December 10, 2025|Franchise Frontlines
December 10, 2025 | United States District Court for the District of Puerto Rico | Unpublished Opinion
Executive Summary
In an unpublished opinion, Judge María Antongiorgi-Jordan of the United States District Court for the District of Puerto Rico granted a temporary restraining order under the Petroleum Marketing Practices Act (“PMPA”), 15 U.S.C. § 2801 et seq., temporarily enjoining a petroleum franchisor from terminating or selling a gasoline service station pending further proceedings. The franchisee alleged that Puerto Rico Energy, LLC lacked statutory grounds for nonrenewal and failed to make a bona fide offer to sell the premises. Applying the PMPA’s statutory standard—which requires only “sufficiently serious questions going to the merits” and a balance of hardships favoring the franchisee—the court concluded that the franchisee raised fair grounds for litigation and that the balance of hardships supported maintaining the status quo. The ruling does not resolve the merits of the dispute and leaves open whether the franchisor ultimately will be able to justify its actions under the Act.
Relevant Background
Isla Verde Service Station is a family-owned gasoline station in Carolina, Puerto Rico, that operated under a franchise relationship with Puerto Rico Energy, LLC for approximately twelve years. The original written franchise agreement expired in May 2024, after which the parties continued operating on a month-to-month basis.
Before expiration, the franchisor advised that it intended to move to a “dealer-owned, dealer-operated” model. Under that approach, the franchisee would be required to purchase the premises while continuing to purchase branded fuel from the franchisor. The parties engaged in extended negotiations regarding the sale of the premises. The franchisor ultimately issued written notice that the franchise relationship would expire in December 2025 and proposed what it characterized as an “exit offer.”
The franchisee filed suit under the PMPA and sought emergency injunctive relief to prevent termination and sale of the property.
Decision
The court began by recognizing that injunctive relief under the PMPA is governed by a statutory framework that differs from the traditional Rule 65 standard. Under 15 U.S.C. § 2805(b)(2), a court “shall” grant preliminary relief if the franchisee shows (1) sufficiently serious questions going to the merits to make them a fair ground for litigation and (2) that the balance of hardships favors the franchisee.
The court emphasized that this is a threshold inquiry and does not require the franchisee to prevail on the merits.
The franchisor relied on 15 U.S.C. § 2802(b)(3)(A), which permits nonrenewal where the parties fail to agree on changes or additions to the franchise, provided those changes result from determinations made in good faith and in the normal course of business and are not insisted upon for the purpose of preventing renewal.
The franchisee alleged that the proposed transition to a dealer-owned model and the sale price demanded were not made in good faith, were not in the ordinary course of business, and were structured in a manner that would effectively preclude renewal. Among other things, the franchisee alleged that no independent appraisal was obtained and that the asking price materially exceeded fair market value.
Without making findings on the ultimate merits, the court concluded that these allegations were sufficient to raise “serious questions” under the PMPA’s statutory standard.
The court separately addressed the PMPA’s requirement that, in certain circumstances, a franchisor must make a “bona fide offer to sell” its interest in the premises and provide a right of first refusal. Courts apply an objective test to determine whether an offer is bona fide, examining whether it approaches fair market value and conforms to ordinary business practices. The franchisee’s allegations regarding valuation and negotiation practices were sufficient, at this stage, to present a fair ground for litigation on that issue as well.
Turning to the balance of hardships, the court noted that the franchisee faced potential loss of its longstanding business and associated goodwill if the franchise relationship were terminated and the premises sold. By contrast, the franchisor would continue to receive revenue under the existing arrangement during the temporary restraining order period. On the limited record before it, the court determined that the hardship to the franchisee outweighed any interim burden on the franchisor.
The court therefore temporarily enjoined termination and sale of the premises pending further proceedings, including consideration of a preliminary injunction.
Looking Forward
This decision should be read narrowly and in context.
First, the court applied the PMPA’s statutory injunction standard at an early stage of litigation. The ruling reflects only a determination that sufficiently serious questions exist—not a finding that the franchisor acted in bad faith or violated the statute. The franchisor remains free to develop a factual record demonstrating that its business model change and sale offer satisfy the Act’s requirements.
Second, the PMPA continues to impose heightened procedural scrutiny in the petroleum franchise context. Where a franchisor relies on § 2802(b)(3)(A), contemporaneous documentation of business rationale, consistent implementation across the system, and objective valuation support may prove important in defending nonrenewal decisions.
Third, the “bona fide offer” requirement remains fact-intensive. Courts generally evaluate whether an offer reasonably approximates fair market value under an objective framework. Disagreements over valuation, standing alone, do not automatically establish a violation of the Act. However, significant disparities coupled with procedural irregularities may invite judicial scrutiny.
Finally, this case underscores that courts may preserve the status quo where statutory questions are fairly raised. For franchisors, careful attention to notice provisions, valuation methodology, and the documented basis for system-wide changes may reduce the likelihood of interim injunctive relief.
As the case proceeds, the ultimate merits determination will depend on the evidence developed, including whether the franchisor’s determinations were made in good faith and in the normal course of business as contemplated by the PMPA.
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.
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