Mac’s Shell Service v. Shell Oil Products Co.; Shell Oil Products Co. v. Mac’s Shell Service

The Supreme Court has agreed to weigh in on the rights of service station operators to sue to challenge the loss of their franchises from oil companies.

In 2000, eight Massachusetts Shell station operators filed a lawsuit against Shell and affiliates of the Royal Dutch/Shell Group over changes in lease terms that they argued were intended to convert stations run by franchisees to company-owned facilities.

In December 2004, a unanimous jury on the U.S. District Court in Boston awarded more than $3 million to the eight franchisees.

In April 2008, a three-judge panel on the 1st U.S. Circuit Court of Appeals reversed in part, holding that the Petroleum Marketing Practices Act did not support a claim for constructive nonrenewal under the circumstances in the case. The court reasoned that the PMPA requires franchisees faced with objectionable contract terms to refrain from ratifying those terms by executing the contract, as the franchisees did in this case.

Appeals courts are split on the issue.

Question presented: Under what circumstances may a service station operator bring suit against an oil refiner or distributor for "constructive termination" under the Petroleum Marketing Practices Act?