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Valvoline Instant Oil Change Franchising, Inc. v. RFG Oil, Inc.

United States District Court, S.D. California

June 4, 2014

VALVOLINE INSTANT OIL CHANGE FRANCHISING, INC.; ASHLAND CONSUMER MARKETS, a commercial unit of ASHLAND, INC.; ASHLAND LICENSING AND INTELLECTUAL PROPERTY LLC; HENLEY ENTERPRISES, INC.; HENLEY PACIFIC LLC; HENLEY PACIFIC LA LLC; and HENLEY PACIFIC S.D. LLC, Plaintiffs,
v.
RFG OIL, INC., Defendant, RFG OIL, INC., Counter-Claimant,
v.
VALVOLINE INSTANT OIL CHANGE FRANCHISING, INC.; ASHLAND CONSUMER MARKETS, a commercial unit of ASHLAND, INC.; ASHLAND LICENSING AND INTELLECTUAL PROPERTY LLC; HENLEY ENTERPRISES, INC.; HENLEY PACIFIC LLC; HENLEY PACIFIC LA LLC; and HENLEY PACIFIC S.D. LLC, Counter-Defendants.

ORDER DENYING PLAINTIFFS VIOCF AND ASHLAND'S MOTION FOR PARTIAL SUMMARY JUDGMENT; AND DENYING COUNTER DEFENDANTS VIOCF, ASHLAND AND ALIP'S MOTION FOR SUMMARY JUDGMENT ON RFG'S COUNTERCLAIMS [Dkt. No. 87.]

GONZALO P. CURIEL, District Judge.

Before the Court are Plaintiffs Valvoline Instant Oil Change Franchising, Inc. ("VIOCF"), and Ashland Consumer Markets' ("Ashland") motion for partial summary judgment on the fifth count for declaratory judgment that Ashland properly terminated the We Feature Agreement, and the sixth count for declaratory judgment that the Valvoline Group Agreements[1] are terminated; and Counter Defendants VIOCF, Ashland, and Ashland Licensing and Intellectual Property LLC's ("ALIP") motion for summary judgment on the counterclaims alleged against them. Defendant filed an opposition on April 25, 2014. (Dkt. No. 93.) A reply was filed on May 9, 2014. (Dkt. No. 94.) Based on the briefs, supporting documentation, and the applicable law, the Court DENIES Plaintiffs VIOCF and Ashland's motion for partial summary judgment and DENIES Counter Defendants VIOCF, Ashland and ALIP's motion for summary judgment on the claims again them in the first amended counterclaim.

Procedural Background

Plaintiffs Valvoline Instant Oil Change Franchising, Inc. ("VIOCF"), Ashland Consumer Markets, a commercial unit of Ashland, Inc. ("Ashland")[2], Ashland Licensing and Intellectual Property LLC ("ALIP"), Henley Enterprises, Inc., Henley Pacific, LLC, Henley Pacific LA LLC, and Henley Pacific S.D. LLC filed a complaint against Defendant RFG Oil, Inc. ("RFG") on February 8, 2012 in the United States District Court for the Eastern District of Kentucky, which was transferred to this Court on August 22, 2012 pursuant to 28 U.S.C. § 1404(a). (Dkt. No. 42.) On September 5, 2012, RFG filed a counterclaim against all Plaintiffs. (Dkt. No. 47.) On October 10, 2012, Plaintiffs filed a first amended complaint. (Dkt. No. 59.) The First Amended Complaint alleges: (1) trademark infringement of the WeFeature marks; (2) trademark infringment of the VIOCF marks; (3) unfair competition in violation of 15 U.S.C. § 1125(a); (4) violation of California Business & Professions Code section 17200; (5) declaratory judgement that the We Feature Agreement is terminated; (6) declaratory judgment that the Valvoline Group Agreements are terminated; (7) breach of contract for liquidated damages; (8) breach of contract for compensatory damages; (9) tortious interference as to Ashland and VIOCF; (10) tortious interference as to Henley; and (11) injunctive relief. (Id.) On October 11, 2012, the case was transferred to the undersigned judge. (Dkt. No. 60.)

On August 5, 2013, the Court granted in part and denied in part Counter-Defendant's motion to dismiss RFG's counterclaim with leave to amend. (Dkt. No. 74.) On August 26, 2013, RFG filed a first amended counterclaim. (Dkt. No. 75.) In the first amended counterclaim, RFG alleges: (1) breach of contract as to VIOCF, Ashland, and ALIP; (2) declaratory relief as to VIOCF, Ashland, and ALIP that the Valvoline Agreements are enforceable; (3) declaratory relief as to VIOCF, Ashland, and ALIP that the We Feature Agreement was never enforceable; (4) intentional interference with prospective economic advantage as to VIOCF, Ashland, and ALIP; (5) fraudulent misrepresentation as to VIOCF, Ashland, and ALIP; (6) misappropriation of trade secret as to VIOCF, Ashland, and ALIP; (7) intentional interference with prospective economic advantage as to Henley; and (8) breach of confidence as to Henley. (Dkt. No. 75.)

Plaintiffs VIOCF and Ashland filed a motion for partial summary judgment on the fifth count for declaratory judgment that Ashland properly terminated the We Feature Agreement, and the sixth count for declaratory judgment that the Valvoline Group Agreements are terminated. (Dkt. No. 87.) Counter Defendants VIOCF, Ashland, and ALIP also moved for summary judgment on the counterclaims asserted against them. (Id.)

Factual Background

The following are the undisputed facts. Plaintiffs and RFG were engaged in a franchisor/franchisee relationship for over 20 years where RFG branded its 44 oil change facilities with Valvoline trademarks and purchased Valvoline branded products. Each facility was governed by virtually identical sets of franchise agreements. (Dkt. No. 88, McKeown Decl., Exs. A, B.) The relevant agreements are the Licensee Supply Agreement between Ashland Consumer Markets and RFG; and the Renewal License Agreement between Valvoline Instant Oil Change Franchising, Inc. and RFG. (Id.) Pursuant to the Renewal License Agreement, VIOCF promised not to grant a license to another Valvoline franchisee within a two mile radius of the store to which the License Agreement pertained. ( Id., Ex. B., Renewal License Agreement § 1.3.)

From November 17, 2010 to November 24, 2010, RFG placed product orders that resulted in invoices totaling $387, 738.32. (Dkt. No. 87-4, Nolan Decl. ¶ 3, Ex. A.) Then between November 29, 2010 through December 22, 2010, RFG placed additional product orders with an invoice of $118, 415.35. (Id.) At that time, RFG was on a "Net 45-day" payment term which means that payments of orders are due on average 45 days after they are placed. (Id. ¶ 4.) Any products invoiced on or before the 25th of every month would be due the following month on the 25th. (Id.; Dkt. No. 93-2, Gong Decl. ¶ 13.) As applied to RFG's invoices, orders placed from November 17-24, 2010 totaling $387, 738.32 were due by December 25, 2010 and orders placed from November 29-December 22, 2010 totaling $118, 415.34 were due on January 25, 2011. (Dkt. No. 87-4, Nolan Decl. ¶ 4.) It is undisputed that RFG did not make full payment of the amounts due on December 25, 2010. (Dkt. No. 93-2, Gong Decl. ¶ 20; Dkt. No. 84-4, Nolan Decl. ¶ 5.)

Consequently, on January 28, 2011, Plaintiffs issued a "Notice of Default and Potential Termination" letter to RFG. (Dkt. No. 88, McKeown Decl., Ex. C.) Without waiving any of its rights, VIOCF granted RFG additional time to cure its breaches by providing payment extensions, and other opportunities to cure. (Id. ¶ 7; Dkt. No. 93-3, Lea Decl., Exs. 6, 7.) Then on November 30, 2011, VIOCF sent RFG a Confirmation of Termination Notice, which was later revised on December 5, 2011. (Dkt. No. 88, McKeown Decl. ¶ 8, Exs. D, E.)

The Revised Confirmation of Termination terminated the license agreements effective November 30, 2011 and sought damages under the contract totaling over $14, 610, 680.10. ( Id., Ex. D.) However, Plaintiffs were willing to settle the matter and temporarily forego enforcement remedies, as well as forego early termination fees if RFG entered into a new "We Feature" Agreement and the required attached General Release. ( Id., Exs. D, F.) Under the We Feature agreement, RFG would continue to operate its various locations and would continue to sell exclusively Valvoline products, but would de-brand its facilities and no longer be required to pay royalties and other fees associated with being a franchisee. (Dkt. No. 88, McKeown Decl. ¶ 9.) RFG was required to buy specified products from Valvoline and "not sell any bulk products which are not Valvoline brand bulk products." ( Id., Ex. F. § 4.) It also required RFG to "not alter in composition, commingle with products from other sources, or otherwise adulterate the Products." ( Id., Ex. F § 8.) On February 8, 2012, Plaintiffs sent Defendant a Notice of Termination of the We Feature National Account Sales Agreement. ( Id., Ex. J.) The parties present different factual versions of the reasons for termination. ( Id., Ex. J; Dkt. No. 93-2, Gong Decl. ¶¶ 38-39.)[3]

II. Legal Standard for Federal Rule of Civil Procedure 56

Federal Rule of Civil Procedure 56 empowers the Court to enter summary judgment on factually unsupported claims or defenses, and thereby "secure the just, speedy and inexpensive determination of every action." Celotex Corp. v. Catrett , 477 U.S. 317, 325, 327 (1986). Summary judgment is appropriate if the "pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). A fact is material when it affects the outcome of the case. Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248 (1986).

An issue is "genuine" if sufficient evidence exists such that a reasonable fact finder could find for the non-moving party. Villiarimo v. Aloha Island Air, Inc. , 281 F.3d 1054, 1061 (9th Cir. 2002). Initially, the moving party bears the burden of proving there is no genuine issue of material fact. Leisek v. Brightwood Corp. , 278 F.3d 895, 898 (9th Cir. 2002). After the moving party meets its burden, the burden shifts to the non-moving party to produce evidence that a genuine issue of material fact remains for trial. Id . In making this determination, the court must "view[] the evidence in the light most favorable to the nonmoving party." Fontana v. Haskin , 262 F.3d 871, 876 (9th Cir. 2001). The Court does ...


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