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Raddick v. Equilon Enterprises

September 3, 2008


The opinion of the court was delivered by: Honorable Barry Ted Moskowitz United States District Judge


Defendant Equilon Enterpises, LLC ("Defendant" or Equilon") has filed a motion for summary judgment. For the reasons discussed below, Defendant's motion is DENIED.


This action arises out of Equilon's termination of Plaintiff Judy Radick's franchise to operate a Texaco station at 905 Orpheus, Leucadia, CA 92024 (the "Property").

The Property is owned by the Hartman-Ecke Trust. (Banks Decl. ¶ 1.) Equilon, as successor in interest to Texaco, leased the Texaco branded Property from the Hartman-Ecke Trust through Equilon's assumption of a lease dated February 6, 1969, together with a First Modification of Lease dated May 12, 1990, a Second Modification of Lease, dated July 12, 1999, and a Third Modification of Lease, dated October 12, 2004. (Wisdom Decl. ¶ 3.)

From approximately 1978 until June 30, 2006, Plaintiff Judy Radick operated a service station on the Property. Commencing in October, 2000, Plaintiff and Equilon entered into a series of Retail Facility Leases and Retail Sales Agreements, allowing Plaintiff to operate the service station under the Texaco brand name on the Property. (Exs. 1, 2, 7, 8 to Radick Dep. (Ex. B to Wofford Decl.)).

Equilon's right to use the Texaco trademark was to expire on June 30, 2006. This fact was revealed in a Franchise Disclosure Statement received by Plaintiff on October 26, 2004. (Ex. 6 to Radick Dep.) In her deposition, Plaintiff admitted that as early as 2001, she understood that Shell would not be able to continue using the Texaco brand name after June 30, 2006. (Radick Dep. 28:6-10.)

Under the Third Modification of Lease between Equilon and the Hartman-Ecke Trust, Equilon was provided the option to extend the term of the underlying lease for an additional five years commencing on March 23, 2005. (Ex. 1 to Banks Decl.) The Third Modification of Lease also provided that during the option term commencing on March 23, 2005, "the Tenant shall have the right to terminate the Lease effective June 30, 2006, provided that Tenant provides Landlord with written notice of such intent to terminate no later than January 31, 2006."

An Amendment to the Retail Facility Lease between Equilon and Plaintiff dated January 1, 2005, provided:

Notice -- Underlying leases(s): The Premises are subject to an underlying leases(s) that will expire on March 22, 2010. The underlying leases(s) might, however, expire earlier on June 30, 2006 by Lessor giving 150 days advance notice to its landlord(s) due to Lessor's loss of the right to use the Texaco trademark on June 30, 2006. Lessee acknowledges the situation and understands that Lessor's current intentions are to early terminate the underlying leases(s) and this Lease but that circumstances might change whereby the underlying lease(s) would not be early terminated, this Lease would not early terminate and the designated brand Identification would be changed from Texaco to Shell. (Ex. 9 to Radick Dep.)

On November 16, 2005, Equilon notified Philip Banks, Trustee of the Hartmann-Ecke Trust, that Equilon was exercising the option to terminate the underlying lease, effective June 30, 2006. (Ex. 2 to Banks Decl.) On December 5, 2005, Equilon sent Plaintiff a Notice of Termination, which explained that the franchise agreements would be terminated effective June 30, 2006. (Ex. 13 to Radick Dep.) The Notice stated: "The reason for the termination is the loss of Franchisor's right to grant possession of the Premises because of the expiration or other termination of an underlying lease between a third party and Franchisor covering the Premises."

On December 5, 2005, Equilon also sent Plaintiff a Bona Fide Offer to Sell Personal Property ("Offer to Sell") and an Offer to Assign Option Letter Agreement ("Assignment Agreement"). (Exs. 14 & 15 to Radick Dep.) In the Offer to Sell, Equilon offered to sell its personal property on the premises to Plaintiff for $121,262.00. Plaintiff objected to the purchase price (Ex. 16 to Radick Dep.), and no purchase of the personal property was ever consummated. The Assignment Agreement explained that the underlying lease contained an extension option ("Option") and offered to assign the Option to Plaintiff under certain enumerated conditions. Plaintiff never accepted the offer to assign the Option.

On January 24, 2006, Banks received an undated letter from Equilon rescinding its earlier Notice of Termination of Lease but reserving its right to terminate at a later date. (Ex. 4 to Banks Decl.) On January 27, 2006, Banks received another Notice of Termination, which advised Banks that Equilon was exercising its option to terminate the lease effective June 30, 2006. (Ex. 5 to Banks Decl.)

Between December 2005 and March 2006, Banks and Plaintiff engaged in negotiations regarding a potential new lease of the Property to Plaintiff. (Banks Decl. ΒΆΒΆ 7-13.) However, Banks and Plaintiff were unable to agree on the terms of the potential new lease. Therefore, effective June 30, ...

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