LEGAL TRENDS
ises is ‘put to an end.’” Id. at 1257. By contrast, “[c]onduct that does not force an end to the franchise... is not prohibited by the Act’s plain terms.” Id. at 1257–58. All of the plaintiffs in Mac’s Shell remained in business through the end of the franchise term or abandoned the franchise for other reasons. Accordingly, the Court concluded that none had been “terminated” within the meaning of the PMPA. Id. at 1262 & n.10. Because that principle was sufficient to resolve the issues before it, the Court reserved for another day Shell and Motiva’s argument that the PMPA does not create a cause of action for “constructive termination” under any circumstances. Id. at 1257 n.4, 1260 n.8. The Court’s holding effectively destroys the ability of franchisees to pursue a claim for constructive termination while remaining in operation of their service stations, as has become increasingly common in some circuits. Moreover, because the Court reserved the issue of whether “constructive” termination claims exist at all, franchisors remain free to advance the argument that no such claim exists under the PMPA. A Franchisee Who Signs Renewal Paper Cannot Claim “Constructive” Nonrenewal On the constructive nonrenewal claim, the Court adopted a bright-line rule that “a franchisee that chooses to accept a renewal agreement cannot thereafter assert a claim for unlawful nonrenewal” under the PMPA, even if the franchisee signs the renewal agreement “under protest.” Id. at 1262, 1263. Where a franchisee signs “under protest,” the Court reasoned, there has been no “failure to renew” the franchise relationship on the part of the franchisor. Therefore, no claim will lie under these circumstances. Id. at 1263–64. This bright-line holding will eliminate a great deal of the confusion that was created by Pro Sales, Inc. v. Texaco USA, 792 F.2d 1394 (9th Cir. 1986) and similar cases, which had allowed dealers to sign renewal agreements “under protest” and thereafter
file suit alleging “constructive” nonrenewal while continuing to operate their stations. The Court’s ruling will reduce franchisees’ ability to manipulate the renewal process by trying to have things both ways, simultaneously challenging renewal terms in court while proceeding to operate under them. Franchisors will benefit greatly from this increased certainty in the statutory renewal process. David M. Rodi is a partner at Baker Botts L.L.P., who practices in the areas of antitrust and energy litigation. Along with cocounsel, Baker Botts represented Shell and Motiva in the appeal of the Mac’s Shell case.
On Credit Card Cons Beware:
Your Sentence May Be Based on What Could Have Been Fraudulently Charged, Not What Was Actually Charged
I
By N. Jill Yaziji n U.S. v. Harris, _____ F.3d _____, No. 08-11121, and U.S. v. William, _____ F.3d _____, No. 08-11151, Harris and Williams pled guilty to bank fraud and conspiracy to use unauthorized access devices, respectively. Both defendants, however, challenged their sentences claiming the district courts wrongly interpreted the Sentencing Guidelines. The Guidelines base the offense level of a crime involving fraud on the amount of loss inflicted by a defendant—the bigger that loss, the longer the sentence. “Loss,” in turn, is defined as “the greater of actual or intended loss.” Therefore, how a court interprets “intended loss” is highly consequential. Indeed, both district courts interpreted the “intended loss” as the aggregate limits of the credit cards compromised instead of the aggregate amounts fraudulently charged to these cards.1 The Fifth Circuit Court of Appeals affirmed the district courts’ decisions,2 holding Harris and Williams accountable for the aggregate limits of the compromised
credit cards. However, it provided important caveats on the use of aggregate limits as a measure of intended loss. First, the Court considered whether the “intended loss” calculation by the district courts was a question of law subject to de novo review, or one of fact accorded far more deference by the Court of Appeals. Naturally, both defendants argued it was the former; the Fifth Circuit agreed. It held that while the amount of loss incurred by the victims of fraud was a factual issue, the method of determining that amount involved a question of law. Second, while the Court ultimately agreed with the district courts’ method of determining the amount of intended loss in this instance, it cautioned against using the aggregate limit calculation as a bright-line formula and a misapplication of the holding in U.S. v. Sowels, 998 F.2d 249 (5th Cir. 1993) and other precedents. The inquiry must be specific: Did the defendant control the fraudulently accessed credit cards or did he transfer it to a third party whom he did not control, hence potentially jeopardizing the entire face value of the card? Was the offense complete when he was apprehended, or did he intend to charge the compromised cards further? Since both Harris and Williams transferred the cards to third parties whom they did not control, the Court of Appeals held that the district courts may infer the defendants intended the loss to be the entire aggregate limits of the credit cards and determine their sentences accordingly. N. Jill Yaziji is the Principal of Yaziji Law Firm, a downtown firm specializing in business litigation and personal injury, and a member of the editorial board of The Houston Lawyer. Endnotes
1. In both cases, the difference between the aggregate limits and the aggregate amounts was substantial. In Harris, for instance, the total amount fraudulently charged was less than $12,000, while the total credit limit of all cards fraudulently accessed was almost $90,000. 2. The Court of Appeals affirmed Harris’ sentence in its entirety and affirmed the district court’s determination that Williams should be held accountable for the entire aggregate limit of the credit cards he compromised but reversed his sentencing on procedural grounds.
thehoustonlawyer.com
May/June 2010
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