UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

C&C PROPERTIES, INC., a California corporation; et al.,

Plaintiffs

- Appellees,

v.
ALON BAKERSFIELD PROPERTY, INC.; PARAMOUNT PETROLEUM CORPORATION,

Defendants

- Appellants,

and

SHELL PIPELINE COMPANY, a Delaware limited partnership; et al.,

Defendants. No. 19

- 17463

D.C. No. 1:14

- cv

- 01889

- DAD

- JLT Eastern Distr ict of California, Fresno

ORDER

C&C PROPERTIES, INC., a California corporation; et al.,

Plaintiffs

- Appellees,

v.
SHELL PIPELINE COMPANY, a Delaware limited partnership,

Defendant

- Appellant,

and No. 19

- 17464

D.C. No. 1:14

- cv

- 01889

- DAD

- JLT



# FILED

MAY 8 2023

MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS2

ALON BAKERSFIELD PROPERTY, INC.; et al.,

Defendants.

C&C PROPERTIES, INC., a California corporation; et al.,

Plaintiffs

- Appellants,

v.
SHELL PIPELINE COMPANY, a Delaware lim ited partnership; et al.,

Defendants

- Appellees,

and

EOTT ENERGY OPERATING LIMITED PARTNERSHIP, a Delaware limited partnership; et al.,

Defendants. No. 19

- 17601

D.C. No. 1:14

- cv

- 01889

- DAD

- JLT

Before: McKEOWN and NGUYEN, Circuit Judges, and HUCK, * District Judge.
The memorandum disposition filed on April 11, 2023 is amended as follows:

On page 5, a t the end of the final paragraph of section (1) , after < jury instruction
16 on bona fide purchasers

. > insert < W e also affirm the district court’s denial of
Shell’s motion for judgment as a matter of law on C&C’s claim of entitlement to

* The Honorable Paul C. Huck, United States District Judge for the U.S. District Court for Southern Florida, sitting by designation.3

bona fide purchaser status. >

. With this amendment, the concurrent petition s for panel rehearing are
DENIED. No further petitions f or rehearing will be accepted.NOT FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

C&C PROPERTIES, INC., a California corporation; et al.,

Plaintiffs

- Appellees,

v.
ALON BAKERSFIELD PROPERTY, INC.; PARAMOUNT PETROLEUM CORPORATION,

Defendants

- Appellants,

and

SHELL PIPELINE COMPANY, a Delaware limited partnership; et al.,

Defendants. No. 19

- 17463

D.C. No. 1:14

- cv

- 01889

- DAD

- JLT

AMENDED M EMORANDUM *

C&C PROPERTIES, INC., a California corporation; et al.,

Plaintiffs

- Appellees,

v.
SHELL PIPELINE COMPANY, a Delaware limited partnership, No. 19

- 17464

D.C. No. 1:14

- cv

- 01889

- DAD

- JLT

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36

- 3. 

# FILED

MAY 8 2023

MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS2 Defendant

- Appellant,

and

ALON BAKERSFIELD PROPERTY, INC.; et al.,

Defendants.

C&C PROPERTIES, INC., a California corporation; et al.,

Plaintiffs

- Appellants,

v.
SHELL PIPELINE COMPANY, a Delaware lim ited partnership; et al.,

Defendants

- Appellees,

and

EOTT ENERGY OPERATING LIMITED PARTNERSHIP, a Delaware limited partnership; et al.,

Defendants. No. 19

- 17601

D.C. No. 1:14

- cv

- 01889

- DAD

- JLT

Appeal from the United States District Court for the Eastern District of California Dale A. Drozd, District Judge, Presiding
Argued and Submitted July 28, 2021 Submission Vacated August 2, 2021 Resubmitted April 11, 2023 San Francisco, California3

Before: McKEOWN and NGUYEN, Circuit Judges, and HUCK, * * District Judge.

This case arises from several underground oil and gas pipelines and
corresponding easements that ran through a parcel of land in Bakersfield,
California. C&C Properties, Inc., JEC Panama, LLC, and Wings Way, LLC
(collectively, “C&C”) purchased the property in 2013, with plans to subdivide the

land for lease or sale to logistics companies. After purchas e , C&C brought claims

of trespass, and in the alternative breach of the easement agreements, in connection

with two pipelines along the southern frontage of the property, one owned by Shell
Pipeline Company (“Shell”) and the other by Alon Bakersfield Property, Inc. and
Paramount Petroleum Corporation (collectively, “Alon”).

The case proceeded to a ten

- day trial , and the jury returned multimillion
dollar verdicts against both D efendants on the trespass claim

. The parties cross

appealed the district court’s disposition of several post

- trial motions , and we heard
argument in July 2021. After a limited jurisdictional remand, the district court
confirmed what the record on appeal did not: each P laintiff holds diverse
citizenship from each D efendant. See 28 U.S.C. § 1332; see also Demarest v.

HSBC Bank USA , N.A. , 920 F.3d 1223, 1226 (9th Cir. 2019)

. We thus turn to the

** The Honorable Paul C. Huck, United States District Judge for the U.S. District Court for Southern Florida, sitting by designation.4

merits of this appeal.

This court ha s jurisdiction pursuant to 28 U.S.C. § 12 91

. We AFFIRM in

part , REVERSE in part, and VACATE AND REMAND in part.

1. The district court did not err in allowing jury instruction 16 on bona
fide purchasers. We review de novo whether a district court’s jury instructions
accurately state the law, and we review the district court’s formulation of jury

instructions for an abuse of discretion. See Navellier v. Sletten , 262 F.3d 923, 944
(9th Cir. 2001)

. Overall , the instruction fairly stated the law
, Lam v. City of San

Jose , 869 F.3d 1077, 1085 (9th Cir. 2017), and referenced the critical issue in this

case

— whether C&C discharged its duty to inquire with “due care ,” given its

awareness of the pipelines.
Shell could have suggested an alternate instruction emphasizing the duty to
inquire, but it did not. Instead, Shell argued that notice of a pipeline is tantamount

to notice of an easement

. T he district court correctly reject ed that instruction

. Although a bona fide purchaser ’s claim will often be defeated by proof that the
purchaser knew of a third party’s use of the property, that is not always so

. See,

e.g. , Pollard v. Rebman , 124 P. 235 , 237 (Cal. 1912) (“It cannot be said as matter
of law that this gate alone was sufficient to give notice [of the easement] . . . or that
it was sufficient to put an intending purchaser on inquiry.” (emphasis added) ) ;

Johnson v. Cella
, 264 P.2d 98, 100 (Cal. Dist. Ct. App. 1953) (upholding fin ding5

of constructive notice of rights where appellants knew of existence of buried pipes
but failed to investigate and “would not take the trouble to see where [ they ] went”
(cleaned up) ); Rubio Ca ñ o n Land & Water Ass ’ n v. Everett , 96 P. 811, 814 (Cal.
1908) (holding bona fide purchaser claim could be refuted by showing buyer had
“knowledge of facts and circumstances” to put a “prudent man ” on inquiry notice

and showing “by prosecuting such inquiry he might have learned of the existence
thereof”)

. And even with the final instruction, Shell could have focused the jury on the
duty to inquire. It did not. In sum, given the fact that the final instruction

referenced C&C’s duty to inquire with due care , and the fact that this case was not
argued at tri al as a duty of inquiry case, the district court did not err in allowing
jury instruction 16 on bona fide purchasers. We also affirm the district court’s
denial of Shell’s motion for judgment as a matter of law on C&C’s claim of

entitlement to bona fide p urchaser status.

2. At the time C&C purchased the property, Shell had a valid and

enforceable easement explicitly permitting it to use the property , and Shell did not
know the property had been sold

. Accordingly, t he district court erred when it

allow ed C&C to seek trespass damages retroactive to the date C&C acquired title.

This wa s a pure ly legal issue raised in Shell’s post

- verdict motion for judgment as

a matter of law or for a new trial , and whether we review de novo, Cochran v. City6

of Los Angeles , 222 F.3d 1195, 1199 (9th Cir. 2000) , or for abuse of discretion,
Flores v. City of Westminster , 873 F.3d 739, 748 (9th Cir. 2017), the result is the

same. 1

C&C fail ed to cite a ny case awarding trespass damages retroactive to the

date of a bona fide purchase

. The case upon which the district court and C&C
principally rely, Pettis v. General Tel ephone Co. of Cal ifornia
, 426 P.2d 884 (Cal.
1967), arose in the particular context of inverse condemnation, and it did not stand
for the proposition that liability is incurred as of the date of a bona fide purchase

. The California Supreme Court’s reference to a “remedy” and “damages” could

equally have applied to damages accruing after the judgment that the purchase was

bona fide , for instance if the public utility had to continue to use utility lines on the

property. Starrh & Starrh Cotton Growers v. Aera Energy LLC
, 63 Cal. Rptr. 3d

165 , 170

– 71 (Cal. Ct. App. 2007), similarly, states simply that a trespass action
accrues at the time of the entry (which is
, by definition
, an unlawful entry), but that

does not resolve when the entry is deemed unlawful

.

1 We reject C&C’s waiver argument because there is no requirement that all questions of law at trial must be raised in a Rule 50( a) motion

. Although a defendant must raise sufficiency of the evidence challenges pre

- verdict and renew them post

- verdict, that rule involves factual disputes and mostly exists to protect Seventh Amendment rights. With pure questions of law, there is no danger of “impermissible reexamination of facts found by the jury.” See Freund v. Nycomed Amersham , 347 F.3d 752, 761 (9th Cir. 2003). In any event, C&C’s objections to Shell and Alon’s post

- verdict motions were filed the same day as the hearing on the m otions and may themselves be forfeited

.7

Accordingly, w e VACATE the c ourt’s order denying the motion for
judgment as a matter of law and for a new trial. The record reflects that between
June and August 2014
, Plaintiffs’ attorneys sent letters to Shell and Alon
, informing them of C&C’s interest and demanding removal and re location of the
pipelines

. In C&C’s August 5, 2014 letter s , C&C demanded removal and
relocation within 60 days. Therefore, o n remand, the court should revise the
judgment to reflect that liability accrued no earlier than October 4 , 2014
, which is
60 days from the August 5, 2014 demand

.
3. The district court was correct, however, not to revise the “ benefits

obtained ” measure of damages for Shell because of purported flaws in the jury

instruction

. See Cal. Civ. Code § 3334 (b)(1)

. Shell never points to a ny timely
objection to the benefits obtained jury instruction in the record . Indeed, Shell first

raised the issue in its Rule 59 motion

. The district court reasonably concluded that
Shell waived this argument by failing to include it in its a nswer, and in any event,

California law is unsettled on whether mistake is an affirmative defense to the
benefits obtained measure of damages. The district court did not abuse its
discretion by failing to sua sponte instruct the jury on a doubtful legal p roposition

that Shell didn’t raise until the end of the trial. But the district court should revise

the benefits obtained award in accordance with the October 4 , 2014 date, as
explained above

.8

4. As to damages, the method of calculating Alon’s benefits obtained

was deeply flawed . W e conclude as a matter of law that C&C failed to advance a

method that would reasonabl y approximat e the amount of wrongful gain caused by

Alon’s trespass

. See Meister v. Mensinger , 178 Ca l. Rptr. 3d 604, 618 ( Cal. Ct.

App. 2014). Accordingly, the district court erred by failing to modify the
judgment.

While Watson Land Co. v. Shell Oil Co.
, 29 Cal. Rptr. 3d 343 , 3 49

– 5 0 ( Cal.

Ct. App. 2005)
, Starrh
, 63 Cal. Rptr. 3d at 18 0
, and Bailey v. Outdoor Media

Group
, 66 Cal. Rptr. 3d 322
, 327

– 28 (Cal. Ct. App. 2007)
, suggest that § 3334 is
to be broadly construed to encompass financial or business benefits, they also
require a plaintiff to direct ly link damages to trespass

. We need not d ecide what

method would satisfy t hat requirement , because the method C&C used for Alon
was clearly improper

. In the absence of a sensible prima facie damages case, Alon
was not required to provide an alternate methodology. Accordingly, the district
court should have granted Alon’s motion to modify the judgment.

5. In contrast, C&C’s method for calculat ing Shell’s benefits was
sufficiently linked to the advantage s of the trespass and supported by an expert

report. And Shell stipulated to the admission of the expert report. Thus, the

district court reasonably exercised its discretion by declining to modify the awa rd
on this ground

. After C&C met its initial burden of providing a direct

- link9

damages theory and calculation
, Shell could have presented a different view of the

benefits obtained, for instance
, by arguing its profits were lower and its costs were
higher or by presenting information about a smaller segment of pipeline

. I t failed

to do so.

6. The damages awarded against Shell were not unconstitutionally

excessive. 2 Ordinarily, it is the category of exemplary damages, imposed not as
compensation but to punish and deter, that presents constitutional concerns. See

State Farm Mut. Auto Ins. Co. v. Campbell , 538 U.S. 408, 41 7

– 19 (2003) . The

“benefits obtained” measure does not aim to punish or deter , in the sense of
imposing a fine or new cost, but rather aims to “remove any economic incentive ”

to trespass. Starrh
, 63 Cal. Rptr. 3d at 179 ; see also Bailey
, 6 6 Cal. Rptr. 3d at

330 . The Supreme Court looks favorably up on measures of damages that consider
“the profitability to the defendant of the wrongful conduct and the desirability of

removing that profit and of having the defendant also sustain a loss. . . [and] the
‘financial position’ of the defendant,” so even a l arge benefits obtained damage
does not, per se, raise excessiveness concerns, assuming the measure includes a
direct link or causation requirement to impose a “definite and meaningful

2 Because we conclude that the computation method used for the award against Alon did not satisfy the direct link requirement, it could pose excessiveness problems as well. We need not reach that issue, however, because the award is vacated.10

constraint” on the discretion of the factfinder. See Pac. Mut. Life Ins . Co. v.
Haslip , 499 U.S. 1, 21

– 2 2 (1991). Jury instruction 25 included such a requirement.

7. The district court erred in granting C&C’s request for attorneys’ fees.
We review the district court’s interpretation of state law de novo, Salve Regina

Coll. v. Russell , 499 U.S. 225, 231 (1991) , and conclude that C&C’s winning

trespass claim was not “on a contract,” in th e sense required by California law
, see
Cal. Civ. Code § 1717(a)

. The purpose of section 1717 is to ensure mutuality of remedy for attorney
fee claims under contractual attorney fee provisions. Santisas v. Goodin
, 951 P.2d

399, 406 (Cal. 1998). Even though C&C prevailed on the grounds that the
easements were “inapplicab le, invalid, unenforceable or nonexistent,” the pipeline
companies would not “have been entitled to attorney’s fees had [they] prevailed”

on the same claim. See Hsu v. Abbara , 891 P.2d 804, 808 (Cal. 1995). Instead, the
jury would have proceeded to consi der whether there was a breach of contract
claim, and whichever party prevailed on that claim would have obtained fees.
Accordingly, we REVERSE the attorneys’ fees award.

8. We AFFIRM the district court’s rulings on the issues presented in

C&C’s cross

- appeal . On consequential damages, the district court acted well
within its discretion in striking the award given the jury’s “highly unusual”
progression, which contravened the jury inst ructions. 389 Orange St. Partners v.11

Arnold

, 179 F.3d 656, 665 (9th Cir. 1999) . Similarly, the district court’s denial of
prejudgment interest was reasonable, because of the great discrepancy between the
amount of damages initially requested and the amou nt awarded by the jury.

Watson Bowman Acme Corp. v. RGW Constr., Inc.
, 206 Cal. Rptr. 3d 281, 293

– 94
(Cal. Ct. App. 2016) (recovery closely approximating plaintiffs’ claims is an
indicator that prejudgment interest is warranted)

.

AFFIRMED in part; REVERSE D in part; and VACATED AND

REMAND ED in part

. Each party shall bear its own costs on appeal.