Amphora Oil & Gas Corp. v. Cumberland Farms, Inc. et al
MEMORANDUM OF DECISION AND ORDER - For the reasons set forth in this opinion, the Court denies the Plaintiff's motion for a preliminary injunction. The parties are directed to contact the chambers of United States Magistrate Judge Anne Y. Shields for the purpose of scheduling an initial conference within 10 days of the date of this opinion. So Ordered by Judge Arthur D. Spatt on 10/19/2015. (Coleman, Laurie)
10/19/2015 2:05 pm
U.S. DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
LONG ISLAND OFFICE
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
AMPHORA OIL & GAS CORP.,
DECISION AND ORDER
-againstCUMBERLAND FARMS, INC., GULF OIL
LIMITED PARTNERSHIP and 750 MOTOR
PARKWAY REALTY LLC,
AMANATIDES KOCHISARLI PLLC
Attorneys for the Plaintiff
125 Jericho Turnpike, Suite 303
Jericho, NY 11753
By: Alexander M. Amanatides, Esq., Of Counsel
SHIPMAN & GOODWIN LLP
Attorneys for the Defendants Cumberland Farms, Inc. and
Gulf Oil Limited Partnership
One Constitution Plaza
Hartford, CT 06103
By: Vaughan Finn, Esq., Of Counsel
ROBINSON & ASSOCIATES, P.C.
Attorneys for the Defendant 750 Motor Parkway Realty, LLC
35 Roosevelt Avenue
Syosset, NY 11791
By: Kenneth L. Robinson, Esq., Of Counsel
SPATT, District Judge:
This case arises under the federal Petroleum Marketing Practices Act,
15 U.S.C. § 2801 et seq. (“PMPA”).
On August 7, 2015, the Plaintiff Amphora Oil & Gas Corp. (the “Plaintiff” or
“Amphora”) commenced this action against the Defendants Cumberland Farms, Inc.
and its subsidiary Gulf Oil Limited Partnership (together, “Cumberland Gulf”) and
750 Motor Parkway Realty LLC (“Parkway Realty”), to enforce its rights under
certain lease and franchise agreements relating to the Plaintiff’s operation of a
Gulf-branded retail gasoline service station in Brentwood, New York (the “Service
Station”). By this action, the Plaintiff seeks various declaratory, injunctive, and
monetary relief under the PMPA.
Presently before the Court is a motion by the Plaintiff, brought by Order to
Show Cause (“OTSC”), which seeks a preliminary injunction preventing the
Defendants from interfering with Amphora’s operation of the Service Station;
terminating the subject lease and franchise agreements; and tolling the relevant
time periods set forth in those agreements during the pendency of this litigation.
On October 16, 2015, the parties appeared before the Court for a hearing on
the OTSC. Following the hearing, the Court reserved decision on the Plaintiff’s
For the reasons that follow, the Court now denies the Plaintiff’s motion for a
preliminary injunction in its entirety.
The following facts are drawn from the complaint and any evidence
submitted in connection with the instant motion.
The Master Lease
The Service Station is situated on real property located at 750 Vanderbilt
Motor Parkway in Brentwood.
In 2001, the landlord of that property was one
Joseph Zanghi (“Zanghi”).
On January 1, 2001, Zanghi entered into a Site and Facilities Lease (the
“Master Lease”) with an entity known as Tosco Refining L.P. A copy of the Master
Lease is in the record as Exhibit “1” to the August 6, 2015 Affidavit of Oguz
Kurtoglu in support of the instant motion (the “Kurtoglu Aff.”).
The following provisions of the Master Lease are allegedly relevant here:
4.1. Initial Term. The “Initial Term” of this Lease shall coincide
with the Primary Term identified in this lease.
4.2. Primary Term. The “Primary Term” shall commence on
January 1, 2001 . . . and shall end at midnight on December 31, 2015.
The Primary Term may be extended as provided herein. . . .
4.4. Extended Terms. As a further material consideration for
the execution of this Lease, Tenant is hereby granted the irrevocable,
exclusive right and option to extend the Primary Term upon the same
terms, covenants and conditions, and for the same rental as set forth
[there]in . . . for four (4) additional, consecutive terms of such number
of years not to exceed five (5) years each (“Extended Terms”), as
Tenant may declare. At least ninety (90) days prior to the expiration of
the Lease Term then in effect, Tenant shall provide Landlord with
written notice of each election to extend the Lease Term, together with
the declared term of such extension.
11. ASSIGNMENT & SUBLETTING. Tenant may sublet the Leased
Premises, or any part thereof, or assign the Lease to any person or
entity for any lawful purpose as long as Tenant is not in default of any
provision of this Lease and the subtenant or assignee agrees to be
bound by or assume all obligations of the Lease. No subletting or
assignment shall relieve Tenant of its obligations hereunder to
Tenant shall give notice within ninety (90) days of any such
subletting or assignment to Landlord. Landlord shall give similar
notice of any sale or assignment of its interest in this Lease to Tenant.
Such notice by either party shall include appropriate documentation
evidencing the sale or assignment, including, but not limited to, copy of
the recorded deed, copy of the assignment of lease, and a W-9 form (if
See Kurtoglu Aff., Ex. “1” (emphasis supplied).
The parties dispute the meaning of the emphasized text above (the
The Defendants contend that the phrase “[n]o . .
. assignment shall relieve Tenant of its obligations hereunder to Landlord” means
that “in the event of an assignment, the tenant remained liable for payment of rent
and other financial obligations, remediating environmental contamination, and
other liability resulting from the assignee’s operation of the Premises.”
Cumberland Gulf Opp. Memo at 3; see also Sept. 14, 2015 declaration of Mark
Russell (the “Russell Decl.”) ¶ 6 (same). By contrast, the Plaintiff focuses on the use
of the word “its” to argue for a narrow interpretation. The Plaintiff contends that,
in the event of an assignment, the tenant would only be liable for its own
obligations under the Master Lease and would not be responsible for guarantying
the assignee’s performance. See Pl. Reply Memo at 3 (“[T]he assignment provision
of the Master Lease neither states nor requires the Tenant to be liable to the
Landlord for, or to guaranty, the new tenant/assignee’s obligations under the
Master Lease after the date of the assignment”).
In any event, through a series of mergers, the original tenant under the
Master Lease, Tosco Refining L.P., eventually became known as ConocoPhillips
Company (“ConocoPhillips”). On September 10, 2003, ConocoPhillips assigned the
lease to the Defendant Cumberland Gulf pursuant to an Assignment and
Assumption of Lease. Thus, as of that date, the parties to the Master Lease were
Zanghi, as landlord, and Cumberland Gulf, as tenant.
According to the complaint, since September 10, 2003, Cumberland Gulf has
been the tenant under the Master Lease and the underlying property has been
utilized as a gas station and convenience store.
On April 5, 2004, Amphora entered into a Retail Motor Fuel Outlet Lease
(the “Sublease”) with Cumberland Gulf. An executed copy of the Sublease is in the
record as Exhibit “3” to the Russell Declaration.
The Sublease contains the
following relevant provision:
2. TERM: The term of this lease shall begin at noon on the 10th day of
September, 2012, and terminate at noon on the 9th day of September,
2015, unless the prior Lessee has not relinquished possession of the
premises to Lessor by the above-mentioned beginning date, in which
event this Lease shall be null and void and Lessor shall not be liable to
Lessee in any manner as a result thereof. It is understood and agreed
that any holding over by Lessee at the end of this Lease, or at the end of
any extension period, without this Lease having first been renewed or
extended in writing, shall not be considered as a renewal of this Lease,
but this Lease shall instead continue on a month-to-month basis. . . .
See Russell Decl., Ex. “3”.
The Plaintiff asserts that the Sublease has been extended on three separate
occasions, most recently on September 10, 2012. Consistent with this assertion, a
copy of the executed Sublease, dated September 10, 2012, is in the record. See id.
Amphora also entered into certain related agreements with Cumberland
Gulf, including a Dealer Contract of Sale, which agreements collectively constitute a
franchise agreement. These agreements are in the record as Exhibit “4” to the
It is undisputed that the parties’ franchise agreement is
subject to the federal PMPA.
According to Cumberland Gulf, attached to the Sublease was a document
entitled “Notice of Underlying Lease.” This notice, which Cumberland Gulf asserts
complies with Section 2802(b)(2)(C) of the PMPA, informed Amphora that the
Sublease was subject to the Master Lease; that the Master Lease might expire and
not be renewed; and that, in this event, the Sublease and franchise agreement
would also end. See Russell Decl. ¶ 9 & Ex. “5”.
It is undisputed that the Sublease and franchise agreement were due to
expire on September 9, 2015. The Plaintiff asserts that the Sublease’s three-year
term was “automatically renewed as required by and subject to PMPA,” so long as
none of the grounds for termination or nonrenewal set forth in the PMPA occur.
See, e.g., Compl. ¶¶ 32-33; Kurtoglu Aff. ¶ 21. In this regard, the Plaintiff appears
to contend that, on September 9, 2015, the Sublease and franchise agreements were
automatically renewed, as none of the grounds for termination under the PMPA had
However, this position is placed in question by the evidence in the record,
including a copy of the Sublease and related documents, which were executed on
September 10, 2012. The parties’ execution of lease renewal documents undermines
the idea that the Sublease was “automatically renewed.” Similarly, this contention
is inconsistent with the plain language of the Sublease, which specifically requires
any renewal or extension of the Sublease to be in writing or else the leasehold
continues on a month-to-month basis. The Plaintiff has not identified any contract
language to support its automatic renewal proposition. Nor has it provided any
citation to the section of the PMPA that purportedly “requires” such automatic
The Facts Relating to Oguz Kurtoglu
Kurtoglu is the President of the Plaintiff Amphora. In support of the instant
motion, he submitted an affidavit, which sets forth the following relevant facts.
Prior to April 2004, Kurtoglu was a Turkish resident and applied for a United
States E-2 Investment Visa. This type of Visa is issued to nationals of certain
treaty countries who enter the United States to develop and manage a business
enterprise into which they have invested or are committed to invest a substantial
amount of capital. Kurtoglu states that, in order to obtain and remain compliant
with his E-2 Visa, he must actively manage a business enterprise in which he has
invested a substantial amount of money. He asserts that the Service Station at
issue in this case satisfied the visa requirements.
Cumberland’s Non-Renewal Decision
On December 8, 2014, one Alison Welton, Cumberland Gulf’s Leasing and
Acquisitions Manager, sent a letter to Zanghi (the “Welton Letter”), stating that
Cumberland Gulf “d[id] not intend to renew [the Master L]ease and therefore it
shall expire on December 31, 2015.” See Kurtoglu Aff., Ex. “9”.
Mark Russell, Cumberland Gulf’s Director of Real Estate Property
Management, stated in his opposing affidavit that Cumberland Gulf’s decision was
grounded in unspecified “business reasons.” See Russell Aff. ¶ 10.
The Termination of the Franchise
On December 22, 2014, two weeks after Cumberland Gulf advised the
landlord of its intention not to extend the Master Lease, one Kevin Cummins,
Management, sent a letter to Amphora (the “Termination Notice”). According to
Russell, the Termination Notice was sent by certified mail, return receipt requested,
regular mail, and hand delivery. See id. ¶ 14. However, Kurtoglu allegedly refused
to accept the hand delivery or to sign the Notice, as requested. See id. A return
receipt for the copy sent via certified mail indicates that the Notice was received by
Amphora on December 26, 2014. See id., Ex. “8”.
The Termination Notice provides, in pertinent part, as follows:
This letter will serve as written notice that Gulf has elected not to
extend its lease at the above mentioned property. Gulf hereby notifies
you, in accordance with provisions of the [PMPA] that your franchise
relationship and all related Agreements with Gulf will terminate and
not be renewed effective September 9, 2015.
Also, in accordance with the P.M.P.A., Gulf hereby informs you that it
possesses a contractual right to extend the underlying lease for four (4)
additional five (5) year periods. While Gulf has elected not to exercise
its contractual rights, if you so desire, Gulf will attempt to assign to
you its right to extend the underlying lease provided that you provide
to Gulf, prior to Friday, July 31, 2015 the following:
1. An unconditional release of Gulf, executed by you and Joseph
Zanghi . . . from any and all liability accruing after the date upon
which Gulf’s rights under the underlying lease are assigned to you
a. financial obligations arising under the extended underlying
b. environmental contamination to, or originating from the
c. the operation of the premises.
2. An agreement, executed by you and Joseph Zanghi that ensures
Gulf and its contractors reasonable access to the premises for the
purpose of testing for and remediating any environmental
contamination that may be present at the premises prior to
Friday, July 31, 2015.
In the event you fulfill the foregoing conditions, and as a result acquire
the right to possession of the premises effective immediately after
Gulf’s possession, Gulf will, if you so request in writing within thirty
(30) days of your receipt of this Notice, make a bona fide offer to sell,
transfer, or assign its interest in the improvements or equipment
located on the premises.
See Kurtoglu Aff., Ex. “4” (emphasis in original).
Cumberland Gulf’s insistence upon an unconditional release from ongoing
liability after the date of the assignment appears to be in response to its
interpretation of the Assignment Provision contained in the Master Lease.
However, as discussed more fully below, notwithstanding the parties’ diverging
interpretations of the Assignment Provision, the PMPA expressly permits
Cumberland Gulf to demand an unconditional release of the type described in the
The Exercise Notice
On May 22, 2015, Amphora, through counsel, sent a letter (the “Exercise
Notice”) to Cumberland Gulf, stating that the Plaintiff “elect[ed] to exercise its right
to assume the remaining options to extend the Lease to the Marketing Premises.”
See Kurtoglu Aff., Ex. “5”.
The notice further stated that “Amphora is ready,
willing and able to comply with all terms and conditions of the PMPA relative to the
assignment and assumption of the Lease.” Id.
Approximately one week later, on May 28, 2015, one Timothy Brooks,
Cumberland Gulf’s Director of Corporate Administration, sent a response letter to
Amphora. The letter acknowledged receipt of the Exercise Notice, but reiterated
that, as set forth in the Termination Notice, in order to properly exercise its rights
in this regard, certain materials, including and especially the unconditional release
from ongoing liability, were required to be provided by Amphora to Cumberland
Gulf by July 31, 2015. The letter cautioned that, “[i]f Gulf does not receive the
above-referenced documents by Friday, July 31, 2015, then, in accordance with the
[Termination] Notice, it will expect your client [Amphora] to voluntarily and
peacefully vacate the premises and end our franchise relationship on or before
September 9, 2015.” See id.
The Plaintiff asserts that, between June 3 and June 15, 2015, Brooks, the
author of the May 28, 2015 letter, directed Amphora to communicate directly with
the landlord under the Master Lease regarding the proposed assignment from
Cumberland Gulf to Amphora.
The Rejection by Parkway Realty
Apparently, in late 2014 or early 2015, Zanghi, the original landlord, sold the
premises to the Defendant 750 Motor Parkway Realty LLC. As a result, Parkway
Realty succeeded Zanghi as landlord under the Master Lease.
On June 15, 2015, Amphora, through counsel, sent a letter to one Nehal
Tivendi, the managing member of Parkway Realty. The letter stated, in relevant
part, that, “under the [PMPA] Amphora has a statutory right to assume the
remaining options to extend the lease to the [Gas Station property], which it
exercised by notice dated May 21, 2015.” See Kurtoglu Aff., Ex. “7”. The letter
enclosed four copies of a proposed Assignment and Assumption of Lease for
Parkway Realty’s review and execution.
The proposed assignment included a
proposed unconditional release of Cumberland Gulf, as required by the Termination
Notice. See Kurtoglu Aff., Ex. “7” at ¶ 10. An e-mail containing identical language
and attachments was also sent by Amphora to Tivendi on that date.
On June 18, 2015, Tivendi, who is an attorney, sent a responsive e-mail to
Amphora’s counsel, with a copy to Cumberland Gulf’s Director of Corporate
Administration, Timothy Brooks (the “Rejection Notice”).
The Rejection Notice
stated that Parkway Realty “will not execute the Assignment and Assumption of
See Kurtoglu Aff., Ex. “8”.
Further, the Rejection Notice stated that
“Cumberland Farms Inc. is the tenant. Cumberland Farms has declined to extend
the lease beyond December 31, 2015. Accordingly 750 Motor Parkway LLC does not
wish to offer the option to your client [Amphora] to extend the lease.” Id. The Court
notes that, despite Amphora’s apparent willingness to assume Cumberland Gulf’s
responsibilities under the Master Lease and to provide Cumberland Gulf with the
unconditional release that it requested, the Rejection Notice did not specify
Parkway Realty’s reasons for declining to consent to the assignment of the Option
Term from Cumberland to Amphora.
Subsequently, on or about July 1, 2015, Tivendi furnished to Amphora a copy
of the Welton letter, in which Cumberland Gulf gave notice to Zanghi, Parkway
Realty’s predecessor, of its intention to let the Master Lease expire on December 31,
In its briefing and arguments in opposition to the instant motion, Parkway
Realty’s position concerning Amphora’s proposed extension of the Master Lease has
come into sharper focus. According to an affidavit submitted by Tivendi, “[t]here is
no economic reason for [Parkway Realty] to substitute Plaintiff, which apparently
has only one lease as an asset[,] for Gulf as a responsible party under the Master
See Tivendi Decl. ¶ 18 (internal citation omitted).
For this reason,
Parkway Realty asserts that it “did not and would not have agreed to the terms and
conditions of [the proposed] Assignment and Assumption agreement” circulated by
Amphora on or about June 15, 2015.
Consistent with these assertions, Mark Russell, Cumberland Gulf’s Director
of Real Estate Property Management, states that, on July 8 and 9, 2015, he spoke
directly with Parkway Realty’s principals, namely, Tivendi and his business
partner, Bill Blau, who indicated that they would not agree to any assignment of
the Option Term that unconditionally released Cumberland Gulf from ongoing
liability. See Russell Aff. ¶ 21. In this regard, both men indicated to Russell that
Parkway Realty “would never have agreed to an assignment that relieved Gulf of
ongoing liability because Amphora, a small operator with few resources, would not
have been able to provide the same level of protection as Gulf.” Id.
The gravamen of the Plaintiff’s current position is that, because Parkway
Realty did not consent to an assignment of the Option Terms from Cumberland Gulf
to Amphora, it will be wrongfully displaced from the premises and forced to
discontinue operating the Service Station in accordance with the Master Lease; the
Sublease; and the relevant franchise agreements. Despite the Plaintiff’s reliance
upon a purported “automatic renewal,” there appears to be no real dispute that the
subject franchise terminated on September 9, 2015. However, in connection with
the instant motion, the parties stipulated to maintain the status quo until October
The Instant Action
Based on the allegations outlined above, Amphora commenced the instant
action, seeking the following relief: (i) a declaratory judgment that Amphora timely
exercised its right to assume the Option Terms under the Master Lease, and that
Parkway Realty has wrongfully failed and refused to recognize Amphora’s rights
under the PMPA; (ii) in the alternative, a declaratory judgment that, by sending the
Welton Letter, Cumberland Gulf “undermined Amphora’s right to maintain its
business at the” Service Station, in violation of the PMPA; (iii) a permanent
injunction preventing Cumberland Gulf from terminating or failing to renew the
Master Lease, Sublease, and related franchise agreements, and tolling the
applicable time periods set forth in those agreements until a final determination is
reached on the merits of this case; (iv) actual and exemplary damages, and
reasonable attorneys’ and expert witness fees, under the PMPA.
The instant motion seeks preliminary relief that mirrors the third cause of
action described above, namely, an order preventing Cumberland Gulf from
terminating or failing to renew the Master Lease, Sublease, and related franchise
agreements, and tolling the applicable time periods set forth in those agreements
during the pendency of this litigation.
As noted above, on or about August 26, 2015, the Court approved a proposed
amended briefing schedule, which, among other things, temporarily enjoined the
Defendants from engaging in the activities identified in the OTSC through October
The Additional Allegations in the Amended Complaint
The Court notes that, while the instant motion was pending, Amphora filed
an amended complaint, which is now the operative pleading in this action. The
amended complaint adds the following relevant allegations.
On September 12, 2014, Parkway Realty entered into a new lease for the Gas
Station with an entity called Bolla Operating L.I. Corp. (“Bolla”). The Court will
refer to this new lease as the “Bolla Lease.”
It is alleged that, by entering into the Bolla Lease, Parkway Realty violated a
provision of the Master Lease, which provides, in relevant part, as follows:
Tenant [Cumberland Gulf] shall have the preferential right to
purchase, lease or accept an assignment of an option or contract to
purchase or lease the Leased Premises and/or the Facilities during the
Lease Term. Landlord [Parkway Realty] agrees not to sell or lease all
or any portion of the Leased Premises without first giving Tenant
written notice of each proposed sale or lease (which notice shall include
a copy of the proposed sale of lease document subject to Tenant’s rights
hereunder) stating therein the price, rent, and all other terms and
conditions thereof. If the Leased Premises are being sold or leased as a
part of a larger parcel of property, Tenant’s rights hereunder shall
extend only to the purchase or lease of the larger preferential right to
purchase, lease or accept an assignment of an option or contract to sell
or lease the Leased Premises at the rent or the price and upon the
term and condition set forth in the notice. Tenant shall have ninety
 [sic] days after receipt of such notice to notify Landlord that
Tenant elects to exercise such right granted under this Section 15.
See Kurtoglu Aff., Ex. “1” (emphasis supplied).
In this regard, Amphora asserts that Parkway Realty entered into the Bolla
Lease without first giving Cumberland Gulf the requisite written notice and an
opportunity to exercise a preferential right to that new lease.
In addition, the
Plaintiff appears to contend that the PMPA requires Cumberland Gulf, in turn, to
offer its preferential interest in the Bolla Lease to Amphora. The Plaintiff asserts
that, in the event this Court finds that it is so entitled, it is ready, willing, and able
to assume Cumberland Gulf’s preferential rights, and to enter into the Bolla Lease.
Based on these additional allegations, the amended complaint adds a hybrid
injunction/declaratory judgment cause of action seeking to declare and compel
Parkway Realty to furnish to Cumberland Gulf the required written notice of the
Bolla Lease; declaring and compelling Cumberland to assign its preferential rights
to the Bolla Lease to Amphora; and declaring and compelling Parkway Realty to
recognize Amphora as the tenant under the Bolla Lease.
Parkway Realty readily concedes that it entered into the Bolla Lease. In this
regard, Trivedi, Parkway Realty’s managing member, states that, on December 8,
2014, when Cumberland Gulf advised it of its intention not to extend the Master
Lease, Parkway Realty began negotiations with Bolla. Trivedi states that:
When Gulf vacates the Premises, it is my understanding that Gulf will
remove the canopy, underground petroleum storage tanks and possibly
the building. Bolla plans to install a new canopy, three (3) two
thousand (20,000) [sic] gallon underground petroleum storage tanks
and a 2500 to 300 [sic] square foot convenience store with a gourmet
delicatessen area. . . . Paragraph 9.2 of the Bolla lease provides that
all improvements and alterations made by Bolla to the Premises
becomes the property of [Parkway Realty] at the expiration or
termination of the Lease.
. . . If [Parkway Realty] can not [sic] provide timely possession of the
Premises to Bolla, it is very likely that Bolla will terminate the Bolla
Lease. As a result, [Parkway Realty] would lose the substantial value
of the improvements to be made to the Premises by Bolla. [Parkway
Realty] would also lose a tenant with a substantial net worth,
especially compared to Plaintiff.
See Sept. 16, 2015 Declaration of Nehal Trivedi, Esq. (“Trivedi Decl.”) at ¶¶ 26, 28.
Based on these circumstances, Parkway Realty asserts that, if the Court
grants a preliminary injunction, Amphora should be required to post security in the
amount of $758,000. At oral argument, counsel for Parkway Realty stated that this
amount reflects the investment that Bolla is prepared to make in the Service
Consistent with this assertion, Parkway Realty offered a document,
prepared on the letterhead of an entity known as Bolla Construction, LLC, which
counsel represented is the construction arm of the Bolla organization.
document, which is signed by one Harry Singh, the President of Bolla Construction,
LLC, purports to demonstrate the scope of estimated construction costs at the
Service Station, which total $758,000.
Over the Plaintiff’s objection, the Court
agreed to take this document into consideration, together with the other evidence in
The Applicable Legal Standards
Recognizing “the imbalance of power in favor of refiners and franchisors in
the making, modifying, renewal and termination of contracts with franchisees,”
Congress enacted the PMPA, which establishes “certain requirements for
termination or nonrenewal of a franchise.” California Petroleum Distrib., Inc. v.
Chevron U.S.A., Inc., 589 F. Supp. 282, 285 (E.D.N.Y. 1984) (citing S. Rept. No. 95731, 95th Cong., 2d Sess. 1, reprinted in 1978 U.S. Code Cong. & Ad. News 875-76;
15 U.S.C. § 2802); see Darling v. Mobil Oil Corp., 864 F.2d 981,983 (2d Cir. 1989)
(“In broad terms, the PMPA was enacted to establish federal standards regarding
the termination and nonrenewal of petroleum marketing franchises. . . . Its
overriding purpose is to establish protection for franchisees from arbitrary and
discriminatory terminations or non-renewals of their franchises” (internal citation
and quotation marks omitted)).
“In keeping with its legislative purpose, the PMPA contains a general
prohibition against termination of a franchise or nonrenewal of a franchise
relationship by a franchisor, except upon specified preconditions and grounds.” MS
& BP, LLC v. Big Apple Petroleum, LLC, 14-cv-5675, 2015 U.S. Dist. LEXIS 61011,
at *14 (E.D.N.Y. May 8, 2015) (citing 15 U.S.C. § 2802(b)(1)). In particular, the
statute provides, in relevant part, as follows:
(2) For purposes of this subsection, the following are grounds for
termination of a franchise or nonrenewal of a franchise relationship:
(C) The occurrence of an event which is relevant to the franchise
relationship and as a result of which termination of the franchise or
nonrenewal of the franchise relationship is reasonable, if such event
occurs during the period the franchise is in effect and the franchisor
first acquired actual or constructive knowledge of such occurrence—
(i) not more than 120 days prior to the date on which notification
of termination or nonrenewal is given, if notification is given
pursuant to section 104(a) [15 U.S.C.§ 2804(a)]; or
(ii) not more than 60 days prior to the date on which notification
of termination or nonrenewal is given, if less than 90 days
notification is given pursuant to section 104(b)(1)
[15 U.S.C. § 28014(b)(1)].
See 15 U.S.C. § 2804(a), (b)(2)(C).
The PMPA defines “an event which is relevant to the franchise relationship
and as a result of which termination of the franchise or nonrenewal of the franchise
relationship is reasonable.” See id. § 2804(c). Relevant here, such an event includes
(4) loss of the franchisor’s right to grant possession of the leased
marketing premises through expiration of an underlying lease, if—
(A) the franchisee was notified in writing, prior to the
commencement of the term of the then existing franchise—
(i) of the duration of the underlying lease; and
(ii) of the fact that such underlying lease might expire and not
be renewed during the term of such franchise (in the case of
termination) or at the end of such term (in the case of
(B) during the 90-day period after notification was given pursuant
to section 104 [15 U.S.C. § 2804], the franchisor offers to assign to
the franchisee any option to extend the underlying lease or option
to purchase the marketing premises that is held by the franchisor,
except that the franchisor may condition the assignment upon
receipt by the franchisor of—
(i) an unconditional release executed by both the landowner and
the franchisee releasing the franchisor from any and all liability
accruing after the date of the assignment for—
(I) financial obligations under the option (or the resulting
extended lease or purchase agreement);
(II) environmental contamination to (or originating from) the
marketing premises; or
(III) the operation or condition of the marketing premises;
(ii) an instrument executed by both the landowner and the
franchisee that ensures the franchisor reasonable access to the
marketing premises for the purpose of testing for and
remediating any environmental contamination that may be
present at the premises; [ . . . ]
Id. § 2802(c)(4).
Where such an event is established, the Second Circuit conclusively presumes
that the termination of a franchise or the nonrenewal of a franchise relationship
which is predicated on that event is reasonable as a matter of law. See Big Apple
Petroleum, LLC, 2015 U.S. Dist. LEXIS 61011, at *16-*17 (“Once having
ascertained that an event is encompassed by one of the twelve enumerated events, a
court need make no further inquiry as to the reasonableness of the termination”
(quoting Russo v. Texaco, Inc., 808 F.2d 221, 225 (2d Cir. 1986)).
The PMPA creates a right of action for franchisees against franchisors who
fail to comply with the requirements of 15 U.S.C. § 2802. In particular, “Congress
enacted an enforcement section that provides for the grant of a preliminary
injunction by the federal courts on a somewhat lesser showing of cause than is
usual for such equitable relief.” California Petroleum Distrib., Inc., 589 F. Supp. at
285 (citing 15 U.S.C. § 2805(b)(2)). The statute provides that the district court shall
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;
(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 upon
the franchisor by the issuance of such preliminary injunctive relief will
be less than the hardship which would be imposed upon such
franchisee if such preliminary injunctive relief were not granted.
15 U.S.C. § 2805(b)(2).
As noted above, “[t]he Second Circuit recognizes this burden as less severe
than is generally required under Rule 65 of the Federal Rules of Civil Procedure.”
Big Apple Petroleum, LLC, 2015 U.S. Dist. LEXIS 61011, at *19-*20 (internal
quotation marks and brackets omitted) (quoting Nassau Blvd. Shell Serv. Station,
Inc. v. Shell Oil Co., 875 F.2d 359, 363 (2d Cir. 1989).
With this analytical framework in mind, the Court will now consider the
The First Element – As to Whether Amphora’s Franchise Has Been
Terminated or Not Renewed
In this case, the parties do not appear to dispute that the franchise
relationship between Amphora and Cumberland Gulf was terminated by
Cumberland Gulf on September 9, 2015. See Cumberland Gulf Opp. Memo at 8
(“Nor is there any dispute that, on December 22, 2014, [Cumberland Gulf] notified
Amphora that the franchise relationship would terminate on September 9, 2015”).
Accordingly, the Termination Notice discussed above easily satisfies the first
element of the PMPA’s preliminary injunction standard. “Thus, whether this Court
will issue a preliminary injunction under section 2805 turns on whether there are
sufficiently serious questions going to the merits to make such questions a fair
ground for litigation.” Big Apple Petroleum, LLC, 2015 U.S. Dist. LEXIS 61011, at
The Second Element – As to Whether Sufficiently Serious Questions
Exist Relating to the Merits of Amphora’s Claims
A closer question is presented by the second prong of the applicable standard,
under which Amphora is required to show “a reasonable chance of success on the
merits.” Nassau Boulevard Shell Serv. Station, Inc. v. Shell Oil Co., 875 F.2d 359,
363 (2d Cir. 1989) (citation omitted); see Persaud v. Exxon Corp., 867 F. Supp. 128,
137 n.4 (E.D.N.Y. 1994) (“In contrast to Rule 65, which requires a movant to show a
strong or reasonable likelihood of success, the PMPA requires only that a franchisee
show a reasonable chance of success on the merits” (quoting Nassau Coulevard,
supra)); Kajdan v. Exxon Co. U.S.A., 80-cv-126, 1980 U.S. Dist. LEXIS 9078, at *17-
*18 (D. Conn. Mar. 14, 1980) (“In order to satisfy this burden, plaintiff must present
a significant showing of something that would constitute some reasonable chance of
success” (internal citation and quotation marks omitted)).
At the heart of the Plaintiff’s position is an alleged “right to assume the
Option Terms” under the Master Lease from Cumberland Gulf. In particular, the
Plaintiff appears to contend that it has an absolute right under the PMPA to
assume any options that Cumberland Gulf held under the Master Lease, and
further, that Parkway Realty’s unwillingness to consent to such an assignment
constitutes a violation of the PMPA. The Court disagrees.
As discussed more fully above, Section 2802(c)(4) of the PMPA provides that
the expiration of an underlying ground lease may provide a basis for a franchisor’s
decision to terminate a franchise or its decision not to renew a franchise
relationship if, inter alia, within 90 days of giving notice of such decision the
franchisor offers to assign to the franchisee any option to extend the underlying
lease or option to purchase the premises. Thus, despite Amphora’s contentions,
franchisees are not given an absolute right to assume an option contained in a lease
agreement between its franchisor and the landlord of the premises. See Gun Hill
Rd. Serv. Station v. ExxonMobil Oil Corp., 08-cv-7956, 2013 U.S. Dist. LEXIS
14199, at *57-*58 (S.D.N.Y. Feb. 1, 2013) (recognizing that the right of a franchisee
to be assigned an option to extend a ground lease “is limited” in that the franchisor
may condition the assignment upon receipt by the franchiser of an unconditional
release of liability executed by the landlord and the franchiser; finding that “it d[id]
not appear that the PMPA granted [the franchisee] an unconditional right to stay
on as the franchisee” of the service station in question).
Rather, the statute imposes upon the franchisor the obligation to offer to
assign the option to its franchisee, a burden that Cumberland Gulf indisputably
satisfied in this case. In the Court’s view, the December 22, 2014 Termination
Notice, which was received by Amphora on December 26, 2014, satisfied
Cumberland Gulf’s obligations under the PMPA. That notice clearly stated that, “in
accordance with the P.M.P.A., Gulf hereby informs you [Amphora] that it possesses
a contractual right to extend the underlying lease for four (4) additional five (5) year
periods. While Gulf has elected not to exercise its contractual rights, if you so
desire, Gulf will attempt to assign to you its right to extend the underlying
lease . . .” The PMPA does not require anything more of Cumberland Gulf, and the
Plaintiff has pointed to no legal authority to the contrary.
The Court’s reasoning is not altered by the fact that Cumberland Gulf
conditioned its assignment on an unconditional release of future liability. In this
regard, as noted above, the parties dispute whether the Assignment Provision in the
Master Lease actually requires Cumberland Gulf to remain liable for Amphora’s
performance under the contract in the event of as assignment. However, the Court
need not decide that issue because, regardless of which party’s interpretation
prevails, the PMPA plainly authorizes Cumberland Gulf’s conduct.
The relevant portions of the PMPA provide that a franchisor must “offer[ ] to
assign to the franchisee any option to extend the underlying lease or option to
purchase the marketing premises that is held by the franchisor, except that the
franchisor may condition the assignment upon receipt by the franchisor of an
franchisee . . .”
15 U.S.C. § 2802(c)(4)(B)(i) (emphasis supplied). In the Court’s view, even if the
Plaintiff’s proposed interpretation of the Assignment Provision is correct,
Cumberland Gulf is under no legal obligation to assign the Option Terms without
first receiving an unconditional release of future liability as described in the
Further, it is clear that the content of the release demanded by
Cumberland Gulf in the Termination Agreement, and reiterated in Brooks’ May 28,
2015 letter, tracks the relevant statutory language almost verbatim. However, it is
undisputed that Amphora did not, and indeed could not, obtain such a release from
Under these circumstances, the Court can discern no basis for
concluding that the PMPA was violated.
Similarly, in the Court’s view, Parkway Realty’s failure to consent to an
unconditional release of Cumberland Gulf, and, therefore, an assignment of the
Option Term to Amphora, does not violate the PMPA. In this regard, counsel for
the Plaintiff asserted at oral argument that the PMPA requires the landlord to sign
off on the assignment of the Option Terms. However, the Plaintiff has pointed to no
authority for such a proposition, and this Court’s independent research has not
On the contrary, the plain language of the statute specifically
authorizes the franchisor to condition its assignment of an option upon receipt of a
release that is executed by the landlord.
In the Court’s view, this language
implicitly contemplates situations where, as here, the landlord declines to release
the franchisor from future liability, and as a result, the franchisor declines to assign
its option. Such a provision would be superfluous if, in every instance, the landlord
was required to provide such a release. On the contrary, it is clear to this Court
that Parkway Realty was within its rights to withhold its consent to the
assignment, and in doing so, did not violate the PMPA.
In this regard, the evidence demonstrates that Cumberland Gulf decided not
to extend the ground lease for business reasons; that Parkway Realty deemed it
unacceptable for Amphora, a small enterprise allegedly without substantial
resources, to continue in Cumberland Gulf’s place as the sole responsible party for
any liability arising from the operation of the Service Station; and that, accordingly,
Parkway Realty declined to assent to the assignment of the Option Terms and,
instead, entered into a new ground lease with Bolla, a large organization with
substantial resources, not only for the continued operation of the Service Station,
but also for the installation of extensive new facilities.
Absent evidence to the
contrary, the Court accepts these facts as reflections of the parties’ legitimate
business interests, and finds no basis for concluding that they violate the PMPA.
See Kajdan, 1980 U.S. Dist. LEXIS 9078, at *17-*18 (“In applying this standard the
Court’s task is a narrow one—Congress did not intend for a court to substitute its
business judgment for that of the franchisor”).
In reaching this conclusion, the Court rejects an argument that the Plaintiff
made for the first time in his reply and upon which he elaborated at oral argument.
In particular, the Plaintiff contends that his failure to secure an unconditional
release from Parkway Realty is not the type of failure that can justify termination
of a franchise under the PMPA. For this proposition he relies upon the definition of
“failure” found in 15 U.S.C. § 2801(13), which states, in relevant part, that “the
term ‘failure’ does not include . . . any failure for a cause beyond the control of the
Thus, the Plaintiff contends that, because Parkway Realty failed to
consent to a release of Cumberland Gulf, despite Amphora being ready, willing, and
able to assume the Option Terms, its inability to secure the release was necessarily
due to factors beyond its control, and should not be considered a “failure” of its
obligations under the PMPA.
In the Court’s view, this argument is misplaced. As noted above, the general
prohibition in the PMPA against franchisors terminating a franchise or not
renewing a franchise relationship is augmented by a series of enumerated grounds
upon which such termination or nonrenewal is considered appropriate.
these enumerated grounds are various “failures” on the part of a franchisee. See,
e.g., 15 U.S.C. § 2802(b)(2)(A) (“failure” of a franchisee to comply with provisions of
the franchise agreement); id. § 2802(b)(2)(B) (“failure” by the franchisee to exert
good faith in carrying out the franchise); id. § 2802(b)(3)(C) (“failure” of the
franchisee to operate the franchise in a clean, safe, and healthful manner). It is
with regard to these enumerated grounds that the statutory definition of the word
“failure” is relevant. See Gun Hill Rd. Serv. Station, 2013 U.S. Dist. LEXIS 14199,
at *26-*30 (appropriately applying the definition found in 15 U.S.C. § 2801(13)(B) to
“the ‘failures’ enumerated in Sections 2802(c)(8) and (c)(9),” namely, the failure to
make timely payments and the failure to operate the marketing premises for seven
However, none of these particular grounds involving a statutory “failure” is
implicated here. By contrast, in this case, Cumberland Gulf terminated Amphora’s
franchise pursuant to 15 U.S.C. § 2802(b)(2)(C) and (c)(4) – i.e., because the ground
lease with Parkway Realty expired and, therefore, the franchisor could not grant
possession of the Service Station to Amphora. As discussed above, under those
circumstances, Cumberland was only required to offer to assign the Option Terms
to Amphora, but was also able to condition the assignment on receipt of an
unconditional release. Thus, the statutory provision at issue here does premise
liability on the franchisee’s performance or nonperformance of a particular task. In
fact, the term “failure” does not appear anywhere in the relevant statutory
Consequently, although material to Cumberland Gulf’s decision to
terminate the franchise, Amphora’s failure to secure the release, and, thereby, to
consummate the assignment of the Option Terms, is not a “failure” as that term is
defined in the PMPA.
This conclusion is supported by the cases relied upon by the Plaintiff. See,
Sun Refining & Marketing Co. v. Rago, 741 F.2d 670, 673 (3d Cir. 1984)
(applying the definition of “failure” to 15 U.S.C. § 2802(c)(8), which authorizes the
termination of a franchise based on a franchisee’s “failure” to timely make
payments); Marini v. Atlantic Richfield Co., 475 F. Supp. 142, 144 (D.N.J. 1979)
(same). District court cases in this circuit are in accord. See Gun Hill Rd. Serv.
Station, 2013 U.S. Dist. LEXIS 14199, at *26-*30; California Petroleum, 589
F. Supp. at 288.
The Court is also unpersuaded by Amphora’s contention that Parkway Realty
wrongfully entered into the Bolla Lease without first giving Cumberland Gulf
written notice and the opportunity to exercise a preferential right to enter that
lease. Initially, the Court notes that Amphora improperly asserted this claim for
the first time in its reply. See Anghel v. Sebelius, 912 F. Supp. 2d 4, 14 (E.D.N.Y.
2012) (Spatt, J.) (noting that “[i]t is well settled in the Second Circuit that a party
may not raise an argument for the first time in his reply brief” (internal citations
However, because the Defendants were afforded an opportunity to
submit sur-replies, and to address this issue at oral argument, the Court will now
In the Court’s view, this theory of liability fails for two reasons. First, it is
clear that any preferential rights contained in the Master Lease inure solely to the
benefit of Cumberland Gulf, not Amphora. To the extent that Amphora is neither a
party to the Master Lease, nor, as set forth in this opinion, entitled to compel
Cumberland Gulf to assign its interest in the Option Terms, Amphora appears to
have no standing to enforce the preferential rights provisions of the Master Lease.
To the extent the Plaintiff contends that Cumberland Gulf is required by
Section 2802 of the PMPA to assign its preferential rights to the Bolla Lease, it is
The PMPA only requires the franchisor to “offer[ ] to assign to the
franchisee any option to extend the underlying lease or option to purchase the
marketing premises that is held by the franchisor.” 15 U.S.C. § 2802(c)(4). As the
Plaintiff concedes, the scope of this requirement is limited to “any options [the
franchisor] hold[s] either to purchase the property or to extend the lease.” See Pl.
Reply Memo at 7 (quoting 140 CONG. REC. 27316, 27317-18 (1994) (Rep. by Rep.
Wyden)). It is clear to this Court that the Bolla Lease is neither one to purchase the
property or to extend the Master Lease.
Accordingly, in the Court’s view, the
preferential rights at issue here are outside the purview of 15 U.S.C. § 2802(c)(4).
Based on the foregoing, the Court does not find sufficiently serious questions
going to the merits to warrant the relief that the Plaintiff seeks.
Amphora’s motion for a preliminary injunction is denied.
Having so held, the Court at this time need not consider the final element of
the preliminary injunction standard, namely, whether, on balance, the hardships
imposed upon the Defendants by the issuance of a preliminary injunction would be
less than the hardship imposed upon Amphora if such relief were not granted. See
Big Apple Petroleum, LLC, 2015 U.S. Dist. LEXIS 61011, at *21.
In addition, the Court at this time need not decide whether it is appropriate
for Amphora to post security, and if so, the amount of such a bond.
For the reasons set forth in this opinion, the Court denies the Plaintiff’s
motion for a preliminary injunction. The parties are directed to contact the
chambers of United States Magistrate Judge Anne Y. Shields for the purpose of
scheduling an initial conference within 10 days of the date of this opinion.
Dated: Central Islip, New York
October 19, 2015
/s/ Arthur D. Spatt___________________
ARTHUR D. SPATT
United States District Judge
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