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N.D.Ill.,2012.
Oshana v. Buchanan Energy
Slip Copy, 2012 WL 426921 (N.D.Ill.)
BUCHANAN ENERGY and Exxonmobil Oil Corporation, Defendants.
No. 11 C 4135.
Feb. 10, 2012.
John J. Conway, Ryan Arthur Mahoney, Sullivan Hincks & Conway, Oak Brook, IL, for Plaintiffs.
fendants Buchanan Energy (“Buchanan”) and ExxonMobil Corporation (“Mobil”) oppose the plaintiffs' motion to
amend and concurrently move to dismiss the plaintiffs' proposed amended complaint. For the reasons stated below,
the court grants the plaintiffs' motion in part and grants them leave to file an amended complaint consistent with this
opinion. Additionally, the defendants' motion to dismiss is granted in part and denied in part.
I. BACKGROUND
tually terminated by Buchanan for invalid and pretextual reasons. Accordingly, the proposed amended complaint
counts allege that the defendants committed various state law violations including breaches of contract and conver-
leave when justice so requires.” Fed.R.Civ.P. 15(a)(2). Courts interpret this standard to allow amendment “when
cedure, a pleading must contain a “short and plain statement of the claim showing that the pleader is entitled to re-
lief.” Documents attached to the pleadings may be considered when reviewing a motion to dismiss “if [those docu-
ments] are referred to in the plaintiff's complaint and are central to [the plaintiffs'] claim[s].” Wright v. Associated
Ins. Co. Inc., 29 F.3d 1244, 1248 (7th Cir.1994). “To survive a motion to dismiss, a complaint must contain suffi-
cient factual matter, accepted as true, to ‘state a claim for relief that is plausible on its face.’ “ Ashcroft v. Iqbal, 556
Because this court must assess the plaintiffs' proposed amended complaint for futility, and the futility analysis
blends with the analysis governing a motion to dismiss, the court analyzes each of the relevant counts of the com-
plaint as if this were a motion to dismiss under Rule 12(b)(6).
A. Plaintiffs' Breach of Contract Claims (Counts I & VI)
the Seventh Circuit, incorporates both the Lease and the Rent Guidelines into the pleadings, as well as the other
documents that are referenced in the plaintiffs' complaint and are central to their claims. See Wright, 29 F.3d at
1248.
According to the Rent Guidelines, the rent Mobil charges its franchisees “is determined by multiplying the total
property value by 12% and adding the real property tax charge.” (See Rent Guidelines at 1, ECF No. 1–1.) The total
As Exhibit 4 to their complaint, however, the plaintiffs attach an appraisal (the “Carbone Appraisal”) that
they—not Mobil—solicited, indicating that the appraised value of the property is $400,000, which the plaintiffs al-
lege implies that their monthly rent should be $4,000 ((12% of $400,000)/12 months). (See Prop. Am. Compl. ¶ 16.)
This appraisal was dated October 20, 2010. Further, they allege that the transfer price of the property was only
© 2012 Thomson Reuters. No Claim to Orig. US Gov. Works.
$300,000 when Mobil transferred the property to Buchanan, which would imply a monthly rent of $3,000. Standing
alone, however, these allegations are problematic for the plaintiffs because the Rent Guidelines, as noted above,
provide that the rent determination is made using Mobil's third party appraiser. The plaintiffs, by referencing Exhibit
2, admit that Mobil's appraiser estimated the land value at $706,000, which would justify the proposed rent charges
outlined by Mobil under the Rent Guidelines.FN2
FN2. Nothing in the contracts indicate that the transfer value of the property can be used as a substitute for
Mobil's third-party appraisal.
Nonetheless, the Rent Guidelines allow a lessee dealer to challenge Mobil's rent appraisal by “provid[ing] writ-
ten notice to its territory manager within 10 days of receipt of [an] appraisal summary from Mobil's appraiser.” Such
March 18, 2011. This letter specifically responds to the plaintiffs' rent reduction requests, notes that Mobil obtained
a third appraisal in the amount of $1,040,000, and averages that proposal with the two other appraisals using the
averaging procedure contemplated in the Rent Guidelines. The average appraisal was $715,000, which was more
than Mobil's original appraisal in the amount of $706,000. As a result, Buchanan determined that the plaintiffs' rent
should have been increased even more. None of the plaintiffs' other allegations dispute the contents of Buchanan's
13, 2010. This, in addition to Buchanan's March 18, 2011 letter, further suggests that GTO challenged the
rent proposal for 2011–2014 in a timely fashion under the Rent Guidelines.
All of the plaintiffs' documents, when considered alongside the allegations in the complaint, seem to indicate
that the defendants followed the rent-setting procedures set forth in the Rent Guidelines. Thus, they appear to refute
the plaintiffs' claim that the defendants “fail[ed] to set the rent in accordance with the Rent Guidelines and col-
porto an inference that the defendants may have breached their obligation properly to appraise the property in ac-
cordance with the Rent Guidelines. For example, the two appraisals obtained by the defendants that were used to set
the rent may not have complied with the Rent Guidelines' requirement that “[t]he value of the land component of the
appraisal will be determined using the sales-comparison method and will be based on the highest and best use of the
land, regardless of current use or the nature of the underlying estate.” (National Rent Guidelines at 1.) If they did
© 2012 Thomson Reuters. No Claim to Orig. US Gov. Works.
the rent that had been set by Mobil from 2006–2010 pursuant to the Lease. As the defendants correctly
note, these challenges must be made within ten days of receiving the summaries of appraised values from
Mobil, and nothing in the pleadings indicates that GTO challenged the rent that was set by Mobil in either
2006 or 2009 pursuant to the rent-setting procedures of the Rent Guidelines. Thus, GTO cannot claim a
breach on those rent charges.
2. Count VI
Under the Lease, the plaintiffs were also obligated to purchase gasoline from the defendants. (Lease § 2. 1.)
Count VI, the plaintiffs' second breach of contract claim, alleges that “[p]ursuant to Plaintiffs' PMPA fuel supply
agreement and Lease, Buchanan is obligated to sell [gasoline] to the Plaintiffs at prices set by Buchanan in good
faith.” (Proposed Am. Compl. ¶ 51.) Specifically, the Lease states that the “Franchise Dealer shall pay ExxonMobil
The plaintiffs allege that the defendants breached their obligations under the Illinois Commercial Code, which
requires sellers who fix prices under a contract to fix those prices in “good faith.” See 810 ILCS 5/2–305(2). FN7 This
court has discussed a similar “open price term” in another gasoline contract and has confirmed that it falls within the
scope of § 2–305, triggering the lessor's obligation to “fix the price to Plaintiffs ‘in good faith.’ “ Dixie Gas & Food,
Inc. v. Shell Oil Co., No. 03 C 8210, 2008 WL 631106, at *5 (N.D.Ill. Mar.3, 2008). While courts in Illinois have
not settled. In such a case the price is a reasonable price at the time for delivery if:
(a) nothing is said as to price; or
(b)the price is left to be agreed by the parties and they fail to agree; or
(c) the price is to be fixed in terms of some agreed market or other standard as set or recorded by a third
person or agency and it is not so set or recorded.
Nonetheless, the court cannot conclude at this time that the defendants were entitled to the plaintiffs' credit card
receipts. The Lease provisions that Buchanan argues allow it to engage in such withholding of credit card receipts
and other sums do not necessarily apply here. Section 2.4 of the Lease allows the defendants to “maintain security
Section 14.4 on the Lease, finally, would allow the defendants to “apply ... sums or security” other than the
Product Security to pay down the indebtedness of a party that had defaulted under the Lease, but whether or not a
default occurred here (as default would be defined under the Lease) is a question that needs to be resolved at sum-
mary judgment or trial. Although the defendants argue that Section 14.4 is triggered by Buchanan's letter of Sep-
tember 1, 2011, which stated that the plaintiffs were “in default [or violation] of your PMPA Franchise Agreement”
sion claim is futile.
C. Petroleum Management Practices Act (PMPA) Claims (Counts III & IV)
1. Count III
However, an examination of the September 1, 2011 letter indicates that it was not a notice stating an intent to
terminate the plaintiffs' franchise. While, as noted above, it indicated that the plaintiffs had either defaulted on or
had violated their obligation to maintain certain levels of inventory, and it stated that a consequence of failure to
correct the violation could result in termination of the PMPA franchise agreement, the September 1, 2011 notice was
not actionable under the PMPA because it did not indicate that the Lease would be terminated or non-renewed. See,
non-renewed. And when the defendants subsequently sent the plaintiffs a notice of termination on November 2,
2011, that notice complied with all of the notification requirements of the PMPA: it was in writing, was sent certi-
fied mail, and contained a statement indicating an intention to terminate the franchise along with the date on which
that nonrenewal takes effect. See 15 U.S.C. § 2804(c); (Proposed Am. Compl. Ex. 8.) Thus, the court concludes that
Count III is futile; the plaintiffs may not include this count in their amended complaint.FN9
FN10. Indeed, Judge Coar specifically cited Cox for the proposition that equitable recoupment must be a
duct. Thus, equitable recoupment is inapplicable here, and all of the damages sought by plaintiffs against the de-
fendants in the remaining counts will sufficiently compensate them for any losses they may have suffered. The
plaintiffs' equitable recoupment theory is flawed, and this claim is dismissed as a result of its futility.
E. Oshana's Standing
Franchise Dealer, as defined in the Lease's preamble, (see id. at 45, 184 Ill.Dec. 714, 613 N.E.2d 1306) solely refers
to GTO Investments, (see id. at 5, 184 Ill.Dec. 714, 613 N.E.2d 1306) and not to George Oshana in his individual
capacity. While a Franchise Dealer can be an individual in some instances,FN11 Oshana chose to make GTO Invest-
ments the legal franchisee. Accordingly, Oshana is only a personal representative of the Franchise Dealer, GTO In-
vestments, and he does not have any legal rights under the Lease.FN12 This was what Oshana agreed to when he as-
FN11. The Lease specifically contemplates a single Franchise Dealer in the event that the dealer is an indi-
vidual. If, however, the Franchise Dealer is a corporate entity, Mobil designates a Key Individual to serve
as a personal representative for the Franchise Dealer. This Key Individual is designated through a “Key In-
dividual Guaranty” agreement, which George Oshana signed.
FN12. Although the court acknowledges that Oshana is the Key Individual for the purposes of the Lease,
“Franchise Dealer”—in this case GTO—has rights in the use of proprietary marks under the Lease)).
Beyond the fact that the Lease counsels dismissing Oshana, he must also be dismissed as a party because he
serves as a guarantor to his own corporation. When guarantors (like Oshana) provide performance assurances to
businesses in exchange for the right to create a corporate franchisee (like GTO), they disclaim their rights to sue in
© 2012 Thomson Reuters. No Claim to Orig. US Gov. Works.
their individual capacity because they are not directly injured by the defendants' conduct, insofar as that conduct
inflicts harm only on the corporation; as a result, they may sue only if they are injured independently from the firm's
injury. See, e.g., Mid–State Fertilizer Co. v. Exchange Nat'l Bank, 877 F.2d 1333, 1335–36 (7th Cir.1989) (noting
that “creditors cannot recover directly for injury inflicted on a firm, so guarantors as potential creditors likewise
cannot recover”). Oshana cannot make any damage claims that are independent from the damages inflicted on GTO
as the Franchise Dealer, and accordingly he must be dismissed from this suit in his individual capacity.
IV. CONCLUSION
For the reasons stated above, the plaintiffs' motion for leave to file an amended complaint is granted, insofar as
the amended complaint complies with the dictates of this order. The defendants' motion to dismiss is granted as to
Counts III and V, but is denied as to Counts I, II, IV, and VI, which should be included in the plaintiffs' amended
END OF DOCUMENT
leave when justice so requires.” Fed.R.Civ.P. 15(a)(2). Courts interpret this standard to allow amendment “when
cedure, a pleading must contain a “short and plain statement of the claim showing that the pleader is entitled to re-
lief.” Documents attached to the pleadings may be considered when reviewing a motion to dismiss “if [those docu-
ments] are referred to in the plaintiff's complaint and are central to [the plaintiffs'] claim[s].” Wright v. Associated
Ins. Co. Inc., 29 F.3d 1244, 1248 (7th Cir.1994). “To survive a motion to dismiss, a complaint must contain suffi-
cient factual matter, accepted as true, to ‘state a claim for relief that is plausible on its face.’ “ Ashcroft v. Iqbal, 556
Because this court must assess the plaintiffs' proposed amended complaint for futility, and the futility analysis
blends with the analysis governing a motion to dismiss, the court analyzes each of the relevant counts of the com-
plaint as if this were a motion to dismiss under Rule 12(b)(6).
A. Plaintiffs' Breach of Contract Claims (Counts I & VI)
the Seventh Circuit, incorporates both the Lease and the Rent Guidelines into the pleadings, as well as the other
documents that are referenced in the plaintiffs' complaint and are central to their claims. See Wright, 29 F.3d at
1248.
According to the Rent Guidelines, the rent Mobil charges its franchisees “is determined by multiplying the total
property value by 12% and adding the real property tax charge.” (See Rent Guidelines at 1, ECF No. 1–1.) The total
As Exhibit 4 to their complaint, however, the plaintiffs attach an appraisal (the “Carbone Appraisal”) that
they—not Mobil—solicited, indicating that the appraised value of the property is $400,000, which the plaintiffs al-
lege implies that their monthly rent should be $4,000 ((12% of $400,000)/12 months). (See Prop. Am. Compl. ¶ 16.)
This appraisal was dated October 20, 2010. Further, they allege that the transfer price of the property was only
© 2012 Thomson Reuters. No Claim to Orig. US Gov. Works.
$300,000 when Mobil transferred the property to Buchanan, which would imply a monthly rent of $3,000. Standing
alone, however, these allegations are problematic for the plaintiffs because the Rent Guidelines, as noted above,
provide that the rent determination is made using Mobil's third party appraiser. The plaintiffs, by referencing Exhibit
2, admit that Mobil's appraiser estimated the land value at $706,000, which would justify the proposed rent charges
outlined by Mobil under the Rent Guidelines.FN2
FN2. Nothing in the contracts indicate that the transfer value of the property can be used as a substitute for
Mobil's third-party appraisal.
Nonetheless, the Rent Guidelines allow a lessee dealer to challenge Mobil's rent appraisal by “provid[ing] writ-
ten notice to its territory manager within 10 days of receipt of [an] appraisal summary from Mobil's appraiser.” Such
March 18, 2011. This letter specifically responds to the plaintiffs' rent reduction requests, notes that Mobil obtained
a third appraisal in the amount of $1,040,000, and averages that proposal with the two other appraisals using the
averaging procedure contemplated in the Rent Guidelines. The average appraisal was $715,000, which was more
than Mobil's original appraisal in the amount of $706,000. As a result, Buchanan determined that the plaintiffs' rent
should have been increased even more. None of the plaintiffs' other allegations dispute the contents of Buchanan's
13, 2010. This, in addition to Buchanan's March 18, 2011 letter, further suggests that GTO challenged the
rent proposal for 2011–2014 in a timely fashion under the Rent Guidelines.
All of the plaintiffs' documents, when considered alongside the allegations in the complaint, seem to indicate
that the defendants followed the rent-setting procedures set forth in the Rent Guidelines. Thus, they appear to refute
the plaintiffs' claim that the defendants “fail[ed] to set the rent in accordance with the Rent Guidelines and col-
porto an inference that the defendants may have breached their obligation properly to appraise the property in ac-
cordance with the Rent Guidelines. For example, the two appraisals obtained by the defendants that were used to set
the rent may not have complied with the Rent Guidelines' requirement that “[t]he value of the land component of the
appraisal will be determined using the sales-comparison method and will be based on the highest and best use of the
land, regardless of current use or the nature of the underlying estate.” (National Rent Guidelines at 1.) If they did
© 2012 Thomson Reuters. No Claim to Orig. US Gov. Works.
the rent that had been set by Mobil from 2006–2010 pursuant to the Lease. As the defendants correctly
note, these challenges must be made within ten days of receiving the summaries of appraised values from
Mobil, and nothing in the pleadings indicates that GTO challenged the rent that was set by Mobil in either
2006 or 2009 pursuant to the rent-setting procedures of the Rent Guidelines. Thus, GTO cannot claim a
breach on those rent charges.
2. Count VI
Under the Lease, the plaintiffs were also obligated to purchase gasoline from the defendants. (Lease § 2. 1.)
Count VI, the plaintiffs' second breach of contract claim, alleges that “[p]ursuant to Plaintiffs' PMPA fuel supply
agreement and Lease, Buchanan is obligated to sell [gasoline] to the Plaintiffs at prices set by Buchanan in good
faith.” (Proposed Am. Compl. ¶ 51.) Specifically, the Lease states that the “Franchise Dealer shall pay ExxonMobil
The plaintiffs allege that the defendants breached their obligations under the Illinois Commercial Code, which
requires sellers who fix prices under a contract to fix those prices in “good faith.” See 810 ILCS 5/2–305(2). FN7 This
court has discussed a similar “open price term” in another gasoline contract and has confirmed that it falls within the
scope of § 2–305, triggering the lessor's obligation to “fix the price to Plaintiffs ‘in good faith.’ “ Dixie Gas & Food,
Inc. v. Shell Oil Co., No. 03 C 8210, 2008 WL 631106, at *5 (N.D.Ill. Mar.3, 2008). While courts in Illinois have
not settled. In such a case the price is a reasonable price at the time for delivery if:
(a) nothing is said as to price; or
(b)the price is left to be agreed by the parties and they fail to agree; or
(c) the price is to be fixed in terms of some agreed market or other standard as set or recorded by a third
person or agency and it is not so set or recorded.
Nonetheless, the court cannot conclude at this time that the defendants were entitled to the plaintiffs' credit card
receipts. The Lease provisions that Buchanan argues allow it to engage in such withholding of credit card receipts
and other sums do not necessarily apply here. Section 2.4 of the Lease allows the defendants to “maintain security
Section 14.4 on the Lease, finally, would allow the defendants to “apply ... sums or security” other than the
Product Security to pay down the indebtedness of a party that had defaulted under the Lease, but whether or not a
default occurred here (as default would be defined under the Lease) is a question that needs to be resolved at sum-
mary judgment or trial. Although the defendants argue that Section 14.4 is triggered by Buchanan's letter of Sep-
tember 1, 2011, which stated that the plaintiffs were “in default [or violation] of your PMPA Franchise Agreement”
sion claim is futile.
C. Petroleum Management Practices Act (PMPA) Claims (Counts III & IV)
1. Count III
However, an examination of the September 1, 2011 letter indicates that it was not a notice stating an intent to
terminate the plaintiffs' franchise. While, as noted above, it indicated that the plaintiffs had either defaulted on or
had violated their obligation to maintain certain levels of inventory, and it stated that a consequence of failure to
correct the violation could result in termination of the PMPA franchise agreement, the September 1, 2011 notice was
not actionable under the PMPA because it did not indicate that the Lease would be terminated or non-renewed. See,
non-renewed. And when the defendants subsequently sent the plaintiffs a notice of termination on November 2,
2011, that notice complied with all of the notification requirements of the PMPA: it was in writing, was sent certi-
fied mail, and contained a statement indicating an intention to terminate the franchise along with the date on which
that nonrenewal takes effect. See 15 U.S.C. § 2804(c); (Proposed Am. Compl. Ex. 8.) Thus, the court concludes that
Count III is futile; the plaintiffs may not include this count in their amended complaint.FN9
FN10. Indeed, Judge Coar specifically cited Cox for the proposition that equitable recoupment must be a
duct. Thus, equitable recoupment is inapplicable here, and all of the damages sought by plaintiffs against the de-
fendants in the remaining counts will sufficiently compensate them for any losses they may have suffered. The
plaintiffs' equitable recoupment theory is flawed, and this claim is dismissed as a result of its futility.
E. Oshana's Standing
Franchise Dealer, as defined in the Lease's preamble, (see id. at 45, 184 Ill.Dec. 714, 613 N.E.2d 1306) solely refers
to GTO Investments, (see id. at 5, 184 Ill.Dec. 714, 613 N.E.2d 1306) and not to George Oshana in his individual
capacity. While a Franchise Dealer can be an individual in some instances,FN11 Oshana chose to make GTO Invest-
ments the legal franchisee. Accordingly, Oshana is only a personal representative of the Franchise Dealer, GTO In-
vestments, and he does not have any legal rights under the Lease.FN12 This was what Oshana agreed to when he as-
FN11. The Lease specifically contemplates a single Franchise Dealer in the event that the dealer is an indi-
vidual. If, however, the Franchise Dealer is a corporate entity, Mobil designates a Key Individual to serve
as a personal representative for the Franchise Dealer. This Key Individual is designated through a “Key In-
dividual Guaranty” agreement, which George Oshana signed.
FN12. Although the court acknowledges that Oshana is the Key Individual for the purposes of the Lease,
“Franchise Dealer”—in this case GTO—has rights in the use of proprietary marks under the Lease)).
Beyond the fact that the Lease counsels dismissing Oshana, he must also be dismissed as a party because he
serves as a guarantor to his own corporation. When guarantors (like Oshana) provide performance assurances to
businesses in exchange for the right to create a corporate franchisee (like GTO), they disclaim their rights to sue in
© 2012 Thomson Reuters. No Claim to Orig. US Gov. Works.
their individual capacity because they are not directly injured by the defendants' conduct, insofar as that conduct
inflicts harm only on the corporation; as a result, they may sue only if they are injured independently from the firm's
injury. See, e.g., Mid–State Fertilizer Co. v. Exchange Nat'l Bank, 877 F.2d 1333, 1335–36 (7th Cir.1989) (noting
that “creditors cannot recover directly for injury inflicted on a firm, so guarantors as potential creditors likewise
cannot recover”). Oshana cannot make any damage claims that are independent from the damages inflicted on GTO
as the Franchise Dealer, and accordingly he must be dismissed from this suit in his individual capacity.
IV. CONCLUSION
For the reasons stated above, the plaintiffs' motion for leave to file an amended complaint is granted, insofar as
the amended complaint complies with the dictates of this order. The defendants' motion to dismiss is granted as to
Counts III and V, but is denied as to Counts I, II, IV, and VI, which should be included in the plaintiffs' amended
END OF DOCUMENT
