|
|
|
Lawletter No. 157 Ruling illustrates problems with mutual termination agreements Facts: For nine years, Marshall L. Johnson operated an Amoco station in Washington, D.C. In December, 1989, Amoco told Johnson that his D.C. station would be closed, but he had the option of taking over another station in Oxon Hill, Maryland. Johnson expressed concern about the fact that the Oxon Hill station was in a high crime area. Amoco’s marketing personnel assured him that the previous dealer had enjoyed a good auto repair business and that he would make more money. Amoco also said it would paint the station and install new lighting and a security booth. Johnson signed a mutual termination agreement on the D.C. station and took over the Maryland station. Amoco failed to improve it. Johnson lost his former employees and customers. By late 1990, he realized he would never generate the same profits that he had at his former station. In July, 1991, the dealer sued Amoco under the PMPA. He asserted that Amoco had violated the PMPA notice requirement. The Act generally requires an oil company (or jobber) to serve a formal written notice franchise termination or nonrenewal. The notice must state the reasons for the franchisor’s action. In this case, Amoco’s representatives induced the dealer to sign the mutual termination agreement by orally telling him that the station would be closed. The PMPA requires a dealer to file suit for damages within one-year after the franchisor commits an allegedly illegal act. However, in this case, the dealer claimed that the one-year requirement should be excused because: (1) he had a stroke in late 1990 and was disabled for several months; and (2) He did not realize that he would not be able to make a reasonable profit at the Maryland station until December of 1990. Ruling: The court dismissed the dealer’s suit on the grounds that he failed to file suit within one year. The court held that the one-year requirement was not excused under these circumstances because: (1) Amoco was not responsible for the dealer’s physical condition. As a general rule, the one-year limitation period will be excused only if the franchisor hides key facts from the dealer; and (2) Under the provisions of the PMPA, Johnson’s problems with the second station had nothing to do with the termination on the second station. Analysis and recommended procedures: We suggest the following: (1) Mutual termination agreement: Never sign a mutual termination agreement without legal advice. This case illustrates some of the problems with such agreements. When you sign a mutual, you may in effect save the franchisor from having to issue a formal termination notice and state formal grounds. (2) Right to buy station: In this case, it appears that the dealer may not have realized that when an oil company or jobber nonrenews a franchise in order to close a station, it has an obligation to offer to sell its interest in the station premises to the dealer at fair market value. (See Lawletter No. 152) There are some indications that the location the dealer gave up was a very desirable one. (3) Don’t wait to sue: If you believe you may want to bring a legal action against your franchisor, do not delay in consulting your lawyer. As this case illustrates, courts tend to strictly apply PMPA time limits. |
|
|