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ARBABIAN v. BP AMERICA

February 7, 1995

NICK ARBABIAN, et al., Plaintiffs,
v.
BP AMERICA, a Delaware corporation, et al., Defendants.



The opinion of the court was delivered by: SAUNDRA BROWN ARMSTRONG

 Plaintiffs, who are retail service station dealers, have raised various federal and state law claims against defendants BP America, BP Oil Company, BP Marketing Corporation, and BP Exploration & Oil Incorporated (defendants collectively referred to as "BP" or "defendants"). In September 1994, defendants filed a motion to dismiss plaintiffs' first through eighth causes of action. The hearing on this motion was originally noticed for November 22, 1994 and then renoticed for December 13, 1994. On December 15, 1994, this Court issued an order granting defendants' motion as to the first through fifth causes of action and continuing the hearing as to the sixth through eighth causes of action. *fn1" (Order Granting Defendants' Motion to Dismiss on the First Through Fifth Causes of Action and Continuing Hearing on the Sixth Through Eighth Causes of Action at 11-12 (filed Dec. 15, 1994) [hereinafter "Order of 12/15/94"].) The Court continued the hearing as to the sixth through eighth causes of action because the parties had not adequately briefed the issue of whether plaintiffs' state common law fraud (sixth cause of action), negligent misrepresentation (seventh cause of action) and breach of contract (eighth cause of action) claims were preempted by the Petroleum Marketing Practices Act ("PMPA"), 15 U.S.C. §§ 2801 et seq. (Order of 12/15/94 at 10.) To give the parties ample time to address this issue, the Court established a briefing schedule and continued the hearing to February 28, 1995. (Id. at 11-12.) The parties have submitted the supplemental briefing pertaining to whether plaintiffs' state fraud, negligent misrepresentation and breach of contract claims are preempted. After having read and considered all papers submitted in connection with defendants' motion to dismiss the sixth through eighth causes of action, including all supplemental briefs, and being fully informed, the Court finds for the reasons discussed below that these causes of action are preempted, and consequently GRANTS defendants' motion to dismiss the sixth through eighth causes of action. *fn2"

 BACKGROUND

 In 1989, BP acquired various California assets of Mobil Oil Corporation, including certain Mobil franchises. The majority of plaintiffs are former Mobil franchisees whose gas station franchises were transferred from Mobil to BP. Starting in 1992, BP began a withdrawal from the California market, resulting in the eventual sale of its assets, including the California franchises, to Tosco Corporation ("Tosco"). Through this action, plaintiffs essentially dispute BP's sale of the franchises to Tosco, asserting that BP should have sold the franchises to them. Plaintiffs have raised their dispute and assertion in their Supplemental Complaint, filed August 3, 1994, through 19 causes of action.

 In September 1994, defendants moved to dismiss the first through eighth causes of action in the Supplemental Complaint. In the Order of 12/15/94, the Court granted the motion as to the first through fifth causes of action and continued the hearing as to the sixth through eighth causes of action.

 Plaintiffs' first cause of action asserted a claim under the PMPA, the second under Cal. Bus. & Prof. Code § 20999.25(a), the third under Cal. Bus. & Prof. Code § 17200, the fourth for declaratory relief, and the fifth for intentional interference with prospective advantage. Plaintiffs' fourth and fifth causes of action were predicated on a finding that defendants violated the PMPA or Cal. Bus. & Prof. Code § 20999.25(a). As to plaintiffs' third cause of action, plaintiffs alleged that defendants engaged in unfair competition in violation of Cal. Bus. & Prof. Code § 17200 when they (1) committed acts in violation of the PMPA and Cal. Bus. & Prof. Code § 20999.25(a), and (2) engaged in coercive gasoline pricing and accepted illegal kickback payments. Thus, to the extent that the third cause of action involved allegations that the PMPA and Cal. Bus. & Prof. Code § 20999.25(a) were violated, this cause of action was predicated on a finding that defendants violated the PMPA and Cal. Bus. & Prof. Code § 20999.25(a).

 In the Order of 12/15/94, the Court determined that Cal. Bus. & Prof. Code § 20999.25(a) was preempted by the PMPA, and therefore dismissed all causes of action predicated on a finding that this section was violated. (Order of 12/15/94 at 5-8.) In connection with their claim under the PMPA, plaintiffs alleged that defendants violated 15 U.S.C. § 2802(b)(2)(E)(iii)(I) by failing to provide plaintiffs with a bona fide offer to purchase the premises upon which the franchises are located prior to the termination of the franchise agreement. Plaintiffs also alleged that defendants violated 15 U.S.C. § 2804(b)(2)(A) by failing to give sufficient notice of the termination of the franchises. As to plaintiffs' PMPA claim, the Court held that defendants did not violate 15 U.S.C. § 2802(b)(2)(E)(iii)(I) because the transfer agreement between BP and Tosco requires Tosco to offer each franchisee a non-discriminatory franchise agreement of at least three years duration. (Order of 12/15/94 at 9.) The Court additionally held that defendants did not violate 15 U.S.C. § 2802(b)(2)(A) because they had provided notice of the January 15, 1995 termination on July 1, 1994. (Id.) Based on these holdings, the Court found that plaintiffs had failed to state a cause of action under the PMPA, and therefore dismissed all causes of action predicated on a finding that the PMPA had been violated. On this basis, the Court granted defendants' motion regarding the first through fifth causes of action. *fn3"

 The Court now considers defendants' arguments regarding dismissal of the sixth through eighth causes of action, which involve California common law. Plaintiffs' sixth cause of action asserts a claim for fraud, the seventh for negligent misrepresentation, and the eighth for breach of contract. In their initial moving and reply papers, defendants argued that this Court had previously ruled in its order denying plaintiffs' motions for a temporary restraining order ("TRO") and preliminary injunction that plaintiffs' state law claims for fraud, negligent misrepresentation and breach of contract were preempted by the PMPA. On this basis, defendants sought dismissal of plaintiffs' sixth through eighth causes of action. In its order regarding the TRO and preliminary injunction, however, the Court did not address the issue of whether these state law claims were preempted. (See Order Denying Plaintiffs' Ex Parte Application for a Temporary Restraining Order and Order to Show Cause Re Preliminary Injunction (filed July 29, 1994).) As the parties' memoranda of points and authority did not adequately brief this issue, the Court required the parties to submit supplemental briefs and continued the hearing to February 28, 1994. As discussed below, the Court now finds that plaintiffs' sixth through eighth causes of action are preempted, and therefore DISMISSES these claims.

 A. STANDARD OF REVIEW

 For purposes of a motion to dismiss under Rule 12(b)(6), a complaint is construed in a light most favorable to the plaintiff and all properly pleaded factual allegations are taken as true. Jenkins v. McKeithen, 395 U.S. 411, 421, 23 L. Ed. 2d 404, 89 S. Ct. 1843 (1969). A motion to dismiss should not be granted unless it appears beyond a doubt that the plaintiff "can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 2 L. Ed. 2d 80, 78 S. Ct. 99 (1957). When assessing a Rule 12(b)(6) motion, the court is confined to consideration of the allegations in the pleadings and any documents attached to the pleadings. Hal Roach Studios v. Richard Feiner & Co., 896 F.2d 1542, 1555 (9th Cir. 1990).

 B. THE MERITS

 1. Standards Regarding Preemption

 The PMPA has two main objectives. The first is to protect petroleum marketing franchisees against arbitrary or discriminatory terminations or nonrenewals of their service station franchises. Millett v. Union Oil Co. of Cal., 24 F.3d 10, 13 (9th Cir. 1994) (citing S. Re. No. 731, 95th Cong., 2d Sess. 19, reprinted in 1978 U.S.C.C.A.N. 873, 877 [hereinafter "Senate Report, 1978 U.S.C.C.A.N. at "]). The second is to provide "'adequate flexibility so that franchisors may initiate changes in their marketing ...


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