Osborn v. Sinclair Refining Company

• Decision Date: 03 July 1962
• Docket Number: Civ. No. 9769.
• Citation: 207 F. Supp. 856
• Parties: S. Kriete OSBORN v. SINCLAIR REFINING COMPANY.
• Court: U.S. District Court — District of Maryland

207 F. Supp. 856

S. Kriete OSBORN v. SINCLAIR REFINING COMPANY.

Civ. No. 9769.

United States District Court D. Maryland.

July 3, 1962.

John S. McDaniel, Jr., Calhoun Bond and Cable & McDaniel, Baltimore, Md., for plaintiff.

Milton Handler, Stanley D. Robinson, Kaye, Scholer, Fierman, Hays & Handler, New York City, and David R. Owen and Semmes, Bowen & Semmes, Baltimore, Md., for defendant.

THOMSEN, Chief Judge.

This case is before the Court on remand by the Fourth Circuit for the determination of all issues relating to damages — whether plaintiff sustained any damages that are properly recoverable, and if so, the amount of such damages. Osborn v. Sinclair Refining Co., 4 Cir., 286 F.2d 832, 840, 841, reversing D.Md., 171 F.Supp. 37. The facts set out in those opinions will not be repeated here, except so far as may be necessary to understand the issues now before the Court.

Defendant (Sinclair) is a refiner and distributor of petroleum products. Plaintiff was a dealer to whom Sinclair had leased a service station in Reisterstown, Md., about ten miles north of the Baltimore City line.

At the original trial of this private antitrust suit plaintiff claimed that his service station lease and dealer's sales agreement were canceled by Sinclair in furtherance of an attempt by Sinclair to monopolize the sale of tires, batteries and accessories (TBA) to its service station dealers in Maryland in violation of section 2 of the Sherman Act, 15 U.S.C.A. § 2, and/or a combination or conspiracy between Sinclair and Goodyear Tire and Rubber Company (Goodyear) to restrain trade in those products, in violation of Section 1 of the Sherman Act, 15 U.S. C.A. § 1. Plaintiff conceded at the original trial that he had not proved a tying arrangement which violated Section 3 of the Clayton Act, 15 U.S.C.A. § 14. This court held that no violation of the anti-trust laws had been shown, and entered judgment for the defendant Sinclair. The reasons for the decision were set out in the opinion, 171 F.Supp. at 44 et seq.

The Fourth Circuit did not disturb the findings and conclusions of this Court that plaintiff had failed to prove an attempt to monopolize or to show that the agreements between Sinclair and Goodyear involved an unreasonable restraint of trade. See 286 F.2d at 835. The Fourth Circuit found, however, that an illegal tying arrangement existed between Sinclair and its dealers, unreasonable per se, and prohibited by Section 1 of the Sherman Act, 15 U.S.C.A. § 1, citing particularly Northern Pacific R. Co. v. United States, 356 U.S. 1, 78 S.Ct. 514, 2 L.Ed.2d 545. See 286 F.2d at 835 et seq.

This Court had found that two factors contributed substantially to Sinclair's decision to cancel plaintiff's lease in May, 1956, namely: (1) the failure of plaintiff's gasoline gallonage to approach the figure which Sinclair thought it should have reached after Sinclair rebuilt and enlarged the station in 1953, and (2) the fact that plaintiff carried so much more Firestone TBA than Goodyear TBA. This Court found that neither of those reasons was predominant, and the Fourth Circuit did not disturb that finding. The Fourth Circuit said:

"Since Sinclair-Sherwood had the right to cancel the lease at its yearly termination date, the problem arises whether the damages flowing from the cancellation are recoverable as damages resulting from the violation of the anti-trust laws. See, however, Emich Motors Corp. v. General Motors Corp., 1951, 340 U.S. 558, 71 S.Ct. 408, 95 L.Ed. 534 (1951). Moreover, there is evidence in the record that Osborn had to pay more for Goodyear TBA products than for other brands which he desired.

"Of course, if Osborn sustained no damages that are properly recoverable, he has no cause of action. Because of the questions inherent in this phase of the case, we think it appropriate to remand it to the District Court for further hearing, in which the parties will have full opportunity to present additional evidence on the question of damages in the period before as well as after the termination of the lease. The District Court should then determine what items, if any, are recoverable. We wish to emphasize that we are not at this time expressing or intimating any opinion on this aspect of the case." 286 F.2d at 840, 841.

On remand, four questions are presented:

A. What damages, if any, did plaintiff suffer as a result of the illegal tying arrangement in the period before the termination of the lease.

B. Whether the damages flowing from the termination are recoverable as damages resulting from the violation of the antitrust laws.

C. If so, the amount of such damages.

D. The amount of any counsel fees which should be awarded.

The findings of fact made by this Court after the original trial were not disputed by the parties on appeal or on remand, but the parties have filed an additional stipulation of certain facts, plaintiff has offered further testimony, and each side has offered exhibits on the issue of damages. The facts stated below with respect to each point have been found after considering all of the evidence. There is little or no dispute about the historical facts, but much dispute about the inferences to be drawn therefrom and about the rules of law to be applied thereto.

A

The first question is: what damages, if any, did plaintiff suffer as a result of the illegal tying arrangement in the period before the termination of the lease?

Sinclair agrees that under the decision of the Fourth Circuit, plaintiff is entitled to recover the difference between the cost of any Goodyear TBA which he purchased because of the alleged tie-in and the cost of the equivalent amount of Firestone TBA. Because of the statute of limitations, plaintiff has limited his claim under this head to the three years 1954, 1955 and Jan. 1-May 31, 1956. During those years, as during the entire period of his dealership, plaintiff's total purchases of Goodyear TBA were but a small fraction of his total TBA purchases, most of which he made from Firestone. It has been stipulated that if plaintiff had purchased from Firestone all of the TBA which he purchased from Goodyear during 1954, 1955 and 1956, the extra discount would have been $534 ($164 in 1954, $161 in 1955, and $209 in 1956). The evidence also shows that he purchased $4,068 from Goodyear in 1954, $4,983 in 1955 and $4,127 in 1956; and that under the method of proof of this type of damages adopted by plaintiff, there would have been no extra discount from Firestone and therefore no recovery for a particular year unless the additional purchases from Firestone during that year would have been sufficient to carry plaintiff into the next higher discount bracket. The necessary additional purchases from Firestone would have been $2,241 for the year 1954, $2,810 for 1955 and $4,077 for 1956. Stated another way, there would have been no additional discount from Firestone for the year 1954 if plaintiff had purchased as little as $1,823 from Goodyear in that year; the corresponding figures for 1955 and 1956 were $2,173 and $50 respectively.

Plaintiff testified that he purchased some Goodyear TBA because of customer requests for tire sizes not carried by Firestone, and said that he would have purchased at most $500 of Goodyear TBA during the three years 1954-1956 apart from Sinclair's pressure. On the other hand, Sinclair calls attention to the fact that plaintiff bought $1,961 of Goodyear TBA in 1952, when as he testified, there was solicitation but no pressure, and argues that plaintiff would have willingly bought a similar amount in 1954 and 1955.

On all the evidence I find as a fact that apart from any pressure plaintiff would have bought in each year (including the five month period of 1956), not less than $150 nor more than $1,800 of Goodyear TBA.

This finding leads to the conclusion that for the period before the termination of the lease plaintiff has proved $325 damages, which, trebled, amount to $975.

B

"Whether the damages flowing from the cancellation are recoverable as damages resulting from the violation of the antitrust laws"¹ is a troublesome question, because of the difficulty of reconciling the policy of the antitrust laws with the policy of the general law to preserve the freedom of a private trader acting unilaterally to develop his business and to select his customers as he sees fit. See United States v. Parke, Davis & Co., 362 U.S. 29, 37-38, 44-46, 80 S.Ct. 503, 4 L.Ed.2d 505 discussing the development of the law since United States v. Colgate & Co., 250 U.S. 300, 306-308, 39 S.Ct. 465, 63 L.Ed. 992.

Chief Judge Sobeloff, speaking for the Fourth Circuit in McElhenney Co. v. Western Auto Supply Co., 269 F.2d 332, 337, said: "Generally speaking, the right of customer selection is sanctioned by both statute and case law. Absent conspiracy or monopolization, a seller engaged in a private business may normally refuse to deal with a buyer for any reason or with no reason whatever. Thus, the courts have until now not held a seller liable in damages for refusing to deal with one who is unwilling to enter into an unlawful vertical price agreement or an exclusive dealing arrangement."

A manufacturer or distributor cannot claim the benefit of the single trader rule if its refusal to deal is in furtherance of a conspiracy. It is now clear that concerted refusals to deal are illegal per se under sec. 1 of the Sherman Act. Radiant Burners, Inc. v. Peoples Gas Light and Coke Co., 364 U.S. 656, 81 S.Ct. 365, 5 L.Ed.2d 358; Klor's, Inc. v. Broadway-Hale Stores, Inc., 359 U.S. 207, 79 S.Ct. 705, 3 L.Ed.2d 741. However, there was no concerted refusal to deal in this case. Sinclair acted alone. Plaintiff argues that there was a conspiracy or combination between Sinclair and the dealers generally. But, although Sinclair may have sought to impose a tying arrangement on each of its dealers, i. e. to require each of them to buy substantial quantities of Goodyear TBA if he desired to...