Special Fee Shifting Statute: Frivolous Counterclaim By Franchisee Defending Against Franchisor Suit Opened Up Franchisee To Fee Exposure Under Petroleum Marketing Practices Act

Defense Alone Would Not Result in Fee Exposure, but Frivolous Counterclaim Did Open Up Exposure.

     Under the Petroleum Marketing Practices Act (PMPA), a franchisee can be subjected to an attorney’s fees award in favor of a franchisor if franchisee brought a frivolous PMPA action. (15 U.S.C. § 2805(d).) However, what happens if the franchisee is defending a declaratory relief action brought by franchisor under PMPA but also files a counterclaim found to be frivolous?

     Same result, the Ninth Circuit concluded in Chevron U.S.A. Inc. v. M&M Petroleum Services, Inc., Case Nos. 09-56427/09-56686 (9th Cir. Sept. 12, 2011) (for publication). If franchisee had simply unsuccessfully defended, no fee exposure would occur. (Merchants’ Heat & Light Co. v. James B. Clow & Sons, 204 U.S. 286, 289-90 (1907).) However, the filing of the frivolous counterclaim–which is tantamount to a new suit–did sustain a district court’s award of fees to franchisor under section 2805(d).

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