitrust laws.
Phillips' termination of jobber sales contracts, leases and distributorships has led to a number of recent decisions in the courts throughout the country. See Aranosian Oil Company, Inc. v. Phillips Petroleum Company, C.A. No. 73-62 (D.N.H. April 2, 1973); Giant Service Stations, Inc. v. Phillips Petroleum Co., C.A. No. 73-126 (D. Ariz. Mar. 23, 1973); Lapera Oil Co., Inc. v. Phillips Petroleum Co., C.A. No. 72-652 (M.D. Pa. Dec. 30, 1972); Kimber Petroleum Co. v. Phillips Petroleum Company, Docket No. C-693-72 (N.J. Super. Chancery Division, Dec. 8, 1972).
In the Giant Service Stations case, Phillips attempted to terminate an oral jobber sales contract on twenty-one days' notice. The United States District Court for the District of Arizona issued a preliminary injunction restraining Phillips from terminating the contract. In the case before us, North Penn's jobber contract specifically provided that it could be terminated by either party on 90 days' notice. In the Arizona case, there was no written contract and the basis for the preliminary injunction was the allegation that there was an oral agreement to supply the jobber for as long as Phillips was supplying its own stations in the area.
In Kimber, Phillips attempted to terminate the distributor's lease of service stations while continuing the distributors' obligation to purchase its petroleum products. The Superior Court of New Jersey, Chancery Division, issued an interlocutory injunction restraining the sale or lease of the service stations based on an alleged violation of the New Jersey Franchises Practices Act. Neither the law nor the facts in Kimber are similar to the instant case.
In Lapera, Phillips, pursuant to its determination to withdraw from the Northeastern marketing area, gave notice of termination of its written jobber's sales contract with terms similar to those in the instant case. The United States District Court for the Middle District of Pennsylvania, Muir, J., denied plaintiff's motion for a temporary restraining order on the ground of no likelihood of eventual success on the merits.
In Aranosian Oil, Phillips, pursuant to its determination to withdraw from the Northeastern marketing area, gave notice of termination of its written jobber sales contract. The United States District Court for the District of New Hampshire denied plaintiff's request for a preliminary injunction, finding, inter alia, that the plaintiff had not established a reasonable likelihood of success on the merits.
The standards for the issuance of a preliminary injunction require the moving party to demonstrate, inter alia, a reasonable probability of eventual success on the merits and irreparable injury pendente lite. The district court has broad discretion, since its task involves weighing the benefits and burdens that granting or denying the injunction will have on each of the parties and the public. Penn Galvanizing Company v. Lukens Steel Co., 468 F.2d 1021 (3rd Cir. 1972). In applying these standards to the instant case, we shall consider separately each of the counts in North Penn's amended complaint.
The amended complaint in this action seeks relief under five counts. In the first count North Penn contends that Phillips is obligated pursuant to contract to continue to supply gasoline after April 15, 1973. North Penn contends that the basis of this contractual agreement is an alleged November 29, 1961 oral agreement between it and Phillips. An alternate contention for the conclusion that North Penn is entitled to a continued supply of gasoline is that the various written contracts between the parties are interrelated and mutually dependent. North Penn also contends that the ninety-day termination clause in the jobber supply contract is unconscionable under Section 2-302 of the Uniform Commercial Code.
Our finding that North Penn has failed to establish by sufficient credible evidence a reasonable probability that it will succeed in proving an oral agreement on November 29, 1961, is dispositive, at the preliminary injunction stage, of North Penn's contention that there was an oral agreement, requiring Phillips to continue to supply petroleum products beyond April 15, 1973. Furthermore, the parole evidence rule set forth in Section 2-202 of the Uniform Commercial Code provides that written contractual terms may not be contradicted by evidence of any prior agreement or of a contemporaneous oral agreement. 12A P.S. § 2-202. This section permits oral evidence of consistent additional terms to a contract to explain or supplement the contract but only where the court finds that the written terms were not intended as a complete and exclusive statement of the contract. Here, parole evidence is offered not as consistent explanation, but in absolute derogation of the termination date set forth in the express language of the contracts.
In support of North Penn's contention that the written contracts between the parties are mutually dependent and interrelated, North Penn relies on the case of Kimber Petroleum Corporation v. Phillips Petroleum Co., supra. Neither the law nor the facts in Kimber are similar to the instant case. The principal fallacy in the argument that the contracts are mutually dependent has been the failure to demonstrate that a relationship exists between the lease agreements and the supply contracts. Other Phillips jobbers who own their own bulk plants have similar supply contracts even though there is no lease-leaseback arrangement. If the supply contract is terminated, North Penn can still use the bulk plant facilities for non-Phillips products (as it has been doing for heating oil). This is clearly what North Penn intended to do until it discovered that it could not find another gasoline supplier because of the present shortage of gasoline. The length of the lease terms are related to the financing, not to the supply contracts. Moreover, although both the lease agreements and the supply contracts obviously constitute two transactions in the overall relationship between Phillips and North Penn, there is no reason that either cannot stand alone. Neither supplies terms missing in the other. It would seem to have been to North Penn's advantage not to be committed on supply contracts for 15-year and 20-year terms. In fact, North Penn has in no way indicated that if it had wished to terminate the supply contracts on April 15, 1965, or any April 15th thereafter, it could not have done so.
A case very similar is Jones v. Pepsi Cola Company, 223 F. Supp. 650 (D. Neb. 1963). In the Jones case, a partnership had two contracts with Pepsi Cola designated "exclusive bottling appointment" and "exclusive fountain syrup appointment." The assignability provisions in the two contracts differed although both contracts were executed between the same parties at the same time and constituted separate phases of an overall distribution relationship between Pepsi and its bottler. Pepsi urged the Court to read the two contracts together and hold that the bottling contract was not assignable without the consent of Pepsi, in order to conform it with the assignability provision in the fountain syrup contract. The court stated:
In the case at bar the two contracts refer to different things. One provides for the distribution of fountain syrup. The other has as its subject matter the bottling and sale of Pepsi Cola. However, even if they were to be construed together, to do so would only serve to establish the difference in the provisions dealing with the assignability of the two contracts. It is conceivable that the provisions for the two contracts would be different. The expense involved in establishing a bottling plant for soft drinks is much greater than the expense of distributing fountain syrup due to the difference in equipment and personnel needed to perform a bottling operation as opposed to the distribution of syrup. (223 F. Supp. at 656).
Since there is no business reason why the leases could not be for longer terms than the supply contracts, and since the parties in their letters regarding the leases referred to the supply contracts as three-year contracts, and since it was, at least at the time the supply contracts were made, actually to North Penn's advantage not to have 15-year or 20-year supply contracts, it would be totally unreasonable and fly in the face of the clear intention of the parties for the Court at this time to hold that in fact the supply contracts did have 15-year terms or 20-year terms.
It is contended by North Penn that the practice of linking short-term Jobbers' supply contracts with long-term financing of supply facilities and stations constitutes an unconscionable contract and the ninety-day notice provision in the Jobbers' supply contract is an unconscionable clause therein. North Penn further contends that Phillips' attempted exercise of this ninety-day notice termination clause must be enjoined by this Court in order to avoid the unconscionable result of complete termination of its business leaving it with long-standing financial obligations incurred at the instance of Phillips. On this point, North Penn relies on the New Jersey case of Shell Oil Co. v. Marinello, 120 N.J. Super. 357, 294 A. 2d 253 (1972). In Marinello, Shell Oil attempted to terminate year-to-year service station leases pursuant to lease clauses authorizing termination by Shell upon 30 days' notice. The original leases ran for three-year terms and were automatically renewed from year to year. The New Jersey Superior Court disagreed with Shell and held that Shell was bound to an implied covenant to renew these leases as long as the dealer substantially performed its contractual obligations thereunder. However, in a companion case in the United States District Court for the District of New Jersey, Marinello v. Shell Oil Co., 1973 Trade Cas. (CCH) P74,320, C.A. 1506-72 (Dec. 13, 1972), Chief Judge Coolahan granted summary judgment on the ground that Shell had the right to terminate its service station lease with William Marinello, brother of the defendant in the state court action, and found that the contract was not unconscionable.
Regarding the state court action, Judge Coolahan stated:
In a companion case to the one at bar, Shell Oil Co. v. Marinello, 120 N.J. Super. 357, 294 A.2d 253 (1972 Trade Cases P74,178), the Superior Court of New Jersey, Law Division, Bergen County, sustained the contentions of the franchisee in a case whose facts closely parallel those presently before us. Shell contends that the two cases are distinguishable. I find it unnecessary to reach this question, and I feel that the State Court decision is contrary to various principles which have been established by the New Jersey Supreme Court with definiteness and finality. For this reason, I am bound not to pay heed to that opinion.