Court Opinion

ID: 625676
Source: CourtListenerOpinion
Date Created: 2012-03-19 20:20:58+00
Date Added: 2024-06-11T17:51:12.422675
License: Public Domain

NOT FOR PUBLICATION

                    UNITED STATES COURT OF APPEALS                         FILED
                            FOR THE NINTH CIRCUIT                           MAR 19 2012

                                                                        MOLLY C. DWYER, CLERK
                                                                         U .S. C O U R T OF APPE ALS

ANDREW ARMASWALKER, an                           No. 10-56285
individual,
                                                 D.C. No. 2:09-cv-07183-ODW-
              Plaintiff - Appellant,             PLA

  v.
                                                 MEMORANDUM *
EQUILON ENTERPRISES LLC, a
Delaware limited liability company,

              Defendant - Appellee.

AID, INC., a California corporation,             No. 10-56286

              Plaintiff - Appellant,             D.C. No. 2:09-cv-07188-ODW-
                                                 PLA
  v.

EQUILON ENTERPRISES, LLC, a
Delaware limited liability company,

              Defendant - Appellee.

                    Appeal from the United States District Court
                       for the Central District of California
                     Otis D. Wright, District Judge, Presiding

        *
             This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
                      Argued and Submitted February 14, 2012
                               Pasadena, California

Before:        FARRIS and W. FLETCHER, Circuit Judges, and HELLERSTEIN,
               Senior District Judge.**

      In these consolidated appeals, Plaintiffs Aid, Inc. and Andrew Armaswalker

(collectively, the “Franchisees”) appeal the district court’s grant of summary

judgment in favor of Defendant Equilon Enterprises, LLC. We affirm the grant of

summary judgment in Armaswalker v. Equilon Enterprises, LLC, reverse the grant

of summary judgment in Aid v. Equilon Enterprises, LLC, and reverse the award of

expert fees in both Armaswalker and Aid.

      1.       Statutory Framework – The Petroleum Marketing Practices Act

(“PMPA”) forbids a franchisor from “fail[ing] to renew any franchise

relationship,” except for reasons specified by statute. 15 U.S.C. § 2802(a)(2). One

such reason, at issue in this appeal, allows for termination or nonrenewal of a

franchise relationship if the franchisor determines to sell the premises of a retail

station “in good faith and in the normal course of business.” Id. § 2802(b)(3)(D).

As applicable to these cases, the franchisor must either (1) “ma[ke] a bona fide

offer to sell, transfer, or assign to the franchisee such franchisor’s interest in such

          **
             The Honorable Alvin K. Hellerstein, Senior United States District
Judge for the Southern District of New York, sitting by designation.

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premises” or (2) “offer[] the franchisee a right of first refusal of at least 45-days

duration of an offer, made by another, to purchase such franchisor’s interest in

such premises.” Id. § 2802(b)(3)(D)(iii). Equilon offered each of the Franchisees

a right of first refusal (“ROFR”) based on a third-party offer to purchase the

premises.

      We begin with the reasons why we affirm the grant of summary judgment in

the Armaswalker case. For reasons specific to the Aid case, we describe later why

we ultimately reverse summary judgment in the Aid case.

      2.     Affirmance of Summary Judgment in the Armaswalker case – No

evidence in the record shows that Equilon made the determination to sell the

Armaswalker premises in bad faith by “conceal[ing] selective discrimination

against” Armaswalker. See Unocal Corp. v. Kaabipour, 177 F.3d 755, 767 (9th

Cir. 1999). It is undisputed that Equilon provided Armaswalker more than 90 days

notice that its franchise agreement was not going to be renewed, pursuant to 15

U.S.C. § 2804(a). It is also undisputed that Equilon offered Armaswalker a ROFR

within the 90-day period after notice was given, pursuant to 15 U.S.C. §

2802(b)(3)(D)(iii). Finally, it is undisputed that Equilon kept the ROFR open to

acceptance for at least a 45-day duration, pursuant to 15 U.S.C. §

2802(b)(3)(D)(iii)(II). Given the absence of evidence of bad faith, Equilon

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satisfied its statutory obligations for the nonrenewal of Armaswalker’s franchise

agreement. We reject any contention to the contrary.

         Armaswalker contends that we must review the terms contained in the

ROFRs for commercial reasonableness. However, in this case, Equilon did not

choose to extend Armaswalker a “bona fide offer” pursuant to §

2802(b)(3)(D)(iii)(I). It instead chose to extend ROFRs pursuant to §

2802(b)(3)(D)(iii)(II). Armaswalker supports his position in favor of judicial

scrutiny of the ROFR terms with cases involving a “bona fide offer.” See, e.g.,

Ellis v. Mobil Oil, 969 F.2d 784, 787 (9th Cir. 1992) (“It is settled law that a bona

fide offer under the PMPA is measured by an objective market standard.”); Slatky

v. Amoco Oil Co., 830 F.2d 476, 485 (3d Cir. 1987) (“bona fide offer” case).

Unlike with respect to a “bona fide offer,” neither the statutory text nor any case

law suggests that a court is to review the commercial reasonableness of ROFR

terms.

         Armaswalker complains of a provision in the contract giving Equilon certain

rights of access to the UST System if the franchisee defaulted in its obligation to

maintain insurance on the System. However, Equilon did not retain any ownership

or possessory interest in the UST System. Thus, unlike in Roberts v. Amoco Oil

Co., 740 F.2d 602, 604 (8th Cir. 1984), where the franchisor retained title to gas-

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dispensing equipment on the premises, Equilon has merely retained a contractual

right of access to the UST System under limited and specified conditions.

      By failing to raise the challenges to the deed restrictions in the district court,

Armaswalker waived the issue on appeal. See Taniguchi v. Schultz, 303 F.3d 950,

958-59 (9th Cir. 2002).

      The challenge to the release of liability also fails. The plain language of 15

U.S.C. § 2805(f) does not prohibit a franchisor from conditioning the termination

of a franchise relationship on a general release of liability. It prohibits only a

waiver of rights afforded by the PMPA as “a condition of entering into or renewing

the franchise relationship.” 15 U.S.C. § 2805(f). In any event, the provision for a

release was withdrawn. Furthermore, the release does not evince a bad faith

determination to sell the premises. Cf. § 15 U.S.C. § 2802(b)(3)(D). Nothing

about the releases shows that Equilon’s actions “are designed to conceal selective

discrimination against individual franchises.” Kaabipour, 177 F.3d at 767.

      Armaswalker’s ROFR did not include a leaseback provision contained in the

third-party offer. Armaswalker fails to show that these leaseback provisions render

the ROFR materially different from the third-party offer. The leaseback provision

requires Equilon to forward rent payments made by the franchisee to the third-

party purchaser once Equilon sells the property to a third party. Whether the

                                            5
ROFR contains a leaseback provision or not, Armaswalker has no rent expense if

he accepts the ROFR.

       3.     Reversal of Summary Judgment in the Aid Case – We now discuss

why we reverse the grant of summary judgment solely in the Aid case. Where the

third party offer and the ROFR contain materially different terms or conditions, the

franchisor has not “offered the franchisee a right of first refusal . . . of an offer,

made by another, to purchase” the premises. 15 U.S.C. § 2802(b)(3)(D)(iii)(II).

The summary judgment record shows that, before the third party, Harry Hahn, bid

on the premises, Hahn and Equilon reached a side agreement. We do not describe

it here because it has been filed under seal. Suffice it to say that it was an

agreement that was to be executed at closing. That the side agreement was not

written into the final agreement between Equilon and the third party is not

determinative. If an agreement is not part of a third-party offer for purposes of the

PMPA merely because it was not written into the formal agreement, this would

provide an easy way to evade the requirements of § 2802(b)(3)(D)(iii)(II).

       Equilon counters that it later extended the side agreement to Aid, making the

issue “moot” or meritless. Equilon’s decision to extend the side agreement came

too late. Equilon must tender an ROFR “during the 90-day period after” the notice

of nonrenewal sent pursuant to 15 U.S.C. § 2804. See 15 U.S.C. §

                                             6
2802(b)(3)(D)(iii). Equilon sent Aid the notice of nonrenewal on September 8,

2009. It extended the side agreement to Aid on January 13, 2010. January 13 is

more than 90 days after September 8, 2009, rendering its attempt to cure the ROFR

defective.

      4.     Reversal of the Award of Expert Fees – We reverse the award of

expert fees in both the Armaswalker and the Aid cases. The district court found

that the Franchisees’ actions were “frivolous” pursuant to 15 U.S.C. § 2805(d)(3)

and so awarded expert fees to Equilon. The Franchisees appeal from the district

court’s award of expert fees. Because the Franchisees have “raised [several]

question[s] that [were] not answered clearly by our precedent,” Gibson v. Office of

Attorney Gen., State of Cal., 561 F.3d 920, 929 (9th Cir. 2009), we reverse the

awards in both Aid and Armaswalker.

      AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.

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