Chevron U.S.A. Inc. v. M & M Petroleum Services, Inc.

As a general rule, only a franchisee may recover attorney fees under the Petroleum Marketing Practices Act. However, 15 U.S.C. § 2805 (d)(3) authorizes a district court to award attorneys’ fees to a franchisor — against a franchisee — if the franchisee is found to have brought a frivolous PMPA action. In this case, Chevron U.S.A., the franchisor, brought suit for declaratory judgment against one of its franchised dealers, M & M Petroleum Services, Inc. M & M responded with a counterclaim of its own, a counterclaim that was not only found to be frivolous, but the product of perjury and other misconduct. We hold that had M & M merely defended Chevron’s suit, it could not have been held liable for attorneys’ fees. However, in affirmatively bringing a counterclaim that was reasonably found to be frivolous, M & M opened itself up to liability for attorneys’ fees.

Factual Background

Chevron U.S.A. sells gasoline to consumers through Chevron-branded retail service stations. Some Chevron-branded retail service stations are owned and operated by Chevron and others are owned and/or operated by independent dealers that enter into franchise agreements to sell Chevron…