In a published Ninth Circuit opinion, Horvitz & Levy LLP obtained reversal of a judgment against Chevron USA, Inc., after a jury trial in a case brought under the federal Petroleum Marketing Practices Act (PMPA).
A franchisee leased a gas station from Chevron. When the lease was expiring, Chevron decided to not renew the franchise relationship and to sell the property. Before selling to anyone else, Chevron was required by the PMPA to make a “bona fide offer” to sell the property to the franchisee. The franchisee accepted Chevron’s offer and bought the property, but did so under protest, claiming the offer was too high. It then sued, alleging Chevron violated the PMPA by not making a bona fide offer. A jury awarded the franchisee $495,000 in damages. The court awarded almost $250,000 in attorney fees under the PMPA.
Chevron retained Horvitz & Levy to appeal the judgment. The Ninth Circuit reversed in a 2-1 published opinion.
The court held it was prejudicial error for the district court to have excluded as hearsay an appraisal that valued the property higher than Chevron’s offer. The appraisal was prepared by a bank that was considering a loan to the franchisee to buy the property. When the bank did not make the loan, the franchisee’s president took all the loan documents – including the appraisal – to another lender, who did make the loan. Chevron claimed the appraisal was not hearsay, because it was an adopted statement under Federal Rule of Evidence 801(d)(2)(B). The president claimed it was not an adopted statement because he didn’t read the appraisal before giving it to the second lender. The Ninth Circuit concluded that “when a party acts in conformity with the contents of a document — e.g., by giving an independent appraisal to a lender in support of accomplishing its objective to secure a commercial loan — such an action constitutes an adoption of the statements contained therein even if the party never reviewed the document’s contents.”