ABSTRACT

This article examines Indo-Phili, Inc. v. Circle K Stores, Inc., decided by the United States District Court for the Central District of California on March 19, 2026. The case involved a petroleum franchise dispute under the Petroleum Marketing Practices Act (PMPA) where franchisee Indo-Phili challenged franchisor Circle K’s nonrenewal of their franchise relationship. Circle K issued a Notice of Nonrenewal after Indo-Phili failed to accept a renewal offer containing increased rent and higher gasoline volume requirements. The court granted summary judgment in favor of Circle K, finding that the franchisor complied with all PMPA requirements and that the nonrenewal based on the franchisee’s failure to agree to non-discriminatory rent increases was lawful. The decision reinforces franchisors’ flexibility to modify franchise terms at renewal and clarifies that contract extensions do not invalidate prior valid nonrenewal notices. This ruling has significant implications for the balance between protecting franchisees from arbitrary termination and preserving franchisors’ business flexibility.

CASE CAPTION AND PARTIES

Indo-Phili, Inc. v. Circle K Stores, Inc., 2026 U.S. Dist. LEXIS 63308 (C.D. Cal. March 19, 2026), involved Plaintiff and Counter-Defendant Indo-Phili, Inc. (franchisee), a California corporation operating service stations in Southern California, and Defendant and CounterClaimant Circle K Stores Inc. (franchisor), a Texas corporation operating convenience stores and gas stations throughout the United States and internationally. The case was decided by the Honorable John F. Walter, United States District Judge for the Central District of California.

FACTUAL BACKGROUND

Indo-Phili was a family business started by Sheikh Hassan Imam and his two sons, operating four service stations in Southern California. The station at issue was a Mobil-branded retail motor fuel facility and convenience store located at property owned by Circle K at 3950 West Olympic Boulevard, Los Angeles, California.

On June 9, 2021, Circle K and Indo-Phili entered into a Contract of Sale (BrandedLessee), a Station Lease, and various related agreements and amendments, collectively establishing a petroleum franchise relationship under the PMPA that was set to expire on May 31, 2024, after a three-year term. On March 15, 2024, Circle K sent Indo-Phili a Renewal Offer proposing to extend the existing agreements for another three-year term from June 1, 2024 to

May 31, 2027. The Renewal Offer specified increased monthly base rents of $35,010 for months 1-12, $38,511 for months 13-24, and $42,362 for months 25-36, calculated based on current appraised property value.

The offer included a Voluntary Appraisal Option allowing Indo-Phili to challenge the rent calculation through a new appraisal if requested within twenty-five days. The Renewal Offer stated that if Indo-Phili did not timely elect the appraisal option, acceptance of the rental terms would be presumed unless Indo-Phili provided written notice to the contrary via certified mail within twenty-five days.

On May 21, 2024, Imam called Bryan Topham, Circle K’s Director of Wholesale Fuels for the West Coast Division, asking whether the rental and gasoline volume requirements could be reviewed and lowered. Imam made clear he did not want to lose the station, and Topham said he would look into the matter. That same day, Imam sent Topham an email confirming their conversation, noting that rent had increased by $6,000 to $42,000 and minimum gasoline volume requirements had increased to 151,000 gallons per month. Imam stated he already had the highest rent among Mobil stations and only pumped between 120,000-130,000 gallons monthly, questioning how he could pay the rental increase while increasing gas volume by almost 30,000 gallons.

He requested more time to review the documents while Circle K figured out the numbers for gas volume and rent. On May 24, 2024, Circle K issued a Notice of Nonrenewal pursuant to the PMPA, stating the franchise relationship would terminate effective August 29, 2024, based on Indo-Phili’s failure to agree to changes to the Station Lease, specifically the rent increase, which Circle K asserted was a valid basis under 15 U.S.C.S. § 2802(b)(3)(A).

On May 29, 2024, Imam attended a Mobil service station dealer meeting in Pasadena where he spoke with Topham about his concerns and asked if Circle K would consider changing to a Commissioned Based Marketing (CBM) model, under which Indo-Phili would manage the station for $0.15 per gallon while Circle K would own gasoline sales and set retail prices, with Indo-Phili operating the convenience store and car wash without paying rent. Between May 29 and July 12, 2024, Imam called Topham seven times to follow up, with Topham responding that he was working on it but never informing Imam that Indo-Phili would not be permitted to renew or that it was too late to accept the Renewal Offer. During this period, Indo-Phili continued paying rent and operating the business under the existing agreements.

On July 12, 2024, Imam emailed Topham noting he had not signed anything yet and requesting follow-up, to which Topham responded he was still waiting on modeling for CBM consideration. On July 22, 2024, Circle K emailed a Contract Extension extending the existing agreements through August 31, 2024. On August 3, 2024, Imam and Topham discussed Imam’s concerns and the CBM possibility, with Topham requesting financial documents. On August 13, 2024, Imam emailed Topham financial information with the subject line proposing conversion to CBM. On August 14, 2024, Circle K issued another Contract Extension through September 30, 2024. On September 16, 2024, Imam called Topham about the status, and Topham said he was still working on it.

On November 29, 2024, Imam emailed Topham noting it had been a while since they spoke about the Olympic site renewal. On December 12, 2024, Imam spoke with Topham who assured him he was still working on it. On December 19, 2024, Imam met with Mark Harrison, Circle K’s Development Manager, who informed him that Circle K would be repairing canopies at Imam’s three other locations. During this meeting, Harrison received a call from Topham on speaker phone, during which Topham informed Imam that the Renewal Offer had expired and Circle K would not convert the station to a CBM model, instead intending to run it as a Circle K company-operated station. That same day, Circle K issued a second Notice of Nonrenewal stating the franchise relationship would terminate effective March 19, 2025, based on Indo-Phili’s failure to agree to the rent increase.

On December 20, 2024, Imam called Harrison stating he was willing to sign the Renewal Offer with its original terms, but Topham informed Imam that Circle K would not renew the relationship and would proceed with termination and conversion to a company-operated station. Indo-Phili never signed or returned the renewal agreements, never took steps to accept or comply with the renewal terms, and instead continued operating under the original agreements.

PROCEDURAL HISTORY AND CURRENT POSTURE

On March 5, 2025, Indo-Phili filed a Complaint against Circle K alleging wrongful nonrenewal of franchise in violation of the PMPA, seeking an order enjoining the nonrenewal and mandating Circle K to present franchise renewal documents for execution. On March 12, 2025, Circle K filed its Answer and Verified Counterclaim, which was amended on April 2, 2025, seeking declaratory relief that its Notice of Nonrenewal was valid under the PMPA and that Indo-Phili must vacate the property by March 19, 2025. On April 16, 2025, Indo-Phili filed its Answer to Circle K’s Counterclaim. On September 26, 2025, Circle K filed a Motion for Summary Judgment. Indo-Phili filed its Opposition on October 27, 2025, Circle K filed a Reply on November 10, 2025, and Indo-Phili filed a Sur-Reply on December 16, 2025.

The court found the matter appropriate for submission on papers without oral argument pursuant to Federal Rule of Civil Procedure 78 and Local Rule 7-15. The court granted Circle K’s Motion for Summary Judgment on March 19, 2026, concluding that Circle K was entitled to judgment on both Indo-Phili’s Complaint and Circle K’s Counterclaim, finding that Circle K’s nonrenewal complied with all PMPA requirements and that Indo-Phili must vacate the property.

PARTIES’ POSITIONS

Circle K argued that it issued a valid and timely Notice of Nonrenewal on May 24, 2024, that the franchise relationship subsequently expired, that the nonrenewal did not violate the PMPA, that Indo-Phili must vacate the property, and that Circle K was entitled to declaratory relief that the relationship had ended. Circle K contended that Indo-Phili failed to agree to changes in the Station Lease, specifically the rent increase, which was calculated using a nondiscriminatory rent formula based on an appraisal process and offered in good faith in the normal course of business. Circle K asserted that the July 22 and August 14, 2024 Contract Extensions, continued negotiations regarding the CBM model, and the December 19, 2024 Notice of Nonrenewal did not void or invalidate the May 24, 2024 Notice of Nonrenewal.

Indo-Phili argued that Circle K failed to meet its burden of establishing that the renewal was offered in good faith and in the normal course of business because Circle K made the decision in September 2024 to convert the station to a company-operated station. Indo-Phili contended that it accepted the renewal, including the proposed rent increase, and that there was no requirement that Indo-Phili had to sign the Renewal Notice. Indo-Phili argued that the extensions, continued negotiations, and second nonrenewal notice demonstrated that the franchise relationship was still subject to renewal and that these actions voided or invalidated the May 24, 2024 Notice of Nonrenewal.

FRANCHISE AGREEMENT DOCUMENTS IN DISPUTE

The franchise agreements at issue included the Contract of Sale (Branded-Lessee), the Station Lease (Lessee Branded) dated June 1, 2021, and various related agreements and amendments. Section 1(b) of the Contract of Sale provided that Circle K had the right to grant temporary extensions of the Contract of up to 180 days, and that any such extension would not be considered a renewal of the Contract. Section 34 of the renewal Contract of Sale provided that the Contract or any modification thereof would not be binding upon Circle K until signed on its behalf by an authorized representative of Circle K.

Section 32 of the original Contract of Sale provided that no amendment, deletion, modification, or alteration to the Contract would have any effect unless and until made in writing and signed by an authorized representative of Circle K and by Indo-Phili. Section 28 of the Station Lease similarly provided that no amendment, deletion, modification or alteration to the Lease would have any effect unless and until made in writing and signed by an authorized representative of Circle K and by Indo-Phili.

The March 15, 2024 Renewal Offer specified that base rent would be calculated upon current appraised property value with monthly base rents of $35,010 for months 1-12, $38,511 for months 13-24, and $42,362 for months 25-36. The Renewal Offer included a Voluntary Appraisal Option allowing Indo-Phili to challenge the rent calculation through a new appraisal if requested within twenty-five days by certified mail. The Renewal Offer stated that if Indo-Phili did not timely elect the appraisal option, acceptance of the rental terms would be presumed unless Indo-Phili expressly provided written notice to the contrary via certified mail within twenty-five days.

LEGAL STANDARDS AND COURT’S ANALYSIS

The court applied the summary judgment standard under Federal Rule of Civil Procedure 56(a), which requires the movant to show there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law. The moving party has the burden of demonstrating the absence of a genuine issue of fact for trial. Once the moving party meets its burden, the opposing party may not rest upon mere denials but must set out specific facts showing a genuine issue for trial. When the non-moving party bears the burden of proving an element essential to its case, that party must make a showing sufficient to establish a genuine issue of material fact or be subject to summary judgment. An issue is genuine if evidence is produced that would allow a rational trier of fact to reach a verdict in favor of the non-moving party.

The court explained that the PMPA was enacted to serve two main objectives: first, to provide protection for petroleum marketing franchisees against arbitrary or discriminatory termination or nonrenewal of their service station franchises; and second, to provide adequate flexibility so that franchisors may initiate changes in their marketing activities to respond to changing market conditions and consumer preferences. The court noted it is particularly important to recognize franchisors’ need for flexibility, and that exceptions allowing for franchise termination are broad, reflecting an intent to allow reasonable business judgments by the franchisor.

The cornerstone of the PMPA is 15 U.S.C.S. § 2802, which precludes franchisors from terminating any franchise or failing to renew any franchise relationship unless notification requirements are met and the termination or nonrenewal is based on specified grounds. Section 2802(a) makes a significant distinction between a franchise and the franchise relationship. The term franchise refers to any number of contracts between a retailer/distributor and a supplier of motor fuel, and Section 2802(a)(1) prohibits a franchisor from terminating a franchise before it expires. The term franchise relationship refers to the respective motor fuel marketing or distribution obligations and responsibilities of a franchisor and a franchisee which result from the marketing of motor fuel under a franchise.

The legal entity of the franchise relationship was created by Congress to avoid any contention that because the franchise does not exist after it expires, there is nothing to renew, and to clarify that the PMPA contemplates changes in the specific provisions of the franchise agreement at the time of renewal. When a franchise expires, the franchise relationship between the parties continues and it is that relationship which the franchisor is obligated to renew under Section 2802(a)(2) unless the requirements of Section 2802(b)(1) are met. Franchisors may terminate or decline to renew a franchise relationship only if they satisfy both prongs of Section 2802(b)(1), which requires that the notification requirements of Section 2804 are met and that such nonrenewal is based upon a ground described in paragraph (2) or (3).

Section 2804(a) provides that prior to nonrenewal of any franchise relationship, the franchisor shall furnish notification to the franchisee in the manner described in subsection (c) and not less than 90 days prior to the date on which such nonrenewal takes effect. Section 2804(c) provides that notification shall be in writing, shall be posted by certified mail or personally delivered to the franchisee, and shall contain a statement of intention not to renew the franchise relationship together with the reasons therefor, the date on which such nonrenewal takes effect, and the summary statement prepared under subsection (d).

The court found that Circle K satisfied the requirements of Section 2804 when it issued the May 24, 2024 Notice of Nonrenewal in writing and sent it to Indo-Phili by certified mail with at least ninety days notice. The court noted it was undisputed that the May 24, 2024 Notice of Nonrenewal satisfied all Section 2804 requirements. The court also found that the May 24, 2024 Notice of Nonrenewal satisfied the requirements of Section 2802(b)(1) because it included a lawful reason for the nonrenewal—Indo-Phili’s failure to agree to changes to the Station Lease, specifically the rent increase.

The PMPA requires only that the franchisor articulate with sufficient particularity the basis for the decision not to renew so that the franchisee can determine his rights under the Act. Section 2802(b)(3)(A) provides that the failure of the franchisor and the franchisee to agree to changes or additions to the provision of the franchise is a ground for nonrenewal if such changes or additions are the result of determinations made by the franchisor in good faith and in the normal course of business, and such failure is not the result of the franchisor’s insistence upon such changes or additions for the purpose of converting the leased marketing premises to operation by employees or agents of the franchisor for the benefit of the franchisor or otherwise preventing the renewal of the franchise relationship.

The court found that Indo-Phili admitted that after Circle K made the Renewal Offer, it never signed anything. Instead, Indo-Phili informed Circle K through phone calls and emails that it thought the rent and minimum gasoline volumes in the Renewal Offer were too high and asked Circle K to consider lowering them. Indo-Phili also pursued converting its relationship with Circle K from a franchise relationship to an alternative CBM model. The court rejected IndoPhili’s argument that it was not required to sign the Renewal Offer in order to accept it, noting that although the Renewal Offer did not require a signature, the renewal franchise agreements clearly required a signature in order to become effective.

Section 34 of the renewal Contract of Sale provided that the Contract or any modification thereof shall not be binding upon Circle K until signed on its behalf by an authorized representative of Circle K. The original franchise agreements also required signatures by both parties to effectuate any modification, and Indo-Phili could not persuasively argue that the parties agreed to some sort of modification of the original agreements.

COURT’S RESOLUTION OF GOOD FAITH ISSUE

The court concluded that the increased rent in the Renewal Offer was sought by Circle K in good faith. The court found it undisputed that the increased rental amount was based on a nondiscriminatory rent formula calculated by an appraisal process, citing objective rental formulas and uniform application, appraisal procedures, and rent review programs as objective evidence of good faith. The court noted that the Renewal Offer included a Voluntary Appraisal Option which allowed Indo-Phili to challenge the appraisal through a formal process, but although Indo-Phili expressly protested the increased rent and asked Circle K to consider an alternative arrangement such as the CBM Model, it never pursued the Voluntary Appraisal Option.

The court rejected Indo-Phili’s argument that Circle K acted in bad faith by planning to convert the property to a company-operated station, finding that Indo-Phili failed to provide any evidence demonstrating that Circle K took any affirmative steps to do so prior to Indo-Phili’s failure to agree to the Renewal Offer and Circle K’s issuance of the Notice of Nonrenewal. The undisputed evidence demonstrated that Circle K issued the Notice of Nonrenewal only after Indo-Phili objected to the increase in rent and minimum gasoline volumes. Indo-Phili admitted that Circle K did not consider converting the property to a company-operated station until September 2024, nearly four months after Circle K issued the Notice of Nonrenewal.

COURT’S REASONING FOR ACCEPTING CIRCLE K’S POSITION

The court accepted Circle K’s position over Indo-Phili’s for several reasons. First, the court found that Indo-Phili’s failure to sign the renewal agreements was fatal to its claim because the agreements explicitly required signatures to become effective, and the original agreements required written modifications signed by both parties. Second, the court found that Circle K’s rent increase was based on an objective, non-discriminatory formula calculated through an appraisal process, which constituted objective evidence of good faith. Third, the court found no evidence that Circle K planned to convert the station to a company-operated facility prior to issuing the May 24, 2024 Notice of Nonrenewal, as Indo-Phili admitted Circle K did not consider conversion until September 2024, four months after the nonrenewal notice. Fourth, the court found that Indo-Phili had the opportunity to challenge the rent through the Voluntary Appraisal Option but failed to pursue it, instead only protesting the rent and requesting alternative arrangements. Fifth, the court found that Circle K’s nonrenewal based on Indo-Phili’s failure to agree to a non-discriminatory rent increase, after Indo-Phili was given several months to consider the rent increase, was a legitimate basis for nonrenewal under the PMPA.

The court emphasized that Congress affirmatively declined to give franchisees more elaborate protections because of concern that this might unduly interfere with franchisors’ property rights, possibly amounting to an unconstitutional taking, and addressed this problem by allowing the franchisor to alter the terms of the franchise at the time of renewal and to terminate the franchise relationship if agreement could not be reached.

COURT’S ANALYSIS OF EXTENSIONS AND MULTIPLE NOTICES

The court rejected Indo-Phili’s argument that the July 22 and August 14, 2024 Extension Notices, the parties’ negotiations regarding conversion to a CBM model, and the December 19, 2024 Notice of Nonrenewal voided or otherwise invalidated the May 24, 2024 Notice of Nonrenewal. The court found that the extension notices did not void or invalidate the May 24, 2024 Notice of Nonrenewal because such extensions were permitted pursuant to the franchise agreements. Section 1(b) of the Contract of Sale provided that Circle K had the right to grant temporary extensions of the Contract of up to 180 days, and that any such extension would not be considered a renewal of the Contract. The court stated that the law is clear that such extensions and even subsequent notices of nonrenewal do not have any effect on an initial, valid notice of nonrenewal.

The court cited authority holding that a notice is not revoked by the parties’ mutual agreement to extend the original contract for the purpose of continuing negotiations. The court explained that because the PMPA distinguishes between the nonrenewal of franchise relationship and the termination of the franchise, which is the contract(s) governing the franchise relationship, the extensions of the franchise agreements in this case could not void the nonrenewal of the franchise relationship pursuant to the May 24, 2024 Notice of Nonrenewal. The court found that the franchisee’s attempt to rely on remaining on the property posttermination and attempts to agree to renewal as proof that the franchise relationship endured was pure, unadulterated sophistry.

POTENTIAL SIGNIFICANCE FOR FUTURE FRANCHISE RELATIONSHIPS

This decision may have significant implications for both franchisees and franchisors in petroleum franchise relationships governed by the PMPA. For franchisors, the decision appears to reinforce a degree of flexibility to modify franchise terms at renewal, including rent increases based on objective appraisal formulas, without necessarily being deemed to act in bad faith. At the same time, such changes may raise practical and legal considerations for franchisees evaluating renewal offers. Franchisors may be able to issue valid nonrenewal notices when franchisees do not timely accept renewal offers with modified terms, even if the franchisor continues negotiations or extends the existing contract temporarily. The ruling also suggests that contract extensions for the purpose of continuing negotiations do not automatically invalidate prior nonrenewal notices, which may provide some additional predictability in business planning while still leaving room for case-specific outcomes.

For franchisees, the decision appears to emphasize the importance of timely and formal acceptance of renewal offers, particularly when the franchise agreements require written signatures for modifications. Franchisees may not be able to rely on informal communications expressing a willingness to accept terms or continued operation under existing agreements as constituting acceptance of renewal offers.

The decision may also highlight the importance of utilizing contractual mechanisms such as voluntary appraisal options when challenging proposed rent increases, rather than simply protesting the increases informally. Franchisees should be aware that continued negotiations after a valid nonrenewal notice does not necessarily preserve their right to renew, and that late acceptance of renewal terms may not be effective once a valid nonrenewal notice has been issued. The decision appears to reinforce the PMPA’s dual objectives of protecting franchisees from arbitrary termination while preserving franchisors’ business flexibility to respond to changing market conditions.

COMPARISON TO OTHER JURISDICTIONS

The Central District of California’s decision seems to align closely with First Circuit precedent, particularly the C.K. Smith case, which held that failure to timely respond to a renewal offer constitutes a valid ground for nonrenewal under Section 2802(b)(3)(A) of the PMPA and that franchisors are not required to wait until the end of the franchise term to issue a notice of nonrenewal when the franchisee fails to respond within the specified timeframe. The court’s reliance on C.K. Smith may demonstrate consistency with First Circuit jurisprudence holding that failure to execute renewal documents in a timely manner can be entirely the franchisee’s fault and that there is no failure more important to the franchise relationship than a failure to enter into the very lease by which that relationship would be renewed.

The decision also may align with Ninth Circuit precedent in cases like Dass v. Tosco Corp., which held that various notices of nonrenewal and extensions do not affect the validity of an initial, valid notice of nonrenewal. The court’s analysis of good faith rent increases based on objective appraisal formulas appears to be consistent with decisions from multiple jurisdictions, including the District of New Jersey in Florham Park Chevron and the District of Connecticut in Bellmore v. Mobil Oil Corp., which found that rental formulas and appraisal procedures constitute objective evidence of good faith. The decision’s emphasis on franchisors’ flexibility to modify terms at renewal may reflect the broad interpretation of PMPA exceptions found in First Circuit cases like Veracka v. Shell Oil Company, which held that exceptions allowing for franchise termination are broad, which may suggest an intent to allow reasonable business judgments by the franchisor.

The court’s rejection of the argument that planning to convert a station to company operation demonstrates bad faith may be consistent with First Circuit precedent in C.K. Smith v. Motiva Enterprises, which held that there must be evidence of affirmative steps toward conversion prior to the nonrenewal notice for such an argument to succeed.

LAW AND ECONOMICS PERSPECTIVE

From a law and economics perspective, this decision appears to efficiently balance the competing interests of franchisors and franchisees by minimizing transaction costs while preserving property rights and contractual freedom. The court’s holding that objective rent formulas based on appraisals may constitute good faith reduces information asymmetries and provides a clear, predictable standard that both parties can rely upon when negotiating renewals. By allowing franchisors to issue nonrenewal notices when franchisees fail to timely accept renewal offers, the decision may reduce holdout problems that could otherwise allow franchisees to extract rents by delaying acceptance while continuing to operate under expired terms.

The ruling that contract extensions do not invalidate prior nonrenewal notices may prevent strategic behavior by franchisees who might otherwise use continued negotiations as a means to indefinitely extend their occupancy beyond the franchise term. The decision appears to promote efficient resource allocation by allowing franchisors to reclaim properties for alternative uses, including company operation, when franchisees are unwilling to accept market-based rent increases. The requirement that franchisees formally accept renewal offers through written signatures may reduce ambiguity and potential litigation costs by establishing clear evidence of contract formation.

However, the decision may create some inefficiency by potentially discouraging goodfaith negotiations after nonrenewal notices are issued, as franchisees may be reluctant to invest time in discussions that cannot result in renewal. The ruling’s emphasis on procedural compliance over substantive fairness may also lead to outcomes where franchisees lose valuable business relationships due to technical failures to timely respond, even when they ultimately would have accepted the renewal terms, potentially destroying relationship-specific investments and goodwill.

FINAL JUDGMENT

The court ordered the parties to meet and confer and agree on a joint proposed judgment consistent with the order, to be lodged with the court by March 26, 2026. The final judgment entered on March 27, 2026, provided that judgment was entered in favor of Circle K and against Indo-Phili on Indo-Phili’s Complaint, with Indo-Phili to take nothing by its Complaint. Judgment was also entered in favor of Circle K and against Indo-Phili on Circle K’s Counterclaim for declaratory relief under 28 U.S.C.S. § 2201. The court declared that Circle K’s Notice of Nonrenewal dated May 24, 2024 was valid and lawful under the Petroleum Marketing Practices Act, 15 U.S.C.S. §§ 2801-2841, and that Indo-Phili must vacate the property located at 3950 West Olympic Boulevard, Los Angeles, California 90019 within 60 days of entry of the judgment. The judgment resolved all claims and counterclaims in the action.