Governor of Maryland v. Exxon Corp.

• Decision Date: 18 February 1977
• Docket Number: No. 10,10
• Citation: 279 Md. 410,370 A.2d 1102
• Parties: , 1977-1 Trade Cases P 61,297 GOVERNOR OF the State of MARYLAND et al. v. EXXON CORPORATION et al.
• Court: Maryland Court of Appeals

Page 410

279 Md. 410

370 A.2d 1102, 1977-1 Trade Cases P 61,297 GOVERNOR OF the State of MARYLAND et al. v. EXXON CORPORATION et al.

No. 10.

Court of Appeals of Maryland.

Feb. 18, 1977.

Jon F. Oster, Deputy Atty. Gen., and John A. Woodstock, Asst. Atty. Gen., Baltimore (Francis B. Burch, Atty. Gen., Stephen M. Cordi, Glenn E. Bushel, Steven P. Resnick and Thomas M. Wilson, III, Asst. Attys. Gen. Baltimore, on the brief), for appellants.

Robert G. Levy, George W. Liebmann and Frank, Bernstein, Conaway & Goldman, Baltimore, on the brief of amici curiae Day Enterprises, Inc., etc., Booth's, Inc., Dolan Enterprises, Inc. and PLB Industries, Inc.

Lewis A. Noonberg, Baltimore (William L. Marbury, David F. Tufaro, Piper & Marbury and Richard P. Delaney, Baltimore, on the brief), for Exxon Corp.

William Simon, Robert G. Abrams, Howrey & Simon, Washington, D.C., George W. Shadoan, Shadoan & Mack, Rockville, and A. M. Minotti, Houston, Tex. on the brief, for Shell Oil Co.

Lawrence S. Greenwald, Baltimore (Gordon, Feinblatt, Rothman, Hoffberger & Hollander, Baltimore, on the brief), for Gulf Oil Corp.

Wilbur D. Preston, Jr., Baltimore (Stanley B. Rohd and Whiteford, Taylor, Preston, Trimble & Johnston, Baltimore, on the brief), for Continental Oil Co. and Kayo Oil Co.

Richard A. Reid, Towson (Royston, Mueller & McLean, Towson, on the brief), for Petroleum Marketing Corp. and Com. Oil Refining Co., Inc.

Fred W. Drogula, Washington, D.C. (David Ginsburg, James E. Wesner, Ginsburg, Feldman & Bress, Washington, D.C., David F. Albright, Semmes, Bowen & Semmes, Baltimore, and Arloe W. Mayne, Gen. Counsel, Ashland, Ky., on the brief), for Ashland Oil, Inc.

J. Edward Davis, Daniel T. Doherty, Jr., and Weinberg & Green, Towson, submitted brief for Phillips Petroleum Co.

Argued before MURPHY, C. J., SMITH, DIGGES, LEVINE and ELDRIDGE, JJ. and JAMES C. MORTON, Jr. and RIDGELY P. MELVIN, Jr., Special Judges.

ELDRIDGE, Judge.

In this case we are presented with several questions concerning the constitutionality of Chapter 854 of the Laws of Maryland of 1974, as amended by Chapter 608 of the Laws of 1975, and codified in Maryland Code (1957, 1972 Repl.Vol., 1976 Cum. Supp.), Art. 56, § 157E. These chapters added the following provisions to the Motor Fuel Inspection Law (italicized portions are those added by Chapter 608 of the Laws of 1975):

'(B) After July 1, 1974, no producer or refiner of petroleum products shall open a major brand, secondary brand or unbranded retail service station in the State of Maryland, and operate it with company personnel, a subsidiary company, commissioned agent, or under a contract with any person, firm, or corporation, managing a service station on a fee arrangement with the producer or refiner. The station must be operated by a retail service station dealer.

'(C) After July 1, 1975, no producer or refiner of petroleum products shall operate a major brand, secondary brand, or unbranded retail service station in the State of Maryland, with company personnel, a subsidiary company, commissioned agent, or under a contract with any person, firm, or corporation managing a service station on a fee arrangement with the producer or refiner. The station must be operated by a retail service station dealer.

'(D) Every producer, refiner, or wholesaler of petroleum products supplying gasoline and special fuels to retail service station dealers shall extend all voluntary allowances uniformly to all retail service station dealers supplied.

'(E) Every producer, refiner, or wholesaler of petroleum products supplying gasoline and special fuels to retail service station dealers shall apply all equipment rentals uniformly to all retail service station dealers supplied.

'(F) Every producer, refiner or wholesaler of petroleum products shall apportion uniformly all gasoline and special fuels to all retail service station dealers during periods of shortages on an equitable basis, and shall not discriminate among the dealers in their allotments.

'(G) The Comptroller may adopt rules or regulations defining the circumstances in which a producer or refiner temporarily may operate a previously dealer-operated station.

'(H) The Comptroller may permit reasonable exceptions to the divestiture dates specified by this section after considering all of the relevant facts and reaching reasonable conclusions based upon those facts.'

In addition to the authority granted in Paragraphs G and H to promulgate rules and regulations for the temporary operation of retail service stations by producers and refiners, and to permit reasonable exceptions to the specified divestiture dates, see 2 Maryland Register 228, the Comptroller has the power generally to promulgate rules and regulations for the administration of the Motor Fuel Inspection Law, Art. 56, § 157B(a). Additionally, the Comptroller may direct those marketing petroleum products in violation of the Motor Fuel Inspection Law or regulations adopted pursuant thereto to cease such violations. If the violations should continue, the Comptroller shall refer the matter to the Attorney General who is authorized to apply to the circuit courts for an injunction against the continuance of the violations, Art. 56, § 157B(b). There are also criminal penalties for violation of the Motor Fuel Inspection Law, Art. 56, § 157K.

Chapter 854 was signed into law on May 31, 1974, effective July 1, 1974. On June 17, 1974, Exxon Corporation instituted an action in the Circuit Court for Anne Arundel County seeking a declaratory judgment pursuant to the Maryland Uniform Declaratory Judgments Act, Code (1974), § 3-401 et seq. of the Courts and Judicial Proceedings Article, that Chapter 854 be declared unconstitutional and invalid. Additionally, Exxon sought injunctive relief prohibiting enforcement of Ch. 854. Defendants in the action were the Governor of Maryland, the Attorney General of Maryland, and the Comptroller of the Treasury of Maryland.

Thereafter Continental Oil Company and its subsidiary Kayo Oil Company, Shell Oil Company, Gulf Oil Corporation, Phillips Petroleum Company, Commonwealth Oil Refining Company, Inc. and its susidiary Petroleum Marketing Corporation, and Ashland Oil, Inc., filed substantially similar actions, and all actions were consolidated for trial. The plaintiffs either directly or through their subsidiaries are all engaged in the direct retail marketing of petroleum products in the state of Maryland. All, with the exception of Commonwealth and Ashland, are large multi-national, fully integrated oil companies engaged in the production, refining, transportation and marketing or petroleum products. Commonwealth is a refiner dependent solely upon foreign crude oil supplies, and markets gasoline through its wholly owned subsidiary, Petroleum Marketing Corporation. Ashland is primarily a refiner and marketer of petroleum products, but does engage in some limited production of crude oil. ¹ Additionally, four independent retail dealers of Crown Central Petroleum Corporation were permitted to appear in support of the Act as amici curiae.

The substance of the oil companies' attack on the validity of Chapter 854 is fairly represented by the allegations in Exxon's complaint. The Act was challenged on several grounds. Exxon alleged that the Act did not bear a real and substantial relationship to the health, safety, morals or welfare of the people of Maryland and thus denied it due process of law in violation of Art. 23 of the Maryland Declaration of Rights and the Fourteenth Amendment to the United States Constitution; that the Act discriminates against and unduly burdens interstate commerce and is invalid under the Commerce Clause, Art. 1, § 8 of the United States Constitution; that the Act constituted a taking of its investment in retail service stations without just compensation in violation of Art. III, § 40 of the Maryland Constitution and the just compensation clause of the Fifth Amendment to the United States Constitution; that the Act, in prohibiting only producers and refiners of petroleum products from engaging in the retail sale of gasoline, denied them the equal protection of the laws in violation of Art. 23 and the Fourteenth Amendment; and that the provisions of the Act authorizing the Comptroller to issue rules and regulations permitting exceptions to the divestiture dates and allowing temporary operation of retail service stations by producers and refiners failed to set forth any standards to guide the Comptroller, and thus constituted an unlawful delegation of legislative authority in violation of Art. 8 of the Maryland Declaration of Rights. Additionally, it was alleged that the provision of the Act providing for equitable allocation of petroleum products was in conflict with the Federal Emergency Petroleum Allocation Act of 1975, 15 U.S.C. § 751 et seq., that the provision of the Act requiring uniform 'voluntary allowances' was in conflict with the Robinson-Patman Act, 15 U.S.C. § 13, and that, therefore, both provisions were invalid under the Supremacy Clause of Art. VI of the United States Constitution. Finally, it was alleged that certain provisions of the Act are void for vagueness.

On May 5, 1975, the circuit court, after a pre-trial conference, entered an order prohibiting the defendants from enforcing the provisions of Chapter 854 against the plaintiffs while the cases were pending. Plaintiffs were ordered not to open any new retail service stations operated with company personnel nor to convert existing retail service stations to direct company operation without first notifying defendants of their intention to do so and reasons therefor. Motions for partial summary judgment were then filed by Exxon, Shell and Gulf with respect to those provisions of the Act requiring uniform 'voluntary allowances' (Paragraph D) and uniform allocation of products during periods of shortages (Paragraph F) on the ground that both were in conflict with federal law....