The U.S. Supreme Court on March 2 unanimously held that a franchisee that stays in business cannot sue for constructive termination under the Petroleum Marketing Practices Act. The court also decided that a franchisee waives its constructive nonrenewal claim where it actually enters into a renewal agreement.
In Mac’s Shell Service Inc. v. Shell Oil Products Co. LLC , service station franchisees sued their franchisor, Motiva Enterprises LLC, a joint venture of Shell Oil and two other companies, for withdrawing a volume-based rent subsidy. By withdrawing the subsidy upon renewal, the franchisees alleged their rent was escalated to a point that threatened viability. As each franchise agreement expired, Motiva offered new agreements that contained a new formula for calculating rent, which resulted in higher rent. The franchisees sued both for constructive termination and for constructive non-renewal while continuing in operation.
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