Van Der Valk v. Shell Oil Co.

MEMORANDUM *

Charanjit Deol (“Deol”), a franchisee of several Shell-branded gas stations in Southern California, appeals the District Court’s grant of summary judgment on res judicata grounds to Equilon Enterprises, LLC (“Equilon”). Because under California law, Deol’s cause of action in each of his state and federal court suits arise out of separate contracts embodying distinct primary rights, we now reverse the District Court’s judgment and remand for further proceedings.

In granting summary judgment to Equilon, the District Court erroneously applied federal res judicata law. Since Deol’s first action was filed in and dismissed by a California state court, the Full Faith and Credit Statute requires this Court to conduct its own de novo res judicata analysis according to California principles of res judicata. See Migra v. Warren City Sch. Dist. Bd. of Educ., 465 U.S. 75, 85 , 104 S.Ct. 892 , 79 L.Ed.2d 56 (1984); 28 U.S.C. § 1788 .

Under California law, res judicata may bar an action if “(1) the decision in the prior proceeding is final and on the merits; (2) the present proceeding is on the same cause of action as the prior proceeding; and (3) the parties in the present…

dissenting:

I respectfully dissent.

The “primary right” Deol seeks to vindicate is not breach of contract but the right to be free from unfair competition. It therefore does not matter to the claims, in this case, that separate substantially identical franchise agreements are involved.

Because the same “primary right” is involved, the claim dismissed by the state court and the claim he later filed in federal involve the same “cause of action” under the California “primary right” doctrine. Deol is not entitled to sue on the same theory for each of his gas stations, and let his lawsuits die until one looks like it is going well. Because the dismissal of the first suit was a decision on the merits and because the parties in both proceedings are identical, the district court was correct in dismissing Deol’s claim on the basis of res judicata. Its ruling should be upheld.