Attorney Ted Heiser Wins Decision for Client in Dispute Over Franchise Relationships

In Branford Quick Mart, LLC v. Aldin Associates Limited Partnership, Attorney Ted Heiser represented Aldin Associates against claims that its leases and commissioned agent agreements created franchise relationships. The three plaintiff entities are all limited liability companies that leased defined premises from Aldin in which they operated convenience stores. In addition to the leases of the convenience store locations, the plaintiffs also signed commissioned agent agreements with Aldin whereby they agreed to act as the agent of Aldin at gas stations operating on the same property but outside of the convenience stores. According to the commissioned agent agreements, the plaintiffs were responsible for taking payment for petroleum sold to consumers at the stations and for other basic reporting requirements to Aldin. However, Aldin owned the petroleum sold at the facilities as well as the equipment used in the service station business. Aldin was responsible for the upkeep and maintenance of the equipment and was the party exposed to all risk of loss with respect to the petroleum sales. In keeping with the leases and the commissioned agent agreements, Aldin could terminate the agreements for no reason by providing 120 days written notice. Aldin terminated each of the agreements with sufficient notice. The present lawsuit followed.

The plaintiffs contended that the relationship between Aldin and each of the plaintiffs was a franchise relationship. As such, the plaintiffs argued that the Connecticut Petroleum Franchise Act (“CPFA”) applied to the agreements. Among other restrictions, the CPFA requires that an agreement can only be terminated for good cause. Therefore, the plaintiffs contended that Aldin’s termination notices were defective because they did not set forth good cause for the termination. Aldin disputed that the agreements created a franchise relationship. The parties agreed prior to trial to bifurcate the damages portion of the case and asked the Court to first address the question of whether the CPFA applied to the relationship or not. Judge Blue heard the case in the Connecticut Superior Court in New Haven.

Judge Blue agreed with Aldin that no franchise relationship was created by the leases and the commissioned agent agreements and even quoted Sylvester Stallone’s character from the 1993 movie Demolition Man[1]. Judge Blue’s primary basis for ruling in Aldin’s favor was his determination that the plaintiffs were not “retailers” of the petroleum products. To that end, the opinion notes:

A “retailer” is a “person engaged in the business of selling personal property to the public or to consumers as opposed to selling to those who intend to resell the items.” Black’s Law Dictionary 1573 (11th ed. 1999). Although the petroleum products in question are indeed sold to the public, they are not sold by Quick Mart. They are sold by Aldin. Aldin owns the petroleum products until such time as they are transferred to a motorist’s tank. Quick Mart has no ownership of the gasoline. It may be an “agent” of the seller; Ex. 3, at 2; but it is not the seller. Aldin is the seller. Consequently, it is Aldin rather than Quick Mart that is the “retailer.”

Judge Blue also looked at the policy implications of the plaintiffs’ claims. He found that the plaintiffs were not the types of entities that the CPFA sought to protect because it was Aldin who bore all of the entrepreneurial risk in the relationship.

Two other Superior Court judges have reached different conclusions under similar circumstances. As such, it is fully expected that the plaintiffs will appeal Judge Blue’s decision to the Connecticut Appellate Court or the Connecticut Supreme Court.

[1] In the 1993 film Demolition Man, a police officer played by Sylvester Stallone awakens in the year 2023 from a forty-year cryogenic sleep. He is taken to a “fine restaurant” for dinner. As he pulls up to the restaurant, he notices the name:  Taco Bell. Is this a mistake? “Not at all,” he is informed. “Since the great franchise wars, all restaurants are now Taco Bell.”