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Lawletter No. 175 Court rejects dealer's religious objections to operating hour’s requirements An Oregon federal court has ruled that a dealer's religious beliefs did not entitle him to violate his franchise agreements by closing his stations from sundown Friday to sundown Saturday in the recent case of Texaco Refining & Marketing Inc. v. Davis DC Ore, Nos 93-481-FR, 93-595-FR, 10/21/93, 65 BNA Antitrust & Trade Reg. Rptr 601. Facts: Barry P. Davis leased three Texaco stations in Oregon. The franchise agreements required 24-hour 7-days-a-week operation. In late 1992, Davis starting closing the three stations from sundown on Friday to sundown on Saturday for religious reasons. Texaco sued the dealer and obtained a court order requiring him to keep the station open at all times. Davis ignored the order and continued to close on Friday and Saturday. Texaco then sent him a notice of termination, citing his violation of the court order and the franchise agreements. He asked to court to declare Texaco's termination of the franchise unlawful under the federal Petroleum Marketing Practices Act. The PMPA forbids franchise termination without good cause. Ruling: The court ruled for Texaco and upheld the termination, holding that: (1) The PMPA authorizes franchise termination for the dealer's violation of a reasonable and material provision of the franchise agreement; (2) The PMPA also authorizes termination for the dealer's failure to exert good faith efforts to carry out the provisions of the franchise; (3) Under these circumstances, the PMPA also permits termination for the dealer's violation of the court order; (4) The dealer's religious objections are not legally valid grounds for violating the franchise agreements. Recommended procedures: We suggest the following in this area: (1) Do not violate your franchise agreement: Never violate your franchise agreement before seeing your lawyer. You can test the validity of a franchise clause by filing a lawsuit for declaratory relief without risking loss of the franchise. Do not ignore repeated default notices. (2) Preparing a challenge: As we reported in Lawletter Nos. 153 and 157, the federal courts have held that a dealer may challenge hours clauses under the PMPA on the grounds that in a particular case they are not "reasonable" or "materially significant" to the franchise relationship. Be sure to carefully prepare and document any planned challenge to any franchise clauses. The court rulings in those two previous issues provide some standards for such preparation. (4) Be realistic: It appears that the dealer in the Texaco Refining & Marketing case had plenty of warning. He continued to close on Friday night and Saturday despite a court order directing him to stay open. This cost him three stations. Presumably the dealer was sincere in his religious beliefs and was willing to make the sacrifice. |
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