Santiago-Sepulveda v. Esso Standard Oil Co.

634 F.Supp.2d 201

Luis Alfredo SANTIAGO-SEPULVEDA, et al., Plaintiffs, v. ESSO STANDARD OIL COMPANY (PUERTO RICO), INC., et al., Defendants.

Civil No. 08-1950 (CCC)(JA).

Civil No. 08-1986(CCC)(JA).

Civil No. 08-2025(CCC)(JA).

Civil No. 08-2032(CCC)(JA).

Civil No. 08-2044(CCC)(JA).

United States District Court, D. Puerto Rico.

June 23, 2009.

COPYRIGHT MATERIAL OMITTED

Juan H. Saavedra-Castro, Juan H. Saavedra Castro Law Office, Manuel L. Correa-Marquez, Xana M. Connelly, Correa, Collazo, Herrero & Fortuno, Carlos E. Montanez, Carlos E. Montanez Law Office, Ana M. Nin-Torregrosa, Lourdes M. Santos-Gutierrez, Nin & Rodriguez Law Office, Roberto Buso-Aboy, Buso Aboy Law Office, Gerardo Pavia, Pavia & Diaz Garcia, San Juan, PR, for Plaintiffs.

PHV Mark Andrew Klapow, Howrey, LLP, Washington, DC, Luis G. Parrilla-Hernandez, Sepulvado & Associates, Jenyfer Garcia-Soto, Jorge A. Galiber-Sanchez, Lee Sepulvado-Ramos, Sepulvado & Maldonado, PSC, Angel E. Rotger-Sabat, Maymi, Rivera & Rotger, P.S.C., San Juan, PR, for Defendants.

OPINION AND ORDER

JUSTO ARENAS, United States Chief Magistrate Judge.

This matter is before the court on motions by defendants Total Petroleum Puerto Rico Corporation ("Total") and Esso Standard Oil (Puerto Rico), Inc. ("Esso"). On April 29, 2009, Total filed a motion to preclude further participation of plaintiffs in cases 08-1950, 08-1986, and 08-2025. (Docket No. 247.) On May 8, 2009, Esso moved for an entry of final judgment in its favor as to all claims in cases 08-1950, 08-1986, 08-2025, 08-2032, and 08-2044. (Docket No. 248.) Plaintiffs from cases 08-1950, 08-1986, and 08-2025 ("Group I plaintiffs") filed their opposition to the motions filed by Esso and Total on May 11, 2009. (Docket No. 249.) On May 18, 2009, those plaintiffs filed an informative memorandum in further support of their opposition. (Docket No. 252.) Plaintiffs from case 08-2044 and 08-2032 ("Group II plaintiffs") filed oppositions to the entry of final judgment on May 21, 2009 and May 23, 2009, respectively. (Docket Nos. 256, 260.) On June 3, 2009, Total filed a reply¹ to plaintiffs' opposition to the entry of final judgment, and moved to strike plaintiffs' informative motion in further support of their existing opposition motion. (Docket Nos. 267, 268.) For the reasons set forth below, Total's motion is GRANTED and Esso's motion is GRANTED in part and DENIED in part.

I. PROCEDURAL AND FACTUAL BACKGROUND

The facts of this case have been recounted multiple times. See Santiago-Sepulveda v. Esso Standard Oil Co. (P.R.), 582 F.Supp.2d 154, 156-174 (D.P.R.2008); (Docket Nos. 118, 145, 149, 228.) In March 2008, Esso announced that it would terminate its Puerto Rico gasoline retail franchises, effective September 30, 2008. Id. at 156. The company later changed the effective termination date to October 31, 2008. (Docket No. 41.) On August 26, 2008, a large group of Esso franchisees filed a complaint under the Petroleum Marketing Practices Act ("PMPA") (15 U.S.C. § 2801, et seq.) to enjoin Esso from terminating the franchises. (Docket No. 2.) Four other complaints were subsequently filed in four separate cases, all of which were consolidated into this one. (Docket No. 46.) On September 4, the retailer plaintiffs in the consolidated case (Civil No. 08-1950) moved for a preliminary injunction to prevent Esso from terminating their franchises. (Docket No. 7.) Total moved to intervene in the consolidated cases on September 9, 2008, as the motion for preliminary injunction posed a threat to Total's plans to purchase the gasoline retail stations whose franchises Esso sought to terminate. (Docket No. 10.) On September 17, 2008, this case was referred to me, and on October 9, 2008, I granted Total's motion to intervene. (Docket Nos. 30, 91.)

On October 7, 2008, I issued an order acknowledging an agreement between the Group II plaintiffs and the defendants, and retaining supervision and jurisdiction over the parties until final resolution of the matter. (Docket No. 81.) On October 18, 2008, I issued an opinion and order denying plaintiffs' motion for preliminary injunction. (Docket No. 118.) On October 29, 2008, plaintiffs in case 08-1986 announced that they had agreed to accept the franchise agreements offered by Total. (Docket No. 146.) Between that date and October 31, 2008, all but two plaintiffs signed agreements with Total. (Docket No. 157, at 5, ¶ 2.)

In the time since that date, the parties appear to have been adhering to their mutual obligations under the contract. Esso and Total now contend that this court has already deemed them compliant with the PMPA. Thus, Esso argues for entry of final judgment and Total moves for "an order precluding [Group I plaintiffs] to [sic] appear in any further proceedings. ...." (Docket No. 247, at 7.) Plaintiffs, however, argue that the court has decided only that a permanent injunction will not issue against Total and Esso. (Docket No. 249, at 2.) They contend that they are still entitled to a ruling on the legality of the franchise contracts, which Total offered to them on a "take it or leave it" basis. (Docket No. 155, at 3.) In plaintiffs' view, final judgment may not be entered before such a ruling.

The franchise agreement offered to plaintiffs by Total consists of three separate contracts: a Lease Contract, a Franchise Contract for Total's convenience store enterprise known as "Bonjour," and a Sale and Supply Contract. (Docket Nos. 155, at 3, 155-4.) Plaintiffs have argued that the following provisions of those contracts are illegal and should not be imposed upon them:

Paragraph 2 of Article 4.1 of the Lease Contract:

The Retailer [plaintiffs] expressly acknowledges that the Company shall be entitled to lease to third parties parts or portions of the lands or structures where the Station is located, and that the Retailer shall have no right to discounts or credits of any kind as a consequence of the above.

(Docket No. 108-3, at 3.)

Article 4.4 of the Lease Contract:

[T]he parties agree that the Minimum Rent may be increased to account for any additional investment the Company [Total] may make ... at any time while this Contract is in effect ... at its sole and absolute discretion.

(Docket No. 108-3, at 4.)

Article 11.2 of the "Bonjour" Franchise Contract:

The Retailer agrees to purchase for sale at the store only those Products and Services of the type, brand and quality recommended and/or approved by the Company.... The Retailer agrees to purchase only from those suppliers and providers authorized by the Company.... The retailer must refrain from selling any product or service that is not authorized by the Company....

(Docket No. 155-4, at 15.)

Article 9.3 of the "Bonjour" Franchise Contract-Non-Competition Agreement:

The Retailer agrees, for the duration of the Contract, and for an additional period of twelve (12) months after its termination or expiration, not to engage in or acquire any interest, directly or indirectly, in a convenience store type of business within the territorial jurisdiction of the municipality where the BONJOUR Franchise object of this agreement is located, or any adjoining municipality. The Retailer will be deemed to be engaged in such business indirectly if he is an employee, officer, director, trustee, agent or partner of a person, firm, corporation, association, partnership, trust, or any other legal entity that is engaged in such a business within the aforementioned area. The above shall not be understood as a prohibition from having any interest in a corporation or entity for investment purposes without intending to acquire control or majority interest in securities traded in a recognized stock market.

(Docket No. 155-4, at 11.)

Article 8.1 of the Sale and Supply Contract—Discontinuation, Substitution of Products The Company shall have the absolute right to discontinue or subtitute [sic] any engine fuel, petroleum product or any of the Total Products object of this Contract for industrial reasons, inventory reasons, world-wide supply of materials, or for marketing or competition decisions, and the retailer agrees to acquire the substitute products as long as the Company sells them within the Territory instead of the substituted product.

(Docket No. 155-5, at 8.)

Each of the three contracts also contains language relating to the interpretation of the contracts themselves:

This Contract shall be interpreted consistent with and governed by the laws of the Commonwealth of Puerto Rico.

(Lease Agreement, Article 19.1, Docket No. 108-3, at 21; Franchise Contract, Article 17.1, Docket No. 155-4, at 24; Sale and Supply Contract, Article 23.1, Docket No. 155-5, at 23.) All three contracts also provide for the severability of contract terms under certain circumstances:

The intention of the parties appearing herein is for all provisions on this Contract to be complied with in their entirety as allowed by law. Therefore, should a court with jurisdiction find that the scope of some of the provisions is too broad to be complied with as written, the intention of the parties is that the court must modify such provision until its scope is one that the court finds may be enforceable. However, should any provision in this Contract be found to be unlawful, invalid, or unenforceable under present or future laws, said provisions shall be nullified; this Contract shall be interpreted and governed as if said unlawful, invalid or unenforceable provision had never been a part thereof, and the rest of the provisions in this Contract shall remain in force and will not be affected by the unlawful, invalid or unenforceable provision or its elimination.

(Lease Agreement, Article 20.10, Docket No. 108-3, at 23; Franchise Contract, Article 18.3, Docket No. 155-4, at 25; Sale and Supply Contract, Article 24.3, Docket No. 155-5, at 24.)

II. DISCUSSION

A. Prior Rulings

The first issue is the extent to which I may order relief to plaintiffs in light of prior rulings...