Abrahim & Sons Enterprises v. Equilon Enterprises, LLC

Abrahim & Sons Enterprises and 42 other independent dealers (the dealers) (plaintiffs) operated gas stations in California that they leased from Shell or Texaco (defendants). Shell and Texaco combined their retail marketing-and-refining businesses into a limited-liability company (LLC) called Equilon Enterprises, LLC (Equilon) (defendant). As part of the transaction, Shell and Texaco assigned their interests in the leases and dealer agreements to Equilon, and the dealers continued to operate their gas stations under the existing contracts. Together, Shell and Texaco owned 100 percent of Equilon. Shell and Texaco both completed filings with the Securities Exchange Commission (SEC) documenting the creation of Equilon. Shell’s filing indicated that Shell did not exercise control over Equilon, and Texaco’s stated that Shell and Texaco jointly controlled Equilon. The record also reflected that Shell deeded all its rights, title, and interest in the gas-station properties to Equilon. The dealers filed suit in state court, alleging that Shell and Texaco violated a state statute that precluded a franchisor from selling, transferring, or assigning an interest in a premises without first offering to sell the interest to its franchisee. The case was removed to federal district court, which held that the transaction was not a sale, transfer, or assignment of the stations to another person. The district court entered summary judgment in favor of Shell, Texaco, and Equilon. The dealers appealed.