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February 8, 1994

THE SOUTHLAND CORPORATION, a Texas corporation; et al., Defendant (s).

The opinion of the court was delivered by: FERN M. SMITH



 On July 19, 1993, this Court granted in part and denied in part defendant's first motion for summary judgment which focused on plaintiffs' claims that they had been irrevocably accepted as franchisees before they had stared the training course. The Court, applying the parol evidence rule, excluded all evidence of acceptance inconsistent with the integrated franchise agreement and found that four of plaintiff's original causes of action -- for breach of contract, breach combined with bad faith denial of contract, and for negligent and intentional fraud -- failed as a matter of law. The Court did find genuine issues of fact sufficient to preserve plaintiffs' claim for breach of the implied covenant of good faith and fair dealing.

 On December 13, 1993, plaintiffs filed an Amended Complaint and defendant's motions followed. The amended complaint revives some of the same issues addressed in the Court's prior order and raises some new issues and claims. The Amended Complaint focuses on allegations concerning implied rights regarding when and how Southland can disqualify potential franchisees during training. The Amended Complaint also, for the first time, alleges tortious interference and various statutory claims under California's franchise laws.

 The basic factual allegations giving rise to plaintiffs' claims are set forth in this Court's prior order and will not be repeated here. To the extent relevant new facts are raised in the Amended Complaint in other papers currently before the Court, they are discussed below.


 A. The Standard for Summary Judgment

 Under Rule 56(c) of the Federal Rules of Civil Procedure, a district court may grant summary judgment when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any, 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).

 "If the party moving for summary judgment meets its initial burden of identifying for the court those portions of the materials on file that it believes demonstrate the absence of any genuine issues of material fact," the burden of production then shifts so that "the nonmoving party must set forth, by affidavit or as otherwise provided in Rule 56, 'specific facts showing that there is a genuine issue for trial.'" T.W. Elec. Serv., Inc. v. Pacific Elec. Contractors Ass'n, 809 F.2d 626, 630 (9th Cir. 1987) (quoting Fed. R. Civ. P. 56(e) (emphasis added) and citing Kaiser Cement Corp. v. Fischbach & Moore, Inc., 793 F.2d 1100, 1103-04 (9th Cir.), cert. denied, 479 U.S. 949, 93 L. Ed. 2d 384, 107 S. Ct. 435 (1986)); and Celotex Corp. v. Catrett, 477 U.S. 317, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986)). With respect to these specific facts offered by the non-moving party, the court does not make credibility determinations or weigh conflicting evidence, and is required to draw all inferences in a light most favorable to the non-moving party. T.W. Elec. Serv., 809 F.2d at 630-31 (citing Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 89 L. Ed. 2d 538, 106 S. Ct. 1348 (1986)).

 Rule 56(c) nevertheless requires this Court to enter summary judgment, "after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex, 477 U.S. at 322. The mere existence of a scintilla of evidence in support of the non-moving party's position is insufficient: There must be evidence on which the jury could reasonably find for the non-moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250-51, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986).

 B. Plaintiff's First Claim: Breach of Contract

 1. In General

 The Traumanns claim their franchise agreement was "terminated" (1) wrongfully and without good cause or dissatisfaction, (2) without prior warning or notice, (3) without explanation, and (4) without an opportunity "to cure any problem allegedly perceived by Southland." Amended Complaint § 8. These claims presume the existence of certain rights and of internal, unwritten Southland policies. A claim for breach of contract, however, must be based on the non-performance of express promises or legal duties contained in a contract. 4 A. Corbin, Corbin on Contracts, § 943 at 807, n. 1 (1951).

 Paragraph 3 of the franchise agreement sets forth Southland's obligations after the agreement is signed and ...

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