Skip to main content



Anil Enterprises v. Getty Petroleum Marketing, Inc.

2009 WL 467844 (U.S. Dist. Ct. D. N.J. 2009) (Unpublished)

CONTRACTS; GOOD FAITH; FRANCHISES — It does not necessarily violate the implied covenant and good faith and fair dealing when a party to a business contract, such as a petroleum marketing franchisor, exercises discretion in setting prices based on its own reasonable beliefs concerning business strategy and such a discretionary decision results in economic disadvantage on another party.

A franchisee-operator of a gasoline service station whose franchisor converted from one brand to another brand filed a complaint alleging that the conversion was a constructive termination of its franchise agreement. It also claimed that the conversion constituted a contractual breach, and violated both the Petroleum Marketing Practices Act (PMPA) and the New Jersey Franchise Practices Act (NJFPA). The franchisor moved to dismiss these claims. The franchisee requested leave to amend its complaint to assert that the franchisor violated its implied covenant of good faith and fair dealing. The franchisor opposed, arguing that amending the complaint would be futile because the facts did not support the cause of action. In support of its motion, the franchisee argued that the franchisor charged unreasonably high wholesale prices for the newer brand gasoline, and the franchisee had to lower its gasoline price in order to lure former customers back and build loyalty for the newer, unfamiliar brand. The franchisor responded that the proposed amendment would be futile because the franchisee submitted no evidence showing that its volume decreased after rebranding.

The Court dismissed the complaint. It held that when a party to a business contract exercises discretion in setting prices based on its own reasonable beliefs concerning business strategy and such a discretionary decision results in economic disadvantage to another party, it does not necessarily violate the implied covenant of good faith and fair dealing. The Court also found that the franchisee had lowered its retail price based on its own reasoning that its customers would never buy the newer brand at the original brand’s prices. It further found that the franchisee did not provide the court with any facts that could show that its customer base would no longer buy gas from it because of the higher price charged for an unfamiliar brand. The Court noted that the franchisee also had not alleged facts that could suggest it had not been profitable since the rebranding. It found that even though sales profit margin decreased, sales volume increased. Accordingly, the Court concluded that the franchisor had validly exercised its business discretion and the franchisee did not demonstrate that the franchisor sought to harm the franchise by leaving its wholesale price for the new brand at the same level as it sold the more familiar, original brand.


MEISLIK & MEISLIK
66 Park Street • Montclair, New Jersey 07042
tel: 973-783-3000 • fax: 973-744-5757 • info@meislik.com