Willenken Employs Novel Strategy To Defeat Franchise Law Claims Brought By Multiple Service Station Operators

When the client, the largest independent owner of service stations and convenience stores in the country, sought to retake possession of its service stations, the stations’ operators filed suit, claiming that termination of their franchises was prohibited by federal and state franchising laws. The operators banded together to maximize their efforts to stop and delay the client. However, the Willenken team used novel legal arguments and strategy to defeat the operators and enable the client to quickly retake the stations.

Time was of the essence. The client had negotiated an eight-figure deal to sell a large group of service stations. If the lawsuit dragged on, the buyers would walk away from the deal. In addition, the federal petroleum franchising law (“PMPA”) and its California counterpart were very favorable to franchisees. Under these statutes, a petroleum franchise could only be terminated under very limited circumstances.

The Willenken team has extensive experience in this field and, led by the team of Nhan Vu and Carlos Singer, won a series of decisive victories in this matter. The plaintiffs first filed suit in federal court, alleging violations of the PMPA. Nhan and Carlos brought a motion for judgment on the pleadings. Rather than arguing that the client had complied with the PMPA, which would have been an uphill battle, the firm argued that the plaintiffs were not franchisees at all, but “fee operators” who were paid a fee to operate the stations but did not share in the business’ profits or losses. In a case of first impression in California, the federal district court agreed and dismissed the entire action.

The plaintiffs then filed suit in state court, alleging state law claims, seeking a preliminary injunction to halt the disposition of the service stations, which would have destroyed the deal to sell the .service stations. Nhan and Carlos opposed the injunction and brought a motion for judgment on the pleadings, again arguing that plaintiffs were not franchisees. The state court agreed, denying the injunction and dismissing plaintiffs’ claims.