Unocal Corp. v. Kaabipour

177 F.3d 755, 1999 WL 308564
CourtCourt of Appeals for the Ninth Circuit
DecidedMay 18, 1999
DocketNos. 97-56324, 98-56216, 98-56631 and 98-56365
StatusPublished
Cited by33 cases

This text of 177 F.3d 755 (Unocal Corp. v. Kaabipour) is published on Counsel Stack Legal Research, covering Court of Appeals for the Ninth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Unocal Corp. v. Kaabipour, 177 F.3d 755, 1999 WL 308564 (9th Cir. 1999).

Opinion

FERNANDEZ, Circuit Judge:

These cases arise out of the withdrawal of Union Oil Company from the retail marketing of motor fuel in the states of Alaska, Arizona, California, Hawaii, Nevada, Oregon and Washington. In so doing, Union Oil sold all of its marketing assets to Tosco Corporation. A number of former Union Oil franchisees objected to the sale on various grounds. The district court ruled against all of them and these appeals ensued.

One group, the Kaabipour Group,1 asserts that the district court erred when it declared that the Petroleum Marketing Practices Act, 15 U.S.C. §§ 2801-06, [759]*759preempts California law as far as this transaction is concerned. Another group, the Simmons Group,2 asserts that the district court erred when it decided that Union Oil and Tosco properly adhered to the provisions of the PMPA regarding withdrawal from the market, despite the Simmons Group’s claims that they violated the timing, new franchise offer, and transfer of premises provisions of the PMPA. See 15 U.S.C. § 2802(b)(2)(E).3 A third group, the Raether Group,4 asserts that the district court erred when it decided that Union Oil and Tosco properly adhered to the provisions of the PMPA regarding withdrawal from the market, despite the Raether Group’s' claims, which were the same as the Simmons Group’s PMPA claims. The final group, the Hindi Group,5 asserts that the district court erred when it decided that Union Oil and Tosco properly adhered to the PMPA regarding withdrawal from the market, despite the Hindi Group’s claims that they violated the franchise termination and transfer provisions of the PMPA. See 15 U.S.C. § 2802(b)(2)(E). We affirm.

BACKGROUND

Unocal Corporation had established its wholly owned subsidiary, Union Oil, to conduct its petroleum refining, transportation, and marketing business. In 1994, Union Oil established a business unit, the 76 Products Company, to manage its refining and marketing operations, including a chain of more than 1200 service stations in Alaska, Arizona, California, Hawaii, Nevada, Oregon, and Washington. Those were operated under the terms of PMPA franchise agreements with Union Oil as the franchisor.

For several years, Unocal gave consideration to various ways of restructuring the 76 Products operations, with the principal [760]*760options being a spin-off of the entity, a joint venture arrangement, or a sale. Though early negotiations during this period fell through, Unocal continued to hear expressions of interest in acquiring the 76 Products business unit from several businesses, and in September 1996 began meeting with Tosco about the possibility that Tosco would purchase 76 Products. Nevertheless, other restructuring plans continued and in October of 1996, Unocal management decided that the assets and employees of the 76 Products business unit should be transferred into a separate subsidiary. That plan was never consummated, but when it was announced, Unocal noted that it would be evaluating different options which could establish 76 Products as a separate entity, including an IPO, a joint venture, or a sale. Any future plans depended on the ability of 76 Products to develop sufficient earnings and cash flow to stand alone.

Discussions with Tosco continued, and by late October, Tosco and Unocal were in active negotiations over 76 Products. Tosco offered to purchase the 76 Products business unit. The Union Oil board authorized a counter-offer on November 4, 1996, and a letter of intent calling for Union Oil to sell 76 Products to Tosco was signed by Tosco and Union Oil on November 17. Negotiation of specific agreements remained to be accomplished, and several conditions, including the approval of Union Oil’s board, had to be met before the sale was formalized. On December 2,1996, the Union Oil board conditionally approved the sale and purchase agreement and other agreements, and authorized Union Oil’s management to enter into agreement with Tosco. The management committee of the Union Oil board authorized the signing of the sale and purchase agreement on December 13, 1996, and the sale then took place on December 14,1996.

The assets sold included the premises of the “76” service stations, which were leased to the franchisees; Union Oil’s interests in the franchise agreements with its dealers; the rights to the “76” and “Union 76” trademarks; and other assets, including refineries, pipelines, tankers, inventories, etc. The sale of 76 Products constituted a “market withdrawal” by Union Oil from the motor fuel market in Alaska, Arizona, California, Hawaii, Nevada, Oregon, and Washington. Union Oil was to terminate its franchises, but Tosco was also obliged to offer each Union Oil franchisee a nondiscriminatory, three-year Tosco franchise. Between December 23 and 26, 1996, Union Oil sent all of its franchisees a letter notifying them of the termination and nonrenewal of their franchises, effective June 30, 1997, and also notified the Governors of the affected states of its market withdrawal.

By April 15, 1997, Tosco offered franchises, which were to become effective July 1, 1997, to the Union Oil franchisees. The new franchise contracts offered by Tosco essentially mirrored the prior contracts between Union Oil and the franchisees. However, an addendum to the Franchise Agreements noted that “[f]or off-balance sheet financing purposes,” fee title to some of the franchise premises would be held by Clover Trust, which would purchase the property by taking a loan secured by a deed of trust, take fee title to it, and then lease it to T Northwest Properties II, Inc. (“Northwest”), a wholly owned subsidiary of Tosco. The franchisee’s lease from Tosco was said to be “SUBJECT TO AND SUBORDINATE TO the lease with Clover Trust and deed of trust,” (capitalization in original). Tosco reserved the right to terminate a franchisee’s lease upon any termination or expiration of the Clover Trust lease, and Clover Trust could terminate a franchisee’s lease upon any termination of the Clover Trust lease. If the Clover Trust lease were to terminate before the Franchise Agreement terminated, the addendum stated that “Tosco will exercise its option (or first right) to purchase the real property and improvements from the Clover Trust,” after which the franchisees would lease their premises [761]*761lease directly from Tosco, “rather than indirectly through the underlying lease” with Northwest. The Addendum further stated:

if Tosco has determined to non-renew or terminate this Agreement, or any renewal thereof, pursuant to a provision of the Petroleum Marketing Practices Act (PMPA) which gives you the right to receive an offer to purchase the service station premises, you will receive from Tosco either a bona fide offer or a right of first refusal to purchase the marketing premises.

Clover Trust is a Special Purpose Entity created to facilitate a “synthetic leasing” arrangement used by Tosco to finance a portion of the purchase from Union Oil.

Free access — add to your briefcase to read the full text and ask questions with AI

Related

Andrew Armaswalker v. Equilon Enterprises LLC
472 F. App'x 484 (Ninth Circuit, 2012)
Eforce Global, Inc. v. Bank of America Corporation
440 F. App'x 556 (Ninth Circuit, 2011)
Santiago-Sepúlveda v. Esso Standard Oil Co.
643 F.3d 1 (First Circuit, 2011)
American Petroleum Institute v. Cooper
681 F. Supp. 2d 635 (E.D. North Carolina, 2010)
Rosedale Plaza Group, LLC v. BP West Coast Products LLC
665 F. Supp. 2d 1118 (E.D. California, 2009)
Santiago-Sepulveda v. Esso Standard Oil Co. (Puerto Rico), Inc.
582 F. Supp. 2d 154 (D. Puerto Rico, 2008)
Anand v. BP West Coast Products LLC
484 F. Supp. 2d 1086 (C.D. California, 2007)
Bp West Coast Produce v. May
Ninth Circuit, 2006
Harara v. ConocoPhillips Co.
377 F. Supp. 2d 779 (N.D. California, 2005)
Mustang Marketing, Inc. v. Chevron Products Co.
406 F.3d 600 (Ninth Circuit, 2005)
Daly v. Harris
117 F. App'x 498 (Ninth Circuit, 2004)
Sun Chase Enterprises, Inc. v. Swati Enterprises, Inc.
143 S.W.3d 902 (Court of Appeals of Texas, 2004)
BP West Coast Products LLC v. Greene
318 F. Supp. 2d 987 (E.D. California, 2004)
Chevron U.S.A., Inc. v. Lutz
271 F. Supp. 2d 1196 (N.D. California, 2003)
Deol v. Equilon Enterprises, LLC
57 F. App'x 777 (Ninth Circuit, 2003)

Cite This Page — Counsel Stack

Bluebook (online)
177 F.3d 755, 1999 WL 308564, Counsel Stack Legal Research, https://law.counselstack.com/opinion/unocal-corp-v-kaabipour-ca9-1999.