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Recent Court Decisions Relating To Dealer "Unfairness" Claims, and Claims of Fraud by Franchisor in Connection with the Franchisee's Sale of its Franchise

April 2011

Authors: Paul D. Sanson, Karen T. Staib

Court Rejects Dealers' "Unfairness" Claims Relating to Debit Card Fees, Automated Gas Delivery Systems, and Delayed Refunds and Reimbursements

In an unpublished opinion, the California Court of Appeals rejects claims that a franchisor violated California’s unfair competition law by failing to pay franchisees fees generated by debit card transactions, keeping vendor rebates and promotional allowances, and delaying payment of refunds and reimbursements owed for erroneous gas charges. It also turns away claims alleging that the automated delivery system forced them to accept unnecessary fuel deliveries when fuel prices were decreasing, to experience fuel shortages when fuel prices were increasing, and to bear the cost of fuel price changes while scheduled fuel deliveries were pending. R.N.R. Oils, Inc. v. BP West Coast Products LLC, B219126, 2011 Cal. App. Unpub. LEXIS 108 (Cal. App. Jan. 6, 2011) 

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Fraud Claims Based on Information Provided by Franchisor in Connection With Dealers' Purchases of Franchises Allowed to Proceed to Trial

The U.S. District Court for the Northern District of Illinois finds a triable issue of fact as to whether dealers who purchased 17 BP franchises reasonably relied on alleged misrepresentations and omissions about the value of the sites. The dealers contended that they relied on allegedly false historical sales figures provided by BP and on its “implicit endorsement” of their business plans by consenting to their purchasing the franchises. The court rejected the franchisor’s argument that any reliance by the dealers was unreasonable because of the company’s disclaimers, finding that these related only to projections of future earnings, not historical sales data. The Court also denied BP’s motion for summary judgment on the issue of whether it had set its gasoline prices “in good faith.” RWJ Management Co., Inc. v. BP Products North America, Inc., No. 09 C 6141, 2011 U.S. Dist. LEXIS 2928 (N.D. Ill. Jan. 12. 2011) 

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EPA Reminder That Sale of E15 Remains Prohibited for Gasoline-Only Vehicles Until Waiver Conditions Satisfied

The Director of the EPA’s Air Enforcement Division issued a letter on March 24, 2011, stating that the Clean Air Act continues to prohibit the sale of gasoline containing more than 10% ethanol for use in gasoline-only vehicles and engines. In January 2011, EPA granted conditional waivers to allow the use of gasoline containing between 10% and 15% ethanol in model year 2001 and newer light-duty motor vehicles. Because the conditions associated with the E15 waiver have not yet been satisfied, however, the EPA letter issued this reminder that it remains illegal to blend more than 10% ethanol into gasoline sold for use in gasoline-only motor vehicles and non-road engines. 

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