Opinion
Case No. 11-00328 SC.
September 15, 2011
ORDER GRANTING DEFENDANTS' MOTION TO DISMISS
I. INTRODUCTION
Plaintiff Evelyn Poquez ("Plaintiff") has filed a Second Amended Complaint against defendants Suncor Holdings — COPII, LLC ("Suncor"), GSM Partners, LLC ("GSM"), Tower Energy Group ("Tower"), and Does 1 through 20, bringing a claim for violation of the Petroleum Marketing Practices Act, 15 U.S.C. § 2801, et seq. ("PMPA"), as well as state and common law claims for specific performance and declaratory relief. ECF No. 26 ("SAC"). Suncor, GSM, and Tower (collectively, "Defendants") filed a Motion to Dismiss for failure to state a claim and lack of subject matter jurisdiction, which is fully briefed. ECF Nos. 29 ("Mot."), 30 ("Opp'n"), 32 ("Reply"). For the reasons stated below, the Court GRANTS Defendants' Motion and dismisses this action WITH PREJUDICE.
II. BACKGROUND
As it must on a Federal Rule of Civil Procedure 12(b)(6) motion, the Court assumes the truth of the well-pleaded facts in Plaintiff's SAC. Plaintiff alleges that she operates a Union 76 branded motor fuel station in San Francisco, California. SAC ¶ 1. Defendants became the leasor and franchisor of the fuel station through a 2005 bulk sale. Id. ¶¶ 1, 5, 14. The bulk sale agreement provides for PMPA compliance and also states that the lease dealer has a right of first refusal to purchase the property. Id. ¶ 14. On or around June 30, 2005, Plaintiff entered into an agreement with defendant GSM, the "Assignment of First Refusal," giving Plaintiff the exclusive option to purchase the premises at the appraised value. Id. ¶ 16. The agreement was allegedly reaffirmed in a May 2006 agreement among the parties.Id. ¶ 17.
On or around November 24, 2010, Defendants sent Plaintiff a Notice of Nonrenewal of Plaintiff's dealership franchise agreement. Id. ¶ 21. Defendants withdrew the Notice of Nonrenewal on February 7, 2011 and the parties entered into a new three-year franchise agreement that commenced March 2011 and expires February 2014. SAC ¶ 23. Plaintiff alleges this agreement was a "sham" since the underlying lease expires in February 2012, two years prior to the expiration of the renewed franchise agreement.Id. Defendant Tower had notified Plaintiff about the expiration of the underlying lease before the parties renewed the franchise agreement. See SAC Ex. 13 at 1.
On February 9, 2011, Defendants informed Plaintiff that she had four days to match a third party offer from "Strada" to purchase the property for $3.2 million. Id. ¶ 24. Two days later, Plaintiff requested an appraisal of the property, but Defendants allegedly refused to respond. Id. ¶ 26. The Strada deal apparently fell through and, in April 2011, Forest City West, LLC ("Forest City"), a national real estate developer, acquired the property from defendant Suncor. Id. ¶ 27. Plaintiff alleges that she was never given the opportunity to purchase the property on the same terms and conditions as Forest City. Id. She also contends that Forest City intends to develop the subject property and will terminate the franchise and evict her when the underlying lease expires in February 2012. Id.
On January 21, 2011, Plaintiff commenced this action, contending Defendants' November 2010 Notice of Nonrenewal violated the PMPA because Plaintiff never received written notice of the duration of the underlying lease before beginning the term of her franchise agreement. ECF No. 1 ("Compl.") ¶¶ 17-18. The Court dismissed Plaintiff's Complaint without prejudice, finding that Defendants' withdrawal of the Notice of Nonrenewal and subsequent assent to a new three-year franchise agreement mooted Plaintiff's claims.
In the SAC, Plaintiff claims that Defendants violated the PMPA by (1) failing to provide Plaintiff with forty-five days to exercise her right of first refusal to purchase the property; (2) denying Plaintiff's alleged right of first refusal to purchase the property and selling it to Forest City; (3) issuing Plaintiff a sham three-year lease; and (4) selling the property to Forest City, allegedly knowing that the developer will terminate the underlying lease and evict the Plaintiff. SAC ¶ 30. Plaintiff also asserts state law claims for specific performance and declaratory relief. Id. ¶¶ 40-48.
Plaintiff seeks an injunction enjoining Defendants from selling the subject property or terminating and/or non-renewing Plaintiff's franchise; an order compelling Defendants to provide an appraisal of the property; compensatory damages under the PMPA; exemplary damages to deter future violations; restitution and disgorgement of illegally gained profits; a declaration regarding the parties' rights and obligations under the PMPA and various factual and legal allegations in the SAC; and attorneys' fees and costs. Id. at 15-18.
Defendants contend that Plaintiff cannot state a claim for violation of the PMPA because her franchise agreement has not been terminated or not renewed. Mot. at 2. Defendants also argue that the Court lacks subject matter jurisdiction because Plaintiff's claims for violations of the PMPA fail as a matter of law. Id. With respect to Plaintiff's state law claims, Defendants contend that Plaintiff has failed to plead facts sufficient to state a claim for specific performance and that Plaintiff's claim for declaratory relief is superfluous. Id. Additionally, Defendants contend that, because the court lacks jurisdiction over Plaintiff's claim for violation of the PMPA, the Court cannot exercise supplemental jurisdiction over her state law causes of action. Id.
III. LEGAL STANDARD
A. Rule 12(b)(6)
A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) "tests the legal sufficiency of a claim." Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). "Dismissal can be based on the lack of a cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal theory."Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1988). "When there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief." Ashcroft v. Iqbal, 129 S. Ct. 1937, 1950 (2009). However, "the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions. Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Id. (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). The allegations made in a complaint must be both "sufficiently detailed to give fair notice to the opposing party of the nature of the claim so that the party may effectively defend against it" and "sufficiently plausible" such that "it is not unfair to require the opposing party to be subjected to the expense of discovery." Starr v. Baca, 633 F.3d 1191, 1204 (9th Cir. 2011).
B. Rule 12(b)(1)
When a defendant submits a motion to dismiss under Federal Rule of Civil Procedure 12(b)(1), the plaintiff bears the burden of establishing the propriety of the court's jurisdiction. See Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994). As a court of limited jurisdiction, "[a] federal court is presumed to lack jurisdiction in a particular case unless the contrary affirmatively appears." Stock West, Inc. v. Confederated Tribes, 873 F.2d 1221, 1225 (9th Cir. 1989). A Rule 12(b)(1) jurisdictional attack may be facial or factual. White v. Lee, 227 F.3d 1214, 1242 (9th Cir. 2000). In a facial attack, the defendant challenges the basis of jurisdiction as alleged in the complaint, while in a factual attack, the defendant may submit extrinsic evidence to address factual disputes as necessary to resolve the issue of jurisdiction, and no presumption of truthfulness attaches to the plaintiff's jurisdictional claims.Safe Air for Everyone v. Meyer, 373 F.3d 1035, 1039 (9th Cir. 2004); Thornhill Pub. Co. v. Gen. Tel. Elecs. Corp., 594 F.2d 730, 733 (9th Cir. 1979). In the instant case, Defendants have brought a facial attack.
IV. DISCUSSION
A. Plaintiff's claim for violation of the PMPA
The PMPA was designed to offer additional protections to petroleum products franchisees, such as Plaintiff, to "remedy[] the disparity in bargaining power between franchisors and franchisees." Unocal Corp. v. Kaabipour, 177 F.3d 755, 762 (9th Cir. 1999) (quoting S. Rep. No. 95-731, at 18-19 (1978)). As such, the provisions of the PMPA are to be liberally construed to protect the interests of franchisees. Id. at 765. The PMPA provides that a franchisor may "terminate" or "fail to renew" a franchise relationship only where the franchisor provides written notice and takes the action for a reason specifically recognized by the statute. 15 U.S.C. §§ 2802, 2804. The PMPA defines the term "termination" to "include[] cancellation." 15 U.S.C. § 2801. The terms "fail to renew" and "nonrenewal" mean, "with respect to any franchise relationship, a failure to reinstate, continue, or extend the franchise relationship" at the conclusion of the franchise term or following a termination. Id. Where a franchisor terminates or fails to renew a franchise relationship in violation of the PMPA, a franchisee may bring a civil action in federal court to enforce the provisions of the Act. 15 U.S.C. § 2805.
In Mac's Shell Service, Inc. v. Shell Oil Products Co. LLC, 130 S. Ct. 1251 (2010), the Supreme Court addressed the circumstances under which a franchisee may bring a claim for improper termination and nonrenewal under the PMPA. In that case, Shell dealers brought claims against their franchisor for breach of contract under state law and for "constructive termination" and "constructive nonrenewal" of their franchise agreements under the PMPA. Id. at 1255-56. The dealers alleged that the franchisor had violated the statute by discontinuing rent subsidies and offering dealers new franchise agreements that calculated rent using a different formula. The Supreme Court rejected the dealers' PMPA claims on the grounds that the dealers had not abandoned their franchises and had chosen to accept the franchisor's renewal agreements. Id. at 1258, 1262. The Court reasoned that "a standard for identifying those breaches of contract that should be treated as effectively ending a franchise even though the franchisee continues to use the franchisor's trademark, purchase the franchisor's fuel, and occupy the service station premises" would be "indeterminate and unworkable." Id. at 1260. Further, extending the PMPA to apply to breaches of contract "would be inconsistent with the Act's limited purpose and would further expand federal law into a domain traditionally reserved for the States." Id. at 1259.
Ninth Circuit case law is in accord. See Unocal Corp. v. Kaabipour, 177 F.3d 755, 769 (9th Cir. 1999) (PMPA not implicated where there was no termination or nonrenewal); Fresher v. Shell Oil Co., 846 F.2d 45, 46-47 (9th Cir. 1988) (dealers could not state a claim under the PMPA where they alleged that assignment of their lease agreements would result in termination of their franchises).
Relying in part on Mac's Shell, Defendants argue that Plaintiff's claim for violation of the PMPA fails as a matter of law because Plaintiff has not alleged that Defendants terminated or failed to renew her franchise agreement. Mot. at 3. Instead, Defendants argue, Plaintiff has merely pled that Defendants' conduct "amounts to" a termination of the franchise agreement.Id. at 3-4. Defendants specifically point to the first paragraph of the SAC which alleges that Plaintiff continues to operate a Union 76 branded motor fuel service station on the subject property. Reply at 1. Defendants contend that the PMPA is inapplicable in such situations. Mot. at 3-4.
Plaintiff counters that this is not a case of constructive termination or nonrenewal, but rather "an actual severance of the relevant legal relationship." Opp'n at 6. Plaintiff contends that the franchise relationship has already been terminated because Forest City intends "to commercially develop the property, not to continue to supply [Plaintiff] with fuel, trademarks and branding" and because "[t]he actual franchisor GSM/Suncor/Tower[] now no longer exists, having been destroyed by the sale of the land to Forest City." Id. at 9. Plaintiff also argues that this case is distinguishable from Mac's Shell since, in that case, the franchisor did not intend to terminate the gasoline franchise.Id. at 5-6. Here, on the other hand, Defendants' intent is allegedly to terminate Plaintiff's franchise agreement. Id. at 6. To support her argument regarding Defendants' intent, Plaintiff points to the Notice of Termination issued by Defendants in November 2010; the "sham lease"; and the sale of the property to Forest City, who allegedly intends to evict Plaintiff and commercially develop the property. Id.
Plaintiff's arguments are unpersuasive. There is no indication that Defendants have terminated or failed to renew Plaintiff's franchise agreement or that there has otherwise been "an actual severance of the legal relationship." In fact, Plaintiff has pled that she "currently operates a Union 76 branded motor fuel service station" on the subject property, SAC ¶ 1, and that she recently renewed her franchise agreement with Defendants for a three-year term, id. ¶ 23. Moreover, Defendants' sale of the subject property to Forest City has not destroyed the franchise, as defendant Tower currently remains the franchisor of Plaintiff's Union 76 station. See SAC ¶¶ 5, 23. Plaintiff has not alleged any facts showing that the franchise agreement has been terminated or that Defendants have in any way interfered with Plaintiff's use of the Union 76 trademark, purchase of fuel, or occupation of the subject property. Whether or not Defendants or Forest City will act to terminate Plaintiff's franchise agreement is a matter of pure conjecture at this time.
Plaintiff's argument regarding Defendants' purported "intent" to terminate the franchise agreement is also unconvincing. Defendants' intent is irrelevant to Plaintiff's claim for violation of the PMPA. The pertinent inquiry is whether Defendants have actually terminated or failed to renew the franchise, not whether Defendants intend to do so. Nothing in the Act suggests that a right of action may be based solely on a franchisor's intent to terminate and Plaintiff points to no other authority for support. In any event, a standard for identifying actionable intentions would be just as "indeterminate and unworkable" as a standard for "indentifying those breaches of contract that should be treated as effectively ending a franchise." See Mac's Shell, 130 S. Ct. at 1260.
Because there has not been a termination or nonrenewal of Plaintiff's franchise, Plaintiff cannot state a claim for violation of the PMPA. However, in the interest of thoroughness, the Court addresses each of the PMPA violations alleged in the SAC.
Plaintiff alleges that Defendants violated the statute first by failing to provide her with four rather than forty-five days to match the Strada offer and second by selling the property to Forest City before allowing her to exercise her right of refusal to purchase the property. SAC ¶ 30. Under certain provisions of the Act, the franchisor is required to "offer[] the franchisee a right of first refusal of at least 45-days duration," but these provisions only apply where there has been a termination or nonrenewal. See 15 U.S.C. §§ 2802(b)(2)(E)(iii)(I), 2802(b)(3)(D)(iii)(II). When the Strada offer was presented to Plaintiff and when the property was later sold to Forest City, Plaintiff's franchise had not been terminated or non-renewed. Defendants informed Plaintiff she had four days to match the Strada offer on February 9, 2011, two days after they had withdrawn the Notice of Nonrenewal. SAC ¶¶ 23-24. Forest City acquired the property about two months later. Id. ¶ 27. Accordingly, the PMPA did not require Defendants to provide Plaintiff with forty-five days to match the Strada offer or to provide Plaintiff with the opportunity to purchase the property on the same terms and conditions as Forest City.
See also Patel v. Sun Ref. Mktg. Co., 710 F. Supp. 1023, 1023-1024 (E.D. Pa. 1989) (defendant did not violate the PMPA by selling the premises to a third party without first offering the franchisee the chance to purchase on the same terms since the franchise had been renewed and "no one can state with certainty whether plaintiffs will ever face the prospect of nonrenewal").
Plaintiffs allege that Defendants' refusal to allow her to purchase the property on the same terms and conditions as Forest City constitutes a breach of the parties' June 30, 2005 agreement. SAC ¶ 26. While Defendants' alleged breach may be actionable under state law, it cannot support a cause of action brought under the PMPA.
Next, Plaintiff alleges that Defendants violated the PMPA by "issuing a sham 3 year lease . . . presumably extending the lease term to February 28, 2014, but preserving the right for defendants to terminate the lease when the underlying lease . . . terminates on February 29, 2012." SAC ¶ 30. Plaintiff does not point to any provision of the PMPA which would prohibit such an action. Nor can the Court identify any provision of the PMPA which would preclude the parties from entering into a franchise agreement subject to a lease agreement of shorter duration. In any event, before Plaintiff voluntarily entered into the renewed franchise agreement, Defendants informed her that the underlying lease for the site expires on February 29, 2012. See SAC, Ex. 13. As Plaintiff had notice of the expiration of the underlying lease, the franchise agreement could hardly be considered a sham.
Moreover, the PMPA anticipates and allows for situations where an underlying lease expires prior to the franchise agreement. Specifically, the PMPA provides for the termination and nonrenewal of a franchise where there is a "loss of the franchisor's right to grant possession of the leased marketing premises through expiration of an underlying lease," so long as the franchisor provides notice and certain other conditions are met. 15 U.S.C. § 2802(c)(4).
Finally, Plaintiff alleges that Defendants violated the PMPA by selling the property to Forest City, "knowing that Forest City will terminate the underlying lease in February 2012 and evict plaintiff." SAC ¶ 30. As an initial matter, Plaintiff's allegations are insufficient to raise her "right to relief above the speculative level." Twombly, 550 U.S. at 555. Plaintiff pleads no facts to support her conjecture that Forest City will terminate the underlying lease in February 2012. More importantly, Plaintiff has not pled that her franchise has yet been subject to termination or nonrenewal. Allegations that Defendants sold the underlying property to a third party who may possibly terminate the franchise agreement in the future, without more, are insufficient to state a cause of action. See Fresher, 846 F.2d at 46-47.
In sum, Plaintiff has not alleged that Defendants have either terminated or failed to renew her franchise agreement and, as such, her claim for violation of the PMPA fails as a matter of law. If and when Defendants terminate or fail to renew Plaintiff's franchise agreement in violation of the PMPA, she may then bring suit. Until that time, her action is premature. As the Court has granted Plaintiff leave to amend once before and Plaintiff's claim fails as a matter of law, this claim is dismissed with prejudice.
B. Plaintiff's claims for specific performance and declaratory relief
Plaintiff also brings two state law claims for relief. First, Plaintiff brings a claim for specific performance under the parties' June 30, 2005 agreement, which allegedly gives Plaintiff the exclusive option to purchase the premises at the appraised fair market value. SAC ¶¶ 40-46. With respect to this claim, Plaintiff asks that the Court order Defendants to select a mutually acceptable appraiser to appraise the fair market value of the property. Id. at 43. Second, Plaintiff brings a claim for declaratory relief, asking the court for a declaration regarding the parties' rights and obligations under the PMPA, whether Defendants' termination/nonrenewal of plaintiff's franchise was in good faith, and various other factual and legal allegations in the SAC. Id. at 47-49. Plaintiff alleges that the Court may exercise supplemental jurisdiction over these claims under 28 U.S.C. § 1367 because "they are so related to federal claims that they form part of the same case or controversy." Id. ¶ 11.
Defendants contend that both claims fail to state a claim upon which relief can be granted. Mot. at 9-10. Specifically, Defendants contend that Plaintiff's claim for specific performance fails because Plaintiff has not alleged why monetary damages would be inadequate or why Plaintiff cannot obtain an appraisal on her own and then seek to recover proportionate costs from Defendants. Id. Defendants contend that Plaintiff's claim for declaratory relief fails because it is subsumed by Plaintiff's first claim for violation of the PMPA and is therefore superfluous. Id. at 10.
While these arguments may have merit, the Court need not address them because it declines to exercise jurisdiction over Plaintiff's claims for specific performance and declaratory relief. Under 28 U.S.C. § 1367(c), "the district courts may decline to exercise supplemental jurisdiction over a claim" where "the district court has dismissed all claims over which it has original jurisdiction." As Plaintiff's claim for violation of the PMPA fails to allege a valid claim for relief under federal law, the Court declines to exercise supplemental jurisdiction over her state law claims. Therefore, the Court dismisses Plaintiff's claims for specific performance and declaratory relief for lack of subject matter jurisdiction.
V. CONCLUSION
For the foregoing reasons, Defendants Suncor, GSM, and Tower's Motion to Dismiss is GRANTED; Plaintiff Evelyn Poquez's Second Amended Complaint is DISMISSED WITH PREJUDICE.
IT IS SO ORDERED.