Atlantic Richfield Co. v. Guerami, 86-1523

• Decision Date: 23 June 1987
• Docket Number: No. 86-1523,86-1523
• Citation: 820 F.2d 280
• Parties: ATLANTIC RICHFIELD COMPANY, a Delaware Corporation, Plaintiff-Appellee, v. Mani GUERAMI; Apadona Corporation, a California Corporation; Sabek, Inc., a California Corporation; Andy Saberi; and Arman Bezjian, Defendants-Appellants. SABEK, INC., a California Corporation; and Apadona Corporation, a California Corporation, Plaintiffs-Appellants, v. ATLANTIC RICHFIELD CORPORATION, a Delaware Corporation; and Arco Petroleum Products Company, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 280

820 F.2d 280

ATLANTIC RICHFIELD COMPANY, a Delaware Corporation, Plaintiff-Appellee, v. Mani GUERAMI; Apadona Corporation, a California

Corporation; Sabek, Inc., a California

Corporation; Andy Saberi; and Arman

Bezjian, Defendants-Appellants.

SABEK, INC., a California Corporation; and Apadona

Corporation, a California Corporation, Plaintiffs-Appellants, v. ATLANTIC RICHFIELD CORPORATION, a Delaware Corporation; and Arco Petroleum Products Company, Defendants-Appellees.

No. 86-1523.

United States Court of Appeals Ninth Circuit.

Argued and Submitted Dec. 11, 1986.

Memorandum Filed May 1, 1987.

Order Filed June 23, 1987.

David Jay Morgan, San Mateo, Cal., for defendants-appellants.

Douglas W. Beck, Los Angeles, Cal., for plaintiff-appellee.

Appeal from the United States District Court for the Northern District of California.

Before KENNEDY, TANG and THOMPSON, Circuit Judges.

KENNEDY, Circuit Judge:

Appellants Mani Guerami, Apadona Corporation (Apadona), Sabek, Incorporated (Sabek), Andy Saberi, and Arman Bezjian appeal the district court's grant of summary judgment in favor of Atlantic Richfield Corporation (Arco) in Civil No. 85-4838 (N.D.Cal. Dec. 20, 1985). Apadona and Sabek also appeal the grant of summary judgment against them in Civil No. 85-4848 (N.D.Cal. Dec. 20, 1985). We affirm the district court's decision granting summary judgment in favor of Arco as to Arco's termination of the franchise at 504 Whipple Avenue, Redwood City, California. We vacate and remand the district court's grant of summary judgment as to the damages claim of Apadona and Sabek in No. 86-4848.

We review the district court's grant of summary judgment de novo. Bower v. Bunker Hill Co., 725 F.2d 1221, 1223 (9th Cir.1984). The district court found three independent bases for its conclusion that Arco did not violate the Petroleum Marketing Practices Act (PMPA), 15 U.S.C. Secs. 2801-2841, in terminating the franchise. We agree with the district court that any one of the grounds for termination cited by Texaco was sufficient and that no triable issue of fact existed as to any of them. There is no genuine issue of material fact on which to challenge any one of ARCO's grounds for termination.

Under the PMPA, a "franchisee" is a person who is authorized to use a trademark under a franchise, and a "franchise" is a contract conferring such authorization. 15 U.S.C. Sec. 2801(1), (4). The parties agree that Arco's only signed agreement was with Guerami personally, and that this agreement is the franchise at issue in this case. Thus Guerami was the franchisee by virtue of his contract with Arco.

The PMPA also states that a franchisee's conviction of "any felony involving moral turpitude" constitutes an event that will permit the franchisor to terminate the franchise. 15 U.S.C. Secs. 2802(b)(2)(C), (c)(12). Guerami was convicted of possession of heroin for sale, a crime of moral turpitude. See, e.g., United States ex rel. DeLuca v. O'Rourke, 213 F.2d 759, 762 (8th Cir.1954). Because appellants do not argue that Arco acquired knowledge of Guerami's conviction more than one hundred and twenty days before giving its notice of termination, or that the conviction did not occur during the period the franchise was in effect, there is no issue of fact as to whether the notice requirements of 15 U.S.C. Sec. 2802(b)(2)(C) were met.

We reject appellants' argument that Guerami's assignment of the franchise to Apadona rendered Apadona, and not Guerami, the "franchisee" for the purposes of the PMPA. Accepting appellants' evidence as true, Arco's permission of the assignment to Apadona was based on its acknowledgment of Guerami's legal right under California law to make such an assignment. But under California law, Guerami only had the legal right to assign the franchise to Apadona if he offered in writing to personally guarantee Apadona's performance of its obligations under the franchise. Cal.Bus. & Prof.Code Sec. 21149. Although appellants submitted evidence that an attorney offered to obtain Guerami's guarantee, they concede that the attorney did not represent Guerami, that he did not obtain Guerami's guarantee, and that Guerami himself never made the required written offer. There is no evidence to suggest that Arco was willing to consent to any transfer to Apadona without such a guarantee from Guerami. Under these circumstances, Guerami's transfer to Apadona did not bind Arco, and Arco was still entitled to look to Guerami as the person bound by the franchise agreement, i.e. Guerami was its franchisee.

Even if we agreed that Apadona was the nominal "franchisee," Arco's termination of the franchise would still have been proper. In Humboldt Oil Co. v. Exxon Co, U.S.A., 695 F.2d 386 (9th Cir.1982), this court affirmed the district court's holding that a franchise held by a corporation may be terminated under the PMPA when its sole shareholder is convicted of a crime involving moral turpitude. We stated that "[g]ood faith belief of the franchisor that the franchisee is untrustworthy or engages in fraudulent practices undermines the entire franchise relationship. Conviction in the trial court provides a reasonable basis for such a belief." Id. at 389. Because Saberi's option to buy Guerami's shares was never exercised, Guerami was Apadona's sole shareholder at all relevant times. He remained Apadona's president even after he went to prison. Arco had no recourse against any individual other than Guerami if problems developed with Apadona. Thus, Guerami's conviction undermined the franchise relationship regardless of whether he or Apadona was the nominal "franchisee."

We also reject appellants' argument that Guerami was no longer the "franchisee" for the purposes of the PMPA because Arco had consented to, or was estopped from objecting to, Guerami's replacement by Saberi and Sabek. Although Guerami testified at his deposition that he notified Arco officials that he would like Saberi to run the station, appellants' brief concedes that any permission granted by Arco was conditioned on Guerami's maintaining...