Catch 26, LLC v. LGP Realty Holdings LP

Filing 93

MEMORANDUM Opinion and Order: The Defendants' motion to dismiss 18 is granted with respect to the Plaintiffs PMPA claims concerning the Grayslake and Woodstock locations, but is denied in all other respects. Signed by the Honorable Sharon Johnson Coleman on 4/17/2018. Mailed notice.(ym, )

UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
CATCH 26, LLC, an Illinois Limited Liability
Company, GAS CAP FUELS, LLC, an Illinois
Limited Liability Company, and GRAYSLAKE
STOP & SHOP, LLC, an Illinois Limited
Liability Company,

)
)
) Case No. 17-cv-6135
)
) Judge Sharon Johnson Coleman
)
Plaintiffs,
)
)
v.
)
)
LGP REALTY HOLDINGS, LP, a Delaware
)
Limited Partnership, as successor by assignment )
from PT, LLC, BAPA, LLC and STATE OIL
)
COMPANY and LEHIGH GAS
)
WHOLESALE, LLC, a Delaware Limited
)
Liability Company,
)
)
Defendants.
)
MEMORANDUM OPINION AND ORDER
The defendants’ motion to dismiss [18] is granted in part and denied in part. The plaintiffs’
Petroleum Marketing Practices Act (PMPA) claims are dismissed with respect to the Grayslake and
Woodstock locations. The plaintiffs’ PMPA claim as to the Ingleside location remains pending, and
this Court exercises its supplemental jurisdiction over all of the remaining claims in this case.
Background
The background of this case is fully set forth in this Court’s prior rulings on the plaintiff’s
multiple motions for preliminary restraining orders. The defendants now move this Court, through
a motion filed prior to those rulings, to dismiss the plaintiffs’ federal claims for failure to state a
claim, to decline to exercise supplemental jurisdiction over the remaining claims, and accordingly to
dismiss this action.
Legal Standard

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A motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) tests the legal
sufficiency of the complaint, not the merits of the allegations. The allegations must contain
sufficient factual material to raise a plausible right to relief. Bell Atlantic Corp. v. Twombly, 550 U.S.
544, 569 n.14, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). Although Rule 8 does not require a plaintiff
to plead particularized facts, the complaint must allege factual “allegations that raise a right to relief
above the speculative level.” Arnett v. Webster, 658 F.3d 742, 751–52 (7th Cir. 2011). Put differently,
Rule 8 “does not require ‘detailed factual allegations,’ but it demands more than an unadorned, thedefendant-unlawfully-harmed-me accusation.” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937,
173 L.Ed.2d 868 (2009), see also Fed. R. Civ. P. 8(a). When ruling on a motion to dismiss, the Court
must accept all well-pleaded factual allegations in the complaint as true and draw all reasonable
inferences in the plaintiff’s favor. Park v. Ind. Univ. Sch. of Dentistry, 692 F.3d 828, 830 (7th Cir.
2012).
Discussion
As an initial matter, the Court notes that the defendants offer a conclusory argument that the
plaintiffs’ federal claims must be dismissed for lack of subject matter jurisdiction under Federal Rule
of Civil Procedure 12(b)(1), based on the plaintiffs’ failure to satisfy the eligibility requirements of
the PMPA. The PMPA, however, does not contain any language suggesting that compliance with
the definitions contained within it is a jurisdictional prerequisite to suit. See Arbaugh v. Y&H Corp.,
546 U.S. 500, 516, 126 S.Ct. 1235, 163 L.Ed.2d 1097 (2006) (“[W]hen Congress does not rank a
statutory limitation on coverage as jurisdictional, courts should treat the restriction as
nonjurisdictional in character.”). Accordingly, the plaintiffs’ satisfaction of the statutory definitions
of the PMPA is not a prerequisite to this Court’s exercise of subject matter jurisdiction over their
federal claims and there is no basis for dismissing their claims pursuant to Rule 12(b)(1). The Court

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accordingly turns to the question of whether the plaintiffs are able to state a claim on which relief
may be granted under the PMPA.
The defendants contend that the plaintiffs’ PMPA claims as to the Grayslake and
Woodstock locations must be dismissed because those locations are not subject to the PMPA. The
Court was already required to answer the question of whether the PMPA applied to the Grayslake
and Woodstock locations in its October 27, 2017, opinion on the plaintiffs’ motion seeking a
preliminary injunction under the PMPA. At that time, the Court concluded that the express
provisions of the PMPA did not apply to the Grayslake and Woodstock locations and that neither
the defendants past conduct nor the cross-default provisions contained in the plaintiffs’ contracts
with the defendants were capable of altering that outcome. The parties subsequently completed
their briefing of the present motion, adding further nuance to their arguments on these points. The
present motion to dismiss occupies a different procedural posture than the prior motion, and this
Court accordingly will consider the parties’ renewed arguments as to the applicability of the PMPA.
Broadly speaking, the PMPA protects the interests of franchisees by regulating when and
how gas station franchises can be terminated. Under section 2801(1)(A) of the PMPA, the term
franchise is defined as:
any contract—
(1) between a refiner and a distributor,
(ii) between a refiner and a retailer,
(iii) between a distributor and another distributor, or
(iv) between a distributor and a retailer,
under which a refiner or distributor (as the case may be) authorizes or
permits a retailer or distributor to use, in connection with the sale,
consignment, or distribution of motor fuel, a trademark which is owned
or controlled by such refiner or by a refiner which supplies motor fuel to the
distributor which authorizes or permits such use.
15 U.S.C. § 2801(1)(A) (emphasis added). That definition further states that the term “franchise”
includes:

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(i) any contract under which a retailer or distributor (as the case may
be) is authorized or permitted to occupy leased marketing premises,
which premises are to be employed in connection with the sale,
consignment, or distribution of motor fuel under a trademark which is
owned or controlled by such refiner or by a refiner which supplies
motor fuel to the distributor which authorizes or permits such
occupancy;
(ii) any contract pertaining to the supply of motor fuel which is to be
sold, consigned or distributed—
(I) under a trademark owned or controlled by a refiner; or
(II) under a contract which has existed continuously since May 15,
1973, and pursuant to which, on May 15, 1973, motor fuel was
sold, consigned or distributed under a trademark owned or
controlled on such date by a refiner; and
(iii) the unexpired portion of any franchise, as defined by the
preceding provisions of this paragraph, which is transferred or
assigned as authorized by the provisions of such franchise or by any
applicable provision of State law which permits such transfer or
assignment without regard to any provision of the franchise.
15 U.S.C. § 2801(1)( B) (emphasis added).
Here, it is undisputed that the Ingleside location sold fuel under the Marathon trademark
and therefore constituted a franchise pursuant to the PMPA. It is similarly undisputed that the
Grayslake and Woodstock locations are unbranded gas stations, and that those locations did not
have express consent, authorization, or permission to use a third parties’ trademark in connection
with the sale or distribution of motor fuel. Nevertheless, the plaintiffs contend that those locations
are subject to the PMPA because the Supply Agreements for those locations addressed issues of
branding. Indeed, the supply agreements provided that the retailer must “maintain all signs and
advertising related to the gasoline brand being dispensed,” contemplated advertising fees from the
oil company, indemnified the oil company whose logo or signage was used in connection with the
sale of petroleum products, and provided that failure to comply with oil company branding
requirements would be grounds for termination. The plaintiffs argue that these provisions extended
a right to use a trademark. The provisions in question certainly anticipated the use of trademarks,
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but there can be no doubt that they did not confer any right to use a trademark or require that the
sale of fuel occur under a trademark given their failure to identify a specific trademark or brand or to
expressly confer any right to use such a mark. Accordingly, they are incapable of satisfying the plain
textual requirements of the PMPA. See PDV Midwest Ref., L.L.C. v. Armada Oil and Gas Co., 305 F.3d
498, 505 (6th Cir. 2002) (observing that a letter concerning unbranded gasoline did not reference the
PMPA because “unbranded contracts are not subject to the requirements of the PMPA.”); Unified
Dealer Grp. v. Tosco Corp., 16 F. Supp. 2d 1137, 1140 (N.D. Cal. 1998) (noting that a contract to sell
unbranded motor fuel is not subject to the PMPA because a trademark is an essential element of a
PMPA franchise.”), aff’d 216 F.3d 1085 (9th Cir. 2000).
This conclusion is supported by the lease agreements for the Grayslake and Woodside
properties, both of which expressly provide that:
This lease is not a Franchise within the meaning of federal or state legislation.
Landlord is not selling a way of doing business, and is not selling the right to use
a trademark. Nothing contained in this Lease shall be deemed or
construed by the parties hereto or by a third party to create the
relationship of principal and agent or of partnership or of joint
venture or of any association whatsoever between Landlord and
Tenant, it being expressly understood and agreed that neither the
method of computation of rent nor any other provisions contained in
this Lease nor any act or acts of the parties hereto, shall be deemed to
create any relationship between Landlord and Tenant other than the
relationship of Landlord and Tenant.
(Emphasis added). Accordingly, the Grayslake and Woodstock locations do not satisfy the
PMPA’s definition of “franchise.” See 15 U.S.C. § 2801(1).
The plaintiffs alternatively contend that the defendants are bound by their past admission
that the PMPA applies to the Grayslake and Woodstock locations. The cases that the plaintiffs rely
on, however, all concern clear statements of intent capable of being enforced via contract law or
promissory estoppel. See Rabe v. United Air Lines, Inc., 646 F.3d 866, 871–72 (7th Cir. 2011) (applying
United States law where an employee had signed a written agreement accepting the application of
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United States law); Peters v. Gilead Scis., Inc., 533 F.3d 594, 600–601 (7th Cir 2008) (enforcing leave
provisions in an employee handbook). Here, by contrast, the only contractual language that the
plaintiffs point to is the Supply Agreement’s statement that “[t]he parties specifically acknowledge
and agree that the franchise relationship (as defined in the Petroleum Marketing Practices Act, 15
USC §2801 et seq.) created by this Agreement between the Retailer and the Supplier is necessarily
contingent upon the Retailer's ability to maintain possession of the Premises.” This language falls
far short of demonstrating a mutual intent that the PMPA apply to the parties’ relationship and
therefore is incapable of establishing that the protections of the PMPA should be applied here based
on contract law or promissory estoppel.
Finally, the plaintiffs contend that the cross-default provision renders all three gas stations
subject to the PMPA because the Ingleside location is subject to the PMPA. As this Court
previously held, however, the cross-default provision does not provide for automatic termination,
and therefore does not extend the application of the PMPA to the Grayslake or Woodstock
locations. Cf. Atlantic Richfield Co. v. Brown, 85 C. 5131, 1985 U.S. Dist. Lexis 14720 at *20 (N.D. Ill.
Oct. 21, 1985) (Kocoras, J.) (holding that “where termination of the premises lease automatically
triggers termination of [a] mini-market agreement, the lease, motor fuel franchise agreement, and
mini-market are so inextricably linked that the PMPA will govern termination of the mini-market
agreement as well”). Accordingly, the PMPA does not apply to the Grayslake or Woodstock
locations, and the plaintiffs’ claims under the PMPA regarding those stations must be dismissed.
Although the defendants concede that the PMPA applies to the Ingleside location, they
nevertheless contend that the plaintiffs cannot state a claim because the termination of the Ingleside
location complied with the PMPA’s requirements. In considering a motion to dismiss, however, the
Court is limited to the factual allegations contained in the complaint and those limited matters of
which the Court may take judicial notice. Gomez v. Illinois State Bd. of Educ., 811 F.2d 1030, 1039 (7th
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Cir. 1987). The allegations set forth in the complaint do not establish that the misbranding or
adulteration of fuel has occurred at the Ingleside location, that proper notice of termination was
given, or that termination was otherwise proper. Accordingly, although the parties have presented
evidence during their arguments on prior motions capable of suggesting that the termination of the
Ingleside location was valid, this Court is precluded from considering that evidence in ruling on the
present motion.
Finally, in light of the Court’s determination that the PMPA does not apply to the
Woodstock or Grayslake locations, the defendants ask this Court to decline to exercise its
supplemental jurisdiction over the plaintiffs’ state law claims with respect to those locations. A
district court, in any civil action in which it has original jurisdiction, also has supplemental
jurisdiction to hear all other claims which are so related to the claims within the court’s original
jurisdiction as to constitute part of the same case or controversy. 28 U.S.C. § 1367. Here, the only
remaining claim over which this Court has original jurisdiction is Gas Cap and Catch 26’s PMPA
claim concerning the Ingleside location.
Claims form part of the same case or controversy when they derive from a common nucleus
of operative fact. McCoy v. Iberdrola Renewables, Inc., 760 F.3d 674, 682 (7th Cir. 2014) (quoting United
Mine Workers v. Gibbs, 383 U.S. 715, 725, 86 S.Ct. 1130, 16 L.Ed.2d 218 (1966)). A loose factual
connection between the claims is generally sufficient to establish a common nucleus of operative
fact. McCoy, 760 F.3d at 682 (quoting Baer v. First Options of Chi., Inc., 72 F.3d 1294, 1299 (7th Cir.
1995)). Here, there can be no reasonable dispute that the state law claims concerning the Ingleside
location arise from the same common nucleus of operative fact as the surviving PMPA claim. The
termination of the Grayslake and Woodstock locations, moreover, appears to have happened as part
of the same course of conduct as the termination of the Ingleside location. The three locations,
moreover, were all subject to a cross-default provision, and the defendants have expressed their
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intention to rely, in part, upon that provision. Application of the cross-default provision with
respect to the Ingleside location would place the parties’ contractual relations at the Grayslake and
Woodstock locations at issue, creating the potential for parallel litigation concerning those locations
in state and federal court. In light of this risk, the broad reach of the cross-default provision, and
the timing of the defendants’ actions, this Court exercises its supplemental jurisdiction over the
plaintiffs’ remaining state law claims. See Ervin v. OS Rest. Servs., Inc., 632 F.3d 971, 981 (7th Cir.
2011) (recognizing that the identity of the issues, the convenience to both plaintiffs and defendants
of not having to litigate in multiple forums, and the economy of resolving all claims at once suggest
that the exercise of supplemental jurisdiction is ordinarily appropriate.”).
Conclusion
For the foregoing reasons, the defendants’ motion to dismiss [18] is granted with respect to
the plaintiffs PMPA claims concerning the Grayslake and Woodstock locations, but is denied in all
other respects.

IT IS SO ORDERED.
Date: 4/17/2018
Entered: _____________________________
SHARON JOHNSON COLEMAN
United States District Court Judge

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