Lessig v. Tidewater Oil Company
| Decision Date | 17 February 1964 |
| Docket Number | No. 17924.,17924. |
| Citation | 327 F.2d 459 |
| Parties | Paul LESSIG, Appellant, v. TIDEWATER OIL COMPANY, Appellee. |
| Court | U.S. Court of Appeals — Ninth Circuit |
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Maxwell Keith, San Francisco, Cal., for appellant.
Brobeck, Phleger & Harrison, Moses Lasky and Richard Haas, San Francisco, Cal., for appellee.
Before MADDEN, Judge of the Court of Claims, and HAMLEY and BROWNING, Circuit Judges.
This is an appeal by Paul Lessig from a judgment entered on a jury verdict in a suit for damages brought by Lessig under Section 4 of the Clayton Act,1 alleging injury from violations by Tidewater Oil Company of Sections 1 and 2 of the Sherman Act2 and Section 3 of the Clayton Act.3 We conclude that reversible error occurred in instructing the jury, and remand for new trial.
Tidewater entered into a service station lease and dealer contract with Lessig November 15, 1955, and cancelled both May 15, 1958. The theory of Lessig's case was that during this period Tidewater violated the antitrust laws (1) by fixing the prices at which its dealers resold gasoline, and (2) by imposing upon its dealers a system of exclusive dealing and tying arrangements in the purchase of petroleum products, tires, batteries, and those automotive accessories which were sold or sponsored by Tidewater, and that Lessig was injured thereby.
Lessig offered evidence of the following circumstances in support of his allegation that Tidewater conspired, or created a combination, to control the price at which its dealers resold gasoline.4
Tidewater required its dealers to purchase their estimated total requirements of gasoline from Tidewater at prices "posted by seller at the time and place of delivery." It steadily increased the wholesale or tank-wagon price charged dealers during the relevant period, though the retail price dropped on several occasions. When the retail price went down, Tidewater extended "dealer-aid" in the form of a rebate from the tank-wagon price. When retail prices went up, the rebate was diminished or withdrawn. Payment of "dealer-aid" was conditioned upon adherence by the dealer to resale prices stipulated by Tidewater.
By maintaining, or increasing, the wholesale price when the retail price declined, Tidewater brought pressure upon dealers to accept "dealer-aid" and the accompanying condition requiring resale price maintenance. In addition, Tidewater's representatives checked the prices at which dealers sold their gasoline, told dealers the price changes they were to make, changed prices posted on their pumps, placed price signs on the station premises reflecting the new price, and threatened to terminate and terminated dealers' leases and contracts if dealers did not comply with suggested price changes. Lessig was given notice of termination of his lease and contract three days after he refused to reduce his resale price when Tidewater's district sales manager told him it was two cents too high.
From this evidence the jury could conclude that Tidewater entered into agreements with its dealers fixing resale prices, thus contracting and conspiring in violation of Section 1 of the Sherman Act, or, alternatively, that Tidewater secured dealer adherence to resale prices by a coercive scheme not limited to refusals to deal announced in advance, thus creating a combination in violation of Section 1.5
The evidence supporting Lessig's claim of injury prior to the termination of his lease and contract from Tidewater's resale price-fixing activities was not strong. However, the jury could readily infer that Tidewater terminated its business relationship with Lessig because he failed to adhere to the resale price-fixing scheme. Cancellation of Lessig's lease and dealer contract in such circumstances would be unlawful, though in exercise of a right expressly granted Tidewater by the lease and contract6 Lessig could claim compensation for the resulting loss, including reasonably anticipated future profits,7 and there was evidence from which the jury could find that such loss occurred.
Tidewater makes the threshold contention that review of many of Lessig's numerous claims of error is barred by Lessig's failure properly to present his objections at trial. This may be true of some specifications, but that we need not decide. Lessig did properly present and preserve an objection to what we believe was reversible error in instructing the jury as to damages.
Lessig tendered to the court a proposed instruction concerning his right to recover reasonably anticipated future profits lost as a result of the cancellation of his lease and contract.8 The instruction was not given, and Lessig made timely objection. The omission was error.9 The error was prejudicial since the jury was instructed in detail as to Lessig's right to recover profits lost during his occupancy of the station, and therefore might have concluded that he could recover only on this theory.10 Such a misconception could have led to the verdict adverse to Lessig, for while Lessig's proof of causal connection between the alleged violation and the lease cancellation was substantial and direct, his proof of loss of profits from Tidewater's conduct during his occupancy of the station was, as we have said, relatively meager and tenuous.
Reversal is thus required,11 and we consider only those remaining assignments of error pertinent to a new trial and ignore Lessig's failure to comply with Rule 51 of the Federal Rules of Civil Procedure and other procedural obstacles which would ordinarily preclude review of some of the matters discussed.
Lessig argues that the trial court should have instructed the jury that Tidewater's conduct relating to resale price maintenance violated the Sherman Act as a matter of law. The instruction was properly refused. Tidewater did not concede that "dealer-aid" was conditioned on dealer adherence to its stipulated resale prices. Its officials testified that "dealer-aid" was given whenever the prevailing retail price in a particular area fell below the level at which Tidewater's dealers could pay the posted wholesale price and retain a fair margin of profit; and they insisted that each dealer, though receiving the rebate, was nonetheless free to meet the prevailing retail price or not as he saw fit. The jury was entitled to accept this explanation, and reject the contrary evidence.12
We agree with Lessig, however, that the instructions given did not adequately inform the jury of the theory underlying the price-fixing aspect of his case. They did not clearly state in terms of the specific facts of the case:13 (1) that Lessig need not prove an express agreement to maintain resale prices, but was entitled to prevail, assuming injury, if he established tacit agreements by circumstantial evidence; and (2) that Tidewater could not lawfully go beyond refusals to deal, announced in advance, to secure adherence to resale prices, and Lessig was entitled to prevail, assuming injury, if he established that Tidewater exceeded this limitation in the respects indicated by Lessig's evidence, outlined above.
The instructions on this phase of the case were objectionable in another respect. Lessig testified in detail regarding a conversation with Tidewater's district sales manager immediately preceding receipt by Lessig of notice of the cancellation of his lease and contract. With apparent reference to this conversation, the court instructed the jury "that it was not unlawful for Tidewater to tell Mr. Lessig that his retail prices were so high that a loss of sales and customers was likely." This was one of several instructions which isolated particular incidents from the total course of Tidewater's conduct and pronounced each lawful. These instructions were no doubt accurate, so far as they went. However, as the Supreme Court recently stated, * * *'"; and "acts which are in themselves legal lose that character when they become constituent elements of an unlawful scheme." Continental Ore Co. v. Union Carbide & Carbon Corp., 370 U.S. 690, 699, 707, 82 S.Ct. 1404, 1410, 1415, 8 L.Ed.2d 777 (1962).14
We have said that it would be reversible error to instruct the jury that particular acts, alleged to be part of a conspiracy, were lawful, without adding the express qualification, "in the absence of conspiracy" (Fox West Coast Theatres Corp. v. Paradise Theatre Bldg. Corp., 264 F.2d 602, 606 (9th Cir. 1958)), and it is at least clear that an instruction that a component element of an allegedly illegal course of conduct is lawful should be accompanied by a substance of the admonitions which we have quoted from Continental Ore Co.15
No substantial error occurred in the exclusion of evidence relating to resale price maintenance. Most of the excluded material was cumulative or only remotely relevant, and the discretion of the trial court in dealing with it was accordingly broad.
Lessig offered evidence of the following circumstances in support of his algation that Tidewater imposed upon its dealers a system of exclusive dealing and tying arrangements applicable to petroleum products, and to tires, batteries, and automotive accessories (TBA) which Tidewater sold or sponsored.16
Tidewater's service station leases were renewable...
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