Shell Oil Wins Round In Dispute With Franchisees

BOSTON (CN) - The 1st Circuit overturned a judgment against Shell Oil Co. and franchise manager Motiva Enterprises, ruling that the Shell companies did not violate the Petroleum Marketing Practices Act by cutting off an incentive program that reduced gas-station operators' rent according to how much gas they sold.

Since 1982, Motiva offered a rent subsidy to station operators whose gasoline sales exceeded a certain threshold. When Motiva ended the subsidy in January 2001, the franchisees had to pay much higher rent. Operators sued for breach of contract, and the case went to trial, resulting in a verdict against Shell and Motiva.

The appellate court upheld judgment on all claims except the dealers' claim that the new leases - which charged higher rent - were part of a plan to drive the dealers out of business, and that the plaintiffs had signed them under protest.

The court held that the PMPA "requires that franchisees faced with objectionable contract terms refrain from ratifying those terms by executing the contracts ... and operating under them."

The judges also upheld the damage award, noting that it "largely correlates" with the amounts provided by damage experts.

But because the ruling reversed judgment on one of the claims, the court vacated and remanded the award for attorney fees and costs.

Subscribe to Closing Arguments

Sign up for new weekly newsletter Closing Arguments to get the latest about ongoing trials, major litigation and hot cases and rulings in courthouses around the U.S. and the world.

Email *

Submit