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High Court Rules in Petroleum Marketing Practices Act Case

By FindLaw Staff on March 02, 2010 6:12 PM

Mac's Shell Serv., Inc. v. Shell Oil Prods. Co., No. 08-240, involved an action under the Petroleum Marketing Practices Act (Act) by service station franchisees, alleging that a petroleum franchisor, Shell, and its assignee had constructively terminated their franchises and constructively failed to renew their franchise relationships by substantially changing the rental terms that the dealers had enjoyed for years, increasing costs for many of them.  The Court of Appeals partially affirmed judgment for plaintiffs.

As the Court wrote:  "The Petroleum Marketing Practices Act (PMPA or Act) . . . limits the circumstances in which petroleum franchisors may "terminate" a franchise or "fail to renew" a franchise relationship. . . . In these consolidated cases, service-station franchisees brought suit under the Act, alleging that a franchisor had constructively "terminate[d]" their franchises and had constructively "fail[ed] to renew" their franchise relationships."

The Court affirmed in part on the ground that a franchisee who signs and operates under a renewal agreement with a franchisor may not maintain a constructive nonrenewal claim under the Act.  However, the Court reversed in part, holding that a franchisee cannot recover for constructive termination under the Act if the franchisor's allegedly wrongful conduct did not compel the franchisee to abandon its franchise.

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