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Court Rules in Favor of Exxon Mobil, Against Franchisee

By Tanya Roth, Esq. on March 21, 2012 4:04 PM

The U.S. Court of Appeals for the D.C. Circuit affirmed the District Court’s ruling in favor of Exxon Mobil Corporation, in a suit brought by one if its former franchisees.

Metroil was a gas station franchisee and operated a gas station located next to the Watergate in Washington D.C. The gas station was owned by Exxon and in 2009, the company sold the station to Anacostia, a gasoline distributor. Metroil continued to operate the station.

Metroil brought suit against Exxon and Anacostia, asserting three violations of federal and D.C. law. The violations related to the sale of the gas station by Exxon to Anacostia. Here are some of the main arguments:

Retail Service Station Amendment Act of 2009. Metroil claimed that the sale by Exxon to Anacostia was in violation of the Retail Service Station Amendment Act of 2009, a D.C. law. Under this law, gas station franchisees had the right of first refusal before the sale of the gas station.

The Act took effect on July 18, 2009 and expired on January 1, 2011. The problem for Metroil was that the Act was not in effect at the time of the sale of the gas station to Anacostia. As the court stated, "under D.C. law, statutes are presumed not to apply retroactively."

As such, the Act did not govern the sale of the gas station.

Petroleum Marketing Practices Act. Metroil claimed that there had been a violation of the Petroleum Marketing Practices Act, which requires gas station franchisors to continue existing franchise relationships except under certain circumstances. The sale, Metroil argued, resulted in the failure to continue the relationship.

But facts here dispute the claim. Metroil continued to operate the gas station. It continued to buy and sell Exxon fuel and it continued to use the Exxon trademark. As such, the court ruled that the franchise relationship had continued.

Prohibition against contract assignments. Under the D.C. Code's prohibition against contract assignments, the assignment of a contract is prohibited if it would materially increase the burden or risk on the non-assigning party. The court rejected this argument, saying that all of the risks associated with the assignment were permitted under the original contract and were not a result of the assignment.

The D.C. Circuit affirmed the District Court's dismissal of Metroil's complaint and held in favor of Exxon Mobil.

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