Chevron U.S.A. Inc. v. M & M Petroleum Services, Inc., 658 F.3d 948

Chevron U.S.A. sued M & M Petroleum for declaratory relief to terminate a Chevron franchise under the PMPA; M & M counterclaimed that Chevron had violated the PMPA; district court found termination proper under PMPA and awarded Chevron attorney's fees under §2805(d)(3) for a frivolous counterclaim; district court found M & M’s counterclaim to be frivolous, involving perjury and spoliation; on appeal, court holds that a franchisor can recover fees when a franchisee files a frivolous counterclaim, and that M & M’s counterclaim was frivolous based on undisputed misconduct and underreporting; court affirms decision.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether §2805(d)(3) allows fee shifting to franchisors.	M&M: no, only frivolous complaints by franchisee.	Chevron: counterclaims are civil actions under §2805(a) and may trigger §2805(d)(3).	Yes, franchisor may recover when counterclaim is frivolous.
Whether M&M’s counterclaim was frivolous.	M&M: challenged termination; credibility issues with Chevron witnesses.	Chevron: counterclaim rests on pretext and is baseless given undisputed misconduct.	Yes, counterclaim frivolous; fee award proper.

Interstate Petroleum Corp. v. Morgan, 249 F.3d 215 (4th Cir.2001) (en banc held no fee when no PMPA counterclaim)
Merchants' Heat & Light Co. v. James B. Clow & Sons, 204 U.S. 286 (1907) (distinguishes defense from counterclaim in PMPA context)
Townsend v. Holman Consulting Corp., 929 F.2d 1358 (9th Cir.1990) (frivolous action standard defined)
Rodriguez v. United States, 542 F.3d 704 (9th Cir.2008) (frivolousness and lack of merit described)
Mustang Mktg., Inc. v. Chevron Prods. Co., 406 F.3d 600 (9th Cir.2005) (interpretation of PMPA in fee-shifting)
Rawoof v. Texor Petroleum Co., 521 F.3d 750 (7th Cir.2008) (abuse-of-discretion review for PMPA fees)
Standard Ins. Co. v. Saklad, 127 F.3d 1179 (9th Cir.1997) (jurisdiction for declaratory relief in PMPA context)