When a Judge denounces franchise laws "as rank interferences with liberty of contract" franchisee counsel have an uphill struggle.
Al's Service Center v. BP Products North America (7th Cir, March 26 2010) involved a gas station franchisee who was notified of a partial condemnation by the municipality; the result would be the closure of 2 of the 5 entrances to the station (later modified to a single closure and a narrowing of a second entrance).
The franchisor elected to terminate the franchise (which had been there for 40 years), and the franchisee sought injunctive relief. For some time, the franchisor continued supplying petroleum to the franchisee; when the court asked to see the documentation, neither party could produce any but agreed that there had been an oral contract during the pendancy of the trial. The netherworld between franchisee and spot-market purchaser was another source of irritation to Judge Posner in particular.
Yet another oddity was the failure of the franchisor to collect $62,000 in rent. While not clear from the record, it appears that the froanchisor was supposed to debit the rent money from the franchisee bank account and although the money was deposited to the account, the franchisor for some reason did not debit the account (whether because they refused to recognize the tenancy as posited at oral argument or whether by mistake as posited in Judge Posner's opinion is a question which may never be resolved).
Ultimately the franchisee shut the station, and a long court battle continued.
Although Judge Posner's opinion blames "confused lawyering" and notes the "Job-like patience" of trial judge Andersen, the oral argument casts a somewhat different light: the trial judge seemed to avoid making findings of fact on such basic questions as whether or not the franchisor had interrupted deliveries to the franchisee or not, and the trial judge suddenly discovered (after 6 plus years) that he owned stock in the franchisor, whereupon the case was transferred to another judge. In fairness, a reading of the trial court opinion written by the new judge (Marovich) held that the franchisor did fail to deliver gas on several occasions.
There was indeed confused lawyering: franchisee counsel sought to enforce an injunction by moving to amend his Complaint, much to the consternation of Judge Posner who scolded franchisee counsel as though it were a law school Civ Pro class. The befuddled 3-member appellate panel was at a loss when neither counsel could explain the status of the injunction; the consensus seemed to be that it had been rendered moot but Posner in particular appeared annoyed at slipshod procedure.
Franchisee counsel also did not know how many days the alleged delivery interruption had occured, but stated that both sides were in agreement that there had been an interruption. Franchisor counsel replied that there had been no interruption, but was unable to produce any documents in support of that position.
And so it went, for much of the course of the 34 minute oral argument.
Judge Posner can be an intimidating figure, as is apparent from the start of the oral argument. But both counsel were ill-prepared, especially considering that they knew they were going to appear before one of the founders of the "Law and Economics" school of jurisprudence.
Franchisee counsel in particular comes across poorly. Posner has a record of franchise cases (such as Great American Chocolate Chip (1992), Tuff Racing v. Suzuki (2000), and Sheridan v. Marathon Petroleum (2008). In the Al's Service Center opinion, Judge Posner mentions two other 7th Circuit cases in which the court had taken a dim view of franchise statutes.
Oral argument before a Circuit Court of Appeals warrants significant preparation under the best of circumstances. In this case, the likelihood of getting much sympathy for the franchisee was slim and perhaps counsel for the franchisee conceeded defeat before he entered the courtroom. Franchisor counsel wasn't exactly Clarence Darrow, but then again he didn't need to do much more than chuckle at Judge Posner's observations and dodge criticism of the trial judge.
Franchisee intransigence also played a part in the defeat. Oral argument disclosed that there had been settlement discussions, but when the franchisees demanded $30M damages, the franchisor realized that there was no point in further discussion.
Posner wrote that "it is very difficult to understand either side's arguments" and that annoyance likely accounts for some of the snarky tenor of the opinion. Posner concludes by saying that the franchisee
can pursue further relief in the Illinois state courts if it wants, but we suspect that if it does so it will be tilting at windmills.
