Bajwa v. Sunoco, Inc.

329 F.Supp.2d 726

Jagdev S. BAJWA, Plaintiff, v. SUNOCO, INC. Defendant.

No. CIV.03-1085-A.

United States District Court, E.D. Virginia, Alexandria Division.

January 16, 2004.

COPYRIGHT MATERIAL OMITTED

W. McCauley Arnold, McCandlish & Lillard, Fairfax, VA, for Plaintiff.

Michael J. Lockerby, Hunton & Williams LLP, Riverfront Plaza E. Tower, Richmond, VA, for Defendant.

MEMORANDUM OPINION

CACHERIS, District Judge.

Plaintiff Bajwa, a gas station franchisee, brought this action against Defendant Sunoco, Inc. ("Sunoco") for an alleged breach of a franchise agreement and for compensation in connection with the Commonwealth's purchase of the property. This matter comes before the Court on Plaintiff's Motion for Partial Summary Judgment and Defendant's Motion for Summary Judgment. The primary issue before in this case is whether a sale of property to a potential condemnor constitutes "a condemnation or other taking ... pursuant to the power of eminent domain" within the agreement between the parties and the Petroleum Marketing Practices Act ("PMPA"). For the reasons stated below, the Court holds that such a sale is an "other taking" and a reasonable ground for terminating a franchise. Therefore, the Court will deny the Plaintiff's motion for summary judgment. The Court, however, will grant in part and deny in part the Defendant's motion for summary judgment as there is a genuine issue of material fact concerning the value of Bajwa's leasehold interest and its inclusion in the sale price.

I. Background

The facts giving rise to this case are not in dispute. On April 11, 2001, Bajwa and Sunoco entered into a franchise agreement (the "Agreement"), under which Bajwa would operate a Sunoco gas station at 5928 Richmond Highway, Alexandria, VA 22303 (the "property"). (Def.Ex. 1.) The term of the contract extended from May 22, 2001 to May 21, 2004. (Id.) At all times relevant to this action, Bajwa operated the gas station in compliance with the terms of the lease.

Part III, paragraph 3.06 of the Agreement provides:

a. Should Premises in whole or in part, be condemned or otherwise taken pursuant to power of eminent domain, Company may terminate this Franchise at any time thereafter upon notice to Dealer

b. Dealer shall have no claim to any portion of a condemnation award payable to Company arising from any such taking or from damages to Premises resulting therefrom however Dealer may be entitled to any separate award payable to Dealer for taking of Dealer's leasehold interest, loss of business opportunity, or goodwill.

(Def. Ex. 1 at 13.)

On July 10, 2002, the Virginia Department of Transportation ("VDOT"), through its contractor, the Terra Company, Inc ("Terra"),¹ notified Sunoco that the property would be "affected by the widening of the right of way" for the Woodrow Wilson Bridge. (Def.Ex. 2.) By letter of December 16, 2002, Terra offered to buy the property for $1,650,000. (Def.Ex. 3.) The letter informed Sunoco that its property was in the "fee take area" and the state's acquisition constituted a "total take of the property." (Id.)

On January 8, 2003, Terra notified Bajwa and Sunoco that the property was "being acquired by [VDOT]." (Def.Ex. 4.) Bajwa and Sunoco were notified to vacate the premises by April 8, 2003. (Id.) On February 3, 2003, Sunoco received a letter from Terra updating the schedule for vacation of the property. (Def.Ex. 5.) This letter stated that the property had to be vacated by April 7, 2003. (Id.) Furthermore, the letter reported that the discussions regarding the property acquisitions had been "inconclusive" and that it "appeared that this matter will not be resolved in the near future." (Id.) Therefore, Terra declared that it would "begin the process of acquiring title through eminent domain proceedings with the court." (Id.) Terra stated that it would notify Sunoco when the certificate of eminent domain was filed with the court. (Id.)

On January 9, 2003, Sunoco notified Bajwa that it was terminating the Agreement, because of VDOT's taking of the property. (Def. Ex. at 6.) Sunoco stated that the taking would occur on April 8, 2003. (Id.)

On March 5, 2003, Sunoco granted the Commonwealth of Virginia an option to purchase the property for $1,750,000. (Def.Ex. 7.) The option extended for a period of one year. (Id.) On April 8, 2003, the Commonwealth acquired the property from Sunoco for $1,750,000. Bajwa received none of the proceeds. (Pl. Mem. at 2.) Bajwa's franchise terminated that same day, and Sunoco removed its signs, pumps, and gasoline from the premises. (Id.)

Bajwa filed suit in Fairfax County Circuit Court on July 25, 2003. The Defendant removed the matter to this Court on August 6, 2003. Both parties have moved for summary judgment. These motions are currently before the Court.

II. Standard of Review

Summary judgment is appropriate only if the record shows that "there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Evans v. Techs. Apps. & Service, Co., 80 F.3d 954, 958-59 (4th Cir.1996) (citations omitted). In reviewing the record on summary judgment, "the court must draw any inferences in the light most favorable to the non- movant" and "determine whether the record taken as a whole could lead a reasonable trier of fact to find for the non-movant." Brock v. Entre Computer Ctrs., 933 F.2d 1253, 1259 (4th Cir.1991) (citations omitted).

The very existence of a scintilla of evidence or of unsubstantiated conclusory allegations, however, is insufficient to avoid summary judgment. Anderson, 477 U.S. at 248-52, 106 S.Ct. 2505. Rather, the Court must determine whether the record as a whole could lead a reasonable trier of fact to find for the non-movant. Id. at 248, 106 S.Ct. 2505.

III. Analysis

The Court must resolve two questions: (A) Did Sunoco violate either the PMPA or the Agreement in terminating Bajwa's franchise; and (B) If Sunoco did not wrongfully terminate the franchise, is Bajwa owed compensation under the lease, the PMPA, or state law.

A. Wrongful Termination of the Franchise

Plaintiff argues that Sunoco breached the agreement, because Sunoco terminated the lease prior to the condemnation of the property by the Commonwealth. Since there was no actual condemnation of the property, the sale by Sunoco to the Commonwealth, according to Bajwa, was a consensual transaction. Sunoco responds that even though the property was eventually "sold" to the state, the Commonwealth condemned or took the property within the meaning of paragraph 3.06 of the Agreement and 15 U.S.C. § 2802(c)(5). Sunoco maintains that VDOT initiated the condemnation proceedings by making an offer to purchase the property pursuant to Va.Code Ann. § 25.1-204(A). Therefore, the termination of the franchise was "reasonable" within the PMPA and did not violate the contract. The question that the Court must answer is whether the sale of property to a state constitutes "condemnation or other taking ... pursuant to the power of eminent domain" within the meaning of the PMPA.²

1. Condemnation Under the PMPA

The Petroleum Marketing Practices Act governs the relationships between petroleum refiners and their retail franchisees. Mobil Oil Corp. v. Virginia Gasoline Marketers & Auto. Repair Ass'n, 34 F.3d 220, 223 (4th Cir.1994). The PMPA's primary purpose is to protect petroleum franchisees from arbitrary or discriminatory terminations and nonrenewals. Id. The Act also serves two secondary purposes: to provide uniformity in the law governing petroleum franchise termination and nonrenewal; and to allow franchisors flexibility in dealing with franchisee misconduct or changes in market conditions. Id.

The PMPA generally prohibits termination of a franchise or nonrenewal of a franchise relationship unless the franchisor both complies with the notification provisions of the statute and bases its decision upon a ground described in the statute. 15 U.S.C. § 2802(a); L.M.P. Serv., Inc. v. Shell Oil Co., 128 F.Supp.2d 287, 289 (D.Md.2000). Section 2802 lists valid bases for "reasonable" termination of a franchise agreement. Section 2802(b)(2)(C) establishes the following as a valid ground for termination:

The occurrence of an event which is relevant to the franchise relationship and as a result of which termination of the franchise or nonrenewal of the franchise relationship is reasonable, if such event occurs during the period the franchise is in effect and the franchisor first acquired actual or constructive knowledge of such occurrence.

15 U.S.C. § 2802(b)(2)(C).

The PMPA lists twelve events that are per se reasonable. 15 U.S.C. § 2802(c). Neither party disputes that condemnation, under 15 U.S.C. § 2802(c)(5), constitutes an event the "occurrence of ... which is relevant to the franchise relationship and as a result of which termination of the franchise or nonrenewal of the franchise relationship is reasonable." Romero Rodriguez v. Esso Standard Oil Co., 636 F.Supp. 615, 616-17 (D.P.R.1986). However, this list is nonexclusive, and courts may examine the reasonableness of the franchisor's actions when based upon grounds not enumerated in the statute. See Lugar v. Texaco, 755 F.2d 53, 57-58 (3d Cir.1985).

Courts have held that franchisors did not violate the PMPA when the state had initiated condemnation proceedings. See Halder v. Standard Oil Co., 642 F.2d 107, 111-12 (5th Cir.1981)(affirming district court's ruling that the oil company did not violate the PMPA by failing to renew a franchisee's lease at the end of its term, but continued the franchise relationship on a month-to-month basis after being notified of Georgia's intent to condemn the property); Rodriguez, 636 F.Supp. at 617 (holding that oil company did not violate the PMPA by terminating the gas station franchise following condemnation of portion of the...