Court Watch

A U.S. District Court in New Jersey has held that if a franchisor, as sublessor of the lease of the franchised location, elects not to renew its master lease, it may terminate a Franchise Agreement denominated as a Commission Marketer Agreement (“CMA”) that was coterminous with the lease. In Luso Fuel Inc. v. BP Products North America, Inc. CCH Bus. Franchise Guide '14,166 (D. N.J., June 29, 2009), the plaintiff became a gasoline station franchise in July 2007 as the transferee of a prior owner. Since 1970, the defendant franchisor and its predecessor had a ground lease on the station premises that it subleased to its franchisee. The ground lease was to expire in December 2008, unless the defendant renewed it, which it had the right to do “at its election.” The CMA stated that the term of the franchise was subject to the term of the ground lease. In June 2008, the plaintiff was notified by the defendant that the defendant had lost its right to continue its tenancy, and, therefore, the CMA would terminate at the end of 2008. The plaintiff spent a considerable sum of money on the location based, it claimed, on the defendant's assurance that the lease would be renewed.