The plaintiff (Amoco) is a supplier of petroleum products. The defendant is a dealer engaged in the retail sale of gasoline, oil, and other products at a
The parties have agreed that Amoco terminated the lease "because in its good faith and honest judgment, the station was insufficiently profitable to it." The parties have further agreed that "Amoco's return on its investment in this station, including all of its revenues from this station, both the rent and its margin on gasoline and other products, is less than one percent." There is no claim of any material breach of the lease by the defendant.
Section 5A of G.L.c. 93E, as appearing in St. 1976, c. 64, § 5, provides that a termination or cancellation of "a marketing agreement of any retail dealer without due cause" (emphasis supplied) shall be unlawful. The defendant, who is still in possession of the premises, defends against Amoco's claim of a right to possession of the premises solely on the ground that the reasons stated by Amoco for termination of the lease do not constitute "due cause" under G.L.c. 93E, § 5A. He argues that "due cause" in § 5A is limited to dealer breaches and does not include a supplier's business decisions. We conclude that "due cause" is not so limited in its meaning and that Amoco's good faith decision to cease operations at the premises, coupled with the fact that its return on its investment was less than one per cent, constitutes "due cause" permitting the termination of the lease.
The development of G.L.c. 93E demonstrates that the narrow construction of the words "due cause" in § 5A urged by the defendant was not intended. As initially enacted by St. 1972, c. 772, § 5 of G.L.c. 93E provided in subsection (a) that it would be unlawful to cancel or terminate an agreement "prior to its expiration date unless the dealer has defaulted under any term, condition or obligation set forth in his agreement." If that language were still in effect, Amoco could not cancel or terminate the defendant's lease as it did in this case. Under its 1972 formulation, § 5 provided further, in subsection (b), that a supplier could fail to renew a dealer's agreement only "for cause" and that cause "shall include, but not be limited to, grounds for cancellation or termination under subsection (a)" (emphasis supplied). Plainly, under the 1972 enactment the "cause" for which a supplier could decide not to renew a dealer's agreement included reasons other than dealer default.
Chapter 93E was amended in 1976. St. 1976, c. 64, § 5.
This construction of "due cause" is consistent with the meaning attributed to those or similar words in other contexts. As relevant to the determination whether a distributor has "good cause" for canceling, terminating, or refusing to renew a motor vehicle dealer's agreement or franchise under G.L.c. 93B, § 4 (3) (e) (4), as appearing in St. 1977, c. 717, § 3, the Legislature listed a number of considerations in addition to dealer default. In G & M Employment Serv., Inc. v. Commonwealth, 358 Mass. 430,
The defendant, as did the judge below, relies on Shell Oil Co. v. Marinello, 63 N.J. 402 (1973), a decision not particularly instructive on the issue before us. The court in the Marinello case stated that the public policy of New Jersey prevented an oil company from terminating a gasoline dealer's franchise except for good cause (id. at 410-411), and, relying on a recent statute not applicable
The defendant argues that G.L.c. 93E was obviously enacted to provide protection to gasoline station operators against oil company decisions that would destroy their businesses. We agree that the Legislature perceived a need for protection of gasoline station operators, most of whom do not own their own stations but rather lease them from a supplier from whom they are obligated to purchase gasoline, oil, and other items. Chapter 93E is one of a number of statutes enacted in this Commonwealth in recent years to redress the economic imbalance in particular relationships, mostly involving consumers. See Commonwealth v. DeCotis, 366 Mass. 234, 238 (1974).
We do not accept the defendant's further contention, however, that § 5A must be read to permit termination of a gasoline station dealer's lease only in the event of the
The defendant appears to concede that, if "due cause" in § 5A is not to be read as restrictively as he contends, Amoco's reasons for terminating the lease are sufficient. The parties stipulated that the lease was terminated because of Amoco's "good faith and honest judgment [that] the station was insufficiently profitable to it." We need not consider whether a good faith business judgment which, on inspection, is shown not to be supported by the facts, would constitute "due cause." Here, the parties have further stipulated that Amoco's return on its entire investment in the premises is less than one per cent. We regard this fact as sufficient to show that Amoco's good faith business judgment was reasonably founded.
The judgment for the defendant is reversed, and judgment shall be entered awarding possession of the premises to the plaintiff.
Congress has undertaken to regulate the relationship between gasoline station dealers and their suppliers as to franchise agreements entered into or renewed (or not renewed) on or after June 19, 1978. 15 U.S.C. § 2802 (a) (1) (1978). Nonrenewal is treated differently from termination (id. [b]  [B]), and nonrenewal for valid business reasons is allowed (id. [b]  [D]). State law must conform to Federal requirements. Id. at § 2806.