                              In the

United States Court of Appeals
               For the Seventh Circuit

No. 11-2065

E MMANUEL JOSEPH,
                                                  Plaintiff-Appellant,
                                  v.

S ASAFRASNET, LLC , a Wisconsin
limited liability company,
                                                 Defendant-Appellee.


             Appeal from the United States District Court
        for the Northern District of Illinois, Eastern Division.
         No. 1:11-cv-00402—Harry D. Leinenweber, Judge.



     A RGUED O CTOBER 26, 2011—D ECIDED JULY 26, 2012




 Before R IPPLE and H AMILTON, Circuit Judges, and
M YERSCOUGH, District Judge.
   R IPPLE, Circuit Judge. Emmanuel Joseph operates a
British Petroleum service station franchise in Chicago,
Illinois. Sasafrasnet, LLC, is Mr. Joseph’s franchisor. On



  The Honorable Sue E. Myerscough of the Central District
of Illinois, sitting by designation.
2                                                 No. 11-2065

November 1, 2010, Sasafrasnet provided Mr. Joseph with
written notification that the franchise agreement would
terminate in ninety days. Mr. Joseph then initiated this
action in which he alleges that Sasafrasnet’s termination
of his franchise would violate the Petroleum Marketing
Practices Act (“PMPA” or the “Act”), 15 U.S.C. § 2801
et seq. The district court denied Mr. Joseph’s motion for
a preliminary injunction to prevent the termination.1
Mr. Joseph now appeals that determination.2 Because
we believe that the statute requires additional findings
by the district court, we reverse its judgment and
remand for proceedings consistent with this opinion.


                               I
                      BACKGROUND
A. Facts
  Although Mr. Joseph and Sasafrasnet are the current
parties to the franchise agreement, neither originally was
involved with the station at issue. BP Products North
America, Inc. (“BP Products”) was the station’s original
franchisor. BP Products also owned the station’s premises.
Mr. Joseph purchased the franchise from the previous
franchisee in May 2006 for $400,000. In conjunction with



1
  The district court’s jurisdiction was premised upon 28 U.S.C.
§ 1331.
2
  We have jurisdiction over this interlocutory appeal under
28 U.S.C. § 1292(a)(1).
No. 11-2065                                                 3

this purchase, Mr. Joseph entered into a Dealer Lease
and Supply Agreement (“DLSA”) with BP Products.3 In
March 2009, Sasafrasnet purchased BP Products’s
interest in the land and assumed its obligations under
the DLSA, thereby becoming Mr. Joseph’s lessor and
franchisor.
  The DLSA functions both as a lease agreement and as
a supply contract. It sets a monthly rent for the premises
and contemplates that Mr. Joseph will “act as a reseller
of BP’s trademarked motor fuels, motor oils and other
products to the motoring public.” 4 Sasafrasnet 5 is required
to “deliver branded motor fuels to” the station.6
Mr. Joseph, in turn, is obligated
      to establish an account with a financial institu-
      tion, on terms acceptable to [Sasafrasnet], that
      provides [electronic funds transfer (“EFT”)] ser-
      vices and to authorize [Sasafrasnet] to initiate
      certain transfers of funds between that account
      and designated accounts of [Sasafrasnet] for pay-



3
 The original term of the DLSA was from May 1, 2006, to
April 30, 2009.
4
    R.1-2 at 3 (DLSA 1).
5
  Because BP Products was the franchisor at the time the DLSA
was entered into, the agreement does not mention Sasafrasnet.
We substitute Sasafrasnet for BP Products in setting out the
DLSA’s obligations to reflect the parties’ current contractual
obligations.
6
    R.1-3 at 1 (DLSA 3).
4                                                    No. 11-2065

      ment of any and all amounts due to [Sasafrasnet]
      under [the DLSA].[7 ]
The DLSA contains a provision authorizing Sasafrasnet
to terminate the franchise if Mr. Joseph “fail[s] . . . to
make payment according to [the] EFT policy causing a
draft to be dishonored for nonsufficient or uncollected
funds” more than once within a twelve-month period.8
 Sasafrasnet is not obligated to extend credit to
Mr. Joseph. However, the DLSA indicates that Sasafrasnet
would do so if Mr. Joseph submitted a $40,000 deposit.
Although Mr. Joseph had only deposited $10,000,9



7
    Id. at 2 (DLSA 4).
8
    Id.
9
  In the district court, Mr. Joseph contended that he had
deposited $40,000 with BP Products before Sasafrasnet became
his franchisor. R.4-1 at 4. Sasafrasnet, however, asserted that
Mr. Joseph had deposited only $10,000 with BP Products
and that Sasafrasnet had attempted to obtain the difference
after it became the franchisor. R.7-1 at 2 (Payne Decl.). At the
hearing before the district court, Mr. Joseph admitted that he
paid only $10,000 toward the deposit when he signed the
DLSA. R.22 at 35. In response to questions posed by the
district court, however, Mr. Joseph testified that he had
“believe[d]” that the rest of the deposit was included in the
price he paid the previous franchisee. Id. at 39.
  In its findings of fact, the district court specifically found
that Sasafrasnet “holds a $10,000 security deposit.” R.16 at 3.
Mr. Joseph does not assert that this finding is clearly erroneous.
                                                     (continued...)
No. 11-2065                                                 5

Sasafrasnet did in fact deliver fuel to Mr. Joseph’s station
before collecting payment via EFT.
   In June 2009, shortly after Sasafrasnet became Mr. Jo-
seph’s franchisor, an EFT from Mr. Joseph’s account for
a fuel delivery was returned for non-sufficient funds
(“NSF”). Three more EFTs were returned NSF over the
next three weeks. Mr. Joseph then made his payments
as they came due until March 2010, when three more
EFTs from Mr. Joseph’s account were returned NSF.
Thus, in the first year of Sasafrasnet’s relationship with
its new franchisee, Mr. Joseph had repeated payment
problems in two different months. 1 0 Mr. Joseph acknowl-
edges that he had “cross-collateralized a few of [his]
businesses” and that, when certain “deals” pertaining to
another business “went south,” the bank began “sweeping”
his account, leaving it without sufficient funds to
satisfy the EFTs that Sasafrasnet would be initiating.1 1
He admits that this situation was the result of “a mistake
[he made] that repeated itself over the course of a year.” 1 2



9
  (...continued)
Because there is no indication that this finding was clearly
erroneous, we need not consider this dispute further.
10
  The district court found that there were seven NSFs in 2009.
The district court obviously was referring to the period from
June 2009 to March 2010 rather than calendar year 2009.
See Appellee’s Br. 5 n.3.
11
     R.22 at 13.
12
     Id. at 17.
6                                              No. 11-2065

He testified, however, that he “would always give
them the money the next day or the day after.” 1 3
  In March 2010, after Mr. Joseph’s second round of
NSFs, Sasafrasnet began to require that Mr. Joseph pay
for his fuel before it was delivered. Nevertheless, as the
district court found, this method of payment was
not ideal for Sasafrasnet.1 4 Therefore, in a letter dated
May 7, 2010, Sasafrasnet indicated that it would allow
Mr. Joseph to resume paying for deliveries by EFT
within three days of delivery. The letter stated that
Mr. Joseph would be required to pay a $2,500 penalty for
any subsequent NSF. It also indicated that Mr. Joseph
would be returned to pre-pay status if he incurred two
more NSFs. Mr. Joseph signed the letter, indicating that
he “agree[d]” to its terms.1 5
  On July 8, 2010, Mr. Joseph informed Sasafrasnet that
he was changing banks and that future EFTs should be
taken from the new account, but he admits that he
“failed to give Sasafrasnet adequate notice of [his] change
of bank accounts.” 1 6 Consequently, Sasafrasnet debited
the old account on July 8, and the EFT was returned NSF.
On July 12, Sasafrasnet again debited the old account
for this invoice, and the draft once more was rejected
as NSF. The district court found, however, that this NSF



13
     Id. at 24.
14
     See R.16 at 3-4.
15
     R.1-7 at 2.
16
     Appellant’s Br. 4-5.
No. 11-2065                                                  7

was the fault of Sasafrasnet because it “access[ed] the
wrong bank account.” 1 7 On July 15, yet another EFT was
returned NSF, this time from Mr. Joseph’s new account.
Mr. Joseph contends that this last NSF was the result
of “mutual mistakes.” 1 8 He admits that these NSFs re-
sulted, in part, from his failure to move money into
the new account. Mr. Joseph puts part of the blame on
Sasafrasnet, though, because it continued to deposit
credit card revenues into the old account after it was
on notice of the new account.
  On July 19, the parties agreed that Mr. Joseph could
rectify these NSFs by paying the total amount due in
person by noon the next day. Mr. Joseph was late for this
deadline, arriving to pay at 2:00 p.m. Mr. Joseph then
paid the amounts due, plus the $5,000 penalty for the
two NSFs that were, in Sasafrasnet’s view, his fault.
  By this time, Mr. Joseph had incurred ten NSFs. All but
one of the NSFs were for amounts over $20,000, and
three were for amounts over $45,000.1 9 On July 30, 2010,
Sasafrasnet gave Mr. Joseph ninety days’ notice that it
was terminating his franchise. Sasafrasnet later deter-


17
  R.16 at 2. Although the district court did not indicate
explicitly that it was the second NSF in July 2010 that was the
one that was Sasafrasnet’s fault, Sasafrasnet had admitted
during the district court proceedings that this NSF resulted
from it “incorrectly submitt[ing]” the EFT to the old account.
R.7 at 6 n.3; accord Appellee’s Br. 6 n.4.
18
     Appellant’s Br. 5.
19
     R.7-2.
8                                                   No. 11-2065

mined that this notification did not comply with the
notice requirements in the PMPA, and it withdrew the
notification. In November 2010, Sasafrasnet reissued
the ninety-day notice of termination. It listed the July 2010
NSFs and Mr. Joseph’s failing scores on a mystery
shopper inspection 2 0 as its bases for termination.


B. District Court Proceedings
  Shortly before the termination was to become effective,
Mr. Joseph filed this action under the PMPA in the
United States District Court for the Northern District
of Illinois and moved for a preliminary injunction to
prevent Sasafrasnet from terminating the franchise.
After holding a hearing, the district court denied the
motion. It concluded that late payments are a per se
reasonable basis to terminate a franchise under the
PMPA. On that basis, it concluded that Mr. Joseph
could not meet the standard established by the PMPA
for preliminary relief. The court did find, however, that
the balance of hardships favored Mr. Joseph because
he was poised to lose a $400,000 investment.


20
   On appeal, the parties note that the mystery shopper inspec-
tion was a basis that Sasafrasnet gave for the termination, and
they dispute some of the facts relevant to that legal theory.
However, they do not analyze the issue on its merits in any
detail. Mr. Joseph raised the issue in the district court, but the
district court did not reach it. The district court may have to
address this issue on remand. See infra note 38. We pretermit
any further discussion of this issue.
No. 11-2065                                                  9

  Thereafter, the district court entered an “Injunction
Pending Appeal” on the condition that Mr. Joseph post
a $100,000 appeal bond. By a stipulation of the parties,
the district court further ordered Mr. Joseph to deliver
$30,000 in additional fuel security to Sasafrasnet,
bringing the total deposit to $40,000. At oral argument,
Mr. Joseph’s counsel informed us that Mr. Joseph con-
tinues to operate the station.


                            II
                     DISCUSSION
A. Standard of Review
 In actions under the PMPA,
 the [district] court shall grant a preliminary injunction
 if—
   (A) the franchisee shows—
       (i) the franchise of which he is a party has
       been terminated or the franchise relation-
       ship of which he is a party has not been
       renewed, and
       (ii) there exist sufficiently serious ques-
       tions going to the merits to make such
       questions a fair ground for litigation; and
   (B) the court determines that, on balance, the
   hardships imposed upon the franchisor by the
   issuance of such preliminary injunctive relief
   will be less than the hardship which would be
10                                                  No. 11-2065

     imposed upon such franchisee if such preliminary
     injunctive relief were not granted.
15 U.S.C. § 2805(b)(2).
  “The franchisee’s burden of proof for receiving a prelimi-
nary injunction under the PMPA is not a heavy one.”
Moody v. Amoco Oil Co., 734 F.2d 1200, 1216 (7th Cir. 1984).
“The franchisee need not . . . establish that it would be
irreparably harmed in the absence of an injunction.”
Beachler v. Amoco Oil Co., 112 F.3d 902, 905 (7th Cir.
1997). Furthermore, unlike Federal Rule of Civil Proce-
dure 65, “the PMPA requires only that a franchisee
show a reasonable chance of success on the merits,” not
“a strong or reasonable likelihood of success.” Moody,
734 F.2d at 1216.21
  Our review of a district court’s decision to grant or
to deny preliminary relief under the PMPA is “narrow”;
we “will not reverse a district court’s grant or denial of
a preliminary injunction absent a clear abuse of discre-
tion by the district court.” Id. at 1217. We review ques-
tions of law de novo and questions of fact for clear
error. Burlington N. & Santa Fe Ry. Co. v. Bhd. of Locomotive
Eng’rs, 367 F.3d 675, 678 (7th Cir. 2004).




21
  If the matter were to proceed to trial, however, Sasafrasnet
would “bear the burden of going forward with evidence
to establish as an affirmative defense that such termination”
was permitted by the PMPA. 15 U.S.C. § 2805(c); see infra § II.C.
No. 11-2065                                                       11

B. Grounds for Termination
  In its November 2010 letter, Sasafrasnet informed
Mr. Joseph that it was terminating his franchise because
he had “failed to pay Sasafrasnet all sums due under
the [DLSA] in a timely manner,” noting particularly
the July 2010 NSFs.2 2 Specifically, Sasafrasnet indicated
that it was resting its decision to terminate Mr. Joseph’s
franchise, in part, upon 15 U.S.C. § 2802(b)(2)(C).2 3 This
provision of the PMPA authorizes a franchisor to
terminate a franchise based on:
       The occurrence of an event which is relevant to the
       franchise relationship and as a result of which termina-
       tion of the franchise or nonrenewal of the franchise
       relationship is reasonable, if such event occurs
       during the period the franchise is in effect and
       the franchisor first acquired actual or construc-
       tive knowledge of such occurrence[ within a
       prescribed period.]
15 U.S.C. § 2802(b)(2)(C) (emphasis added). Sasafras-
net also invoked a related provision of the PMPA,
which defines the portion of § 2802(b)(2)(C) that we have
italicized in the preceding quotation. This subsection
provides:



22
     R.1-9 at 2.
23
  Sasafrasnet invoked other provisions of the PMPA in this
letter as well. The district court did not address those
grounds in its order. Accordingly, neither do we consider the
applicability of those provisions.
12                                              No. 11-2065

     As used in subsection (b)(2)(C) of this section,
     the term “an event which is relevant to the fran-
     chise relationship and as a result of which ter-
     mination of the franchise or nonrenewal of the
     franchise relationship is reasonable” includes
     events such as—
        ...
        (8) failure by the franchisee to pay to the
        franchisor in a timely manner when due
        all sums to which the franchisor is legally
        entitled;
        ....
15 U.S.C. § 2802(c)(8) (emphasis added). The PMPA
explicitly excludes from the definition of “failure”:
     (A) any failure which is only technical or unimpor-
     tant to the franchise relationship;
     (B) any failure for a cause beyond the reasonable
     control of the franchisee; or
     (C) any failure based on a provision of the fran-
     chise which is illegal or unenforceable under the
     law of any State (or subdivision thereof).
15 U.S.C. § 2801(13).
   Sasafrasnet contends that the occurrence of an event
listed in § 2802(c) provides a franchisor with a basis for
terminating a franchise that satisfies § 2802(b)(2)(C)’s
reasonableness requirement as a matter of law. Mr. Joseph
disagrees with this interpretation and asserts that
§ 2802(b)(2)(C) requires an independent judicial deter-
mination of the reasonableness of a termination deci-
No. 11-2065                                                   13

sion, even if an event listed in § 2802(c) has occurred. The
courts of appeals have reached differing conclu-
sions on this question. On one side is the Sixth Circuit,
which has held that a court “must scrutinize the rea-
sonableness of terminations even when an event enumer-
ated in § 2802(c) has occurred.” Marathon Petroleum Co. v.
Pendleton, 889 F.2d 1509, 1512 (6th Cir. 1989). Every
other circuit court that has addressed the matter has
held that the occurrence of an event listed in § 2802(c)
provides a franchisor with a per se reasonable basis
for terminating a franchise. See Hinkleman v. Shell Oil Co.,
962 F.2d 372, 377 (4th Cir. 1992) (per curiam); Desfosses
v. Wallace Energy, Inc., 836 F.2d 22, 26 (1st Cir. 1987);
Clinkscales v. Chevron U.S.A., Inc., 831 F.2d 1565, 1573
(11th Cir. 1987); Atl. Richfield Co. v. Guerami, 820 F.2d
280, 283 (9th Cir. 1987); Russo v. Texaco, Inc., 808 F.2d
221, 225 (2d Cir. 1986); Lugar v. Texaco, Inc., 755 F.2d 53, 57-
58 n.3 (3d Cir. 1985). Nevertheless, these courts have
recognized that the definition of “failure” in § 2801(13)
incorporates “[a] specific, limited reasonableness require-
ment” into the grounds listed in § 2802(c) that employ
that statutory term. Hinkleman, 962 F.2d at 377; accord
Chevron U.S.A. Inc. v. El-Khoury, 285 F.3d 1159, 1163-64
(9th Cir. 2002); Lugar, 755 F.2d at 58 n.3.2 4


24
  In Sun Refining & Marketing Co. v. Rago, 741 F.2d 670 (3d Cir.
1984), the Third Circuit applied 15 U.S.C. § 2801(13) to deter-
mine whether the franchisee had committed a “failure” within
the meaning of the PMPA. Id. at 673. In doing so, however, it
stated that it would not “construe § 2802(c) as a per se termina-
                                                   (continued...)
14                                                      No. 11-2065

   We have not determined definitively whether a termina-
tion based on an event listed in § 2802(c) is per se rea-
sonable, although we have indicated an inclination to
accept the analysis of the majority of our sister circuits.
See Al’s Serv. Ctr. v. BP Prods. N. Am., Inc., 599 F.3d 720,
725 (7th Cir. 2010). Today, we make clear that the occur-
rence of an event listed in § 2802(c) justifies, as a
matter of law, a franchisor’s decision to terminate a
franchise under § 2802(b)(2)(C). In our view, the plain
language of the PMPA “unambiguously permits termina-
tion of a petroleum franchise agreement upon failure of
the franchisee to timely adhere to payment obligations.”
Hinkleman, 962 F.2d at 377. Of course, if the franchisor
seeks to terminate the franchise under § 2802(b)(2)(C)
because of the occurrence of an event other than those
listed in § 2802(c), judicial scrutiny of the reason-
ableness of the termination is required. See Moody, 734
F.2d at 1217.




24
   (...continued)
tion rule favoring franchisors.” Id. The Third Circuit since
has made clear that Rago was concerned with the limited
reasonableness requirement contained in 15 U.S.C. § 2801(13)
and not the general reasonableness standard contained in 15
U.S.C. § 2802(b)(2)(C). See Patel v. Sun Co., 141 F.3d 447, 458 (3d
Cir. 1998); Lugar v. Texaco, Inc., 755 F.2d 53, 58 n.3 (3d Cir. 1985);
see also Al’s Serv. Ctr. v. BP Prods. N. Am., Inc., 599 F.3d 720,
724-25 (7th Cir. 2010) (noting that the Third Circuit “backed off”
its strong language from Rago in Lugar).
No. 11-2065                                                15

C. Application
   Having determined that the events listed in § 2802(c)
constitute per se reasonable bases for a franchisor to
terminate a franchise, we now must consider whether the
district court abused its discretion in concluding that
Mr. Joseph’s NSFs satisfied 15 U.S.C. § 2802(c)(8).2 5 We
first pause to examine the language of § 2802(c)(8) in
context and the governing burden of proof.
  A franchisor may invoke properly § 2802(c)(8) only if
there is a “failure by the franchisee to pay to the franchisor
in a timely manner when due all sums to which the
franchisor is legally entitled.” § 2802(c)(8) (emphasis
added); see El-Khoury, 285 F.3d at 1163-64; Hinkleman, 962
F.2d at 377; Lugar, 755 F.2d at 58 n.3. An event is not a
“failure” if it is “only technical or unimportant to the
franchise relationship” or if it is “for a cause beyond the
reasonable control of the franchisee.” § 2801(13)(A)-(B).
  At the preliminary injunction stage, Mr. Joseph had
the burden of “show[ing that] . . . there exist[ed] suffi-
ciently serious questions going to the merits to make
such questions a fair ground for litigation.” 15 U.S.C.
§ 2805(b)(2)(A)(ii). Should the matter proceed to trial,
Sasafrasnet would “bear the burden of going forward
with evidence to establish as an affirmative defense
that such termination . . . was permitted under section
2802(b).” § 2805(c). Consequently, in concrete terms,


25
  There is no dispute that the late payments in July 2010
occurred within 120 days of the November 2010 termination
letter. See 15 U.S.C. § 2802(b)(2)(C)(i).
16                                                  No. 11-2065

Mr. Joseph’s burden at the preliminary injunction stage
was to show that “there is a ‘reasonable chance’ that
[Sasafrasnet] will be unable to prove that the termina-
tion was permissible under the Act.” Khorenian v. Union
Oil Co. of Cal., 761 F.2d 533, 535-36 (9th Cir. 1985) (quoting
Moody, 734 F.2d at 1216).
  Our inquiry requires that we focus on two terms in
this statutory provision—“failure” and “timely.” We
shall address each in turn.


                                1.
  Mr. Joseph did not address explicitly the statutory
definition of “failure” during the proceedings before the
district court.26 Rather, Mr. Joseph took as the focus of
his argument that, even if Sasafrasnet could invoke prop-
erly § 2802(c)(8), there were serious questions about
whether the termination was reasonable for purposes
of § 2802(b)(2)(C).27 As we explained above, however, this


26
   The only argument Mr. Joseph advanced about why prelimi-
nary injunctive relief would be appropriate if § 2802(c)(8) were
a per se termination rule was by focusing on the “timely
manner” portion of the standard, not the “failure” portion.
See R.4-1 at 6 (“Even if the enumerated events are deemed ‘per
se unreasonable,’ [§] 2802(c)(8) provides that ‘failure by the
franchisee to pay to the franchisor in a timely manner . . .
when due all sums to which the franchisor is legally enti-
tled[.]’ ” (emphasis in original)).
27
  After setting out the relevant provisions in § 2802(b)(2)(C) and
§ 2802(c)(8), Mr. Joseph stated: “The issue is, if one of the
                                                    (continued...)
No. 11-2065                                                      17

argument, which rests on the view that the grounds
for termination set forth in § 2802(c)(8) require an inde-
pendent judicial inquiry into the reasonableness of the
particular termination, fails as a matter of law. Sec-
tion 2802(c)(8) provides a franchisor with a per se rea-
sonable basis to terminate a franchise for purposes of
§ 2802(b)(2)(C).
  As we also have noted, however, our sister circuits
have determined further that there is “[a] specific, limited
reasonableness requirement . . . incorporated into the
statute through section 2801(13).” Hinkleman, 962 F.2d
at 377. Although Mr. Joseph never cited § 2801(13), he
did argue facts that might be construed as supporting
the contention that the definition of “failure” set forth in
§ 2801(13) was not met. Specifically, he argued facts
that might support a determination that the failure was
“only technical or unimportant to the franchise relation-
ship” 28 or that the failure was “for a cause beyond [his]
reasonable control.” 2 9 And, notably, Sasafrasnet’s memo-



27
   (...continued)
12 enumerated events [in §] 2802(c) is the basis for the termina-
tion or nonrenewal of a franchise relationship[,] is the termina-
tion ‘per se reasonable[,’] or may the court look to the circum-
stances to determine whether the termination was rea-
sonable?” R.4-1 at 6 (emphasis added).
28
  See R.4-2 at 1 (arguing that his late payments were
“technical in nature” (emphasis added)).
29
     See R.4-1 at 3 (arguing that the second NSF in July 2010 “was
                                                      (continued...)
18                                                 No. 11-2065

randum in opposition to Mr. Joseph’s motion for prelimi-
nary relief stated that the payments were not “ ‘unimpor-
tant,’ ” as that term is used in § 2801(13).3 0 Nevertheless,
the district court, in focusing on the phrase “failure . . . to
pay . . . in a timely manner” of § 2802(c)(8), never
referred explicitly to the statutory definition of “fail-
ure” and never made any findings as to whether this
standard was satisfied.
  We believe it best that the district court revisit this
question and address explicitly the elements of the
term “failure” set forth in § 2801(13). Two points are
particularly deserving of the district court’s attention.
First, the district court should determine which of the
July 2010 NSFs were within Mr. Joseph’s reasonable
control. Although Mr. Joseph appears to concede that
the first NSF was within his reasonable control,3 1
and although the second NSF in July appears to be at-




29
  (...continued)
the sole fault of [Sasafrasnet, which] inadvertently drafted
the former bank account”).
30
  R.7 at 11-12 (quoting the discussion of § 2801(13)(A) in
Hinkleman v. Shell Oil Co., 962 F.2d 372, 376-77 (4th Cir. 1992)
(per curiam), and asserting that “[t]he same logic applies to
this case”).
31
  See Appellant’s Br. 4-5 (stating that this NSF occurred
“because [Mr.] Joseph had failed to give Sasafrasnet adequate
notice of [his] change of bank accounts”).
No. 11-2065                                                    19

tributable to Sasafrasnet,3 2 the proper treatment of the
third NSF in July 2010 is less clear. Mr. Joseph asserts
that this NSF was a “mutual mistake[].” Appellant’s
Br. 5. This characterization results from his belief that
Sasafrasnet’s failure to deposit credit card revenues into
his new account contributed to this NSF and that “[t]he
problem was further exacerbated by the fact that [he]
neglected to transfer[] the remaining funds in the old
account to the new one.” R.4-1 at 3. The district court
did not address this contention.
  The second point that the district court should
consider is whether the July 2010 NSFs that were within
Mr. Joseph’s reasonable control were “only technical or
unimportant to the franchise relationship.” § 2801(13)(A).
In making this determination, the district court would
have to evaluate the July NSFs that were attributable
to Mr. Joseph in the context of the historical rela-
tionship of the parties. 3 3 These determinations should


32
     See supra note 17.
33
   See Brach v. Amoco Oil Co., 677 F.2d 1213, 1221 (7th Cir. 1982)
(stating that § 2802(c)(8) is “intended to cover the potential
problem of repeated lateness”); S. Rep. No. 95-731, at 33-34
(1978), reprinted in 1978 U.S.C.C.A.N. 873, 892 (“If the
franchisor waives the exercise of termination or non-renewal
rights based upon a specific occurrence of an event, the
franchisor may not thereafter base termination or non-renewal
upon the specific occurrence. However, the time limitations
are not intended to stop a franchisor from exercising termina-
tion or non-renewal rights based upon a future event which
constitutes a ground for termination or non-renewal, even if
                                                    (continued...)
20                                                   No. 11-2065

be made in the first instance by the district court.


                                2.
  Mr. Joseph also submits that “[t]he question of what
constitutes payment ‘in a timely manner[]’ . . . is ‘intended
to permit evaluation of nonpayment or late payments
in view of prevailing commercial or industry trade prac-
tices.’ ” Clinkscales, 831 F.2d at 1573 n.19 (quoting S.
Rep. No. 95-731, at 38 (1978), reprinted in 1978 U.S.C.C.A.N.
873, 896). We have previously endorsed this standard,
see Brach v. Amoco Oil Co., 677 F.2d 1213, 1221 (7th Cir.
1982), and we continue to believe that it reflects ac-
curately the statutory intent of § 2802(c)(8). However,
the district court did not consider this standard
expressly in setting forth its findings of facts and con-
clusions of law. Generally, “a district court abuses its
discretion in issuing a preliminary injunction when it
applies an incorrect legal standard in determining
the likelihood of success on the merits.” Am. Can Co. v.
Mansukhani, 742 F.2d 314, 326 (7th Cir. 1984). However,
this rule is not absolute. For instance, we have held that
where the “evidence before this court [is] more than



33
   (...continued)
such future event is a repeat occurrence of an event with respect
to which the previous exercise of termination or non-renewal rights
was waived.” (emphasis added)), cited with approval in
Clinkscales v. Chevron U.S.A., Inc., 831 F.2d 1565, 1573 n.19 (11th
Cir. 1987), and Brach, 677 F.2d at 1216 n.3.
No. 11-2065                                              21

sufficient to mandate a [particular] finding” on an issue
at the preliminary injunction stage, we need not
remand for further consideration of that issue. See Hyatt
Corp. v. Hyatt Legal Servs., 736 F.2d 1153, 1157 (7th Cir.
1984); accord Ezell v. City of Chicago, 651 F.3d 684, 710
(7th Cir. 2011) (reversing a district court’s denial of pre-
liminary injunction and remanding for entry of preliminary
injunction where we determined that “the plaintiffs’ . . .
claim ha[d] a strong likelihood of success on the merits”).
  Here, Mr. Joseph had the burden of demonstrating, in
support of his motion for a preliminary injunction, that
Sasafrasnet would not be able to establish at trial that the
payments were untimely according to the practice of the
industry. He simply did not carry that burden. Assuming,
arguendo, that the district court determines that it was
reasonable for Sasafrasnet to regard Mr. Joseph’s late
payments as “failure[s],” there is no evidence of record
that would have permitted the district court to make a
finding that the payments were timely. The record
before us, at this stage of the proceedings, makes it abun-
dantly clear that, for a franchisee with a payment record
of this caliber, the July 2010 NSFs constituted untimely
payments within the meaning of § 2802(c)(8). Mr. Joseph
has offered no evidence to show that Sasafrasnet treated
him any differently from any other franchisee in the
industry with a similar record.
  For its part, Sasafrasnet has submitted evidence
showing that it had no institutional experience with a
22                                                  No. 11-2065

franchisee with such a record.3 4 After Mr. Joseph experi-
enced his second bout of repeated NSFs within the
first year of the parties’ business relationship, Sasafrasnet
placed him on pre-pay status. This letter put him on
notice that Sasafrasnet was not in the practice of toler-
ating late payments. Sasafrasnet reiterated this point
in May 2010, when it took Mr. Joseph off pre-pay status
on the condition that he pay a stiff monetary penalty
for any future late payment. Therefore, to the extent
that the experience of the franchisor may be considered
as some evidence of industry practice,3 5 the record
simply shows that this situation was extraordinary and
did not comport with Sasafrasnet’s regular practice.
  For the same reason, Mr. Joseph cannot claim that he
lacked “notice that timely payment would be required
in the future,” Sun Ref. & Mktg. Co. v. Rago, 741 F.2d
670, 674 (3d Cir. 1984), because “he had been on notice that
his past practices of late payments would not be con-
doned,” Pendleton, 889 F.2d at 1512. Again, to the
extent that the franchisor’s experience may be said to
be reflective of industry experience, there is no evidence



34
  Sasafrasnet’s president testified that Mr. Joseph was
the only franchisee who had payments returned NSF. See R.22
at 73-74.
35
  Cf. Rago, 741 F.2d at 674 (noting that a franchisor’s “repeated
acceptance of late payments over a period of years would
suggest that timely payment was not its prevailing trade
practice . . . . absent any notice that timely payment would
be required in the future); accord Clinkscales, 831 F.2d at 1573.
No. 11-2065                                                    23

that Mr. Joseph was given              inadequate     notice   of
Sasafrasnet’s expectations.
  Mr. Joseph also makes the argument that his pay-
ments cannot be considered untimely because “the parties
entered into a written agreement regarding how future
late payments would be dealt with” and that he “was
compliant with the terms of [that] agreement.” Appellant’s
Br. 16. Although Mr. Joseph asserts that this agreement
amended the DLSA, 3 6 his more basic point appears to
be that this letter “contemplates a continuing relation-



36
  There is no merit to this contention. At its core, this argu-
ment is premised on the assumption that the DLSA “did not
give the Sasafrasnet [sic] the right to unilaterally impose
monetary sanctions in the event that an EFT was dishonored.”
Appellant’s Br. 17. “Consequently,” Mr. Joseph asserts, “the
changes Sasafrasnet wished to make to its credit policy
requiring a ‘penalty payment’[] required the consent of [Mr.]
Joseph.” Id. In his view, the letter contains an implicit promise
not to cancel his franchise if Sasafrasnet collected the penalties
for late payment, with said promise being the consideration
that Sasafrasnet would have had to give him to make the
agreement binding as a matter of contract law.
  The argument fails in its foundational assumption: that
Sasafrasnet could not require penalty payments without
Mr. Joseph’s consent. The DLSA provides that “[Sasafrasnet]
has the right to impose a service and late payment charge for
each check and/or EFT that is dishonored for nonsufficient or
uncollected funds, whether or not subsequently paid by
[Mr. Joseph].” R.1-3 at 2 (DLSA 4). Therefore, the May 2010
letter did not amend the DLSA.
24                                                No. 11-2065

ship and not a termination of the franchise after the late
payment.” Id. at 19.
 This characterization conflicts with the terms of the
DLSA, which is, of course, the contract that governs
Mr. Joseph’s franchise. The DLSA provides:
       No failure to act on an incident of breach, and no
     course of dealing[,] will be construed as the
     waiver of the right to act. . . . Any failure of
     [Sasafrasnet] to enforce rights or seek remedies
     upon any default of [Mr. Joseph] with respect to
     any of the obligations of [Mr. Joseph] hereunder,
     will not prejudice or affect the rights or remedies
     of [Sasafrasnet] in the event of any subsequent
     default of [Mr. Joseph].
R.1-5 at 3 (DLSA 15). It further provides:
     More than one incident, within a 12 month
     period, of failure by [Mr. Joseph] to make payment
     according to [the] EFT policy causing a draft to
     be dishonored for nonsufficient or uncollected
     funds . . . entitles [Sasafrasnet] to suspend deliver-
     ies, impose other payment or prepay terms, and/or
     terminate or nonrenew [the DLSA], in addition
     to exercising any other rights [Sasafrasnet] may
     have under [the DLSA] at law or in equity or
     under [Sasafrasnet]’s then current Credit Policy.
R.1-3 at 2 (DLSA 4); see also id. (“[Sasafrasnet] has the
right to impose a service and late payment charge for
each check and/or EFT that is dishonored for nonsuf-
ficient or uncollected funds, whether or not sub-
sequently paid by [Mr. Joseph].”).
No. 11-2065                                              25

  This language makes clear that Sasafrasnet’s decision
to impose penalties for future NSFs was not an implicit
waiver of its right to terminate Mr. Joseph’s franchise
in the event of such NSFs. The DLSA put Mr. Joseph
on notice that Sasafrasnet could “impose . . . payment or
prepay terms[] and/or terminate or nonrenew th[e DLSA]”
if Mr. Joseph incurred two NSFs within one year. Id.
(emphasis added).37 It further provided that Sasafrasnet’s
decision to seek certain remedies would not prejudice
Sasafrasnet’s right to seek other appropriate remedies.
Therefore, Mr. Joseph was on notice that Sasafrasnet
would not tolerate late payments and that Sasafrasnet
retained the discretion to determine whether it would
seek to terminate the franchise under the rights afforded
to it by the DLSA and PMPA if and when Mr. Joseph
experienced future NSFs. See Clinkscales, 831 F.2d at 1573
n.19 (explaining that the PMPA allows termination
based on the repeat occurrence of an event even if the
franchisor did not seek termination based on the
previous occurrences); Rago, 741 F.2d at 674 (same).




37
  Of course, Sasafrasnet could not invoke this provision to
terminate Mr. Joseph’s franchise unless that termination was
authorized by the PMPA. See 15 U.S.C. § 2802(a)(1). Whether
the PMPA would permit termination in the circumstances
described by the DLSA is an altogether different question
than whether such provisions put Mr. Joseph on notice of
Sasafrasnet’s trade practices.
26                                                No. 11-2065

                         Conclusion
  For the foregoing reasons, we reverse the judgment of
the district court and remand 3 8 the case for proceedings
consistent with this opinion.
                                 R EVERSED and R EMANDED




38
   If, on remand, the district court determines that Mr. Joseph
would be entitled to preliminary injunctive relief with respect
to § 2802(c)(8), it will have to consider whether Mr. Joseph
has established as well that Sasafrasnet will not prevail on
its independent argument that it is entitled to terminate
the franchise because of the failed mystery shopper inspection.



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