## Facts

- Chevron owned a Chevron-branded service-station property in San Francisco that Transbay operated as a franchisee.
- Chevron offered to sell the property to Transbay for $2.375 million, an offer Transbay later challenged under the Petroleum Marketing Practices Act (PMPA) as not “bona fide” (not approximating fair market value).
- To finance the purchase, Transbay’s owner-operator, Mike Tsachres, first applied for a loan from American Pacific Bank, which obtained an appraisal by Property Sciences Group (PSG) valuing the property at $2.52 million.
- Although American Pacific declined to lend, Tsachres received the PSG appraisal and later submitted it to California Pacific Bank to support a new loan application.
- California Pacific approved financing, and Transbay purchased the property for $2.375 million.
- Transbay then sued Chevron under the PMPA, alleging Chevron’s offer exceeded fair market value.

## Issues

1. Whether the PSG appraisal’s $2.52 million valuation was admissible as a non-hearsay adoptive admission under Federal Rule of Evidence 801(d)(2)(B) based on Transbay’s conduct in using the appraisal to obtain financing.
2. Whether excluding the PSG appraisal’s valuation statement was prejudicial error requiring reversal and a new trial in the PMPA “bona fide offer” case.

## Decision

- The Ninth Circuit reversed the district court’s judgment, vacated the jury’s damages award, and remanded for a new trial.
- The court held the PSG appraisal’s valuation was admissible as Transbay’s adoptive admission under Rule 801(d)(2)(B).
- The court concluded the district court’s exclusion of the appraisal as hearsay was prejudicial because the appraisal was key valuation evidence relevant to whether Chevron’s offer approximated fair market value.

## Legal Principles

- Under Fed. R. Evid. 801(d)(2)(B), a statement is not hearsay if offered against a party and the party manifested adoption or belief in the statement’s truth.
- In the Ninth Circuit, “possession plus” governs adoption of a document: possession alone is insufficient, but a party adopts statements in a document when it acts in conformity with the document’s contents to achieve a substantial objective (such as securing a commercial loan), even if the party did not read the document.
- Forwarding a document as a mere messenger does not constitute adoption; purposeful submission to advance the party’s own objective can.
- Evidentiary error warrants a new trial when exclusion of material evidence likely affected the verdict, particularly where valuation evidence is central to liability and damages.

## Conclusion

The Ninth Circuit held that Transbay’s submission of a third-party appraisal to a lender to obtain purchase financing constituted an adoptive admission of the appraisal’s valuation under Rule 801(d)(2)(B); because the appraisal was important to the PMPA “bona fide offer” dispute, excluding it was prejudicial and required a new trial.


Transbay Auto Serv., Inc. v. Chevron U.S.A. Inc., 807 F.3d 1113 (9th Cir. 2015)