In Seymour Foodmart, LLC v. Drake Petroleum Company, a Connecticut Superior Court ruled on a motion for summary judgment and offered valuable insights into the circumstances under which a franchise relationship can exist. In 2016, the parties entered into two agreements: a commissioned agent agreement (CAA) and a convenience store lease agreement. The CAA explicitly disclaimed the creation of a franchise relationship between Seymour and Drake.
Under the CAA, Seymour was Drake’s agent for the sale of motor fuels, earning monthly commissions on the sale of petroleum products. Despite the agency relationship, Drake remained the sole fuel supplier of the station and dictated retail prices, with the motor fuel trademark owned by an independent party. Under the second agreement, the Seymour leased a portion of Drake’s premises for the operation of a convenience store.
Seymour sued Drake alleging violations of the Connecticut Petroleum Franchise Act (“CPFA”) and the Connecticut Unfair Trade Practices Act (“CUTPA”). Drake moved for summary judgment claiming Seymour’s claims did not fall within the purview of the CPFA or CUTPA. Drake argued that the agreement with Seymour did not establish a franchise agreement.
The CPFA defines as follows:
- Franchise: any contract between a distributor and retailer, authorizing a retailer the use of a trademark in connection with the sale or distribution of motor fuel.
- Franchisor: a refiner or distributor authorizing a retailer use of a trademark in connection with the sale of motor fuel.
- Franchisee: a retailer or distributor authorized to use a trademark in connection with the sale of motor fuel.
However, the CPFA does not define “retailer” or “distributor.” Thus, the Court had to determine those meanings through statutory construction.
Drake contended Seymour could not be classified as a retailer because retailers are engaged in making sales to ultimate consumers. Since Seymour operated solely as Drake’s agent, it did not directly sell motor fuel to the public. Additionally, Drake argued it was not a distributor since it did not sell fuel to Seymour. Instead, distributors were wholesalers authorized by a supplier to sell to retailers.
Drake further urged the Court to adopt the definition of a retailer under a wholly different statute: the Federal Petroleum Practice Act (“PMPA”). The PMPA employs the same definitions for a franchise, franchisor, and franchisee as the CPFA but offers a separate definition for what is a retailer. The PMPA defines a retailer as any person who purchases motor fuel for sale to the public excluding commissioned agents. Drake argued that since the CPFA adopted the PMPA’s franchise, franchisor, and franchisee definitions verbatim, it should similarly adopt the retailer definition.
Seymour disagreed. It countered that as Drake’s agent, it engaged in the business of selling motor fuels, regardless of ownership. Further, Seymour pointed to the legislative history of the CPFA, emphasizing the legislature’s intent to broaden the definitions of franchise, franchisee, and franchisor.
The Court agreed with Seymour and held a franchise relationship existed. The Court found that Drake’s interpretation directly contradicted the legislative intent. Furthermore, it declined to adopt the PMPA’s definition of retailer because nothing in the legislative history of the CPFA indicated the legislature intended for the PMPA’s definition to apply.
The Court denied Drake’s motion for summary judgment, asserting that Seymour’s claims, rooted in their franchise relationship, fell within the scope of the CPFA and CUTPA. This decision holds that commissioned agent agreements can, indeed, create franchise relationships in despite of the applicable agreement disavowing the existence of the same.
