Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Harara v. ConocoPhillips Co.

April 29, 2005

MARWAN AHMED HARARA, PLAINTIFF(S),
v.
CONOCOPHILLIPS COMPANY, ET AL., DEFENDANT(S).



The opinion of the court was delivered by: Bernard Zimmerman United States Magistrate Judge

ORDER ON CROSS MOTIONS FOR SUMMARY JUDGMENT ON PLAINTIFF'S CLAIMS

On September 23, 2004, I granted in part and denied in part defendant's motion to dismiss plaintiff's second amended complaint ("SAC") against defendant ConocoPhillips Company ("Conoco") and dismissed plaintiff's claims against Dean Masterton, a Conoco Account Representative. Now before me are the parties' cross motions for summary judgment with respect to plaintiff's remaining claims against Conoco. For the following reasons, plaintiff's motion is denied and defendant's motion is granted.*fn1

Plaintiff purchased the goodwill and leasehold of the 76-branded franchise gasoline retail station in Oakland, California (the "Station") from Tosco Marketing Company ("Tosco"), predecessor in interest to Conoco, in February 1999. SAC, ¶¶ 1, 2, 17. He qualified as a dealer and franchisee and began operating the Station with his brother, Murad Harara. In late 1999, plaintiff made improvements to the Station, including remodeling the snack shop and restroom. See Decl. of Marwan A. Harara in Supp. of his Mot. for Summ. J. ("Harara Decl."), Ex. C at 83-94. Tosco approved the improvements in advance, based on blueprints submitted by plaintiff, on the condition that the improvements conform to specifications set forth in its Snack Shop Improvement Manual.*fn2 Id. at 88-89, 95, Ex. E-10.

On January 16, 2001, plaintiff renewed the franchise for a three-year period pursuant to a Dealer Station Lease and Motor Fuel Supply Agreement (the "Franchise Agreement") that expired on April 30, 2004. Decl. of Dean Masterton in Supp. of Conoco's Mot. for Summ. J. or, in the Alternative, Summ. Adjudication as to Pl.'s Claims for Relief ("Masterton Decl."), Ex. A. In June or July 2002, defendant placed plaintiff on "Cash in Advance" status, which required him to prepay for all gasoline deliveries.*fn3

Harara Decl. ¶¶ 15-16, Ex. B; Decl. of Paul Curtis in Supp. of Conoco's Mot. for Summ. J. or, in the Alternative, Summ. Adjudication as to Pl.'s Claims for Relief ("Curtis Decl.") ¶ 4.

In early 2003, following the merger of Conoco and Philips Petroleum Corporation, defendant decided to divest itself of approximately 100 petroleum service stations in California. Decl. of Philip Bonina in Supp. of Conoco's Mot. for Summ. J. or, in the Alternative, Summ. Adjudication as to Pl.'s Claims for Relief ("Bonina Decl.") ¶ 3. Plaintiff's station was among those identified for sale, and on April 2, 2003, defendant sent him a Notice of Non-renewal. Id. The notice advised plaintiff that defendant would not renew the Franchise Agreement upon its expiration on April 30, 2004, and stated, "The reason for this non-renewal is CONOCOPHILLIPS's determination made in good faith and in the normal course of business to sell CONOCOPHILLIPS's interest in the marketing premises." Id., Ex. A. Defendant also sent plaintiff a letter, dated April 2, 2003, that stated, "In accordance with the provisions of the Petroleum Marketing Practices Act, [Conoco] offers to sell the Marketing Premises to you pursuant to the terms set forth in the enclosed Real Estate Sales Contract." Id. at ¶ 4, Ex. A. The Real Estate Sales Contract ("Sales Contract") attached to the letter contained the relevant terms of defendant's offer to sell the premises to plaintiff for $1,120,000. Id. According to defendant, the purchase price was based on a third-party appraisal of the Station by Valuation Research that reflected a January 25, 2003 valuation date. Id. at ¶ 4, Ex. C. On June 6, 2003, following discussions with Richard Mathews, Conoco's Northern California Real Estate Manager, plaintiff accepted defendant's offer. Harara Decl. ¶ 3, Ex. U; Mathews Decl. ¶¶ 1, 3, Ex. A. While the Sales Contract specified a closing date of September 15, 2003, defendant extended the deadline at plaintiff's request on at least four occasions, and agreed to a final closing date of December 19, 2003. Decl. of Richard Mathews in Supp. of Conoco's Mot. for Summ. J. or, in the Alternative, Summ. Adjudication as to Pl.'s Claims for Relief ("Mathews Decl.") ¶ 6. On November 12, 2003, plaintiff's lender responded to his original loan application for $1,120,000 and requested that he reduce his loan application by $300,000. Harara Decl. ¶ 7, Ex. D. Plaintiff subsequently amended his loan application by reducing the amount by $300,000. Id. ¶ 8, Ex. D.

Both parties also contacted third parties regarding the sale of the Station. In November 2003, defendant secured from Khalid and Romana Usman an offer to purchase the property for $1,120,000. Bonina Decl., Ex. D. In December 2003, plaintiff entered into two separate form contracts with Wurn Waa Phan to purchase the Station, "including equipment, fixtures, goodwill . . . inventory . . . and improvements," from plaintiff. Id. ¶ 9; Exs. F, G. One contract was for $1,120,000, and was conditioned on Conoco transferring or assigning the Sales Contract. Id., Ex. G. The other contract was for $180,000. Id., Ex. F.

On January 6, 2004, defendant delivered gasoline to plaintiff on credit, pursuant to a one-time exception authorized by Conoco's Credit Department. Curtis Decl. ¶ 6. When plaintiff failed to pay for the shipment, Conoco placed him on a "credit hold" that required him to pay all outstanding amounts on his account prior to any further gasoline deliveries. Id. Plaintiff subsequently requested delivery of gasoline. Harara Decl. ¶ 13, Ex. P. Conoco did not respond. Id. at ¶ 13. In January or February 2004, plaintiff ran out of 89 and 91 octane gasoline. Id.; Decl. of David Vann in Supp. of Conoco's Mot. for Summ. J. or, in the Alternative, Summ. Adjudication as to Pl.'s Claims for Relief ("Vann Decl.") ¶ 2; Masterton Decl. ¶¶ 12-13.

Plaintiff did not close the escrow with Conoco on schedule, and on January 16, 2004, Conoco instructed the escrow agent to cancel escrow. Mathews Decl. ¶ 6; Harara Decl., Ex. E-6. Two days later, plaintiff sent Mathews a letter requesting consent to assign the Sales Contract to a third party purchaser. Harara Decl., Ex. E-8. The following day, Mathews sent plaintiff an email denying consent, and informing plaintiff that Conoco had cancelled escrow. Id., Ex. E-6. On January 20, 2004, the escrow company contacted plaintiff and requested that he execute a release agreement so that it could return his $5,000 deposit. Id., Ex. N. Two days later, Khalid and Romana Usman signed a contract to purchase the Station. The contract was effective March 4, 2004 and would have closed about 5 months later. Bonina Decl., Ex. D. On January 26, 2004, Mathews sent plaintiff a notice informing him that unless closing occurred within ten days, the Sales Contract would be null and void. Harara Decl., Ex. E-2. Plaintiff sent Mathews a letter rejecting the notice, and on February 6, 2004, plaintiff filed this lawsuit against defendant. Id., Ex. O.

On February 11, 2004, Conoco sent plaintiff a notice of default informing him that he was in violation of the Franchise Agreement by failing to maintain a complete inventory of motor fuel. See Masterton Decl., Ex. C. On February 20, 2004, Conoco served Harara with written notice of termination based on his failures to stock 76-branded motor fuel, to pay $13,163.18 in rent and other charges, and to take reasonable steps to control the operations of the station. Harara Decl., Ex. S; Masterton Decl. ¶ 14, Ex. D. Conoco eventually terminated the Franchise Agreement and plaintiff surrendered possession of the Station.

PMPA Claims

In his first and second claims plaintiff contends that defendant's decision not to renew the franchise violated the Petroleum Marketing Practices Act ("PMPA"), 15 U.S.C. §2801, et seq. Plaintiff first argues that Conoco's decision not to renew the Franchise Agreement was not made in good faith in the normal course of business.*fn4 A franchisor may choose not to renew the franchise relationship where the determination is made in good faith and in the normal course of business. 15 U.S.C. § 2802(b)(3)(D). "The good faith requirement looks to whether the franchisor's actions are designed to conceal selective discrimination against individual franchises." Unocal Corp. v. Kaabipour, 177 F.3d 755, 767 (9th Cir. 1999). The test for determining good faith is subjective, and the court should look to the franchisor's intent rather than the effect of the franchisor's actions. Svela v. Union Oil Co., 807 F.2d 1494, 1501 (9th Cir. 1986). "A franchisor meets the 'normal course of business' requirement if the determination was the result of the franchisors' normal decision making process." BP West Coast Products LLC v. Greene, 318 F. Supp. 2d 987, 996 (E.D. Cal. 2004) (citing Beck Oil Co. v. Texaco Ref. & Mktg., Inc., 25 F.3d 559, 562 (7th Cir. 1994)); see also Sandlin v. Texaco Ref. and Mktg., Inc., 900 F.2d 1481, 1481 (10th Cir. 1990).

Defendant has presented evidence that its decision to sell the Station was based on a determination by senior management, following the merger of Conoco and Phillips Petroleum Company, to divest a number of petroleum service station sites throughout the country. Bonina Decl. ¶ 1. Plaintiff's station was one of approximately 100 stations in California that defendant identified for divestment.

Id. While this evidence establishes that defendant's divestment decision was made in good faith and in the normal course of business, it is less clear why defendant chose to divest plaintiff's station in particular. In making divestment decisions defendant considered a number of factors, including volume of gasoline sales, dealer rent structure, ground lease tenure, quality of underground storage tanks, and the location and demographics of the site. See id. at 104-105. Defendant appears to have decided to divest itself of plaintiff's Station based on a several of these factors, including a significant decline in the volume of plaintiff's gasoline sales, and the fact that the Station was located in an economically challenged neighborhood with a very high crime rate and drug and gang problems. See Harara Decl., Exs. E at 105-106, 110-11, 116-117, 121, E-14. As with other divestments, the decision appears to have been based in part on a recommendation from several departments within Conoco, including the Real Estate and Marketing Departments. See Harara Decl., Ex. E at 102-104, 106, 108, 120, E-14. Based on this evidence I find that defendant has demonstrated that its decision to divest itself of plaintiff's station was made in good faith and in the normal course of business. Plaintiff has not presented sufficient evidence to establish that the decision to divest the Station was a sham, pretextual, discriminatory or otherwise not made in good faith and in the normal course of business. See Svela, 807 F.2d at 1501; Marks v. Shell Oil Co., 643 F. Supp. 1050, 1053, 1055 (E.D. Mich 1986), vacated on other grounds, 830 F.2d 68 (6th Cir. 1987).

Plaintiff contends that the fact that income from gasoline sales at the Station were more than $100,000 per year demonstrates that defendant's decision was made in bad faith. Plaintiff has not established that defendant based its non-renewal decision solely upon gasoline sales, however.*fn5 Rather, the evidence establishes that defendant's decision not to renew the franchise was part of a general plan to divest itself of a number of stations, and that profits were among the many factors defendant considered. See Bonina Decl. ¶ 2; Harara Decl., Exs. E at 103-107; 116-19, E-14.

Plaintiff also argues that Masterton's statement in November 2002 that plaintiff should sell the Station establishes that the non-renewal decision was made in bad faith. See Harara Decl., Ex. C at 53:19-54:19. The statement, made by Masterton in the context of a discussion about plaintiff's credit, merely establishes that because the Station's profitabilty was declining, Masterton's opinion was that plaintiff should sell the Station rather than seek to have his credit reinstated. See id. Masterton's statement, "you need act quickly because the operation of the station was as such that I had no choice but to non-renew your lease," is insufficient in and of itself to create a genuine issue of material fact regarding whether defendant decided not to renew in good faith. See Id. There is no evidence that Masterton was directly involved in the senior management divestment decision and Masterton testified he was not. Id. at 51.

Plaintiff's general allegations, unsupported by the record, are likewise insufficient to create a genuine issue of material fact as to whether defendant's decision was made in good faith and in the normal course of business. See Fed. R. Civ. P. 56(e); Rand v. Rowland, 154 F.3d 952, 963 (9th Cir. 1998). While plaintiff generally alleges that defendant continued to deny him credit privileges and access to financial information, he does not explain how these actions relate to defendant's decision not to renew the franchise. Plaintiff also generally claims that defendant never intended to perform under the Sales Contract, but he has provided no credible evidence to support this claim.*fn6

The evidence presented establishes that defendant decided not to renew the franchise in good faith and in the normal course of business. A reasonable trier of fact could not conclude otherwise, and Conoco is therefore entitled to judgment as a matter of law. See Unified Dealer Group v. Tosco Corp., 16 F. Supp. 2d 1137, 1142 (N.D. Cal. 1998) (citing Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986)). Plaintiff next argues that defendant's offer to sell the station was not bona fide. In particular, plaintiff contends that both the provision in the Sales Contract prohibiting ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.