The opinion of the court was delivered by: Hon. Gonzalo P. CURIELUnited States District Judge
ORDER DENYING PLAINTIFFS' MOTION FOR SUMMARY JUDGMENT AND GRANTING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT [Dkt. Nos. 57, 58.]
Before the Court are both parties' motions for summary judgment as to all the claims in the first amended complaint. (Dkt. Nos. 57, 58.) Both parties filed oppositions to the motions for summary judgment on December 14, 2012. (Dkt. Nos. 60, 61.) Replies were filed on January 4, 2013. (Dkt. Nos. 62, 63.) The motions are submitted on the papers without oral argument pursuant to Civil Local Rule 7.1(d)(1). After a review of the briefs, supporting documentation, and applicable law, the Court DENIES Plaintiffs' motion for summary judgment and GRANTS Defendant's motion for summary judgment.
On June 23, 2009, Plaintiffs Leroy Grayson and Alvin McKenzie brought this nationwide class action against Defendant 7-Eleven, Inc. seeking to recover federal excise tax refunds issued to Eleven. (Dkt. No. 1.) Plaintiffs filed the operative First Amended Complaint ("FAC") on August 10, 2009. (Dkt. No. 10.) The FAC asserts three causes of action: (1) conversion; (2) money had and received; and (3) breach of implied contract. (Id.)
On July 21, 2010, the parties submitted a joint motion stipulating to class certification of a nationwide class under Federal Rule of Civil Procedure 23, which the Court granted. (Dkt. Nos. 24, 25.) Subsequently, the parties filed cross-motions for summary judgment. (Dkt. Nos. 31, 32.) Upon review of the parties' summary judgment pleadings, on June 10, 2011, the Court concluded that decertification of the nationwide class was necessary and vacated its prior order without prejudice to Plaintiffs renewing the motion for certification of a redefined class. (Dkt. No. 42.) The parties withdrew their motions for summary judgment. (Dkt. Nos. 45, 46.)
On August 15, 2011, Plaintiffs filed a motion to certify class action. (Dkt. No. 47.) Defendant did not oppose. On March 28, 2012, the Court granted Plaintiffs' motion for class certification. The class is defined as All former franchisees of Defendant 7-Eleven, Inc., located in the state of California who (1) paid a portion of the federal excise tax levied against pre-paid long distance telephone cards sold to the public from July 2000 through July 2006; (2) terminated their franchise agreements with 7-Eleven at any time between July 2000 to September 2007; and (3) for whom 7-Eleven has not paid their pro-rata portion of the excise tax refund as of December 8, 2008.
On October 9, 2012, the case was transferred to the undersigned judge. (Dkt. No. 55.) On October 19, 2012, both parties filed their respective motions for summary judgment. (Dkt. Nos. 57, 58.) Both parties filed their respective oppositions on December 14, 2012. (Dkt. Nos. 60, 61.) On January 4, 2013, the parties filed their replies. (Dkt. Nos. 62, 63.)
In March 1987, Plaintiff Leroy Grayson executed a Store Franchise Agreement with 7-Eleven. (Dkt. No. 60-1, Pls' Statement of Genuine Issues in Opp. to D's MSJ, No. 1.) In May 1992, Plaintiff Alvin McKenzie executed a Store Franchise Agreement with 7-Eleven. (Id., No. 2.) McKenzie executed a replacement Store Franchise Agreement in May 2004. (Id., No. 3.) Grayson executed a "Release of Claims and Termination" agreement on November 1, 2004 and McKenzie executed a "Release of Claims and Termination" agreement on September 1, 2005. (Id., Nos. 4, 5.)
Starting in or before the year 2000, the federal government collected federal excise taxes on all pre-paid long distance telephone cards ("PTCs") sold to the general public. (Dkt. No. 61-1, D's Response to Ps' Separate Statement, No. 1.) Thousands of pre-paid long distance telephone cards were sold by 7-Eleven franchisees throughout the United States. (Id., No. 2.) The excise tax was levied on 3% of the total purchase price of each phone card sold, depending on its denomination. (Id., No. 3.) The actual entity that delivered the total tax payment to the federal government was 7-Eleven.*fn1
(Id., No. 5.) The federal government stopped collecting the excise tax on long distance pre-paid phone cards in June or July 2006. (Id., No. 6.) The U.S. Treasury authorized a one-time refund of the tax collected from all entities who paid the tax from March 2003 through July 2006. (Id., No. 7.) When the federal government ceased collection of the tax and started the refund procedure around mid-2007, Defendant 7-Eleven did not notify its former franchisees about the refund. (Id., No. 8.)
7-Eleven took affirmative steps to file claims with the U.S. government to obtain refunds for 100% of all taxes paid during the July 2000 through July 2006 time period. (Id., No. 11.) In late 2008, Plaintiffs learned that the U.S. government made its first refund payment to 7-Eleven for millions of dollars in taxes paid during the "collection period." (Id., No. 12.) Grayson, upon discovering the fact that payments had been issued by the U.S. Treasury, gave notice to 7-Eleven requesting the accounting and refund. (Id., No. 14.) Former franchisees who had no franchise agreement in effect as of September 18, 2007 were not paid any portion of the excise tax. (Id., No. 15.)
In March 2007, the IRS notified 7-Eleven it had accepted 7-Eleven's refund claim in its entirety. (Dkt. No. 60-1, Pls' Statement of Genuine Issues in Opp. to D's MSJ, No. 12.) The IRS placed no conditions on 7-Eleven's receipt of the refund money. (Id., No. 13.) 7-Eleven decided to share the refund with current franchisees because the refund was similar to a vendor discount or allowance in that it reduced the cost of goods sold. (Id., No. 14.) It even provided refunds to former franchisees who are also current franchisees. (Dkt. No. 63-1, Hanson Decl. ¶ 5.) 7-Eleven decided to distribute portions of the refund allocable to their former franchisees solely as a gesture of goodwill towards individuals with whom it has an ongoing business relationship and not based on any legal obligation. (Id.)
In order to fully understand the payment of the excise tax, 7-Eleven describes the framework for invoicing and payment with franchisees pursuant to the Franchise Agreement. (Dkt. No. 57-9, Hanson Decl. ¶ 8.) The franchisee places an order with a vendor for goods or services. (Id. ¶ 9.) The franchisee submits the invoice for those goods or services to 7-Eleven and 7-Eleven pays the vendor for those goods and services, with funds from a 7-Eleven bank account. (Id. ¶¶ 9-10.) 7-Eleven then charges the franchisee for that cost, through a mechanism known as the "Open Account," which 7-Eleven establishes and maintains for each franchisee. (Id. ¶ 9.) All amounts owed by the franchisee to 7-Eleven (including for goods paid for by 7-Eleven) are charged to the Open Account, and all ...