C.K. Smith & Co. v. Motiva Enterprises LLC

United States Court of Appeals
For the First Circuit

No. 01-1161

C.K. SMITH & CO., INC.,

Plaintiff, Appellant,

v.

MOTIVA ENTERPRISES LLC,

Defendant, Appellee.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MASSACHUSETTS

[Hon. Nathaniel M. Gorton, U.S. District Judge]

Before

Torruella and Selya, Circuit Judges,

and Lisi,* District Judge.

Thomas Paul Gorman and Sherin and Lodgen LLP on brief for
appellant.
Richard E. Powers, Karen M. Connors, and Zizik, LaSalle &
Powers, P.C. on brief for appellee.

October 25, 2001

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*Of the District of Rhode Island, sitting by designation.
 SELYA, Circuit Judge. This appeal requires us to

determine whether a franchisor's decision not to renew a service

station franchise violated the Petroleum Marketing Practices Act

(PMPA), 15 U.S.C. §§ 2801-2841. The ousted franchisee,

plaintiff-appellant C.K. Smith & Co., Inc. (CKS), complains that

the decision of the franchisor, defendant-appellee Motiva

Enterprises LLC, to discontinue the franchise relationship

following CKS's failure to execute a renewal lease in a timely

manner contravened the PMPA.1 The district court rejected these

importunings, see C.K. Smith & Co. v. Motiva Enters., 126 F.

Supp. 2d 34 (D. Mass. 2000), and so do we. The PMPA does not

provide any relief for a franchisee who negligently fails to

execute renewal documents in a timely fashion. Hence, we affirm

the lower court's entry of summary judgment in favor of the

franchisor.

I. BACKGROUND

In accordance with the conventional summary judgment

praxis, we take the material facts in the light most favorable

to the nonmoving party (here, the plaintiff) and indulge all

1
The relationship at issue here was entered into between CKS
and Star Enterprise. Star has since transferred all its assets
and liabilities to Motiva, and the district court granted CKS's
motion to substitute Motiva for Star as the party defendant.
For simplicity's sake, we refer to the defendant throughout as
"Motiva."

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justifiable inferences in that party's favor. McCarthy v. N.W.

Airlines, Inc., 56 F.3d 313, 315 (1st Cir. 1995).

CKS is a Massachusetts corporation engaged in myriad

fuel-related businesses ranging from home delivery of heating

oil to the operation of service stations. One such venture

involved a service station in Randolph, Massachusetts. In mid-

1989, CKS entered into a three-year lease and sales agreement

with Motiva for the Randolph location and thereby established a

franchise relationship within the contemplation of the PMPA.

See 15 U.S.C. §§ 2801(1)-(2), 2802. The parties renewed the

salient agreements (and the franchise relationship) for

additional three-year periods in 1992 and 1995. The last of

these renewals — the lease and sales agreement executed on or

about August 1, 1995 — is at the core of the instant case.

The arrangement negotiated in 1995 was scheduled to

expire on July 31, 1998. The lease provided, inter alia, that

notices from Motiva to CKS would be addressed to the latter's

"place of business," identified in the lease as the service

station premises.2 On March 25, 1998, Motiva mailed a renewal

2This provision was not fortuitous. The 1989 lease and
sales agreement specified that notices were to be sent to CKS's
principal place of business in Worcester, Massachusetts.
Shortly thereafter, Motiva adopted a policy of sending renewal
packages directly to the affected service station location.
This change was embodied in the notice provisions of the 1992
and 1995 agreements.

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package, containing a proposed renewal lease and sales

agreement, to the Randolph location. CKS received the

materials, but one of its employees misplaced them.

Nearly one month elapsed without any word from CKS to

Motiva about the renewal package. Concerned by CKS's silence,

Motiva sent written notice on April 24, 1998, advising CKS that

the existing lease and sales agreement between the parties would

not be renewed beyond the July 31, 1998 expiration date; that

Motiva would terminate the franchise relationship on that date;

and that the ground for nonrenewal was the parties' failure to

reach agreement as to changes and/or additions to the governing

documents. In the same communique, Motiva advised CKS that it

stood ready and willing to rescind the notice of nonrenewal in

the event that the parties entered into a mutually satisfactory

lease and sales agreement for a period extending beyond July 31,

1998. CKS acknowledges that it received the nonrenewal notice.

On June 24, 1998, representatives of both companies met

to discuss station maintenance issues and the possibility of a

renewed franchise relationship. The parties provide differing

accounts regarding the substance of that meeting. CKS's

version, which we accept for summary judgment purposes, is that

Judith Smith (CKS's president) told Motiva's representatives

that she wanted to review the details of a program under which

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Motiva reimbursed its franchisees for a portion of station

repair costs (the so-called "Freedom Five Hundred Manual")

before executing any documents, but that she gave no indication

that she was rejecting any of the renewal terms proposed by

Motiva.

As of July 31, 1998, CKS had not executed the renewal

lease and sales agreement. Motiva deemed the franchise

relationship at an end, and John Molloy, a Motiva official,

called Judith Smith on August 4 to inquire about her plans for

vacating the premises. During that conversation, Smith

expressed her firm's desire to continue the franchise

relationship and, for the first time, voiced a willingness to

execute the documents forwarded by Motiva to CKS on March 25.

Smith reiterated these sentiments in a follow-up letter of even

date. Motiva spurned Smith's entreaties as too little and too

late.

On August 10, 1998, CKS filed a complaint in which it

claimed that Motiva had violated the PMPA by refusing to renew

the lease and franchise relationship. The complaint sought both

injunctive relief and money damages. The district court

preliminarily enjoined Motiva from terminating the lease and

franchise for the Randolph service station.

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 In due course, the parties cross-moved for summary

judgment. In a closely reasoned rescript, the district court

granted Motiva's motion and denied Smith's cross-motion. C.K.

Smith, 126 F. Supp. 2d at 40. This appeal ensued. At its

inception, we stayed the district court's order, see Fed. R.

App. P. 8(a), and, therefore, the preliminary injunction remains

in effect.

II. DISCUSSION

We begin our analysis by limning the applicable

standard of review. We next offer an overview of the pertinent

portions of the PMPA, and then turn to the merits of the

plaintiff's remonstrances.

A. Standard of Review.

We review the district court's entry of summary

judgment de novo. Suarez v. Pueblo Int'l, Inc., 229 F.3d 49, 53

(1st Cir. 2000). Such peremptory relief is justified only "if

the pleadings, depositions, answers to interrogatories, and

admissions on file, together with the affidavits, if any, show

that there is no genuine issue as to any material fact and that

the moving party is entitled to judgment as a matter of law."

Fed. R. Civ. P. 56(c). Thus, to escape summary judgment, CKS,

as the party bearing the ultimate burden of proof, must

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"affirmatively point to specific facts that demonstrate the

existence of an authentic dispute." McCarthy, 56 F.3d at 315.

The parameters of this duty are familiar: the contested facts

must be material and the contest over them must be genuine. Id.

Moreover, those facts must be backed by competent evidence.

Garside v. Osco Drug, Inc., 895 F.2d 46, 48 (1st Cir. 1990).

Because CKS is the party opposing summary judgment,

this court, like the court below, must test the adequacy of its

proffer by resolving all conflicts in the record favorably to it

and drawing all reasonable inferences to its advantage. Perez

v. Volvo Car Corp., 247 F.3d 303, 310 (1st Cir. 2001). There

are, however, limits to this indulgence: a reviewing court need

not heed "conclusory allegations, improbable inferences, [or]

unsupported speculation." Medina-Munoz v. R.J. Reynolds Tobacco

Corp., 896 F.2d 5, 8 (1st Cir. 1990).

B. The PMPA: An Overview.

The PMPA, 15 U.S.C. §§ 2801-2841, governs franchise

arrangements for the sale, consignment, or distribution of motor

fuel. Congress enacted this statutory regime primarily to

protect motor fuel franchisees by leveling the playing field

between them and their franchisors (typically, large oil

companies). See Four Corners Serv. Station, Inc. v. Mobil Oil

Corp., 51 F.3d 306, 310 (1st Cir. 1995); Veracka v. Shell Oil

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Co., 655 F.2d 445, 448 (1st Cir. 1981). To accomplish this

objective, the PMPA establishes minimum standards designed to

prevent arbitrary or discriminatory discontinuance of franchise

agreements. See Chestnut Hill Gulf, Inc. v. Cumberland Farms,

Inc., 940 F.2d 744, 746 (1st Cir. 1991). In the paragraphs that

follow, we delineate those features of the statute that underpin

this appeal.

In the first place, it should be understood that the

PMPA makes a distinction between a "franchise" and a "franchise

relationship." As used in the PMPA, the term "franchise" covers

the essential contracts between a retailer and a supplier (e.g.,

lease of retail premises, provision of motor fuel, use of the

supplier's trademark in connection with retail sales). 15

U.S.C. § 2801(1). The broader term "franchise relationship"

encompasses "the respective motor fuel marketing or distribution

obligations and responsibilities of a franchisor and a

franchisee which result from the marketing of motor fuel under

a franchise." Id. § 2801(2). Congress created the legal rubric

of a franchise relationship to preclude oil companies from

asserting that because a franchise no longer exists after it

expires, there is nothing left to renew. See S. Rep. No. 95-

731, at 30 (1978), reprinted in 1978 U.S.C.C.A.N. 873, 888; see

also DuFrense's Auto Serv., Inc. v. Shell Oil Co., 992 F.2d 920,

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926 n.4 (9th Cir. 1993). Thus, even if the underlying

agreements expire, the PMPA protects the franchise relationship

by obligating the franchisor to renew the franchise, 15 U.S.C.

§ 2802(a)(2), unless the franchisor satisfies the requirements

set forth in 15 U.S.C. § 2802(b) (discussed infra).

The PMPA maintains this binary approach in addressing

a franchisor's right to discontinue an extant business

relationship with a franchisee, specifically limiting both the

franchisor's ability to "terminate any franchise" and its

"fail[ure] to renew any franchise relationship." Id. §

2802(a)(1)-(2). Inasmuch as the instant case revolves around an

expired lease agreement, our analysis focuses on the PMPA

provisions pertaining to a "failure to renew" — a term of art

that the PMPA defines as "a failure to reinstate, conclude, or

extend the franchise relationship — at the conclusion of the

term, or on the expiration date, stated in the relevant

franchise." Id. § 2801(14)(A).

The second point that must be understood is the anatomy

of the PMPA. The heart of the statute is section 2802, which

reads in pertinent part as follows:

(a) Except as provided in subsection (b) of
this section . . . , no franchisor engaged
in the sale, consignment, or distribution of
motor fuel in commerce may—

. . . .

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 (2) fail to renew any
franchise relationship
(without regard to the date on
which the relevant franchise
was entered into or renewed).

(b) Precondition and grounds for . . .
nonrenewal

(1) Any franchisor may . . .
fail to renew any franchise
relationship, if—

(A) the notification
requirements of section 2804
of the title are met; and

(B) . . . such nonrenewal
is based upon a ground
described in paragraph (2) or
(3).

Id. § 2802(a)-(b)(1). Refined to bare essence, these provisions

prohibit a motor fuel franchisor from failing to renew a

franchise unless the franchisor gives adequate notice to the

franchisee3 and bases the failure to renew upon a ground

sanctioned by the PMPA.

The PMPA spells out several permissible grounds for

nonrenewal. See id. § 2802(b). Pertinently, those grounds

include:

3 The PMPA's notice requirements are codified in 15 U.S.C. §
2804. CKS does not dispute that Motiva complied with these
requirements, so it would serve no useful purpose to discuss
them in any detail.

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 (A) The failure of the franchisor and the
franchisee to agree to changes or additions
to the provisions of the franchise, if —

(i) such changes or additions
are the result of
determinations made by the
franchisor in good faith and
in the normal course of
business.

Id. § 2802(b)(3)(A)(i). The principal issue raised in this

appeal is whether Motiva appropriately invoked section

2802(b)(3)(A) as its basis for failing to renew the franchise

relationship with CKS.

C. The PMPA Claims.

We turn next to CKS's claims under the PMPA. The

letter sent by Motiva to CKS in April of 1998 stated that "the

reason for the non-renewal of your franchise relationship is the

failure of [the parties] to agree to changes or additions to the

provisions of the [Lease and Sales Agreement]." This letter

went on to declare that the proposed changes and additions had

been arrived at by Motiva "in good faith in the normal course of

business." CKS assails the stated ground for nonrenewal on

several fronts.

First, CKS offhandedly suggests that Motiva cannot

prevail because it failed to establish each and all of the

grounds for nonrenewal set forth in 15 U.S.C. § 2802(b)(2)(A)-

(B). This is sheer persiflage: the PMPA only requires a

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franchisor to establish a single ground for nonrenewal. See 15

U.S.C. § 2802(b)(1)(B) ("Any franchisor may . . . fail to renew

any franchise relationship, if — . . . such nonrenewal is based

upon a ground described in paragraph (2) or (3).") (emphasis

supplied).

Second, CKS asserts that section 2802(b)(3)(A) does not

apply because its failure to execute the renewal lease by the

expiration date did not constitute a "failure to agree" within

the meaning of the PMPA. This assertion, which seeks to exploit

the difference between a franchise and a franchise relationship,

rests on the notion that the franchise expired on July 31, but

the franchise relationship endured; accordingly, Judith Smith's

August 4 letter effectively signaled CKS's acceptance of the

terms presented in Motiva's renewal package and Motiva was

obliged to renew the franchise relationship.

This is pure, unadulterated sophistry. The record

makes manifest that Motiva contacted CKS three times concerning

the renewal of the Randolph franchise, but CKS failed to

communicate a desire (let alone an intention) to execute the

tendered documents before the July 31 expiration date. Whatever

CKS now says that it subjectively intended, the fact remains

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that it offered no objective manifestation of this intent to

Motiva prior to the July 31 deadline.4

That ends the matter. We agree entirely with the

district court that CKS's failure to give notice prior to July

31 of an intent to execute the renewal lease amounted to a

"failure . . . to agree to changes or additions to the

provisions of the franchise." C.K. Smith, 126 F. Supp. 2d at

39. That was a valid ground for nonrenewal under section

2802(b)(3)(A) of the PMPA.

CKS attempts to blunt the force of this conclusion by

emphasizing the specialized meaning of "failure" in the context

of section 2802(b)(3)(A). The word "failure," separately

defined in the PMPA, expressly excludes "any failure which is

only technical or unimportant to the franchise relationship."

15 U.S.C. § 2801(13). Building upon this PMPA-specific

definition, CKS asseverates that its failure to execute the

renewal lease qualifies as a "technical or unimportant" lapse

(and, therefore, constituted an illegitimate basis for

discontinuation of the franchise relationship). CKS casts this

argument along the line that it substantially complied with the

renewal request by acceding four days late to Motiva's requested

4
CKS claims that this oversight was the byproduct of a
period of corporate turmoil. That may well be so, but it is
beside the point.

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terms, and that this is sufficient because PMPA provisions

should not be strictly enforced.

To support this radical position, CKS relies heavily

on the Eleventh Circuit's decision in Hutchens v. Eli Roberts

Oil Co., 838 F.2d 1138 (11th Cir. 1988). There, the court

refused to insist upon strict compliance with a specific PMPA

provision that required a franchisor to give notice to its

franchisee about the terms of an underlying lease with a third

party. See id. at 1143. The court excused the franchisor's

"technical" failure to comply with the notice provision in light

of the franchisee's awareness of the very information that the

notice, if given, would have contained. Id.

We believe that Hutchens is inapposite. Unlike

Hutchens, which involved a PMPA notice provision, this case

involves the interpretation of a statutorily enumerated ground

for nonrenewal of a franchise relationship. We see no

justification for judicially recalibrating the careful balance

that Congress struck when drafting the PMPA. In all events,

relaxing a plainly worded statutory directive to benefit an

errant franchisee would be especially illogical where, as here,

the franchisor had no inkling of the franchisee's willingness

(or even its desire) to execute a renewal lease until after the

existing lease had expired.

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 We will not paint the lily. In the absence of special

circumstances — and we see none here — courts ought to defer to

Congress's choice of phrase and give words used in a statute

their ordinary and accepted meaning. CKS's failure to execute

the new set of documents in a timeous manner was a substantial

event of default. To characterize this failure as either a

"technical" or an "unimportant" omission would require us to

stretch those terms well beyond their customary meanings. See

C.K. Smith, 126 F. Supp. 2d at 40 (astutely observing that

"there is no 'failure' more important to the 'franchise

relationship' and less technical than a failure to enter into

the very lease by which that relationship would be renewed").

Thus, the particularized definition contained in 15 U.S.C. §

2801(13) does not advance CKS's cause.

In a related vein, CKS argues that the PMPA constitutes

remedial legislation and, accordingly, must be given a liberal

construction consistent with Congress's avowed purpose of

protecting franchisees. See S. Rep. No. 95-731, at 15 (1978),

reprinted in 1978 U.S.C.C.A.N. 873, 873-74. This principle, CKS

says, should lead us to construe its August 4 letter as an

effective acceptance of the terms set forth in the renewal

package, notwithstanding that it was submitted late.

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 We agree with CKS's premise, but not its conclusion.

The PMPA is remedial legislation and, as such, merits a

relatively expansive construction. See Gooley v. Mobil Oil

Corp., 851 F.2d 513, 515 (1st Cir. 1988); Brach v. Amoco Oil

Co., 677 F.2d 1213, 1221 (7th Cir. 1982). This is no reason,

however, to take liberties with the PMPA's carefully stated

provisions and reengineer the statute in the name of rough

justice. After all, the PMPA diminishes franchisors' property

rights and therefore "should not be interpreted to reach beyond

its original language and purpose." Chestnut Hill Gulf, 940

F.2d at 750 (citation omitted).

Here, our review of both the text and legislative

history of the PMPA yields no evidence that Congress either

designed or intended the PMPA to protect franchisees from their

own mistakes. Thus, extending the PMPA to the circumstances at

bar would entail rewriting the statute — an endeavor beyond the

proper province of the Judicial Branch, and one that we are

unwilling to undertake. Cf. United States v. Charles George

Trucking Co., 823 F.2d 685, 689 (1st Cir. 1987) (explaining that

"courts have no warrant to rewrite a statute in the guise of

'interpretation'"). CKS is the author of its own misfortune,

and the relief that it seeks in the name of a liberal

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construction of the PMPA is outside the purview of any

principled exercise in statutory interpretation.

CKS also makes the bare allegation that Motiva's

decision not to renew was made in bad faith and outside the

ordinary course of business. To this end, CKS suggests that

Motiva's rejection of its belated entreaty to continue the

franchise relationship was a fait accompli because Motiva

already had decided, well in advance of July 31, 1998, to

replace CKS with a contract-operated retail outlet (CORO).5

Switching from a franchisee to a CORO, CKS posits, would give

Motiva the ability both to set the retail price of gasoline at

the Randolph location and to extract windfall profits. For this

reason, CKS says, Motiva's course of conduct contravened section

2802(b)(3)(D)(ii) of the PMPA.6

The fundamental difficulty with this suggestion is that

the record does not support it. The only proof on the point is

that prior to the expiration of CKS's lease, a third party, Dia

5 A CORO does not operate under a franchise relationship,
but, rather, operates under a management contract whereby the
franchisor pays the CORO a stipend (often involving a percentage
of the station's revenues or profits) to run the station.
6This section provides in substance that a franchisor may
not fail to renew a franchise subject to the PMPA if the
franchisor's underlying purpose in failing to renew is to
"convert[] the leased marketing premises to operation by
employees or agents of the franchisor for such franchisor's own
account." 15 U.S.C. § 2802(b)(3)(D)(ii).

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George Salem, inquired about operating as a CORO at the Randolph

location. The record is uncontradicted that Motiva advised

Salem that the site would be available for that purpose only if

CKS failed to renew the lease in a timely manner. There is not

a shred of evidence that Motiva took any action to supplant CKS

with a CORO until after July 31, 1998 (that is, until after CKS

had left Motiva high and dry). As the district court concluded,

the evidence here "is simply insufficient to establish that

[Motiva] based its nonrenewal decision on the desire to replace

C.K. Smith with a CORO." C.K. Smith, 126 F. Supp. 2d at 40.

Consequently, we reject out of hand CKS's section

2802(b)(3)(D)(ii) claim.

D. The Role of Equity.

CKS makes a last-ditch argument independent of the

PMPA. This argument invites us to apply equitable principles

and fashion relief to avoid a forfeiture. See 1 Dan B. Dobbs,

Dobbs Law of Remedies § 2.3(4)(2d ed. 1993) (discussing the

maxim that "equity abhors a forfeiture").

This initiative need not detain us. Assuming, for

argument's sake, that equity may play a role in an appropriate

franchise dispute, equitable relief is simply not warranted

here. CKS was entirely to blame for its failure to execute the

renewal documents in a timely manner. See C.K. Smith, 126 F.

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Supp. 2d at 38-39 (explaining that "mismanagement, including the

loss of the Renewal Lease and a lack of internal communication,

led to C.K. Smith's failure to execute the Renewal Lease").

Motiva did nothing wrong. Thus, CKS has no footing to mount a

claim in equity. Cf. Sandstrom v. ChemLawn Corp., 904 F.2d 83,

87 (1st Cir. 1990) ("Equity, after all, ministers to the

vigilant, not to those who slumber upon their rights.").

IV. CONCLUSION

We need go no further. While the PMPA offers motor

fuel franchisees broad protection, it does not aspire to

safeguard them from the predictable consequences of their own

errors. Discerning no genuine issue of material fact such as

would necessitate further legal proceedings, we uphold the lower

court's grant of brevis disposition in the defendant's favor.

The entry of summary judgment is affirmed, the stay

previously issued is dissolved, and the preliminary injunction

is vacated. Costs are awarded in favor of the appellee.

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