IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA
September 15, 2011
SUNCOR HOLDINGS - COPII, LLC, GSM PARTNERS, LLC; TOWER ENERGY GROUP; AND DOES 1 THROUGH 20, DEFENDANTS.
ORDER GRANTING DEFENDANTS' MOTION TO DISMISS
Plaintiff Evelyn Poquez ("Plaintiff") has filed a Second Amended Complaint against defendants Suncor Holdings - COPII, LLC ("Suncor"), GSM Partners, LLC ("GSM"), Tower Energy Group ("Tower"), and Does 1 through 20, bringing a claim for violation of 20 the Petroleum Marketing Practices Act, 15 U.S.C. § 2801, et seq. ("PMPA"), as well as state and common law claims for specific 22 performance and declaratory relief. ECF No. 26 ("SAC"). Suncor, GSM, and Tower (collectively, "Defendants") filed a Motion to Dismiss for failure to state a claim and lack of subject matter 25 jurisdiction, which is fully briefed. ECF Nos. 29 ("Mot."), 30 ("Opp'n"), 32 ("Reply"). For the reasons stated below, the Court GRANTS Defendants' Motion and dismisses this action WITH PREJUDICE.
motion, the Court assumes the truth of the well-pleaded facts in Plaintiff's SAC. Plaintiff alleges that she operates a Union 76 5 branded motor fuel station in San Francisco, California. SAC ¶ 1.
As it must on a Federal Rule of Civil Procedure 12(b)(6)
Defendants became the leasor and franchisor of the fuel station 7 through a 2005 bulk sale. Id. ¶¶ 1, 5, 14. The bulk sale 8 agreement provides for PMPA compliance and also states that the 9 lease dealer has a right of first refusal to purchase the property.
agreement with defendant GSM, the "Assignment of First Refusal," 12 giving Plaintiff the exclusive option to purchase the premises at 13 the appraised value. Id. ¶ 16. The agreement was allegedly 14 reaffirmed in a May 2006 agreement among the parties. Id. ¶ 17.
Notice of Non-renewal of Plaintiff's dealership franchise agreement.
7, 2011 and the parties entered into a new three-year franchise 19 agreement that commenced March 2011 and expires February 2014. SAC 20
¶ 23. Plaintiff alleges this agreement was a "sham" since the 21 underlying lease expires in February 2012, two years prior to the 22 expiration of the renewed franchise agreement. Id. Defendant Tower had notified Plaintiff about the expiration of the underlying 24 lease before the parties renewed the franchise agreement. See SAC
On February 9, 2011, Defendants informed Plaintiff that she had four days to match a third party offer from "Strada" to 28 purchase the property for $3.2 million. Id. ¶ 24. Two days later, Id. ¶ 14. On or around June 30, 2005, Plaintiff entered into an
On or around November 24, 2010, Defendants sent Plaintiff a Id. ¶ 21. Defendants withdrew the Notice of Non-renewal on February
Ex. 13 at 1.
Plaintiff requested an appraisal of the property, but Defendants 2 allegedly refused to respond. Id. ¶ 26. The Strada deal 3 apparently fell through and, in April 2011, Forest City West, LLC 4
("Forest City"), a national real estate developer, acquired the 5 property from defendant Suncor. Id. ¶ 27. Plaintiff alleges that 6 she was never given the opportunity to purchase the property on the 7 same terms and conditions as Forest City. Id. She also contends 8 that Forest City intends to develop the subject property and will 9 terminate the franchise and evict her when the underlying lease 10 expires in February 2012. Id.
On January 21, 2011, Plaintiff commenced this action,
12 contending Defendants' November 2010 Notice of Non-renewal violated 13 the PMPA because Plaintiff never received written notice of the 14 duration of the underlying lease before beginning the term of her 15 franchise agreement. ECF No. 1 ("Compl.") ¶¶ 17-18. The Court 16 dismissed Plaintiff's Complaint without prejudice, finding that 17
Defendants' withdrawal of the Notice of Non-renewal and subsequent 18 assent to a new three-year franchise agreement mooted Plaintiff's 19 claims. 20
21 by (1) failing to provide Plaintiff with forty-five days to 22 exercise her right of first refusal to purchase the property; (2) 23 denying Plaintiff's alleged right of first refusal to purchase the 24 property and selling it to Forest City; (3) issuing Plaintiff a 25 sham three-year lease; and (4) selling the property to Forest City, 26 allegedly knowing that the developer will terminate the underlying 27 lease and evict the Plaintiff. SAC ¶ 30. Plaintiff also asserts 28 state law claims for specific performance and declaratory relief.
In the SAC, Plaintiff claims that Defendants violated the PMPA Id. ¶¶ 40-48. 2
Plaintiff seeks an injunction enjoining Defendants from selling the subject property or terminating and/or non-renewing Plaintiff's franchise; an order compelling Defendants to provide an 5 appraisal of the property; compensatory damages under the PMPA; 6 exemplary damages to deter future violations; restitution and 7 disgorgement of illegally gained profits; a declaration regarding 8 the parties' rights and obligations under the PMPA and various 9 factual and legal allegations in the SAC; and attorneys' fees and 10 costs. Id. at 15-18.
Defendants contend that Plaintiff cannot state a claim for 12 violation of the PMPA because her franchise agreement has not been 13 terminated or not renewed. Mot. at 2. Defendants also argue that 14 the Court lacks subject matter jurisdiction because Plaintiff's 15 claims for violations of the PMPA fail as a matter of law. Id. 16
With respect to Plaintiff's state law claims, Defendants contend 17 that Plaintiff has failed to plead facts sufficient to state a 18 claim for specific performance and that Plaintiff's claim for 19 declaratory relief is superfluous. Id. Additionally, Defendants 20 contend that, because the court lacks jurisdiction over Plaintiff's 21 claim for violation of the PMPA, the Court cannot exercise 22 supplemental jurisdiction over her state law causes of action. Id.
III. LEGAL STANDARD
A. Rule 12(b)(6)
A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) "tests the legal sufficiency of a claim." Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). "Dismissal can be based on the lack of a cognizable legal theory or the absence of 2 sufficient facts alleged under a cognizable legal theory."
1988). "When there are well-pleaded factual allegations, a court 5 should assume their veracity and then determine whether they 6 plausibly give rise to an entitlement to relief." Ashcroft v. Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. Iqbal, 129 S. Ct. 1937, 1950 (2009). However, "the tenet that a 8 court must accept as true all of the allegations contained in a 9 complaint is inapplicable to legal conclusions. Threadbare 10 recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Id. (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). The allegations made 13 in a complaint must be both "sufficiently detailed to give fair 14 notice to the opposing party of the nature of the claim so that the 15 party may effectively defend against it" and "sufficiently 16 plausible" such that "it is not unfair to require the opposing 17 party to be subjected to the expense of discovery." Starr v. Baca, 633 F.3d 1191, 1204 (9th Cir. 2011). 19
When a defendant submits a motion to dismiss under Federal Rule of Civil Procedure 12(b)(1), the plaintiff bears the burden of 22 establishing the propriety of the court's jurisdiction. See (1994). As a court of limited jurisdiction, "[a] federal court is 25 presumed to lack jurisdiction in a particular case unless the 26 contrary affirmatively appears." Stock West, Inc. v. Confederated Tribes, 873 F.2d 1221, 1225 (9th Cir. 1989). A Rule 12(b)(1) 28 jurisdictional attack may be facial or factual. White v. Lee, 227
B. Rule 12(b)(1)
Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 F.3d 1214, 1242 (9th Cir. 2000). In a facial attack, the defendant 2 challenges the basis of jurisdiction as alleged in the complaint, 3 while in a factual attack, the defendant may submit extrinsic 4 evidence to address factual disputes as necessary to resolve the 5 issue of jurisdiction, and no presumption of truthfulness attaches 6 to the plaintiff's jurisdictional claims. Safe Air for Everyone v. Gen. Tel. & Elecs. Corp., 594 F.2d 730, 733 (9th Cir. 1979). In 9 the instant case, Defendants have brought a facial attack. 10
Meyer, 373 F.3d 1035, 1039 (9th Cir. 2004); Thornhill Pub. Co. v.
A. Plaintiff's claim for violation of the PMPA
petroleum products franchisees, such as Plaintiff, to "remedy the disparity in bargaining power between franchisors and franchisees."
(quoting S. Rep. No. 95-731, at 18-19 (1978)). As such, the 18 provisions of the PMPA are to be liberally construed to protect the 19 interests of franchisees. Id. at 765. The PMPA provides that a 20 franchisor may "terminate" or "fail to renew" a franchise 21 relationship only where the franchisor provides written notice and 22 takes the action for a reason specifically recognized by the 23 statute. 15 U.S.C. §§ 2802, 2804. The PMPA defines the term "termination" to "include cancellation." 15 U.S.C. § 2801. The 25 terms "fail to renew" and "non-renewal" mean, "with respect to any 26 franchise relationship, a failure to reinstate, continue, or extend 27 the franchise relationship" at the conclusion of the franchise term 28 or following a termination. Id. Where a franchisor terminates or
The PMPA was designed to offer additional protections to Unocal Corp. v. Kaabipour, 177 F.3d 755, 762 (9th Cir. 1999) fails to renew a franchise relationship in violation of the PMPA, a 2 franchisee may bring a civil action in federal court to enforce the 3 provisions of the Act. 15 U.S.C. § 2805. 4
130 S. Ct. 1251 (2010), the Supreme Court addressed the 6 circumstances under which a franchisee may bring a claim for 7 improper termination and non-renewal under the PMPA. In that case,
In Mac's Shell Service, Inc. v. Shell Oil Products Co. LLC, Shell dealers brought claims against their franchisor for breach of 9 contract under state law and for "constructive termination" and PMPA. Id. at 1255-56. The dealers alleged that the franchisor had 12 violated the statute by discontinuing rent subsidies and offering 13 dealers new franchise agreements that calculated rent using a 14 different formula. The Supreme Court rejected the dealers' PMPA 15 claims on the grounds that the dealers had not abandoned their 16 franchises and had chosen to accept the franchisor's renewal 17 agreements. Id. at 1258, 1262. The Court reasoned that "a 18 standard for identifying those breaches of contract that should be 19 treated as effectively ending a franchise even though the 20 franchisee continues to use the franchisor's trademark, purchase 21 the franchisor's fuel, and occupy the service station premises" 22 would be "indeterminate and unworkable." Id. at 1260. Further, 23 extending the PMPA to apply to breaches of contract "would be 24 inconsistent with the Act's limited purpose and would further 25 expand federal law into a domain traditionally reserved for the 26 Ninth Circuit case law is in accord. See Unocal Corp. v. Kaabipour, 177 F.3d 755, 769 (9th Cir. 1999) (PMPA not implicated "constructive non-renewal" of their franchise agreements under the States." Id. at 1259. 27 28 Plaintiff's claim for violation of the PMPA fails as a matter of 3 law because Plaintiff has not alleged that Defendants terminated or 4 failed to renew her franchise agreement. Mot. at 3. Instead, 5
Defendants argue, Plaintiff has merely pled that Defendants' 6 conduct "amounts to" a termination of the franchise agreement. Id. 7 at 3-4. Defendants specifically point to the first paragraph of 8 the SAC which alleges that Plaintiff continues to operate a Union 9
Reply at 1. Defendants contend that the PMPA is inapplicable in such situations. Mot. at 3-4. 12
termination or non-renewal, but rather "an actual severance of the 14 relevant legal relationship." Opp'n at 6. Plaintiff contends that 15 the franchise relationship has already been terminated because Forest City intends "to commercially develop the property, not to 17 continue to supply [Plaintiff] with fuel, trademarks and branding" 18 and because "[t]he actual franchisor GSM/Suncor/Tower now no 19 longer exists, having been destroyed by the sale of the land to Forest City." Id. at 9. Plaintiff also argues that this case is 21 distinguishable from Mac's Shell since, in that case, the 22 franchisor did not intend to terminate the gasoline franchise. Id. 23 at 5-6. Here, on the other hand, Defendants' intent is allegedly 24 to terminate Plaintiff's franchise agreement. Id. at 6. To 25 support her argument regarding Defendants' intent, Plaintiff points 26 where there was no termination or non-renewal); Fresher v. Shell Oil Co., 846 F.2d 45, 46-47 (9th Cir. 1988) (dealers could not state a claim under the PMPA where they alleged that assignment of their 28 lease agreements would result in termination of their franchises).
Relying in part on Mac's Shell, Defendants argue that 76 branded motor fuel service station on the subject property.
Plaintiff counters that this is not a case of constructive to the Notice of Termination issued by Defendants in November 2010; 2 the "sham lease"; and the sale of the property to Forest City, who 3 allegedly intends to evict Plaintiff and commercially develop the 4 property. Id. 5
indication that Defendants have terminated or failed to renew "an actual severance of the legal relationship." In fact, Plaintiff's arguments are unpersuasive. There is no Plaintiff's franchise agreement or that there has otherwise been Plaintiff has pled that she "currently operates a Union 76 branded 10 motor fuel service station" on the subject property, SAC ¶ 1, and that she recently renewed her franchise agreement with Defendants 12 for a three-year term, id. ¶ 23. Moreover, Defendants' sale of the 13 subject property to Forest City has not destroyed the franchise, as 14 defendant Tower currently remains the franchisor of Plaintiff's Union 76 station. See SAC ¶¶ 5, 23. Plaintiff has not alleged any 16 facts showing that the franchise agreement has been terminated or 17 that Defendants have in any way interfered with Plaintiff's use of 18 the Union 76 trademark, purchase of fuel, or occupation of the 19 subject property. Whether or not Defendants or Forest City will 20 act to terminate Plaintiff's franchise agreement is a matter of 21 pure conjecture at this time. 22
to terminate the franchise agreement is also unconvincing.
Defendants' intent is irrelevant to Plaintiff's claim for violation 25 of the PMPA. The pertinent inquiry is whether Defendants have 26 actually terminated or failed to renew the franchise, not whether Defendants intend to do so. Nothing in the Act suggests that a 28 right of action may be based solely on a franchisor's intent to
Plaintiff's argument regarding Defendants' purported "intent" terminate and Plaintiff points to no other authority for support.
In any event, a standard for identifying actionable intentions 3 would be just as "indeterminate and unworkable" as a standard for "indentifying those breaches of contract that should be treated as 5 effectively ending a franchise." See Mac's Shell, 130 S. Ct. at
Because there has not been a termination or non-renewal of
Plaintiff's franchise, Plaintiff cannot state a claim for violation 9 of the PMPA. However, in the interest of thoroughness, the Court 10 addresses each of the PMPA violations alleged in the SAC.
Plaintiff alleges that Defendants violated the statute first by failing to provide her with four rather than forty-five days to 13 match the Strada offer and second by selling the property to Forest City before allowing her to exercise her right of refusal to 15 purchase the property. SAC ¶ 30. Under certain provisions of the Act, the franchisor is required to "offer the franchisee a right 17 of first refusal of at least 45-days duration," but these 18 provisions only apply where there has been a termination or 19 non-renewal. See 15 U.S.C. §§ 2802(b)(2)(E)(iii)(I),
Plaintiff and when the property was later sold to Forest City, Defendants informed Plaintiff she had four days to match the Strada 24 offer on February 9, 2011, two days after they had withdrawn the See also Patel v. Sun Ref. & Mktg. Co., 710 F. Supp. 1023, 1023-1024 (E.D. Pa. 1989) (defendant did not violate the PMPA by selling 27 the premises to a third party without first offering the franchisee the chance to purchase on the same terms since the franchise had 28 been renewed and "no one can state with certainty whether plaintiffs will ever face the prospect of non-renewal"). 1260. 7
2802(b)(3)(D)(iii)(II). When the Strada offer was presented to Plaintiff's franchise had not been terminated or non-renewed.
Notice of Non-renewal. SAC ¶¶ 23-24. Forest City acquired the 2 property about two months later. Id. ¶ 27. Accordingly, the PMPA 3 did not require Defendants to provide Plaintiff with forty-five 4 days to match the Strada offer or to provide Plaintiff with the 5 opportunity to purchase the property on the same terms and 6 conditions as Forest City.
Next, Plaintiff alleges that Defendants violated the PMPA by "issuing a sham 3 year lease . . . presumably extending the lease 9 term to February 28, 2014, but preserving the right for defendants 10 to terminate the lease when the underlying lease . . . terminates
on February 29, 2012." SAC ¶ 30. Plaintiff does not point to any 12 provision of the PMPA which would prohibit such an action. Nor can 13 the Court identify any provision of the PMPA which would preclude 14 the parties from entering into a franchise agreement subject to a 15 lease agreement of shorter duration.In any event, before Defendants informed her that the underlying lease for the site 18 expires on February 29, 2012. See SAC, Ex. 13. As Plaintiff had 19 notice of the expiration of the underlying lease, the franchise Plaintiffs allege that Defendants' refusal to allow her to purchase the property on the same terms and conditions as Forest 22 City constitutes a breach of the parties' June 30, 2005 agreement. SAC ¶ 26. While Defendants' alleged breach may be actionable under 23 state law, it cannot support a cause of action brought under the PMPA.
4 Moreover, the PMPA anticipates and allows for situations where an 25 underlying lease expires prior to the franchise agreement. Specifically, the PMPA provides for the termination and non-renewal 26 of a franchise where there is a "loss of the franchisor's right to grant possession of the leased marketing premises through 27 expiration of an underlying lease," so long as the franchisor provides notice and certain other conditions are met. 15 U.S.C. § 2802(c)(4).
Plaintiff voluntarily entered into the renewed franchise agreement, agreement could hardly be considered a sham. 2
3 by selling the property to Forest City, "knowing that Forest City 4 will terminate the underlying lease in February 2012 and evict 5 plaintiff." SAC ¶ 30. As an initial matter, Plaintiff's 6 allegations are insufficient to raise her "right to relief above 7 the speculative level." Twombly, 550 U.S. at 555. Plaintiff 8 pleads no facts to support her conjecture that Forest City will 9 terminate the underlying lease in February 2012. More importantly, 10
termination or non-renewal. Allegations that Defendants sold the 12 underlying property to a third party who may possibly terminate the 13 franchise agreement in the future, without more, are insufficient 14 to state a cause of action. See Fresher, 846 F.2d at 46-47. 15
In sum, Plaintiff has not alleged that Defendants have either 16 terminated or failed to renew her franchise agreement and, as such, 17 her claim for violation of the PMPA fails as a matter of law. If 18 and when Defendants terminate or fail to renew Plaintiff's 19 franchise agreement in violation of the PMPA, she may then bring 20 suit. Until that time, her action is premature. As the Court has 21 granted Plaintiff leave to amend once before and Plaintiff's claim 22 fails as a matter of law, this claim is dismissed with prejudice.
Plaintiff brings a claim for specific performance under the 27 parties' June 30, 2005 agreement, which allegedly gives Plaintiff 28 the exclusive option to purchase the premises at the appraised fair
Finally, Plaintiff alleges that Defendants violated the PMPA Plaintiff has not pled that her franchise has yet been subject to
B. Plaintiff's claims for specific performance and declaratory relief Plaintiff also brings two state law claims for relief. First, market value. SAC ¶¶ 40-46. With respect to this claim, Plaintiff 2 asks that the Court order Defendants to select a mutually 3 acceptable appraiser to appraise the fair market value of the 4 property. Id. at 43. Second, Plaintiff brings a claim for 5 declaratory relief, asking the court for a declaration regarding 6 the parties' rights and obligations under the PMPA, whether 7
Defendants' termination/non-renewal of plaintiff's franchise was in 8 good faith, and various other factual and legal allegations in the SAC. Id. at 47-49. Plaintiff alleges that the Court may exercise 10 supplemental jurisdiction over these claims under 28 U.S.C. § 1367 because "they are so related to federal claims that they form part 12 of the same case or controversy." Id. ¶ 11. 13
which relief can be granted. Mot. at 9-10. Specifically,
Defendants contend that Plaintiff's claim for specific performance 16 fails because Plaintiff has not alleged why monetary damages would 17 be inadequate or why Plaintiff cannot obtain an appraisal on her 18 own and then seek to recover proportionate costs from Defendants.
Id. Defendants contend that Plaintiff's claim for declaratory 20 relief fails because it is subsumed by Plaintiff's first claim for 21 violation of the PMPA and is therefore superfluous. Id. at 10.
address them because it declines to exercise jurisdiction over
Under 28 U.S.C. § 1367(c), "the district courts may decline to 26 exercise supplemental jurisdiction over a claim" where "the 27 district court has dismissed all claims over which it has original 28 jurisdiction." As Plaintiff's claim for violation of the PMPA
Defendants contend that both claims fail to state a claim upon While these arguments may have merit, the Court need not Plaintiff's claims for specific performance and declaratory relief.
fails to allege a valid claim for relief under federal law, the Court declines to exercise supplemental jurisdiction over her state 3 law claims. Therefore, the Court dismisses Plaintiff's claims for 4 specific performance and declaratory relief for lack of subject 5 matter jurisdiction. 6 7
For the foregoing reasons, Defendants Suncor, GSM, and Tower's Motion to Dismiss is GRANTED; Plaintiff Evelyn Poquez's Second Amended Complaint is DISMISSED WITH PREJUDICE.
IT IS SO ORDERED.
UNITED STATES DISTRICT JUDGE
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