Court Opinion

ID: 618180
Source: CourtListenerOpinion
Date Created: 2011-12-01 21:32:30+00
Date Added: 2024-06-11T17:50:43.509835
License: Public Domain

FILED
                            NOT FOR PUBLICATION                             DEC 01 2011

                                                                        MOLLY C. DWYER, CLERK
                    UNITED STATES COURT OF APPEALS                       U .S. C O U R T OF APPE ALS

                            FOR THE NINTH CIRCUIT

SAMICA ENTERPRISES LLC, an Illinois              No. 10-55433
Limited Liability Company; et al.,
                                                 D.C. No. 2:06-cv-02800-ODW-CT
              Plaintiffs - Appellants,

  v.                                             MEMORANDUM *

MAIL BOXES ETC., INC., a Delaware
corporation; et al.,

              Defendants - Appellees.

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

                     Argued and Submitted November 9, 2011
                              Pasadena, California

Before: SCHROEDER, REINHARDT, and MURGUIA, Circuit Judges.

       Appellants, approximately 200 franchisees of “The UPS Store” franchise,

sued franchisor Mail Boxes Etc., Inc. (“MBE”), United Parcel Service (“UPS”),

and other UPS subsidiaries (collectively “Appellees”), alleging various state law

        *
             This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
claims. The district court granted summary judgment in favor of Appellees on all

of them. Appellants timely appealed. We affirm.

      Appellants brought claims under the California Franchise Investment Law

(“CFIL”) and common law fraud and misrepresentation, alleging that MBE and

UPS made untrue statements of material fact and omitted material facts from

various communications made in connection with the offer and sale of the

franchises and in connection with the conversion from the old franchise model to

the new “The UPS Store” franchise model. Reasonable reliance is required under

Cal. Corp. Code § 31300, the CFIL section imposing liability for

misrepresentations made in franchise documents, as it requires that the damages to

the franchisee be “caused []by” the misrepresentations. See Mirkin v. Wasserman,

5 Cal. 4th 1082, 1092 (Cal. 1993); Younan v. Equifax Inc., 169 Cal. Rptr. 478, 487

(Cal. Ct. App. 1980). Reasonable reliance is also required under Cal. Corp. Code

§ 31301, the CFIL section imposing liability for misrepresentations and omissions

made in other communications related to the offer or sale of a franchise, as that

section requires that the franchisee, “not knowing or having cause to believe that

such statement was false or misleading,” have “rel[ied] upon such statement.” In a

well-reasoned, but unpublished, district court opinion, Judge Margaret Morrow

summarized the rule: CFIL “incorporate[s] the reasonable reliance requirement of

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the common law.” California Bagel Co. v. American Bagel Co., 2000 WL

35798199, *1, *18-*21 (C.D. Cal. 2000) (unpublished). Finally, it is well

established that reasonable reliance is an element of common law fraud and

misrepresentation claims. See City of Industry v. City of Fillmore, 129 Cal. Rptr.

3d 433, 450 (Cal. Ct. App. 2011); Wells Fargo Bank, N.A. v. FSI, Fin. Solutions,

Inc., 127 Cal. Rptr. 3d 589, 600 (Cal. Ct. App. 2011). Because Appellants have

presented no evidence showing that they reasonably relied on any alleged untrue or

misleading statement, Appellants’ CFIL and common law claims fail.1

      Appellants brought an additional CFIL claim under Cal. Corp. Code § 31125

for failure to register the amendment to the franchise agreement in connection with

the California franchisees’ conversion from the old franchise model to the new

“The UPS Store” franchise model. Appellees argued before the district court that

the registration claim was barred by the one-year statute of limitations pursuant to

Cal. Corp. Code § 31303. Appellants failed to address the statute of limitations bar

before the district court and, specifically, failed to oppose Appellees’ motion for

summary judgment that was based on the one-year provision. Moreover,

Appellants did not address this argument in their opening brief before this court.

      1
        Because we find that Appellants’ common law fraud and misrepresentation
claims fail for lack of a showing of reasonable reliance, we need not decide
whether the CFIL preempts these claims.

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Arguments not raised in opposition to summary judgment or in the opening brief

before this court are waived. See One Indus., LLC v. Jim O’Neal Distrib., Inc., 578

F.3d 1154, 1158 (9th Cir. 2009) (“A party normally may not press an argument on

appeal that it failed to raise in the district court.”); Dream Games of Arizona, Inc.

v. PC Onsite, 561 F.3d 983, 994-95 (9th Cir. 2009) (“We will not ordinarily

consider matters on appeal that are not specifically and distinctly argued in

appellant’s opening brief.”) (internal quotation marks and citation omitted).

Appellants therefore have waived any argument that their failure to register claim

is not barred by the statute of limitations.

      Appellants alleged that MBE breached its duty of “best efforts” under the

franchise agreement to obtain incentives for franchisees. The undisputed facts

establish that MBE engaged in several efforts to obtain improvements to incentives

to franchisees but did so by means of oral persuasion. Appellants’ contention that

attempting to obtain these same improvements by means of written requests was

necessary to meet the best efforts requirement is without authority or merit.

Therefore, summary judgment on this claim was proper.

      Appellants alleged that UPS breached the implied covenant of good faith

and fair dealing in failing to increase the prices set under the carrier agreement

with the franchisees. The district court found that the implied covenant claim was

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preempted by the Federal Aviation Administration Authorization Act of 1994,

which prohibits states from enacting or enforcing “a law, regulation, or other

provision having the force and effect of law related to a price, route, or service of”

carriers such as UPS. 49 U.S.C. § 14501(c)(1). Even if this claim was not

preempted, however, it fails under state law. The implied covenant of good faith

and fair dealing cannot be used to impose an affirmative duty to forbear enforcing

the terms of the contract or to limit the ability of a party to do what is expressly

authorized in the contract. See Storek & Storek, Inc. v. Citicorp Real Estate, Inc.,

122 Cal. Rptr. 2d 267, 277 (Cal. Ct. App. 2002). That is what Appellants wished

to do here – to impose on UPS a duty to offer better prices and incentives than

those dictated by the agreement. Therefore, even if not preempted, summary

judgment on the duty of good faith and fair dealing claim was proper.

      Appellants brought claims under the California Unfair Competition Law

(“UCL”), alleging that MBE and UPS engaged in fraudulent, unfair and unlawful

business practices. “Appellants’ claims under [the UCL] are governed by the

‘reasonable consumer’ test. . . . Under the reasonable consumer standard,

Appellants must show that members of the public are likely to be deceived.”

Williams v. Gerber Prods. Co., 552 F.3d 934, 938 (9th Cir. 2008) (internal

quotation marks omitted). Here, Appellants presented no evidence that a

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reasonable consumer would be deceived by the alleged fraudulent, unfair and

unlawful business practices of MBE and UPS. Summary judgment on Appellants’

UCL claims was therefore proper.

      Appellants argue that the district court erred in failing to apply other states’

“unwaivable” statutes, and in failing to apply Illinois law for franchisees with

Illinois choice-of-law provisions in their franchise agreements. In addition,

Appellants argue that the California choice-of-law provision, found in the majority

of the franchise agreements, does not apply to pre-contract wrongs and that

therefore the other states’ statutes applied. As to the first argument, the district

court found that Appellants’ claims would fail even if the other states’ statutes

applied. Appellants have failed to show why this conclusion was erroneous. As to

the second argument, the franchise agreements with California choice-of-law

provisions provided that the agreements would be “governed and construed under

and in accordance with” California law, which covers all contract claims, including

pre-contract wrongs. See Nedlloyd Lines B.V. v. Superior Court, 834 P.2d 1148,

1151-54 (Cal. 1992) (holding that the phrase “governed by” in a choice of law

clause compels the “logical conclusion” that the parties “intended that law to apply

to all disputes arising out of the transaction or relationship”). Therefore, the

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district court did not err in applying the law of California to all of franchisees’

claims.

      The district court did not abuse its discretion in refusing to unseal the record.

The district court found good cause to seal the record on Appellants’ initial motion.

Appellants then failed to provide adequate justification for unsealing the record,

and failed to follow Central District of California Local Rule 79-5:3 regarding

motions to unseal. The refusal to grant the motion to unseal the record was not an

abuse of discretion.

      The district court considered all of Appellants’ arguments in opposition to

Appellees’ motion for summary judgment at the time of the first and second order,

and was not required to restate its findings in rejecting Appellants’ request for

reconsideration of prior rulings.

      The district court’s grant of summary judgment in favor of Appellees on all

claims is therefore AFFIRMED.

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