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6-07.VYLENE [impl. covenant to negotiate franchise renewal].doc

United States Court of Appeals,

Ninth Circuit.

In re VYLENE ENTERPRISES, INC., Debtor.

VYLENE ENTERPRISES, INC., Plaintiff-Appellant,

v.

NAUGLES, INC., Defendant-Appellee.

No. 94-56470.

Argued and Submitted March 8, 1996.

Submission Vacated April 3, 1996.

Resubmitted May 1, 1996.

Decided July 29, 1996.

As Amended on Denial of Rehearing and

Rehearing En Banc Sept. 12, 1996. [FN*]

FN* Judges Pregerson, T.G. Nelson and Ezra have voted to deny appellee's petition for rehearing.   Judges Pregerson and T.G. Nelson vote to reject the suggestion for rehearing en banc and Judge Ezra so recommends.

Chapter 7 debtor-restaurant franchisee brought adversary proceeding against franchisor, alleging that franchisor refused to negotiate extension of franchise agreement in good faith.   Following further proceeding, the Bankruptcy Court awarded damages to debtor, and appeal was taken.   The United States District Court for the Central District of California, Stephen V. Wilson, J., declined to adopt bankruptcy court's proposed findings of fact and conclusions of law.   Debtor appealed.   The Court of Appeals, T.G. Nelson, Circuit Judge, held that: (1) proceeding was core proceeding; (2) franchisor breached its contract with debtor by failing to negotiate in good faith for extension or renewal of franchise agreement; and (3) franchisor's building of competing restaurant near debtor's restaurant was breach of covenant of good faith and fair dealing.

Vacated and remanded with instructions.

Seg. 6, item 7 (2007)

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