The opinion of the court was delivered by: Joyner, District Judge.
Plaintiff, NSY, Incorporated ("NSY" or "Plaintiff") filed a Complaint
and Motion for Temporary Restraining Order and Preliminary Injunction on
April 26, 2002. alleging that Defendant, Sunoco, Inc. ("Sunoco" or
"Defendant") was attempting to end the franchise agreement between the
parties in violation of the Petroleum Marketing Practices Act ("PMPA"),
15 U.S.C. § 2801, et. seq. On May 1, 2002, this Court issued a
Temporary Restraining Order, which was revised on May 8, 2002. The Court
also set a hearing date of June 17, 2002. The hearing in this matter was
held on June 17 and June 18, 2002.
As discussed below, the Court finds that Defendant had sufficient
grounds for non-renewal of the franchise agreement and that Plaintiff,
therefore, is not entitled to injunctive relief. We now make the
following findings of fact and conclusions of law:
1. On July 25, 1990, Chhung H. Huynh entered into an APlus Agreement,
an APlus Mini Market Premises Lease and a Motor Fuel Supply Agreement
(collectively the "Agreement") with Sunoco's predecessor. In the
Agreement, Mr. Huynh agreed to lease and operate a Sunoco gas station and
an APlus business located at 2601 Penrose Avenue, Philadelphia,
Pennsylvania. See Def.'s Ex. 1, 2, & 3.
2. Effective February 7, 1996, Plaintiff entered into an Assignment and
Assumption of the Agreement from Mr. Huynh. See Def.'s Ex. 4.
3. Sunoco has extended the term of the Agreement on several occasions.
4. Among other things, the Agreement provides that Plaintiff must keep
daily calculations and records of the physical inventory of the petroleum
products and that Plaintiff will reconcile the physical inventory with the
book inventory to figure any gains or losses. See Section 10 of Lease
Agreement, Def.'s Ex. 1 and Section 2.21 of Motor Fuel Supply Agreement,
Def.'s Ex. 2.
5. The Agreement further provides that Plaintiff will notify Defendant
of any discrepancies, as defined by the Agreement, that appear as a
result of the reconciliation process. Id.
6. The Agreement between the parties also provides that Plaintiff will
pay specific royalty amounts and keep certain records to verify the
royalty amounts due and owing. See Sections 8 and 16 of APlus Agreement.
Def.'s Ex. 4 and Sections 17 and 19(a) of APlus premises lease. Def.'s
Ex. 1. These provisions require that, in order to ascertain the amount
due by the franchisee to the franchisor under the royalty Agreement, the
franchisee "maintain true and accurate business records, reports,
accounts, books and data pertaining to the operation of the Store, as
more fully described in the Systems Manual." Def.'s Ex. 4 at section
16(A). The Systems Manual requires that the franchisee maintain and
retain for three years, among other things, "Cash register `X' and `Z'
tapes or Shift and Daily Sales Reports" and "Cash register detail journal
tapes, including all tapes from additional or temporary registers and any
record of a reset to a register by any cash register company service
personnel." See APlus Franchise Systems Manual at Chapter 3, Section
A(2), Def.'s Ex. 3.
7. On November 13, 2001, one of Sunoco's environmental contractors
discovered an increase in petroleum product in a monitoring well at
Plaintiff's location. See N.T., 6/17/02 of T. Smith at pp. 204-05.
8. Sunoco initially determined that the leak must have been from the
refinery across the street because Plaintiff's inventory control records
did not indicate a loss at the site. Id. at pp. 205-07.
9. However, on November 29, 2001, the results of a laboratory analysis
of the leaked product indicated that it was new 87 octane, which could
not have come from the refinery. Id. at pp. 207-08.
10. Subsequently, Sunoco performed a more thorough review of NSY's
inventory control records and discovered Plaintiff's failure to record
the daily inventory reports as required and discovered errors and/or
miscalculations that hid the leak and delayed Sunoco's response to
cleaning up the leak. Id. at pp. 208-210.
11. The source of the leak was found to be in the flex line piping
between the underground storage tanks and the dispensers. Id. at pp.
12. The franchisee's inventory control records are one of the only ways
such a leak could have been detected. Id. at pp. 199, 203, and 210.
13. To date, Sunoco has recovered approximately 6,000 gallons from the
site. Id. at p. 211.
III. The Royalty Payments and Reports
14. In May, 2001, Plaintiff met with Sunoco representatives regarding
operational and performance issues relating to his franchise location
because Plaintiff had requested a contract ...