Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-5_08-cv-02725/USCOURTS-cand-5_08-cv-02725-10/pdf.json

Nature of Suit Code: 196
Nature of Suit: Franchise
Cause of Action: 15:2801 Petroleum Marketing Practices Act

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United States District Court

For the Northern District of California

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ORDER DENYING MOTION TO DISMISS

No. C-08-02725 RMW

TER

United States District Court

For the Northern District of California

E-FILED on: 3/1/10 

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

SAN JOSE DIVISION

OMER KASSA, individually; OMER KASSA

dba H & O, INC., and H & O, INC.,

Plaintiffs,

v.

BP WEST COAST PRODUCTS, LLC, dba

ARCO PRODUCTS COMPANY and DOES 1

to 50,

Defendants.

No. C-08-02725 RMW

ORDER GRANTING IN PART AND

DENYING IN PART DEFENDANT'S

MOTIONS FOR SUMMARY JUDGMENT;

DENYING PLAINTIFFS' MOTION TO REOPEN FACT DISCOVERY; DENYING

PLAINTIFFS' MOTION TO CONTINUE

TRIAL; AND GRANTING PLAINTIFFS'

MOTION TO SET ASIDE ENTRY OF

DEFAULT

[Re Docket Nos. 67, 68, 70, 82, 83, 85]

Five motions in this case came on for hearing before the court on February 26, 2010. These

motions are: 1) defendant BP West Coast Products LLC's ("BPWCP") motion for summary

judgment on plaintiffs' claims; 2) BPWCP's motion for summary judgment on its counter claims; 3)

plaintiffs' motion to set aside the entry of default; 4) plaintiffs' motion to re-open fact discovery; and

5) plaintiffs' motion to continue the trial date and related dates. All motions are opposed. Having

considered the papers submitted by the parties and the arguments of counsel at the hearing, and for

good cause appearing for the reasons set forth below, defendant's motions for summary judgment are

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For the Northern District of California

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ORDER DENYING MOTION TO DISMISS

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granted in part, plaintiffs' motion to set aside default is granted, and plaintiffs' motions to re-open

fact discovery and to continue the trial date are denied.

This lawsuit arises out of a dispute between plaintiffs Omer Kassa and his company H&O,

Inc., and defendant BPWCP regarding their franchise relationship for an ARCO service station and

am/pm mini market in Campbell, California. Plaintiffs held the franchises, a "gas agreement" and an 

am/pm mini market agreement, from 2002 through March 2008, renewing the contracts once in

2005. The franchise agreements had three-year terms. The agreements were not renewed in 2008

when plaintiffs refused to sign the new agreements. Shortly after the franchise agreements were not

renewed and defendant took possession, plaintiffs filed suit.

The second amended complaint asserts the following causes of action: 1) breach of contract;

2) violation of the Petroleum Marketing Practices Act, 15 U.S.C. §2801 et seq.; 3) unfair and

deceptive trade practices; 4) violation of California Business & Professions Code Section 21200;

and 5) violation of the Unruh Civil Rights Act, California Civil Code Section 51 and 52. Defendant,

in turn, has asserted the following counterclaims: 1) declaratory relief that it has not violated the

Petroleum Marketing Practices Act; 2) breach of contract (gasoline agreement); 3) breach of contract

(mini market agreement); 4) breach of contract against Hirut Kassa (franchise guarantor); 5)

common count for goods sold and delivered; and 6) unjust enrichment. 

The gist of plaintiffs' complaint is that BPWCP breached the franchise agreements by failing

to deliver gasoline, electronically withdrawing funds from plaintiffs' account to pay for undelivered

gasoline, and for discriminating against plaintiffs by charging them more than BPWCP charged

neighboring franchisees. Plaintiffs also contend that BPWCP did not act in good faith in not

renewing the franchise agreements. The gist of defendant's claims is that the franchise agreements

were lawfully not renewed because plaintiffs' refused to execute the new franchise agreements and

that plaintiffs did not pay for all the gasoline and goods delivered under the parties' franchise

agreements which expired in March 2008. 

The present motions are complicated to some degree by the manner in which this case has

been prosecuted. Although plaintiffs initiated this lawsuit two years ago, plaintiffs appear to have

taken little action in pursuing discovery, in providing discovery, or in otherwise prosecuting their

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ORDER DENYING MOTION TO DISMISS

No. C-08-02725 RMW

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lawsuit despite the fact that the fact discovery cut-off was extended on two occasions and the expert

discovery cut-off on three occasions. The docket reveals that plaintiffs have been ordered to provide

discovery responses and have had monetary sanctions imposed for their discovery conduct. 

Additionally, defendant previously sought dismissal for plaintiffs' failure to prosecute, a remedy

which the court denied as premature at the time, but the court's order did require plaintiffs to

produce documents in discovery and precluded plaintiffs from offering into evidence any documents

that had been requested in discovery but not produced. Plaintiffs have since replaced their original

attorney with present counsel, but this substitution of counsel did not occur until after fact discovery

had closed. 

The court is thus now presented with defendant's motion for summary judgment on plaintiffs'

claims, as to which plaintiffs have offered very little evidence in opposition; defendant's motion for

summary judgment on their own counterclaims, relying very heavily on default having been entered

against plaintiffs (even though plaintiffs had filed an answer to the counterclaims prior to the clerk's

entry of default); and plaintiffs' motions to set aside default, re-open fact discovery, and continue the

trial and related dates. The court will consider plaintiffs' motions first, followed by defendant's

motions.

1. Plaintiffs' Motions

A. Motion to Re-Open Fact Discovery

Plaintiffs move to re-open fact discovery for forty-five days to enable them to take three

depositions: 1) a Rule 30(b)(6) deposition of defendant regarding the Franchise Agreement, 2) the

deposition of Tom Reeder, regional sales manager, and 3) the deposition of Brad Christensen,

assistant regional sales manager. Plaintiffs, however, have not established good cause to re-open

fact discovery. Fact discovery closed on October 16, 2009 and, as noted above, after the deadline

had been extended on two separate occasions. Plaintiffs offer no explanation for their failure to

conduct discovery during the time in which discovery was open. There is no suggestion that the

witnesses that plaintiffs wish to depose are new, or their knowledge of relevant evidence was

unknown to plaintiffs until recently. Plaintiffs suggest only that prior counsel was responsible for

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1

 The parties' papers reveal that plaintiffs' recently retained counsel spoke with defendant's counsel

on November 19, 2009, the day counsel was retained, and again on November 24, 2009. The parties'

counsel disagree as to whether plaintiffs requested a continuance to enable new counsel to prepare

an Answer, but defendant's counsel related that during the November 24 conversation she informed

plaintiffs' counsel "in the interest of professional courtesy" that defendant intended to file a request

for entry of default that day. Yoon Decl. ¶17. No explanation has been offered as to why defendant

waited for more than a year to seek entry of default and then filed its request immediately after new

counsel took over representation of plaintiffs. Under the circumstances, it might have been more in

line with the "interest of professional courtesy" to have given new counsel a few days in which file

an answer to the counterclaim. 

ORDER DENYING MOTION TO DISMISS

No. C-08-02725 RMW

TER 4

failing to conduct discovery when discovery was open, and that re-opening discovery would not

prejudice defendant. No good cause has been shown, and the motion is denied.

B. Motion to Set Aside Default

Plaintiffs also move to set aside entry of default on defendant's counterclaims. Defendant

filed its Answer and Counterclaims on October 2, 2008. Defendant filed its request for entry of

default more than one year later, on November 24, 2009, and some days thereafter, the clerk entered

default. By the time default was entered, however, plaintiffs had already filed an answer to the

counterclaims. Default should not have been entered, and it is now set aside.1

C. Motion to Continue Trial Date

Plaintiffs finally move to continue the trial date and related dates. Plaintiffs have failed to

demonstrate good cause to continue the trial date, as is required by Rule 16(b). Although plaintiffs'

present counsel is not to blame for the failure of plaintiffs to diligently prosecute this action since

they were retained only a short time ago and after fact discovery had closed, plaintiffs have made no

showing of diligence in the prosecution of this action over the past two years. Plaintiffs are the ones

who initiated this litigation; plaintiffs are the ones who have failed to pursue it. Plaintiffs have

already been given the benefit of three continuances of the trial date. Plaintiffs cannot get a "doover" merely by replacing their attorneys. The motion to continue the trial date is denied. 

2. Defendant's Motions

Defendant seeks summary judgment on all claims asserted against it by plaintiffs and on all

counterclaims it asserts against plaintiffs.

A. Petroleum Marketing Practices Act

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ORDER DENYING MOTION TO DISMISS

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Plaintiffs assert a claim under the Petroleum Marketing Practices Act, 15 U.S.C. §2801 et

seq.; defendant's first counterclaim is for declaratory relief that it has not violated the PMPA. There

is no dispute that the 2005 Franchise Agreement had a three-year term, that defendant proposed a

new agreement prior to the expiration of the 2005 Franchise Agreement, or that plaintiffs did not

like the terms of the proposed Franchise Agreement and refused to sign it. The PMPA generally

prohibits termination or nonrenewal of franchises, but Section 2802(b) sets forth certain exceptions

to that general prohibition, including where the franchisor and franchisee fail to agree to changes or

additions to the provisions of the franchise agreement. 15 U.S.C. § 2802(b)(3). Defendant has

offered evidence that the rent increase and fee changes contained within the proposed franchise

agreement were uniform throughout BPWCP's lessee dealer network and were pursuant to

objectively applied standards. Reeder Decl. ¶7. Plaintiffs have not offered any evidence to the

contrary, other than the conclusory and unsupported declaration of Mr. Kassa that he believes

BPWCP acted in bad faith. Kassa Decl. ¶24.

Plaintiffs argue that they have offered evidence of on-going disputes with defendant that

BPWCP refused to resolve prior to the franchise renewal and suggest that defendant did not act in

good faith with regard to the termination. Plaintiffs further suggest that this presents a material

dispute of fact requiring denial of defendant's motion for summary judgment. 

Defendant's position is supported by the evidence. Plaintiffs have offered no evidence to

counter defendant's showing that the terms of the proposed franchise agreement were no different

than those offered to other franchisees. Even though plaintiffs and defendant were in a dispute

regarding various aspects of their franchise relationship, plaintiffs have offered no evidence from

which a reasonable trier of fact could conclude that defendant was acting in bad faith in negotiating

for the renewal of the franchise agreement.

Accordingly, defendant is entitled to summary judgment on its first counterclaim, as well as

on plaintiffs' second claim for relief for violation of the PMPA.

B. Claims Relating to Breach of Contract and Delivery of Products

Plaintiffs' first claim for relief is for breach of contract. Plaintiffs allege that defendant

breached the contract by the untimely delivery of gasoline, by charging plaintiffs unreasonably high

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2

 Defendant objects to these portions of Mr. Kassa's declaration and to Exhibit 5, primarily on

grounds that the exhibit has not been properly authenticated, and that Kassa lacks personal

knowledge sufficient to authenticate the exhibit, and that Kassa's testimony is conclusory and

speculative, and an improper lay opinion. Defendant's objections have some merit but Mr. Kassa

has personal knowledge of sufficient factual matters to raise a triable issue of fact.

ORDER DENYING MOTION TO DISMISS

No. C-08-02725 RMW

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costs for gasoline products, by wrongfully electronically withdrawing funds from plaintiffs' bank

account for gasoline products that were not delivered, and by refusing to return the funds after being

requested to do so. Defendant, in turn, counterclaims for breach of contract, asserting that plaintiffs

owe defendant $20,423.79 in charges relating to maintenance, rent, royalty fees, and gasoline

deliveries. Chang Decl. ¶6-7, Exhs. A and B. Defendant has also asserted counterclaims for goods

sold and delivered and unjust enrichment arising out of the same facts. Defendant seeks summary

judgment on the claims, asserting that it did not breach the contract and, with regard to plaintiffs'

claim, that plaintiffs have no evidence of any damages resulting from any breach.

In support, defendant offers evidence that it charged plaintiffs for gasoline consistent with

the terms of their agreement with plaintiffs (Newcomer Decl. ¶2 and Ex. A). Defendant also

submits evidence to establish its provision of gasoline products to plaintiffs, and the charges

therefore, including correcting any charges made for fuel that was not delivered. Chang Decl. ¶6

and Exh. A.

In opposition, plaintiffs submit the declaration of Mr. Kassa and supporting exhibits. Among

other things, Mr. Kassa declares that in reviewing his bank records, he discovered several erroneous

and incorrect electronic funds withdrawals made by BPWCP for motor fuel that was not delivered,

that he sought explanations and an accounting that were not provided, and that he hired a CPA and

bookkeeper to review the records and make a determination of whether BPWCP owed plaintiffs any

money. Kassa Decl. ¶10-12. Mr. Kassa has submitted as Exhibit 5 the analysis from his CPA and

bookkeeper, which he testifies "show that BPWCP, as of September 19, 2007, has wrongfully

retained at least $50,000 of my money by charging me gas that was either undelivered or monies

wrongfully taken from my account." Kassa Decl. ¶12, and Exh. 5.2

It appears that defendant made errors in its charges for delivery of gasoline products to

plaintiffs. What remains disputed, however, is whether those errors were corrected, and whether

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ORDER DENYING MOTION TO DISMISS

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defendant owes plaintiffs money, or whether plaintiffs owe money to defendant. These issues

cannot be resolved on summary judgment. Defendant's motion for summary judgment on plaintiffs'

claim for breach of contract and on defendant's counterclaims arising out of their contractual

agreements or the delivery of product to plaintiffs are accordingly denied.

 C. Price Discrimination Claim

Plaintiffs' fourth cause of action is for price discrimination under California Business &

Professions Code § 21200. Section 21200 makes it unlawful "for any refiner, distributor,

manufacturer, or transporter of motor vehicle fuels or oils . . . either directly or indirectly, to

discriminate in price between different purchasers of motor vehicle fuels or oils of like grade and

quality, where the effect of such discrimination is to lessen competition, or to injure, destroy, or

prevent competition with any person who either grants or knowingly receives the benefit of such

discrimination, or with customers of either of them." The elements of a Section 21200 claim are: 1)

that defendant charged different prices to plaintiffs than to dealers with whom plaintiffs compete; 2)

that any such pricing differential affected competition in the market for motor fuel or injured

competition between plaintiffs and the favored dealer(s) who knowingly received the benefit of such

price discrimination; and 3) that plaintiffs' business was injured because of the discriminatory

pricing. Madani v. Equilon Enters. LLC, 2009 U.S. Dist. LEXIS 61079, *45 (C.D. Cal. July 13,

2009). The hallmark of Section 21200 is an injury to competition. Plaintiffs must establish not only

that they lost sales, but that favored dealers gained sales when plaintiffs lost sales. Madani, 2009

U.S. Dist. LEXIS 61079 at *45. 

Defendant seeks summary judgment on the ground that it does not discriminate in the prices

it charges for product, that the prices it charged to plaintiffs are the same as the prices it charged to

the other dealers within plaintiffs' competitive area, or "price zone," as defined by defendant. 

Motion at 15-16; Newcomer Decl. In opposition, plaintiffs argue that defendant did charge

plaintiffs different prices for motor fuel than it charged to other dealers in plaintiffs' price zone. 

Plaintiffs rely on the declaration of Mr. Kassa, in which he generally testifies that he spoke with

other dealers "in his territory" and discovered that he was being charged more than they were. 

Kassa Decl. ¶14. Plaintiffs also rely on a document, offered as Exhibit 6 to the Kassa Declaration,

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ORDER DENYING MOTION TO DISMISS

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which they characterize as a pricing sheet accidently left in plaintiffs' store by one of defendant's

employees. 

Defendant objects to the "pricing sheet" asserting that plaintiffs have not authenticated the

document, and that Mr. Kassa has no personal knowledge regarding the truth of the document. 

Defendant's objections are sustained and the court will not consider the purported pricing sheet. The

document has not been authenticated, and other than the fact of its description as a pricing sheet left

behind by one of defendant's employees, Mr. Kassa does not have the personal knowledge with

which to provide any explanation of the meaning of the document. Had plaintiffs engaged in

discovery and taken the deposition of the employee, or of defendant, plaintiffs might have been able

to learn facts which could have offered to successfully oppose defendant's motion for summary

judgment. They did not, however.

Accordingly, the only evidence offered in opposition to defendant's motion is Mr. Kassa's

declaration that he spoke with other dealers, which he believed to be in his territory, and determined

that they were charged less per gallon than he was being charged. This is far short of demonstrating

that there is a genuine issue of material fact on the elements of a Section 21200 claim. Plaintiffs'

showing is inadequate to withstand summary judgment. Defendant's motion for summary judgment

on plaintiffs' price discrimination claim under Section 21200 claim is granted.

D. Civil Rights Claim: Discrimination

Plaintiffs' fifth claim is for violation of the California Unruh Civil Rights Act, Civil Code

Sections 51 and 52. The essence of the claim is the allegation that defendant discriminated against

Kassa on account of his race, ancestry or national origin by charging him higher prices for gasoline,

by taking money from his account for deliveries that had not been made and refusing to return such

money. 

Defendant seeks summary judgment on the ground that there is no evidence of any

discrimination in defendant's treatment of Kassa. Plaintiffs oppose the motion, but offer no evidence

from which a reasonable trier of fact could find in their favor that defendant's actions were

motivated by any racial animus or that Kassa has been treated differently because of his race,

ancestry or national origin. Plaintiffs' belief that Kassa has been treated differently because of his

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ORDER DENYING MOTION TO DISMISS

No. C-08-02725 RMW

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race, ancestry or national origin is not enough. Accordingly, defendant's motion for summary

judgment is granted. 

E. Unfair Competition under Business & Professions Code Section 17200

Plaintiffs' final claim is for unfair competition, apparently brought under the California

Business & Professions Code Section 17200. The claim appears to be premised upon the other

statutory claims asserted by plaintiff: violation of the PMPA, price discrimination and the Unruh

Civil Rights Act. For the reasons stated above, summary judgment has been granted in defendant's

favor on these underlying statutory claims. Accordingly, there is no remaining basis for plaintiffs'

Section 17200 claim. Defendant's motion for summary judgment on this claim is granted.

CONCLUSION

For the foregoing reasons, it is hereby ordered that:

1. Plaintiffs' motions to set aside default is granted;

2. Plaintiffs' motions to re-open fact discovery and to continue the trial date are denied;

3. Defendant's motion for summary judgment on plaintiffs' second through fifth causes of

action is granted; defendant's motion for summary judgment on plaintiffs' first cause of action for

breach of contract is denied; and

4. Defendant's motion for summary judgment on its first counterclaim for declaratory relief

under the Petroleum Marketing Practices Act is granted; defendant's motion for summary judgment

on its second through sixth counterclaims is denied.

DATED: 3/1/10

RONALD M. WHYTE

United States District Judge

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For the Northern District of California

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ORDER DENYING MOTION TO DISMISS

No. C-08-02725 RMW

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Notice of this document has been electronically sent to:

Counsel for Plaintiff:

Vernon C. Goins, II vgoins@thebusinesslawyers.com 

Counsel for Defendant:

Deborah Yoon Jones djones@wbcounsel.com 

Kurt Vandercook Osenbaugh kosenbaugh@wbcounsel.com 

MacKenzie Elizabeth Bright Hunt mhunt@wbcounsel.com 

Counsel are responsible for distributing copies of this document to co-counsel that have not

registered for e-filing under the court's CM/ECF program.

Dated: 3/1/10 TER

Chambers of Judge Whyte

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