Forty-Niner Truck Plaza, Inc. v. Union Oil Co.

• Decision Date: 22 October 1997
• Docket Number: FORTY-NINER,No. C021946,C021946
• Citation: 58 Cal.App.4th 1261,68 Cal.Rptr.2d 532
• Court: California Court of Appeals Court of Appeals
• Parties: , 97 Cal. Daily Op. Serv. 8322, 97 Daily Journal D.A.R. 13,405 TRUCK PLAZA, INC., et al., Plaintiffs and Appellants, v. UNION OIL COMPANY OF CALIFORNIA, et al., Defendants and Appellants.

Page 532

68 Cal.Rptr.2d 532

58 Cal.App.4th 1261, 97 Cal. Daily Op. Serv. 8322,

97 Daily Journal D.A.R. 13,405

FORTY-NINER TRUCK PLAZA, INC., et al., Plaintiffs and Appellants, v. UNION OIL COMPANY OF CALIFORNIA, et al., Defendants and Appellants.

No. C021946.

Court of Appeal, Third District, California.

Oct. 22, 1997.

Certified for Partial Publication. ¹

Rehearing Denied Nov. 18, 1997.

Review Denied Feb. 18, 1998.

John A. Trocky, Gerald D. Stern, Monterey, McDonough, Holland & Allen, Glenn W. Peterson, Stephen L. Goff, Sacramento, Taylor, Theimann & Aitken, Debra L. King and William L. Taylor, for Plaintiffs and Appellants.

Harold E. Zahner, San Pedro, Brobeck, Phleger & Harrison, Kenneth L. Waggoner, John J. Wasilczyk, Los Angeles, Bren C. Conner, Manhattan Beach, Robert C. McNitt, Jr., Los Angeles, Paul, Weiss, Rifkind, Wharton & Garrison, Lewis R. Clayton, Brad S. Karp, Jonathan H. Hurwitz, Lesley Szanto Friedman, New York City, Weintraub, Genshlea & Sproul, Geoffrey Burroughs, Sacramento, Amy J. Winn, San Francisco, for Defendants and Appellants.

DAVIS, Associate Justice.

In the early 1990s, defendant Union Oil Company of California (Unocal) decided to sell its nationwide network of truckstops (network) to defendant National Auto/Truckstops, Inc. (National). Invoking Business and Professions Code section 20999.25, subdivision (a) (hereafter, section 20999.25(a)), the two plaintiffs, Forty-Niner Truck Plaza, Inc. of Sacramento (Forty-Niner) and Mid California Auto/Truck Plaza, Inc. of Santa Nella (Mid-Cal; collectively, the plaintiffs), asked Unocal for the opportunity to buy their respective truckstops, which were part of the network. Unocal gave Forty-Niner and Mid-Cal the chance to buy their truckstops on the same basic terms that National had offered.

When Forty-Niner and Mid-Cal were unable to make the purchases, they sued Unocal, National, and defendant Clipper Group, L.P. (Clipper), claiming that defendants had manipulated the purchase prices allocated to these respective truckstops so that Forty-Niner and Mid-Cal would be unable to afford them. In a multi-million dollar verdict, which included punitive damages, a jury found in the plaintiffs' favor. The trial court granted the defendants a new trial, finding in part that the weight of the evidence was against the verdict.

Both sides appeal. Each side raises several issues, most of which we discuss in the unpublished portion of this opinion. Basically, the plaintiffs contend the trial court erred in granting the defendants a new trial. The defendants claim the trial court did not go far enough and should have granted their motion for judgment notwithstanding the verdict (jnov).

In the unpublished portion of this opinion, we affirm the orders denying the jnov and granting the new trial. We also reverse an order of nonsuit on the civil conspiracy count involving National and Clipper.

In the published portion of this opinion, we examine several issues regarding section 20999.25(a) that are raised by the defendants' motion for jnov. Section 20999.25(a) allows a petroleum marketing franchisee, typically a service station operator, a bona fide opportunity to buy the station if the petroleum marketing franchisor, typically an oil company, is going to sell it to another. The defendants initially argue that section 20999.25(a) is legally invalid. We conclude that section 20999.25(a) is constitutional under the takings clause and in its breadth, and that section 20999.25(a) is not preempted by the federal Petroleum Marketing Practices Act (the PMPA; 15 U.S.C.A. § 2801 et seq.) in the circumstances presented here--where a station is sold to a third party but the franchise arrangement is merely assigned to that buyer rather than ended. The defendants also argue that if section 20999.25(a) is valid, its first refusal option applies to a multi-site purchase and the trial court erroneously defined the section 20999.25(a) term "bona fide offer." We conclude that the first refusal option of section 20999.25(a) can apply to a multi-site purchase, and that the term "bona fide offer" in section 20999.25(a) should be construed consistent with the prevalent federal decisions construing the same term in the PMPA.

BACKGROUND

In 1991, Unocal decided to sell the network, which encompassed 97 Unocal-branded truckstops. A group of Unocal operators, calling themselves Operation Orange Ball (Orange Ball), joined with investors arranged or spearheaded by Clipper in an effort to buy the network. Unocal wanted to sell the network intact. Clipper believed the network should be purchased intact to realize economies of scale.

In 1992, plaintiffs contacted Unocal and asked about buying their respective truckstops. Unocal passed this information on to Clipper.

Under section 20999.25(a), a franchisor (such as Unocal) who wants to sell service station premises that it owns and leases to franchisees (such as the plaintiffs' truckstops) may either: (1) make a "bona fide offer" to sell its interest in the premises to the franchisee; or (2) give the franchisee "a right of first refusal of any bona fide offer acceptable to the franchisor made by another to purchase the franchisor's interest in the premises."

Unocal asked Clipper and Orange Ball to make individual offers for the six Unocal truckstops in California. In developing these offers, Clipper examined income, strategic value to the network, replacement cost, and the value of the truckstops to a competitor. Clipper relied on information from Forrest Baker, a transportation economist with longstanding experience in the trucking industry. Baker told Clipper that "if Clipper gave up the California locations, [it] would essentially, inevitably move back to being a regional truckstop in the eastern United States." This was because, according to Baker, the 20 Unocal truckstops west of the Mississippi River, "served basically only one purpose, and that was to fuel bridge traffic to California."

Based on this analysis, Clipper and National, the company formed by Clipper and Orange Ball to effectuate the transaction, made the following offers on October 28, 1992, for the California truckstops: $7 million for Forty-Niner; $6.5 million for Mid-Cal; $11.5 million for Ontario; $8 million for Redding; $6 million for Buttonwillow; and $2 million for Blythe.

In letters sent in November 1992, Unocal offered the plaintiffs the chance to buy their truckstops for the prices National had offered. These letters gave the plaintiffs 30 days to accept the offers; Unocal later extended this deadline, at plaintiffs' request, until mid-February 1993.

On November 23, 1992, National and Unocal executed individual purchase agreements for the California truckstops in the amounts set forth above (6 truckstops totaling $41 million). National and Unocal also signed a seventh contract for the purchase of the remainder of the network (91 truckstops totaling $141 million).

By December 1992, Forty-Niner and Mid-Cal had retained an experienced truckstop appraiser, MAI appraiser Charlie Brown, to value their properties. ² Brown testified at trial on behalf of the plaintiffs, stating that he was retained to give an opinion of the fair market value of only the land and improvements comprising Forty-Niner and Mid-Cal, for "negotiating purposes."

Brown did not prepare standard "appraisal" reports for the plaintiffs. He prepared "letter reports" on each property, as he had done for Unocal on several occasions, arriving at fair market values of $2.65 million for Mid-Cal and $2.3 million for Forty-Niner (including their fuel systems).

The plaintiffs refused to buy their leased properties for the amounts National had offered Unocal. National and Unocal then closed the network acquisition, including the California truckstops, in April 1993.

The plaintiffs sued Unocal, National and Clipper. The gist of the complaint alleged that Unocal violated section 20999.25(a) by not giving the plaintiffs a right of first refusal of a bona fide offer, or making them bona fide offers. Plaintiffs sued Unocal for specific performance and promissory estoppel, seeking injunctive relief, and for statutory violation and breach of the implied covenant of good faith and fair dealing, seeking damages. Plaintiffs sued National and Clipper for tortious interference with prospective economic advantage and for tortious interference with contract. Plaintiffs also added a conspiracy theory and a request for punitive damages against all defendants. The jury considered the legal claims while the court simultaneously heard the equitable claims.

At trial, the plaintiffs presented two exhibits and Unocal introduced another, showing internal valuations by Unocal of Forty-Niner and Mid-Cal. In the two exhibits introduced by plaintiffs, Mid-Cal was valued at $2.2 million and Forty-Niner at $3.2 million. In the exhibit introduced by Unocal, Forty-Niner was valued at $3.2 million, and an accompanying notation indicated a low probability of sale to the (former) truckstop operator at that price. Unocal's witnesses testified these valuations were "guesstimates" meant for various internal purposes, not accurate opinions of fair market value.

Dr. George Overstreet, the plaintiffs' economic expert, testified about the values National and Clipper had placed on the California truckstops. Initially, he testified about how the California values compared to the value of the whole network. (He did not include the Blythe truckstop in these calculations as that truckstop was not subject to section 20999.25(a); Unocal did not own, but only leased, those premises.) For example, Dr. Overstreet noted that while the California truckstops comprised 7.2 percent of the network's total rental income, 6.4 percent of the total diesel gallons sold by the network, and 7.5 percent of the total gallons sold by the network to trucking fleets, the same truckstops constituted over 21 percent of the network purchase price ...