Free Amended Complaint - District Court of California - California

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EXHIBIT M TO FIRST AMENDED COMPLAINT

Case 5:07-cv-04808-JF
bp

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bpWestCoast Products LLC 4 Cimterpointe Drive
LaPalma, CA 90623

September 6, 2007

HAND DELIVERY AND CERTIFIED MAIL RETURN RECEIPT REQUESTED

#7007 0710 0004 4233 2815
STTN ENTERPRISES INC. 631 SAN FELIPE ROAD HOLLISTER, CA 95035

Re:

Faciltv No. 82461
NOTICE OF TERMINATION

You are currently a party to an am/pm Mini Market Agreement and Contract Dealer

Gasoline Agreement both dated July 11, 2006 and various related agreements (the
"Agreement"), with BP West Coast Products LLC ("BPWCP':), concerning the above
facilty located at 631 San Felipe Road, Hollister, CA.

(the "Facility").

Please take notice that the Agreements and the am/pm mini market and the petroleum

franchise created thereunder shall terminate immediately for the reasons set forth
below:

You have failed to have any gasoline products available for sale to the motoring public

for at least 7 consecutive days. In fact, the Facility has not sold gasoline since the
evening of August 23rd and your dispensers. have been cautioned taped off from any use by customers. You have been sent a total of twelve (12) defaults for failure to offer all grades of gasoline for sale. Although the period to cure the defaults has passed, as of

today, none of the defaults have been cured. .

Under these circumstarices it would not be reasonable for BPWCP to furnish notification of 90 days prior to the date of termination because of the risk of confusion to the public as well as possible safety risks.

In addition, you have failed to timely pay BP for gasoline products in a timely manner.

You currently have an outstanding balance of $126,394.77 for gasoline product
delivenes that are. due and payable at the time of delivery. Your payment history reflects numerous returned items that were "bounced" by your bank for non-sufficient funds. You are also responsible for any outstanding royalty charges due and payable to BPWCP.

Section 17.1 of the Agreement provides for termination of that Agreement upon the
occurrence of the following triggering events:
(a) Buyer fails to exert good faith efforts to carry out the provisions of the

Agreement following written notice and opportunity to cure;

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(h) Buyer fails to timely pay all sums due to which BPWCP is legally entitled;

(i) Buyer fails to operate the Premises for seven (7) consecutive calendar days, or lesser period, which constitutes an unreasonable period of time.

(0) Buyer breaches any material provision of this Agreement, including without limitation, "Buyer's failure horder and make available for sale quantiies of each grade of Product which are sufficient to satisfy foreseeable customer demand."
Furthermore, the above stated conduct constitutes grounds for termination of the am/pm Mini Market Agreement and franchise. The relevant provision providing for termination

is Article 18.05, "In case of Concurrent Operations at the Premises, BPWCP may
terminate this Agreement upon termination of anyone other franchise agreement."
Article

19.01 (d) of the am/pm Mini Market Agreement provides: "Operator shall pay to BPWCP at the time of termination, as liquidated damages and not as a penalty, the greater of (a) the total minimum royalty fee which would have been payable under the Agreement from the date of termination of the Agreement through the end of the term provided for in the Agreement; or (b) for each month from the date of termination of the

Agreement through the end of the term provided in the Agreement, the actual average
royalty fee paid but not less than the minimum royalty fee for any months that the Store

was operational prior to the termination of the Agreement." The amount owed to
BPWCP is

$235,000.00. This sum shall be immediately due and payable. You shall

also be held answerable for all other damages due BPWCP under the Agreements and'
applicable law.

In addition, you are a party to certain loan agreements (the "Loan Agreements"). As of
September, 5.2007, there remains an outstanding balance on the $150,000.oq. The

Loan Agreements,of
"'I.

termination of the Agreements is an Event of Default under the Lóar....

Agreements; The Loan Agreements require that you repay the outstanding balance of,.. ..
the Loans within 30 days of the occurrence of an Event of Default. The termination of the Agreements is an Event of Default.

YOU ARE HEREBY NOTIFIED THAT YOU ARE OBLIGATED TO PAY THE FULL AMOUNT OF THE UNPAID LOANS WITHIN 30 DAYS OF THE TERMINATION OF . THE AGREEMENTS.
These are all provisions that are both reasonable and of material significance to the franchise relationship. In addition, failng to offer any gasoline for sale and failure to pay sums due under the Petroleum Marketing Practices Act ("PMPAIt), 15 U.S.C. §2801 et seq., specifically, §2802(b)(2)(C) and (c)(9).n. A Summary Statement of the PMPA is attached to this Notice.

Additional provisions of the PMPA relevant to this termination are: 1) failure by the

franchisee to comply with a provision of the franchise, which is both reasonable and material sigllificance to the franchise relationship (§2802(b)(2)(A)); and 2) occurrence of an event which is relevant to the franchise relationship and as a result of which
termination of the franchise relationship is reasonable (§2802(b )(2)(C)), specifically,

failure by the franchisee to pay to the franchisor in a timely manner when due all sums

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to which the franchisor is legally

entitled. As well as your failure to operate the

marketing premises for 7 consecutive days, or a shorter period of time which, taking in.

to account facts and circumstances, amounts to an unreasonable time not to operate,
are enumerated events forming the basis for termination under §2802(b)(2)(C).

Accordingly, upon the above-stated effective date of this Notice of Termination, you are

to cease sellng ARCO-branded gasoline and cease using the ARCO names,
trademarks, or trade names and cease holding yourself out as an authorized dealer of

ARCO-branded motor fuel at the facility. You will be required to comply with the
procedures on expiration or termination described the Agreements. Furthermore, you are required to permit SPWCP to enter upon the premises to remove or de-identify all of ARCO's trademarks and propert at the premises. You must also return to SPWCP all materials bearing ARCO service marks or trademarks. You must pay SPWCP any sums due and owing to BPWCP as a result of your operation of the Facilty.
Sy giving this Notice of Termination, SPWCP neither waives nor surrenders any of its

rights under the Agreements or at law, including but not limited to: (1) its right to
advance the effective date of the termination for similar or dissimilar acts or conduct constituting a breach of the Agreements or other legal grounds for such action; (2) its rights to provide by supplementary notice that the termination set for the above date
also be based on other grounds; and (3) its rights to receiv'e any sums due and owing to SPWCP. Such sums should be forwarded to BPWCP upon their due date.

BPW~~
Sy:

Thomas Reeder
Regional Sales Manager
, .

cc:

Facilty File

Srad Christensen

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FEDERAL REGISTER
Vol.

61,No. 123

Notices

DEPARTMENT OF ENERGY (DOE)
Revised Sumary of Title I of

the Petroleum Marketig Practices Act

61 FR 32786

DATE: Tuesday, June 25, 1996
ACTION: Notice.

__m______----------____m_m______------------------------------- To view the next page, tye .np* TRANSMIT.
To viè\" a specific page, tranmit p* and the page number, e.g. p* 1
-----------------------~------ -------------------------------------- (* 3 2786)

SUMY: This notice contain a sumry of

Title I of

the Petro1ewn Marketing Practices Act, as amended (the

Act). The Petroleum Marketig Practices Act was origially enacted on June 19, 1978, and was amended by the

Petroleum Marketing Practices Act Amendments of 1994, enacted on October 19, 1994. On August 30, 1978, the
Deparent of Energy published in the Federal Register a summary of the provisions of Title I of the 1978 law, as
required by the Act.

The Departent is publishig this revised sumry to reflect key changes made by the 1994

amendments.

The Act is intended to protect franchised distributors and retailers of gasoline and diesel motor fuel againt arbitrary or discriminatory termation or nomenewal of franchises. This sum describes the reasons for which a
franchise may be tennated or not renewed under the law, the responsibilities of franchisors, and the remedies and

relief available to franchisees. The Act requires franchisors to give franchisees copies of the sumry contained in this notice whenever notification of termation or nomenewal of a franchise is given.

FOR FURTHER INFORMATION COJ\''ACT: Canen Difglio, Offce of Energy Effciency, Alternative Fuels;
and Oil Analysis (PO-62), U.S. Deparent of Energy, Washington, D.C. 20585, Telephone (202) 586-4444;

Lawrence Leiken, Offce of General Counel (GC-73), D.S.Deparent of Energy, Washington, D.C. 20585;

Telephone (202) 586-6978.

SUPPLEMENTARY INORM nON: Title I of the Petroleum Marketig Practièes Act, as amended, 15 U.S. C. § § 2801-2806, provides for the protection of francrused distributors and retailers of motor fuel by establishing mium Federal stadads governg the termnation of franchises and the nomenewal of franchise relationships by the
francrusor or distrbutor of such fueL.

Section 1 04( d)( 1) of the Act requied the Secreta of Energy to publish in the Federal Register a simle and concise sumry of the provisions of Title I, including a statement of the respective (*32787) responsibilities of,

and the remedies and relief available to, francmsors and franchisees under that title. The Deparent published ths sumry in the Federal Register on Augut 30, 1978.43 F.R. 38743 (1978).
In 1994 the Congress enacted the Petroleum Marketig Practices Act Amendments to affum and clarify certain key

provisions of the 1978 statute. Among the key issues addressed in the 1994 amendments are: (1) tennation or
nonrenewal of francmsed dealers by their franchisors for purposes of conversion to "company" operation; (2)

application of state law; (3) the rights and obligations of franchisors and franchisees in thd-part lease situations; and (4) waiver of rights limitations. See H.R. REP. NO. 737, 103rd Cong., 2nd Sess. 2 (1994), reprinted in 1994 D.S.C.C.A.N. 2780. Congress intended to: (1) mae explicit that upon renewal a franchisor may not inist on changes to a francmse agreement where the purose of such changes is to prevent renewal in order to convert a

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franchisee-operated service station into a company-operated service station; (2) make clear that where the franchisor

has an option to continue the lease or to purchase the premises but does not wish to do so, the franchisor must offer
to assign the option to the franchisee; (3) make clear that no franchisor may require, as a condition of entering or

renewig a franchise agreement, that a franchisee waive any rights under the Petroleum Marketing Practices Act, .any
other Federal law, or any state law; and (4) reconfirm the limted scope of

Federal preemption under the Act. Id.

The sumry which fo11ows reflects key changes to the statute resulting from the 1994 amendments. The Act
requires franchisors to give copies of this summry statement to their franchisees when entering into an agreement to
ternate the franchise or not to renew the franchise relationship, and when giving notification of tennation or

nonrenewal. This sumry does not purort to interpret the Act, as amended, or to create new legal rights.
In addition to the sum of the provisions of Title I, a more detailed description of the deffirtions contained in

the Act and of the legal remedies available to franchisees is also included in this notice, following the summry
statement.

Sumry of Legal Rights of Motor Fuel Franchisees
11 -is a sum of the 'françhise protection provisions of the Federal Petroleum Marketing Practices Act, as

amended in 1994 (the Act), 15 U.S.c. §§ 2801-2806. This sum must be given to you, as a person holding a
franchie for the sale, consignent or distrbution of gasolie or diesel motor fuel, in connection with any

tennation or nonrenewal of your franchise by your franchising company (referred to in this sumry as your supplier).
You should read. this summary carefulJy, and refer to the Act if necessary, -to detenne whether a proposed
tennation or nonrenewalof your franchise is lawf, and what legal remedies

are available to you if you th the

proposed tennation or failure to renew is not lawfl. In addition, if you th your supplier has failed to comply

with the Act, you may wish to consult an attorney in order to enforce your legal rights.

The franchise protection provisions of the Act apply to a varety of franchise agreements. The term "franchise" is broadly defied as a license to use a motor fuel trademak which is owned or controlled by a refier, and it includes seconda arngements such as leases of real propert and motor fuel supply agreements which have existed contiuously since May 15, 1973, regardless of a subsequent withdrawal of a trademark. Thus, if you have lost the
use of a trademark previously granted by your supplier but have conti~ed to receive motor fuel supplies though

a

continuation ofa supply agreement with your supplier, you are protected under the Act. Any issue arsing under your franchise which is not in which the pricipal place of business of

governed by ths Act will be governed by the law of the State your franchise is located.

Although a State may specify the tenn and conditions under which your franchise may be transfeITed upon the

death of the franchisee, it may not require a payment to you (the franchiee) for the goodwill of a frnchise upon.
tennation or nonrenewal.

The Act is intended to protect you, whether you are a distributor or a retailer, from arbitrary or discriminatory

temation or nonrenewal of your franchise agreement. To accomplish this, the Act first lists the reasons for which tennation or nonrenewal is permtted. Any notice of termnation or nonrenewal must state the precise reason, as
listed in the Act, for which the parcular temration or nonrenewal is being made. These reasons are described

below under the headings "Reasons for Termnation" and "Reasons for Nonrenewal."

The Act also requires your supplier to give you a wrtten notice of termation or intention not to renew the
franchie with certain time periods. These requirements are sumarized below under the heading "Notice

Requirements for Termnation or N onrenewal."

The Act also provides certain special requirements with regard to tral and interim franchise agreements, which are described below under the heading "Trial and Interim Franchises."

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The Act gives you certain legal rights if your supplier termmnates or does not renew your franchise in a way that is
not permtted by the Act. These legal rights are described below under the

heading "Your Legal Rights."

The Act contains provisions pertainIng to waiver of franchisee rights and applicable State law. These provisions are described under the heading "Waiver of Rights and Applicable State Law."

TIs sumry is intended as a simple and concise description of the general nature of your rights under the Act.
For a more detailed description of these rights, you should read the text of the Petroleum Marketing Practices Act, as
amended in 1994 (15 U.se. §§ 2801-2806). This summar does not purort to interpret the Act, as amended, or to create new legal rights.

1. Reasons for Tenntion
If your franchise was entered into on or after June 19, 1978, the Act bars temmation of your franchise for any your franchise was entered Into before June 19, 1978, there is no

reasons other than those reasons discussed below. If

statutory restrction on the reasons for which it may be tennated: If a ffanchise entered into before June 19, 1978, is tennated, however, the Act requires the supplier to reinstate the ffanchj~e relationship unless one of the reasons listed Under this heading ot on~ of the additionai re~sons for nonrehewal described below under the heading
"Reasons for Nonrenewal" exists.

A. Non-Compliance with Franchise Agreement

Your supplier may termnate your ffanchise jf you do not comply 'with a reasonable and important requirement of
the franchise relationship. However, tennation may not be based on a failure .to comply with

a provision of the

franchise that is ilegal or unenforceable under applicable Federal, State or 10ca1law. In order to termnate for noncompliance with the franchise agreement, your supplier must have learned of ths non-compliance recently. The Act
lits the tie period witln which your supplier must have learned of your non-compliance to various periods, the
longest of which is 120 (*32788) days, before you receive notifcation of

the tennnation.

B. Lack of Good FaÜh Efforts

the francllse, provided

Your supplier may termate your franchise if you have not made good faith effort to car out the requirements of you are ffrst notiffed in writing that you are not meetig a requirement of the ffanchise and

you are given an opportty to .make a good faith effort to car out the requirement. This reason can be used by
your supplier only if you fail to make good faith efforts to carr out the requirements of the ffanchise within the

period wllch began not more than .180 days before you receive the notice of termation.

C. Mutul Agreement To Tennate the Franchise

A franchie can be temmted by an agreement in wrting between you and your supplier if the agreement is entered into not more than 180 days before the effective date of the termation and you receive a copy of tht
agreement, together with this surmry statement of your rights under the Act. You may cancel the agreement to

temúte with 7 days after you receive a copy of the agreement, by mailing (by certiffed mail) a wrtten statement
to tls effect to your supplier.

D. Withdrawal From the Market Area
Under certin conditions, the Act pennts your supplier to temúte your frchise if your supplier is withdrawing from marketing activities in the entire geographic area in which you operate. You should read the Act for a more
detailed description of the conditions under which market withdrawal termations are penntted. See 15 u.s. e. § 2802(b )(E).

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E. Other Events Permtting a Tennation
If your supplier learns withn the time period specified in the Act (which in no case is more than 120 days prior to

the tennination notice) that one of the following events has occured, your supplier may termnate your franchise
agreement:
(1 ) Fraud or crial misconduct by you that relates to the operation of your marketig premises.

(2) You declare bankptcy or a cour detemmes that you are insolvent.
(3) You have a severe physical or mental disabilty lasting at least 3 months which makes you unable to provide for
the contiued proper operation of the marketing premises.

(4) Expiration of

your supplier's underlyig lease to the leased maIketig premises, if: (a) your supplier gave you

wrtten notice before the beginng of the tenn of the franchise of the duration of the underlyig lease and that the underlyig lease might expire and not be renewed during the tenn of the franchise; (b) your franchisor offered to
assigr 'to you, durg the 90.:ay period aftr notification of tem1ation or nonrenewal was given, any option wlùch

the franchisor held to extend the underlyig lease or to purchase the marketig premises (such an assigment may'be conditioned on the franchisor receivig from both the landowner and the franchisee an unconditional release from liability for specified events occuring after the assignment); and (c) in a sitution in which the franchisee acquires
possession of the leased maketing preiises effective inuediately after the loss of the right of the franchisor to grant possession, the franchisor, upon the written request of the franclùsee, made a bona fide .offer to sell or assign to the
franchisee the franchisor's franchisee

interest in any imrovements or equipment located on the preiises, or offered the
franchisor's interest in the

a right of fist refusal of any offer from another person to purchase the

imrovements and equipment.
(5) Condenmation or other tag by the governent, in whole or in part, of

power of emient domain. If the tenntion is based on a conderrtion or other takig, your supplier must give you a fair shae of any compensation which he receives for any loss of business opportty or good wilL.
(6) Loss of your supplier's right to grant the use of

the maketig premises pursuant to the

the trademark that is the subject ofthefrancbise, unless the loss
of Federal

was because of bad faith actions by your supplier relatig to trademark abuse, violation

or State law, or

other fault or negligence.
(7) Destrction (other than by your supplier) of all or a substantial par of your marketing premises. If the

temmtion is based on the destrction of the marketing premises and if the premises are rebuilt or replaced by your
supplier and operated under a franchise,

your supplier must give you a right offist refual to th new franchise.

(8) Your failure to make payments to your supplier of any sum to which your supplier is legally entitled.
(9) Your failure to operate the maketing premises for 7 consecutive days, or any shorter period of time wlùch,

takig into account facts and circumstaces, amounts to an. uneasonable period of tie not to operate.
(10) Your intentional adulteration, mislabeling or iisbranding of motor fuels or other trademark violations.
(11 ) Your failure to comply with Federal, State, or local relate to the operation of

laws or regulations of which you have laowledge and that

the maketing premies.
any felony involving moral tuitude.

(12) Your conviction of

(13) Any event that affects the franclùse relationship and as a result of which temmation is reasonable.

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II. Reasons for Nonrenewal

If your supplier gives notice that he does not intend to renew any franchise agreement, the Act requires that the rea.son for nomenewal must be either one of the reasons for tennatton listed immediately above, or one of the
reasons for nonrenewal listed below.

A. Failure To Agreeon Changes or Additions To Franchise
If you and your supplier fail to agree to changes in the franchise that your supplier in good faith has determined are required, and your supplier's insistence on the changes is not for the purose of converting the leased premises to a

company operation or otherwse preventing the renewal of the franchise relationship, your supplier may decline to
renew the franchise.

B. Customer Complaints

If yoUr supplier ha received n~erous customer complaints relating to the condition of your maketig premises
or to the conduct of any of your employees, and'

you have failed to take prompt correCtive action after hamg been

notified of these complaits, your supplier may decline to renew the franchise. .

C. Unsafe or Unhealthl Operations
If you have failed repeatedly to operate your marketig premises in a clean, safe and health

/
manner .after

repeated notices from your supplier, your supplier may decline to renew the franchise.
D. Operation of

Franchise is Uneconomical

Under certin conditions specified in the Act, your supplier may decline to renew your franchise if he has
detemmed that renewal of the franchise is likely to be uneconomicaL. Your supplier may also decline to renew your franchise :if he has decided to convert your maketing premises to a use other than for the sale of motor fuel, to sell
the premises, or to materially alter, add to, or replace the

premises. (*32789)

Il. Notice

Requirements for Termnation or Nonrenewal

The following is a description of the requirements for the notice which your supplier must give you before he may tennte your franchise or decline to renew your franchise relationship. These notice requirements apply to all franchise tenntions, including frchises

entered into before June 19, 1978 and tral and interim franchises, as

well as to. all nonrenewals of franchise relationships.

A. How Much Notice Is Required

In most cases, your supplier must give you notice of termnation or non-renewal at least 90 days before the
teration or nonrenewal takes effect.

In circumtances where it would not be reasonable for your supplier to give you 90 days notice, he must give you
notice as soon as he can do so. In addition, if the franchise involves

leased maketing premises, your supplier may

not establish a new franchise relationship involving the same premises until 30 days after notice was given to you or the date the tennation or nonrenewal takes effect, whichever is later. If the franchise agreement permts, your supplier may repossess the premises and, in reasonable circumstances, operate them thougtt his employees or agents.
If the tennination or nomenewal is based upon a determation to withdraw from the marketing of motor fuel in the area, your supplier must give you notice at least 180 days before the termnation or nonrenewal takes effect.

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B. Manner and Contents of

Notice

To be valid, the notice must be in wrting and must be sent by certified mail or personally delivered to you. It must
contain:

(I) A statement of your supplier's intention to termnate the franchise or not to renew the franchise relationship,
together with his reasons for ths action;

(2) The date the tennation or non-renewal takes effect; and

(3) A copy of

this summry.

IV. Tria) Franchises and Interim Franchises

The. followig is a description of the special requirements that apply to tral and interim franchises.
A. Trial Franchises
A trial franchise is a franchise, entered into on or after June 19, i 978, in which the franchisee has not previously been a part to a franchise with the franchisor and which has an intial tenn of 1 year or less. A tral franchise must
be in wrting and must make certin disclosures, includig that it is a trial franchise, and that the franchisor right

not to renew the franchise relationship at the end of the intial tenn by giving the franchisee proper notice.

has the

The unexpired portion of a transferred franchise (other than as a tral franchise, as described above) does not
qualify as a tral franchise.

In exercising his right not to renew a tral franchise at the end of its initial tenn your supplier must comply with the

notice requirements described above under the heading "Notice Requirements for Termnation or NonrenewaL"
B. Interi Franchises

An

interi franchise is a frnchise, entered into on or

after June 19, 1978, the duration of which, when çombined

with the tenn of all prior interi franchises between the franchisor and the ftanchisee, does not exceed thee yeár,

and which begins iimediately after the expirtion of a prior franchise involving the same maketig premises which was not renewed, based on a lawfl determtion by the franchisor to withdraw from maketing activities in the geogrphic are~ in which the franchisee operates.

An interim ftanchise must be in wrting and must make certin disclosures, including tht it is an interi franchise

and that the franchisor has the right not to renew the franchise at the end of the tenn based upon a lawfl
detenntion to withdraw from marketing activities in the geographic area in which the franchisee operates.
In exercising his right not to renew a francruse relationship under an interim franchise at the end of its tenD your
supplier must comply with the notice requiements described above under the heading "Notice Requirements for T ennation or N omenewaL. "

V. Your Legal Rights
Under the enforcement provisions of the Act, you have the right to sue your supplier if he fails to comply with the

requirements of the Act. The cour are authorized to grant whatever equitable relief is necessary to remedy the
effects of your supplier's failure to comply with the requirements of the Act, including declaratory judgment,

mandatory or prohibitive injunctive relief, and interim equitable relief. Actual damages, exemplary (punitive) damages under certain circumtaces, and reasonable attorney and expert witness fees are also authorized. For a
more detailed description of these legal remedies you should read the text of

the Act. J 5 u.s.e. §§ 2801 -2806. .

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VI. Waiver of

Rights and Applicable State Law

Your supplier may not require, as a condition of entering into or renewing the franchise relationship, that you
relinquish or waive any right that you have under this or any other Federal law or ~pplicable State law. In addition,

no provision in a franchise agreement would be valid or enforceable if the provision specifies that the franchise would be governed by the law of any State other than the one in which the principal place of business for the frnchise is located.
Furer Discussion of

Title I--Defmitions and Legal Remedies

I. Defmitions
Section i 0 1 of the Petroleum Marketing Practices Act sets forth definitions of the key tenn used thoughout the

franchise protection provisions of the Act. The defIntions from the Act which are listed below are of those temm
which' are most essential for' puroses of the sumary statement. (You shouJd consult section '10 i of the Act for additional defmitions not included here.)

A. Franchise
A "frnchise" is any contract between a refmer and a distrbutor, between distrbutor and -another

a refiner and a retailer, between a
'the

distrbutor, or between a distrbutor and a .retailer, under which a refiner or distributor (as

case may be) authories or pennts a retailer or distrbutor to use, in connection with the sale, consignent, or
distrbution of motor fuel, a trademark which is owned or controlled by such refmer or by a refmer which supplies motor fuel to the distrbutor which authorizes or pennts such use.

The term "franchise" includes any contract under which a retailer or distrbutor (as the case may be) is authoried
or penntted to occupy leased maketig premises, which premises are to be employed in connection with the

consignent, or distrbution of motor fuel under a trademak which is owned or controlled by such refmer or by a
refier whch supplies

sale,

motor fuel to the ditrbutor which authorizes or pennts such occupancy. The temmalso

includes any contract pertaining to the supply of motor fuel which is to be sold, consigned or distrbuted under a trademak ownedor'controlled by a refmer,or under a contract which has existed contiuously since May 15, 1973., and puruant to which, on May 15, 1973, motor fuel was sold, consigned or distrbuted under a (*32790) trademak owned or controlled on such date by a refmer. The unexpired porton of a tranferred franchise is also
included in the definition of the temm.

B. Franchise. Relationship

The term "franchise relationship" refers to the respective motor fuel maketing or distrbution obligations and
responsibi1ities of a franchisor and a franchisee which result from the marketing of motor fuel under a franchie.
C. Franchisee

A "franchisee" is a retailer or distributor who is authorized or penntted, under a franchise, to use a trademark in
connection with the sale, .consigmnent, or distribution of motor fueL.

D. Franchisor

A "franchisor" is a refiner or distrbutor who authorizes or pennts, under a franchise, a retailer or distrbutor to use
a trademark in connection with the sale, consignent, or distribution of

motor fueL.

E. Marketig Premises

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"Marketing premises" are the premises which, under a franchise, are to be employed by the franchisee in
connection with the sale, consignment, or distrbution of motor fueL.

F. Leased Marketing Premises

"Leased marketing premises" are marketing premises owned, leased or in any way controlled by a franchisor and which the franchisee is authoried or penntted, under the franclüse, to employ in connection with the sale,
consigment, or distribution of motor fueL

G. FaiJ to Renew and Nonrenewal

The tenns "fail to renew" and "nonrenewal" refer to a failure to reinstate, continue, or extend a franchise
relationship (1) at the conclusion of the tenn or on the expiration date, stated in the relevant franchise, (2) at any
time, in the case of the relevant franchise which does not state a term of duration or an expiration date, or (3) followig a termnation (on or after June 19, 1978) of the relevant franchise which was entered into prior to June 19, 1978 and has not been renewed after such date.

II. Legal Remedies A vaIlable to Franchisee

The followig is a more detailed description of the remedies available to the franchisee if a franchise is temmated or not renewed in a way that fails to comply with the Act.
A. Franchisee's RighHO Sue
A franchisee may brig a civil action in United States Distrct Cour against a franchisor who does not comply with

the requirements of the Act. The action must be brought withn one year after the date of termtion or nomenewal
or the date the franchisor fails to comply with the requirements of

the law, whichever is later.

B. Equitable Relief
Cour are authoried to. grant whatever equitable relief is necessary to remedy the effects of a violation of the law's.
requirements. Cour

are directed to grant a prelimary injunction if the franchisee shows that there are suffciently fair ground for litigation, and .if, on balance, the hadship which the franchisee would suffer if the prelimnar injunction is not granted will be greater than the hardship which the franchisor would suffer if such relief is granted.
serious questions, going to the merits of the case, to mae them a

Cour are not required to order contiuation or renewal of the franchise relationship if the action was brought after the expiration of the period during which the franchisee was on notice concerning /the franchisor's intention to
termte or not renew the frnchise agreement.

C. Burden of Proof

In an action under the Act, the franchisee has the burden of proving that the franchise was tennnated or not
renewed. The franchisor has the burden of proving, as an affintive defens, that the tennation or nonrenewal was

penntted under the Act and, if applicable, that the franchisor complied with certain other requirements relating to

termations and nomenewals based on condemnation or destrction of the marketig premises.
D. Damges

A franchisee who prevails in an action under the Act is entitled to actual damages and reasonable attorney and
expert witness fees. If the action was based upon conduct of the franchisor which was in wilful disregard of

the Act's

requirements or the franchisee's rights under the Act, exemplary (puntive) damages may be awarded where
appropriate. The court, and not the jury, wil decide whether to award exemplary damages

and, if so, in what amount.

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On the other hand, if the court finds that the franchisee's action is frivolous, it may order the franchisee to pay
reasonable attorney and expert witness fees.

E. Franchisor's Defense to Pennanent Injunctive Relief

Cours may not order a continuation or renewal of a franchise relationship if the franchisor shows that the basis of the non-renewal of the franchise relationship was a detemmnation made in good faith and in the nonnl course of
business:
(1) To convert the leased marketig premises to a use other than the sale or distrbution of

motor fuel;

(2) To materially alter, add to, or replace such premises;
(3) To sell such premises;

(4) To withdraw from maketig activities in the geographic area in which such premises are located; or
(5) That the renewal of the franchise relationship Ïs likely to - be uneconomical to the franchisor despite'

any

reasonable changes or additions to the franchise provisions which may be acceptable to the franchisee.

In makig ths defense, the franchisor also must show that he has complied with the notice provisions of the Act.
Ths defense to permanent injunctive relief, however, does not affect the franchisee's

right to recover actual

damages and reasonable attorney and expen witness fees if the nomenewal is otherwse prohibited under the Act.

Issued in Washigton, D.C. on June 12, 1996.
Marc W. Chupka,

Actig Assistat Secreta for Policy.
(FR Doc. 96-16124 Filed 6-24-96;8:45 am)

BILING CODE 6450-01-P
4673 words

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