per gallon for each gallon in excess of 200,000 gallons.
In the Spring of 1981, Hess adopted a new dealer rental program as a result of the recommendation of Norman Goldberg, the Senior Vice President of Marketing for Hess. The recommendation was based upon statistics which documented Hess' escalating ownership and maintenance costs in the face of a steady decline in rental income from the dealer properties. The economic circumstances which led to the restructure of the rental formula, as well as the details of Hess' two phase program to implement the change, are set out at length in Meyer v. Amerada Hess Corp., 541 F. Supp. 321, 323-326 (D. N.J. 1982), and need not be repeated here.
As distinguished from the old cents-per-gallon rent calculation, the most salient characteristic of the new rent calculation was its introduction of a flat fee. The amount of the fee was individually set for each station according to the same standardized formula. The formula took the market value of the land and the replacement cost of the improvements, added them together, and multiplied the sum by 8%. The resulting figure as to any particular station equaled the annual rent on that station which, when divided by 12, yielded the station's monthly rent.
In order to apply the formula to the individual station sites Hess hired an experienced independent real estate appraiser, Britton Appraisal Associates, Inc., to determine the market value of the land, as if unimproved, at all of the stations at their highest and best use. With the assistance of local appraisers working under Britton's supervision, a written evaluation was prepared for each station property based on sales of comparable properties. Hess did not inform Britton why it wanted the appraisals, and Britton did not learn that the appraisals were part of an overall restructuring of dealer rentals until after the reports were completed. To determine the value of the improvements at each station, Hess selected a replacement cost standard. Actual replacement cost was then derived after the results of an on-site inspection and inventory of improvements were applied to the figures from a construction manual containing geographical adjustments for factors such as labor rates.
In July, 1981, Hess presented plaintiff and 140 of its other dealers whose leases were about to expire with new Dealer Agreements containing a flat monthly rental based on uniform application of the above rental formula. Under the agreement given to plaintiff, his new monthly rental was $2,264.00. This, when compared to an average monthly rental for 1981 of $946.75, represented an increase of over 130%. Plaintiff subsequently learned that the new rental was based on an appraised land value for his station of $194,000.00 and an asserted replacement value for the improvements thereon of $145,615.00. (($194,000 $145,615) X.08 = $27,169 divided by 12 = $2,264). Plaintiff signed the new Dealer Agreement in August, 1981, and it became effective on December 1, 1981, as did the new Dealer Agreements for all other Hess dealers.
Plaintiff paid his new rent from December 1, 1981, through March, 1982, when Hess implemented a 20% temporary voluntary rent adjustment ("TVRA") retroactive to March 1, 1982, for all its dealers operating under the new Dealer Agreement. Hess' asserted reason for the TVRA was the unanticipated severe decline in the retail gasoline market which developed in 1982. Under the TVRA plaintiff's monthly rental was reduced to $1,812.20. The March, 1982 TVRA, and consequently plaintiff's reduced rental rate, continues in effect today.
In filing the present suit plaintiff contended that the rent charges demanded by Hess under the new Dealer Agreements were designed to force him and other franchisees like him out of their stations in contravention of the PMPA. In opposing Hess' motion for summary judgment, however, plaintiff appears to have modified his position. Now, plaintiff expressly states that he does not question the right of Hess under the PMPA to adopt a new rental program for its dealers, so long as it is adopted in good faith and in the normal course of business. Plaintiff claims, however, that Hess' expert committed several errors in valuing his particular station, and that these errors support a finding that, or at least create an issue of fact as to whether, Hess acted arbitrarily and discriminatorily in violation of the PMPA by not applying its rental formula in a uniform and accurate manner.
In support of his claim of errors by Hess, plaintiff engaged his own appraiser, William D. Pugliese, to prepare an appraisal report to cover the value of the land at plaintiff's station and to determine the replacement cost of the improvements thereon. Nor surprisingly, plaintiff's expert appraisal resulted in land value and replacement cost figures which were significantly lower than those of Hess' expert. In view of plaintiff's position as supported by his expert's opinion, it cannot be said that there are no issues of fact on this aspect of the dispute. Nonetheless, given that the accepted test for violation of the PMPA by a franchisor is whether changes or additions in the franchise agreement were made by the franchisor in good faith, see Munno v. Amoco Oil Co., 488 F. Supp. 1114 (D. Conn. 1980), the different conclusions of the parties' experts are, in effect, immaterial and thus summary judgment is not precluded.
Section 102(b)(1) of the PMPA, 15 U.S.C. § 2802(b)(1), allows a franchisor like Hess to terminate or fail to renew its franchise if after appropriate notice the franchisor's decision is based upon a ground enumerated in that section. The Act confers a right of action in federal court if a franchisor fails to comply with its requirements governing termination or nonrenewal.
15 U.S.C. § 2805. Paragraph (3) of Section 2802 provides in relevant part:
(3) For purposes of this subsection, the following are grounds for nonrenewal of a franchise relationship:
(A) The failure of the franchisor and the franchisee to agree to changes or additions to the provisions of the franchise, if --