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Chevron U.S.A. Inc. v. M&M Petroleum Services

December 30, 2008


The opinion of the court was delivered by: Hon. Arthur Nakazato, United States Magistrate Judge


(In Chambers - No Appearances)

Proceedings: Motion for contempt and to compel defendant M&M Petroleum Services, Inc. and Mansoor Ghaneeian's depositions and for sanctions ("Motion") (dkt #115)

Rulings: The Motion is GRANTED IN PART AND DENIED IN PART (details discussed below).


Having read and considered the parties' respective papers relating to the Motion, including the Joint Stipulation (dkt #116) ("JS") and numerous supporting exhibits, the Court found this matter was appropriate for disposition without a hearing. See Rule*fn1 78; Local Rule 7-15. Therefore, the hearing date was vacated and removed from the Court's calendar, and the Clerk notified counsel for the parties that no appearances were required.

I. Background

This is a lawsuit between plaintiff and counter-defendant Chevron U.S.A., Inc. ("Chevron") and defendant and counter-claimant M&M Petroleum Services, Inc. ("M&M"), the owner and operator of a Chevron-branded service station located in Newport Beach, California. In its complaint for declaratory relief pursuant to the Petroleum Marketing Practices Act ("PMPA"), 15 U.S.C. § 2801 et seq., Chevron principally alleges that it lawfully terminated M&M's dealership under the PMPA because M&M failed to disclose financial records to Chevron, under-reported certain income to Chevron and the IRS, and withheld income from Chevron, in violation of certain terms of various dealer agreements between Chevron and M&M. (Chevron's 7/17/07 Complaint, ¶¶ 15-25 (dkt #1).) M&M disagrees and, by its First Amended Counterclaim (dkt #17), M&M seeks to prevent its termination as a Chevron dealer.

On September 11 and 22, 2008, Chevron deposed Mansoor Ghaneeian, M&M's president and majority shareholder. The deposition transcripts and exhibits establish that Mr. Ghaneeian appeared in his capacity as M&M's Rule 30(b)(6) designee (Jahunen Decl. (dkt #117), Ex. L) as well as in his individual capacity, which Chevron compelled pursuant to a Rule 45 deposition subpoena that also commanded Mr. Ghaneeian to produce certain records. (Id., Ex. N). During the second session of his deposition held on September 22, 2008, Mr. Ghaneeian invoked his privilege against self-incrimination in response to a majority of the questions posed by Chevron's counsel before the deposition was terminated by his former counsel of record, Thomas J. Borchard, who appeared as counsel for both M&M and Mr. Ghaneeian. (Id., Ex. AA (dkt #117-28) at AA 292-293, 311-314.) Mr. Ghaneeian invoked the privilege because, five days earlier on September 17, 2008, he and Mr. Borchard met with two IRS agents and were informed that Mr. Ghaneeian was the target of an IRS criminal investigation (presumably based upon written information about M&M and Mr. Ghaneeian that Ms. Eshani claims she furnished to the IRS in August or September of 2007). (Borchard Decl. (dkt #119), ¶ 10.)

By its Motion, Chevron moves for an order: (1) finding Mr. Ghaneeian waived his Fifth Amendment privilege against self-incrimination; (2) directing Mr. Ghaneeian to appear for his deposition in both his individual capacity and as M&M's Rule 30(b)(6) designated witness; (3) compelling M&M's further compliance with the Court's discovery order dated July 30, 2008 ("July 30 Order"); (4) directing Mr. Ghaneeian to verify the supplemental response to Chevron's document requests as directed in the July 30 Order; and (5) imposing certain evidentiary sanctions against M&M. (JS at 37-38.)

Alternatively, in the event the Court finds Mr. Ghaneeian did not waive his Fifth Amendment privilege, Chevron requests the Court to issue an order: (1) directing M&M to produce an alternative Rule 30 (b)(6) witness; (2) barring M&M from offering in evidence Mr. Ghaneeian's prior statements in declarations and verified discovery responses regarding issues surrounding documents contained in the "Green Book" or "Bible" and M&M's underreporting of revenue to Chevron and the taxing authorities; and (3) imposing adverse inference sanctions. (Id. at 38.) Chevron also requests the Court to impose monetary sanctions against M&M "to reimburse Chevron's attorneys fees and costs incurred in bringing this [M]otion and attending the frustrated September 11 and 22[, 2008] deposition of Mr. Ghaneeian and M&M's [Rule] 30(b)(6) witness." (Id.)

M&M opposes the Motion and requests the Court to find Mr. Ghaneeian did not waive his Fifth Amendment privilege and should not be required to reappear for his deposition. (Id. at 39.) "M&M agrees to permit Chevron's computer forensic specialist to take a mirror image of M&M's computer and that it will produce verified amended responses to Chevron's document requests nos. 18 and 19, provided that the Court modify its July 30 [Order] so that Mr. Ghaneeian is not required to potentially waive his Fifth Amendment privilege by verifying the responses." (Id.) "M&M also agrees to produce another Rule 30(b)(6) deponent to testify to the issues identified in Chevron's Rule 30(b)(6) deposition notice." M&M contends the Court should deny Chevron's requests for monetary, evidentiary, and negative inference sanctions. (Id.)

The parties are familiar with the other background facts and each party's contentions, all of which are set forth in the JS. Accordingly, only those facts that are helpful to understanding ...

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