Salkhi v. B.P. West Coast Products LLC

Background

Amin Salkhi, Banafsheh S. Salkhi, Ali Salkhi, Souri Salkhi, and Ajang Salkhi brought claims for quiet title and declaratory relief against B.P. West Coast Products LLC. The plaintiffs jointly owned two gas-station properties that they purchased from BP in 2009. In connection with the purchases, the parties entered into franchise agreements and other sales documents providing that the deeds would contain use restrictions or brand covenants.

The deeds restricted use of the properties, after termination of the franchise agreements, as: (1) a convenience store other than one operated under a franchise or other agreement with BP; (2) a fast-food takeout restaurant; or (3) a motor-fuel facility other than one operating under a supply or other agreement with BP. BP refused to release the restrictions.

Legal Issue and Analysis

The plaintiffs argued that the restrictions were covenants against competition and were void under California Business and Professions Code Section 16600. That statute generally provides that a contract restraining someone from engaging in a lawful profession, trade, or business is void to that extent. The court stated that the only issue presented by the cross-motions for summary judgment was whether the restrictions violated Section 16600 as a matter of law.

The court rejected the plaintiffs’ reliance on Edwards v. Arthur Andersen, LLP, explaining that the California Supreme Court limited that decision to employee noncompetition agreements. The court found no authority applying Section 16600 to land-use restrictions. It relied on Boughton v. Socony Mobil Oil Co., which held that a deed restriction on the use of land did not fall within Section 16600 because it restricted use of the property rather than personally restraining the property owners from engaging in a profession, trade, or business.

The court also rejected the plaintiffs’ argument that Edwards disapproved Boughton. It explained that Edwards disapproved Boughton only to the extent inconsistent with its analysis of employee noncompetition agreements, while leaving intact the reasoning that Section 16600 generally does not apply to restrictions imposed on real-property use. The court further cited Doo v. Packwood and other California authority recognizing that property sellers may impose use restrictions, subject to rules against monopolies or other unlawful purposes. The court concluded that the plaintiffs’ asserted violation of Section 16600 did not establish an unlawful purpose because that statute does not apply to land-use restrictions.

Rulings

The court denied plaintiffs’ motion for summary judgment and granted defendant’s cross-motion for summary judgment. The court also denied plaintiffs’ request for judicial notice of filings from another case, finding that judicial notice of party filings in another case was not appropriate. Because the court resolved the motions without relying on BP’s expert, it denied as moot plaintiffs’ motion to strike the expert’s report and exclude his testimony.

The court directed BP to file a proposed form of judgment, approved as to form by the plaintiffs, by September 23, 2019, and stated that the order terminated Docket Numbers 46, 48, and 52.