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Eastling v. BP Products North America

August 27, 2009

DAVID EASTLING; EFP, LLC, A MINNESOTA LIMITED LIABILITY COMPANY, APPELLANTS,
v.
BP PRODUCTS NORTH AMERICA, INC., A MARYLAND CORPORATION, APPELLEE.



Appeal from the United States District Court for the District of Minnesota.

The opinion of the court was delivered by: Gruender, Circuit Judge.

Submitted: June 9, 2009

Before MURPHY, ARNOLD and GRUENDER, Circuit Judges.

David Eastling and EFP, LLC (collectively, "Eastling"), entered into a real estate contract with BP Products North America ("BP") to purchase from BP the property on which Eastling had been operating a gas station. The real estate contract included a restrictive covenant preventing the sale of any non-BP petroleum products on the property. Eastling filed suit, seeking a declaratory judgment that the restrictive covenant was no longer valid and enforceable. Both parties filed motions for summary judgment. The district court*fn1 granted summary judgment to BP, and Eastling appeals. For the following reasons, we affirm.

I. BACKGROUND

In November 2003, Eastling purchased the land and a BP-branded gas station located at 600 Boone Avenue North in Golden Valley, Minnesota, from BP pursuant to a real estate contract. Before purchasing the property, Eastling had been operating the gas station as a retail contract operator, meaning Eastling leased the station from BP. BP had initially intended to develop the property as a company-operated BP Connect convenience store and gas station,*fn2 but it instead decided to sell the property to Eastling.

Under the real estate contract, BP agreed to sell the property to Eastling subject to certain "Restrictive Covenants," which were "annexed... and made a part" of the real estate contract. The "Petroleum Restriction," one of the restrictive covenants found in the second attachment to the real estate contract, states,

No part of the Property shall be used by Grantee [Eastling] or any other Grantee Party for an automobile service station, petroleum station, gasoline station, convenience store, quick-lube facility, or automobile repair shop, or for the purpose of conducting or carrying on the business of selling, offering for sale, storage, handling, distributing, or dealing in petroleum, gasoline, diesel fuel, kerosene, benzol, naphtha, greases, lubricating oils, any fuel used for internal combustion engines, lubricants in any form, automobile parts or accessories, tires, batteries, or other petroleum or petroleum-related products, except for the personal use or consumption of such products by Grantee or other occupants of the Property. For purposes of this restriction, the term "convenience store" shall mean any retail business with its primary emphasis on providing the public with a convenient location to quickly purchase a wide array of consumable products (predominantly food or food and gasoline) and services.

The above covenants and use restrictions bind and restrict the Property as covenants and restrictions running with the land and are deemed to benefit Grantor [BP] as an owner or lessee of lands in Hennepin County, Minnesota, or as the operator of retail operations in such County. These restrictive covenants will remain in full force and effect for a term of approximately ten (10) years commencing on the Closing Date and terminating on the tenth (10th) anniversary after the Completion Date,... whereupon these restrictive covenants will automatically lapse and terminate and be of no further force or effect.

To allow Eastling to continue to operate the gas station as a BP-branded station, the real estate contract further provided,

Purchaser expressly acknowledges and agrees that Seller has entered into this Contract only upon the express understanding that the Property shall (for 10 years, or shorter period if Amoco/BP and its successors and assigns cease to serve the area in which the Property is located), continue to be used following closing as an Amoco/BP (or its successors or assigns)-branded retail gasoline station supplied by Amoco/BP (or its successors or assigns)-branded jobber. Therefore, Seller hereby agrees that the petroleum use restriction set forth in Attachment #2 shall not be enforced by Seller against Purchaser or subsequent owner's [sic] of the Property, and Seller agrees to waive the same, so long as the gasoline station located on the Property continues to be an Amoco/BP (or its successors or assigns)-branded station supplied by Amoco/BP (or its successors or assigns)-branded jobber.... If Amoco/BP (or its successors and assigns) cease serving the area within which the Property is located, then Amoco/BP (or its successors or assigns) shall execute a recordable release to remove the petroleum use restriction from the Property.

The real estate contract also required Eastling to convert the station to a BP-Connect-style store.*fn3 Eastling claims that at the time of the sale, BP told him that it was planning to invest heavily in the Minneapolis-St. Paul market and that it planned to convert all of its Twin Cities stations to BP Connect stores. Eastling contends that he agreed to purchase the property and convert the station to a BP-Connect-style store based on BP's representation that it intended to develop BP Connect stores throughout the Twin Cities market.

Finally, the real estate contract required Eastling to enter into a "dealer supply agreement" with BP, which provided that BP would be the exclusive supplier of petroleum products to Eastling's station for ten years, beginning on December 16, 2004. The dealer supply agreement contained an early-termination option allowing Eastling to terminate it by giving BP ninety days' notice, paying all financial obligations then accrued, and paying certain liquidated damages.

After spending nearly three million dollars to purchase the property and rebuild the station, Eastling opened the BP-Connect-style store in 2004. Soon after, he learned that BP had decided to "decapitalize" the Twin Cities market. Between 2005 and 2006, BP sold its interests in all properties it owned in Hennepin County and assigned all of the leases it had in the market to those purchasers. BP ...


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