C.A.L.L. Group v . Exxon Mobil et a l . CV-08-391-PB 08/14/09

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE

C.A.L.L. Group, Inc.

v. Case N o . 08-CV-391-PB Opinion N o .

Exxon Mobil Corporation

MEMORANDUM AND ORDER

Plaintiff C.A.L.L. Group, Inc. (“CALL”) filed an action in

New Hampshire Superior Court against Exxon-Mobil Corporation

(“Exxon”) and Caron and Sons Mobil, Inc. (“Caron”). Prior to

commencing this lawsuit, CALL operated two Exxon Mobil gasoline

sites: the first, located at 250 South Willow Street, Manchester,

New Hampshire (“South Willow Street Location”), and the second,

located at 210 Eddy Road, Manchester, New Hampshire (“Eddy Road

Location”).

Exxon has removed the case to this court, and CALL now

requests that the matter be remanded to state court. The central

question presented by CALL’s motion for remand is whether one or

more of its claims are completely preempted by the Petroleum Marketing Practices Act (“PMPA”),

I. BACKGROUND

CALL operated two Mobil-branded retail stations in

Manchester, New Hampshire. The South Willow Street Location

consisted of a gasoline business and a “Mobil Mart” convenience

store. The Eddy Road Location similarly had a gasoline business

and a “Mobil On-the-Run” convenience store. (Def. Exxon’s Resp.,

Doc. N o . 11-2, at 2.) With respect to the South Willow Street

Location, CALL’s relationship with Exxon was controlled by a

“PMPA Franchise Agreement” (“South Willow Street Franchise

Agreement”), which contained provisions relevant to both the

lease of the property and the operation of the “Mobil Mart.”2

The parties’ relationship with respect to the Eddy Road Location

was governed by to two, distinct documents. The first, another

“PMPA Franchise Agreement” (“Eddy Road Franchise Agreement”),

explained that with its termination, “the Franchise . . . and all

1 CALL filed an objection to removal (Doc. N o . 5 ) , which I treat as a motion because it seeks affirmative relief.

2 The parties disagree as to the number of agreements in existence for the South Willow Street Location. CALL suggests that a separate agreement governed the “Mobil Mart,” but Exxon disputes this and insists that only the South Willow Street Franchise Agreement existed.

-2- related and supplemental agreements terminate and Franchise

Dealer shall stop all operation of the Motor Fuels Business and

the Related Businesses.” (Eddy Road Franchise Agreement, Doc.

N o . 11-6, at 3.) The parties also entered into an “On-the-Run

Convenience Store Franchise Agreement” (“Eddy Road Convenience

Store Agreement”) that applied only to the “On-the-Run”

convenience store.

The alleged factual circumstances that brought about this

lawsuit are set forth in CALL’s Complaint. In 2004, CALL

negotiated with a Dunkin Donuts franchise to operate a satellite

Dunkin Donuts at the South Willow Street Location. CALL claims

that the plan was approved by Phil Hayes, a representative of

Exxon. (Complaint, Doc. N o . 1-2, ¶ 7.) At a December 1 4 , 2004,

meeting with senior managers from Exxon, CALL set out its plan:

it would convert the South Willow Street Location’s “Mobil Mart”

to an “On-the-Run” convenience store and sell Dunkin Donuts

coffee. Exxon officials “did not indicate any disapproval.”

(Id. ¶ 9.) CALL later received a “sample Mobil/Dunkin Donuts

contract,” but then “heard nothing further from Exxon about

[CALL’s] request to convert to an ‘On-the-Run’ operation selling

Dunkin Donuts products.” (Id. ¶ 12.) In June 2005, CALL learned

-3- that its franchise would not be renewed. CALL claims that it was

given the option to purchase the South Willow Street Location,

but it was unable to ascertain the terms. “Approximately two

years after the discussion concerning the purchase of the

property,” Exxon, through Hayes, advised that it would sell the

property for $1.2 million, but CALL would be required to spend an

additional $200,000 to “bring the site up to Exxon’s standard.”

(Id. ¶ 17.) In November 2007, CALL closed the South Willow

Street Location.

Beginning on June 1 4 , 2002, CALL was authorized to operate a

“Mobil On-the-Run” convenience store and a gas station at the

Eddy Road Location. In January 2007, CALL decided to sell the

Eddy Road Location to Jonathan and Christine Cyr, who agreed to

the purchase price of $495,000. CALL notified Exxon of the

pending sale, and on May 2 5 , 2007, Exxon “elected to not excise

its rights of first refusal.” (Id. ¶ 22.) Exxon furnished CALL

with the requirements needed for the transfer, and Jonathan and

Christine Cyr submitted the appropriate documents to Exxon.

Jonathan Cyr then attended a training seminar, which Caron,

acting as Exxon’s agent, conducted. (Id. ¶ 24.) CALL alleges

that, at some point, Caron made “disparaging statements” to

-4- Jonathan Cyr about CALL, the Eddy Road Location, the purchase

price, and other issues. CALL claims that this was done to

encourage Jonathan and Christine Cyr to reconsider the proposed

Eddy Road Location transaction. (Id. ¶ 26.) Ultimately, the

CALL-Cyr transaction did not take place, and CALL eventually

closed the Eddy Road Location on February 2 9 , 2008. In total,

CALL claims that the defendants’ conduct resulted in CALL’s “loss

of investment, lost business opportunities, unnecessary expenses,

lost profit, attorney’s fees and other damages.” (Id. ¶ 29.)

This lawsuit followed.

CALL’s Complaint consists of six counts. Count 1 alleges

that Exxon breached an implied covenant of good faith and fair

dealing when it failed to cooperate with CALL’s plans to transfer

ownership of the Eddy Road Location, failed to timely respond to

CALL’s interest in purchasing the property at the South Willow

Street Location, failed to timely respond to CALL’s plans for a

Dunkin Donuts site at the South Willow Street Location, treated

CALL differently than other franchisees of “On-the-Run” market

stores, improperly failed to renew the “Mobil Mart” franchise

agreement at the South Willow Street Location,3 disparaged CALL

3 The Complaint is not clear about which location is being referenced, but I assume it is referring to the South Willow

-5- to prospective purchasers, and unreasonably withheld consent to

the approval of the transaction.4 Count 2 alleges that Exxon

breached its contract with CALL when, after first agreeing to

allow CALL to offer for sale Dunkin Donuts products at the South

Willow Street Location, Exxon refused to permit CALL to do so and

then declined to renew the “Mobil Mart” franchise agreement.

Count 3 alleges that Exxon and Caron tortuously interfered

with the contract between CALL and Jonathan and Christine Cyr,

under which Jonathan and Christine Cyr were to purchase the Eddy

Road Location. CALL claims that the defendants sabotaged its

contractual relationship with Jonathan and Christine Cyr in the

following ways: Exxon unreasonably failed to approve the

prospective purchasers as operators, Exxon and Caron disparaged

CALL in an effort to scuttle the transaction, and Caron -- as

part of the effort to scuttle the transaction -- misrepresented

Jonathan Cyr’s abilities while conducting a training program.

Count 4 alleges that Exxon and Caron conspired to commit an

unlawful act by engaging in conduct that was designed to sabotage

Street Location. 4 The Complaint is not clear about which transaction is being referenced, but I assume it is referring to the CALL-Cyr transaction for the Eddy Road Location.

-6- the transaction between CALL and Jonathan and Christine Cyr.

-7- CALL alleges that the defendants’ overt acts brought about the

defendants’ desired end, which was to block the CALL-Cyr deal

from transpiring. Count 5 alleges that Exxon and Caron were

negligent because they breached their duty to reasonably conduct

their affairs by engaging in behavior that harmed CALL’s business

interests. Finally, Count 6 alleges that Exxon and Caron engaged

in activity that rises to the level of unfair methods of

competition and unfair and deceptive practices in violation of

New Hampshire Consumer Protection law. CALL seeks enhanced

compensatory damages, as well as triple damages, attorney’s fees,

and costs pursuant to the New Hampshire Consumer Protection

Statute, RSA § 358-A:10.

On September 1 9 , 2008, Exxon removed the case to federal

court claiming federal question jurisdiction over at least one of

CALL’s claims and supplemental jurisdiction over the remaining

claims. Defendants’ assertion that the court had federal

question jurisdiction was based on the premise that one or more

of CALL’s claims was completely preempted by the PMPA. CALL

objected to removal, arguing that the matter properly belongs in

state court.

-8- II. STANDARD OF REVIEW

As a general principle, “an action is removable to a federal

court only if it might have been brought there originally.”

Parker v . California,

, at *1 (N.D. Cal. Feb. 2 6 ,

1999); see Caterpillar Inc. v . Lewis,

1 , 68 (1996). In

other words, there must be either diversity of citizenship among

the parties or a federal question in the claim.

, 1332. Where, as here, a plaintiff files a motion to remand

a previously removed action, the defendant has the burden of

proving that there is a basis for federal jurisdiction. Winters

v . Diamond Shamrock Chem. Co.,

8 7 , 397 (5th Cir. 1998).

III. ANALYSIS

In arguing for removal in this case, Exxon asserts that CALL

has brought claims concerning termination and nonrenewal of a

petroleum franchise contract, that such claims are completely

preempted by the PMPA, and that as a result, there is federal

question jurisdiction over those claims.

Complete preemption “is a short-hand for the doctrine that

in certain matters Congress so strongly intended an exclusive

federal cause of action that what a plaintiff calls a state law

-9- claim is to be recharacterized as a federal claim.” Fayard v .

N e . Vehicle Servs.,

2 , 45 (1st Cir. 2008). The United

States Supreme Court has applied the complete preemption doctrine

sparingly. See, e.g., Beneficial Nat’l Bank v . Anderson,

(2003) (usury claims against national banks); Metro. Life

Ins. C o . v . Taylor,

(1987) (benefit claims under

ERISA); Avco Corp. v . Aero Lodge N o . 735,

(1968)

(no-strike clause of labor contract). Upon reviewing this

landscape, the United States Court of Appeals for the First

Circuit has articulated a two-pronged test to help courts decide

whether a statute (in this case, the PMPA) supports complete

preemption. There is complete preemption when there is (a)

“exclusive federal regulation of the subject matter of the

asserted state claim” and (b) “a federal cause of action for

wrongs of the same type.” Fayard,

In a prior Order (Doc. N o . 2 2 ) , I instructed the parties to

analyze this matter under the standard articulated in Fayard v .

Northeast Vehicle Services. See

CALL argues that it is not

alleging “a federal cause of action . . . [or] seeking any remedy

under the PMPA, but rather is solely relying upon state common

law claims and a violation of the New Hampshire Consumer

-10- Protection Statute.” (Pl.’s Mot. to Remand, Doc. N o . 2 5 , at 3-

4.) CALL goes on to argue that even if the PMPA completely

preempts state law termination and nonrenewal claims, it still

would not justify removal because CALL “has not alleged a

wrongful termination or a wrongful nonrenewal of a petroleum

agreement.” (Id. at 5.) For its part, Exxon targets CALL’s

claims for breaches of contract and the implied covenant of good

faith and fair dealing, wherein CALL alleges that Exxon

improperly failed to renew the “Mobil Mart” franchise agreement

at the South Willow Street Location. (Def. Exxon’s Resp., Doc.

N o . 29-2, at 3-4.) Exxon argues that because the South Willow

Street Location franchise was governed by a single agreement,

which addressed both the lease of the property on which there was

a gasoline business and the Mobil Mart, any “allegations

regarding the improper nonrenewal of . . . [that agreement]

necessarily implicate the PMPA.” (Id. at 5.)

The PMPA sets out the “precondition and grounds for

termination or nonrenewal” of a franchise.

2803. In passing the PMPA, Congress noted the necessity of a

“single, uniform set of rules governing the grounds for

termination and non-renewal of motor fuel marketing franchises

-11- . . . .” S . Rep. N o . 7 3 1 , 95th Cong., 2d Sess., 1 9 . This desire

for uniformity in the termination of franchise contracts is

reflected in the PMPA itself, which has a provision that

specifically addresses preemption:

To the extent that any provision of this subchapter applies to the termination (or the furnishing of notification with respect thereto) of any franchise, or to the nonrenewal (or the furnishing of notification with respect thereto) of any franchise relationship, no State or any political subdivision thereof may adopt, enforce, or continue in effect any provision of any law or regulation (including any remedy or penalty applicable to any violation thereof) with respect to termination (or the furnishing of notification with respect thereto) of any such franchise or to the nonrenewal (or the furnishing of notification with respect thereto) of any such franchise relationship unless such provision of such law or regulation is the same as the applicable provision of this subchapter.

§ 2806(a)(1). Thus, any conflicting state regulations

concerning termination or nonrenewal of a petroleum franchise are

explicitly preempted by the PMPA. Id.

In addition to regulating the termination and nonrenewal of

petroleum franchise agreements, the PMPA also provides aggrieved

franchisees with a federal cause of action: if “a franchisor

fails to comply with the requirements of section 2802, 2803, or

2807 of this title, the franchisee may maintain a civil action

against such franchisor.” Id. § 2805. Under Fayard, because the

-12- PMPA provides exclusive regulating standards for the termination

and nonrenewal of franchise relationships and sets out a specific

federal cause of action for franchisees complaining about

termination or nonrenewal, any claims of that kind must be

asserted pursuant to the PMPA. See

6 . Other courts

have agreed that the PMPA has preemptive force with respect to

this narrow class of claims. See Kehm Oil C o . v . Texaco, Inc.,

9 0 , 299 (3d Cir. 2008) (“[W]hen state law claims are

‘intimately intertwined’ with the termination or nonrenewal of a

franchise they are preempted by the PMPA.”); Mehdi-Kashi v .

Exxon Mobil,

, at *8 (S.D. Tex. Jan. 7 , 2002).

In this case, the dispute centers around whether CALL is

asserting claims that implicate the termination or nonrenewal of

a franchise contract, namely the South Willow Street Franchise

Agreement. Although its complaint seeks damages for the

nonrenewal of its franchise agreements, CALL’s briefings disavow

any claims for wrongful termination or nonrenewal. (Pl.’s Mot. to

Remand, Doc. N o . 2 5 , at 5.) As stated above, if CALL i s , in

fact, asserting state law claims for breach of contract and the

implied covenant of fair dealing that concern termination or

nonrenewal of a franchise agreement, those claims are completely

-13- preempted.

If CALL intends to pursue claims for nonrenewal or

termination, it has thirty (30) days to file an amended complaint

restating those claims under the PMPA. I f , instead, CALL intends

to disavow all termination and nonrenewal claims as its brief

suggests, the court will decline to exercise supplemental

jurisdiction over the remaining state law claims and an order

will issue explaining that CALL does not assert claims of that

kind, that the matter is remanded to state court, and that CALL

is estopped from reasserting claims regarding termination or

nonrenewal. If the case is remanded, CALL’s remaining state law

claims would not be preempted, and it would be free to litigate

them in state court. Plaintiff’s motion to remand (Doc. N o . 24

is denied.

IV. CONCLUSION

Plaintiff has thirty (30) days from the date of this

Memorandum and Order to clarify its position, explaining whether

or not it intends to pursue claims regarding termination or

nonrenewal of a franchise agreement.

-14- SO ORDERED.

/s/Paul Barbadoro Paul Barbadoro United States District Judge

August 1 4 , 2009

cc: William Aivalikles, Esq. Paul D. Sanson, Esq. Sonia M . Pedraza, Esq. Courtney H.G. Herz, Esq. Vaughn Finn, Esq. Robert R. Lucic, Esq. Douglas N . Steere, Esq.

-15-