Present: All the Justices
CROWN CENTRAL PETROLEUM
CORPORATION, ET AL.
v. Record No. 962601 OPINION BY JUSTICE ELIZABETH B. LACY
June 6, 1997
FRANK G. HILL, T/A CEDAR
ROAD AMOCO
UPON A QUESTION OF LAW CERTIFIED BY THE UNITED STATES
DISTRICT COURT FOR THE EASTERN DISTRICT OF VIRGINIA
Pursuant to our Rule 5:42, the United States District
Court for the Eastern District of Virginia, Norfolk Division,
certified to this Court a question of Virginia law involving
the application of the Virginia Petroleum Products Franchise
Act, Code §§ 59.1-21.8 through 59.1-21.18:1 (the Act). The
district court stated that the answer to the question will be
determinative of a proceeding pending before it. We accepted
the certification by order entered January 15, 1997.
The following facts are set forth in the district court's
certification order. Crown Central Petroleum Corporation
(Crown) is a petroleum refiner. It seeks to build a gasoline
service station on property owned by its wholly-owned
subsidiary, Fast Fare, Inc., and sell Crown gasoline at that
station. Frank G. Hill operates a gasoline service station
under a lease and dealer supply agreement with Amoco Oil
Company, another petroleum refiner. Hill's station is located
within one and one-half miles of Crown's proposed station.
Section 59.1-21.16:2(A) of the Act provides, in pertinent
part, that:
no refiner of petroleum products shall operate any
major brand, secondary brand, or unbranded retail
outlet in the Commonwealth of Virginia with company
personnel, a parent company, or under a contract with
any person, firm, or corporation, managing a service
station on a fee arrangement with the refiner;
however, such refiner may operate such retail outlet
with the aforesaid personnel, parent, person, firm,
or corporation if such outlet is located not less
than one and one-half miles . . . from the nearest
retail outlet operated by any franchised dealer.
Pursuant to 28 U.S.C. § 2201(a), Crown sought a declaratory
judgment that this provision of the Act does not prevent Crown
from building and operating the station on its property because
the location prohibition applies only to retail outlets
operated by a refiner within one and one-half miles of a retail
outlet operated by a franchised dealer of that refiner. To
resolve this issue, the district court certified the following
question to us:
Whether the Virginia Petroleum Products Franchise
Act, Va. Code § 59.1-21.16:2, was only intended to
regulate intra brand competition, that is,
competition among retailers of the same brand of
products and representing the same company, or
whether it was also intended to regulate interbrand
competition, competition among retailers of different
brands of products or representing different refiners
as is contemplated by Crown's proposed use of its
property.
We conclude that § 59.1-21.16:2(A) regulates interbrand
competition because it prohibits a refiner from operating a
retail outlet unless that outlet is located one and one-half
miles or more from a retail outlet operated by a franchised
dealer, including franchised dealers that are not franchisees
of the refiner.
In construing statutes, courts are charged with
ascertaining and giving effect to the intent of the
legislature. City of Winchester v. American Woodmark Corp.,
250 Va. 451, 457, 464 S.E.2d 148, 152 (1995). That intention
is initially found in the words of the statute itself, and if
those words are clear and unambiguous, we do not rely on rules
of statutory construction or parol evidence, unless a literal
application would produce a meaningless or absurd result. Id.;
Allen v. Chapman, 242 Va. 94, 100, 406 S.E.2d 186, 189 (1991);
Beach Robo, Inc. v. Crown Central Petroleum Corp., 236 Va. 131,
134, 372 S.E.2d 144, 146 (1988). The statutory language at
issue here is clear on its face. It prohibits a refiner from
operating any retail outlet in Virginia unless the outlet is
located one and one-half miles or more from a retail outlet
operated by "any franchised dealer." Nothing in the language
used in the Act supports an interpretation that the franchised
dealer must be a franchisee of the refiner.
Crown argues, however, that this interpretation improperly
ignores explicit legislative findings contained in § 59.1-21.9
of the Act. That section states:
The General Assembly finds and declares that since
the distribution and sales through franchise
arrangements of petroleum products in the
Commonwealth of Virginia vitally affect the economy
of the Commonwealth, the public interest, welfare,
and transportation, and since the preservation of the
rights, responsibilities, and independence of the
small businesses in the Commonwealth is essential to
economic vitality, it is necessary to define the
relationships and responsibilities of the parties to
certain agreements pertaining thereto.
Crown asserts that these findings demonstrate that the General
Assembly passed the Act to address the relationships between
parties to franchise agreements and, therefore, the location
prohibition contained in § 59.1-21.16:2(A) applies only to a
refiner and its franchised dealer, and not to refiners and
franchised dealers unrelated by such an agreement. To apply
the location prohibition to such unrelated refiners and
franchised dealers is, Crown concludes, inconsistent with the
clearly expressed intent of the General Assembly. We disagree.
A number of sections in the Act do address the franchise
relationship, such as those prescribing certain terms of the
agreement, requiring disclosure of information prior to the
execution of the agreement, and setting conditions regarding
1
its termination. See §§ 59.1-21.11, -21.14, -21.15. The
legislative findings, however, do not, as Crown suggests,
compel an interpretation of the Act which restricts all
economic regulation imposed by the Act to circumstances
involving a refiner and its own franchisees.
Section 59.1-21.16:2, the section which includes the
location restriction at issue, contains provisions that clearly
regulate the conduct of refiners, irrespective of any franchise
relationship. For example, the second paragraph of § 59.1-
21.16:2(A) imposed a blanket prohibition on refiners
constructing and operating retail outlets, from July 1, 1990
through June 30, 1991, unless the outlets were purchased, or
under option to purchase, by March 1, 1990. This prohibition
was not conditioned on a franchise relationship. Similarly,
1 1
We note that if the General Assembly had intended
only to restrict a refiner/franchisor from locating near its
own franchisee, it could have easily required that the
franchise agreement include a provision requiring the
refiner/franchisor to agree not to locate its retail outlet
within the proscribed distance from the franchisee's outlet.
subsection (B) requires refiners to apportion gasoline "among
their purchasers" in times of shortages. Again, this
requirement is not based on the existence of a franchise
relationship between the refiner and purchaser. Indeed,
"purchasers" include all parties buying product from the
refiner, not just the refiner's franchisees. These provisions
of § 59.1-21.16:2 simply cannot reasonably be construed to
limit their application to circumstances involving a
refiner/franchisor and its franchised dealer, the construction
Crown argues is required by the legislative findings contained
in § 59.1-21.9.
The specific location prohibition at issue is completely
consistent, not only with other provisions of § 59.1-21.16:2,
but also with the expressed legislative intent, to preserve
"the rights, responsibilities, and independence of the small
businesses in the Commonwealth." § 59.1-21.9. A refiner
operating a retail outlet is an integrated business entity
which produces its product and sells that product at both the
wholesale and retail level. Thus, the refiner has the ability
to allocate availability of its product and subsidize the price
of its product sold at its retail outlets. Such control could
injure a franchised dealer regardless of whether the refiner is
the franchisor of the dealer. It is the refiner's integration
and access to the product that puts the retail franchised
dealer at a potentially competitive disadvantage. Therefore,
to protect the rights of franchised dealers in avoiding such a
potentially unfair price structure and thus preserve the
independence of dealers, the General Assembly chose to require
a minimum distance of one and one-half miles between a refiner-
owned-and-operated retail station and a retail station operated
by a franchised dealer. 2
Finally, our construction of § 59.21-16:2(A) is not
inconsistent with the regulations adopted by the Commissioner
of Agriculture and Consumer Services, as Crown asserts. Crown
cites to language in a regulation adopted by the Commissioner
which allows a refiner to relocate its retail outlet "at least
1 1/2 miles from any other franchised retail outlet of the same
brand." 2 Virginia Administrative Code § 5-460-20(A), at 516
(1996). This regulation, Crown argues, shows that the agency
charged with enforcing the statute considers the prohibition to
apply only to refiners and their franchised dealers. Crown's
position, however, fails to consider the regulation in its full
context.
Subsection (E) of § 59.1-21.16:2 is a grandfather clause
which allows refiners to continue operating nonconforming
retail outlets if they were operating the outlets on July 1,
1979. Rather than simply requiring a nonconforming outlet to
comply with the location prohibition in the event the outlet
had to be relocated, the General Assembly instructed the
Commissioner to adopt regulations "providing for" relocation of
2 2
Other states adopted similar protective legislation,
often broader in scope, prohibiting petroleum refiners from
operating any retail outlets based, inter alia, on evidence
that refiners favored company-operated stations in allocating
gasoline. Exxon Corp. v. Governor of Maryland, 437 U.S. 117,
124 (1978).
such outlets. § 59.1-21.16:2(D). The regulation adopted by
the Commissioner limited relocations to instances in which the
original site was lost through involuntary condemnation, non-
renewal by the owner of the property lease, or denial of a
building permit or prohibited zoning. The relocation had to be
within a 10-mile radius of the original site and, rather than
imposing the full prohibition against locating within one and
one-half miles of "any franchised dealer," the relocated,
grandfathered retail outlet was only precluded from relocating
within one and one-half miles of "any other franchised retail
outlet of the same brand."
This regulation was not an interpretation or application
of the statutory location prohibition, but a response to the
legislative directive to provide for circumstances in which a
nonconforming but legal retail outlet was forced to relocate
through no fault of its own. In that response, the
Commissioner struck a balance between strictly applying the
statutory location prohibition and allowing the grandfathered
retail outlet some relief as a result of a forced relocation.
Nothing in the regulations promulgated by the Commissioner is
inconsistent with the plain meaning of the statute.
Accordingly, because § 59.1-21.16:2(A) regulates
interbrand competition, the certified question is answered in
the negative.
Certified Question Answered in the Negative.