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Lawletter No. 155 Appeals court upholds termination in meter reading case A federal appeals court has affirmed an oil company's termination of a dealer who submitted false reports of his sales in the recent case of Baker v. Amoco Oil Co., (7th Cir. 1992) 62 BNA Antitrust & Trade Reg. Rptr. 235. Facts: Dealer Terry Baker operated four Amoco stations in Milwaukee. He operated under Meter Marketing Plan (MMP) agreements. The dealer does not pay for the gasoline until it is sold to the public. Amoco announces price changes to dealers by telephone. Dealers read their meters and file MMP reports. Amoco bills on the basis of MMP reports. Baker submitted MMP reports, which Amoco discovered, understated the amounts due. The company issued a termination notice on the stations for failure to make timely payments and failure to comply with the MMP agreement requiring accurate reports. The dealer filed suit under the PMPA, claiming that Amoco had not proved fraudulent intent. Ruling: The MMP agreement provision was reasonable and material. Amoco did not have to prove fraud to justify termination on the grounds stated. Recommended procedures: We suggest the following: (1) Meters: Most franchise agreements give the franchisor the right to read pump meters. There is no special legal reason why the franchisor cannot use this information in nonpayment, commingling or other cases. Never assume that the franchisor cannot obtain and use this information. (2) Recordkeeping requirements: Many franchise agreements contain provisions requiring the dealer to keep certain records and to allow the franchisor access to them. Many dealers find such provisions objectionable. However, courts tend to uphold such clauses. A dealer may in a given case have a legitimate excuse for not having such records. But it is not a good idea to defy a franchisor's request for such information or documents without first obtaining legal advice. (3) Payment disputes: The PMPA permits a franchisor to terminate a franchise based on the dealer's failure to make timely payment of sums to which the franchisor is legally entitled. Some courts have held that a franchisor may not terminate for failure to make timely payment if the dealer has a good faith belief that he did not owe the money. However, the dealer must be able to articulate a clear reason why he believes his statement is incorrect. In the Baker v. Amoco Oil Co. case, the dealer himself had caused the inaccuracy. He was therefore in no position to assert the existence of a good faith dispute. If you get into a serious payment dispute with your franchisor that you cannot resolve, see your lawyer before things go too far. |
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