Free Reply to Opposition - District Court of California - California

Case 5:07-cv-04808-JF

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KURT OSENBAUGH (State Bar No.1 06132) DEBORAH YOON JONES (State Bar No. 178127)
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SA Y AKA KARIT ANI (State Bar No. 240122)

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WESTON, BENSHOOF, ROCHEFORT, RUBALCA VA & MacCUISH LLP 333 South Hope Street, Sixteenth Floor Los Angeles, California 90071
Telelhone: (213) 576-1000

Facsimile: (213) 576-1100
kosenbaugh(fwbcounsel. com dj ones~wbcounsel.com skari tann(fwbcounsel. com

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Attorneys for Plaintiff and Counter-Defendant
BP WEST COAST PRODUCTS LLC

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA
BP WEST COAST PRODUCTS LLC, a Delaware Limited Liability Company,
Plaintiff,
v.

Case No.: C07 04808 JF

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STTN ENTERPRISES, INC., a California Corporation; NAZIM FAQUIRYAN, an individual;
SA YED F AQUIR Y AN, an individual; and

REPL Y BRIEF IN SUPPORT OF BP WEST COAST PRODUCT LLC'S MOTION FOR SUMMARY JUDGMENT, OR IN THE ALTERNATIVE, PARTIAL SUMMARY JUDGMENT AS TO THE SECOND

AMENDED COMPLAINT

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MAGHUL FAQUIRY AN, an individual; and A V A (Filed concurrently with Reply Brief re Summary Judgment as to Counterclaim; GLOBAL ENTERPRISE, LLC, a California limited Declaration of Elizabeth Chang; Additional liability company, Declaration of Deborah Y oon Jones; Evidentiary Objections to Declarations of Sayed Defendants. Faquiryan and John Michael; and Appendix of Authorities.)
Date: Time: Crtm:

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August 8, 2008 (reserved)
9:00 a.m.

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Honorable Jeremy Fogel

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Filing Date:

September 17,2007

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AND RELATED CROSS-ACTION

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TABLE OF CONTENTS
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Page
i.

STTN F AILS TO DISPUTE MA TERIAL F ACTS WITH SIGNIFICANT

PROBATIVE EVIDENCE IN OPPOSITION TO BPWCP'S MOTION FOR
SUMMARY JUDGMENT ON THE SECOND AMENDED COMPLAINT ..........................1
A.

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STTN's Bald Assertions Lack Evidentiary Support and Should Be
Disregarded................................................................................................................... .2

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B.
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II.
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STTN Misrepresents Deposition Testimony................................................................. 4

BPWCP is ENTITLED TO SUMMARY JUDGMENT TO CONFIRM THE
PROPER TERMINATION OF THE FRANCHISE UNDER THE PMPA..............................5
A.
B.

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BPWCP's Termination Can be Determined as Proper as a Matter of Law................... 5

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STTN's Failures Were Not Due to Causes Beyond Its Reasonable Control.................6

II.

STTN UNSUCCESSFULLY ASSERTS THAT IT EITHER DOES NOT OWE
BPWCP FOR GASOLINE DELIVERIES OR HAS BEEN DISCHARGED FROM PAYMENT OBLIGATIONS .................................................................................................... 7
A.

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The Doctrine of Setoff Does Not Apply to Excuse STTN's Failure to Pay for Gasoline Deliveries........................................................................................................ 8
The Payment Plan Agreement is Not an "Accord" ....................................................... 9
STTN Breached the Payment Plan Agreement............ ......................... ........... ........... 11
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B.

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C.

iv.

BPWCP'S NOTICE OF TERMINATION WAS PROPER....................................................

A.
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The Timing of

the Notice of

Termination Was Proper Under the PMPA...................12

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B.

The Content of

the Notice of

Termination Was Suffcient Under the PMPA.............13

V.

BPWCP is ENTITLED TO SUMMARY JUDGMENT ON ALL OTHER CAUSES OF ACTION IN THE SECOND AMENDED COMPLAINT...... .......................................... 13
CO N CL U S ION ....................................................................................................................... 15

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Vi.

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T ABLE OF AUTHORITIES
CASES

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Abjo Motors, Inc. v. Delray Shell Servo Center (S.D. Fla. 1994) 856 F.Supp. 656 .......................................................................................... 6-7

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Allance Mortg. Co. v. Rothwell (1995) 10 Cal.4th 1226 ........................................................................... .................... ........... ..14
Ball V. Johanns (E.D. Cal. Jan. 29,2008) 2008 WL269069 .............................................................................15
Birman V. Loeb

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7
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(1998) 64 Cal.AppAth 502 ........................................................................................................ 9
Brown v. Am. Petrojina Marketing, Inc.

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(M.D. Fla. 1983) 555 F.Supp. 1327.........................................................................................13
California Petroleum Dist. v. Chevron U.SA.

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(E.D.N.Y. 1984) 589 F.Supp. 282 .............................................................................................7
Cantrell v. Exxon Co. U. SA.

(D.C. Tenn. 1983) 574 F.Supp. 313........................................................................................... 7

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Careau & Co. v. Security Pacifc Business Credit, Inc. (1990) 222 Cal.App.3d 1371 ...................................................................................................14
Charter Marketing CO. V. Burgin

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(D. Conn. 1989) 1989 U.S. District Lexis 18393......................................................................6
Chevron U.SA., Inc. v. El-Khoury (9th Cir. 2002) 285 F.3d 1159 ....................................................................................................5
Conderback, Inc. V. Standard Oil Co. oICal., Western Operations

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(1966) 239 Cal.App.2d 664 .....................................................................................................1 0
F. D. i. C. v. Craft

(9th Cir. 1998) 157 F.3d 69 ......................................................................................................9
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Ferro v. Citzens Nat'l Trust & Savings Bank 01 Los Angeles

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(1955) 44 Cal.2d 401 .............................................. ................................................................ .15
Fotinos v. Amoco Oil Co. (Feb. 25, 1985) CCH Business Franchise Guide ~ 8326 .........................................................13

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Gasaway v. Northwestern Mut. Life Ins. Co. (9th Cir. 1994) 26 F.3d 957 .......................................................................................................1

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Harrison v. Adams (1942) 20 Cal.2d 646 .................................................................................................................8
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Hauger v. Gates (1954) 42 Cal.2d 752 .................................................................................................................8
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In re Smith d/b/a Sam's Service Center (1988) CCH BFG ~ 9264.......................... ................................. ................................. ...............7
Jackson v. Kerr-McGee Rejining Corp.

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(1989) 1989 U. S. Dist. LEXIS 15266........................................................................................7
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Loomis v. Gulf Oil Corp. (M.D. Fla. 1983) 567 F. Supp. 591.....................................................................................5,12

Marathon Petroleum Co. v. Pendleton (6th Cir. 1989) 889 F .2d 1509 ............................................................................................ .6, 12
McDaniel v. City and County of

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San Francisco

(1968) 259 Cal.App.2d 356 ..................................................................................... ..................8
Mobil Oil Guam, Inc. v. Lee (Guam Terr. 2004) 2004 WL 1305314. """"'" .......... .... .... ........... ...... ... ....................................7

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Moving Picture Mach. Operators Union Local No. 162 v. Galsgow Theaters, Inc. (1970) 6 Cal.App.3d 395 .........................................................................................................10
Murchison v. Murchison (1963) 219 Cal.App.2d 600 . ............ ........ ............... .... ............. ........ .... ...... ........... .............. .......8
Murphy v. F. D. i. C.

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(9th Cir. 1994) 38 F.3d 1490 .....................................................................................................9
Potter v. Pacifc Coast Lumber Co. of

California (1951) 37 Cal. 2d 594 ............................................................................................................... 11

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Rivera v. National R.R. Passenger Corp. (9th Cir. 2003) 331 F.3d I 074 ............................................................................................... 1-2
Roehm Distributing Co. v. Burgermeister Brewing Corp. (1961) 196 Cal.App.2d 678 .......................................................................................................2
Shell Oil Company v. Kozub (N.D. Ohio 1983) 574 F. Supp. I 14...........................................................................................6

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Smoot v. Mobil Oil Corporation (D. Mass. 1989) 722 F. Supp. 849 .......................................................................................6, 12
Talbert-Siebert Ent., Inc. v. Shell Oil Co. (M.D. La. May 8, 1992) 1992 WL I 19916....... ................................. .......... ......................... ..... 7
Wiliams v. Pratt (1909) 10 Cal.App. 625 .................. ...........................................................................................8
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Zandi-Talaie v. BP West Coast Products LLC (D.Nev. June 4, 2004) CV -N-03-0370-LRH ............................................................................. 7
ST A TUTES

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15 U .S.C. § 2804(b )(b)( 1 )(A) .................................................................................... ................... .12
OTHER AUTHORITIES

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4 Miler & Starr CaL. Real Estate (3rd Ed. 2000).........................................................................14
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i.
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STTN

FAILS

TO

DISPUTE

MA TERIAL

FACTS

WITH

SIGNIFICANT

PROBA TIVE EVIDENCE IN OPPOSITION TO BPWCP'S MOTION FOR
SUMMARY JUDGMENT ON THE SECOND AMENDED COMPLAINT
In its moving papers, BPWCP provides indisputable evidence that STTN: (1) had an
ongoing delinquent gasoline balance from January 2007 through September 2007 and owed BPWCP

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over $126,000 worth of gasoline product as of the franchise termination; (2) taped off dispensers

from customers for more than 7 consecutive days and therefore failed to operate the station as
required under the franchise agreements; (3) failed to make all grades of gasoline available for sale

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as required by the Gasoline Agreement; and (4) failed to pay back $150,000 in loan amounts
disbursed by BPWCP as required by the Store Loan Agreement after the franchise terminated. Thus
the facts are not disputed and the applicable statutory and legal authority support BPWCP's
summary judgment motion.
In short, STTN's breaches are per se reasonable grounds for

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termination under both the franchise agreements and the governing PMP A. It is also undisputed that
all loan amounts automatically became due and payable upon the franchise termination. STTN

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should not be allowed to take BPWCP's money in the form of loan funds and unpaid for gasoline

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deliveries, use those monies to upgrade its Station and earn 100% profit on the gasoline, and then
simply rebrand its Station without repayment to BPWCP. Summar judgment on BPWCP's Second
Amended Complaint is waranted.

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While STTN does its best to try and muddy the waters and sow confusion for the
Court through unsupported assertions and conclusory allegations, STTN ultimately fails to meet the

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burden necessary to defeat BPWCP's Motion. STTN had the burden to "set forth specific facts
showing that there is a genuine issue for triaL." Rivera v. National R.R. Passenger Corp. (9th Cir.
2003) 331 F.3d 1074, 1078. In order to show a genuine issue for trial, STTN should have introduced

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"significant probative evidence tending to support" its positions. Id. (citations omitted.) Indeed,
mere allegations or denials or "(c)onclusory allegations unsupported by factual data canot defeat
summary judgment." Id.; and Gasaway v. Northwestern Mut. Life Ins. Co. (9th Cir. 1994) 26 F.3d

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957, 690. In Rivera, for example, the plaintiff relied only on his own conclusory statements in his
complaint and declaration to support his claim for wrongful termination. Rivera, supra, 331 F.3d at
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1078. The Rivera court held that because plaintiff

failed to offer any independent evidence to create

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a genuine issue of fact, plaintiff s own conclusory allegations were insuffcient to defeat a motion for
summary judgment. Id.; see also Roehm Distributing Co. v. Burgermeister Brewing Corp. (1961)

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196 Cal.App.2d 678, 682 (plaintiffs bald assertion without any evidentiary facts that he was under
economic duress at time contracts were signed could not be afforded any evidentiary weight on

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summary judgment).

Other than the declaration signed by Sayed Faquiryan (which does not attach a single
supporting document) and a declaration by STTN's counsel which attaches deposition testimony that

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is blatantly misrepresented throughout the Opposition, STTN presents no other evidence to properly

rebut any of the arguments set forth in BPWCP's summary judgment motion as to the Second
Amended Complaint. Neither of these declarations provide the requisite "significant probative
evidence" necessary to raise a triable issue of fact or directly refute BPWCP's claims.
A.

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STTN's Bald Assertions Lack Evidentiarv Support and Should Be Disreearded
Throughout its Opposition, STTN throws about various contentions in an effort to

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create triable issues of fact. The contentions, however, are backed by nothing more than conclusory

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statements in Sayed's declaration; no evidentiary support is provided to substantiate Sayed's claims.
The most significant of

these unsupported statements are as follows:

.

STTN claims that it was charged for gasoline loads that were purportedly

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never delivered to the Station (Opp., p. 7, Ins. 2-4) and thus, contends that it was not delinquent in
amounts suffcient to justify the franchise termination. But the bottom line is that STTN admits it
failed to pay for gasoline.

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Moreover, STTN fails to present any evidence other than Sayed's

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declaration to support this claim. BPWCP, on the other hand, presents evidence that the delinquent

gasoline balance existed from January 2007 through September 2007. Moreover, in rebuttal to
STTN's claims, BPWCP presents herewith an exact accounting of the gasoline deliveries which

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unequivocally shows that STTN owed BPWCP over $126,000 as of the date of termination (See
Elizabeth Y. Chang Declaration ("Chang Decl.") fied concurrently herewith, ~ 2 and Exh. A);

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.

STTN contends that it made all the requisite payments under the Payment

Plan Agreement (Opp., p. 7, Ins. 8-11) and was therefore not in breach of the franchise agreements
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(and thus, not subject to termination). Instead of presenting documents (i.e., cancelled checks

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reflecting payment pursuant to the Payment Plan Agreement), STTN simply alleges that it complied

with the Payment Plan Agreement. Furthermore, as discussed in more detail below, closer review of

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the undisputed facts and BPWCP's accounts reveal that STTN did not make the required payments

and breached the Payment Plan Agreement in addition to the other franchise agreements at issue
(Chang Decl., ~ 2 and Exh. A);

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.

STTN insinuates that it was operating the Station during the more than 7

consecutive days that BPWCP maintains that the Station was not operating and/or did not have all
grades of gasoline available for sale. (Opp., p. 14, Ins. 8-9.) However, STTN carefully states that

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certain grades of gasoline were "available for sale" (Id.) but does not provide any evidence that the

Station was actually operating during the days in question or that gasoline was even sold. STTN
also admits that immediately prior to the franchise termination it did not have all grades of gasoline

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available for sale. (Id.) Further, STTN does not dispute that the pumps were cautioned taped off as

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set forth in BPWCP's moving papers. (MSJ, p. 8). Finally, STTN does dispute the testimony that
BPWCP's representative attempted to pump gasoline but was unable to do so.

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.

STTN contends that all conditions necessary to the disbursement of the

Gasoline Loan were met as of March 2007, and as such, BPWCP's failure to disburse funds

allegedly caused mechanics liens to be placed on the property and the depletion of working capital
necessary to pay for gasoline deliveries. (Opp., p. 4.) Sayed's declaration presents no evidence to

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support these claims.

The only "evidence" to support STTN's contention that all conditions

necessary to disburse loans were met are purported cites to deposition testimony; as discussed
further below, the testimony does not support this contention. Furthermore, STTN fails to provide

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the purported mechanics liens (most likely because STTN would have to admit that both mechanics

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liens and tax liens existed on the property in March 2007 and were caused by its own failures to

make necessary payments). STTN also does not present any evidence of the purported lack of
working capital, and in fact, STTN admits later in the Opposition that it had the ability to payoff the gasoline delinquencies but did not want to put its money into an escrow account before BPWCP put
loan funds into a separate escrow account (Opp., p. 8, In. 1-2).
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Given STTN's failure to present adequate evidence to support its factual contentions,
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BPWCP respectfully requests that the Court disregard these statements and grant BPWCP's motion
for summary judgment in its entirety.
B.

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STTN Misrepresents Deposition Testimonv

Not only does STTN fail to provide any documentary or factual evidence to support

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its Opposition, STTN also fails to properly and accurately describe deposition testimony. The
following summarizes the most blatant misrepresentations:
Purported Statement

Citation
McDonnell Depo., 56:18-5:8
Smith Depo., 11 :8-

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"All of the conditions to funding the loan were set forth in the CCL." (Opp., p. 4, In. 14.)
By March 9, 2007, all conditions to funding had been met." (Opp., p. 4, Ins. 19-20.)

Actual Testimony Indicates the CCL has a list of things that need to be satisfied but does not
state that list is exhaustive.

12:14,14:21-24,
19:20-20:20,27: 1116, 31:6-21, 32: 14-24,

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34: 10-35: 11, 40:3-9,

44:14-45:7,54:13-17, 55:24-56:7,58:8-11
"BP, however, refused to fund the loan, alleging that it had to wait for the actual policy of title insurance."
Smith Depo., 45:1320

Describes background, job duties; when first became involved with STTN, conditions necessary to fulfill her particular department, credit approval process which differs from funding.

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Indicates she does not want to guess as to why BPWCP did not place funds into escrow even though Deed of Trust recorded on March 9.

"Even after the liens had McDonnell Depo., cleared, BP held up loan funding 134:7-10. while gathering documents that
were not conditions to funding.

Simply confrms that for 3 months the Deed of Trust was recorded but funds. were not released.
Merely confirms that an exception was made to fund only part of the loan and indicates "we were just trying to keep him going." Does not state that reason was to get best chance of earning a return.

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"BP obtained a waiver of its
policy in order to fund the store

Smith Depo., 99:6100: 19

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loan because BP determined that its best chance of earning return on its investment and its profits
was to release the store loan

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funds."

"Finally, STTN tendered payment through an escrow."

McDonnell Depo., 99:23-100:4

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States that Sayed wiling to pay gas balance and came up with payment plan. Does not state that STTN tendered payment through an escrow.

STTN's misrepresentations concerning the deposition testimony of BPWCP
witnesses are completely improper. The Court should admonish STTN and disregard each of these
statements in their entirety.
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Thus, from a factual and evidentiary standpoint, STTN fails to meet its burden in
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opposing BPWCP's summary judgment motion on the Second Amended Complaint. Furthermore,

as discussed below, STTN's legal arguments are unpersuasive and BPWCP's Motion should be
granted in its entirety.

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II.

BPWCP IS ENTITLED TO SUMMARY JUDGMENT TO CONFIRM THE PROPER
TERMINATION OF THE FRANCHISE UNDER THE PMP A
A.

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BPWCP's Termination Can be Determined as Proper as a Matter of Law
STTN argues that BPWCP is precluded from obtaining summary judgment on the

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PMP A termination claim on grounds that, under Chevron U.SA., Inc. v. El-Khoury (9th Cir. 2002)

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285 F.3d 1159, 1163, the determination involves a question of fact. However, the El-Khoury case

does not stand for the proposition that in every case, whether or not there was a "failure" that was
material to the franchise relationship for termination, is a question of fact. See id. Rather, the El-

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Khoury court held that: "(w)hether a violation is a 'failure' that is so serious to warrant termination
can be a question of fact for trial," and goes on to note that "( n Jot every case necessarily requires a

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trial to settle the question of materiality. We can imagine a case in which the materiality of a
particular violation is obvious." Id. at I 164. In El-Khoury, the service station franchisee was

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terminated for underpayment of taxes, even though there was no specific provision in the agreement

requiring tax compliance. Id. at 1 161. The El-Khoury court held that the evidence did not support a
finding as a matter of law on summary judgment that the "failure to be tax compliant" was important

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enough to be an event under 2802( c)( 11) for which termination was proper. The payment for
gasoline deliveries requirement and store operation requirements at issue here, on the other hand, are

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specifically enumerated in BPWCP's franchise agreement. (Gasoline Agreement, Art. 2 ("Buyer
agrees to accept and pay for such Product as BPWCP delivers to the Premises.") and Art. 6 ("Buyer
will pay for Product prior to its delivery in U.S. dollars."); Exh. A to Reeder Decl.)

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Furthermore, as discussed at length in BPWCP's moving papers, summary judgment

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in favor of a franchisor based upon a franchisee's failures to pay for gasoline and operate the
franchise are per se reasonable and well-supported by applicable legal authority. See, e.g., Loomis v.
Gulf

Oil Corp. (M.D. Fla. 1983) 567 F. Supp. 591, 598 (failure to pay $56,233.52 for gasoline is a
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default in the franchise agreements entitling franchisor to summary judgment); Shell Oil Company v.
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Kozub (N.D. Ohio 1983) 574 F. Supp. 114, 118 (in accordance with Section 2802(c)(8), of the
franchisee's failure to pay for gasoline entitles the franchisor to summary judgment.); Marathon

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Petroleum Co. v. Pendleton (6th Cir. 1989) 889 F.2d 1509, 1510 (affrming summary judgment for
the franchisor based on an overdue balance of $3,347.93, and missed payments on a note for other

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funds owned); Smoot v. Mobil Oil Corporation (D. Mass. 1989) 722 F. Supp. 849, 855 ("(b)ecause

the fundamental purpose of any Mobil franchise is to sell Mobil products," the court granted
franchisor's motion for summary judgment based on franchisee's failure to sell gas for seven days);

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and Charter Marketing Co. v. Burgin (D. Conn. 1989) 1989 U.S. District Lexis 18393, CCH
Franchise Business Guide Paragraph 9504 (franchisor's motion for summary judgment was granted

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based on the franchisee's failure to operate the Station for seven days or pay rent). Notably, STTN
did not distinguish or even address any of

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these cases in its Opposition.

Accordingly, this Court can and should summarily adjudicate that BPWCP's
termination of STTN' s franchise was proper under the PMP A.
B.

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STTN's Failures Were Not Due to Causes Bevond Its Reasonable Control
STTN also seeks to avoid summary judgment on the franchise termination claim by

alleging that its failure to pay for gasoline, failure to operate the Station, and failure to make all
grades of gasoline available for sale resulted from causes beyond its reasonable control. Indeed,
STTN blames its failures on the lack of working capital allegedly caused by BPWCP's refusal to
disburse loan proceeds. Notwithstanding the fact that STTN fails to produce any evidence - - either

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in opposition to the summary judgment or in response to BPWCP's discovery requests - - of the
purorted lack of working capital, STTN's financial instabilities are not, as a matter of law,

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considered a "cause beyond the franchisee's reasonable control" which would preclude BPWCP
from properly terminating the franchise.

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In Abjo Motors, Inc. v. Delray Shell Servo Center (S.D. Fla. 1994) 856 F.Supp. 656,

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for example, the franchisor terminated the franchisee for failure to pay sums due. The franchisee
attempted to argue that non-payment was due to reasons beyond his control, but the Abjo court held
that "a franchisee's lack of funds to pay rent due, for whatever reason, simply cannot be

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characterized as a cause beyond the franchisee's reasonable control." Id. at 658; citing California
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Petroleum Dist. v. Chevron U.SA., Inc. (E.D.N.Y. 1984) 589 F.Supp. 282, 288 (non-payment as an

express ground for termination "destroys any contention that nonpayment should be construed as a
ground beyond the franchisee's reasonable control"); see also Talbert-Siebert Ent., Inc. v. Shell Oil

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Co. (M.D. La. May 8, 1992) 1992 WL 119916 (economic stress does not excuse failure to operate
the station for a period greater than seven days even if franchisee's purported lack of money was due
to franchisor's breach of the oral contract to covert the station to a convenience location); Zandi-

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Talaie v. BP West Coast Products LLC (D. Nev. June 4, 2004) CV-N-03-0370-LRH (franchisee's

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failure to operate the premises for seven consecutive days was not due to a cause beyond the
reasonable control of the franchisee); Mobil Oil Guam, Inc. v. Lee (Guam Terr. 2004) 2004 WL
1305314 (franchisee's failure to pay sums due franchisor were not beyond the reasonable control of

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franchisee despite franchisor's furnishing of incorrect information on monthly account statements;
franchisee was knowledgeable of the facts and had an affrmative duty to pay amounts due to

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franchisor); In re Smith d/b/a Sam's Service Center (1988) CCH BFG ~ 9264 (lack of funds not a
reason beyond franchisee's control and termination proper when franchisee blocked pump islands
and failed to operate); Jackson v. Kerr-McGee Rejining Corp. (1989) 1989 U.S. Dist. LEXIS 15266,

16

17
18 19

at * 1 (franchisee's failure to set aside funds to pay accruing taxes which had inadvertently not been biled by franchisor was not a failure beyond franchisee's reasonable control); and Cantrell v. Exxon

Co. U.SA. (D.C. Tenn. 1983) 574 F.Supp. 313 (hard economic times did not excuse franchisee's
failure to timely pay rent).

20
21

Accordingly, STTN cannot excuse its failures to pay all sums due to BPWCP and
properly operate the franchise by virtue of its purported lack of working capitaL.

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23

BPWCP's

termination under the PMP A was warranted and legally proper.

24
25

III.

STTN UNSUCCESSFULLY ASSERTS THAT IT EITHER DOES NOT OWE BPWCP
FOR GASOLINE DELIVERIES OR HAS BEEN DISCHARGED FROM PAYMENT

26
27
28

OBLIGATIONS

As discussed summarily above and more fully in its moving papers, BPWCP's
termination of STTN's franchise was per se reasonable under the PMP A and controlling authority
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given STTN's admitted and undeniable failure to pay the over $126,000 in sums due for gasoline
2
3

delivered to the Station. (See MSJ at pp. 13-14.) Although STTN concedes that it failed to pay for
the gasoline deliveries (Opp., p. 4, Ins. 11-12, and Sayed Decl., ~ 7), STTN relies upon inapplicable

4
5

legal theories and insuffcient "facts" to claim that it does not owe BPWCP for the gasoline or was
discharged of any obligation to pay for the gasoline. However, STTN's arguments fail as a matter of
law.
A.

6
7
8

The Doctrine of Setoff Does Not Apply to Excuse STTN's Failure to Pay for
Gasoline Deliveries

9 10
11

STTN contends that it had a right to "setoff' the over $126,000 it owed to BPWCP at

the time of the franchise termination with the amounts of the proposed Gasoline Loan ($250,000).
Not only is the doctrine of "setoff' illogical in the context of this case, STTN's cited authorities are
distinguishable.

12
13

Each of the cases cited in STTN's Opposition involve parties who are already
indebted to one another. STTN's lead case, a 1909 decision, involved existing debts owed by the

14
15

respective parties. Wiliams v. Pratt (1909) 10 Cal.App. 625. In addition, the Wiliams decision

16 17
18

does not stand for the proposition that "where a debtor on a promissory note secured by a deed of
trust was owed more by the payee than was owing on the promissory note, there was no default

under the promissory note" as asserted in the Opposition (at 11:16-19). Moreover, it is only in the
concurring opinion that a discussion of "setoff' occurs, however, that discussion is irrelevant to the
facts here. Id. at 632 (concuring opinion).

19

20
21

STTN's other cited authority is similarly inapposite. See, e.g., Hauger v. Gates
(1954) 42 Cal.2d 752, 753-55 (plaintiffs' existing debt to defendant on promissory note could be
offset by the value of personal property that is owed by the defendants to plaintiffs); Murchison v.

22
23

24
25

Murchison (1963) 219 Cal.App.2d 600, 602-605 (husband's obligations to pay monthly payments t9
ex-wife could be offset by tax contributions paid by husband for tax deficiency on joint return);

26 27
28

McDaniel v. City and County of San Francisco (1968) 259 Cal.App.2d 356, 359-60, 365 (city
entitled to offset money it paid out to retired employee's former wife against any back wages claimed

by retired employee); Harrison v. Adams (1942) 20 Ca1.2d 646, 647-49 Qudgment debtor can have
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his judgment amount offset against judgment in which he is a creditor); Birman v. Loeb (1998) 64
2
3

Cal.AppAth 502, 506-14 (defendants not allowed to setoff money judgment, costs and attorneys fees

owed to plaintiffs in connection with fraud and failure to disclose case against deficiency remaining

4
5

after foreclosure sale); Murphy v. FD.IC (9th Cir. 1994) 38 F.3d 1490,1504 (former bank director

allowed to setoff $100,000 owed to bank on promissory note against judgment amount owed by
bank to him); FD.IC v. Craft (9th Cir. 1998) 157 F.3d 69 (setoff

6
7
8

available where a person who is

both a creditor and debtor to an insolvent bank).

None of the cases cited in STTN's Opposition concern an already indebted party who claims a right to offset the debt with additional debt that it will incur from the other party to whom it
is already indebted. Here, STTN became indebted to BPWCP for gasoline deliveries beginning in

9

10
11

January 2007 and through September 2007. (MSJ, pp. 7-8.) STTN now absurdly argues that
BPWCP was essentially indebted to STTN by virtue of agreeing to loan monies for the franchise.
But BPWCP had no obligation to disburse the funds contemplated by the Gasoline Loan once STTN

12
13

14
15

started failing to pay for gasoline deliveries in breach of the Gasoline Agreement. Paragraph 2.2(f)

of the Gasoline Loan Agreement states that "(i)n no event shall Lender be required to make any
Disbursement if. . . (uJnder any o/the Loan Documents, a default or Event of

16 17
18

Default (as defined in

that document) has occured and is continuing, or an event has occurred that with notice or the
passage of time could become a default or Event of Default." (Emphasis added.) (Reeder Decl.,

19

Exh. K, ~ 2.2(f).) The Gasoline Loan Agreement lists the Gasoline Agreement, as one of the "Loan
Documents." (Reeder Decl., Exh. K (Exh. C thereto).) In other words, BPWCP had no obligation to
disburse funds from the Gasoline Loan if there was default of the Gasoline Agreement, which

20
21

22
23

occurred here by virtue of STTN's undeniable failure to pay for delivered gasoline. (Reeder Decl.,
Exhs. A and D at ~~ 6 and 17.1(h).) Consequently, the doctrine of setoff is inapplicable to this

24
25

matter and summary judgment in favor of BPWCP is warranted.
B.

The Payment Plan Aereement is Not an "Accord"
STTN also argues that its obligation to pay BPWCP for the gasoline deliveries under

26 27
28

the Gasoline Agreement was "suspended" by virtue of the Payment Plan Agreement on grounds that

it is "clearly an accord." (Opp., p. 13, Ins. 11-12.)
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Though STTN has accurately described an accord as an "agreement to accept, in
2
3

extinction 0/ an obligation, something diferent/rom or less than that to which the person agreeing
to accept is entitled" (Opp., at 13: 14-16, emphasis added), STTN misconstrues the legal theory of an

4
5

"accord" as it applies to the undisputed facts at issue here.

By allowing STTN to repay the

outstanding gasoline balance in monthly installments, BPWCP never agreed to accept, in extinction
of an obligation, something different from what it is entitled; the Payment Plan does not indicate this

6
7
8

nor does STTN present any evidence to suggest that BPWCP was willing to accept "something
different from or less than" the amounts owed to BPWCP. Indeed, the Payment Plan clearly states

9 10
11

that Nazim and Sayed are to make the monthly payments of $30,000, until "total sums of balance

due are paid in full per BP credit dept" and "all outstanding balances due to BPWCP, currently,
$184,075.50 have been paid." (Reeder Decl., Exh. E.) Moreover, as discussed in STTN's cited

12
13

authority, Moving Picture Mach. Operators Union Local No. 162 v. Galsgow Theaters, 1nc. (1970) 6

Cal.App.3d 395, "(f)or the principle of accord and satisfaction to apply there must be a bona fide
dispute between the parties." Id. at 403 (emphasis added). Here, there was no dispute that the STTN

14
15

owed money to BPWCP for gasoline deliveries; STTN admitted in the Payment Plan Agreement that

16 17
18

a balance, as of May 4, 2007, of $184,075.50 was due BPWCP for unpaid gasoline. (Sayed Depo.,
at 159:8-11; Exh. 1 to Jones Decl.)

STTN should not be allowed turn BPWCP's generous

accommodation against it.

19

Furthermore, STTN's cited authority is factually distinct from this matter.

The

20
21

Moving Picture decision, for example, involved an oral agreement which altered the original
agreement but was eventually repudiated by one of the parties. The court held the oral agreement
was no an accord given the repudiation. Id. at 403-04. The other case cited by STTN, Conderback,
Inc. v. Standard Oil Co. of CaL., Western Operations (1966) 239 Cal.App.2d 664, involved the issue

22
23

24
25

of whether certain invoices and checks constituted a final billing and final payment.

The

Conderback court held that there was no accord and satisfaction because the parties did not agree
that the invoice claimed to be the final billing and payment of the same was actually the final billing

26 27
28

and final payment. Id.
inapposite.

Thus, STTN relies upon legal authority that is factually and legally

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Accordingly, the Court can and should determine that the Payment Plan Agreement
2
3

did not constitute an accord as a matter of law. See Potter v. Pacifc Coast Lumber Co. of California

(1951) 37 Ca1.2d 594, 597-603. STTN has no excuse for its failures to pay BPWCP for gasoline
deliveries and BPWCP's termination of

4
5

the franchise was proper.

c.

STTN Breached the Payment Plan Aereement
Even if the Payment Plan Agreement is considered to be an accord, STTN admits it

6
7
8

failed to make the requisite payments (and still has not paid BPWCP for all the gasoline delivered),

Pursuant to the Payment Plan Agreement, STTN agreed to make monthly payments of $30,000 to
BPWCP commencing June 20, 2007. (See MSJ at p. 8, Ins. 7-11; Exh. E to Reeder Decl; and Exh.

9 10
11

A to Christensen Decl.) Though small payments may have been made at different intervals, Sayed

admitted in deposition that he never made any of the payments pursuant to the Payment Plan
agreement. (MSJ, p. 8, Ins. 13-15.) Furthermore, although the delinquent gasoline balance was

12
13

reduced from $184,075.50 on May 4, 2007 to $126,394.77 on September 6, 2007, there is still no
indication that STTN complied with the Payment Plan Agreement; STTN cleverly tries to round up
the numbers but the difference between $184,075.70 and $126,394.77 is $58,075.50 and not

14
15

16 17
18

$60,000. STTN breached the Payment Plan Agreement based upon the undisputed facts presented in
the moving papers.
Moreover, review of the account balances from January 2007 through September

19

2007 reveals that between May 4,2007 and July 15,2007, STTN's payments for gasoline included

20
21

additional amounts which totaled $28,679.09 for this time period (not the $30,000 called for in the

Payment Plan Agreement). (See Chang Decl., ~ 2 and Exh. A) Between July 16,2007 and August
15,2007, STTN's payments for gasoline included additional amounts which totaled only $15,019.42

22
23

for this time period (nearly half of the $30,000 called for in the Payment Plan Agreement). (Id) As
of August 24, 2007, the total outstanding balance for gasoline deliveries made to the Station, but not
paid for by STTN, was $138,394.77. (Id) Thus, as of August 24, 2007, STTN had only paid

24
25

26 27
28

$45,680.73 towards reducing the delinquent gasoline balance, and not the "almost" $60,000 that
STTN claims to have paid. (Id) STTN was not in compliance with the terms of the Payment Plan

Agreement and BPWCP acted properly in terminating STTN's franchise for failure to pay for
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gasoline deliveries.
2
3

Finally, as already discussed above, to the extent that STTN is now claiming that it

was charged for loads that were not delivered (see Opp., p. 7, Ins. 2-4), STTN fails to present any
documents or suffciently probative evidence to support its assertion. Accordingly, STTN cannot

4
5

refute the fact that it failed to pay for over $126,000 worth of gasoline deliveries, STTN does not
create a triable issue of fact in this regard, and the Court should grant BPWCP's motion in its
entirety.

6
7
8

iv.

BPWCP'S NOTICE OF TERMINATION WAS PROPER
A.
The Timine of the Notice of

9
10
11

Termination Was Proper Under the PMPA

Under 15 U.S.c. § 2804(b)(b)(1)(A), the PMPA provides that BPWCP may notify the

franchisee "on the earliest date on which furnishing of such notification is reasonably practicable" if
it would not be reasonable to furnish notification 90 days prior to the termination. Where there is an
"enduring problem with a fundamental aspect of its relationship" with a franchisee, courts have held

12
13

14
15

that it would be "unreasonable to require that problem be tolerated for another ninety days." Smoot
V. Mobil Oil Corp. (D.Mass. 1989) 722 F. Supp. 849, 855 (accelerated notice permissible for failure

16 17
18

to sell gasoline); Loomis v. Gulf Oil Corp. (M.D. Fla. 1983) 567 F. Supp. 591, 597 (accelerated

notice permissible for deficiency in payment of over $56,000); and Marathon Petroleum Co. v.
Pendleton (6th Cir. 1989) 889 F.2d 1509, 1510 and 1512-1513 (summary judgment affrmed for
franchisor based on overdue balance of $3,347 and missed payments on a note for other funds owed,
accelerated notice permissible).

19

20
21

By September 5, 2007, STTN had failed to timely pay BPWCP for gasoline products
in a timely manner, incurring an outstanding balance of over $126,000, for gasoline product

22
23

deliveries that are due and payable at the time of delivery. (Reeder Dec1., ~~ 8-9 and Exh. F;
Christensen Decl., ~ 8; Sayed Depo., at 166:3-13 and Exh. P.) Moreover, as discussed above, the

24
25

gasoline delinquencies had been tolerated by BPWCP since at least January 2007. In addition,

26
27 28

STTN had persistently failed to comply with its obligation to have ARCO-branded gasoline
available for sale, despite many warnings that STTN's franchise would be terminated if he did not
do so. (Reeder Decl., ~~ 10-11 and Exh. F; Christensen Decl., ~~ 10-12 and Exh. B; Sayed Depo.,
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Exh. P.) Accordingly, it was not reasonable for BPWCP to provide any additional notice to STTN;
2
3

immediate termination was proper.
B.

The Content of the Notice of Termination Was Suffcient Under the PMP A

4
5

Under Section 2804( c) et seq. of the PMP A, Notices of Termination of a gasoline
station franchise: (1) shall be in writing; (2) shall be posted by certified mail or personally delivered
to the franchisee; (3) shall contain a statement of intention to terminate the relationship; (4) shall

6
7
8

contain the date on which such termination takes effect; and (5) shall contain a summary statement
of

the PMPA.

9 10
11

STTN contends that BPWCP's Notice of Termination was defective because it did
not reference the One-Year Gasoline Agreement dated October 12, 2006. However, BPWCP's

failure to reference the One Year Gasoline Agreement (which is nearly identical to the 20-year Gasoline Agreement) does not render the Notice of Termination defective. Indeed, courts have
rejected strict compliance of the PMP A's notice requirements where, after "looking at the totality of

12
13

14
15

the circumstances and all the facts known by the franchisee in connection with the notice given by

the franchisor," the franchisees have been provided with requisite notice and have not been
prejudiced. See Fotinos v. Amoco Oil Co. (February 25, 1985) CCH Business Franchise Guide P
8326 (where date referenced in notice of determination was incorrect but parties were aware of the
correct date) (a copy of which is submitted herewith in the Appendix of

16 17
18

Non-Federal Authority); and

19

Brown v. Am. Petrojina Marketing, Inc. (M.D. Fla. 1983) 555 F.Supp. 1327, 1334-1335 (where
plaintiffs had actual knowledge of substantially all the information required by Section 2802( c)( 4)

20
21

despite failure to provide written notice). Here, BPWCP's Notice of Termination contained all the
requisite information to comply with the PMP A.

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23

v.

BPWCP IS ENTITLED TO SUMMARY JUDGMENT ON ALL OTHER CAUSES OF
ACTION IN THE SECOND AMENDED COMPLAINT

24
25

As discussed above, BPWCP has established - - and STTN has failed to properly
show otherwise - - that the termination of the franchise relationship with STTN was proper under the

26 27
28

PMP A given STTN's failure to pay for delinquent gasoline balances, failure to operate the Station

for more than 7 consecutive days, and failure to make all grades of gasoline available for sale. It
13

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logically follows that summar judgment in BPWCP's favor on the remaining related eight causes of
2
3

action for breaches of the franchise agreements and guaranties, goods sold and delivered, unjust
enrichment, breach of the Store Loan Agreement and related guaranties, and judicial foreclosure is
proper.

4
5

Furthermore, STTN fails to present any other persuasive arguments in opposition of

BPWCP's Motion on these other causes of action, as follows:

6
7
8

.

STTN contends that BPWCP allegedly breached the various franchise and

loan agreements by refusing to disburse the Gasoline Loan funds even though all conditions to such
disbursal were supposedly met. (Opp., p. 18.) Given the undisputed gasoline balance delinquencies

9

and STTN's inability to present any evidence that conditions were met (citations to deposition
testimony that do not stand for that proposition should be disregarded), STTN fails to establish that
BPWCP breached franchise and loan agreements by refusing to disburse the Gasoline Loan funds.

10
11

12
13

.

STTN argues in defense of the breach of contract claims that BPWCP

breached its obligations to fund the Gasoline Loan given BPWCP's recording of the related Deed of

14
15

Trust. A deed of trust simply secures some debt or obligation and entitles the lender to reach some
asset of the debtor if the note is not paid. See 4 Miler & Starr CaL. Real Estate (3rd Ed. 2000) §

16
17
18

10:10, p. 41; and Allance Mortg. Co. v. Rothwell (1995) 10 Ca1.4th 1226, 1235. BPWCP's
recording of the Deed of Trust did not automatically require BPWCP to disburse the funds to STTN
and STTN fails to present any factual or legal authority to support its claim.

19

.

STTN argues that BPWCP breached the implied covenant of good faith and

20
21

fair dealing that is implied in each contract and relies entirely on Careau & Co. v. Security Pacifc
Business Credit, Inc. (1990) 222 Ca1.App.3d 1371, 1393. Given STTN's proclamation that "(t)he
allegations described by the Careau & Co. court are the same allegations contained in STTN's

22
23

Counterclaim" (Opp, at 20:22-23), STTN should have no opposition to the Court to apply the ruling
in Careau. The Care

24
25

au court concluded that the plaintiffs allegations were not suffcient to state

any cause of action for a breach of the implied covenant of good faith and found their claim to be
duplicative of their two contract causes of action. Id. at 1392.

26 27
28

.

STTN asserts that BPWCP is not entitled to damages under the common count

for goods sold and delivered because of the general rule that a common count for goods sold and
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delivered will not lie where express binding agreements exist and define the paries' rights. STTN
2
3

does, however, recognize that an exception exists where the seller has performed its part and nothing

remains to be performed but payment under the contract. (Opp., p. 23, Ins. 9-12, citing Ferro v.

4
5

Citzens Natl Trust & Savings Bank of Los Angeles (1955) 44 Cal.2d 401.) BPWCP has fully
performed on its contract, as discussed more fully in its Motion, and therefore the exception applies.
BPWCP can obtain summary judgment on this cause of action.

6 7
8

.

STTN alleges that BPWCP is not entitled to maintain an unjust enrichment

action simultaneously with a contract claim. However, according to a recent decision, Ball v.
Johanns (E.D. Cal. Jan. 29, 2008) 2008 WL269069, at * 3, a party's claim for unjust enrichment
should "not be barred despite the simultaneous claim for breach of contract."

9
10
11

Without more, STTN does not successfully oppose BPWCP's summary judgment
motion on the Second Amended Complaint.
VI.

12
13

CONCLUSION
Based on the foregoing and the moving papers, i BPWCP respectfully requests that

14
15

the Court not be fooled by STTN's blatant misrepresentations, bald assertions, and inapplicable legal

16
17
18

authority presented in Opposition to the Motion, and grant summar judgment in BPWCP's favor, in

its entirety. After all, BPWCP should not be forced to continue doing business with, or loan money
to, a franchisee who failed to pay for gasoline delivered and operate its franchise business.

19

20
21

DATED: July 25, 2008

Respectfully submitted,

KURT OSENBAUGH DEBORAH YOON JONES
SA Y AKA KARIT ANI

22
23

WESTON, BENSHOOF, ROCHEFORT,

RUBALCAVA & MacCUISH LLP

24
25

26
27
28
1 BPWCP also respectfully requests that this Court consider the conculTently fied Reply Brief in support of BPWCP's
Summary Judgment as to the Counterclaim as there are overlapping, duplicative issues involved. 15 REPL Y RE MSJ/PARTIAL SJ ON SAC 1226241.2