Newport Beach Chevron Station Owner Who Cooked the Books Must Pay Oil Giant's Attorney Fees
Trouble began for Newport Beach Chevron gas station owner Mansoor Ghaneeian when his bookkeeper told a Chevron USA auditor that the company's designated dealer of record kept a second set of accounting books.
That eventually led to a suit against Ghaneeian by Chevron, a counterclaim that a federal judge deemed "frivolous" and now an appellate ruling that finds the station owner is liable for oil giant Chevron/Texaco's attorney fees.
Ghaneeian is a fifty percent shareholder in M&M Petroleum Services, which owns the fueling station and is an independent Chevron-brand dealer. Under its original franchising agreement with Chevron, M&M paid the oil company a fixed monthly rent. However, beginning in July 2005, M&M agreed to pay Chevron the greater of either the fixed monthly rent or a percentage of its reported daily sales.
That led to a May 2007 audit by Chevron to determine if M&M was paying its fair share. During that process, M&M's bookkeeper, Afsaneh Ehsani, told Chevron's auditor that M&M maintained a second set of financial records that accurately reflected actual sales. The real books, which had not been provided to Chevron, included calculations of unreported revenue and cash payments to M&M's employees, Ghaneeian and his family.
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Needless to say, the auditor informed Chevron of the discrepancies between M&M's actual sales and the amounts M&M reported to Chevron and state and federal taxing authorities. Treating this as a breach of the dealer agreement--and grounds for termination of the agreement that could lead to Chevron taking over the franchise--Chevron sued Ghaneeian.
Chevron based its suit on the federal Petroleum Marketing Practices Act (PMCA), part of which allows for the recovery of attorney fees if a franchisee is found to have brought a frivolous PMPA action. That happened in this case when Ghaneeian filed a counterclaim citing PMCA, according to the federal trial judge and now the U.S. Ninth Circuit Court of Appeals.
The trial judge found plenty of evidence that M&M failed fully and accurately to report its sales to Chevron, created "secret" books and records as part of efforts to knowingly and intentionally misrepresent income to Chevron, failed to maintain required records, failed to provide documents required for audits, and lied about the existence of the "secret" books and records--each grounds justifying Chevron's termination of the dealer agreements.
Ghaneeian tried to argue in his counterclaim that Chevron brought the original suit as a means to take over his gas station. The trial judge did find Chevron's attempts to reacquire independently owned stations "gravely concerning," but he also ruled that Ghaneeian failed to produce evidence of this in his particular case. He simply tried to mirror Chevron's same argument under the PMCA.
Chevron then sought attorney fees and costs based on Ghaneeian having filed a frivolous lawsuit. The federal judge reversed an earlier finding and said Chevron could recover such fees once they are determined.
The appeals court, in its ruling filed Sept. 12, affirmed the district court judge's findings that Ghaneeian's counterclaim fit the definition of a frivolous lawsuit and that he's liable for Chevron's attorney fees.
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