that, even if it had applied the more expansive preemption view, plaintiffs' claims would nevertheless be preempted.
a. Breach of Contract
Plaintiffs allege that, after defendants rescinded their notices of termination, on or about October 13 and 14, 1993, December 3, 1993 and January 5 through 7, 1994, "plaintiffs and defendants entered into an oral agreement whereby defendants promised to sell to plaintiffs the real property upon which" the franchises were located. (Supplemental Complaint P 121 at 97:1-10; P 134 at 100:17-22.) Plaintiffs also allege that, in accordance with the oral agreement, thirteen plaintiffs submitted fair market value offers to BP, but BP accepted and executed only three. BP then discontinued any discussions with regard to selling its franchise interests. Based on these allegations, plaintiffs assert a breach of contract claim against defendants.
The Court finds that this claim pertains to the procedures for and grounds for terminating a franchise, and therefore is preempted by the PMPA.
15 U.S.C. § 2802(b) specifies the procedures and grounds for termination of a franchise. Under 15 U.S.C. § 2802(b)(1), a franchisor may terminate a franchise if it meets the notification requirements under 15 U.S.C. § 2804 and if termination is based upon one of the grounds specified in 15 U.S.C. § 2802(b)(2). Under 15 U.S.C. § 2802(b)(2)(D), a permissible ground for termination exists when the franchisor and the franchisee agree, in writing, to terminate the franchise and the agreement to terminate is not entered into more than 180 days before the date of termination, the franchisee is provided a copy of the agreement, and the franchisee does not repudiate the agreement within seven days after receipt of the copy of the agreement. In the instant action, because the alleged oral promise for defendants to sell the franchises to plaintiffs would result in the termination, or the end, of the franchises through agreement by the parties, the alleged oral promise implicates the grounds for termination specified in 15 U.S.C. § 2802(b)(2)(D) as well as the procedures required to effect termination in accordance with that section. As the alleged oral promise invokes procedures for termination that are not consistent with the provisions of § 2802(b)(2)(D), e.g., termination through an oral agreement as opposed to termination through a written agreement, the PMPA preempts plaintiffs' state law breach of contract claim. The Court therefore DISMISSES plaintiffs' breach of contract claim. The Court notes that plaintiffs will not be able to assert that defendants somehow violated § 2802(b)(2)(D) because the prerequisites of that section have not been meet. In particular, as alleged by plaintiffs, plaintiffs and defendants did not enter into a written contract to terminate the franchise, but an oral contract. Furthermore, as no written contract existed, plaintiffs, the franchisees, never received a copy of the written agreement, and therefore, the conditions in § 2802(b)(2)(D)(ii)&(iii) were not satisfied.
b. Fraud and Negligent Misrepresentation
In sum, plaintiffs' fraud and negligent misrepresentation allegations are as follows: Defendants made false representations that they would sell plaintiffs the franchises if plaintiffs submitted written fair market value offers for the franchises; at the time defendants made the representations, they knew the representations were false or had no grounds to believe they were true; defendants made the representations with the intent to induce plaintiffs to overpay for the properties and to deprive plaintiffs of their preferential rights; plaintiffs relied on the misrepresentations by obtaining appraisals of their franchises, pursuing loan commitments, submitting fair market value offers, and delaying the filing of this suit; and plaintiffs were damaged by this reliance.
The alleged misrepresentations made by defendants relate to the manner, or the procedure, by which the parties would end, or terminate, the franchises. Further, the alleged misrepresentations seek to impose requirements that are different than those specified under the PMPA. Essentially, defendants allegedly stated that they would sell the franchises to plaintiffs, thereby terminating them, if plaintiffs submitted fair market offers to defendants. This procedure for termination is not the same as required by the PMPA. See 15 U.S.C. §§ 2804(b)(1)&(2), 2804(b)(2)(D). If plaintiffs were to prevail on their misrepresentation claims, defendants would be penalized for not following the procedure they allegedly represented they would follow. As the procedure defendants allegedly represented they would follow is not the same as that required by the PMPA, defendants would be penalized for their failure to follow a procedure which is different than that required by the PMPA. As 15 U.S.C. § 2806(a) requires preemption when the effect of violating a state law is not the same as the effect of violating the PMPA, preemption is required with regard to plaintiffs' misrepresentation claims. See 15 U.S.C. § 2806(a) ("no state . . . may adopt . . . any law or regulation (including any remedy or penalty applicable to any violation thereof) with respect to termination . . . unless . . . such law or regulation. . . is the same as the applicable provision" of the PMPA).
Supporting this Court's holding that plaintiffs' misrepresentation claims are preempted is Consumers Petroleum Co. v. Texaco, Inc., 804 F.2d 907 (6th Cir. 1986). In Consumers, the Sixth Circuit found that misrepresentations made during the course of the franchise relationship regarding the franchisor's withdrawal from the market and termination of the franchisee's franchise were preempted by the PMPA. Id. at 909, 914-15. In the case at bar, defendants' misrepresentations regarding their termination of plaintiffs' franchises--i.e., their alleged representation that they would sell the franchises to plaintiffs--were made during the course of the franchise relationships. Thus, under Consumers, plaintiffs' misrepresentation claims are preempted.
The Court notes that, in Pride v. Exxon, the Ninth Circuit distinguished Consumers from the case before it to find no preemption. 911 F.2d 251, 257-58 (9th Cir. 1990). In Pride, the Ninth Circuit found that because the alleged misrepresentations occurred before the franchise relationship commenced, the initial validity of the underlying franchise contract was called into question. Id. at 258. The Ninth Circuit therefore found that the grounds for, procedures for, and notification requirements regarding terminations under the PMPA were not implicated. Id. at 258. Specifically, the Ninth Circuit stated:
The misrepresentation claim, as formulated by Pride, involves the actions of parties in forming the contract. Consumers Petroleum, on the other hand, involved a situation where the two parties were already in an existing contractual relationship and the franchisor then made misrepresentations regarding the withdrawal or failure to renew provisions of the [PMPA]. This distinction is crucial, since as the court in Consumers Petroleum observed, the Act "does not preempt every state law that relates remotely to the termination or nonrenewal of petroleum franchises; but it does preempt any state law with respect to 'grounds for, procedures for, and notification requirements' with respect to terminations and nonrenewals." Oregon state law regarding fraud in the formation of contracts does not implicate the grounds for, procedures for or notification requirements of termination and nonrenewal under the [PMPA] because the relationship that the [PMPA] governs has not been formed at that stage. Consumers Petroleum is thus distinguishable.
Pride, 911 F.2d at 257-58 (citations omitted). Thus, although the Ninth Circuit does not specifically state in Pride that it would have found preemption if the misrepresentations occurred during the course of the franchise relationship, its discussion of Consumers indicates that, if faced with that situation, it most likely would have found preemption. Even if the Ninth Circuit would not have found preemption under such circumstances, however, preemption of plaintiffs' misrepresentation claims are nonetheless appropriate because, as discussed above, the claims have the effect of altering the PMPA's grounds, procedures and penalties relating to the termination of a petroleum franchise.
As a final matter, the Court determines that its decision to find preemption is consistent with the policy of ensuring uniform application of the PMPA, as finding no preemption would allow these parties to terminate franchises on grounds different than those permitted under the PMPA and in a manner different than that permitted under the PMPA. Furthermore, as to plaintiffs' misrepresentation claims, because the procedures that defendants allegedly represented they would follow to terminate the franchises were not the same as those under the PMPA and because plaintiffs are presumed to know the requirements of the PMPA, plaintiffs bore the risk that defendants would not follow the termination procedures they allegedly represented they would follow. Moreover, given that plaintiffs are presumed to know the requirements of the PMPA, they are presumed to know that franchises cannot be terminated in a manner different than specified in the PMPA. Thus, plaintiffs could not have reasonably relied on any representations by defendants regarding termination of their franchises in a manner different than specified under the PMPA. Consequently, even if plaintiffs' misrepresentation claims were not preempted, they would fail for inadequate allegations with regard to their reliance.
For the foregoing reasons, the Court finds that plaintiffs' sixth through eighth causes of action are preempted. Accordingly,
IT IS HEREBY ORDERED THAT the sixth through eighth causes of action in the Supplemental Complaint are DISMISSED. The Court notes this resolution does not dispose of the instant action, as plaintiffs' ninth through 19th causes of action are still pending.
IT IS SO ORDERED.
DATED: February 7, 1995
SAUNDRA BROWN ARMSTRONG
United States District Judge