Bankr. L. Rep. P 71,566 in Re Fred Herbert, Debtor. Atlantic Richfield Company v. Fred Herbert

Debtor, Fred Herbert (“Herbert”) appeals the order of the district court prohibiting him from assigning a petroleum franchise agreement with Atlantic Richfield Company (“ARCO”). The appeal centers around the extent to which, in a bankruptcy proceeding, the Petroleum Marketing Practices Act (PMPA), 15 U.S.C. §§ 2801-2806 (1982), preempts otherwise applicable state law. In deciding this question, we necessarily resolve: (1) whether Herbert could assume and assign the petroleum franchise, (2) when the franchise was terminated, and (3) whether Herbert had a right to cure his monetary defaults to ARCO. Because we find the PMPA preempts otherwise applicable state law, we affirm the district court.

I. BACKGROUND

In December, 1983, Herbert and ARCO entered into a service station lease and a lessee-dealer gasoline agreement (collectively, the “franchise”) in which Herbert agreed to operate an ARCO service station in Santa Barbara, California. Later, Herbert experienced financial difficulty and sought to sell the franchise. On January 15, 1985, Herbert opened an escrow to assign the franchise to Mohammed H. Hussein, a nonimmigrant alien holding an H-2 visa. Closing of the escrow was…