Joseph v. Sasafrasnet, LLC

Filing 49

MEMORANDUM Opinion and Order Signed by the Honorable Harry D. Leinenweber on 12/28/2012:Mailed notice(wp, )

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

EMMANUEL JOSEPH,
Plaintiff,
v.

Case No. 11 C 402
Hon. Harry D. Leinenweber

SASAFRASNET, LLC, a Wisconsin
Limited Liability Company,
Defendant.

MEMORANDUM OPINION AND ORDER
This matter is before the Court on remand from the Seventh
Circuit.

In light of the Seventh Circuit’s opinion, the Court

directed the parties to submit briefs on the outstanding issues
with respect to Plaintiff’s Motion for a Preliminary Injunction.
The Court will now review those issues and re-examine its prior
denial of Plaintiff’s Motion.
I.

BACKGROUND

Plaintiff Emmanuel Joseph (hereinafter, the “Plaintiff” or
“Joseph”) operates a British Petroleum (“BP”) service station
franchise in Chicago, Illinois.

Defendant Sasafrasnet, LLC is an

authorized distributor of BP products and Plaintiff’s franchisor.
On April 27, 2006, Plaintiff entered into a Dealer Lease and
Supply Agreement (the “DLSA”) with BP Products North America.
Pursuant to the DLSA, Plaintiff, as a franchisee, agreed to lease
a service station located in Chicago, Illinois and sell “BP’s

trademarked motor fuels, motor oils, and other products to the
motoring public.”

Pl.’s Compl.; Ex. 2 at 2; (Dkt. 1-2; Page

ID #15). Plaintiff also agreed to pay $14,334.00 in monthly rent.
Pl.’s Compl.; Ex. 2 at 2 (Dkt. 1-2; Page ID #16).
At some point after Plaintiff entered into the DLSA, BP sold
the service station to Defendant Sasafrasnet, LLC, (hereinafter,
the “Defendant” or “Sasafrasnet”) who in turn, assumed all of BP’s
rights and responsibilities as Plaintiff’s franchisor. Sasafrasnet
asserts that since it assumed the role of Plaintiff’s franchisor,
Plaintiff “has been consistently problematic and in breach of his
contractual obligations.”

Memo. In Opp. to Mot. for TRO, Ex. 1

at 2 (Dkt. 7-1; Page ID# 122).

Because of Plaintiff’s persistent

problems, in November 2010, Sasafrasnet sent Plaintiff notice of
its intent to terminate the franchise.

Specifically, Sasafrasnet

cited Plaintiffs repeated violations with respect to the payment
and performance

requirements

of

the

DLSA

as

reasons

for

the

termination.
Pursuant to the DLSA, Plaintiff is, among things, required to:
establish
an
account
with
a
financial
institution,
on
terms
acceptable
to
[Sasafrasnet], that provides [electronic funds
transfer (“EFT”)] services and to authorize
[Sasafrasnet] to initiate certain transfers of
funds between that account and designated
accounts of [Sasafrasnet] for payment of any
and all amounts due to [Sasafrasnet] under
[the DLSA]
Pl.’s Compl.; Ex. 3 at 4; (Dkt. 1-3; Page ID # 18).

- 2 -

The DLSA also obligates Plaintiff to manage and operate the
station in satisfactory working order to maintain BP’s reputation,
brand, and image.

It requires Plaintiff to meet certain standards

with respect to the appearance of the service station and obligates
Plaintiff
materials.

to

display

the

BP

uniform,

sign,

and

advertising

In order to ensure compliance with the aforementioned

requirements, the DLSA mandates that Plaintiff participate in a
Mystery Shopper inspection program where Plaintiff must achieve
certain scores and promptly correct any deficiencies documented in
the Mystery Shopper reports.

The DLSA states “[f]ailure to do so

may result in termination of this Agreement [the DLSA].”

Pl.’s

Compl.; Ex. 3 at 4; [Dkt. 1-3; Page ID #20].
The DLSA also contains a provision which authorizes the
franchisor to terminate the franchise if Plaintiff “fail[s] . . .
to make payment according to BP’s EFT policy causing a draft to be
dishonored for nonsufficient or uncollected funds” more than once
within a twelve-month period.

Id. at 2. [Dkt. 1-3; Page ID# 18].

In June 2009, shortly after Sasafrasnet became Plaintiff’s
franchisor, an EFT from Plaintiff’s account for a fuel delivery was
returned for non-sufficient funds (“NSF”).

Over the next few

weeks, an additional three EFTs were returned for the same reason.
In March 2010, another three EFTs from Plaintiff’s account
were returned NSF.

At this time, Sasafrasnet notified Plaintiff

- 3 -

that he was now required to prepay for his fuel.

Plaintiff agreed

to this.
However, the prepayment method was not ideal for Sasafrasnet.
Thus, after Plaintiff made a series of timely prepayment, on May 7,
2010,

Sasafrasnet

sent

Plaintiff

a

letter

indicating

that

Sasafrasnet would allow Plaintiff to resume paying for deliveries
by EFT, but informed him that if he incurred future NSFs, Plaintiff
would have to pay a $2,500 penalty.

The letter also notified

Plaintiff that Sasafrasnet would require Plaintiff to prepay again
if he had two more NSFs.

Plaintiff agreed to the terms and signed

the letter.
From May 2010 to June 2010 Plaintiff made EFT payments without
a NSF.

Nevertheless, a future issue with respect to Plaintiff’s

payment ensued. On July 8, 2010, Plaintiff notified Sasafrasnet he
was changing banks.

At this time, Plaintiff directed Sasafrasnet

to withdraw future EFTs from his new bank account.

However,

Plaintiff failed to provide Sasafrasnet advanced notice of the
account change.

Indeed, Plaintiff had an EFT payment due on the

July 8, 2010, (the same day he notified Sasafrasnet of the change)
which Sasafrasnet debited from the old account.

Not surprisingly,

this was returned for NSF.
On July 12, 2010, Sasafrasnet again debited the old account
which was returned NSF. Sasafrasnet has admitted that this NSF was
the result of Sasafrasnet “incorrectly submit[ing]” the EFT to

- 4 -

Plaintiff’s old account, implying that this NSF was its fault, not
Plaintiffs.
Emergency

Def. Sasafrasnet, LLC Memo. of Law in Opp. to Pl.’s
Mot.

for

Temp.

Restraining

Order

Injunction at 6, n. 3 [Dkt. 7 Page ID #111].

and

Preliminary

Because of its error,

on July 15, 2010, Sasafrasnet tried to withdraw from the new
account.

However, this EFT was also returned NSF.

(Plaintiff

claims that the reason for the July 15, 2010 NSF was partially
because

Sasafrasnet

Plaintiff’s

behalf

had
and

collected
failed

to

credit

card

deposit

receipts

these

funds

on
into

Plaintiffs’ new bank account, and partially because Plaintiff
failed to transfer funds from the old account to the new account.)
In November 2010, Sasafrasnet gave Plaintiff the requisite
notice that Sasafrasnet would be terminating Plaintiff’s franchise.
In

this

notice,

Sasafrasnet

cited

the

July

2010

NSFs

and

Plaintiff’s failing Mystery Shopper inspection scores as the bases
for the termination.
Before the termination became effective, Plaintiff filed the
instant suit under the Petroleum Marketing Practices Act, (“PMPA”)
seeking a temporary restraining order and/or other preliminary
relief to prevent Sasafrasnet from terminating the franchise.
On April 28, 2011, this Court held a hearing to determine
whether to grant Plaintiff’s motion for preliminary relief.

After

finding Plaintiff’s late payments were a per se reasonable basis
for Sasafrasnet to terminate the franchise under the PMPA, the

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Court determined that Plaintiff could not satisfy the standard set
by the PMPA for preliminary relief, and therefore denied his
Motion.
On May 6, 2011, Plaintiff filed a Notice of Appeal to the
Seventh Circuit challenging the Court’s denial.

(At this time,

Plaintiff also filed a Motion to Stay enforcement of this Court’s
Order pending his appeal, which the Court granted.)

On August 17,

2012, the Seventh Circuit reversed and remanded the case back to
this Court for further proceedings.

In its opinion, it instructed

the Court to address explicitly the term “failure” set out in 15
U.S.C. § 2801(13) to determine whether the July 2010 NSFs were
within Plaintiff’s reasonable control.

It further directed the

Court to “consider whether the July 2010 NSFs that were within Mr.
Joseph’s reasonable control were only technical or unimportant to
the franchise relationship.”

Joseph v. Sasafrasnet, LLC, 689 F.3d

683, 692-93 (7th Cir. 2012).
The Court instructed both parties to submit briefs on the
remaining issues, which both parties filed timely.

Accordingly,

the Court now will consider those issues that remain to determine
whether to grant Plaintiff’s Motion for Preliminary Relief under
the PMPA.
II.
The

PMPA

“governs

LEGAL STANDARD

franchise

arrangements

for

the

consignment, or distribution of motor fuel “in commerce.””

- 6 -

sale,
Dersch

Energies, Inc. v. Shell Oil Co., 314 F.3d 846, 855 (7th Cir. 2002)
citing Beachler v. Amoco Oil, Co., 112 F.3d 902, 904 (7th Cir.
1997).

Congress enacted the PMPA to protect franchisees from the

inherent disparity in bargaining power that exists between major
oil company franchisors and franchisees in the petroleum industry.
Beck Oil, Co. v. Texaco Ref. & Mktg., Inc., 25 F.3d 559, 561 (7th
Cir. 1994).

The PMPA is intended to protect franchisees by

providing “a single, uniform set of rules governing the termination
of petroleum franchises and nonrenewal of petroleum franchise
relationships.”

Dersch Energies, Inc., 314 F.3d at 855-56.

If a

franchisor terminates a franchise in violation of the PMPA, it
provides a franchisee the ability to maintain a civil action
against the franchisor under 15 U.S.C. § 2805(a) and/or (b).
Section 2805(b) governs actions requesting equitable relief.
instructs a court to grant a preliminary injunction if:
(A)

the franchisee shows –
(I)

the franchise of which he is a party has
been
terminated
or
the
franchise
relationship of which he is a party has
not been renewed, and

(ii) there
exist
sufficiently
serious
questions going to the merits to make
such
questions
a
fair
ground
for
litigation; and
(B)

the court determines that, on balance, the
hardships imposed on the franchisor by the
issuance of such preliminary injunction will
be less than the hardship which would be
imposed
upon
such
franchisee
if
such
- 7 -

It

preliminary
granted.

injunctive

relief

were

not

15 U.S.C. § 2805 (b)(2).
Unlike the requirements for a preliminary injunction under
Federal Rule of Civil Procedure 65, “the PMPA requires only that a
franchisee show a reasonable chance of success on the merits,” not
“a strong or reasonable likelihood of success on the merits.”
Joseph v. Sasafrasnet, 689 F.3d 683, 689 (7th Cir. 2012) citing
Moody v. Amoco Oil Co., 734 F.2d 1200, 1216 (7th Cir. 1984).
III.

DISCUSSION

At the outset, the Court notes that Plaintiff previously
satisfied Section 2805(b)(2)(A), and Section 2805(b)(2)(B).

Here,

it is undisputed that Sasafrasnet seeks to terminate the franchise
and that the balance of hardships weighs in Plaintiff’s favor, as
he stands to lose the $400,000 he spent in purchasing the business
if the termination is upheld.

See [Dkt. 16 at 3].

Thus, the only

inquiry the Court will undertake is whether Plaintiff can satisfy
the burden of demonstrating “there is a ‘reasonable chance’ that
[Sasafrasnet] will be unable to prove that the termination was
permissible under the Act.”

Sasafrasnet, 689 F.3d at 691.

Section 2802(b)(2)(C) authorizes a franchisor to terminate a
franchisee if an event occurs which is relevant to the franchise
relationship.

15 U.S.C. § 2802(b)(2)(C).

Section 2802(c) sets

forth a list of twelve non-exclusive events that constitute “an
event which is relevant to the franchise relationship and as a
- 8 -

result of which termination of the franchise . . . is reasonable.”
15 U.S.C. § 2802 (b)(2)(C).

One of the twelve events listed is a

“failure by the franchisee to pay the franchisor in a timely manner
when due all sums to which the franchisor is legally entitled.” 15
U.S.C. § 2802 (c)(8).

While the PMPA does not define the term

“failure” expressly, it does exclude from the definition “(A) any
failure which is only technical or unimportant to the franchise
relationship,

[or]

(B)

any

failure

for

reasonable control of the franchisee . . .”

a

cause

beyond

the

15 U.S.C. § 2801(13).

Plaintiff argues that the July 2010 NSFs were merely technical
failures beyond his reasonable control.
A.

Sasafrasnet disagrees.

15 U.S.C. § 2801(13)(B) Beyond Reasonable Control

In the Seventh Circuit’s opinion, it directed the Court to
“determine which of the July 2010 NSFs were within Mr. Joseph’s
[Plaintiff’s] reasonable control.”

Sasafrasnet, 689 F.3d at 692.

It specifically noted that Plaintiff appeared “to concede that the
first NSF was within his reasonable control,” and the “second NSF
in July appear[ed] to be attributable to Sasafrasnet.” Id. at 69293.

The Seventh Circuit then instructed this Court to consider

whether the final July NSF was in Plaintiff’s reasonable control.
Plaintiff now contends that all three July 2010 NSFs were out
of his control.

With respect to the first NSF, Plaintiff claims he

“was unaware that the switch in bank accounts would require a 4-day
advance notice of the change.”

Pl.’s Supp. Memo. in Supp. of its
- 9 -

Mot. for a TRO at 5.

Plaintiff contends the second NSF in July was

out of his control because Sasafrasnet mistakenly tried to withdraw
funds from his old account.

Finally, Plaintiff argues that the

final NSF in July 2010 was out of his control because Sasafrasnet
failed

to

deposit

Plaintiff’s

credit

card

receipts

in

the

appropriate account.
Sasafrasnet disagrees.

It argues that the first NSF in July

was within Plaintiff’s control because Plaintiff admitted that “he
failed to give Sasafrasnet adequate notice of his change of bank
accounts.”

Def.’s

Br.

Regarding

Issues

on

Remand

at

11.

Sasafrasnet claims that the second NSF was within Plaintiff’s
control for the same reason, and argues that the third NSF in July
was in Plaintiff’s control because it “was the direct result of
[][Plaintiff’s]

mismanagement

accounts.”

With respect to the third NSF Sasafranet points

Id.

of

the

transition

between

bank

out that in Plaintiff’s Complaint, Plaintiff admitted that he
“neglected to transfer the remaining funds in the old account to
the new one[.]”

Id. citing Compl. ¶ 23.

When determining whether the first and second NSFs in July
were within Plaintiff’s reasonable control, the Court finds the
April 28, 2011 hearing transcripts informative.

At the hearing,

Plaintiff testified regarding the NSFs at issue.
Q:
A:

Okay.
I’m not clear.
Explain that to me
again. You wanted to change banks?
I wanted to change banks.

- 10 -

Q:
A:

What did you do about that?
What we did was I – I was not in town.
I
called
my
manager
and
told him,
call
Sasafrasnet because we need to change banks.
And I believe that there was some EFTs coming
through at the time – if I’m not mistaken,
there was some EFT coming through on the old
bank account.
And he called Sasafrasnet to
let them know that, you know, we’re changing
bank accounts.

Q:
A:

Okay.
And –

Q:
A:

What happened then?
What happened was they were already hitting
the old account. And I guess it was a mutual
mistake, you know, that maybe we should have
told them a little earlier, I don’t know, but
I wasn’t here.
He handled it.
He called
them, let them know that there’s going to be a
new bank account, we need a voided check. And
they hit – what happened – actually what
happened was they hit the old account when
they were supposed to hit the new account, and
that caused a problem, that caused an NSF.

Tr. of Proceedings at 6-7; [Dkt. 22; Page ID #231-232].
In light of this testimony, the Court refuses to conclude that
the first NSF in July was out of Plaintiff’s control.

The above

colloquy illustrates that Plaintiff recognized he should have given
Sasafrasnet advance notice of his change in financial institutions,
particularly because he knew an EFT was pending.

Moreover, to the

extent that Plaintiff is attempting to argue that this was out of
his control because he was out of town, the Court is not persuaded.
In Potter v. Ashland Oil, Inc., 905 F.2d 1538 (6th Cir. 1990), the
Sixth Circuit affirmed a district court’s denial of a preliminary
injunction, rejecting the franchisee’s argument that his failure to
- 11 -

pay his franchisor timely was beyond his control because the
payments were the responsibility of his employees.

Id.

The Sixth

Circuit reasoned that it was not unreasonable for the franchisor to
terminate the franchise when the franchisee failed to exercise his
control effectively.

Id.

The Court finds the same true here and

as such, finds the first NSF was within Plaintiff’s reasonable
control.
With respect to the second and third NSFs in July, the Court
finds

the

testimony

persuasive.

of

Plaintiff’s

manager,

George

Urbieta

During his testimony the Court asked Mr. Urbieta to

clarify a few issues with respect to the July 2010 NSFs.
Q:
A:

So one of them – the first one was your fault,
the other two was their fault in a sense?
Yes. I would say the third one would be both
of us because of the simple fact that I wasn’t
able to grab the money from the old account to
put into the new account.

Tr. of Proceedings at 58-59; [Dkt. 22; Page ID# 283-284].
In light of this testimony, as well as the testimony from
Sasafrasnet’s representative which revealed that Plaintiff only was
forced to pay $5,000 in fees for the July 2010 NSFs ($2,500 for
each NSF pursuant to the parties’ May 2010 Agreement), the Court
finds Sasafrasnet to be the responsible party for the second July
NSF.
With respect to the third NSF in July, the Court finds that
while both parties could be partially to blame, this NSF was not
beyond Plaintiff’s reasonable control. As support, the Court finds
- 12 -

Moody

v.

Amoco

instructive
franchisee’s

In

Oil

Company,

Moody,

failure

to

the
cure

734

F.2d

Seventh
bad

1200

(7th

Circuit

checks was

Cir.

found

not

1984)

that

“beyond

a
the

debtors’ reasonable control” as the franchisee tried to argue. Id.
at 1217.

While the franchisee argued that their failure to cure

the checks was in part because of an agreement the franchisor made
with them to continue their fuel supply, the Seventh Circuit
disagreed and held that the “debtors had no reasonable basis to
believe that their duty to cure within five days had been tolled.”
Id.
The Court finds this analysis applicable to the instant case.
First, the Court finds that Plaintiff’s failure to recognize the
exact steps needed to ensure a smooth transition when changing
financial institutions is something within Plaintiff’s control.
Plaintiff could have (and should have) had discussions with either
or both of his financial institutions to inquire about what he
needed to do to ensure there were adequate funds in the new account
at the time of the third NSF.

This seems particularly logical

given that the terms of the DLSA state Plaintiff was required to
give the bank authorization for Sasafrasnet to make EFT withdraws,
and given that EFT withdrawals only occur after Plaintiff places a
fuel order.
Furthermore,

the

Court

finds

the

Third

Circuit’s

interpretation of 15 U.S.C. § 2802 (13)(B) in Sun Refining and
- 13 -

Marketing Co. v. Rago, 741 F.2d 670 (3d Cir. 1984) informative.

In

that case, the Third Circuit rejected a franchisee’s argument that
a store closing for over one week was beyond his control.

Id.

Relying on the Seventh Circuit’s opinion in Brach v. Amoco Oil,
Co., 677 F.2d 1213 (7th Cir. 1982), the Third Circuit found that
since the franchisee “failed to put forth any reasons . . . which
would excuse the admitted closing of his service station[,]” the
franchisor’s decision to terminate the franchise was reasonable.
Id. at 674.

In making its decision, the Third Circuit noted that

Section 2802(13) was intended to provide a franchisee a “legislated
excuse for nonperformance” in a limited number of unforeseen
circumstances such as a “flood or some other cause beyond his or
her reasonable control.”

Id. at 673 citing Brach v. Amoco Oil Co.,

677 F.2d at 1224, n. 16.

Like the Third Circuit in Rago, the Court

does

not

find

Plaintiff’s

failure

to

fund

his

new

account

adequately analogous to those circumstances contemplated in Brach.
Plaintiff cites Beachler v. Smith Oil Co. of Kankakee, 112
F.3d 902 (7th Cir. 1997) as support for the argument that the July
NSFs did not constitute a “failure” as defined by the PMPA.
However, Beachler involved a question of whether a franchisor’s
actions

effectively

terminated

a

franchise,

not

whether

a

franchisee’s alleged failure was within his/her reasonable control.
See id. at 905-07 (holding “the assignment of a franchise by a
refiner to a distributor generally will not implicate the PMPA
- 14 -

unless the assignment either breaches an essential component of the
statutory franchise or violates state law.”). Plaintiff’s reliance
on Brach v. Amoco Oil Co., 677 F.2d 1213 is similarly misplaced.
In Brach, the Seventh Circuit considered whether the nonrenewal of
a franchise due to a franchisee’s default on a real estate contract
was permissible under the PMPA.

In Brach, the Court noted that

while the franchisee’s actions were similar to those cited in
Section 2802(c)(8) (failure to pay in a timely manner), because
that provision is “intended to cover the potential problem of
repeated lateness or arrearage in rent or motor fuel payments,” the
lower court needed to determine whether the default on the real
estate contract was material to the franchise relationship. Id. at
1221.
Here, Plaintiff’s failures involve repeated late payments and
arrearages in motor fuel payments, exactly the type of problem the
court in Brach noted that Section 2802(c)(8) is intended to cover.
Moreover, Plaintiff is incorrect in his assertion that if the Court
determines that one of the NSFs was within Plaintiff’s control that
the Court must also engage in an inquiry to determine whether the
facts in this case are of a material significance to the franchise
relationship to justify the termination.

That inquiry would only

be necessary if Sasafrasnet’s only justification for termination
was not of those listed in Section 2802(c).

See Sasafrasnet, 689

F.3d at 690-92, (noting that while the Sixth Circuit requires
- 15 -

courts to “scrutinize the reasonableness of terminations even when
an event enumerated in § 2802(c) has occurred” the Seventh Circuit
holds that “the occurrence of an event listed in § 2802(c),
justifies as a matter of law, a franchisor’s decision to terminate
a franchise under § 2802(b)(2)(C).”).
not

examine

the

material

Therefore, this Court need

significance

that

the

NSFs

Plaintiff’s control had on the franchise relationship.

within

Instead,

the only other additional inquiry the Court must undertake is
“whether

the

reasonable

July

2010

NSFs

control

were

only

that

were

technical

within
or

Mr.

Joseph’s

unimportant”

and

therefore excluded from being considered “failures” pursuant to 15
U.S.C. § 2801(13)(A).
B.

Sasafrasnet, 689 F.3d at 692-93.

15 U.S.C. § 2801(13)(A) Technical or Unimportant Failure
Plaintiff contends that Sasafrasnet’s attempt to terminate the

franchise is in violation of the PMPA because the July 2010 NSFs
were technical or unimportant.

Plaintiff claims this is evidenced

by Sasafrasnet’s failure to make timely credit card deposits on
Plaintiff’s behalf over the course of the parties’ franchise
relationship.

Plaintiff

specifically

cites

an

incident

that

occurred on May 7, 2009 where Sasafrasnet notified Plaintiff that
it debited Plaintiff’s account instead of crediting it for credit
card receipts Sasafrasnet received on May 4 and 5 for Plaintiff.
Plaintiff claims a similar incident occurred on April 5, 2012 and
on September 21, 2012.

Plaintiff argues that the untimely credit

- 16 -

card deposits by Sasafrasnet illustrate that the July 2010 NSFs
were only technical failures.
Sasafrasnet claims that Plaintiff cannot escape responsibility
for the July 2010 NSFs on the ground that these failures were only
technical in nature or unimportant to the franchise relationship.
Sasafrasnet contends that the substantial amount of money at issue
with respect

to

the

NSF

transactions

as

well

as

Plaintiff’s

extensive history of making delinquent payments establish that
these failures were “vital” to the franchise relationship.

Def.’s

Br. Regarding Issues on Remand at 13.
When determining whether Plaintiff’s NSF’s were technical or
unimportant to the franchise relationship the Court finds Hinkleman
v. Shell Oil Co., 962 F.2d 372 (4th Cir. 1992) persuasive.

In

Hinkleman, the franchisor terminated a franchise with the plaintiff
due to the plaintiff’s failure to provide timely payments.
374-76.

In Hinkleman, the plaintiff tendered at least three NSF

payments to his franchisor within a one-year time period.
374-75.

Id. at

Id. at

One of the NSF transactions was due to the plaintiff

closing his bank account. Id.

While the plaintiff argued that the

franchisor’s termination was a violation of the PMPA because the
plaintiff’s failure to pay the funds was an “unimportant” failure
pursuant to the PMPA, the Fourth Circuit disagreed, noting that the
plaintiff’s

failures

“constituted

significant

important part of the franchise agreement.”
- 17 -

breaches

of

Id. at 376l.

an
It

reasoned that the number of occurrences that the plaintiff failed
to pay on time combined with the substantial amount of money of
each delinquent payment demonstrated that the failure could not be
construed to be “unimportant.”

Id.

The Court finds the facts in Hinkleman similar to the facts
here.

Like the plaintiff in Hinkleman, it is undisputed that over

the course of the parties franchise relationship, Plaintiff had a
habit of making late payments because of insufficient funds.

See

Ct.’s Findings of Fact and Conclusions of Law at 2, [Dkt. 16.
Page ID# 203]. Moreover, similar to the plaintiff in Hinkleman, in
this case the amount of each of Plaintiff’s delinquent payments was
substantial.

Sasafrasnet states that the invoice amount for each

of the three July 2010 NSFs was over $22,000.

Accordingly, the

Court finds that “[t]his is not a case of constructive payment,
where all but an insignificant amount had been rendered to the
franchisor,” or a case where the failure to make timely payments
was unimportant.

Id. at 377.

While Plaintiff attempts to argue

that his late payments were unimportant since Sasafrasnet also was
guilty of making untimely deposits for Plaintiff, Plaintiff fails
to offer any support which convinces the Court that this makes
Plaintiff’s
relationship.

late

payments

Therefore,

unimportant
the

Court

to

refuses

the
to

franchise
find

that

Plaintiff’s delinquent payments of over $50,000 in only one month
were merely “unimportant” or “technical” failures.
- 18 -

Thus, the Court finds Plaintiff fails to satisfy the burden of
establishing that “there is a reasonable chance that [Sasafrasnet]
will be unable to prove that the termination was permissible under
the Act” due to Plaintiff’s repeated late payments and NSFs.
Sasafrasnet, 689 F.3d at 691 citing Khorenian v. Union Oil Co. of
Cal., 761 F.2d 533, 535-36 (9th Cir. 1985) (quoting Moody, 734 F.2d
at 1216).

As a result, the Court finds it unnecessary to also

examine whether Sasafrasnet’s other cited reason for termination,
the failing Mystery Shopper scores, would also be permissible under
the PMPA.
IV.

CONCLUSION

For the reasons stated herein, Plaintiff’s Motion for a
Preliminary Injunction is denied.

IT IS SO ORDERED.

Harry D. Leinenweber, Judge
United States District Court
DATE: 12/28/2012

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