Free Declaration in Support - District Court of California - California

Case 5:07-cv-04808-JF

Document 49

Filed 07/03/2008

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KURT OSENBAUGH (State Bar No. 106132) DEBORAH YOON JONES (State BarNo. 178127)
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SA Y AKA KARIT ANI (State Bar No. 240122)

WESTON, BENSHOOF, ROCHEFORT, RUBALCA VA & MacCUISH LLP
333 South Hope Street, Sixteenth Floor

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Los Angeles, California 90071
Telephone: (213) 576-1000

Facsimile: (213) 576-1100
kosenbaugh(iwbcounsel. com d j ones(iwbcounsel. com

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skaritani(iwbcounsel. com
Attorneys for Plaintiff and Counter-Defendant
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BP WEST COAST PRODUCTS LLC

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UNITED STATES DISTRICT COURT

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

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Case No.: C07 04808 JF

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DECLARATION OF THOMAS REEDER IN SUPPORT OF BP WEST COAST PRODUCTS LLC'S:
(1) MOTION FOR SUMMARY mDGMENT, OR IN THE AL TERNA TIVE, PARTIAL SUMMARY JUDGMENT AS TO THE SECOND AMENDED COMPLAINT;
AND

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STTN ENTERPRISES, INC., a California Corporation; NAZIM FAQUIRYAN, an individual; SAYED FAQUIRY AN, an individual; and MAGHUL FAQUIRY AN, an individual; and A V A GLOBAL ENTERPRISE, LLC, a California limite liability company,
Defendants.

(2) MOTION FOR SUMMARY
mDGMENT, OR IN THE AL TERN

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PARTIAL SUMMARY mDGMENT AS TO THE COUNTERCLAIM
(Filed concurrently with Notices and Motions; Memoranda of Points and Authorities;

A TIVE,

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Declaration of Brad Christensen, Deborah Y oon

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Jones, and Cecile McDonnell; Appendix of Non-Federal Authorities; and (Proposed) Orders.)

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Date: August 8, 2008 (reserved) Time: 9:00 a.m.
Crtrm: 3

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Honorable Jeremy Fogel

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Filing Date:

September 17,2007

AND RELATED CROSS-ACTION.
DECLARATION OF THOMAS REEDER IN SUPPORT OF BP WEST COAST PRODUCTS LLC'S

1213043.1

MOTIONS FOR SUMARY JUDGMENT. OR IN THE ALTERNATIVE, PARTIAL SUMARY JUDGMENT AS TO THE SECOND AMNDED COMPLAIT AND COUNTERCLAIM

Case 5:07-cv-04808-JF

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Filed 07/03/2008

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DECLARATION OF THOMAS REEDER
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I, Thomas Reeder, declare and state as follows:
1.

This declaration is made in support BP West Coast Products LLC's

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("BPWCP"): (1) Motion for Summary Judgment, or in the Alternative, Parial Summary Judgment
as to the Second Amended Complaint; and (2) Motion for Summary Judgment, or in the Alternative,

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Partial Summary Judgment as to the Counterclaim, in the matter entitled BP West Coast Products, et
aI., v. STTN Enterprises, lnc, et aI., United States District Court, Case No. C07 04808 JF. BPWCP

is the franchisor for ARCO-branded service stations, including the station at issue in this litigation.

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The facts set forth herein are true of my own personal knowledge, and if called upon to testify

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thereto, I could and would competently do so under oath.
2.

I am a Regional Sales Manager ("RSM") for BPWCP for the region that

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includes the former ARCO-branded gasoline station and am/pm mini market located at 631 San
Felipe Road, Hollister, California 95035 ("Station") and I have franchise consultants who report to
me. The franchise consultants are the main source of communication to and from the franchisees,

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including communications regarding company policies (e.g., trade dress issues). As a RSM, I
discuss with the franchise consultant issues that arise with a franchisee and make the ultimate

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decision on key issues including issuance of defaults and termination notices.

STTN'S FRANCHISE RELATIONSHIP WITH BPWCP
3.

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I am familiar with defendants and counterclaimants in this case, STTN

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Enterprises, Inc., Sayed Faquiryan and Nazim Faquiryan (collectively, "STTN"). I first met Mr.
Sayed Faquiryan at a franchisee interview approximately 3 years before STTN Enterprises, Inc.
became a franchisee. I met Nazim Faquiryan when STTN became a franchisee within the market

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under my responsibility. STTN Enterprises, Inc.'s franchise relationship with BPWCP was pursuant
to the several written agreements, principal among them are: (1) a Contract Dealer Gasoline

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Agreement, including any and all amendments and addendums, effective July 11, 2006 ("Gasoline

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Agreement") and (2) an am/pm Mini Market Agreement, including any and all amendments and

addendums effective July 11, 2006 ("Mini Market Agreement"). True and correct copies of the
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DECLARATION OF THOMAS REEDER IN SUPPORT OF BP WEST COAST PRODUCTS LLC'S

1213043.1

MOTIONS FOR SUMARY JUGMENT. OR IN TH ALTERNATIVE. PARTIAL SUMARY JUDGMENT AS TO TH SECOND AMNDED COMPLAIT AN COUNTERCLAIM

Case 5:07-cv-04808-JF

Document 49

Filed 07/03/2008

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Gasoline Agreement and Mini Market Agreement are respectively attached hereto as Exhibits A
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and B.

4.

On October 12, 2006, STTN signed an Amendment to the Contract Dealer

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Gasoline Agreement and a I-year Contract Dealer Gasoline Agreement. At the time, BPWCP

believed this was necessary since it was allowing STTN to operate the gasoline station only during
the remodeling of the mini market store located at the Station. However, the terms and conditions in

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the Gasoline Agreement (a 20-year agreement) continued in full force.

Moreover, STTN's

obligations concerning the payment for and sale of gasoline remained the same in the Gasoline

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Agreement and the I-year Gasoline Agreement. True and correct copies of the Amendment to
Gasoline Agreement and I-vear Gasoline Agreement are attached respectively hereto as Exhibits
C and D. The Mini Market Agreement, the Gasoline Agreement, the Amendment to Gasoline

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Agreement, the I-year Gasoline Agreement, and the Franchise Guaranties shall be referred to
collectively as the "Franchise Agreements."

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STTN'S DEFAULTS IN ITS OBLIGATION TO PAY

FOR GASOLINE DELIVERIES
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Under the Franchise Agreements, STTN was not only required to maintain

adequate supplies for sale, it was obligated to pay BPWCP for gasoline deliveries. (See Exh. A
attached hereto, at Art. 2.) Payment of gasoline product was accomplished by way of an electronic

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funds transfer ("EFT"). Starting in July 2006, BPWCP delivered gasoline to STTN pursuant to the
Gasoline Agreement (and later under the I-year Gasoline Agreement).
6.
Starting in January 2007, I learned from Brad Christensen, the Senior

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Franchise Consultant who reports to me and whose territory includes the Station, that STTN had
failed to pay for gasoline delivered and that numerous EFT requests pertaining to gasoline deliveries

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were returned for insufficient fuds by STTN's bank. Some payments for gasoline deliveries were
retured due to deliberate "stop payments" orders from STTN.

As such, I placed STTN on

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"cashier's check only" status, which required STTN to present a cashier's check to the driver of the
gasoline delivery truck in order to receive gasoline product.
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DECLARATION OF THOMAS REEDER IN SUPPORT OF BP WEST COAST PRODUCTS LLC'S

MOTIONS FOR SUMARY JUDGMENT, OR IN TH ALTERNATIVE, PARTIAL
1213043. i

SUMARY JUDGMENT AS TO TH SECOND AMNDED COMPLAIT AN COUNRCLAI

Case 5:07-cv-04808-JF

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7.
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Despite STTN's failures to pay for gasoline and growing delinquencies, I

approved a payment plan for STTN to pay down a portion of their outstanding gasoline delivery

balance every month (on top of payments for gasoline deliveries). I asked Brad Christensen to
discuss this payment plan with the Faquiryans. I received a letter from Sayed Faquiryan and Nazim

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Faquiryan dated May 4, 2007 in which Sayed and Nazim Faquiryan agreed to pay an additional
$30,000 by certified check payable to BPWCP on or before the 15th day of each month ("Payment

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Plan Agreement"). A true and correct copy of the Payment Plan Agreement is attached hereto as
Exhibit E.

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8.

Despite executing this Payment Plan Agreement, as of September 5, 2007,

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STTN had not paid for these gasoline deliveries based on this payment plan. The then-current
outstanding balance for the gasoline product that STTN has failed to reimburse BPWCP for gasoline

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product delivered was One Hundred Twenty-Six Thousand, One Hundred Ninety-Four Dollars and
Seventy-Seven Cents ($126,194.77).
9.

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To date, STTN has not paid for the gasoline provided by BPWCP.

The

current outstanding balance is One Hundred Twenty-Six Thousand, One Hundred Ninety-Four

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Dollars and Seventy-Seven Cents ($126,194.77) plus interest.
10.

When a franchisee is found to be in violation of the Franchise Agreements,

BPWCP issues a written "Default Notice" describing the violation ("Default"). The Default is then
sent to the franchisee via certified mail, giving the franchisee an opportunity to cure the violation. I

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issued a number of Defaults based upon STTN's repeat operational violations for failure to accept
gasoline delivery and to make payment for gasoline that was delivered and payable upon receipt. I
also issued a number of Defaults for STTN's failure to operate the Station and sell gasoline product

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commencing on the evening of August 23, 2007 through at least September 4, 2007, in violation of

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the Franchise Agreements. True and correct copies of all Default Notices pertaining to STTN's

failure to pay for gasoline product deliveries and failure to operate the Station for at least 12
consecutive days are attached hereto collectively as Exhibit F.

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DECLARATION OF THOMAS REEDER IN SUPPORT OF BP WEST COAST PRODUCTS LLC'S

1213043.1

MOTIONS FOR SUMARY JUDGMENT, OR IN TH ALTERNATIVE, PARTIAL SUMARY JUGMENT AS TO THE SECOND AMNDED COMPLAIT AN COUNTERCLAIM

Case 5:07-cv-04808-JF

Document 49

Filed 07/03/2008

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BPWCP'S DECISION TO TERMINATE STTN'S
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FRANCHISE RELATIONSHIP
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Starting on the evening of August 23, 2007, I learned that STTN was stil not

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paying for gasoline, was not operating the Station for at least 12 consecutive days (from the evening

of August 23, 2007 through at least September 4, 2007), and was failing to ensure that all grades of
gasoline were available for sale. Indeed, BPWCP's records indicated that BPWCP's last delivery of

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gasoline to STTN was in or about August 18, 2007. STTN would have run out of the amounts
delivered within 3-5 days. Unless STTN was purchasing gasoline from non-BPWCP sources (which
would have been in breach of

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the Franchise Agreements), STTN would not have had any product to

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sell by August 24, 2007. A true and correct copy of BPWCP's gasoline deliveries is attached hereto
as Exhibit G and is incorporated by reference herein as though fully set forth at length.
12.

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On August 30, 2007, I had a conference call with Mr. Christensen and Sayed

Faquiryan, during which I informed Sayed that STTN continued to violate the Franchise Agreements

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by STTN's continued failure to pay for gasoline delivered by BPWCP, failure to order ARCObranded gasoline from BPWCP, and failure to make all grades of gasoline products available to the

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public continued to violate the Franchise Agreements. Despite my warnings on August 30 to
comply with the Franchise Agreements, STTN continued to violate the Franchise Agreements by
failing to operate to Station, failing to make all grades of gasoline available to the public, and failing
to pay BPWCP for gasoline delivered.
13.

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Based on STTN's refusal to pay for the gasoline deliveries and make the

gasoline available to the public, I sent a Notice of Termination letter dated September 6, to STTN,
advising that the Franchise Agreements would be immediately terminated ("Termination Notice").

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A true and correct copy of this Termination Notice is attached hereto as Exhibit H.

The

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Termination Notice stated the grounds for termination based on both the Franchise Agreements and
the related Petroleum Marketing Practices Act 15 U.S.C. §§ 2801, et seq. (the "PMP A") provisions.

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DECLARATION OF THOMAS REEDER IN SUPPORT OF BP WEST COAST PRODUCTS LLC'S

1213043.1

MOTIONS FOR SUMMARY JUDGMENT, OR IN THE ALTERNATIVE, PARTIAL SUMARY JUDGMENT AS TO THE SECOND AMNDED COMPLAIT AND COUNTERCLAIM

Case 5:07-cv-04808-JF

Document 49

Filed 07/03/2008

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BPWCP'S LOANS TO STTN
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In addition to the requirements for operating the station, the Gasoline

Agreement and Mini Market Agreement also required STTN to complete a remodel or retrofit of the

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station within nine (9) months of the commencement of the franchise relationship. (See Exh. A,
Gasoline Agreement, § 1.2, Exh. B, Mini Market Agreement, § 5.03(a).) To facilitate and assist its

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dealers' efforts in complying with BPWCP's "remodel and retrofit" requirement, BPWCP offers its
dealers a special loan program to provide funds specifically for completing construction and

remodeling of its station and am/pm mini market store. This loan program allows dealers to make

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repayments based on "credits" from selling ARCO gasoline or, alternatively, through a specified
percentage per year payment for a specified amount of years. Under BPWCP's loan program, if a

franchisee meets certain yearly gallonage and store sale requirements, a portion of the loan is
deemed repaid at the end of each year term. Thus, as long as a franchisee sells a specified amount of
gasoline product and/or store products each year for the duration of the loan term, the loan payments

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for that year are deemed repaid. Furthermore the franchisee enjoys the use of a remodeled and
retrofitted station and store, which in tur attracts more customers and therefore generates more

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income and profit for the franchisee. In June 2007, I approved STTN for such a special loan
program, allowing STTN to make repayments based on "credits" from achieving certain sales
figures in the Mini Market or, alternatively, through a five percent (5%) per year payment for twenty
years.
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BPWCP offered two loans to STTN (a Store Loan and Gasoline Loan). To

confirm the details of BPWCP and STTN's discussions regarding the loan programs and outlining
the general conditions upon which BPWCP would agree to loan STTN monies for the capital

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improvements, BPWCP sent STTN a Conditional Commitment Letter ("CCL") dated May 25, 2006.

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A true and correct copy of the May 25. 2006 CCL is attached hereto as Exhibit i. The CCL is
intended to set forth some of the essential terms of the proposed loans in order to determine whether
to proceed forward with the loan processing, but the CCL is not intended to be a binding loan
agreement.
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DECLARATION OF THOMAS REEDER IN SUPPORT OF BP WEST COAST PRODUCTS LLC'S

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MOTIONS FOR SUMARY JUDGMENT, OR IN TH ALTERNATIVE, PARTIAL

1213043.1

SUMARY JUDGMENT AS TO TH SECOND AMNDED COMPLAIT AN COUNRCLAIM

Case 5:07-cv-04808-JF

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16.

Based on the CCL, BPWCP and STTN entered into two such loan agreements

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(a Store Loan Agreement and Gasoline Loan Agreement).

(a)

The first loan agreement - the "am/pm Mini Market Loan Agreement" -

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provided a base loan in the amount of $150,000 to fund the costs associated with pre-approved

modifications and/or equipment and improvements to the ampm Mini Market (hereinafter, "Store
Loan Agreement"). The Store Loan Agreement included an additional $75,000 that BPWCP could
elect to disburse for refreshing and refurbishing the am/pm Mini Market on the eleventh aniversary

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of the base loan disbursement. A true and correct copy of the Store Loan Agreement signed by
STTN is attached hereto as Exhibit J.
(b)
The second loan agreement - the "Gasoline Loan Agreement" -

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provided a base loan in the amount of $250,000 to fund costs associated with the pre-approved

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modifications and/or equipment and improvements to the gasoline sales-related aspects of the
Station (i.e., dispensers, canopy, etc.). A true and correct copy of the Gasoline Loan Agreement
signed by STTN is attached hereto as Exhibit K.
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Pursuant to the terms of the loan agreements, the loan funds were to be

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disbursed directly to the third parties who were retained to complete the construction, remodeling

and retrofitting. To ensure that all conditions for disbursement were met, STTN and BPWCP
entered into a Disbursement Agreement that sets forth the terms and conditions governing
disbursements of funding. A true and correct copy of the Disbursement Agreement is attached

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hereto as Exhibit L.
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To secure BPWCP's interests and STTN's obligations under the loan

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agreements, BPWCP had A VA Global, as owner of the real property upon which STTN's franchise
station is located, execute the Deed of Trust dated March 2, 2007 and that was recorded on March 9,
2007. A true and correct copy of the Deed of Trust

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is attached hereto as Exhibit M. BPWCP, AVA

Global, and STTN also entered into a "Consent to Encumbrance of Tenant's Interest" dated March 2,

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2007 and recorded on March 9, 2007 ("Consent to Encumbrance"). A true and correct copy of the
Consent to Encumbrance is attached hereto as Exhibit N. In addition, BPWCP had STTN execute a
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DECLARATION OF THOMAS REEDER IN SUPPORT OF BP WEST COAST PRODUCTS LLC'S

1213043.1

MOTIONS FOR SUMARY JUGMENT, OR IN TH ALTERNATIVE, PARTIAL SUMARY JUDGMENT AS TO THE SECOND AMNDED COMPLAIT AN COUNTERCLAIM

Case 5:07-cv-04808-JF

Document 49

Filed 07/03/2008

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Promissory Note evidencing the Store Loan. A tre and correct copy of the Promissory Note is
attached hereto as Exhibit O. STT also executed and delivered to BPWCP, as beneficiary, a
DCC-I. A true and correct copy of

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the UCC-l is atthed hereto as Exhibit P.
The Temmination Notice also states that STI was also required to pay the

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outstanding 10an balance of $150,000.00 under the Store Loan Agreement withn 30 days of the
tennination of the Franchise Agreements.

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To date, however, STil, Sayed Faquiyan, Nazim

FaquIran, and Maghul Faquiyan, have failed and refused to pay the outstding balance due under
the Store Loan Agreement. The current outstanding loan balance is $150,000 plus interest.

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I declare under penalty of perjury under the laws of the State of California that the

foregoing is true and correct.
Executed on July i- 2008, at Ct. '( lJ_, California.

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~~

THOMAS EDER

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DBCLMlTlOr- OF THOMAS REER IN SUPPORT OF BI' WEST COAST PRODUCTS LLC' 5
MOTK:.S FOR SllM1IAY JUDGMENT, OR IN THE ALTEIlATrVE, PARTIAL
1 ~ 1104, 1

SUMMARY JUG\\:i AS TO THE SECOND AMEED COM?Lo\1NT AND COL'I\1'ERCLAIM

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