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Salkhi v. B.P. West Coast Products LLC

United States District Court, N.D. California

September 16, 2019

Amin Salkhi, et al., Plaintiffs,
v.
B.P. West Coast Products LLC, Defendant.

          ORDER DENYING PLAINTIFFS' MOTION AND GRANTING DEFENDANT'S CROSS-MOTION FOR SUMMARY JUDGMENT RE: DKT. NOS. 46, 48, 52

          YVONNE GONZALEZ ROGERS, UNITED STATES DISTRICT COURT JUDGE

         Plaintiffs Amin Salkhi, Banafsheh S. Salkhi, Ali Salkhi, Souri Salkhi, and Ajang Salkhi bring this action for quiet title and declaratory relief against defendant BP West Coast Products, LLC (“BPWCP” or “BP”).[1] (Dkt. No. 1 (“Compl.”).) Specifically, plaintiffs are joint tenant owners of two gas station properties, upon which defendant has executed a use restriction, which it now refuses to release. (Id. ¶¶ 10-21.) Plaintiffs contend that this use restriction violates and is therefore void pursuant to California Business and Professions Code Section 16600. (Id. ¶ 22.)

         Now before the Court are parties' cross-motions for summary judgment (Dkt. No. 48 (“Salkhi MSJ”); Dkt. No. 52 (“BP Cross-MSJ”)). Having considered the papers, including parties' supplemental breifs, [2] as well as arguments by counsel on June 25, 2019, the Court Denies plaintiffs' motion for summary judgment and Grants defendant's cross-motion for the same.[3]

         I. Background

         Given the limited nature of the motions currently pending before the Court, the only relevant undisputed fact is that the restrictions at issue are ones governing land use. (See Salkhi MSJ at 8; BP Cross-MSJ at 8.)

         Nonetheless, by way of background, the Court notes that the following facts are also undisputed. In 2009, plaintiffs purchased from BPWCP the real estate for two gas stations. (Salkhi MSJ at 7; BP Cross-MSJ at 8-9.) In connection with those purchases, and in addition to franchise agreements with BPWCP, plaintiffs and BPWCP entered into grand deeds conveying the properties to plaintiffs as well as “Sealed-Bid Real Estate Sales Agreements” which contained a provision that the grant deeds transferring the properties would contain use restrictions or brand covenants. (Salkhi MSJ at 7-8; BP Cross-MSJ at 8-9.) The grant deeds restricted the owners from using the property, following a termination of the franchise agreements, as a (i) convenience store other than a convenience food store operated under a franchise or other agreement with BPWCP; (ii) fast food take our restaurant; or (iii) facility selling motor fuel other than a facility selling motor fuel under a supply or other agreement with BPWCP. (Id.)

         II. Legal Standard

         Summary judgment is appropriate if “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). Factual disputes are only “genuine” if the evidence could cause a reasonable jury to reach a verdict for the other party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252 (1986). The movant can meet its burden by “showing . . . there is an absence of evidence to support the nonmoving party's case.” Fairbank v. Wunderman Cato Johnson, 212 F.3d 528, 531 (9th Cir. 2000) (citation and quotation omitted). Once the movant meets its burden of showing the absence of genuine issues of material fact that burden shifts to the nonmoving party, who must demonstrate the existence of a material issue of fact. Mahdavi v. C.I.A., 898 F.2d 156 (9th Cir. 1990) (citations omitted).

         A party opposing summary judgment must “go beyond the pleadings and by [its] own affidavits, or by the depositions, answers to interrogatories, and admissions on file, designate specific facts showing that there is a genuine issue for trial.” Turner v. Brown, 961 F.2d 217 (9th Cir. 1992) (citations omitted). The opposition party “cannot rest on the allegations in his pleadings to overcome a motion for summary judgment.” Id. The plaintiff “must do more than simply show that there is some metaphysical doubt as to the material facts.” Matsushita Elec. Inudus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986).

         III. Analysis

         Plaintiffs' complaint contains two causes of action - quite title and declaratory relief - both of which hinge on plaintiffs' assertion that the land use and operating restrictions in the relevant grant deeds are illegal and therefore voidable and unenforceable under California law. (See Salkhi MSJ at 10; BP Cross-MSJ at 11.) Each are grounded on the premise that the restrictions constitute covenants against competition and are therefore violative of public policy in California and void pursuant to Section 16600. (Id.) Section 16600 states “[e]xcept as provided in this chapter, every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void.” Cal. Bus. Prof. Code § 16600.[4] Section 16600 states “[e]xcept as provided in this chapter, every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void.” Cal. Bus. Prof. Code § 16600.[5] The only question presented by parties' cross-motions is whether the restrictions at issue violate Section 16600 as a matter of law.

         For the proposition that Section 16600 does apply to restrictions on land use plaintiffs' motion relies heavily, and almost exclusively, on California Supreme Court case Edwards v. Arthur Andersen, LLP, 44 Cal.4th 937 (2008).[6] Plaintiffs contend that Edwards stands for the broad proposition that “any restriction or restraint that restrains competition is void.” (Id. at 18.) The Court disagrees. The Edwards court specifically limited its holding to the context of employee noncompete agreements. Edwards, 44 Cal.4th at 942 (“We conclude that section 16600 prohibits employee noncompetition agreements[.]”). Plaintiffs fail to provide, and the Court cannot find, any authority for applying Section 16600, to restrictions on land use specifically. Moreover, Edwards distinguished the employee agreement at issue there from a case factually quite similar to the restrictions at issue here - Boughton v. Socony Mobil Oil Co. Id. at 949 (citing Boughton, 231 Cal. App.2d 188 (1964)).

         In Boughton, upon which BPWCP relies, the “[p]laintiffs, owners of a parcel of real property, sued to have the court declare a restriction prohibiting the dispensing of petroleum products thereon to be invalid and unenforceable.” Id. at 190. With respect to Section 16600, the court “conclude[d] that the restriction in the deed [did] not fall within the purview of the statute” because “[t]he single restriction is imposed, not personally on plaintiffs restraining them from engaging or carrying on any profession, trade or business but, on the use of the land upon which they as grantees are barred merely from selling petroleum products, and then only for a limited period of time.” Id. (emphasis supplied). Edwards confirmed this analysis, finding that “[i]n Boughton, the restriction was not upon the plaintiff's practice of a profession or trade, but took the form of a covenant in a deed to a parcel of land that specified the land could not be used as a gasoline service station for a specified period of time.” Edwards, 44 Cal.4th at 949. The court further concluded that “[b]ecause the case involved the use of land, section 16600 was not implicated.”[7] Id.

         Plaintiffs next focus on the claim that the Edwards court disapproved of Boughton. This argument fails. Edwards disapproval of Boughton was limited “to the extent that [it was] inconsistent with” Edwards' analysis in determining that there is no narrow-restraint exception to Section 16600. See Edwards, 44 Cal.4th at 959 n. 5. Within the same notation, the Edwards court made clear that it did not believe Boughton “provide[d] any guidance on the issue of noncompetition agreements, largely because [it did not] involve[] noncompetition agreements in the employment context.” Id. As plaintiffs concede in their supplemental filing, “Boughton based its holding on two reasons. First, the court stated that, [t]he single restriction is imposed, not personally on plaintiffs restraining them from engaging or carrying any profession, trade or business, but on the use of land . . . . Second, the court stated that, [m]oreover, under this restriction the grantees are not prevented from dispensing petroleum products and operating a service station at any time at any other place and there directly competing with defendant. The Court in Edwards, [citation omitted], however only disapproved of the second rationale . . . . The court did not express disapproval of the rational ...


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