Gas Station Franchisee Entitled to Independent Claim for Loss of Business Goodwill
The California Department of Transportation (Caltrans) will be required to pay a stipulated judgment ($704,500) for loss of business goodwill to the operator and sub-lessee of a gas station/mini mart whose franchise was terminated as a result of a condemnation by Caltrans. In "The People ex rel. Department of Transportation v. Mercedes Acosta, et al.," (Third App.Dist., C059064, October 26, 2009), the Court of Appeal affirmed that the Petroleum Marketing Practices Act (PMPA) does not limit a franchisee's recovery of loss of business goodwill to an allocation of the compensation recovered by the franchisor.
Caltrans argued that Code of Civil Procedure section 1263.510, which provides for the recovery of the loss of business goodwill in condemnation actions, is preempted by the PMPA (section 2806) whenever the business is a petroleum (gas station) franchisee. Caltrans contended that only a franchisor (such as BP, Shell, Chevron) may claim a loss of goodwill in a condemnation proceeding and that the franchisee is restricted to seeking an apportionment of the goodwill damages recovered by the franchisor.
Both the trial court and appellate court disagreed. The court concluded that the PMPA was enacted to regulate the relationship between franchisors and franchisees, including the termination or nonrenewal of petroleum franchises due to condemnation. Although the PMPA requires an apportionment of business goodwill compensation, if any, received by a franchisor, it does not prohibit a state from enacting law which provides a franchisee the independent ground for recovery of loss of business goodwill. In California, section 1263.510 specifically provides for the recovery of loss of business goodwill under certain conditions - - and it does not limit this right to particular types of businesses.
