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Alboyacian v. BP Products North America, Inc.

2011 WL 5873039 (U.S. Dist. Ct. D. N.J. 2011) (Unpublished)

FRANCHISES — When a franchisee makes claims for wrongful termination of its franchise, absent fraudulent inducement, negligent representation, and similar items, and the court rules that its franchise agreement had not, in fact, been terminated, those claims must be dismissed.

An oil company entered into agreements with service station owners pursuant to a Commissioner Marketer Agreement (CMA). Under the CMA, the service stations did not purchase the fuel from the oil company. Instead, the oil company supplied the fuel and the service stations received a commission from the oil company based on how much fuel was sold. Federal courts in New Jersey have recognized that a CMA creates a legal franchise under New Jersey’s Franchise Practices Act, N.J.S.A. 56:10-1. Therefore, the termination of a CMA is subject to the provisions of the Franchise Practices Act.

Here, the CMA was for a four-year term, with two additional four-year renewal options. The oil company advised the franchisees that it intended to withdraw from the CMAs at the end of the then current term. It offered each service station, as an alternative, the opportunity to buy their service stations, purchase fuel from the oil company as a dealer, and sell to the public. As a second alternative, the service stations were offered the opportunity to become dealers, but the oil company would continue to own the service station property. The oil company sued various service stations, seeking a declaration that it had no obligation to continue doing business with them or to renew the CMA. Several station owners sued the oil company, seeking a declaration that the oil company’s failure to renew the CMA violated the Franchise Practices Act. It also asserted nine other causes of action against the oil company.

The Court found that the oil company’s attempt to terminate the CMA would violate the Franchise Practices Act, and granted summary judgment against the oil company on its complaint. The Court then considered the service stations’ claims in the second action. The Court dismissed several of the claims as not being ripe. The claims for wrongful termination of a franchise, fraudulent inducement, and negligent misrepresentations, were each dismissed because they were all predicated on the CMA being terminated. Since the Court, in the earlier case, found that terminating the CMA would violate the Franchise Practices Act and since, at that point, no agreements had been terminated, there was no controversy to be decided. The Court also rejected the service station owners’ claims for tortious interference. Malice is a required element of a tortious interference claim. One must show that the conduct was intentional and without legal justification. In this case, there was no illegal, fraudulent or dishonest activity by the oil company in attempting to terminate the CMA and in attempting to shift some responsibilities from the oil company to the service station owners. Therefore, there was no malice and no case for tortious interference.

The Court also rejected the service station owners’ claims of unjust enrichment. In order to succeed on an unjust enrichment claim, they needed to prove that the oil company had received a benefit for which it did not pay, and that retention of that benefit would be unjust. However, those arguments failed because any benefit the oil company received was based solely on its contractual agreements with the service station owners. Lastly, the Court rejected the claim for quantum meruit. Quantum meruit is an alternative remedy when one is unable to prove an enforceable agreement but is seeking to collect compensation for services provided. The problem in this case was that the CMA spelled out the obligations of the parties and there was no allegation that the service station owners had provided additional services that were not included in the CMA and for which they were not paid. Therefore, there was no claim for quantum meruit.

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