A and S Engineering Services Inc v. Frydoun Sheikhpour et al
Filing
58
MINUTES (IN CHAMBERS) ORDER GRANTING Motion to Dismiss Counterclaims by Judge Philip S. Gutierrez granting 38 Motion to Dismiss: In sum, because the Court finds (1) an identity of claims in the prior, Related Case and the counterclaims asserted in the present action complaint; (2) that the Related Case was resolved by a final judgment on the merits; and (3) there is sufficient privity between parties to bind the current parties to the result of the prior litigation, it holds that Sheikhpour's counterclaims are barred by the doctrine of res judicata. Chevron's motion to dismiss Sheikhpour's counterclaims is therefore GRANTED with prejudice. (see document for further details) (bm)
O
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
Link #38
CIVIL MINUTES - GENERAL
Case No.
CV 11-2776 PSG (AGRx)
Title
A&S Engineering Services, Inc. v. Frydoun Sheikhpour et al.
Present:
The Honorable Philip S. Gutierrez, United States District Judge
Wendy K. Hernandez
Deputy Clerk
Date
Not Present
Court Reporter
Attorneys Present for Plaintiff(s):
n/a
Tape No.
Attorneys Present for Defendant(s):
Not Present
Proceedings:
Sept. 19, 2011
Not Present
(In Chambers) Order GRANTING Motion to Dismiss Counterclaims
Pending before the Court is Defendant/Counter-Claimant/Counter-Defendant Chevron
U.S.A. Inc.’s (“Chevron”) motion to dismiss Defendant/Counter-Defendant Frydoun
Sheikhpour’s (“Sheikhpour”) counterclaims. The Court finds the matter appropriate for decision
without oral argument. See Fed. R. Civ. P. 78; L.R. 7-15. After considering the moving and
opposing papers, the Court GRANTS the motion.
I.
Background
Before the Court is another motion arising from Frydoun Sheikhpour’s (“Sheikhpour”)
2003 purchase of a gas station in Manhattan Beach, California (the “Property”) from Chevron,
U.S.A., Inc. (“Chevron”).1 The present action, which involves a dispute over the prioritization
of multiple liens encumbering the Property, relates to another case previously before this Court,
Chevron U.S.A. Inc. v. Frydoun Sheikhpour, CV 07-4451 (PSG) (ARGx) (the “Related Case”).
In the Related Case, Chevron sued Sheikhpour seeking enforcement of a franchise agreement
under which Sheikhpour agreed to purchase and remodel the Property. Related Case, Dkt. # 1
(July 10, 2007). Under the parties’ Purchase and Sale Agreement (“PSA”), Chevron reserved a
right to repurchase the Property in the event Sheikhpour failed to construct certain improvements
to the Property within a specified time frame. Id. After Sheikhpour failed to complete the
required reconstruction by the deadline, and refused to resell the Property to Chevron per the
parties’ agreement, Chevron filed suit to enforce its recorded repurchase option. Id. Sheikhpour
1
The Court assumes familiarity with the underlying facts of this case, and incorporates by
reference the factual and procedural history set forth in its prior Orders in both this litigation and
the Related Case, CV 07-4451 PSG (AGRx).
CV-11-2776 PSG (AGRx) (09/11)
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
Link #38
CIVIL MINUTES - GENERAL
Case No.
CV 11-2776 PSG (AGRx)
Date
Title
Sept. 19, 2011
A&S Engineering Services, Inc. v. Frydoun Sheikhpour et al.
counterclaimed, alleging that Chevron concealed material facts from him at the time of his
purchase “which materially impacted upon the ability and timing for remodeling of the service
stations.” Related Case, Dkt. # 14 (Sept. 27, 2007); see also Dkt. # 15 (Sept. 27, 2007)
(Answer). Specifically, Sheikhpour alleged that:
CHEVRON failed to disclose material information concerning the
ability of SHEIKHPOUR to remodeling [sic] and the time period in
which such remodeling could reasonably be completed, which
information known to CHEVRON at the time the MB Property was
sold to SHEIKHPOUR and as a consequence such non-disclosure
CHEVRON is estopped from seeking termination of the PMPA
franchise.
Related Case, Dkt. # 14, ¶ 24(h).
On September 18, 2008, the parties executed a Settlement Agreement that sought to
settle all disputes between the parties and resolve the lawsuit. Sheikhpour refused to comply
with its terms, however, thereby necessitating at least four separate motions to enforce the
Settlement Agreement, all of which the Court granted. See, e.g., Related Case, Dkt. # 163 (Sept.
24, 2010) (Order denying Sheikhpour’s motion to reconsider Order enforcing Settlement
Agreement); Dkt. # 193 (Apr. 11, 2011) (Order enforcing the Settlement Agreement and holding
that Sheikhpour’s related state court action may be enjoined on grounds of res judicata under the
Anti-Injunction Act, 28 U.S.C. § 2283).
The present action was brought by Plaintiff/Counter-Defendant A&S Engineering
Services, Inc. (“A&S”) against Sheikhpour on August 12, 2010 in Los Angeles County Superior
Court. See Dkt. # 1, Ex. B. A&S’s complaint asserts claims for breach of contract, foreclosure
of mechanic’s lien, and common counts.2 Id. Chevron subsequently filed a Cross-Complaint in
this action against Sheikhpour and other lien-holders, upon discovering that Sheikhpour had
encumbered the Property with over $3,000,000 in liens while the Property was in his possession.
See Cross-Compl., Dkt. # 1, Ex. A (Feb. 18, 2011).3
2
On April 1, 2011, Cross-Defendant United States of America (improperly named as Internal
Revenue Service) removed the case to federal court under 28 U.S.C. §2410(a)(1).
3
In asserting claims for declaratory relief and quiet title, Chevron’s Cross-Complaint “seeks a
determination of how [its] $1,490,000 purchase price should be allocated among CrossDefendants; and a determination of each party’s rights and obligations with respect to the
CV-11-2776 PSG (AGRx) (09/11)
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
Link #38
CIVIL MINUTES - GENERAL
Case No.
CV 11-2776 PSG (AGRx)
Date
Title
Sept. 19, 2011
A&S Engineering Services, Inc. v. Frydoun Sheikhpour et al.
On May 3, 2011, Sheikhpour asserted counterclaims against Chevron for: (1) breach of
contract, namely, the 2003 Purchase and Sale Agreement (“PSA”); (2) fraud relating to the
August 2008 Settlement Agreement; (3) violation of Cal. Bus. & Prof. Code § 17200 for breach
of the covenant of good faith and fair dealing; and (4) violation of Cal. Health & Safety Code §
25359.7, which relates to the release of hazardous substances on nonresidential real property. 4
See Counter-Claim ¶ 1 [Dkt. # 33 (May 3, 2011)]. In essence, Sheikhpour claims he is entitled
to compensatory and statutory damages because he purchased the Manhattan Beach Property
without knowing it was “subject to substantial contamination which had never been disclosed to
Sheikhpour by Chevron.” Id., ¶ 16. He alleges that upon discovering petroleum impacted soil at
the station, id. ¶ 17, he investigated the Property and discovered: (1) petroleum impacted soil
containing 70%-90% petroleum products; (2) gasoline contamination containing MTBE and
BTEX; (3) petroleum waste; (4) tank bottom petroleum tar/wax waste mixed with aged crude
oil; and (5) a “tank farm”; and (6) the existence of petroleum impacted soil and ground water
monitoring wells. Id. ¶ 18.
Chevron now seeks to dismiss Sheikhpour’s counterclaims pursuant to Federal Rule of
Civil Procedure 12(b)(6).
II.
Analysis
In bringing this motion, Chevron argues that Sheikhpour’s counterclaims are barred
under the doctrine of res judicata and, accordingly, should be dismissed. For the following
reasons, the Court agrees.
The doctrine of res judicata “prevents litigation of all grounds for, or defenses to,
recovery that were previously available to the parties, regardless of whether they were asserted
or determined in the prior proceeding.” Brown v. Felsen, 442 U.S. 127, 131, 99 S.Ct. 2205,
2209, 60 L. Ed. 2d 767, 771 (1979). “Res judicata is applicable whenever there is (1) an identity
of claims, (2) a final judgment on the merits, and (3) privity between parties.” Tahoe- Sierra
Pres. Council, Inc. v. Tahoe Reg’l Planning Agency, 322 F.3d 1064, 1077 (9th Cir. 2003)
(citations and internal quotation marks omitted). As Sheikhpour concedes that there is privity
between the parties, the Court addresses below only the first two elements.
Property.” Cross-Compl. ¶ 1.
4
Sheikhpour’s Counter-claim erroneously refers to this statute as Cal. Bus. & Prof. Code §
25359.7.
CV-11-2776 PSG (AGRx) (09/11)
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
Link #38
CIVIL MINUTES - GENERAL
Case No.
CV 11-2776 PSG (AGRx)
Title
A&S Engineering Services, Inc. v. Frydoun Sheikhpour et al.
A.
Date
Sept. 19, 2011
Identity of Claims
Res judicata applies to claims that were “actually litigated and those that arise from the
same transaction and could have been litigated in a prior proceeding.” W. Sys., Inc. v. Ulloa, 958
F.2d 864, 868 (9th Cir. 1992) (emphasis in original). In determining whether claims are
identical, courts in this Circuit consider four criteria: (1) whether rights or interests established in
the prior judgment would be destroyed or impaired by prosecution of the second action; (2)
whether substantially the same evidence is presented in the two actions; (3) whether the two
suits involve infringement of the same right; and (4) whether the two suits arise out of the same
transactional nucleus of facts. U.S. v. Liquidators of European Federal Credit Bank, 630 F.3d
1139, 1150-51 (9th Cir. 2011). The fourth factor – whether the claims arise from “the same
transactional nucleus of facts – is the most important. Cent. Delta Water Agency v. United
States, 306 F.3d 938, 952 (9th Cir. 2002); see also Tahoe-Sierra Pres. Council, Inc., 322 F.3d at
1078. Whether two suits arise out of the “same transactional nucleus” depends upon “whether
they are related to the same set of facts and whether they could conveniently be tried together.”
Liquidators of European Fed. Credit Bank, 630 F.3d at 1151.
Here, the Court agrees with Chevron that Sheikhpour’s new counterclaims are identical
to his counterclaims in the Related Case for purposes of res judicata. Both sets of claims arise
from Chevron’s purported failure to disclose material information about the Manhattan Beach
Property. More specifically, both sets of claims are premised on the following facts: (1)
Sheikhpour entered into a PSA with Chevron in June 2003 (Countercl., ¶ 8; Related Case, Dkt. #
14, ¶ 8); (2) the PSA obligated Sheikhpour to make certain improvements to the Manhattan
Beach station (Countercl., ¶ 9; Related Case, Dkt. # 14, ¶ 14); (3) at the time the Property was
sold, Chevron concealed material facts (i.e., that the station was contaminated), which related to
his ability to remodel (Countercl., ¶¶ 16, 22; Related Case, Dkt. # 14, ¶ 24(h)); and (4) that
Sheikhpour allegedly incurred damages as a result of the concealed facts (Countercl., ¶ 25;
Related Case, Dkt. # 14, ¶ 27). Given this shared factual predicate, the Court thus concludes
that counterclaims in this case and the counterclaims in the Related Case arise from the “same
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
Link #38
CIVIL MINUTES - GENERAL
Case No.
CV 11-2776 PSG (AGRx)
Date
Title
Sept. 19, 2011
A&S Engineering Services, Inc. v. Frydoun Sheikhpour et al.
transactional nucleus of facts.”5 See Liquidators of European Fed. Credit Bank, 630 F.3d at
1151.
In opposing Chevron’s motion, Sheikhpour contends that his new counterclaims are not
identical to his previous counterclaims because, whereas he previously alleged that Chevron
concealed zoning, permit, and boundary issues, he is presently asserting that Chevron concealed
environmental contamination issues. Opp’n 8:11-9:9. This argument, however, misses the
point. Res judicata does not merely apply to questions which were actually litigated in a prior
action; it bars all grounds for recovery which could have been asserted – whether they were or
not – in a prior suit between the same parties on the same cause of action. Costantini v. Trans
World Airlines, 681 F.2d 1199, 1201 (9th Cir. 1982) (stating the “appellant’s contention that the
question involved in his present action was never actually litigated in the prior action is simply
irrelevant”). The Court therefore finds Sheikhpour’s contention that the “focus” of the two
counterclaims is different, Opp’n 7:18, immaterial and unpersuasive.
Sheikhpour’s related argument that he could not have known about the contamination
until he commenced construction on the property, see Opp’n 8:11-9:9, is also of little avail.
First, given that the terms of the 2003 PSA expressly contemplate the presence of environmental
contaminants on the property, it is clear that Sheikhpour was on notice of at least the possibility
of such issues as early as June 2003. Second, on numerous occasions during the related
litigation, Sheikhpour specifically raised the same environmental issues which now form the
basis of his new counterclaims. See, e.g., Related Case, Opp’n to Chevron’s Mot. to Enforce
Settlement, Dkt # 128 (June 7, 2010); Sheikhpour Decl. in Support of Opp’n to Mot. to Enforce
Settlement, Dkt. # 129 (June 7, 2010); Supp. Sheikhpour Decl. in Opposition to Chevron’s Mot.
5
For the same reasons set forth in Liquidators of European Federal Credit Bank, none of the
other three factors to be considered in deciding whether the claims are identical are significant to
resolution of this issue. The second factor supports a finding of res judicata, because
substantially the same “evidence” concerning environmental contamination on the Property
would be presented in the two actions. Liquidators of European Federal Credit Bank, 630 F.3d
at 1151 n.7 (citing Costantini, 681 F.2d at 1202). The third factor also cuts in favor of res
judicata, because “the two suits involve infringement of the same right.” Id. Finally, as the
Ninth Circuit stated, the “first factor, ‘whether rights or interests established in the prior
judgment would be destroyed or impaired by prosecution of the second action,’ is unhelpful here
because it begs the question. Resolution of that factor depends only on our conclusion about res
judicata.” Id. (internal citations omitted).
CV-11-2776 PSG (AGRx) (09/11)
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
Link #38
CIVIL MINUTES - GENERAL
Case No.
CV 11-2776 PSG (AGRx)
Date
Title
Sept. 19, 2011
A&S Engineering Services, Inc. v. Frydoun Sheikhpour et al.
to Enforce Settlement, Dkt. # 141 (June 23, 2010); Sheikhpour’s Motion to Reconsider Order
Enforcing Settlement Agreement, Dkt. # 150 (Aug. 3, 2010).
Accordingly, based on the foregoing, the Court concludes that Sheikhpour’s
concealment-related counterclaims in this action and in the Related Case are identical for
purposes of res judicata.
B.
Final Judgment on the Merits
Res judicata also requires a final judgment on the merits. Tahoe-Sierra Preservation
Council, Inc. v. Tahoe Regional Planning Agency, 322 F.3d 1064, 1081 (9th Cir. 2003). There
was clearly such a final judgment in this case. Indeed, this Court has already expressly held that
dismissal of the Related Case pursuant to the parties’ settlement constitutes a final judgment on
the merits for purposes of res judicata. Related Case, Dkt. # 193 (Apr. 11, 2011). In so holding,
the Court reasoned that because its prior dismissal order was not entered at plaintiff’s request, or
as otherwise provided under Rule 41(b), it therefore was a final judgment on the merits. Id. at 89 (citing Int’l Union of Operating Eng’rs-Employers Const. Industry Pension, Welfare and
Training Trust Funds v. Karr, 994 F.2d 1426, 1429 (9th Cir. 1993) (holding that dismissal of
action pursuant to settlement agreement was a “final judgment on the merits preventing
reassertion of same claim in subsequent action.”)). Although, Sheikhpour now contends there
has been no final judgment on the merits pertaining to the environmental contamination issues
he raises in his new counterclaims, his argument is unsupported by law or fact. It is also
inconsistent with his own concession that the Court’s Order enforcing the Settlement Agreement
in the Related Case was a “final order” for purposes of his pending Ninth Circuit appeal. See
Chevron’s Request for Judicial Notice, Ex. 1 at 9. The Court therefore finds the second element
of the res judicata analysis readily satisfied.
III.
Conclusion
In sum, because the Court finds (1) an identity of claims in the prior, Related Case and
the counterclaims asserted in the present action complaint; (2) that the Related Case was
resolved by a final judgment on the merits; and (3) there is sufficient privity between parties to
bind the current parties to the result of the prior litigation, it holds that Sheikhpour’s
counterclaims are barred by the doctrine of res judicata. Chevron’s motion to dismiss
Sheikhpour’s counterclaims is therefore GRANTED with prejudice.
CV-11-2776 PSG (AGRx) (09/11)
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O
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
Link #38
CIVIL MINUTES - GENERAL
Case No.
CV 11-2776 PSG (AGRx)
Date
Title
Sept. 19, 2011
A&S Engineering Services, Inc. v. Frydoun Sheikhpour et al.
IT IS SO ORDERED.
CV-11-2776 PSG (AGRx) (09/11)
CIVIL MINUTES - GENERAL
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