William O. Gilley Enters v. Atlantic Richfield

• Decision Date: 03 April 2009
• Docket Number: No. 06-56059.,06-56059.
• Citation: 561 F.3d 1004
• Parties: WILLIAM O. GILLEY ENTERPRISES, INC., a Nevada corporation doing business in California and the estate of William O. Gilley, deceased; Dennis Decota, an individual; Patrick Palmer, an individual on behalf of themselves and all others similarly situated, Plaintiffs-Appellants, v. ATLANTIC RICHFIELD COMPANY; Chevron Corporation; Exxon Corporation; Mobil Oil Opinion Corporation; Exxon/Mobil Corporation; Shell Oil Company; Texaco Inc.; Tosco Corporation; Ultramar Diamond Shamrock; Valero Corporation; Conocophilips Petroleum Corporation; Chevron/Texaco Corporation; Tesoro Corporation, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

561 F.3d 1004

WILLIAM O. GILLEY ENTERPRISES, INC., a Nevada corporation doing business in California and the estate of William O. Gilley, deceased; Dennis Decota, an individual; Patrick Palmer, an individual on behalf of themselves and all others similarly situated, Plaintiffs-Appellants, v. ATLANTIC RICHFIELD COMPANY; Chevron Corporation; Exxon Corporation; Mobil Oil Opinion Corporation; Exxon/Mobil Corporation; Shell Oil Company; Texaco Inc.; Tosco Corporation; Ultramar Diamond Shamrock; Valero Corporation; Conocophilips Petroleum Corporation; Chevron/Texaco Corporation; Tesoro Corporation, Defendants-Appellees.

No. 06-56059.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted February 13, 2008.

Filed April 3, 2009.

Charles M. Kagay, Spiegel, Liao & Kagay LLP, San Francisco, CA, for the plaintiffs-appellants.

Timothy D. Cohelan, Cohelan & Khoury, San Diego, CA, for the plaintiffs-appellants.

Hojoon Hwang, Munger, Tolles & Olson LLP, San Francisco, CA, for the defendants-appellees.

Peter H. Mason, Fulbright & Jaworski LLP, Los Angeles, CA, for the defendant-appellee.

David M. Foster, Fulbright & Jaworski LLP, Washington, DC, for the defendant-appellee.

Patrick J. Sullivan, Law Offices of Patrick J. Sullivan, Oceanside, CA, for defendants-appellees ExxonMobil Oil Corp., Exxon Corp., and Mobil Oil Corp.

Appeal from the United States District Court for the Southern District of California, Barry T. Moskowitz, District Judge, Presiding. D.C. No. CV-98-0132-BTM.

Before: STEPHEN S. TROTT, RICHARD R. CLIFTON, and CONSUELO M. CALLAHAN, Circuit Judges.

TROTT, Circuit Judge:

The district court granted Defendants' motion to dismiss Plaintiffs' antitrust claim founded on § 1 of the Sherman Act, holding that 1) Aguilar v. Atlantic Richfield Co., 25 Cal.4th 826, 107 Cal.Rptr.2d 841, 24 P.3d 493 (2001), precludes the allegations made in the operative pleading; 2) Defendants' exchange agreements can not be aggregated to establish market power and anti-competitive effect; and 3) even if the exchange agreements could be aggregated, the absence of a conspiracy to limit supply and raise prices eliminates a causal connection between the exchange agreements and anti-competitive effect. We have jurisdiction pursuant to 28 U.S.C. § 1291, and we reverse and remand.

I BACKGROUND

Plaintiff-Appellant William O. Gilley filed this class-action lawsuit in 1998 on behalf of himself and other wholesale purchasers of CARB gasoline in the state of California. CARB gas is a cleaner-burning fuel, and since 1996 it is the only type of gas that can be sold in California. The complaint alleged that Defendants-Appellees, major oil producers, violated § 1 of the Sherman Act by entering into a conspiracy to limit the supply of CARB gasoline and to raise prices.

The allegations of the complaint were similar to those alleged in Aguilar, a class-action suit filed in California Superior Court in 1996. That suit was brought under the Cartwright Act, CAL. BUS. & PROF. CODE § 16720 et seq., California's equivalent to the Sherman Act. Aguilar, 107 Cal.Rptr.2d 841, 24 P.3d at 502. The plaintiff in Aguilar was a retail purchaser and consumer of gasoline and sought to represent a class of retail purchasers. The plaintiff in this action was a wholesale purchaser and retail dealer of gasoline and sought to represent a class of wholesale purchasers. Both plaintiffs were represented by the same attorneys, and both actions targeted the same defendants for essentially the same allegedly unlawful conduct. Because of the similarity in the cases, the district court hearing this case stayed the suit pending the outcome of Aguilar.

In Aguilar, the state superior court granted summary judgment to the defendants, concluding that there was insufficient evidence presented by the plaintiffs to allow a reasonable juror to find a conspiracy to limit supply and raise prices among the several gasoline companies. Id. at 503. The California Supreme Court affirmed. Id. at 521. As a result, Defendants in this case brought a motion for summary judgment arguing that Gilley's claims were barred by collateral estoppel. In response, Gilley offered a proposed amended complaint, which the court found insufficient. The district court, however, granted Gilley leave to provide another proposed amended complaint, which he did.

On May 6, 2002, the district court granted Defendants' motion for summary judgment on that complaint, holding that Gilley was precluded by Aguilar from relitigating whether a conspiracy existed to limit supply and raise prices. However, the court granted Gilley further leave to amend the complaint to allege that "each of the bilateral agreements, entered into independently between various defendant gasoline companies, ha[s] anti-competitive effects and therefore violate[s] the Sherman Act."

On May 24, 2002, Gilley filed the third post-Aguilar complaint, alleging that forty-four bilateral exchange agreements had the effect of unreasonably restraining trade in violation of § 1 of the Sherman Act and in violation of CAL. BUS. & PROF. CODE § 17200. On March 27, 2003, the district court granted Defendants' motion to dismiss that complaint with prejudice. With respect to the § 1 claim, the court explained that Gilley had not alleged any theory as to how any individual exchange agreement, which accounts for a small percentage of the relevant market, is able to inflate the price of CARB gasoline. The district court rejected Gilley's argument that the court could consider the aggregate effects of the individual bilateral agreements to allege an anti-competitive effect—namely higher gas prices.

Gilley appealed to this Court, which reversed and remanded, holding that the district court erred in not giving Gilley an opportunity to correct the newly identified deficiencies. After the remand, the second amended complaint ("SAC") was filed. Most of the allegations of anti-competitive conduct and effect are stated in the following terms:

[Defendant] entered into the following sales/ exchange agreements for delivery of CARB gas in [geographic market]: [list of exchange agreements.]

[Defendant's] intent and purpose in entering into these sales/exchange agreements was to limit refining capacity for CARB gas and/or to keep CARB gas out of the spot market and away from unbranded marketers.

These agreements have had the effect of raising CARB gas prices in [geographic market] above competitive levels, without any countervailing procompetitive benefit.

The district court granted Defendants' motion to dismiss the SAC, holding that Plaintiffs failed to allege that the exchange agreements, when considered individually, would be capable of producing significant anti-competitive effects. We now review the district court's summary dismissal of the SAC.

II DISCUSSION

A. Standard of Review

We review de novo a dismissal for failure to state a claim pursuant to Rule 12(b)(6). Knievel v. ESPN, 393 F.3d 1068, 1072 (9th Cir.2005). All allegations of material fact are taken as true and construed in the light most favorable to the nonmoving party. Id.

B. Analysis

We address the following issues in this appeal: 1) the preclusive effect of the California Supreme Court's decision in Aguilar; 2) the pleading standard for § 1 claims; 3) the sufficiency of Plaintiffs' SAC; 4) Plaintiffs' standing to add Tesoro as a Defendant in the SAC; and 5) the state law claim under CAL. BUS. & PROF. CODE § 17200.

1. The Preclusive Effect of the California Supreme Court's Aguilar Decision.

Gilley does not dispute that the decision in Aguilar has some preclusive effect in the current lawsuit, but he contends that his current claim is not entirely extinguished by Aguilar. In contrast, Defendants argue that all of the allegations in the SAC are precluded by Aguilar. We conclude that Gilley has stated a claim that is not precluded by the California Supreme Court's decision.

The critical determination in Aguilar was that the plaintiff failed to provide sufficient proof of a fact necessary for the claim she had pled, specifically that Defendants conspired and acted collectively through exchange agreements to fix prices and/or control supply. As the California Supreme Court explained: "Aguilar had to present evidence that tended to exclude the possibility that the petroleum companies acted independently rather than collusively. This she did not do." Aguilar, 107 Cal.Rptr.2d 841, 24 P.3d at 518. In the order granting Defendants' motion to dismiss, the district court in this case summarized its understanding of that finding: "With respect to exchange agreements specifically, the court found that the evidence showed independent action on the part of the petroleum companies rather than a collusive web of bilateral exchange agreements to control supply and prices." The district court, applying the doctrine of issue preclusion (or collateral estoppel), accepted as an established fact the finding that the defendants did not collude to control supply and prices through the exchange agreements.

The California Supreme Court was clear in Aguilar, however, that the failure to prove that fact did not necessarily mean that plaintiff did not have a legally viable claim against Defendants:

In alleging facts for her Cartwright Act cause of action, Aguilar proceeded on a theory, which was legally sound, that the assertedly unlawful conspiracy consisted of an agreement among the petroleum companies as competitors to restrict the output of CARB gasoline and to raise its price, and was unlawful per se without regard to any of its effects.

In granting the petroleum companies summary judgment, the superior court did so on that theory. On appeal, Aguilar apparently attempted to introduce an alternative theory, which was also legally sound, that the assertedly unlawful conspiracy consisted of the various exchange agreements entered into by the various petroleum companies, and was unlawful because of its...