BP West Coast Products, LLC v. Crossroad Petroleum, Inc.

         ORDER (1) GRANTING BP’S PMPA MOTION FOR SUMMARY JUDGMENT; (2) DENYING BP’S INDEMNITY MOTION FOR SUMMARY JUDGMENT; (3) DENYING AS MOOT BP’S MOTION FOR SUMMARY JUDGMENT AGAINST PACIFIC EXPOTECH; (4) DENYING BP’S MOTION TO STRIKE UNTIMELY FILINGS; AND (5) DENYING AS MOOT BP’S MOTION TO STRIKE SCHILLER DEFENDANTS’ OPPOSITIONS (ECF Nos. 492, 493, 494, 518, & 519)

          Janis L. Sammartino United States District Judge

         Presently before the Court are three motions for summary judgment filed by plaintiff and counter-defendant BP West Coast Products (BP): BP’s Motion for Partial Summary Judgment on the PMPA Claims (PMPA MSJ), (ECF No. 492-2); BP’s Motion for Partial Summary Judgment Re Indemnity Obligations (Indemnity MSJ), (ECF No. 493-2); and BP’s Motion for Summary Judgment Against Pacific Expotech and Its Guarantors (Expotech MSJ), (ECF No. 494-1).

         In its Expotech MSJ, BP seeks summary judgment against defendant and counter-claimant Pacific Expotech and its Guarantors. These Defendants/Counter-Plaintiffs^[1] reached a settlement agreement with BP at a June 8, 2016 Mandatory Settlement Conference with Magistrate Judge Jill L. Burkhardt. (See ECF No. 530.) Accordingly, the Court DENIES AS MOOT BP’s Expotech MSJ.

         Although several other Defendants have reached settlement agreements with BP, BP initially directed its PMPA MSJ against 53 Defendants^[2] and its Indemnity MSJ against two groups of Defendants: 53 against whom it seeks to enforce franchise indemnity agreements and 79 against whom it seeks to enforce guaranty agreements.^[3]

         Three opposition briefs were filed in response to BP’s PMPA MSJ: Meetra’s Opposition, (Meetra PMPA Opp’n, ECF No. 504); the Schiller Defendants’ Opposition, ^[4] (Schiller Opp’n, ECF Nos. 506 & 507); and Crossroad’s Opposition, (Crossroad PMPA Opp’n, ECF No. 509). BP filed a single reply in support of its PMPA MSJ. (PMPA Reply, ECF No. 515.)

         Likewise, three opposition briefs were filed in response to BP’s Indemnity MSJ: the Meetra Defendants’ Opposition, (Meetra Indemn. Opp’n, ECF No. 505); the Schiller Defendants’ Opposition, (Schiller Opp’n, ECF Nos. 506 & 507); and the Crossroad Defendants’ Opposition, (Crossroad Indemn. Opp’n, ECF No. 510). In support of its Indemnity MSJ, BP filed three reply briefs, one responding to each opposition brief. (Indemn. Reply to Schiller, ECF No. 521; Indemn. Reply to Crossroad, ECF No. 522; Indemn. Reply to Meetra, ECF No. 523.)

         The briefing on these MSJs elicited yet another round of motions and briefing. In response to the Schiller Defendants’ briefing, BP filed a Motion to Strike Evidentiary Objections to Schiller Defendants’ Responses to BPWCP’s Motions for Summary Judgment (Motion to Strike Schiller Oppositions), (ECF No. 518-1), and in response to the Crossroad Defendants’ late-filed oppositions, BP filed a Motion to Strike Crossroad Petroleum, Inc.’s Untimely Responses to BPWCP’s Motions for Summary Judgment (Motion to Strike as Untimely), (ECF No. 519-1). The Crossroad Defendants filed an opposition to, (Strike Opp’n, ECF No. 528), BP’s Motion to Strike as Untimely. The Court DENIES BP’s Motion to Strike as Untimely.^[5]

         For the reasons stated below, the Court GRANTS BP’s PMPA MSJ, DENIES BP’s Indemnity MSJ, and DENIES AS MOOT BP’s Motion to Strike Schiller Oppositions.

         BACKGROUND

         The Defendants operated gas stations under franchise agreements with BP on sites they leased from BP, and the guarantor Defendants backed these lease and franchise agreements. BP did not own the land, but leased the more than 200 gas station sites relevant to this litigation as a package deal from Thrifty Oil Co. (Thrifty).

         Thrifty leased the land to BP under the Agreement to Lease Retail Gasoline Facilities (Master Agreement). (Statement of Facts, ¶¶ 1-2, ECF No. 493-3 [hereinafter “Indemnity SOF”]; Wolfe Decl., Ex. A ¶ 4.) The deal involved more than 200 gas station sites in California. BP and Thrifty executed individual lease agreements for each site, referred to as “Master Leases, ” each of which incorporated the Master Agreement by reference. (Indemn. SOF ¶ 2.) By organizing hundreds of gas stations under the Master Agreement, Thrifty achieves “(i) benefits of economies of scale, (ii) ease of management, and (iii) efficiency of enforcement of master lessee obligations and direct recourse to remedy any damages suffered by the master lessor.” (Statement of Facts ¶ 5, ECF No. 492-3 [hereinafter “PMPA SOF”] (citing Esses Report, Risner Decl. Ex. 139, ECF No. 492-178).)

         The Master Leases were set to begin expiring in 2012, but gave BP an option to extend (Extension Options). (PMPA SOF ¶¶ 1-8, 14.) However, BP had to exercise the Extension Options well in advance, by July 1, 2010, or else they would expire. (PMPA SOF ¶ 14.) The Extension Options terms provided, “In order to exercise an Extension Option under any Lease, [BP] must exercise the corresponding Extension Options of all Leases, except those Leases which by their provisions have terminated prior to the date of exercise.” (PMPA SOF ¶ 14.)

         Before entering the franchise agreements, each of the Defendants subject to the PMPA MSJ acknowledged that the premises they leased were subject to the Master Lease, (PMPA SOF ¶ 12 (citing Risner Decl. Exs. 1-52, 127, 128, 131, 132, ECF Nos. 492-6- 492-82, 492-157-492-163, 492-166-492-171)), although they were not actually provided a copy of the contract between BP and Thrifty. The acknowledgements stated, for example:

1. The premises are leased to BP West Coast Products LLC by a third party pursuant to a lease agreement (“Master Lease”).

2. The Master Lease expires by its express terms on [Applicable Expiration Date], with an early out date of [if applicable] and may be terminated prior to its expiration date.

3. The lease pertaining to the premises between the Current franchisee and BP West Coast Products LLC is, in accordance with Section 2 thereof, subject to the terms and conditions of the Master Lease. The lease may be terminated before the above dates if legal grounds exist to do so.

(PMPA MSJ ¶ 5; see also, e.g., Risner Decl., Ex. 1, ECF No. 492-6, at 44.)^[6]

         In May 2010, BP notified Thrifty that it would not exercise the Extension Options. (PMPA SOF ¶ 15.) BP had not completely abandoned the leased gas stations, however, and attempted to negotiate a new contract with Thrifty. (See PMPA SOF ¶ 17.) These negotiations did not lead to a deal and, in September 2011, BP learned that Thrifty had agreed to lease these gas stations to Tesoro Refining & Marketing Company (Tesoro). (PMPA SOF ¶ 18.) Soon after learning about the Tesoro deal, BP began sending the franchisees “Notices of Nonrenewal/Termination of the Franchise Agreements” (Notices). (PMPA SOF ¶ 19 (citing Risner Decl. Exs. 1-52, 127, 128, 131, 132, ECF Nos. 492-6- 492-82, 492-157-492-163, 492-166-492-171).) These Notices informed the franchisees of the date upon which BP would lose the right to grant them possession of the sites, and consequently, when they would have to relinquish control of their gas station premises. (See PMPA SOF ¶ 20.) These Notices were sent at least ninety days before each termination or nonrenewal took effect. (PMPA SOF ¶ 22.) In February and March 2012, BP sent the franchisees additional Notices with “amended termination/nonrenewal dates.” (PMPA SOF ¶ 21.)

         Soon before the underlying Master Leases were due to expire, BP learned that many of the franchisees were preparing to refuse to leave the gas station properties or to sue BP. (Indemn. SOF ¶ 14.) BP preemptively filed lawsuits in March 2012 seeking declaratory and injunctive relief affirming the propriety of the terminations and nonrenewals under the Petroleum Marketing Practices Act (PMPA) and to ensure the franchisees turned over the properties. (Indemn. SOF ¶ 14.) Several franchisees and guarantors filed their own lawsuits later that month, suing not only BP, but also Thrifty. (Indemn. SOF ¶ 15.) All of these actions were consolidated to this Court.

         The franchisees and Thrifty had no contractual franchise relationship. Although they operated gas stations on Thrifty’s land, Thrifty leased the land to BP, and BP sub-leased the land to the franchisees. The Defendants in April 2012 moved for a temporary restraining order and preliminary injunction against BP and Thrifty. (ECF Nos. 17, 24, & 31.) The Court denied these motions on April 19, 2012. (ECF No. 43.) BP and Thrifty all the while urged the Defendants to dismiss their claims against Thrifty. (Indemn. SOF ¶¶ 19, 22, 23.) The Defendants eventually relented, dismissing their claims against Thrifty in May 2012. (ECF Nos. 71, 79.)

         Both the Master Agreement and Master Leases obligated BP to indemnify Thrifty for any claims “related to the Gasoline Stations or any Lease Premises” and for Thrifty’s “becoming a party to any action instituted by [BP] against any third party . . or by any third party against [BP] . . . .” (Indemn. SOF ¶¶ 3-4.)

         The franchise agreements between BP and the franchisees required the franchisees, among other things, to maintain the leased premises and equipment in a particular manner, perform maintenance in some circumstances, return possession of the stations and leased equipment to BP at the expiration of the franchise agreements, and assign permits and licenses-such as licenses for alcohol, beer, and wine-to BP at the expiration of the lease. (Indemn. SOF ¶ 6.) The franchise agreements also included the following indemnity provision:

Franchisee agrees to indemnify, hold harmless and defend BPWCP, its parents, subsidiaries, officers, directors and employees, from . . . any damages, claims, costs, expenses, fines or penalties relating to operation(s) . . . on the Premises, arising out of or in connection with any failure or breach by or on behalf of Franchisee respecting any provision of this Agreement, or arising out of Franchisee’s use or occupancy of the Premises, Franchisee’s operation of the business(es) or Franchisee’s use, custody or operation of Loaned Equipment or any other equipment on the Premises . . . .

(Indemn. SOF ¶ 7.) The guarantor Defendants executed Franchise Agreement Guaranties, backing the franchisee Defendants’ obligations to BP. (Indemn. SOF ¶ 8-9.)

         Thrifty demanded that BP reimburse it for costs paid to defend this action, and BP ultimately paid $453, 643.15. (Indemn. SOF ¶¶ 25-29.) BP attributes $449, 060.50 of those costs to the Defendants who were originally subject to the Indemnity MSJ. (Indemn. SOF ¶ 29.) After the franchisees surrendered possession to BP, and BP in turn surrendered possession to Thrifty, Thrifty identified “defective conditions” at various facilities, including “(a) graffiti on the building structures, fixtures and equipment; (b) holes in building structures that needed repair; and (c) dispenser hoses. Other defective conditions that applied to many of the Premises included those concerning costly landscaping and interior/exterior/canopy lighting issues.” (Indemn. SOF ¶¶ 33-38.) Thrifty also demanded that BP compensate it for failing to timely turn over liquor licenses and for “holdover premiums” related to Meetra’s five gas stations and one other site. (Indemn. SOF ¶¶ 39, 40.) After negotiating these matters for more than a year, BP and Thrifty settled these claims, with BP paying $2, 120, 881.10 for costs relevant here. (Indemn. SOF ¶ 43.) BP alleges that $1, 908, 668.21 of that is attributable to the Defendants subject to the Indemnity MSJ. (Indemn. SOF ¶ 43.)

         Meanwhile, in August 2012, BP announced the sale of its ARCO brand, which included 400 additional ARCO stations throughout Southern California, and nearly all of its Southern California assets, including a refinery located in Carson, California, to Tesoro, the entity who leased the premises after BP’s Master Leases expired. (PMPA SOF ¶ 23.) The BP-Tesoro deal closed on June 1, 2013. (PMPA SOF ¶¶ 24, 26.)

         LEGAL STANDARD

         Under Federal Rule of Civil Procedure 56(a), a party may move for summary judgment as to a claim or defense or part of a claim or defense. Summary judgment is appropriate where the Court is satisfied that there is “no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). Material facts are those that may affect the outcome of the case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A genuine dispute of material fact exists only if “the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Id. When the Court considers the evidence presented by the parties, “[t]he evidence of the non-movant is to be believed, and all justifiable inferences are to be drawn in his favor.” Id. at 255.

         The initial burden of establishing the absence of a genuine issue of material fact falls on the moving party. Celotex, 477 U.S. at 323. The moving party may meet this burden by identifying the “portions of ‘the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, ’” that show an absence of dispute regarding a material fact. Id. When a party seeks summary judgment as to an element for which it bears the burden of proof, “it must come forward with evidence which would entitle it to a directed verdict if the evidence went uncontroverted at trial.” See C.A.R. Transp. Brokerage Co. v. Darden Rests., Inc., 213 F.3d 474, 480 (9th Cir. 2000) (quoting Houghton v. South, 965 F.2d 1532, 1536 (9th Cir. 1992)).

         Once the moving party satisfies this initial burden, the nonmoving party must identify specific facts showing that there is a genuine dispute for trial. Celotex, 477 U.S. at 324. This requires “more than simply show[ing] that there is some metaphysical doubt as to the material facts.” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). Rather, to survive summary judgment, the nonmoving party must “by her own affidavits, or by the ‘depositions, answers to interrogatories, and admissions on file, ’ designate ‘specific facts’” that would allow a reasonable fact finder to return a verdict for the non-moving party. Celotex, 477 U.S. at 324; Anderson, 477 U.S. at 248. The non-moving party cannot oppose a properly supported summary judgment motion by “rest[ing] on mere allegations or denials of his pleadings.” Anderson, 477 U.S. at 256.

         ANALYSIS

         I. The PMPA MSJ

         In its PMPA MSJ, BP seeks summary judgment:

1. On its First Claim for Relief under the Petroleum Marketing Practices Act (the PMPA), 15 U.S.C. § 2801 et seq., in which BP seeks a declaratory judgment that it did not violate the PMPA, (BP Fifth Am. Compl. ¶¶ 137-140, ECF No. 296-3);

2. Against Crossroad’s counterclaims, in particular its First, Second, and Third Causes of Action, which allege that BP violated the PMPA, 15 U.S.C. § 2801, et seq., as set forth in Crossroad’s Second Amended Counterclaim for Injunctive Relief and Damages, (Crossroad Second Am. Countercl. ¶¶ 35-72, ECF No. 206);

3. Against Meetra’s counterclaims, in particular its First and Second Causes of Action for violations of the PMPA and Declaratory Relief, respectively, (Meetra Inc.’s Third Am. Countercl. ¶¶ 40-49, ECF No. 263); and

4. Against the Schiller Defendants’ counterclaims, in particular their PMPA and Declaratory Judgment Causes of Action, (Fourth Am. Answer and Countercl. ¶¶ 217-220, ECF No. 257).

         One purpose of the PMPA is to protect gas station franchisees in their dealings with franchisors, who are typically “large oil corporations and gasoline distributors, and to remedy the disparity in bargaining power between parties to gasoline franchise contracts.” BP W. Coast Prods. LLC v. May, 447 F.3d 658, 662 (9th Cir. 2006) (quoting DuFresne’s Auto Serv., Inc. v. Shell Oil Co., 992 F.2d 920, 925 (9th Cir.1993)). At the same time, however, the PMPA is designed to provide “adequate flexibility so that franchisors may initiate changes in their marketing activities to respond to changing market conditions and consumer preferences.” Unocal Corp. v. Kaabipour, 177 F.3d 755, 762 (9th Cir. 1999) (citing S. Rep. No. 95-731, at 18-19 (1978), reprinted in 1978 U.S.C.C.A.N. 873, 877). The PMPA achieves these goals by establishing minimum “standards ...