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HOUSTON -- The U.S. Supreme Court bolstered the ability of oil companies to change their leases with independent service station owners, ruling in favor of Shell Oil Co. and Motiva Enterprises LLC in a Massachusetts case, Bloomberg reported.
The Supreme Court on Tuesday unanimously said a group of station owners can't press claims under the U.S. Petroleum Marketing Practices Act (PMPA), a 1978 law that gave independent station owners more power in their dealings with oil companies.
The station owners argued in their lawsuit that Shell and Motiva used rent increases to try to end their franchise arrangements so they could take over operation of their stations. They objected to Motiva's decision to phase out a rent subsidy that had been tied to gasoline sales and to begin calculating rent based on the value of the station's real estate.
Writing for the court, Justice Samuel Alito said the federal law doesn't address that sort of dispute. "The PMPA was enacted to address the narrow areas of franchise terminations and non-renewals, not to govern every aspect of the petroleum franchise industry," he wrote.
The station owners at one point won a $3.3 million jury verdict. A federal appeals court upheld part of the award and both sides appealed to the Supreme Court. The high court ruling affected only the federal claims being pressed by the station owners and not other allegations under Massachusetts state law, according to Bloomberg's report.
The station owners sued under provisions in the federal law barring improper lease terminations. Shell and Motiva contended the station owners can't invoke those provisions because they accepted new lease terms and continued to operate their franchises.
A federal appeals court in Boston said the station owners could press claims for "constructive termination" even though they continued to operate their franchises. But the high court reached the opposite conclusion on the owners' allegations of "constructive non-renewal," saying they forfeited those claims by signing new leases.
Houston-based Motiva is a refining and marketing joint venture owned by Shell and Saudi Refining Inc. Shell -- a unit of Royal Dutch Shell Plc -- transferred its franchising rights to Motiva when the venture was created in 1998.
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