## Facts

- Gerald W. Moody controlled Jermoo’s, Inc., which operated three Wisconsin retail gasoline dealerships and a separate wholesale “jobbership” relationship with Amoco Oil Co.
- Each retail dealership was governed by its own lease and supply agreement; the retail contracts had no cross-default provisions.
- On January 26, 1983, the debtors’ bank accelerated a loan and set off funds in the debtors’ checking account, causing checks to be dishonored, including checks payable to Amoco.
- Amoco issued default and termination notices under the dealership and jobbership agreements and asserted statutory support under the Petroleum Marketing Practices Act (PMPA).
- The debtors filed Chapter 11 and, as debtors-in-possession, brought an adversary proceeding seeking to assume contracts under 11 U.S.C. § 365 and to obtain declaratory and injunctive relief under the PMPA.
- Moody testified the debtors could not cure within Amoco’s five-day cure period but were ready, willing, and able to cure after the adversary proceeding began.

## Issues

1. Whether the PMPA claim was a “related proceeding” under the interim bankruptcy rule such that final adjudication belonged in the district court rather than the bankruptcy court.
2. Whether the debtors could assume the Amoco jobbership contract under 11 U.S.C. § 365 despite prepetition defaults and Amoco’s attempted termination.
3. Whether the denial of preliminary injunctive relief under the PMPA should be upheld on the record presented.

## Decision

- The Seventh Circuit held the PMPA claim was a “related proceeding” under the interim rule and reversed the remand of that claim to the bankruptcy court for final disposition.
- The court reversed the ruling that the debtors could not assume the jobbership contract under § 365.
- The court affirmed the remainder of the district court’s disposition, including denial of preliminary injunctive relief under the PMPA.

## Legal Principles

- A federal statutory claim arising under non-bankruptcy law that can affect the bankruptcy estate may be “related” to the bankruptcy case but not a core bankruptcy matter; under the interim rule, final judgment in such a related proceeding lies with the district court, not the bankruptcy court.
- A debtor-in-possession may assume an executory contract under 11 U.S.C. § 365 if it cures or provides adequate assurance of prompt cure of defaults and provides adequate assurance of future performance.
- Whether an agreement remains assumable can depend on whether termination was effective under applicable non-bankruptcy law, including federal statutory requirements applicable to the relationship.
- Under the PMPA, termination must comply with statutory grounds, notice, and cure requirements; payment defaults and dishonored checks may constitute statutory grounds where material and reasonable.
- Preliminary injunctive relief under the PMPA requires a sufficient showing on the merits and equities; inability to cure within the specified cure period may weigh against such relief.

## Conclusion

The Seventh Circuit treated the franchisee’s PMPA challenge as a related, non-core proceeding for district-court adjudication and held the Chapter 11 debtors were not categorically barred from assuming the executory jobbership contract under § 365, while leaving intact the denial of preliminary PMPA injunctive relief on the record presented.


Moody v. Amoco Oil Co., 734 F.2d 1200 (7th Cir. 1984)