In the
United States Court of Appeals
For the Seventh Circuit
No. 09-3006
A L’S S ERVICE C ENTER, et al.,
Plaintiffs-Appellants,
v.
BP P RODUCTS N ORTH A MERICA, INC.,
Defendant-Appellee.
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 03 C 4508—George M. Marovich, Judge.
A RGUED F EBRUARY 9, 2010—D ECIDED M ARCH 26, 2010
Before P OSNER, R OVNER, and SYKES, Circuit Judges.
P OSNER , Circuit Judge. This suit under the Petroleum
Marketing Practices Act, 15 U.S.C. §§ 2801 et seq., pits a
defunct gas station in Oakbrook Terrace (a suburb of
Chicago), called Al’s Service Center, against BP, the giant
oil company. Al’s’ owner is a coplaintiff, but we need
not discuss him separately.
The suit was filed almost seven years ago and has
dragged on unconscionably as a result of confused law-
2 No. 09-3006
yering and the Job-like patience of Judge Andersen, who
presided over the case until almost the end, when it was
reassigned to Judge Marovich, who administered the
coup de grâce.
The Petroleum Marketing Practices Act protects a
franchised gas station from arbitrary termination by
the franchisor. Draeger Oil Co. v. Uno-Ven Co., 314 F.3d 299,
299-300 (7th Cir. 2002); cf. Fleet Wholesale Supply Co. v.
Remington Arms Co., 846 F.2d 1095, 1097 (7th Cir. 1988);
James A. Brickley, Frederick H. Dark & Michael S.
Weisbach, “The Economic Effects of Franchise Termina-
tion Laws,” 34 J.L. & Econ. 101, 110 (1991). The best
theory for why such a law is needed is that “a franchised
dealer in effect invests in the franchisor’s trademarks
and as a result creates goodwill for the franchisor which
the latter might on occasion be tempted to appropriate
by terminating the franchisee.” Draeger Oil Co. v. Uno-Ven
Co., supra, 314 F.3d at 299. Consistent with this theory,
Al’s contends that BP drove it out of business so that
it could open a company station on the site, though as far
as we know BP has not done so.
Whether it’s a sensible theory is another question;
we expressed doubts in both the cases we just cited,
echoing criticisms of franchise laws, such as the
Petroleum Marketing Practices Act, as rank interferences
with liberty of contract. Thomas M. Pitegoff, “Franchise
Relationship Laws: A Minefield for Franchisors,” 45
Business Lawyer 289, 309-10 (1989); Donald P. Horwitz &
Walter P. Volpi, “Regulating the Franchise Relationship,”
54 St. John’s L. Rev. 217, 273-76 (1980). But the wisdom
No. 09-3006 3
of the law is not our business; all that matters is that
Al’s was a BP franchisee within the scope and meaning
of the Act and therefore BP could neither terminate the
franchise except on a ground listed in the Act nor
refuse to renew the franchise relationship, if it was
severed, other than on one of those grounds. 15 U.S.C.
§§ 2802(a)-(c).
A franchise is a set of contracts: in the case of a gas
station, a set consisting of a supply contract, a lease of
premises (unless the dealer owns the premises, as it
did not here), and a trademark license. None of these
contracts is required to be perpetual, and when one or
more expires, the franchise may be said to have expired.
But the franchisee can insist on renewal of the expired
contract or contracts on reasonably similar terms, and
thus on the continuation of the franchise relationship,
unless the franchisor has some authorized ground for
nonrenewal. The reason the statute speaks of renewal of
the “franchise relationship” rather than of the “franchise”
is that “the PMPA contemplates that franchisors can
respond to market demands by proposing new and
different [contract] terms at the expiration of a franchise
agreement.” Mac’s Shell Service, Inc. v. Shell Oil Products
Co., 2010 WL 693684, at *10 (U.S. Mar. 2, 2010). Hence
our reference, in speaking of renewal, to “reasonably
similar terms.”
In 2002 Al’s learned that the State of Illinois intended
to condemn a small slice of the gas station’s property in
order to widen one of the roads that run alongside it. The
widening would close off two of the five entrances to the
station, although the plan was later modified so that only
4 No. 09-3006
one entrance would be eliminated and another one nar-
rowed. But the elimination even of just that one entrance
was bound to create a problem. The gas station was on
a corner at which a highway intersects a side street. Most
of the station’s customers entered the station by one of the
two entrances from the highway and, after tanking up,
left by the other. With one of those entrances closed,
drivers entering the station from the highway would
have to either enter and leave by the same entrance,
increasing congestion and the risk of an accident, or exit
on the side street, which would deflect them from their
intended route.
In March 2003 BP notified Al’s that it would terminate
the franchise 10 days before the condemnation took effect,
pursuant to the provision in the Petroleum Marketing
Practices Act that “the term ‘an event which is relevant
to the franchise relationship and as a result of which termina-
tion of the franchise or nonrenewal of the franchise relationship
is reasonable’ includes events such as . . . condemnation or
other taking, in whole or in part, of the marketing
premises pursuant to the power of eminent domain.”
15 U.S.C. § 2802(c)(5) (emphasis added).
The condemnation took place on June 27, 2005. Al’s’
franchise contracts (the lease, supply contract, and trade-
mark license) expired by their terms (that is, besides as a
consequence of the condemnation) the following month.
BP wrote Al’s, telling it to vacate the premises because
the franchise had been terminated. Al’s didn’t do so—for
years. And BP continued selling it gasoline. Indeed
nothing changed in the parties’ relationship until late
No. 09-3006 5
May and early June 2006, when, according to Al’s, for a
period of 12 days (eight of them consecutive, including
the Memorial Day weekend), BP delivered no gasoline
to Al’s. BP denies that there was any interruption in
delivery; the district court never resolved the dispute.
Later, in the summer of 2006, as part of the widening
project, the state removed Al’s’ tall roadside Amoco
sign. (BP had acquired Amoco in 1998. Al’s had been an
Amoco station and it continued to use the Amoco name
after the acquisition.) Al’s asked BP to replace it, and
offered to pay the cost of doing so, but BP refused. (That
was in October.) Al’s claims that without the sign it
could not break even.
It never got the sign, and abandoned the business on
May 1, 2008. It seeks tens of millions of dollars in compen-
satory and punitive damages for what it contends were
BP’s illegal efforts to destroy its business. It seeks these
damages under both the Petroleum Marketing Practices
Act and state law, though the district court refused to
allow Al’s to amend its complaint to add any state-law
claims.
Al’s argues that BP terminated the franchise in the letter
of March 2003 which said that the franchise would be
terminated 10 days before the condemnation. But the
condemnation did not occur for more than two years
after the letter was sent, and how the letter could be the
termination escapes us. Both Al’s and BP continued to
behave as if the lease remained in effect, the supply
contract remained in effect, and the trademark license
remained in effect—and they did remain in effect. Even
6 No. 09-3006
after the contracts expired, the parties behaved as if they
were still in effect. Except that Al’s claims that the threat
of termination caused it to lose valuable employees
because they were afraid they’d soon be out of work, no
change of practical significance in the franchise relation-
ship occurred until the interruption (if there was an
interruption) of supply in May 2006, more than three
years after the letter had been sent.
In June 2006, right after the alleged interruptions in the
supply of gasoline, the district court on Al’s’s motion
issued a preliminary injunction against BP’s terminating
the franchise. Nothing further of note happened until
October, when BP refused to replace the sign. One might
have expected Al’s to ask the district court to hold BP in
contempt of the preliminary injunction, which was still
in effect and indeed remained so until made moot by
Al’s’ abandonment of its business, and to impose an
appropriate sanction for the contempt; for Al’s believes
(though mistakenly, as we’ll see) that the refusal to
replace the sign was an act of termination. Instead, having
it seems forgotten about the injunction, Al’s waited a year
and then moved the district court for leave to file a fourth
amended complaint, adding various claims (such as a
claim for damages from the alleged supply interruptions)
and additional supplemental state-law counts. The court
denied leave to file the amended complaint and later
granted BP’s motion for summary judgment and dis-
missed the suit.
After entry of the final judgment against it, Al’s moved
the district court for reconsideration under Fed. R. Civ. P.
No. 09-3006 7
59 and asked to be allowed to file a sixth amended com-
plaint (the court had allowed a fifth to be filed). The judge
denied the motion, and the appeal challenges that denial
as well as the denial of leave to file the fourth amended
complaint, and the original judgment.
It is very difficult to understand either side’s arguments.
But it seems to us that the proper analysis is the following.
The franchise was not terminated by the March 2003
letter; that is for sure. Also, it is reasonably clear, though
not certain, that BP was entitled to terminate the
franchise or decline to renew the franchise relationship
when the condemnation occurred, even though the state
took less than 2 percent of the gas station’s 1.3 acres.
Whether the condemnation was an event justifying
termination depends on whether any part of the “market-
ing premises” was taken, and, if so, whether a taking is
grounds for termination even if its impact on the
franchisor is trivial. The condemnation significantly
degraded the marketing premises. Convenient entrances
for cars and trucks are part of a gas station’s marketing
premises, and as we noted earlier the closing of one of
only two entrances on the highway side of the gas station
made the use of the station by customers less safe and
convenient. That was consequence enough to entitle BP
to terminate its relationship with Al’s, even though
the amount of land that the state took in the condemna-
tion was only a small percentage of the entire property.
The amount of land taken, whether in relative or in abso-
lute terms, is unimportant in itself; what is important is
the effect of the taking on the marketing of gasoline.
8 No. 09-3006
The statutory list of acts that warrant termination of a
franchise relationship is prefaced by the statement that
such an act must be “relevant to the franchise relationship
and as a result of [the act] termination of the franchise or
nonrenewal of the franchise relationship [must be] rea-
sonable.” And so it is possible to argue that condemnation
or some other listed event is grounds for lawful termina-
tion only if termination would be a “reasonable” response
to the event. That is the interpretation adopted by the
Sixth Circuit in Marathon Petroleum Co. v. Pendleton, 889
F.2d 1509, 1512 (6th Cir. 1989). The Third Circuit adopted
it as well in Sun Refining & Marketing Co. v. Rago, 741 F.2d
670, 673 (3d Cir. 1984), but later backed off. See Lugar v.
Texaco, Inc., 755 F.2d 53, 58-59 (3d Cir. 1985). The other
circuits to have addressed the issue (we have not) have
rejected the Sixth Circuit’s approach. Hinkleman v. Shell
Oil Co., 962 F.2d 372, 378 (4th Cir. 1992) (per curiam);
Desfosses v. Wallace Energy, Inc., 836 F.2d 22, 26 (1st Cir.
1987); Atlantic Richfield Co. v. Guerami, 820 F.2d 280, 283
(9th Cir. 1987); Russo v. Texaco, Inc., 808 F.2d 221, 225
(2d Cir. 1986).
There isn’t much at stake in this disagreement, at least
in the case of condemnation. Even without the prefatory
language quoted above, it would be apparent that if the
state condemned merely a strip of unused property at
the back of the gas station, it would not be taking any
part of the station’s “marketing premises,” and that if
the state condemned a part of those premises so small
that it couldn’t possibly reduce the gas station’s sales of
BP gas, the invocation of the condemnation clause as
No. 09-3006 9
grounds for terminating the franchise relationship would
be in bad faith. For the prefatory language, whether or
not (probably not, as the majority of the circuits have
ruled) it establishes an additional criterion that must be
satisfied for termination to be permissible, indicates the
spirit in which the listed events should be interpreted.
That indication of spirit is important because the list is not
exhaustive; other, unlisted events are allowed to justify a
termination, and they have to be “reasonable” too.
So, to resume the narrative, BP could in June 2005, when
the condemnation finally was ordered, have terminated
its relationship with Al’s. But it didn’t do so. It gestured at
doing so by demanding possession of the premises, but
rather than following through and taking possession it
acquiesced in Al’s’ continued possession. BP also con-
tinued supplying Al’s with gasoline and allowing it to
use the BP name and Amoco sign. Everything was, at least
at first, as before.
A franchise, as we said, is a set of contracts. Can one
or more of the contracts be implied? The definition of
“contract” in the Petroleum Marketing Practices Act
suggests that it can be, as we assumed in Brach v. Amoco
Oil Co., 677 F.2d 1213, 1217-18 (7th Cir. 1982). For “the
term ‘contract’ means any oral or written agreement. For
supply purposes, delivery levels during the same month
of the previous year shall be prima facie evidence of an
agreement to deliver such levels.” 15 U.S.C. § 2801(10). The
second sentence of the definition describes a contract
implied by the parties’ course of conduct. Such contracts
are common and to exclude them from the scope of the
Act would be arbitrary.
10 No. 09-3006
A typical such contract is formed when a landlord
accepts rent from an overstaying tenant. Illinois law deems
the lease extended by that acceptance. Hunt v. Morton,
18 Ill. 75 (1856); Meyer v. Cohen, 632 N.E.2d 22, 29 (Ill. App.
1993); A.O. Smith Corp. v. Kaufman Grain Co., 596 N.E.2d
1156, 1162-63 (Ill. App. 1992); Restatement (Second) of
Property, Landlord and Tenant § 14.4 and comment e (1977).
Brach was such a case, and accepting rent from an over-
staying tenant was what BP, the owner of the premises
of Al’s’ gas station, did in this case.
The lease was not the only contract. There were also as
we said a trademark license and a gasoline-supply con-
tract. (The lease and the supply contract were in the
same document, captioned “lease and supply con-
tract,” but analytically they are distinct.) They too were
extended when BP continued to accept the payments
prescribed by them. People v. Dummer, 113 N.E. 934, 935
(Ill. 1916); Village of Orland Hills v. Citizens Utilities Co., 807
N.E.2d 590, 595-96 (Ill. App. 2004); Hobbs v. Massasoit Whip
Co., 33 N.E. 495 (Mass. 1893) (Holmes, J.). For the principle
of the overstaying-tenant cases is general: You can’t accept
payment for performance without performing, when it
is obvious that you are in a commercial relationship with
the payor. Receipt of payment in such a context creates
what is called an “implied-in-fact contract” and is treated
just like an express contract. That is the significance of
“in fact”: the circumstances allow an inference that the
parties had a deal (a “meeting of the minds”) even though
there was no statement to that effect. “[B]ehavior takes
the place of articulate acceptance,” as we put it in Brines
v. XTRA Corp., 304 F.3d 699, 703 (7th Cir. 2002). “[A]n
No. 09-3006 11
implied-in-fact contract is a true contract, containing
all necessary elements of a binding agreement; it differs
from other contracts only in that it has not been com-
mitted to writing or stated orally in express terms, but
rather is inferred from the conduct of the parties in the
milieu in which they dealt.” Lirtzman v. Fuqua Industries,
Inc., 677 F.2d 548, 551 (7th Cir. 1982) (Illinois law); E. Allan
Farnsworth, Contracts § 3.10, pp. 129-30 (4th ed. 2004).
The parties’ relationship may have altered in May 2006,
if indeed there was an interruption of supply then; and it
altered in October with BP’s refusal to replace the sign. A
temporary interruption of supply, unless excused by force
majeure or some other defense, would be a breach of
contract entitling Al’s to sue under state law. But Al’s
could seek a remedy under the Petroleum Marketing
Practices Act only if BP had terminated the franchise, or
failed to renew the franchise relationship, 15 U.S.C.
§§ 2805(a), (d), and a merely temporary breach of a supply
contract would not do either. As the Supreme Court said
in Mac’s Shell Service, Inc. v. Shell Oil Products Co., supra,
at *7, “reading the Act to prohibit simple breaches of
contract . . . would be inconsistent with the Act’s limited
purpose and would further expand federal law into a
domain traditionally reserved for the States.”
In contrast, the refusal to replace the sign, as opposed
to a merely temporary failure to replace it, might, as an
original matter, be thought an act of “constructive” termi-
nation—an act so destructive of the franchisee’s ability to
operate that it would have the practical consequences of
an explicit termination. Dersch Energies, Inc. v. Shell Oil Co.,
12 No. 09-3006
314 F.3d 846, 859-60 (7th Cir. 2002); May-Som Gulf, Inc. v.
Chevron U.S.A., Inc., 869 F.2d 917, 922-23 (6th Cir. 1989).
The Supreme Court in its recent Mac’s Shell opinion
refused to say whether constructive termination is a
proper ground for a violation of the Petroleum Marketing
Practices Act, and expressed skepticism that it is. Mac’s
Shell Service, Inc. v. Shell Oil Products Co., supra, at *7 n. 8;
see also id. at *5-9 nn. 4, 9, 11. We don’t know why the
Court is skeptical; without a doctrine of constructive
termination, there would be, as in employment-discrim-
ination law, where the closely analogous doctrine of
constructive discharge is well recognized, Pennsylvania
State Police v. Suders, 542 U.S. 129, 142-43 (2004); Boumehdi
v. Plastag Holdings, LLC, 489 F.3d 781, 789-90 (7th Cir. 2007);
Lindale v. Tokheim Corp., 145 F.3d 953, 955 (7th Cir. 1998), a
big loophole in the Petroleum Marketing Practices Act. But
we cannot ignore the Court’s ruling that “a necessary
element of any constructive termination claim under the
Act is that the franchisor’s conduct forced an end to the
franchisee’s use of the franchisor’s trademark, purchase
of the franchisor’s fuel, or occupation of the franchisor’s
service station.” Mac’s Shell Service, Inc. v. Shell Oil Products
Co., supra, at *9. None of those things happened here.
And we mustn’t forget the preliminary injunction. It
ordered the maintenance of the franchise relationship,
and was still in force when Al’s abandoned the business.
Had BP refused to comply with the injunction and
engaged in acts forbidden by it that destroyed the
franchise relationship, the mere existence of the injunction
would be an irrelevance. But Al’s never complained to the
court that BP was violating the injunction, and this is
No. 09-3006 13
further evidence that the franchise relationship ended
only when Al’s abandoned its business. We conclude that
BP did not violate the Petroleum Marketing Practices Act.
The district court refused to allow Al’s to file a fourth
and sixth amended complaint, and it was in those
amended complaints that Al’s sought to add supple-
mental state-law claims. When all federal claims in a suit
in federal court are dismissed before trial, the presumption
is that the court will relinquish federal jurisdiction over
any supplemental state-law claims, 28 U.S.C. § 1367(c)(3);
Beck v. Dobrowski, 559 F.3d 680, 686 (7th Cir. 2009), which
the plaintiff can then prosecute in state court. The
district court did that in effect by refusing to allow Al’s
to add supplemental state-law claims after dismissing
Al’s’ federal claim. The court’s decision was not only well
within its discretion but clearly correct. Al’s not only
dawdled in adding state-law claims, but sketched them
so cursorily in the proposed amended complaints as to
give the judge no inkling of whether they might have
any possible merit.
With jurisdiction over its state-law claims relinquished,
Al’s can continue its fight with BP in state court, though
with uncertain prospects; for its state-law breach
of contract claim may be barred by the contract doctrine
that requires a plaintiff to mitigate his damages. Moran
Foods, Inc. v. Mid-Atlantic Market Development Co., 476 F.3d
436, 439-40 (7th Cir. 2007); Fisher v. Fidelity & Deposit Co.,
466 N.E.2d 332, 340 (Ill. App. 1984); Restatement (Second) of
Contracts § 350 (1981); Farnsworth, supra, § 12.12, pp. 778-
88. By failing to complain that the injunction was being
14 No. 09-3006
violated, Al’s may have condoned the violations that it
claims imposed tens of millions of dollars of losses on it.
Not that the injunction was violated; all it says is that
“BP Products North America is hereby prohibited from
terminating or not renewing its franchise relationship
with Al’s Service Center,” and there was no termination
or nonrenewal. But Al’s thought there was, so that its
failure to try to enforce the injunction casts doubt on its
claim to have been harmed. And although it didn’t have
to ask for injunctive relief in order to preserve a right to
seek damages, Wilson v. Kreusch, 675 N.E.2d 571, 574 (Ohio
App. 1996), it wasted the district court’s time by ob-
taining an injunction that it was unwilling to take any
steps to enforce.
Al’s may in any event be judicially estopped to assert a
breach of contract claim in state court. A litigant who
prevails on one ground cannot in a subsequent case
repudiate that ground in an effort to obtain a further
victory. New Hampshire v. Maine, 532 U.S. 742, 750 (2001);
Bidani v. Lewis, 675 N.E.2d 647, 652 (Ill. App. 1996); Kale v.
Obuchowski, 985 F.2d 360, 362 (7th Cir. 1993); In re Cassidy,
892 F.2d 637, 641 (7th Cir. 1990). The purpose of the
doctrine is “to reduce fraud in the legal process by
forcing a modicum of consistency on a repeating liti-
gant.” Ladd v. ITT Corp., 148 F.3d 753, 756 (7th Cir. 1998).
Al’s obtained a preliminary injunction that prevented BP
from terminating its franchise for five years, on the theory
that BP had cancelled the contracts that constituted the
franchise. It shouldn’t be permitted after what is now
seven years to seek damages for breach of contracts that
it successfully argued had been terminated. The fact
No. 09-3006 15
that its success had come at a preliminary stage in the
litigation is no bar to the application of the doctrine. Bidani
v. Lewis, supra, 675 N.E.2d at 652; Kale v. Obuchowski, supra,
985 F.2d at 362; United National Ins. Co. v. Spectrum World-
wide, Inc., 555 F.3d 772, 779-80 (9th Cir. 2009); Murray v.
Silberstein, 882 F.2d 61, 66-67 (3d Cir. 1989).
It is true that no matter how construed, the preliminary
injunction would not have prevented the loss of gasoline
sales during a period of interruption of supply or loss
of valuable employees. But we can’t see how BP could be
thought at fault for notifying Al’s that the franchise
would be terminated as soon as the condemnation took
place, even if an inevitable consequence was that some of
Al’s’ employees, seeing the handwriting on the wall,
sought employment elsewhere. And the loss of the
gasoline sales, if there was a loss, could not have been
consequential. For earlier BP had mistakenly failed to
bill Al’s for five months’ rent—some $62,000—and there is
no evidence that the alleged supply interruption cost Al’s
that much. And because consequential damages are not
available in the usual breach of contract case, Al’s’ belief
that it can lever its tiny loss into a multimillion damages
claim is a fantasy.
Breach of contract is not the only state-law claim that
Al’s sought to add in its fourth and sixth amended com-
plaints, however. The others are tort claims and include
fraud, intentional interference with prospective economic
advantage, violation of the Illinois Franchise Disclosure
Act, 815 ILCS 705 (which however is similar to the Petro-
leum Marketing Practices Act), and even slander. These
16 No. 09-3006
seem fanciful, but their merits cannot be determined from
the brief description in the complaint.
Al’s can pursue further relief in the Illinois state courts
if it wants, but we suspect that if it does so it will be
tilting at windmills.
A FFIRMED.
3-26-10