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Evans Group, Inc. v. Robert Foti and Foti Fuels

September 14, 2012


The opinion of the court was delivered by: Burgess, J.

Evans Group, Inc. v. Foti and Foti Fuels, Inc.


2012 VT 77

Supreme Court January Term, 2012

On Appeal from Superior Court, Washington Unit, Civil Division

PRESENT: Reiber, C.J., Dooley, Skoglund, Burgess and Robinson, JJ.

¶ 1. Appellant Foti Fuels, Inc. (Foti), a fuel distributor, appeals from the Washington Civil Division's judgment in favor of Evans Group, Inc. (Evans), also a fuel distributor. Evans cancelled its agreement to sell fuel to Foti for resale and delivery to a retail gasoline station, and sued for payment of an outstanding balance of $68,864. Foti claims the unilateral termination of the agreement violated the federal Petroleum Marketing Practices Act (PMPA), 15 U.S.C. §§ 2801-07, which regulates fuel franchise agreements. The trial court determined that Foti was not a "franchisee" within the meaning of the PMPA and, therefore, not entitled to its contract termination protections. We affirm.

¶ 2. Both Evans and Foti were wholesale fuel distributors who purchased fuel from major oil companies for resale to service stations and other retail outlets. In the trade, they are known as "jobbers." Foti had a long-term business relationship with a Montpelier retail fuel outlet, Parker's Quick Stop (Quick Stop), supplying it with gasoline. Evans maintained an account at a Citgo fuel depot at Albany, New York, where it purchased large quantities of Citgo-brand fuel for redistribution to retail outlets. In 1999, Evans and Foti reached an agreement by which Evans would purchase gasoline from Citgo and supply it to Foti for one-half cent per gallon over cost to Evans.*fn1 Under this arrangement, Quick Stop, already supplied by Foti with a different brand of gasoline, converted to a Citgo gas station. Evans and Foti agreed to split a discount offered by Citgo to offset the cost of new brand-name signage at Quick Stop.

¶ 3. As agreed, Foti picked up Citgo gas from the Albany depot and delivered it to Quick Stop. The financial relationship is not entirely clear from the court's findings, but generally it appears that Foti would charge the cost of the gas to the Evans account at the depot, and pay Evans for the gas charged. Evans received credit card payments for gasoline purchased at Quick Stop and would credit these payments to Foti who, in turn, would credit Quick Stop. Cash sales at Quick Stop would be paid over to Foti which, in turn, would be paid over to Evans.

¶ 4. This arrangement worked satisfactorily for almost a decade, during which the delivery of Quick Stop's fuel changed hands. In 2004, Foti's owner sold his affiliated tanker truck company, Foti Fuels Enterprises, Inc., to one Kurrle, an employee of Foti, and later retired to Arizona. Kurrle also assumed management of Foti, but in 2008 fell into disagreement with the owner who resumed managing Foti from Arizona.

¶ 5. Thereafter, Foti's relationship with Evans and Quick Stop deteriorated. Foti became delinquent in its formerly prompt payment of $10,000 to $35,000 to Evans every ten days or so. At the same time, Quick Stop became concerned about continuing business with Foti because of lost sales due to uneven gasoline deliveries to the station. In one incident, one of Foti's trucks was locked out of the Albany depot for several hours. In another, Quick Stop ran out of gas for part of a day. Dissatisfied, Quick Stop began to buy fuel directly from Evans in early April 2009.

¶ 6. On April 21, 2009, Evans sent Foti written notice terminating their agreement. The termination was retroactive to April 2, 2009, the date of the first direct delivery of gasoline by Evans to Quick Stop. Evans also notified defendant that a balance of $68,864 was due for fuel drawn on Evans' account at the Citgo depot. Evans sued Foti to recover this outstanding balance, and Foti counterclaimed, alleging Evans' unilateral termination of their agreement was improper under the PMPA.

¶ 7. The PMPA regulates "the termination and non-renewal of franchise relationships for the sale of motor fuel." Checkrite Petroleum, Inc. v. Amoco Oil Co., 678 F.2d 5, 7 (2d Cir. 1982). Enacted as a "response to widespread concern over increasing numbers of allegedly unfair franchise terminations . . . in the petroleum industry," the PMPA provides protection against unilateral dissolution of franchise relationships, absent a statutorily-specified reason for termination. Mac's Shell Serv., Inc. v. Shell Oil Prods. Co., 130 S. Ct. 1251, 1255 (2010); seealso 15 U.S.C. § 2802 (listing legitimate reasons for termination under the statute). The PMPA also establishes the manner in which termination may occur. For example, it mandates ninety days notice prior to termination, 15 U.S.C. § 2804, a procedural nicety not observed by Evans here. Foti maintained that it was a franchisee under the statute's definition, which encompasses any distributor or retailer authorized "to use a trademark in connection with the . . . distribution of motor fuel." Id. § 2801(4).

¶ 8. At trial, Foti claimed the PMPA's franchise protection on two related grounds. One was that it held a "franchise" under § 2801(1)(B) of the Act, ...

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