Unocal Corp. v. Kaabipour, s. 97-56324
| Decision Date | 18 May 1999 |
| Docket Number | 98-56216,Nos. 97-56324,98-56631 and 98-56365,s. 97-56324 |
| Parties | 99 Cal. Daily Op. Serv. 3616 UNOCAL CORPORATION; Union Oil Company of California, Plaintiffs-counter-claimants-Appellees, v. Ebrahim KAABIPOUR, dba, Sunnyvale Unocal & dba, Santa Clara Unocal; Hassan Khaziri; Hossain Khaziri; Mohsen Khaziri; Evergreen Union Services, Inc., dba Evergreen Unocal; Fariborz Nickbakhsh-Tali, Aka, Nick; Ali Raghian, dba, Al's Unocal; Thuy Gia Nguyen; Leavesley Rd. Union 76 Inc.; Noah Tollison; Tom W. Barnum, Dba, Cuperrino Union; David J. Joines, Dba, Unocal at North First and Brokaw; Ronald Gene Diedrich; Dba, La Jolla Tire and Service Center; Mark Horne; Vu Hadoung, dba, San Mateo Unocal; Tinoosh Eftekharian, dba, Sunnyside Unocal, Defendants-counter-claimants-Appellants. v. Tosco Corporation, Counter-defendant-Appellee. Charles Simmons; Yosuf Homayun; Seung K. Choi; David Avisrur; Mehran Mike Hariri; Meir Ben-david; Fred Pakzad; A.H.B. Properties, Inc.; Manasseh Bareh; Omid Badakhsh; Dalla, Inc.; Asghar Kholdi; Steven Tedesco; Akbar Akrami; S.M.B. Corporation; Javad S. Taat; Sabour Andkhoy; Warm Springs Unocal, Inc.; Basir Andkhoy; Lawrence E. Raether; Ata Tajyar; Ali Majdi; Sagahoh, Inc.; Mansor Ghneeian; Best Care Unocal Auto Center, Inc.; Calabasas Unocal, Inc.; Sayed Hashemyar; George Benjamin; John Otte; Toros K. Deurdulian: Kevork Kasbarian, Plaintiffs-Appellants, v. Unocal Corporation; Union Oil Company of California; 76 Products Company, Inc.; Tosco Corporation, Defendants-Appellees. Unocal Corporation; Union Oil Company of California, Plaintiffs-Appellees, v. Robert Cassel, Defendant, and Mohsen Khaziri; Charles Simmons; Lawrence E. Raether; Meir Ben-david; Sabour Andkhoy; Basir Andkhoy; Omid Badakhsh; Akbar Akrami; Sayed Hashemyar; Ata Tajyar, Steven Tedesco; Manasseh Bareh; David Avisrur; Mehran Mike Hariri; Javad S. Taat; Farhad Pakzad; Ali Majdi; Asghar Kholdi; Seung K. Choi; Mansoor Ghaneeian; Yosef Homayun; S.M.B. Corporation; A.H.B. Properties, Inc.; Sagahoh, Inc.; Warm Springs Unocal, Inc.; Dalla, Inc.; Best Care Unoca |
| Court | U.S. Court of Appeals — Ninth Circuit |
James R. Carroll and Richard L. Dooley, Law Offices of Carroll, Gilbert & Bachnor, Brea, California, for the defendants-counter-claimants-appellants in No. 97-56324.
Joseph M. Alioto, Alioto Law Firm, Daniel R. Shulman, Shulman, Walcott & Shulman, Minneapolis, Minnesota, for the plaintiffs-appellants in No. 98-56216 and for the defendants-appellants in No. 98-56631.
Kenneth P. Roberts, Kenneth, Roberts, APLC, Woodland Hills, California, for the plaintiffs-appellants in No. 98-56365.
Kenneth L. Waggoner, John J. Wasilczyk and Earle Miller, Brobeck, Phleger & Harrison, Los Angeles, California, for plaintiffs-counter-defendants-appellees Unocal Corporation and Union Oil Company of California.
Gregory N. Pimstone, Latham & Watkins, Los Angeles, California, for defendants-appellees Tosco Corporation.
Appeals from the United States District Court for the Central District of California; Audrey B. Collins, District Judge, Presiding. D.C. No. CV-97-00161-ABC, D.C. No. CV-97-01759-ABC, D.C. No. CV-97-00161-ABC, D.C. No. CV-97-6388-ABC.
Before: D.W. NELSON, FERNANDEZ, and FLETCHER, Circuit Judges.
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.
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 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.
options 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.
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...
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