Phillips 66 Co. v. Cal. Pride, Inc.

• Decision Date: 05 July 2017
• Docket Number: Case No. 1:16-cv-01102-LJO-SKO
• Court: U.S. District Court — Eastern District of California
• Parties: PHILLIPS 66 CO., Plaintiff, v. CALIFORNIA PRIDE, INC., et al., Defendants.

PHILLIPS 66 CO., Plaintiff, v. CALIFORNIA PRIDE, INC., et al., Defendants.

Case No. 1:16-cv-01102-LJO-SKO

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF CALIFORNIA

July 5, 2017

FINDINGS AND RECOMMENDATIONS THAT THE COURT GRANT IN PART PLAINTIFF'S MOTION FOR DEFAULT JUDGMENT AS TO DEFENDANT CALIFORNIA PRIDE, INC.

OBJECTION PERIOD: 21 DAYS

(Doc. 15)

Before the Court is Plaintiff's Motion for Default Judgment. (Doc. 15.) For the reasons provided herein, the undersigned recommends that the presiding district court judge GRANT IN PART Plaintiff's Motion for Default Judgment, (id.), to the extent that Plaintiff request that the Court enter default judgment against Defendant California Pride, Inc.

I. BACKGROUND

This action involves a contractual dispute between the provider of certain goods and services, Plaintiff, and the owners and/or operators of a gas station, Defendants. Plaintiff "is a Delaware corporation with its principal place of business in Houston, . . . Texas." (Doc. 1 ¶ 2.) "Defendant California Pride, Inc. . . . is an inactive California corporation . . . ." (Id. ¶ 3.) Defendants Steven Coldren and Rebecca Coldren (together, the "Individual Defendants") are individuals who reside in Kingsburg, California. (Id. ¶¶ 4-5.)

A. Background Facts and the Parties' Agreements

Defendant California Pride, Inc. "operated a gas station in Fresno, California and purchased motor fuels and related products from ConocoPhillips Company" ("ConocoPhillips"). (Id. ¶ 8.) On September 22, 2005, the Individual Defendants "executed a personal guaranty under which each absolutely and unconditionally guaranteed the prompt payment of any and all present and future indebtedness of [Defendant California Pride, Inc.] to ConocoPhillips" (the "Guaranty"). (Id. ¶ 15; see id. at 80-82 (the Guaranty).)

"On December 4, 2006, Defendant California Pride, Inc. . . . entered into a 15-year [b]randed [r]eseller [a]greement with ConocoPhillips Company" (the "Reseller Agreement"). (Doc. 15, Ex. 3 ¶ 2; see Doc. 1 at 12-59 (the Reseller Agreement).) Under this Reseller Agreement, Defendant California Pride, Inc. "agreed to promote and sell . . . branded motor fuel at its station, including purchasing minimum amounts of . . . branded motor fuel for resale, participating in ConocoPhillips's marketing programs, and complying with ConocoPhillips's guidelines on operation and image standards." (Doc. 1 ¶ 9.)

"Pursuant to [the Reseller Agreement], ConocoPhillips advanced $250,000 to [Defendant California Pride, Inc.] for improvements to the [gas] station." (Id. ¶ 10.) "On or about December 11, 2006, [Defendant California Pride, Inc.] executed a [p]romissory [n]ote in favor of ConocoPhillips," (Doc. 13, Ex. 3 ¶ 2), "to secure the loan" of $250,000, (Doc. 1 ¶ 10).

Subsequently, Defendant California Pride, Inc. "requested" that ConocoPhillips "reduce" its quotas under the Reseller Agreement for "annual minimum amount of fuel purchase." (Id. ¶ 11.) ConocoPhillips and Defendant California Pride, Inc. then executed an addendum to the Reseller Agreement "on or about January 22, 2010," as well as an amended promissory note. (Id. ¶¶ 11-12.)

In May 2012, "ConocoPhillips spun off its downstream assets into newly formed [Plaintiff]." (Id. ¶ 16.) "On or about May 1, 2012, ConocoPhillips assigned all rights" to the Reseller Agreement, the related promissory notes, and the Guaranty to Plaintiff, "including all rights to collect the indebtedness due to ConocoPhillips under" these agreements. (Doc. 15, Ex. 3 ¶ 4.)

In roughly 2013, Defendant California Pride, Inc. "again requested" that Plaintiff "reduce its annual minimum fuel purchase requirement." (Doc. 1 ¶ 13.) Defendant California Pride, Inc. and Plaintiff entered into another addendum to the Reseller Agreement with an effective date of July 1, 2013. (Id. ¶ 13.) Additionally, Defendant California Pride, Inc. executed another amended promissory note with an effective date of July 1, 2013 (the "Amended Note"). (Id. ¶ 14; see id. at 74-77.) At the time of the execution of the Amended Note, the balance of Defendant California Pride, Inc.'s debt to Plaintiff was $195,501. (Id. at 74.)

Under the Amended Note, Defendant California Pride, Inc. agreed to "make quarterly principal and interest payments" to Plaintiff "in the amount of $6,240.00." (Id. at 75.) The Amended Note provides an interest rate on the principal of the loan—which is defined in the Amended Note as the "Note Rate"—of "10.00% per annum." (Id.) The Amended Note also states that, "in the event of a default under the [Amended] Note, . . . the principal shall bear interest at a default rate of two percent . . . higher than the Note Rate"—which the Amended Note defines as the "Default Rate." (Id.) The Amended Note further states that Plaintiff "may declare the unpaid principal balance of the [Amended] Note immediately due and payable" in the event of a default on the Amended Note by Defendant California Pride, Inc. (Id.)

On the issue of attorneys' fees, the Amended Note states the following: "[Defendant California Pride, Inc.] agrees to reimburse [Plaintiff] on demand for all legal fees and other costs and expenses incurred in collection or enforcing this [Amended] Note and protecting or realizing on any collateral, together with interest at the Default Rate." (Id. at 76) As to choice of law, the Amended Note states that "the rights and obligations of the parties hereunder shall be governed by and construed in accordance with the internal laws of the State of California without regard to principles of conflicts of law." (Id.)

In 2015, Defendant California Pride, Inc. "fail[ed] to purchase the minimum amounts of . . . branded motor fuel and . . . fail[ed] to timely pay for fuel purchase," as required by the Reseller Agreement and its addenda. (Id. ¶ 17.) Defendant California Pride, Inc. also "fail[ed] to timely make the quarterly payments due" under the Amended Note. (Id. ¶ 26.)

The parties subsequently entered into a Mutual Termination and General Release Agreement with an effective date of September 1, 2015 (the "Termination Agreement"). (Id. at 84-86.) In this Termination Agreement, Defendant California Pride, Inc. and Plaintiff state that they "agree to mutually cancel and terminate" the Reseller Agreement, as well as "any and all amendments, exhibits, attachments and assignments thereof." (Id. at 84.) The Termination Agreement further states that, pursuant to the January 22, 2010 addendum to the Reseller Agreement, "an early termination of the [Reseller Agreement] should result in payment of the . . . [l]oan balance owed by [Defendant California Pride, Inc.] to [Plaintiff] in the amount of . . . $187,548.60." (Id. at 85.) "[A]s consideration for" the Termination Agreement, Plaintiff agreed to "$100,000 in consideration of a full release of the . . . [l]oan [b]alance." (Id.) The Termination Agreement further states that Plaintiff "accepts such payoff provided that no later than November 30, 2015, [Defendant California Pride, Inc.] has sold the [gas station] to a company or individual that is approved by [Plaintiff] and agrees to rebrand the [gas station] with [Plaintiff] and sell [Plaintiff's] motor fuels." (Id.; cf. Doc. 15, Ex. 3 ¶ 5 (providing the declaration of Chad Cunningham, Plaintiff's "Director, US Marketing, Lubes & Specialty Products," in which Mr. Cunningham states that "the amount due under the Amended Note was due and payable" on November 17, 2015).)

Defendant California Pride, Inc. "failed to pay [Plaintiff] $100,000 and failed to timely sell its gas station." (Id. ¶ 18.) As such, Plaintiff asserts that Defendant California Pride, Inc. failed to satisfy the terms of the release provided in the Termination Agreement. (Id.) As of November 7, 2015, the "principal and regular accrued interest under the Amended Note" was "$187,469.39." (Id. ¶ 22.)

B. Procedural Posture

Plaintiff filed its Complaint for Breach of Contract (the "Complaint") in this Court on July 29, 2016. (Doc. 1.) The Complaint includes a single claim for breach of contract against all Defendants. (See id. ¶¶ 24-34.) In particular, the Complaint alleges that Defendant California Pride, Inc. breached the Amended Note, while the Individual Defendants breached the Guaranty. (See id.) The Complaint includes the following requests for relief: (1) "actual damages of$187,469.39," (2) "costs of court," (3) "reasonable and necessary attorneys' fees," (4) prejudgment interest allowed by law," and (5) "post judgment interest at the highest legal rate from the date of judgment until the judgment is satisfied." (Id. at 6-7.)

Plaintiff effectuated service of the Complaint on all Defendants on October 8, 2016. (See Docs. 6-8.) To date, no Defendant has filed a response to the Complaint.

Plaintiff filed a Request for Entry of Default against all Defendants on November 15, 2016. (Doc. 9.) The Clerk then entered default against all Defendants on November 18, 2016. (Doc. 13.)

On January 25, 2017, Plaintiff filed its Motion for Default Judgment, in which it requests default judgment against all Defendants. (Doc. 15.) To date, no Defendant has filed a response to this motion. In an order entered on February 21, 2017, the undersigned found that Plaintiff's Motion for Default Judgment was "suitable for decision without oral argument" and vacated the hearing regarding this motion. (Doc. 16.)

On April 4, 2017, the Individual Defendants filed a Notice of Automatic Stay Pursuant to 11 U.S.C. § 362 (the "Bankruptcy Notice"), in which the Individual Defendants state that they "filed a petition for relief under provisions of Chapter 7 of Title 11, U.S.C., . . . Case Number 17-11261, in the Eastern District of California." (Doc. 18.) In an order entered on April 10, 2017, the undersigned noted that the bankruptcy stay applied only to the Individual Defendants and not Defendant California Pride, Inc. (Doc. 19 at 1.) The undersigned then directed Plaintiff to "file a brief addressing whether the Court should rule on...