467 F.Supp. 841 (N.D.Cal. 1979), C-74-0189, Murphy Tugboat Co. v. Shipowners & Merchants Towboat Co., Ltd.

Docket NºC-74-0189-WWS.
Citation467 F.Supp. 841
Party NameMURPHY TUGBOAT COMPANY, Plaintiff, v. SHIPOWNERS & MERCHANTS TOWBOAT CO., LTD. et al., Defendants. SHIPOWNERS & MERCHANTS TOWBOAT CO., LTD. et al., Counter-Claimants, v. MURPHY TUGBOAT COMPANY, Counter-Defendant.
Case DateMarch 06, 1979
CourtUnited States District Courts, 9th Circuit

Page 841

467 F.Supp. 841 (N.D.Cal. 1979)

MURPHY TUGBOAT COMPANY, Plaintiff,

v.

SHIPOWNERS & MERCHANTS TOWBOAT CO., LTD. et al., Defendants.

SHIPOWNERS & MERCHANTS TOWBOAT CO., LTD. et al., Counter-Claimants,

v.

MURPHY TUGBOAT COMPANY, Counter-Defendant.

No. C-74-0189-WWS.

United States District Court, D. California.

March 6, 1979

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Ronald Lovitt, Lovitt & Hannan, Inc., San Francisco, Cal., Robert L. Palmer, Martori, Meyer, Henricks & Victor, Phoenix, Ariz., Thomas Elke, Tucson, Ariz., for plaintiff and counter-defendant.

Richard J. Archer, Kristina M. Hanson, Sullivan, Jones & Archer, San Francisco, Cal., for defendants and counter-claimants.

MEMORANDUM OPINION AND ORDER ON MOTIONS FOR JUDGMENT NOTWITHSTANDING THE VERDICT AND FOR NEW TRIAL

WILLIAM W SCHWARZER, District Judge.

Plaintiff charges defendants with having violated Sections 1 and 2 of the Sherman Act (15 U.S.C. ss 1, 2) and Section 17045 of the California Business and Professions Code. 1 After 28 days of trial and 5 days of deliberation, the jury returned a verdict awarding plaintiff damages aggregating $700,000. Defendants have moved for judgment notwithstanding the verdict or alternatively for a new trial.

I. The Factual Background

The relevant facts established at the trial may be summarized as follows. Defendants Shipowners & Merchants Towboat Co., Ltd. ("Red Stack") and Bay Cities Transportation Company ("Bay Cities") have for many years been engaged in ship assisting and ship towing on San Francisco Bay and its tributaries. Although until recently a small percentage of Red Stack's capital stock was held by outsiders, both companies have at all material times been substantially owned and controlled, directly or indirectly, by the Crowley family. Major decisions by the management of either company have required the approval of defendant Thomas B. Crowley, who was the principal officer of each of the companies. Beginning about 1973, Crowley Maritime Corporation ("Crowley Maritime") became the holding corporation of these companies and gradually

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undertook to provide various administrative services. So far as the record shows, however, it engaged in no operations and performed no acts relevant to the matters at issue.

Plaintiff Murphy Tugboat Company ("Murphy") entered the ship assist business on San Francisco Bay about October 1971 with a single tug. It remained in business, acquiring additional tugs, until September 1975 when ship assist operations were discontinued.

Ship assist work consists of providing tugs to aid vessels in docking or undocking. Vessels are docked or undocked in a variety of ways, depending on their size and configuration, tide and weather conditions, the qualifications of the master or pilot, and other circumstances. They may or may not employ an inland pilot to assist in docking or undocking, and they may choose to dock or undock without tugs or with the aid of one or more tugs.

In addition to assisting vessels in docking or undocking, tugs from time to time perform so-called flat tows, i. e., shifting vessels not under power between locations on the Bay.

Murphy entered the ship assist business about 18 months following the end of a six-months tug strike which had idled Red Stack and Bay Cities. During that strike, other companies had entered the ship assist business in the area, including Murphy-Pacific Marine Salvage Corporation, which had acquired the use of some seven tugs. Roger Murphy, who subsequently organized and largely owned plaintiff Murphy Tugboat Company, headed the ship assist operations for Murphy-Pacific, which was also engaged in the construction and salvage business. After defendants resumed their operations, Murphy-Pacific began to suffer substantial losses in its ship assist operations and ultimately agreed to sell its tugs to the Crowley interests in June 1971. There is evidence which, although disputed by defendants, would have permitted the jury to find that as a part of that transaction Murphy-Pacific agreed to stay out of the ship assist business.

For some years prior to Murphy's entry into the ship assist business, Red Stack and Bay Cities had a policy of refusing, except in emergencies, to provide service to a vessel which was also being assisted by tugs of another company. Thus, if a vessel had arranged for ship assist services with another tugboat company, and more tugs were required for the job than that company could furnish, Red Stack and Bay Cities would decline to furnish the additional tugs to work with the tug of the other company. Defendants gave as a reason for the policy the hazards of divided responsibility in ship handling. Other Crowley controlled companies operating in Los Angeles harbor and Puget Sound, and other tugboat companies operating in New York harbor, did not adhere to such a policy.

During the period at issue, Red Stack and Bay Cities performed not less than 70 percent of the tug-assisted docking and undocking on San Francisco Bay (excluding military and other proprietary operations). The services of these companies were offered under two different tariffs. Bay Cities, operating smaller tugs, served primarily smaller vessels (i. e., less than 14,000 net tons). It charged a flat rate per tug, plus overtime. Red Stack, operating larger, more powerful tugs, generally served the larger vessels. Its charges were computed under a grid tariff which took into account the size of the vessel and the length of the ship assist move and generally produced higher charges.

The thrust of Murphy's case at trial was that defendants' policy of refusing to work with competitors effectively excluded it from the large vessel segment of the ship assist market, where most of the demand for multi-tug jobs arose. There was evidence from which the jury could find that potential customers were deterred from hiring a Murphy tug by the knowledge that if the need for additional tugs arose during the operation, defendants would not provide them.

Murphy contended that but for defendants' exclusionary practice, its share of the large vessel market would have been equal

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to the 28 per cent share it held of the small vessel market. In that event, it would have been able either to raise its rates or increase its volume substantially, resulting in additional revenue which it claimed would have eliminated the operating losses plaintiff incurred between 1972 and 1976.

Murphy also charged that Red Stack had entered into an unlawful conspiracy with the Red Stack pilots' association to fix the fees collected by Red Stack masters for pilotage services rendered by them on Red Stack jobs. Red Stack had for many years offered pilot services along with ship assist services; it was able to do so because the masters of its tugs were licensed inland pilots, and its tugs had five men crews. When Red Stack tugs assisted a vessel, the master of one of the tugs would, at the vessel's request, go on the bridge and serve as pilot. While Red Stack made no extra charge for this service, the master/pilot collected a fee from the vessel. The amount of that fee was set by agreement between Red Stack and the association. During the relevant time, the fee varied, depending on the specific job, but it was always considerably less than the fees charged by independent pilots. Murphy contended that the Red Stack pilots' agreement, by holding down the pilotage component of the package cost of using Red Stack's service, made it necessary for Murphy to hold down its tug charges so that the combined charge for the Murphy Tug-independent pilot package would remain competitive. As a result, Murphy claimed, it lost revenue which it would have realized had it been able either to raise its charges or to attract more jobs by reason of a greater price differential.

Murphy's damage proof consisted of evidence of its operating losses (reflected on its federal income tax returns) for the four fiscal years ended August 31, 1972, 1973, 1974 and 1975, as well as the loss suffered during fiscal 1976 following the shutdown of its operations. These losses totaled $490,936. In addition, Murphy computed its lost profits for the five succeeding years by applying to its average annual gross revenue of $435,928 the lowest net profit ratio experienced by Bay Cities during this period 8.2 percent. This resulted in a hypothetical annual profit of $35,756, or $178,730 for the five-year period. The total amount of damages claimed was $669,666. The jury awarded damages for violation of Section 2 aggregating $700,000, assessed as follows:

$160,000 against Red Stack,

80,000 against Bay Cities,

180,000 against Crowley Maritime Corp., and

180,000 against Thomas B. Crowley.

In addition, the jury awarded $100,000 against Red Stack for violation of Section 1 by reason of the Red Stack pilots' agreement. No verdict was reached on the remaining conspiracy claims. (See Exhibit A, attached.)

II. The Standard of Review

Defendants' motion for judgment n. o. v. is governed by the same standards as a motion for directed verdict. The Court is bound to view the evidence in the light most favorable to the non-movant, drawing all permissible inferences in its favor. If, by that standard, there is substantial evidence to support a finding by a reasonable jury, the motion must be denied. Continental Ore Co. v. Union Carbide & Carbon Corp., 370 U.S. 690, 696, 82 S.Ct. 1404, 8 L.Ed.2d 777 (1962); Autohaus Brugger, Inc. v. Saab Motors, Inc., 567 F.2d 901, 909 (9th Cir.), Cert. denied, 436 U.S. 946, 98 S.Ct. 2848, 56 L.Ed.2d 787 (1978).

The foregoing standard is applicable to the issues on which the jury returned a verdict for plaintiff (monopolization, attempt to monopolize, the Red Stack pilots'...

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