## Facts

- Graham Oil Co. operated as a branded gasoline distributor for ARCO in Coos Bay, Oregon under a Branded Distributor Gasoline Agreement effective January 1, 1991 through December 31, 1993.
- The agreement required Graham to purchase minimum monthly volumes of ARCO gasoline.
- ARCO gave notice that it intended to terminate the agreement, asserting Graham failed to meet minimum purchase requirements.
- Graham sued in federal court under the Petroleum Marketing Practices Act (PMPA), alleging ARCO’s pricing conduct prevented compliance and that termination violated the PMPA.
- The agreement contained an arbitration clause that also: (i) shortened the time to bring claims to three to six months; (ii) barred exemplary damages; and (iii) barred recovery of attorneys’ fees.
- The district court enjoined termination temporarily but held arbitration was Graham’s exclusive remedy, ordered arbitration, and later granted summary judgment for ARCO and dismissed with prejudice after Graham refused to arbitrate.

## Issues

1. Whether a petroleum franchise arbitration clause is enforceable when it requires waiver or reduction of rights and remedies granted by the PMPA, including the one-year limitations period, exemplary damages, and mandatory attorneys’ fees.
2. Whether dismissal with prejudice based on refusal to arbitrate was proper when the arbitration clause conflicted with the PMPA’s anti-waiver provision.

## Decision

- The Ninth Circuit reversed the district court’s summary judgment and dismissal.
- The court held the arbitration provision was unenforceable to the extent it required surrender of PMPA rights, including the statute’s one-year filing period, exemplary damages, and attorneys’ fees.
- Because the clause impermissibly curtailed statutory rights, Graham could not be compelled to arbitrate its PMPA claims under that provision.
- The case was remanded for further proceedings on the PMPA claims in court.

## Legal Principles

- The PMPA’s anti-waiver provision voids franchise agreement terms that require a franchisee, as a condition of entering into or renewing the relationship, to waive rights granted by the PMPA.
- Contract terms that shorten the PMPA’s one-year limitations period for bringing a civil action conflict with the statute and are unenforceable.
- Contract terms that eliminate PMPA-authorized exemplary damages or PMPA-mandated fee shifting for prevailing franchisees conflict with the statute and are unenforceable.
- The Federal Arbitration Act’s general policy favoring arbitration does not require enforcement of an arbitration clause that conflicts with an explicit congressional command in another federal statute.

## Conclusion

The Ninth Circuit held that the PMPA forbids enforcement of an arbitration clause that, in operation, strips a franchisee of statutory protections and remedies; therefore, Graham’s PMPA claims could not be dismissed for refusing to arbitrate under a rights-waiving provision and had to proceed in court on remand.


Graham Oil Co. v. ARCO Prods. Co., 43 F.3d 1244 (9th Cir. 1994)