bid, and chose to remain in the Mid-Atlantic market area.
In July of 1991, Chevron again began to explore the possibility of a sale or exchange of its Mid-Atlantic assets. Chevron conducted a number of studies to determine the feasibility of market strategy that would include market withdrawal from the Mid-Atlantic area.
On July 18, 1991, Chevron's Executive Committee authorized Chevron's Marketing Department to determine the market value of Chevron's Mid-Atlantic assets and to explore the possibility of whether an attractive exchange might be available.
A planning group within Chevron's Marketing Department subsequently analyzed the company's options, and on October 17, 1991, recommended to the Chairman of Chevron's Board of Directors that Chevron test the feasibility of trading its Mid-Atlantic assets for similar assets in Florida.
It is undisputed that, at this time, Chevron's Mid-Atlantic assets were operating profitably, and that Chevron would continue its operations in this area in the event that Chevron was unable to find a suitable buyer or exchange party.
Chevron approached Mobil in October 1991 to determine whether Mobil had any interest in discussing the possibility of an exchange of assets. In December 1991 -- while Chevron awaited a response from Mobil representatives -- Exxon inquired whether Chevron would be interested in an exchange of Chevron's Mid-Atlantic assets for similar Exxon assets in southern Florida. Chevron declined to pursue discussions with Exxon in light of its ongoing discussions with Mobil. On January 16, 1992, however, Mobil advised Chevron that it was not interested in exchanging assets. As a result, Chevron's planning group resumed discussions with Exxon.
On February 6, 1992, Chevron sent Exxon a list of all Chevron assets in the Mid-Atlantic area to assist Exxon in its determination whether to present an exchange offer to Chevron. On February 14, 1992, Exxon sent Chevron a list of all its Florida assets, and the parties entered into a confidentiality agreement on February 27, 1992.
Although Exxon had not yet made an offer to Chevron, the parties continued to evaluate internally their interests in the proposed exchange. Finally, on or about July 10, 1992, Exxon proposed an exchange of approximately sixty Exxon stations in southern Florida for sixty Chevron stations in the Mid-Atlantic area. Over the next few days, Chevron's planning group and Marketing Department reviewed the Exxon proposal, and made a preliminary determination to present the Exxon offer to Chevron's Board of Directors. On July 13, 1992, Chevron stopped renewing or entering into agreements with dealers in the Mid-Atlantic area.
Negotiations between Chevron and Exxon continued throughout the remainder of the month, and on August 6, 1992, the working Exxon proposal was presented to Chevron's Executive Committee. Chevron's Executive Committee authorized further negotiations, and on October 1, 1992, the Board authorized the final negotiation and execution of the proposed exchange agreement. The exchange agreement was executed on October 14, 1992.
At the time of execution of the exchange agreement, all of the plaintiffs, with the exception of Richard Moore,
were Chevron licensees operating under three-year franchise agreements that were identical in all relevant respects. Moreover, all the franchise agreements between plaintiffs and defendant Chevron, with the exception of Richard Moore, were entered into or renewed on or before May 20, 1992.
A. Standard of Review
Summary judgment is appropriate where there is no genuine dispute as to any material fact and the moving party is entitled to judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986). Inferences drawn from the facts must be viewed in the light most favorable to the non-moving party. Adickes v. S.H. Kress & Co., 398 U.S. 144, 157, 26 L. Ed. 2d 142, 90 S. Ct. 1598 (1970). If summary judgment is to be denied, there must be evidence on which the jury could reasonably find for the non-moving party. Anderson v. Liberty Lobby, 477 U.S. 242, 252, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986). If the non-moving party "fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial," summary judgment may be granted. Celotex, 477 U.S. at 322.
B. Alleged Violation of the Market Withdrawal Provision of the PMPA
1. The PMPA
Congress enacted the PMPA to prevent the arbitrary, pretextual or discriminatory cancellation of fuel marketing franchises. See S. Rep. No. 731, 95th Cong., 2d Sess. 15, 19, reprinted in 1978 U.S.C.C.A.N. 873, 877, 896. "Congress was primarily concerned with franchisors' use of the threat of termination to force franchisees to comply with corporate marketing policies." See May-Som Gulf, Inc. v. Chevron, U.S.A., Inc., 869 F.2d 917, 921 (6th Cir. 1989). In doing so, however, Congress drafted the PMPA in a manner that attempts to strike a careful balance between the rights of franchisors and the rights of franchisees. Thus, while limiting the right of franchisors to terminate or refuse to renew their dealers franchises, the Act also recognizes and protects franchisors' rights to discontinue franchises where justified by legitimate business reasons. As this Circuit correctly observed in Lewis v. Exxon Corp., 230 U.S. App. D.C. 280, 716 F.2d 1398 (D.C. Cir. 1983):
Although the PMPA attempts to prevent arbitrary and unreasonable terminations, it also seeks to preserves intact the franchisor's legitimate freedom to choose with whom it will deal. The one goal is as important as the other. The object is balance.
716 F.2d at 1399.
Under the PMPA, any franchisor subject to the Act is prohibited from terminating or failing to renew existing franchises unless such termination or non-renewal is conducted in accordance with the express requirements of the PMPA. At issue in the instant matter is whether defendant Chevron complied with the market withdrawal provision of the PMPA when it entered into the asset exchange agreement with Exxon that resulted in Chevron's termination of existing franchise agreements with local dealers and Chevron's near complete withdrawal from the Mid-Atlantic market. Under the market withdrawal provision, Chevron may terminate existing franchises only if Chevron's determination to withdraw from the market and the occurrence of changes in relevant facts and circumstances upon which that determination was based had taken place after Chevron entered into or most recently renewed plaintiffs' franchises. See 15 U.S.C. § 2802(b)(2)(E)(i).
2. Summary Judgment on Plaintiffs' PMPA Claims
Defendant Chevron argues that it complied fully with the franchise termination provision of the PMPA, and that its decision to withdraw from the Mid-Atlantic market "(I) was made after the date that [the franchise agreements were] entered into or renewed, and (II) was based upon the occurrence of changes in relevant facts and circumstances after [the date of the franchise agreements]." 15 U.S.C. § 2802(b)(2)(E)(i) (emphasis added). In construing the language of a statute, this court begins its inquiry with the language of the statute itself. See United States v. Ron Pair Enterprises, 489 U.S. 235, 241, 103 L. Ed. 2d 290, 109 S. Ct. 1026 (1989). Where the statutory language is plain, the plain meaning of the text provides the appropriate interpretation of the statute, and the court's "'sole function . . . is to enforce it according to its terms.'" Id. (quoting Caminetti v. United States, 242 U.S. 470, 485, 61 L. Ed. 442, 37 S. Ct. 192 (1917)).
In this case, however, the statutory language "decision to withdraw" cannot be understood as having a plain or fixed meaning. The reality of corporate decisionmaking is that there is no single, universal and steadfast method by which corporations make their decisions. Thus, a court's determination as to the moment at which a withdrawal decision occurred necessarily entails a case-by-case analysis conducted in accordance with the realities of corporate decisionmaking.
Pinpointing the withdrawal decision is further complicated by competing policy considerations embodied in the PMPA itself. The PMPA attempts to reconcile two conflicting aims -- (1) to protect franchisees' reasonable expectations and (2) to insure that distributors retain adequate flexibility to respond to changing market conditions and consumer preferences. The court's interpretation of the market withdrawal provision must reflect the balancing of these competing interests. Thus, a court's determination regarding the occurrence of a withdrawal decision in the relatively fluid context of corporate decisionmaking is further complicated by the necessity of having that determination be consistent with the balance set forth in the PMPA.
In Florham Park Chevron, Inc. v. Chevron, Bus Franchise Guide (CCH) P 9012, at 18,422 (D.N.J. 1987), a district court, in making this determination, found that conditional acceptance of a bid pending execution of a final agreement by a Board of Directors constituted a decision to withdraw. See id. at 18,425. The issue in Florham Park was whether Chevron complied with the market withdrawal provision of PMPA when it transferred certain service station leases to Cumberland Farms as part of Chevron's withdrawal from the New Jersey, Delaware, and Pennsylvania markets. The Florham Park court found that Chevron's determination to withdraw came on November 7, 1985, when the Board of Directors conditionally accepted Cumberland's bid pending execution of a final agreement. Moreover, the Florham Park court explicitly rejected the argument that recommendations by market strategists within the corporation constituted a decision withdraw. As the court properly observed:
The [Board of Directors] was the entity within Chevron authorized to make this determination. The recommendation of the "study team" did not bind the board. . . . Therefore, earlier actions by the "study team" -- such as its April 1985 contact with prospective buyers or its June 1985 mailing of bid instructions and draft agreements -- did not constitute a determination to withdraw by Chevron.
Id. at 18,425.
The rule adopted by the Florham Park court appears to be a sound one. Accordingly, this court finds that the decision to withdraw from the Mid-Atlantic area was made no earlier than October 1, 1992, the day when the Board of Directors of defendant Chevron tentatively approved the proposed exchange of assets with Exxon, and instructed Mr. Reeves to negotiate an execute a final exchange agreement. It is undisputed that no franchise agreement had been initiated or renewed after May 20, 1992. See Joint Stipulation and Order of March 27, 1995, at P 5 and Schedule A. Because Chevron's decision to withdraw from the Mid-Atlantic area was made several months after Chevron initiated or renewed the last of plaintiffs' franchise agreements, the court finds that defendant had not violated the first of the two-prong test of the market withdrawal provision of the PMPA.
The court also finds that Chevron's decision to withdraw from the Mid-Atlantic market was based upon "changes in relevant facts and circumstances" that occurred after the last of plaintiffs' franchise agreements had been initiated or renewed. 15 U.S.C. § 2802(b)(2)(E)(i). Traditionally, courts have identified the existence of a willing and acceptable buyer as the critical change in circumstances for purposes of the PMPA. In Florham Park, a Chevron study team approached various potential buyers of its refining and marketing assets in the northeastern United States. See id. at 18,425. The study team informed the potential buyers that only Chevron's Board of Directors had authority to approve a sale. On September 20, 1985, Chevron sent potential buyers bidding instructions and drafts of sales agreements. Cumberland Farms submitted a bid, and on November 7, 1985, Chevron's Board of Directors tentatively accepted Cumberland's bid, subject to the execution of a final agreement. Chevron and Cumberland executed a final sales agreement on December 19, 1985.
The Florham Park court ruled that "the presence of Cumberland Farms as willing buyer constituted the 'change in relevant circumstances' upon which Chevron's withdrawal determination was based." Id. at 18,426. The court also observed that recognizing any earlier date would interfere with the legitimate business decisions of franchisors in a way that Congress never intended. The court reasoned:
Any large franchisor who contemplates withdrawal and sale to another franchisor initially acts in response to some economic stimulus . . . . However, some substantial period of time will elapse before a final determination to withdraw and sell to a particular buyer will be made, if at all. During that interim period, the withdrawing franchisor may have dozens of franchises coming up for renewal. If the franchisor fails to renew at that time, the franchisee must receive a bona fide offer or a right of first refusal. If the franchisor renews at that time, and the economic stimulus constitutes "changed circumstances," the market withdrawal provision will be unavailable as to that franchisee -- that franchisee must also receive an offer or a right of first refusal. In either event, the withdrawing franchisor most likely will be unable to sell these franchises to any prospective purchaser. Market withdrawal by sale . . . would be difficult, if not impossible. The court finds that Congress did not intend to so limit the withdrawing franchisor.