Opinion
No. C 04-2413 MHP.
March 17, 2005
MEMORANDUM ORDER
Re: Defendants' Motion for Summary Judgment
This action arises out of the nonrenewal of a service station franchise governed by the provisions of Title I of the Petroleum Marketing Practices Act ("PMPA"), 15 U.S.C. §§ 2801-06. On May 7, 2004, plaintiff Andy Saberi filed a complaint in San Francisco County Superior Court seeking to enjoin the termination of his service station franchise by defendants Equilon Enterprises and Shell Oil Products USA (collectively "Equilon") under section 105 of the PMPA, 15 U.S.C. § 2805. Saberi's state court complaint also asserted causes of action for fraud under California common law and for violations of California Business and Professions Code § 21150.1. Following the removal of Saberi's state court complaint, Equilon moved for summary judgment. That motion is now pending before this court. Having considered the arguments presented and for the reasons set forth below, the court enters the following memorandum and order.
BACKGROUND
Plaintiff Andy Saberi operates a Shell Service station located at 400 South Van Ness Avenue in San Francisco, California. Saberi Decl. ¶ 3; Maday Decl. ¶ 2. Prior to the expiration of his franchise on January 31, 2005, Saberi leased the premises on which the station was located from Equilon. Saberi Decl. ¶ 3. The franchise relationship between the parties was governed by a Retail Facility Lease dated July 31, 2001 (hereinafter "Lease Agreement") and a Retail Sales Agreement executed on the same date (hereinafter "Sales Agreement"). Maday Decl., Exhs. 1-2. Both agreements had a three-year term that expired on July 31, 2004. Id. ¶ 4.
The instant action arises from Equilon's decision not to renew Saberi's Lease and Sales Agreements. According to Equilon, this decision was made after undertaking a network-wide study of the economic performance of its service stations, which considered factors such as the volume of fuel sales, the amount of non-fuel revenue, and the cash flow generated by each station. Hallberg Decl. ¶ 2. The study concluded that the 400 Van Ness Avenue property would have a higher valuation if it were used for non-service station purposes. Id. ¶ 4. Based on this conclusion, Equilon decided to sell the property. Id. ¶ 5. Equilon subsequently listed the station with a third-party real estate broker and identified the property as being for sale on the Shell Website. Vaughn Decl. ¶ 2. On June 10, 2004, JPS Builders and Timothy Brown (collectively "JPS") offered to purchase the property for a price of $3.2 million. Id. ¶ 3 Exh. 1. Equilon subsequently accepted this offer, and the property was put into Escrow. Id. ¶ 3.
On October 27, 2004, Equilon notified Saberi via certified mail of its intent to terminate the lease and sales agreements, informing him that it had made a decision to sell the station "in good faith and in the normal course of business . . . in accordance with the applicable provisions of Title I of the Petroleum Practices Marketing Act, 15 U.S.C. § 2802(b)(3)(D)."Id., Exh. 3 at 1. The letter also informed Saberi that per the requirements of the PMPA, Equilon intended to offer to sell the station to him or to offer him a right of first refusal of a third party's offer to purchase the property. Id. Equilon made the promised offer in a letter dated October 28, 2004, in which Saberi was given the opportunity to match JPS's $3.2 million offer price. Id., Exh. 3. The letter also specified that Equilon's offer would remain open until forty-five days after receipt. Id., Exh. 3 at 1-2. On December 7, 2004, Saberi accepted this offer and tendered a cashier's check in the amount of $320,000 as earnest money. Id., Exh. 4. However, Saberi refused to release Equilon from claims arising from the nonrenewal of the Lease and Sales Agreements. Id., Exh. 4 at 1.
Those claims are now before this court, having been timely removed from San Francisco County Superior Court on June 17, 2004. Saberi's first amended complaint, the currently operative pleading in this action, asserts causes of action for injunctive relief under the PMPA, 15 U.S.C. § 2805, for fraud in violation of California law, and for violations of California Business and Professions Code § 21150.1. On January 24, 2005, Equilon moved for summary judgment that the PMPA does not provide any basis for enjoining the nonrenewal of Saberi's service station franchise and that Saberi's fraud claim fails as a matter of law. The court considers each of the arguments raised by Equilon's motion in the following memorandum and order.
LEGAL STANDARD
I. Summary Judgment
Summary judgment is proper when the pleadings, discovery, and affidavits show that there is "no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). Material facts are those which may affect the outcome of the proceedings. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A dispute involving a material fact is genuine if there is sufficient evidence for a reasonable jury to return a verdict for the nonmoving party. Id. The party moving for summary judgment bears the burden of identifying those portions of the pleadings, discovery, and affidavits that demonstrate the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). On an issue for which the opposing party will have the burden of proof at trial, the moving party need only point out "that there is an absence of evidence to support the nonmoving party's case." Id. On the other hand, where the moving party bears the burden of proof at trial, "it must come forward with evidence which would entitle it to a directed verdict if the evidence went uncontroverted at trial." Houghton v. South, 965 F.2d 1532, 1536 (9th Cir. 1992) (quotingInternational Shortstop, Inc. v. Rally's, Inc., 939 F.2d 1257, 1264-65 (5th Cir. 1991)).
Once the moving party meets its initial burden, the nonmoving party must go beyond the pleadings and, by its own affidavits or discovery, "set forth specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. 56(e). Mere allegations or denials do not defeat a moving party's allegations. Id.;see also Gasaway v. Northwestern Mut. Life Ins. Co., 26 F.3d 957, 960 (9th Cir. 1994). However, the court may not make credibility determinations, Anderson, 477 U.S. at 249, and inferences drawn from the facts must be viewed in the light most favorable to the party opposing the motion, Masson v. New Yorker Magazine, 501 U.S. 496, 520 (1991).
II. The PMPA
"The PMPA is intended to protect gas station franchise owners from arbitrary termination or nonrenewal of their franchises with large oil corporations and gasoline distributors, and to remedy the disparity in bargaining power between parties to gasoline franchise contracts." DuFresne's Auto Serv., Inc. v. Shell Oil Co., 992 F.2d 920, 925 (9th Cir. 1993) (citing S. Rep. 95-731, 95th Cong., 2d Sess., at 17-19 (1978)). In order to achieve these goals, the PMPA prohibits a service station franchisor from terminating or declining to renew an existing franchise relationship unless one of the conditions in 15 U.S.C. § 2802(b) has been satisfied. 15 U.S.C. § 2802(a)-(b). Of particular relevance here is paragraph (3)(D)(i)(III) of section 2802(b). Under section 2802(b)(3)(D)(i)(III), a franchisor may decline to renew a franchise agreement having a term of three or more years if "the franchisor in good faith and in the normal course of business" determines to sell the premises on which the franchise is located. Id. § 2802(b)(3)(D)(i)(III). In addition, where the service station is located on "leased marketing premises," the franchisor must either make the franchisee "a bona fide offer to sell, transfer, or assign" its interest in the property, or alternatively, if a third party has offered to purchase the property, the franchisor must offer the franchisee a right of first refusal of that offer having a duration of least forty-five days. Id. § 2802(b)(3)(D)(iii).
The PMPA defines "leased marketing premises" as "marketing premises owned, leased, or in any way controlled by a franchisor and which the franchisee is authorized or permitted, under the franchise, to employ in connection with the sale, consignment, or distribution of motor fuel." 15 U.S.C. § 2801(9). Neither party disputes that the franchise at issue here falls within the scope of this definition.
Assuming that one of the conditions of section 2802(b) has been satisfied, the franchisor may terminate or decline to renew the franchise relationship after providing the franchisee with written notice of its intent to terminate the franchise. Id. §§ 2802(a)-(b), 2804(a), (c). The notice must be posted via certified mail or delivered personally to the franchisee at least ninety days prior to termination of the franchise, id. § 2804(a), (c)(2), and must include the following information:
(A) a statement of intention to terminate the franchise or not to renew the franchise relationship, together with the reasons therefor;
(B) the date on which such termination or nonrenewal takes effect; and
(C) the summary statement prepared [by the Secretary of Energy under section 2804(d)].Id. § 2804(c)(3).
If a franchisor fails to comply with the requirements of Title I of the PMPA, the franchisee may bring suit under 15 U.S.C. § 2805. In an action brought under section 2805, the franchisee has the initial burden of proving that his or her franchise was not renewed. Id. § 2805(c); Reyes v. Atlantic Richfield Co., 12 F.3d 1464, 1469 (9th Cir. 1993). The burden then shifts to the franchisor to demonstrate that it satisfied the requirements of sections 2802 and 2804. 15 U.S.C. § 2805(c); Reyes, 12 F.3d at 1469. Accordingly, the franchisor is entitled to summary judgment that nonrenewal was proper only if it presents evidence that would entitle it to a directed verdict on that issue if the evidence were uncontroverted at trial. See Houghton, 965 F.2d at 1536.
DISCUSSION
I. PMPA
The court first considers Equilon's contention that it is entitled to summary judgment that it complied with the requirements of the PMPA in declining to renew Saberi's service station franchise. Liberally construed, Saberi's complaint alleges two violations of the PMPA, the first arising from Equilon's alleged failure to provide notice as required by 15 U.S.C. § 2804(a) and the second from Equilon's alleged lack of good faith in terminating Saberi's franchise. In moving for summary judgment, Equilon contends that it has met is burden of producing evidence to show that it complied with these requirements and that there are no genuine issues of material fact that preclude entry of judgment in its favor. The court considers the parties' arguments with respect to each of Saberi's claims below.
A. Notice
Saberi first asserts that Equilon failed to provide him with the notice required by 15 U.S.C. § 2804(a) prior to the nonrenewal of his service station franchise. The requirements of section 2804(a) are straightforward: the franchisee must be informed of the franchisor's intent not to renew the franchise, together with the reasons therefor and the effective date of the nonrenewal of the franchise relationship, and must be provided with the Secretary of Energy's summary of the PMPA. 15 U.S.C. § 2804(a). This information must be sent via certified mail or personally delivered to the franchisee at least ninety days prior to the effective date of the nonrenewal. Id.
Here, Equilon contacted Saberi via certified mail on October 27, 2004 and informed him that it did not intend to renew his service station franchise. Vaughn Decl., Exh. 2 at 1. Equilon's letter stated the Lease and Sales Agreements would expire on January 31, 2005 and was accompanied by the Department of Energy's "Revised Summary of Title I of the Petroleum Marketing Practices Act," 61 Fed. Reg. 32,786 (June 25, 1996). Vaughn Decl., Exh. 2 at 1-10. Thus, Equilon clearly provided Saberi with the requisite ninety-day notice that his franchise would not be renewed, as well as informing him of the effective date of the nonrenewal and providing him with the required summary of the applicable provisions of the PMPA.
Equilon's letter also informed Saberi of the reason for its decision not to renew the franchise agreement, stating that Equilon "has in good fath and in the normal course of business made a determination to sell the retail outlet in accordance with the applicable provisions of Title I of the Petroleum Marketing Practices Act, 15 U.S.C. § 2802(b)(3)(D)." Id., Exh. 2 at 1. Such a recital of the applicable statutory provision has been held sufficient to fulfill the franchisor's obligation to state the reasons underlying the termination or nonrenewal of a service station franchise. See, e.g., Atlantic Ave. Oil Gas, Ltd. v. Texaco Ref. Mktg., Inc., 699 F.Supp. 27, 29 (E.D.N.Y. 1988) (holding that a franchisor's statement that a franchise agreement would not be renewed because it had decided to sell the premises sufficiently apprised the franchisee of the reasons for nonrenewal per the requirements of 15 U.S.C. § 2804(c)(3)(A)),aff'd, 870 F.2d 93 (2d Cir. 1989). Although there might be certain circumstances where merely reciting the statutory language would not adequately inform the franchisee of the reasons for terminating the franchise relationship, nothing in the record suggests that Saberi was unaware of Equilon's motives for declining to renew his franchise. In light of that fact and considering Equilon's unambiguous communication of its intent to sell the 400 Van Ness Avenue property, the court concludes that Equilon's letter adequately informed Saberi of the reason for the nonrenewal of his service station franchise. The court therefore holds as a matter of law that Equilon complied with the notice requirements of 15 U.S.C. § 2804(a) and § 2804(c).
B. Good Faith
Saberi's second claim under the PMPA relies upon 15 U.S.C. § 2802(b), which enumerates the grounds on which a franchisor may permissibly decline to renew a service station franchise. In moving for summary judgment, Equilon argues that it complied with requirements of section 2802(b)(3)(D)(i)(III), which permits the franchisor to refuse to renew a service station franchise where it has "in good faith and in the normal course of business" made a decision to sell the premises on which the franchise is located. 15 U.S.C. § 2802(b)(3)(D)(i)(III). To establish it had a good-faith basis for declining to renew Saberi's franchise agreement, Equilon submits that it made a decision to sell the 400 Van Ness Avenue property after a network-wide study in which it concluded that "the site had a higher valuation as something other than a service station." Hallberg Decl. ¶¶ 2-5. The property was then listed with a third-party real estate broker, and notice of its availability was posted on Shell's website. Vaughn Decl. ¶ 2. There is no evidence of procedural irregularities or other facts that would suggest bad faith on Equilon's part. Indeed, Saberi himself asserts that the station operated at a loss, Pl.'s First Am. Compl. ("FAC") ¶ 7; Saberi Decl. ¶¶ 8-13, lending further support to Equilon's conclusion that the franchise was not economically viable and that the property could more profitably be used for other purposes. These facts, which are not contested by Saberi, require the court to conclude that Equilon had a good-faith business reason for selling the premises on which Saberi's franchise operated.
Saberi also appears to contend that Equilon failed to comply with the "bona fide offer" requirement of 15 U.S.C. § 2802(b)(3)(D)(iii), asserting that Equilon offered the station for sale to the public at an "exorbitant and unrealistic" price. Pl.'s FAC ¶ 11. As noted above, section 2802(b)(3)(D)(iii) provides that the franchisor of a service station located on "leased marketing premises" must make the franchisee a "bona fide offer to sell, transfer, or assign" the property. 15 U.S.C. § 2802(b)(3)(D)(iii)(I). Alternatively, if there is an outstanding third-party offer to purchase the property, the franchisor must extend the franchisee a right of first refusal of that offer of at least forty-five days duration. Id. § 2802(b)(3)(D)(iii)(II).
The court assumes without deciding that the "bona fide offer" requirement of section 2802(b)(3)(D)(iii)(I) also applies where the franchisor attempts to comply with the requirements of section 2802(b)(3)(D) by extending a right of first refusal on the terms set forth in section 2802(b)(3)(D)(iii)(II). A standard of objective reasonableness applies in determining whether a franchisor's offer to sell is "bona fide" within the meaning of section 2802(b)(3)(D)(iii)(I). Ellis v. Mobil Oil, 969 F.2d 784, 787 (9th Cir. 1992). "To be objectively reasonable, an offer must approach fair market value." Id. (citations, internal alterations, and internal quotation marks omitted).
Applying this standard to the offer at issue here, it is undisputed that Equilon gave Saberi the opportunity to purchase the 400 Van Ness Avenue property (including the improvements thereon) for $3.2 million, the price specified in the land-only offer that Equilon received from JPS on June 10, 2004, and that this offer was held open for the statutorily mandated period of forty-five days. Vaughn Decl, Exh. 3 at 1, 3. As the Ninth Circuit observed in Ellis, "[w]hen a third party's offer is in the form of a single transaction for cash, the court can justifiably infer that the amount of an arms' length offer represents the value of the station." 969 F.2d at 786. In the absence of any evidence of collusion between Equilon and JPS, such an inference is both warranted and dispositive in the instant action. The court therefore holds there is no triable issue of material fact regarding Equilon's compliance with 15 U.S.C. § 2802(b)(3)(D). Accordingly, having already concluded that it must grant summary judgment that Equilon satisfied the notice requirements of section 2804, the court holds as a matter of law that Equilon's decision not to renew Saberi's service station franchise did not violate the PMPA.
II. Fraud
In addition to his claims under the PMPA, Saberi asserts a state law claim for fraud. The gravamen of Saberi's fraud claim is that he entered into the July 31, 2001 franchise agreement in reliance on Equilon's promise to sell him the 400 Van Ness Avenue property at fair market value, thereby suffering damages stemming from the operating losses that the service station has sustained during his ownership of the franchise. Pl.'s FAC ¶ 7; Saberi Decl. ¶¶ 5-13.
The elements of a fraud claim under California law are: (1) a misrepresentation (i.e., a false representation, concealment, or nondisclosure); (2) knowledge of falsity (or "scienter"); (3) intent to defraud (i.e., to induce reliance); (4) justifiable reliance; and (5) resulting damage. Lazar v. Superior Court, 12 Cal. 4th 631, 638 (1996) (citing 5 Witkin, Summary of Cal. Law § 676, at 778 (9th ed. 1988)). The sole misrepresentation that Saberi has identified is recited in Paragraph 5 of his declaration, which states:
On June 1, 2001, prior to entering the [Lease and Sales] Agreements, Shell/Equilon Sales Representative Mike Rettus represented and promised me that if I executed the Agreements within 90 to 120 days, defendant would sell me the subject service station and real property. At no time prior to commencement of [this] action did defendant perform said promise, and it was apparent from defendant's initial refusal to perform said promise that it never, in fact intended to perform said promise when the promise was made to me.
Saberi Decl. ¶ 5. Assuming for the purposes of this motion that Equilon did in fact promise to sell Saberi the 400 Van Ness Avenue property as an inducement to sign the Lease and Sales Agreements, Saberi's reliance on this promise as a basis for his fraud claim nonetheless suffers from one fatal flaw: namely, that Equilon performed as promised. As noted above, Equilon offered Saberi the right to purchase the station for $3.2 million, an offer that Saberi accepted in December 2004. Thus, Saberi has failed to identify an actionable mispresentation that would support a claim for fraud.
Ignoring this fact, Saberi argues that Rettus' promise raises a genuine issue of material fact because Equilon failed to perform within the time specified in the promise. However, neither Rettus' allegedly false statement nor any other evidence in the record specifies a time when performance of Equilon's promise became due. Furthermore, although Saberi alludes to Equilon's "refusal to perform" its promise to sell the property to him, id., there is nothing in the record to suggest that Saberi tendered an offer to purchase the property or even discussed what the terms of such an offer might be in advance of filing this action. Accordingly, no reasonable juror could conclude that Saberi has met his burden of proving the elements of a prima facie claim for fraud. The court therefore grants Equilon's motion for summary judgment as to that claim.
At the hearing held on this motion, Saberi's counsel asserted that the representation set forth in paragraph 5 of the Saberi Declaration attests to Equilon's promise to sell the 400 Van Ness Avenue property to Saberi within 90 to 120 days of the date on which he renewed the Lease and Sales Agreements. This assertion simply cannot be reconciled with the plain meaning of Saberi's declaration, nor is it consistent with the allegations in his first amended complaint. In the absence of any evidence in the record to support counsel's representation, the court must construe Saberi's statement according to its ordinary meaning, which, dangling modifiers notwithstanding, plainly does not specify any date by which Equilon promised to offer the Van Ness Avenue property for sale.
Having concluded that Saberi's fraud claim fails as a matter of law, the court need not consider Equilon's alternative argument that this claim is preempted by the PMPA.
III. California Business and Professions Code § 21150.1
Saberi's final claim alleges that Equilon's nonrenewal of his franchise violated California Business and Professions Code § 21150.1. Subject to a number of exceptions, section 21150.1 prohibits franchisors from requiring retail gasoline dealers to operate service station franchises during hours that are not profitable to the franchisee. Cal. Bus. Prof. § 22150.1(a). Although no formal stipulation to the dismissal of this claim has been submitted, the Joint Case Management Statement filed in this action on November 2, 2004 reflects the parties' agreement to submit this claim to binding arbitration pursuant to section 21150.1(d) of the Business and Professions Code. In any event, the court notes that section 22150.1(a)'s prohibition on requiring franchisees to remain open during unprofitable hours does not apply "[w]here the retail gasoline station subject to the franchise agreement is located within one-half mile access of any highway which is part of the California freeway and expressway system." Cal. Bus. Prof. § 22150.1(g)(2). The court takes judicial notice of the fact that the address of Saberi's service station, 400 Van Ness Avenue, is located within one-half mile access of a segment of U.S. Highway 101 that is part of the California freeway and expressway system. See Cal. Sts. High. Code § 253.5. Saberi's claim under Business and Professions Code § 22150.1 is therefore dismissed with prejudice.
CONCLUSION
For the foregoing reasons, the court GRANTS defendants' motion for summary judgment as to the first and third causes of action of plaintiff's first amended complaint. Plaintiff's second cause of action is DISMISSED WITH PREJUDICE. The clerk shall close the file.
IT IS SO ORDERED.