Little Oil Co., Inc. v. Atlantic Richfield Co.

• Citation: 852 F.2d 441
• Decision Date: 19 July 1988
• Docket Number: 87-6166 and 87-6456,Nos. 87-6114,s. 87-6114
• Parties: 26 Fed. R. Evid. Serv. 12 LITTLE OIL COMPANY, INC., a Calif. corp.; Haber Oil Products, Inc., a Calif. corporation, d/b/a Ed Haber & Sons Petroleum, Plaintiffs-Counter-Defendants- Appellants/Cross-Appellees, v. ATLANTIC RICHFIELD COMPANY, a Penn. corp., Defendant-Counter-Claimant-Appellee/Cross-Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)

Page 441

852 F.2d 441

26 Fed. R. Evid. Serv. 12

LITTLE OIL COMPANY, INC., a Calif. corp.; Haber Oil

Products, Inc., a Calif. corporation, d/b/a Ed

Haber & Sons Petroleum, Plaintiffs-Counter-Defendants- Appellants/Cross-Appellees, v. ATLANTIC RICHFIELD COMPANY, a Penn. corp.,

Defendant-Counter-Claimant-Appellee/Cross-Appellant.

Nos. 87-6114, 87-6166 and 87-6456.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted May 4, 1988.

Decided July 19, 1988.

David Laufer, Lloyd K. Chapman, David Gurnick, Kindel & Anderson, Woodland Hills, Cal., for plaintiffs-counter-defendants-appellants/cross-appellees.

Donald G. Smaltz, Robert B. Miller, Robert L. Hess, and Leighton M. Anderson, Miller, Lewis & Bockius and Paul J. Richmond, Atlantic Richfield Co., Los Angeles, Cal., for defendant-counter-claimant-appellee/cross-appellant.

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

Before GOODWIN, Chief Judge, and FLETCHER and FARRIS, Circuit Judges.

FARRIS, Circuit Judge:

Little Oil Company, Inc. and Haber Oil Products were both franchise gasoline distributors for the Atlantic Richfield Company. In 1981 Little and Haber accepted new multi-year franchise agreements with ARCO. From 1973 through January 1981, federal regulations controlled gasoline price and allocation, preventing ARCO and other oil companies from making certain changes in their business and marketing practices, or restructuring the prices they charged to their various classes of customers. In January 1981, most of the regulations relating to the marketing of motor gasoline ended. Gasoline demand peaked in 1978, and by 1981 was steadily declining.

Beginning in 1981 ARCO instituted a number of marketing changes. ARCO: (1) eliminated its credit card program; (2) terminated hauling allowances ¹; (3) significantly reduced class of trade price differentials ² ; (4) refused to sell gasoline above the maximum quantities set forth in the franchise agreements; (5) eliminated Little's and Haber's line of credit; and (6) changed 10th and 30th prox payment terms ³ to receipt-of-invoice payment terms.

At trial Little and Haber argued that these marketing changes were prohibited by the terms of their franchise agreements and constituted "constructive termination" in violation of the Petroleum Marketing Practices Act, 15 U.S.C. Secs. 2801 et seq. ARCO counterclaimed seeking declaratory relief that the marketing changes were permitted by the terms of the agreement, and did not constitute a termination of the franchise. Little's and Haber's claims were tried to the jury which found in favor of ARCO. ARCO's counterclaims were tried to the judge who also ruled for ARCO.

Little and Haber appeal. On cross-appeal, ARCO argues that the district court erred in failing to apply defensive collateral estoppel and in denying its motion to retax costs of preparing visual aids for trial. We affirm.

I.

Little and Haber assign error to (1) the court's instructions to the jury regarding the Petroleum Marketing Practices Act, 15 U.S.C. Secs. 2801 et seq., and (2) the denial of its motion for a new trial.

In reviewing jury instructions to which timely objections have been made, we determine,

whether, viewing the jury instructions as a whole, the trial judge gave adequate instructions on each element of the case to ensure that the jury fully understood the issues. A court is not required to use the exact words proposed by a party, incorporate every proposition of law suggested by counsel or amplify an instruction if the instruction as given allowed the jury to determine intelligently the issues presented.

Los Angeles Memorial Coliseum Comm'n. v. National Football League, 726 F.2d 1381, 1398 (9th Cir.1984), cert. denied, 469 U.S. 990, 105 S.Ct. 397, 83 L.Ed.2d 331 (1984) (citations omitted).

The Petroleum Marketing Practices Act, 15 U.S.C. Sec. 2801 et seq., prohibits the termination of a franchise except for reasons specifically enumerated in Sec. 2802(b)(2) and upon proper notice. Khorenian v. Union Oil Co. of California, 761 F.2d 533, 535 (9th Cir.1985). The burden of proving termination is upon the franchisee. 15 U.S.C. Sec. 2805(c). The franchisor then "bear[s] the burden of going forward with evidence to establish as an affirmative defense that such termination ... was permitted." Id.

Little's and Haber's theory of the case was that the change in ARCO's marketing strategy constituted a "constructive" termination of their franchises. The district court specifically incorporated this theory. Nevertheless, Little and Haber challenge instructions which state (1) that "[a] franchisor ... may initiate changes in its marketing activities to respond to changing market conditions or consumer preferences," and (2) that "[e]ach plaintiff has the burden of proving by a preponderance of the evidence that such changes, in marketing practices, were unduly burdensome and overbearing." They argue that the instructions impermissibly create a nonstatutory affirmative defense and erroneously shift the burden of proof regarding affirmative defenses to the plaintiff.

We have not yet decided what constitutes a "constructive" termination under the Petroleum Marketing Practices Act, or even whether a termination under the Act may occur "constructively." The Fourth Circuit found a "constructive" termination where a franchise was assigned invalidly under state law, and the assignment resulted in higher gasoline prices to the franchisee. Barnes v. Gulf Oil Corp., 795 F.2d 358 (4th Cir.1986). ⁴ Barnes is distinguishable because of the assignment, which terminated the relationship between the original franchisor and the franchisee. ⁵ Despite the paucity of authority to support Little's and Haber's theory of the case, the district court adopted it and instructed the jury regarding "constructive" termination under the Act.

The district court's instructions that Little and Haber demonstrate that ARCO's marketing changes were "unduly burdensome and overbearing" makes obvious sense. If the changes were not "unduly burdensome and overbearing," no "constructive" termination could have occurred. Instructing the jury that ARCO may initiate changes in its marketing strategy in response to market conditions or consumer preferences is also appropriate. The legislative history of the Act recognizes the "importance of providing adequate flexibility so that franchisors may initiate changes in their marketing activities to respond to changing market conditions and consumer preferences." S Rep. No. 731, 95th Cong., 2d Sess., reprinted in 1978 U.S.Code Cong. & Admin.News 873, 877; see Valentine v. Mobil Oil Corp., 789 F.2d 1388, 1390 (9th Cir.1986) (act permits franchisors significant latitude in responding to changing market conditions). By including this instruction, the trial court ensured that ARCO would not be penalized for legitimate business practices which are not targeted by the Act.

We need not decide whether the Petroleum Marketing Practices Act applies to "constructive" terminations. If it does, the district court did not err in its instructions. The two challenged instructions neither create an affirmative defense nor incorrectly shift the burden of proof. Rather, they define the contours of Little's and Haber's initial burden under 15 U.S.C. Sec. 2805(c) of proving that a "constructive" termination has occurred. If, however, the Act does not apply to "constructive" terminations of this sort, the jury's verdict in favor of ARCO renders the error harmless.

II.

The trial court dismissed Little's and Haber's claims based on alleged violations of California Business & Professions Code Sec. 17200 et seq. and Sec. 17500 et seq. which create private rights of action for unfair business practices and false advertising. It held that no private right of action for damages exists under those statutes and that the claims for injunctive relief were moot.

In arguing an exception which permits business competitors to seek damages, Little and Haber rely primarily on the following language in Committee on Children's Television, Inc. v. General Foods, 35 Cal.3d 197, 197 Cal.Rptr. 783, 673 P.2d 660 (1983): "We do not, however, decide whether a plaintiff other than a business competitor can recover damages on a cause of action based on the unfair competition or false advertising law." 197 Cal.Rptr. at 794, 673 P.2d at 671. They rely too heavily on too little. In Chern v. Bank of America, 15 Cal.3d 866, 127 Cal.Rptr. 110, 544 P.2d 1310 (1976), the California Supreme Court held that Sec. 17535 "do[es] not authorize recovery of damages by private individuals. Private relief is limited to the filing of actions for an injunction; ... and civil penalties are recoverable only by specified public officers...." 127 Cal.Rptr. at 115, 544 P.2d at 1315 (citations omitted). The Chern holding is equally applicable to Sec. 17200. Meta-Film Associates, Inc. v. MCA, Inc., 586 F.Supp. 1346, 1363 (C.D.Cal.1984). In light of the clear holding in Chern that damages are not available to private individuals, we reject Little's and Haber's interpretation of California law which is based on ambiguous language and dicta at best. See also Kates v. Crocker National Bank, 776 F.2d 1396, 1398 (9th Cir.1985) (citing Chern, 127 Cal.Rptr. at 115, 544 P.2d at 1315, for the proposition that California law does not recognize the recovery of damages by individuals for unfair business practices); Meta-Film Associates, 586 F.Supp. at 1363 (concluding that Chern, 127 Cal.Rptr. at 115, 544 P.2d at 1315, limits private individuals to injunctive relief).

III.

On the grounds that his answers would involve ultimate facts and would not be helpful to the jury, the trial court precluded answers of Robert Taylor, Little's and Haber's expert witness, to three questions: (1) whether ARCO's marketing changes constituted a termination, (2) whether the imposition of a volume restriction on one class of trade is burdensome...