January 27, 2026|Franchise Frontlines
January 27, 2026 | Appellate Court of Connecticut | Published Opinion
Executive Summary
In a published opinion, the Appellate Court of Connecticut affirmed judgment for a fuel distributor that terminated lease and commissioned agent agreements with three convenience store operators, holding that the relationships were not protected “franchises” under the Connecticut Petroleum Franchise Act (“CPFA”), General Statutes § 42-133j et seq. The plaintiffs argued that their consignment-style arrangements qualified them as “retailers” and therefore franchisees entitled to statutory protection against termination absent good cause. The court rejected that argument, concluding that because the plaintiffs did not purchase fuel, take title, assume market risk, or exercise entrepreneurial control over pricing and supply, they were not retailers within the meaning of § 42-133k. In reaching its decision, the court relied on federal Petroleum Marketing Practices Act (“PMPA”) precedent and prior Connecticut authority distinguishing independent retailers from commissioned agents. A detailed dissent argued that the 1991 statutory amendments expanded the Act to cover consignment relationships. The decision is particularly relevant to distributors and franchisors employing commissioned agent or consignment models in regulated industries.
Relevant Background
The defendant, Aldin Associates Limited Partnership, leased convenience store premises to the plaintiffs and entered into “Commissioned Agent Agreements” governing the sale of motor fuel. Under those agreements:
- The defendant retained ownership of the motor fuel until sold to retail customers.
- The defendant arranged delivery and bore risk of loss in transit.
- The defendant owned the underground storage tanks and fuel equipment.
- The defendant set retail fuel prices in its sole discretion.
- The plaintiffs sold fuel “for the account of” the defendant.
- Sale proceeds were held “in trust” for the defendant and remitted after deduction of commissions.
The plaintiffs had “no involvement in the purchase, negotiation, transport, or otherwise with respect to the petroleum products delivered to the station.”
When the defendant issued termination notices pursuant to contractual provisions, the plaintiffs brought suit alleging that the terminations violated § 42-133l(a), which prohibits termination of a petroleum franchise absent good cause. The central legal issue became whether the plaintiffs qualified as “retailers” under § 42-133k and thus franchisees entitled to statutory protection.
Decision
The Appellate Court exercised plenary review because the case turned on statutory interpretation. It began with § 42-133l(a), which provides that “[n]o franchisor shall … terminate, cancel or fail to renew a franchise, except for good cause shown.”
Whether the plaintiffs were protected turned on whether they were “retailers” within the statutory definition of “franchise” under § 42-133k. The statute incorporates the PMPA framework for defining franchise relationships but does not separately define “retailer.”
The court deemed the statute ambiguous in that respect and examined legislative history and federal case law. It relied heavily on Farm Stores, Inc. v. Texaco, Inc., 763 F.2d 1335 (11th Cir. 1985), which held that an operator who did not purchase fuel, take title, bear market risk, set price, or retain proceeds was not a “retailer” under the PMPA.
The Connecticut court also relied on Automatic Comfort Corp. v. D & R Service, Inc., 627 F. Supp. 783 (D. Conn. 1986), which concluded that a commissioned station operator was not “engaged in the business of offering/selling gasoline,” but was instead “the temporary custodian of the gasoline, the caretaker of the property, the cashier, all as part of [the supplier’s] business.”
Additionally, the court referenced Getty Petroleum Marketing, Inc. v. Ahmad, 253 Conn. 806 (2000), where the Connecticut Supreme Court held that parties who did not own gasoline or assume substantial market risk were not retailers under the General Franchise Act because they lacked “entrepreneurial responsibility.”
Applying those principles, the Appellate Court found that the plaintiffs:
- Did not purchase the motor fuel.
- Did not take title.
- Did not assume meaningful market risk.
- Did not set retail price.
- Did not hold the required fuel retailer license.
- Remitted all proceeds to the defendant.
Although the plaintiffs argued that the statutory inclusion of “consignment” expanded coverage, the court rejected that theory. It concluded that the parties’ agreements did not constitute true consignment arrangements because the plaintiffs lacked possession and control of the fuel in a manner consistent with entrepreneurial retail operation.
The court emphasized that accepting the plaintiffs’ interpretation would create an “absurd result,” including placing the defendant in automatic violation of § 42-133l(f), which prohibits franchisors from requiring franchisees to sell gasoline at a specific price — despite the agreements expressly granting the defendant sole pricing authority.
Accordingly, the court affirmed judgment for the defendant.
The Dissent
Judge Pellegrino dissented, arguing that the 1991 amendments to the CPFA broadened coverage to include consignment relationships. He emphasized the plaintiffs’ operational responsibilities in maintaining the premises, supervising employees, and maximizing fuel sales. In his view, those factors demonstrated sufficient possession and control to qualify as retailers under the statute.
The dissent underscores that this issue is not free from debate and that statutory coverage questions may remain fact-intensive.
Looking Forward
For franchisors and distributors operating under commissioned agent or consignment structures, the decision offers important guidance.
First, courts will focus on entrepreneurial indicia: ownership, title, pricing control, assumption of market risk, and licensing. Entities that merely facilitate sales “for the account of” another — without purchasing inventory or bearing risk — may not qualify as statutory franchisees.
Second, contract drafting matters. The majority repeatedly referenced the allocation of ownership, risk, and pricing authority in the agreements. Clear documentation of independent contractor status and economic structure significantly influenced the outcome.
Third, statutory interpretation remains jurisdiction-specific. Connecticut aligned its reasoning with federal PMPA precedent. Other jurisdictions may interpret similar statutes differently, particularly where legislative language diverges.
Finally, while this decision narrows statutory coverage in Connecticut for commissioned agents, it does not eliminate franchise risk in other models where operators purchase product, set prices, assume market risk, or otherwise function as independent retailers.
For franchisors and fuel distributors using hybrid lease/agency models, this opinion reinforces the importance of maintaining economic clarity and consistency between contractual allocation of rights and actual operational practice.
This article is based solely on the opinion of the Court in this matter. The author has not conducted any independent investigation into the facts. For the avoidance of doubt, each statement related to the law and facts in this article is drawn from the Court’s opinion in this case.
Thomas O’Connell is a Shareholder at Buchalter LLP and Chair of the firm’s Franchise Practice Group. For questions about this article or media inquiries, you can contact Tom at toconnell@buchalter.com.
This communication is not intended to create, and does not create, an attorney-client relationship or any other legal relationship. No statement herein constitutes legal advice, nor should it be relied upon or interpreted as such. This communication is for general informational purposes only and is not a substitute for legal counsel. Readers should not act or refrain from acting based on any information provided without seeking appropriate legal advice specific to their situation. For more information, visit www.buchalter.com.
