This litigation involves a dispute between Shell Oil Company (Shell), a petroleum franchisor, and several Shell franchisees in Massachusetts. Pursuant to their franchise agreements with Shell, each franchisee was required to pay Shell monthly rent for use of the service- station premises. For many years, Shell offered the franchisees a rent subsidy that reduced the monthly rent by a set amount for every gallon of motor fuel a franchisee sold above a specified threshold. Shell renewed the subsidy annually through notices that “explicitly provided for cancellation [ of the rent subsidy] with thirty days’ notice.”
1. Why might a franchisor want to terminate a franchise? Why might a franchisee want to continue its association with a franchisor?
2. In this case, if shell oil products company wanted to terminate the plaintiff’s franchises, why didn’t shell simply notify the franchisees that the franchise were no terminated effective immediately?
3. The PMPA regulates only the circumstances in which service-station franchisors may terminate a franchise or decline to renew a franchise relationship. Are there any reasons why congress might have limited the scope of the PMPA to just these two aspects of franchising? Explain
4. Suppose that some of the service-station franchisees, on the expiration of their contracts with shell, signed a renewal agreement with Motive, even though franchisees believed that the rental terms of the new agreement were unacceptable. Given Court’s reasoning on the issue of constructive termination, would the franchisees have been be likely to succeed in a suit against the franchisor for “Constructive nonrenewal” of the franchise agreement? Why or why not?