John Atchley v. Pepperidge Farm Inc. ( 2010 )

FILED
NOT FOR PUBLICATION MAY 14 2010
MOLLY C. DWYER, CLERK
UNITED STATES COURT OF APPEALS U .S. C O U R T OF APPE ALS
FOR THE NINTH CIRCUIT
JOHN R. ATCHLEY and MICHAEL No. 09-35275
GILROY,
D.C. No. 2:04-cv-00452-FVS
Plaintiffs - Appellants,
v. MEMORANDUM *
PEPPERIDGE FARM INC., a Connecticut
corporation,
Defendant - Appellee.
Appeal from the United States District Court
for the Eastern District of Washington
Fred L. Van Sickle, District Judge, Presiding
Argued and Submitted March 8, 2010
Seattle, Washington
Before: TASHIMA, FISHER and BERZON, Circuit Judges.
John R. Atchley and Michael Gilroy (“Appellants”) appeal from a judgment
entered in a case arising from the purchase and operation of Pepperidge Farm
distributorships. We affirm in part and reverse in part and remand.
*
This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
The district court erred in granting summary judgment to Pepperidge Farm
on Appellants’ Washington Franchise Investment Protection Act (“FIPA”) claim
by finding that they had not paid a franchise fee. Payments for “the mandatory
purchase of goods or services” are fees under FIPA. Wash. Rev. Code §
19.100.010(12); see also Blanton v. Mobil Oil Corp., 721 F.2d 1207, 1220 (9th
Cir. 1983) (holding under FIPA that the required purchase of unwanted goods
could be a franchise fee). Appellants argue that Pepperidge Farm effectively
required them to purchase goods by mandating inventory levels and controlling
pallet shipments and then requiring Appellants to pay for some product that went
stale prior to sale. The district court found that “Plaintiffs were never required to
purchase a set quantity of [Pepperidge Farm] product.” However, Appellants
submitted evidence to support their claim to the contrary. There is therefore a
genuine dispute of material fact precluding summary judgment.
On the other hand, we affirm the grant of summary judgment to Pepperidge
Farm on Appellants’ Washington Business Opportunity Fraud Act (“BOFA”)
claim. We are skeptical that Washington state courts would adopt the district
court’s narrow construction of “seller” under BOFA. See Haberman v. Wash. Pub.
Power Supply Sys., 744 P.2d 1032, 1051-52 (Wash. 1987) (interpreting a similar
term of the Washington State Securities Act broadly in order to fulfill the
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“legislative purpose”). However, we need not reach this question because, as
Pepperidge Farm argues, it is not apparent that a distributorship is a business
opportunity under the Act, and Appellants have offered no counter-argument. See
Wash. Rev. Code § 19.110.020(1) (defining a business opportunity as “the sale or
lease of any product, equipment, supply, or service which is sold or leased to
enable the purchaser to start a business”).
We also affirm the dismissal of Appellants’ negligent misrepresentation
claim as barred by the consignment agreement’s non-reliance clause. The
agreement is a fully integrated contract, subject to the parol evidence rule. See
Berg v. Hudesman, 801 P.2d 222, 230 (Wash. 1990). The agreement specifically
required distributors to remove stale product from store shelves and provided that
Pepperidge Farm had no obligation to accept stale goods. The balance of factors
the Washington courts have established bars reliance on other representations
concerning the stale product policy. See Stewart v. Estate of Steiner, 93 P.3d 919,
927 (Wash. Ct. App. 2004).
Finally, the district court did not clearly err in finding that Pepperidge
Farm’s sale of Gilroy’s route was commercially reasonable. Pepperidge Farm
undertook efforts in excess of ordinary procedures for marketing a distributorship,
easily satisfying the standard for a commercially reasonable sale. See Wash. Rev.
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Code § 62A.9A-627(b)(1). “The fact that a greater amount could have been
obtained . . . at a different time or in a different method from that selected by the
secured party is not of itself sufficient to preclude the secured party from
establishing that . . . disposition . . . was made in a commercially reasonable
manner.” Id. § 515A.9A-627(a).
AFFIRMED IN PART AND REVERSED IN PART AND
REMANDED.
Parties shall bear their own costs.
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