Kehm Oil Co v. Texaco Inc ( 2008 )

Opinions of the United
2008 Decisions States Court of Appeals
for the Third Circuit
7-31-2008
Kehm Oil Co v. Texaco Inc
Precedential or Non-Precedential: Precedential
Docket No. 07-1650
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PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 07-1650
KEHM OIL COMPANY; GOLDEN OIL COMPANY,
Appellants
v.
TEXACO, INC.; TEXACO REFINING AND MARKETING
(EAST), INC., D/B/A STAR ENTERPRISE-PARTNERSHIP;
CHEVRON CORPORATION; MOTIVA ENTERPRISES,
LLC; SFM ENERGY, LLC; CHEVRON PRODUCTS
COMPANY; CHEVRON U.S.A. INC; CHEVRONTEXACO
CORPORATION; STAR ENTERPRISE PARTNERSHIP,
Appellees
On Appeal from the United States District Court
for the Western District of Pennsylvania
(D.C. No. 06-cv-785)
District Judge: Honorable Terrence F. McVerry
Argued March 13, 2008
Before: FUENTES, CHAGARES, and VAN ANTWERPEN,
Circuit Judges.
(Filed: July 31, 2008)
1
Thomas J. Farnan (Argued)
Robb, Leonard & Mulvihill
One Mellon Bank Center, Suite 2300
Pittsburgh, PA 15219
Attorneys for Appellants
Samuel E. Stubbs (Argued)
David M. Goldberg
Matthew E. Coveler, Esq.
Jennifer B. Hogan, Esq.
Pillsbury, Winthrop, Shaw & Pittman
Two Houston Center
909 Fannin, 22nd Floor
Houston, TX 77010
Eric L. Horne
Eckert, Seamans, Cherin & Mellott
600 Grant Street, 44th floor
Pittsburgh, PA 15219
Attorneys for Appellees
OPINION OF THE COURT
FUENTES, Circuit Judge.
Kehm Oil and Golden Oil (collectively, “Kehm”), owned by
George Kehm, were dealers of Texaco-branded gasoline in
Western Pennsylvania for 44 years, owning 28 Texaco gas stations
by the end of the relationship. Over that period of time, Kehm
entered into franchise agreements with various distinct Texaco-
owned entities, including Motiva Enterprises, LLC (“Motiva”).
Motiva, which was at that time part-owned by Texaco, informed
Kehm in 2002 that as of June 2006, it could no longer license the
2
Texaco brand to Kehm and would terminate Kehm’s franchise.
When Motiva terminated Kehm’s franchise in 2006, Kehm filed
this action under the Petroleum Marketing Practices Act
(“PMPA”), claiming that it had an unbroken “franchise
relationship” with Texaco that was not properly cancelled under the
PMPA.
In this opinion, we address whether Kehm was in a
franchise relationship with Texaco, Inc. (“Texaco”) at the time of
termination, requiring Texaco to fulfill the requirements of the
PMPA before terminating its relationship with Kehm. We
conclude that Motiva, not Texaco, had a franchise relationship with
Kehm at the time of termination and therefore Texaco did not, and
could not, violate the PMPA.
I.
Following a number of franchise agreements that Kehm
signed with various Texaco-owned entities over time, in 1998,
Kehm entered into a five-year agreement with Star Enterprises
(“Star”)1 (the “Final Contract”). Less than a year after the contract
was signed, Star sent Kehm a letter indicating that the contract
would be assigned to Motiva, a joint venture between Texaco,
Shell Oil Company (“Shell”), and SRI. In October 2001, Texaco
and Chevron Corporation (“Chevron”) merged.2 As a condition of
approval for the merger, the Federal Trade Commission (“FTC”)
required Texaco to divest its interest in Motiva and, if certain
conditions were met, to offer to extend Motiva’s ability to license
Texaco-branded oil until June 30, 2006. Chevron Corp. and
Texaco Inc., F.T.C. Docket No. C-4023, Jan. 2, 2002.
Accordingly, Texaco transferred its interest in Motiva to Shell and
SRI and agreed to license its brand to Motiva through June 30,
1
Star was a joint venture between Saudi Refining, Inc.
(“SRI”) and Texaco.
2
Chevron Corporation changed its name to ChevronTexaco
Corporation after the merger but then changed it back to Chevron
Corporation in 2005. Kehm Oil Co. v. Texaco, Inc., No.
2:06-cv-785, 2007 WL 626140, at *2 (W.D. Pa. Feb. 26, 2007).
3
2006.
In light of the impending loss of its ability to license Texaco
products, Motiva sent a letter to Kehm in February 2002, stating
that as of June 30, 2006, it would no longer have a license in the
Texaco brand. Motiva also indicated that, in its new role as a Shell
affiliate, it would consider whether to offer Kehm a Shell-branded
franchise when the Texaco licensing agreement expired. In that
letter, Motiva stated that “[a]s Motiva is losing its right to grant you
the right to use the Texaco trademark, Motiva must formally end
our Texaco brand franchise in accordance with the Petroleum
Marketing Practices Act . . . effective June 30, 2006.” (A. 642.)
Kehm claims that it did not consider Motiva’s notice to
terminate the franchise as an official termination from Texaco
because a “Texaco” representative had stated that the relationship
would continue beyond June 30, 2006. Specifically, an employee
of Chevron Products Company, James Barnes, performed a site
visit in March or April of 2006 allegedly to negotiate an agreement
to continue the franchise relationship between Texaco and Kehm.
Kehm also claims that in order to continue the relationship with
Texaco it agreed to debrand six stations, invest $500,000 in
improving the remaining 22 stations, and offer two of the stations
for sale to fund the improvements. Kehm contends that it only
learned that Texaco would not continue the franchise after June 30,
2006, at some point between April and June of that year. Kehm
and Motiva continued to act under the terms of the Final Contract
until the termination of the franchise on June 30, 2006.
Kehm brought suit against Texaco, Texaco Refining and
Marketing (East), Inc. (“TRMI”), Motiva, SFM Energy LLC,
Chevron, Chevron USA Inc., Chevron Products Company, and Star
in federal district court under the PMPA, seeking a TRO, a
preliminary injunction, and damages under the PMPA and state law
on June 14, 2006.3 The District Court denied the emergency relief,
3
The District Court granted Motiva and SFM’s motion to
dismiss on November 9, 2006. Kehm did not appeal that decision.
4
holding that Kehm only had a franchise relationship with Motiva
and that Motiva had the right to terminate the relationship under the
PMPA because Motiva lost the right to use the Texaco trademark.
Subsequently, Texaco, Chevron, TRMI, and Star filed
motions for summary judgment, and Chevron also filed a motion
to dismiss for lack of personal jurisdiction. The District Court
granted Chevron’s motion to dismiss for lack of personal
jurisdiction and granted the other defendants’ summary judgment
motions, finding that Kehm failed to sue within the PMPA’s one
year statute of limitations period. Kehm Oil Co. v. Texaco, Inc.,
No. 2:06-cv-785, 2007 WL 626140, at *3, *5 (W.D. Pa. Feb. 26,
2007). In the alternative, the District Court found that when its
franchise was terminated, Kehm did not have a franchise
relationship with Texaco, and Motiva, who Kehm did have a
franchise relationship with, properly terminated the franchise under
the PMPA. Id. at *6. Kehm appeals.
II.
The District Court had subject matter jurisdiction over the
PMPA claim pursuant to 15 U.S.C. § 2805(a) and 28 U.S.C. §
1331, and supplemental jurisdiction over the state law claims
pursuant to 28 U.S.C. § 1367. We have jurisdiction over the
District Court’s final decision pursuant to 28 U.S.C. § 1291. We
exercise plenary review over the grant of Chevron’s motion to
dismiss for lack of personal jurisdiction and the grant of the
remaining defendants’ summary judgment motions. Marten v.
Godwin, 499 F.3d 290, 295 n.2 (3d Cir. 2007); Bus. Edge Group,
Inc. v. Champion Mortgage Co., 519 F.3d 150, 153 n.5 (3d Cir.
2008). Summary judgment is appropriate if there are no genuine
issues of material fact and the movant is entitled to judgment as a
matter of law. Fed. R. Civ. P. 56(c). In reviewing the District
Court’s grant of the motion to dismiss and the motions for
summary judgment, we view the facts in the light most favorable
to the nonmoving party. Marten, 499 F.3d at 295 n.2; Lighthouse
Inst. for Evangelism, Inc. v. City of Long Branch, 510 F.3d 253,
260 (3d Cir. 2007).
III.
5
The aim of the PMPA is to “protect[ motor fuel station]
franchisees from arbitrary or discriminatory termination or non-
renewal of their franchises.” S. Rep. No. 95-731, at 15 (1978), as
reprinted in 1978 U.S.C.C.A.N. 873, 874 (hereinafter “Senate
Report”). According to the legislative history of the PMPA,
Congress found that franchisors have more bargaining power than
franchisees because franchisees depend on franchisors to supply
their main product, motor fuel, and franchisors often control the
premises upon which the franchisees operate. O’Shea v. Amoco
Oil Co., 886 F.2d 584, 587 (3d Cir. 1989). Because of the
imbalance in bargaining power, franchisors, prior to the enactment
of the PMPA, were able to enter into contracts granting them great
flexibility in their ability to terminate. Senate Report at 17-18,
1978 U.S.C.C.A.N. at 876. Therefore, it was determined that there
was a need to protect motor fuel franchisees because “terminations
and non-renewals, or threats of termination or non-renewal, [were
being] used by franchisors to compel franchisees to comply with
marketing policies of the franchisor.” Id. at 17, 1978 U.S.C.C.A.N.
at 876.
Congress’s purpose in enacting the PMPA was to “protect
a franchisee’s ‘reasonable expectation’ of continuing the franchise
relationship while at the same time insuring that distributors have
‘adequate flexibility . . . to respond to changing market conditions
and consumer preferences.’” Slatky v. Amoco Oil Co., 830 F.2d
476, 478 (3d Cir. 1987) (quoting Senate Report at 19, 1978
U.S.C.C.A.N. at 877). In order to achieve these goals, the PMPA
restricts the grounds on which a franchisor can terminate or fail to
renew a franchise.4 15 U.S.C. § 2802. The PMPA also imposes
4
The PMPA provides a number of valid reasons for a
franchisor to terminate or fail to renew a franchise, including
mutual agreement, the failure of the franchisee to comply with
material provisions of the franchise agreement, the franchisee’s
declaration of bankruptcy, and others. 15 U.S.C § 2802(b)(2), (c).
There are additional valid reasons to fail to renew a franchisee,
such as the franchisee’s failure to operate the premises in a clean,
safe, and healthful manner. 15 U.S.C. § 2802(b)(3).
6
notice requirements on franchisors looking to terminate or
nonrenew the franchise relationship. 15 U.S.C. §§ 2804. Congress
also included a statute of limitations for PMPA actions. The
PMPA provides that “no . . . action may be maintained [under the
PMPA] unless commenced within 1 year . . . of . . . the date of
termination of the franchise or nonrenewal of the franchise
relationship.” 15 U.S.C. § 2805(a)(1).
A review of the agreements Kehm signed with the
defendants makes clear that Kehm’s claims are time-barred. The
most recent agreement between Kehm and Texaco expired, by its
terms, on December 13, 1987. The agreement with TRMI expired,
by its terms, on June 30, 1990. The Final Contract with Star was
set to expire on June 30, 2003 but was assigned to Motiva in 1999.
In the assignment letter, Star indicated to Kehm that “Motiva shall
be substituted for Star with respect to the rights and obligations of
Star under these agreements.” (A. 309.) Finally, Kehm never had
a contractual relationship with Chevron, ChevronTexaco
Corporation, Chevron Products Company, or Chevron U.S.A., Inc.5
Accordingly, Kehm’s claims against the defendants are
untimely because they were not “commenced within 1 year . . . of
. . . the date of termination of the franchise or nonrenewal of the
franchise relationship.” 15 U.S.C. § 2805(a)(1). Kehm did not file
its lawsuit until June 14, 2006. The defendant with the most recent
contract with Kehm, Star, properly assigned the Final Contract to
Motiva in May 1999, over seven years before Kehm filed its
lawsuit.
5
Kehm complains that a representative from Chevron
Products Company, James Barnes, spoke to him in April 2006 and
led him to believe that the franchise relationship with Texaco
would continue. Whatever representations Barnes made to Kehm
could not have given rise to an obligation under the PMPA because
Kehm was not in a contract with Chevron Products Company in
April of 2006. A franchise under the PMPA requires a “direct
contractual relationship.” Hutchens v. Eli Roberts Oil Co., 838
F.2d 1138, 1144 (11th Cir. 1988).
7
IV.
A.
Kehm argues that its “franchise relationship” with Texaco
did not end until June 30, 2006, so that its claim is timely filed.6
Kehm contends that, regardless of the specific entity that it
contracted with, its franchise relationship with Texaco endured
throughout the time Kehm sold Texaco-branded oil at its stations.
Kehm asserts that Texaco violated the PMPA when it did not offer
to renew Kehm’s franchise after Motiva was no longer able to
provide it with Texaco-branded oil.
In order to have a timely claim against Texaco, we would
need to find that Texaco and Kehm remained in a franchise
relationship at least through June 15, 2005, one year prior to the
date that Kehm filed its lawsuit. For the reasons that follow, we
conclude that Kehm’s franchise relationship with Texaco ended in
1987.
The term “franchise relationship” is defined under the
PMPA as “the respective . . . obligations and responsibilities of a
franchisor and a franchisee which result from the marketing of
motor fuel under a franchise.” 15 U.S.C. § 2801(2). The PMPA
defines a franchise, in relevant part, as “any contract . . . between
a distributor and a retailer.” 15 U.S.C. § 2801(1)(A)(iv). Kehm is
indisputably not in a franchise with any of the defendants but
argues that franchise relationship, as used in the PMPA, is broad
enough to encompass its current relationship with Texaco.
The legislative history of the PMPA explains why, given
that a franchise gives rise to a franchise relationship, the term
6
Presumably, this argument only applies to Kehm’s claim
against Texaco itself. Kehm lumps all of the Texaco entities
together, suing Texaco and then stating that Texaco is “doing
business as” the rest of the defendants, without providing any basis
for doing so. See Second Am. Compl., Count I.
8
“franchise relationship,” rather than simply “franchise” is used in
connection in the nonrenewal provisions of the PMPA. According
to the Senate Report, a “franchise relationship” covers:
the broad relationship which exists between a
franchisor and a franchisee by reason of the
franchise agreement. The term is utilized for two
reasons. First, in the renewal context, the contract
which constitutes the franchise may no longer exist
and the term ‘franchise relationship’ is utilized to
avoid any contention that because the ‘franchise’
does not exist there is nothing to renew. The
renewal provisions of the title address the renewal of
the relationship between the parties rather than the
specific rights or obligations of the parties under the
franchise agreement. Second, because the title
contemplates changes in the specific provisions of
the franchise agreement at the time of renewal, the
title requires renewal of the relationship between the
parties as distinguished from a continuation or
extension of the specific provisions of the franchise
agreement. Use of the narrower term ‘franchise’ in
this context could raise unintended questions
regarding the ability of the franchisor to comply with
the renewal obligations of the title by offering a[n] .
. . agreement which differs in any particular from the
expiring franchise.
Senate Report at 30, 1978 U.S.C.C.A.N. at 888; see also H. Rep.
No. 95-161, at 20 (1977). Thus, the Senate contemplated two very
specific scenarios, neither implicated here, when it decided to use
the language “franchise relationship” rather than simply the word
“franchise” with respect to prohibitions on nonrenewal. “Franchise
relationship” was used to require a franchisor to renew with the
franchisee, except if certain conditions were satisfied, even if the
contract that the parties were operating under had expired. The use
of the phrase “franchise relationship” also allows the franchisor to
alter the terms of the franchise agreement between franchise
contracts. In this case, the contract between Kehm and Texaco has
not simply expired. The last contract with Texaco ended eighteen
9
and a half years and two contracts ago. The Senate Report does not
support Kehm’s view that it was in a franchise relationship with
Texaco through June 30, 2006.
B.
Our view that Kehm was not in a franchise relationship with
Texaco in 2006 is further supported by the relevant case law. See
Hutchens v. Eli Roberts Oil Co., 838 F.2d 1138 (11th Cir. 1988);
Consumers Petroleum Co. v. Texaco, Inc., 804 F.2d 907 (6th Cir.
1986). In Hutchens, American Petrofina Marketing (“Fina”)
owned the service station operated by the plaintiff, Hutchens. 838
F.2d at 1140. Fina leased the property to Roberts Oil, which in
turn subleased the property to Hutchens. Id. Hutchens brought a
lawsuit under the PMPA when Fina terminated the underlying lease
between Fina and Roberts Oil. Id. The Eleventh Circuit found that
Hutchens did not have a claim against Fina because under the
PMPA, a franchise requires a “direct contractual relationship.” Id.
at 1144.
In Consumers, Consumers Petroleum Company
(“Consumers”) filed a lawsuit against Texaco alleging that it
violated the PMPA by misleading Consumers into believing that it
was planning to remain in Michigan, the geographic market in
which Consumers operated. 804 F.2d at 910. Consumers had
entered into a number of franchise contracts with Texaco and in
1976 entered into one such contract for a five-year term. Id. at 909.
In 1977, a rumor circulated that Texaco planned to withdraw from
Michigan. Id. Subsequently, Consumers was approached by a
competitor of Texaco’s, with an offer to become a franchisee. Id.
Texaco told Consumers that it would not withdraw from the market
and Consumers declined the offer from the competitor. Id. Two
years later, Texaco announced its decision to withdraw from
Michigan. Id. Texaco provided notice that it would not renew the
contract after it expired and the parties entered into a one-year
interim agreement, which was designed to ease the transition prior
to Texaco’s withdrawal from the market. Id. at 909-10.
After the interim agreement expired, Consumers sued,
alleging that Texaco misled it into believing that Texaco was not
10
planning to withdraw from Michigan during the pendency of the
five year contract. Id. at 910. Texaco moved for summary
judgment, claiming that the lawsuit was untimely under the
PMPA’s statute of limitations, as it was filed more than a year after
the nonrenewal of the five-year agreement, even though it was filed
within a year of the termination of the interim agreement. Id.
In order to resolve whether the case was time-barred, the
Sixth Circuit considered the meaning of “franchise relationship” in
the context of the PMPA. Id. at 910-12. The court found that a
“franchise relationship is nothing more than the distribution
obligations and responsibilities resulting from a particular
franchise” and the franchise and interim franchise “form[ed] . . .
separate franchise relationship[s].” Id. at 911. Accordingly, the
Sixth Circuit found that Consumers was obliged to sue within one
year of the termination of the five-year agreement, because
Consumers alleged a violation of that agreement. Id. at 912.
In this case, Kehm has not had a direct contractual
relationship with Texaco for almost two decades. Kehm is a
sophisticated business entity that presumably understood that it was
dealing with distinct corporate entities. Under Hutchens, Kehm
cannot assert the existence of a franchise relationship without the
existence of a direct contractual relationship. Furthermore, under
Consumers, an entity needs to sue within a year of the termination
that it claims violated the PMPA. In 2006, Kehm had a single
franchise relationship with Motiva and Kehm has abandoned any
argument that Motiva violated the PMPA. We hold that Kehm
cannot reach back to a contract which expired in 1987 to claim a
current franchise relationship with Texaco.
Kehm relies on two cases to support its view that it was in
a franchise relationship with Texaco in 2006. See Barnes v. Gulf
Oil Corp., 795 F.2d 358 (4th Cir. 1986); Wisser Co. v. Texaco,
Inc., 529 F. Supp. 727 (S.D.N.Y. 1981). In Barnes, the plaintiff
entered into a series of franchise agreements with Gulf Oil
Corporation (“Gulf”) between 1979 and 1985. 795 F.2d at 359-60.
Barnes asserted that Gulf terminated the franchise relationship in
violation of the PMPA by assigning its interest in the franchise to
an unrelated entity, Anderson Oil. Id. at 360. Barnes alleged that
11
by assigning the contract, the cost of gasoline went up over $1,000
a month, because Anderson marked up Gulf’s oil. Id. at 361. The
Fourth Circuit found that even if an assignment is legal under state
law, it is not permissible under the PMPA if “the franchisee can no
longer obtain gasoline at the stipulated franchise price.” Id. at 362.
The court held that “[a] franchisor cannot circumvent the
protections [of the PMPA] by the simple expedient of assigning the
frachisor’s obligation to an assignee who increases the frachisee’s
burden.” Id.
Barnes can be distinguished from the instant case. Kehm
was not negatively affected when Star assigned the Final Contract
to Motiva in 1999.7 It was not until 2002, when Motiva wrote a
letter to Kehm indicating that in 2006 it would no longer have the
right to license Texaco Oil, that it became clear that the assignment
would have any affect on Kehm. Thus, there is no indication that
Star used the “simple expedient” of assignment to avoid the
strictures of the PMPA. Kehm concedes this point, admitting that
Motiva “did not become exclusively affiliated with Shell and lose
its connection to Texaco until after the assignment.” (Reply Br. at
4.)
In Wisser, another case relied on by Kehm, Wisser sued
Texaco under the PMPA to try to prevent Texaco from halting its
supply of Texaco-branded oil. 529 F. Supp. at 728. Wisser and
Texaco first entered into an agreement in June of 1969 for a period
of three years. Id. Towards the end of that period, Texaco told
Wisser that it intended to terminate the relationship at the end of
the contract. Id. Despite this representation, the parties entered
into a series of six-month contracts extending the franchise
relationship, between 1972 and 1981. Id. Texaco argued that
subsequent to 1972, every agreement entered into was intended to
be temporary and did not reinstate the franchise relationship. Id. at
729. The Wisser court found that Texaco could not evade the
7
In its brief, Kehm overlooks the fact that it was Star, not
Texaco, which assigned the contract to Motiva. Whether this claim
is properly asserted against Texaco or Star is irrelevant, since it
fails against either defendant.
12
creation of a franchise relationship by breaking it into short
duration contracts. Id. at 732. This case does not support Kehm’s
argument that it was in a franchise relationship with Texaco in
2006 as Wisser had contracted with Texaco throughout the entire
period. There is nothing in Wisser to suggest that a franchise
relationship endures even after a franchisee contracts with a new
corporate entity. Accordingly, the District Court properly found
Kehm’s PMPA claim to be time-barred.
V.
Kehm brought several state common law causes of action
against the defendants, including breach of contract, promissory
estoppel, civil conspiracy, and interference with contract and
prospective contract. The District Court could have, in its
discretion, chosen to dismiss the state law claims pursuant to 28
U.S.C. § 1367(c)(3), after dismissing Kehm’s PMPA claim.
Instead, the District Court found that Kehm’s state law claims were
all preempted by the PMPA. Thus, we address whether the state
causes of action were, in fact, preempted by the PMPA. For the
reasons discussed below, we will remand this issue to the District
Court for further proceedings consistent with this opinion.
The doctrine of preemption is rooted in the Constitution,
which provides that the “Constitution, and the Laws of the United
States which shall be made in Pursuance thereof . . . shall be the
supreme Law of the Land.” U.S. Const. art. VI, cl. 2. This clause
has been interpreted to “invalidate state laws that ‘interfere with,
or are contrary to,’ federal law.” Colacicco v. Apotex Inc., 521
F.3d 253, 261 (3d Cir. 2008) (quoting Gibbons v. Ogden, 22 U.S.
(9 Wheat.) 1, 211, 6 L. Ed. 23 (1824)). The Supreme Court has
identified three types of preemption: 1) express preemption, which
is achieved when Congress “so stat[es] in express terms” its
intention to preempt state law, 2) field preemption, which is
achieved when Congress legislates in a particular area in a
“sufficiently comprehensive [way] to make reasonable the
inference that Congress ‘left no room’ for supplementary state
regulation,” and 3) conflict preemption, which is achieved when a
state law actually conflicts with a federal law, even where Congress
has not preempted all state law in that area. Hillsborough County
13
v. Automated Med. Labs., Inc., 471 U.S. 707, 713 (1985) (quoting
Rice v. Santa Fe Elevator Corp., 331 U.S. 218, 230 (1947)).
Here, the PMPA expressly preempts certain state laws:
[N]o State or any political subdivision thereof may
adopt, enforce, or continue in effect any provision of
any law or regulation (including any remedy or
penalty applicable to any violation thereof) with
respect to termination (or the furnishing of
notification with respect thereto) of any such
franchise or to the nonrenewal (or the furnishing of
notification with respect thereto) of any such
franchise relationship unless such provision of such
law or regulation is the same as the applicable
provision of this subchapter.
15 U.S.C. § 2806(a)(1).
We considered 15 U.S.C. § 2806(a)(1) in O’Shea and
concluded that “the PMPA preempts only those state laws that
regulate the ‘grounds for, procedures for, and notification
requirements with respect to termination,’ to the extent that such
laws are not the same as the PMPA.” 886 F.2d at 592 (quoting
Bellmore v. Mobil Oil Corp., 783 F.2d 300, 304 (2d Cir. 1986)).8
Accordingly, we stated that the “PMPA only preempts state laws
that limit the permissible substantive reasons that a petroleum
franchisor can terminate a franchisee” because “[t]he goal of the
framers of the PMPA was to create a uniform system of franchise
termination, not a uniform system of contract law.” Id. at 592-93.
8
Note that this discussion arises in the context of our
determining whether O’Shea should have brought his state law
claim in an earlier state law suit. O’Shea argued that he could not
have because it would have been preempted by the PMPA. We
concluded that because his claim was not preempted by the PMPA,
he should have brought it in that earlier suit and was barred from
bringing the claim with his PMPA claim in federal court by New
Jersey’s entire controversy doctrine. O’Shea v. Amoco Oil Co.,
886 F.2d 584, 589-93 (3d Cir. 1989).
14
We concluded that the plaintiff’s state law “contract claims . . . in
no way involved procedures for or notification requirements with
respect to termination,” and thus were not preempted by the PMPA.
Id. at 592 (quotation marks omitted).
Subsequently, the Eleventh Circuit, in Shukla v. BP
Exploration & Oil, Inc., 115 F.3d 849 (11th Cir. 1997), considered
what claims are preempted by the PMPA. Shukla held that “[t]he
PMPA provides exclusive remedies for disputes relating to the
nonrenewal of franchises and preempts state law claims based on
nonrenewal, no matter how such claims are characterized.” Id. at
856. Shukla agreed with the outcome in O’Shea because O’Shea
“was challenging the enforcement of a provision in the franchise
agreement, not the termination or nonrenewal of that agreement.”
Id. In contrast, if the “state law . . . claims . . . are intimately
intertwined with the termination or nonrenewal of a franchise,” the
PMPA preempts those claims. Id. at 857. We agree with the
reasoning of the Eleventh Circuit and adopt the “intimately
intertwined” test to determine whether a state law claim is
preempted by the PMPA.
In short, when state law claims are “intimately intertwined”
with the termination or nonrenewal of a franchise they are
preempted by the PMPA. See Clark v. BP Oil Co., 137 F.3d 386,
396 (6th Cir. 1998) (holding that the plaintiff’s state law claims
were preempted by PMPA because they sought to impose standards
more stringent than the PMPA regarding the termination or
nonrenewal of his franchise); Simmons v. Mobil Oil Corp., 29 F.3d
505, 512 (9th Cir. 1994) (holding state law claim, premised on
implied duty of good faith, was preempted by the PMPA because
it concerned the termination of a petroleum franchise); Consumers,
804 F.2d at 915-16 (holding that although a claim for
“misrepresentation or fraud does not appear to relate to the
nonrenewal or notice requirements” of the PMPA, the state law
claim asserted in that case was preempted by the PMPA because it
sought to impose a different notice requirement upon Texaco than
that required under the PMPA.)
In this case, Kehm’s breach of contract, promissory
estoppel, civil conspiracy, and interference with contract and
15
prospective contract claims may be so intimately intertwined with
the termination or nonrenewal of its franchise that they are
preempted by the PMPA. We therefore remand these claims for
further proceedings. On remand, the District Court should decide
whether to exercise supplemental jurisdiction over Kehm’s state
law claims. See 28 U.S.C. § 1367(c)(3). If the District Court
decides to address the state law claims, it must decide whether
Kehm’s state law claims are so intimately intertwined with the
nonrenewal of his franchise relationship with Texaco that they are
preempted by PMPA. If so, the District Court should dismiss those
claims.
VI.
Finally, we turn to the issue of whether the District Court
has personal jurisdiction over Chevron, in the event that it elects to
exercise supplemental jurisdiction over the state law claims against
Chevron and finds that they are not preempted. For the reasons
discussed below, we will affirm the District Court’s grant of
Chevron’s motion to dismiss based on lack of personal jurisdiction.
The District Court has jurisdiction over Chevron to the
extent provided under Pennsylvania state law. Miller Yacht Sales,
Inc. v. Smith, 384 F.3d 93, 96 (3d Cir. 2004). Pennsylvania’s long
arm statute authorizes personal jurisdiction over entities to the
fullest extent permitted under the United States Constitution. 42
Pa. C. S. A. § 5322(b). The Due Process Clause of the Fourteenth
Amendment requires that nonresident defendants have “certain
minimum contacts with [the forum state] such that the maintenance
of the suit does not offend traditional notions of fair play and
substantial justice.” Int’l Shoe Co. v. Washington, 326 U.S. 310,
316 (1945) (quotation marks and citations omitted). Having
minimum contacts with another state provides “fair warning” to a
defendant that he or she may be subject to suit in that state. See
Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472 (1985)
(quotation marks and citations omitted).
Federal courts have recognized two types of personal
jurisdiction which comport with these due process principles:
16
general and specific jurisdiction. General jurisdiction exists when
a defendant has maintained systematic and continuous contacts
with the forum state. See Helicopteros Nacionales de Colombia,
S.A. v. Hall, 466 U.S. 408, 414-15 & n.9 (1984). Specific
jurisdiction exists when the claim arises from or relates to conduct
purposely directed at the forum state. See id. at 414-15 & n.8.
Kehm relies on the following contacts that Chevron had
with Pennsylvania to justify personal jurisdiction: 1) all of
Texaco’s contacts with Pennsylvania, because of the merger, 2) a
website, www.chevron.com, in which Chevron purports to be a
worldwide service provider, 3) the actions of James Barnes, an
employee of Chevron Products Company, and 4) a cease and desist
letter sent from Chevron corporation to Kehm after June 30, 2006.9
The District Court properly determined that it could not
exercise general jurisdiction over Chevron. First, a review of
Chevron’s website, which Kehm directed the District Court to
consider, does not reveal any “systematic and continuous contacts
with” Pennsylvania. The merger between Chevron and Texaco was
accomplished in such a way that Chevron is now the parent of
Texaco, which is indisputably subject to general jurisdiction in
Pennsylvania. To obtain general jurisdiction over Chevron in
Pennsylvania based on Texaco’s contacts, Kehm would need to
show that Chevron controls Texaco. See Steinbuch v. Cutler, 518
F.3d 580, 589 (8th Cir. 2008). Kehm failed to do so, presenting no
evidence that Chevron controls Texaco. The District Court thus
credited Chevron’s unrebutted evidence that Chevron’s subsidiaries
operate independently from Chevron.
Next, we consider whether the District Court can exercise
specific jurisdiction over Chevron based on Chevron’s conduct
directed at Pennsylvania in connection to this lawsuit. Determining
9
Kehm cites to additional facts which do not support its
argument, such as the fact that Chevron has owned property in
Pennsylvania in the past, though it owns none at present, and has
defended lawsuits in Pennsylvania in the past.
17
whether specific jurisdiction exists involves a three-part inquiry.
O’Connor v. Sandy Lane Hotel Co., 496 F.3d 312, 317 (3d Cir.
2007). First, the defendant must have “purposefully directed his
activities” at the forum. Burger King, 471 U.S. at 472 (quotation
marks and citation omitted). Second, the plaintiff’s claim must
“arise out of or relate to” at least one of those specific activities.
Helicopteros, 466 U.S. at 414. Third, courts may consider
additional factors to ensure that the assertion of jurisdiction
otherwise “comport[s] with fair play and substantial justice.”
Burger King, 471 U.S. at 476 (quotation marks and citation
omitted).
Reviewing the facts that Kehm provided, we conclude that
the District Court also cannot exercise specific jurisdiction over
Chevron. Since James Barnes is an employee of Chevron Products
Company, not Chevron, and because Kehm provides no reason to
ignore the corporate separateness of these two entities, Barnes’s
acts cannot be attributed to Chevron. See Escude Cruz v. Ortho
Pharm. Corp., 619 F.2d 902, 905 (1st Cir. 1980) (“The mere fact
that a subsidiary company does business within a state does not
confer jurisdiction over its nonresident parent, even if the parent is
sole owner of the subsidiary.”) (citation omitted). Moreover, the
fact that Chevron sent Kehm a cease and desist letter does not rise
to the level of purposeful availment for purposes of jurisdiction in
Pennsylvania, since the letter expresses the goal not to do business
in P en n sylvania. Se e R e d W ing Shoe C o. v.
Hockerson-Halberstadt, Inc., 148 F.3d 1355, 1361 (Fed. Cir. 1998)
(holding that a “patentee [does] not subject itself to personal
jurisdiction in a forum solely by informing a party who happens to
be located there of suspected infringement,” as “[g]rounding
personal jurisdiction on such contacts alone would not comport
with principles of fairness.”) Accordingly, Kehm has not shown
sufficient facts for the District Court to exercise specific
jurisdiction over Chevron.
VII.
For the reasons discussed above, the District Court’s
decision is affirmed in part and vacated in part for further
proceedings consistent with this opinion. Specifically, the District
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Court properly dismissed the PMPA claim and properly found that
it did not have personal jurisdiction over Chevron. However, we
remand this case for additional proceedings on the issue of whether
Kehm’s state law claims were preempted by the PMPA.
19