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PATEL v. SUN CO.

November 15, 1996

PRAKASH H. PATEL, et al., Plaintiffs,
v.
SUN COMPANY, INC., et al., Defendants.



The opinion of the court was delivered by: BRODY

 Anita B. Brody, J.

 November 15, 1996

 Plaintiffs Prakash H. Patel and Shobha P. Patel (the "Patels") brought this action against Defendants Sun Company, Inc. ("Sun") and Lancaster Associates ("Lancaster") under the Petroleum Marketing Practices Act (the "PMPA"), 15 U.S.C.A. §§ 2801-2841 (West 1982 & Supp. 1996). On April 8, 1996, Sun moved for summary judgment under Federal Rule of Civil Procedure 56 to dismiss with prejudice the complaint of the Patels. That same day, the Patels moved for partial summary judgment with respect to Sun's liability under the PMPA. Both motions are now under consideration, and for the reasons stated below, I will deny the Patels' motion for partial summary judgment and grant Sun's motion for summary judgment.

 I. SUMMARY OF FACTS

 The parties do not dispute the material facts relevant to the disposition of this controversy. Sun and the Patels entered into a franchise relationship in 1978 for the operation of a Sunoco gas station located in Wayne, Pennsylvania. At that time, Sun was the owner of the real estate upon which the service station premises were located.

 In 1985, Sun and the Patels entered into a franchise agreement renewing the franchise for a period of three years. In 1987, Sun entered into an agreement of sale with Lancaster for the sale of a parcel of land that included both an office building and the service station premises at issue here. In connection with the sale, Lancaster agreed to lease the service station premises back to Sun for a term beginning on December 23, 1987 and ending on September 30, 1994. Sun then subleased the service station premises to the Patels so that they could continue operating the service station under the terms of the franchise.

 In 1988, the Patels and Sun renewed the franchise for a term of three years. Before the commencement of this renewal, Sun notified the Patels in writing that its right to grant possession of the service station premises to the Patels was subject to an underlying lease with an initial term of six years, nine months, and seven days. Sun informed the Patels that this underlying lease would expire on September 30, 1994 and that it might not be renewed upon expiration.

 In 1991, the Patels and Sun renewed the franchise for another three years. Before the commencement of this latest renewal, Sun again notified the Patels in writing that its right to grant possession of the service station premises was subject to an underlying lease that would expire on September 30, 1994 and that the lease might not be renewed.

 In 1994, Sun sent the Patels a letter by certified mail dated April 28, 1994 notifying the Patels that the franchise would not be renewed and that the nonrenewal would be effective August 20, 1994. Sun explained in the notification letter that the franchise would not be renewed because the underlying lease would expire on September 30, 1994.

 The Patels then filed this lawsuit, seeking preliminary injunctive relief and declaratory judgment on grounds that the impending nonrenewal of the franchise relationship would violate the PMPA.

 II. PRIOR PROCEEDINGS

 This litigation follows an earlier lawsuit filed in 1988 in the Eastern District of Pennsylvania by the Patels against Sun and Lancaster. The earlier lawsuit and the instant action both revolve around the same alleged wrongdoing. The Patels allege that Sun did not offer to sell the service station premises to them in 1987 and that Sun did not offer them a right of first refusal of Lancaster's offer to purchase the service station premises. The Patels contend that Sun's alleged failure to make an offer or to grant a right of first refusal violated the PMPA.

 Chief Judge (now Senior Judge) Fullam dismissed the earlier lawsuit because at the time it was pending, Sun had not terminated the franchise or failed to renew the franchise relationship. See Patel v. Sun Ref. & Mktg. Co., 1992 U.S. Dist. LEXIS 1814, No. CIV. A. 88-3958, 1992 WL 25737, at *2 (E.D. Pa. Feb. 7, 1992). He ruled that in the absence of a termination or nonrenewal, he did not have jurisdiction under 15 U.S.C.A. § 2805(a) of the PMPA to hear the case. See id. Earlier in the proceedings, he had rejected the Patels' claim that Sun's alleged failure to offer the premises violated the PMPA, explaining that "the franchisor is at liberty to sell the premises at any time, to anyone; all the statute says is that such a sale cannot justify non-renewal of the franchise unless the franchisor did allow the franchisee to purchase." Patel v. Sun Ref. & Mktg. Co., 710 F. Supp. 1023, 1024 (E.D. Pa. 1989). The Patels did not appeal either of these rulings.

 The Patels filed the instant action on July 15, 1994, following notification that the franchise would not be renewed. Now that nonrenewal was clearly about to occur, they again sought relief based on the argument that Sun's alleged failure to offer the premises was wrongful. The complaint requested a preliminary injunction barring Sun from failing to renew the franchise relationship on August 20, 1994. The complaint also requested declaratory judgment that the relationship between the parties was governed by the PMPA, that Sun and Lancaster were both subject to the obligations of the PMPA, and that Sun was liable for actual and exemplary damages and reasonable attorney fees.

 On November 1, 1994, I denied the Patels' motion for a preliminary injunction. See Patel v. Sun Co., 866 F. Supp. 871, 874 (E.D. Pa. 1994). I determined that no fair grounds for litigation existed because the 1987 sale to Lancaster did not trigger the right to an offer of sale under 15 U.S.C.A. § 2802(b)(3)(D)(iii) and the 1994 nonrenewal was justified by the expiration of Sun's underlying lease with Lancaster under 15 U.S.C.A. § 2802(b)(2)(C) and 2802(c)(4). See id. at 873.

 On August 21, 1995, the United States Court of Appeals for the Third Circuit affirmed my decision. See Patel v. Sun Co., 63 F.3d 248, 253 (3d Cir. 1995). The Third Circuit did not address the merits of the lawsuit, however, to reach its decision. See id. at 252. Rather, the Third Circuit determined that 15 U.S.C.A. § 2805(e) barred injunctive relief in this case. See id. at 252-53. Thus, the Third Circuit had no reason to address the substantive issue whether fair grounds for litigation existed because even if it had found that such grounds did exist and that a preliminary injunction were otherwise warranted, it would have still had to rule against the preliminary injunction, based on its determination that § 2805(e) applied in this case. Having determined that injunctive relief was ...


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