Samica Enterprises LLC v. Mail Boxes Etc., Inc. , 460 F. App'x 664 ( 2011 )

FILED
NOT FOR PUBLICATION DEC 01 2011
MOLLY C. DWYER, CLERK
UNITED STATES COURT OF APPEALS U .S. C O U R T OF APPE ALS
FOR THE NINTH CIRCUIT
SAMICA ENTERPRISES LLC, an Illinois No. 10-55433
Limited Liability Company; et al.,
D.C. No. 2:06-cv-02800-ODW-CT
Plaintiffs - Appellants,
v. MEMORANDUM *
MAIL BOXES ETC., INC., a Delaware
corporation; et al.,
Defendants - Appellees.
Appeal from the United States District Court
for the Central District of California
Otis D. Wright, District Judge, Presiding
Argued and Submitted November 9, 2011
Pasadena, California
Before: SCHROEDER, REINHARDT, and MURGUIA, Circuit Judges.
Appellants, approximately 200 franchisees of “The UPS Store” franchise,
sued franchisor Mail Boxes Etc., Inc. (“MBE”), United Parcel Service (“UPS”),
and other UPS subsidiaries (collectively “Appellees”), alleging various state law
*
This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
claims. The district court granted summary judgment in favor of Appellees on all
of them. Appellants timely appealed. We affirm.
Appellants brought claims under the California Franchise Investment Law
(“CFIL”) and common law fraud and misrepresentation, alleging that MBE and
UPS made untrue statements of material fact and omitted material facts from
various communications made in connection with the offer and sale of the
franchises and in connection with the conversion from the old franchise model to
the new “The UPS Store” franchise model. Reasonable reliance is required under
Cal. Corp. Code § 31300, the CFIL section imposing liability for
misrepresentations made in franchise documents, as it requires that the damages to
the franchisee be “caused []by” the misrepresentations. See Mirkin v. Wasserman,
5 Cal. 4th 1082, 1092 (Cal. 1993); Younan v. Equifax Inc., 169 Cal. Rptr. 478, 487
(Cal. Ct. App. 1980). Reasonable reliance is also required under Cal. Corp. Code
§ 31301, the CFIL section imposing liability for misrepresentations and omissions
made in other communications related to the offer or sale of a franchise, as that
section requires that the franchisee, “not knowing or having cause to believe that
such statement was false or misleading,” have “rel[ied] upon such statement.” In a
well-reasoned, but unpublished, district court opinion, Judge Margaret Morrow
summarized the rule: CFIL “incorporate[s] the reasonable reliance requirement of
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the common law.” California Bagel Co. v. American Bagel Co., 2000 WL
35798199, *1, *18-*21 (C.D. Cal. 2000) (unpublished). Finally, it is well
established that reasonable reliance is an element of common law fraud and
misrepresentation claims. See City of Industry v. City of Fillmore, 129 Cal. Rptr.
3d 433, 450 (Cal. Ct. App. 2011); Wells Fargo Bank, N.A. v. FSI, Fin. Solutions,
Inc., 127 Cal. Rptr. 3d 589, 600 (Cal. Ct. App. 2011). Because Appellants have
presented no evidence showing that they reasonably relied on any alleged untrue or
misleading statement, Appellants’ CFIL and common law claims fail.1
Appellants brought an additional CFIL claim under Cal. Corp. Code § 31125for failure to register the amendment to the franchise agreement in connection with
the California franchisees’ conversion from the old franchise model to the new
“The UPS Store” franchise model. Appellees argued before the district court that
the registration claim was barred by the one-year statute of limitations pursuant to
Cal. Corp. Code § 31303. Appellants failed to address the statute of limitations bar
before the district court and, specifically, failed to oppose Appellees’ motion for
summary judgment that was based on the one-year provision. Moreover,
Appellants did not address this argument in their opening brief before this court.
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Because we find that Appellants’ common law fraud and misrepresentation
claims fail for lack of a showing of reasonable reliance, we need not decide
whether the CFIL preempts these claims.
3
Arguments not raised in opposition to summary judgment or in the opening brief
before this court are waived. See One Indus., LLC v. Jim O’Neal Distrib., Inc., 578
F.3d 1154, 1158 (9th Cir. 2009) (“A party normally may not press an argument on
appeal that it failed to raise in the district court.”); Dream Games of Arizona, Inc.
v. PC Onsite, 561 F.3d 983, 994-95 (9th Cir. 2009) (“We will not ordinarily
consider matters on appeal that are not specifically and distinctly argued in
appellant’s opening brief.”) (internal quotation marks and citation omitted).
Appellants therefore have waived any argument that their failure to register claim
is not barred by the statute of limitations.
Appellants alleged that MBE breached its duty of “best efforts” under the
franchise agreement to obtain incentives for franchisees. The undisputed facts
establish that MBE engaged in several efforts to obtain improvements to incentives
to franchisees but did so by means of oral persuasion. Appellants’ contention that
attempting to obtain these same improvements by means of written requests was
necessary to meet the best efforts requirement is without authority or merit.
Therefore, summary judgment on this claim was proper.
Appellants alleged that UPS breached the implied covenant of good faith
and fair dealing in failing to increase the prices set under the carrier agreement
with the franchisees. The district court found that the implied covenant claim was
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preempted by the Federal Aviation Administration Authorization Act of 1994,
which prohibits states from enacting or enforcing “a law, regulation, or other
provision having the force and effect of law related to a price, route, or service of”
carriers such as UPS. 49 U.S.C. § 14501(c)(1). Even if this claim was not
preempted, however, it fails under state law. The implied covenant of good faith
and fair dealing cannot be used to impose an affirmative duty to forbear enforcing
the terms of the contract or to limit the ability of a party to do what is expressly
authorized in the contract. See Storek & Storek, Inc. v. Citicorp Real Estate, Inc.,
122 Cal. Rptr. 2d 267, 277 (Cal. Ct. App. 2002). That is what Appellants wished
to do here – to impose on UPS a duty to offer better prices and incentives than
those dictated by the agreement. Therefore, even if not preempted, summary
judgment on the duty of good faith and fair dealing claim was proper.
Appellants brought claims under the California Unfair Competition Law
(“UCL”), alleging that MBE and UPS engaged in fraudulent, unfair and unlawful
business practices. “Appellants’ claims under [the UCL] are governed by the
‘reasonable consumer’ test. . . . Under the reasonable consumer standard,
Appellants must show that members of the public are likely to be deceived.”
Williams v. Gerber Prods. Co., 552 F.3d 934, 938 (9th Cir. 2008) (internal
quotation marks omitted). Here, Appellants presented no evidence that a
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reasonable consumer would be deceived by the alleged fraudulent, unfair and
unlawful business practices of MBE and UPS. Summary judgment on Appellants’
UCL claims was therefore proper.
Appellants argue that the district court erred in failing to apply other states’
“unwaivable” statutes, and in failing to apply Illinois law for franchisees with
Illinois choice-of-law provisions in their franchise agreements. In addition,
Appellants argue that the California choice-of-law provision, found in the majority
of the franchise agreements, does not apply to pre-contract wrongs and that
therefore the other states’ statutes applied. As to the first argument, the district
court found that Appellants’ claims would fail even if the other states’ statutes
applied. Appellants have failed to show why this conclusion was erroneous. As to
the second argument, the franchise agreements with California choice-of-law
provisions provided that the agreements would be “governed and construed under
and in accordance with” California law, which covers all contract claims, including
pre-contract wrongs. See Nedlloyd Lines B.V. v. Superior Court, 834 P.2d 1148,
1151-54 (Cal. 1992) (holding that the phrase “governed by” in a choice of law
clause compels the “logical conclusion” that the parties “intended that law to apply
to all disputes arising out of the transaction or relationship”). Therefore, the
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district court did not err in applying the law of California to all of franchisees’
claims.
The district court did not abuse its discretion in refusing to unseal the record.
The district court found good cause to seal the record on Appellants’ initial motion.
Appellants then failed to provide adequate justification for unsealing the record,
and failed to follow Central District of California Local Rule 79-5:3 regarding
motions to unseal. The refusal to grant the motion to unseal the record was not an
abuse of discretion.
The district court considered all of Appellants’ arguments in opposition to
Appellees’ motion for summary judgment at the time of the first and second order,
and was not required to restate its findings in rejecting Appellants’ request for
reconsideration of prior rulings.
The district court’s grant of summary judgment in favor of Appellees on all
claims is therefore AFFIRMED.
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