United States District Court, S.D. California
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 ...