Graham Oil Co. v. ARCO Products Co.

Graham Oil Company (Graham) (plaintiff) was a franchisee of ARCO Products Company (ARCO) (defendant) gasoline. Graham and ARCO entered into a distributor agreement providing that Graham would purchase a minimum amount of gasoline monthly during the agreement period. The agreement included an arbitration clause with provisions stating that disputes would be arbitrated, exemplary damages were prohibited as part of the arbitration award, and the parties could not recover attorney’s fees through the arbitration. The arbitration provision also required the parties to submit claims within three to six months of the dispute, with the time varying depending on the claim. ARCO notified Graham that it intended to terminate the agreement because Graham had not purchased the minimum amount of gasoline. Graham filed suit in federal district court against ARCO and petitioned that court for a preliminary injunction against ARCO, seeking to keep ARCO from terminating the agreement. Graham argued that ARCO had violated the Petroleum Marketing Practices Act (PMPA) by raising its prices so that Graham could not purchase the requisite amount of gasoline. The district court issued the injunction. However, the court also found that arbitration was Graham’s exclusive remedy and compelled the parties to arbitrate the dispute within 90 days. Graham appealed the court’s arbitration order and refused to arbitrate. At the end of the 90 days, ARCO filed for summary judgment with the district court. Graham cross-motioned to retain the injunction pending resolution of the dispute. The district court denied Graham’s cross-motion and granted summary judgment to ARCO. Graham appealed the decision to the Ninth Circuit, arguing that the arbitration agreement was invalid because it improperly waived Graham’s statutory rights under the PMPA.