Nevada Deanza Family Limited Partnership v. Tesoro Refining & Marketing Company…

Background

Nevada DeAnza Family Limited Partnership (NDF) owned a fueling station in Sunnyvale, California. In July 2016, NDF agreed to lease part of the station to FirstElement Fuel so FirstElement could install hydrogen fuel dispensers. The site plan allegedly placed the dispensers under the station’s canopy because that was the only possible location.

NDF separately negotiated and signed a petroleum-supply and branding agreement with Tesoro Refining & Marketing Company, rebranding the station as a Mobil station. According to FirstElement’s complaint, NDF told Tesoro about the planned hydrogen dispenser, and Tesoro did not object. NDF later informed Tesoro and its successor, Marathon Petroleum Corporation, about the plans and again received no objection. In 2019, Marathon allegedly told NDF that the dispensers could not be installed under the canopy. The following year, Tesoro terminated the branding agreement and stated that construction of the hydrogen dispensers was the reason.

After the court allowed FirstElement to intervene, FirstElement asserted claims against the defendants for intentional interference with a contractual relationship, violation of California’s Unfair Competition Law, and declaratory relief. The defendants moved to dismiss the complaint-in-intervention under Federal Rule of Civil Procedure 12(b)(1), arguing that the court lacked jurisdiction because the claims presented a political question, and under Rule 12(b)(6), arguing that the complaint did not state legally sufficient claims.

Statutory interpretation

The Petroleum Marketing Practices Act (PMPA), 15 U.S.C. § 2807, prohibits certain franchise-related restrictions on installing, converting, advertising, or selling renewable fuel. The statute defines “renewable fuel” as either fuel consisting of at least 85 percent ethanol or a specified mixture containing at least 20 percent biodiesel or renewable diesel. The parties agreed that hydrogen does not meet either definition.

The court held that the statutory definition was clear and did not include hydrogen. It rejected FirstElement’s argument that later state and federal policies encouraging hydrogen use justified expanding the statutory definition. The court therefore found that hydrogen fuel is not a renewable fuel protected by PMPA § 2807.

Political-question challenge

The defendants argued that FirstElement’s claims presented a political question because deciding that hydrogen qualified as renewable fuel would effectively require the court to amend the statute. The court rejected that argument. It concluded that interpreting and applying the statutory language was a judicial task and did not require the court to make a policy decision assigned to Congress or the executive branch.

The court therefore denied the motion to dismiss on the political-question ground. It also concluded that the intentional-interference and Unfair Competition Law claims did not depend entirely on whether the PMPA protected hydrogen, because those claims principally alleged that Tesoro misrepresented its position about the dispensers.

Failure to state a claim

For intentional interference with a contractual relationship, FirstElement had to plausibly allege, among other things, that the defendants intentionally acted to cause a breach or disruption of the Site Lease. The court found that the complaint alleged a contract, the defendants’ knowledge of it, disruption, and damages, but did not adequately allege the required intent.

The court explained that the alleged misrepresentations, requests for additional dispenser details, and termination of the branding agreement did not plausibly show that Tesoro specifically intended to disrupt the Site Lease. The allegations also did not show that Tesoro knew disruption of the Site Lease was substantially certain to result. The court granted the motion to dismiss this claim and granted leave to amend.

For the Unfair Competition Law claim, the complaint sought an injunction requiring Tesoro and Marathon to accept that hydrogen was included in the PMPA’s definition of renewable fuel. The court held that this requested injunction was unavailable because hydrogen was not covered by the statute. It therefore granted the motion to dismiss the Unfair Competition Law claim and granted leave to amend because FirstElement could seek different equitable remedies.

For the declaratory-relief claim, FirstElement asked the court to declare that hydrogen was a protected renewable fuel under the PMPA and that restricting the dispensers violated that law. Because the court had determined that the PMPA did not protect hydrogen dispensers, it granted the motion to dismiss this claim. The court stated that no additional facts could cure the problem and did not grant leave to amend.

Disposition

The court granted the defendants’ motion to dismiss FirstElement’s claims for intentional interference with contractual relations and violation of California’s Unfair Competition Law, and granted leave to amend those claims. It also granted the motion to dismiss the declaratory-relief claim without granting leave to amend it. FirstElement could file an amended complaint by August 10, 2020, and could not add new claims or parties without the court’s permission.