MARC Defeats Bid for Injunction Against Franchise Expiration, Allegation of Ill Motive

On October 24, 2016, a federal judge in Trenton denied a service station operator’s application for an injunction that would have disrupted operations of MARC’s client, a petroleum distributor, by suspending the expiration of a franchise agreement and turnover of the station.

The agreement was set to expire after the plaintiff operator’s refusal to agree to the distributor’s renewal terms. The operator argued that the renewal terms included excessively high rents that reflected a bad-faith attempt to drive it out of the station so the distributor could replace the plaintiff with a company agent.

MARC partner Bruce S. Rosen and associate Zachary D. Wellbrock presented testimony of the distributor’s vice president and regional manager to show that the proposed rents were calculated in good faith and in the normal course of business and that the distributor had no interest in replacing its franchised operators with company agents.

Although the federal Petroleum Marketing Practices Act sets exceptionally relaxed requirements for issuing injunctions against the termination of a service station franchise, the court found that even this low hurdle had not been met.

After two days of testimony by representatives of the plaintiff and the distributor, U.S. District Court Peter Sheridan denied the requested injunction. He held that there were not “sufficiently serious questions” as to the distributor’s good faith and that the issue was therefore not “a fair ground for litigation.”

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