William O. Gilley Enter. v. Atlantic Richfield

• Decision Date: 02 December 2009
• Docket Number: No. 06-56059.,06-56059.
• Citation: 588 F.3d 659
• 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 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 Corporation; Exxon/Mobil Corporation; Shell Oil Company; Texaco Inc.; Tosco Corporation; Ultramar Diamond Shamrock; Valero Corporation; Conoco-Philips Petroleum Corporation; Chevron/Texaco Corporation; Tesoro Corporation, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

588 F.3d 659

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 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 Corporation; Exxon/Mobil Corporation; Shell Oil Company; Texaco Inc.; Tosco Corporation; Ultramar Diamond Shamrock; Valero Corporation; Conoco-Philips 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 December 2, 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 defendant-appellee.

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

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

Patrick J. Sullivan, Law Offices of Patrick J. Sullivan, Oceanside, CA, for the defendant-appellee.

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.

ORDER AND OPINION ORDER

The Opinion filed April 3, 2009, slip op. 4188, and appearing at 561 F.3d 1004 (9th Cir.2009), is withdrawn. It may not be cited as precedent by or to this court or any district court of the Ninth Circuit.

The superseding opinion will be filed concurrently with this order. The parties may file an additional petition for rehearing or rehearing en banc. All other pending motions are denied as moot.

OPINION

PER CURIAM:

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 anticompetitive 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 anticompetitive effect. We have jurisdiction pursuant to 28 U.S.C. § 1291, and we affirm.

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 plainly 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 anticompetitive 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.

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 anticompetitive effects. We now review the district court's 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. On a motion to dismiss in an antitrust case, a court must determine whether an antitrust claim is "plausible" in light of basic economic principles. Bell Alt. Corp. v. Twombly, 550 U.S. 544, 556, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007).

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; and 4) the state law claim under CAL. BUS. & PROF. CODE § 17200.¹

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 as pleaded in the SAC are precluded by Aguilar. We conclude that Gilley's claims are precluded by the California Supreme Court's decision.

Section 1 of the Sherman Act prohibits "[e]very contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States." 15 U.S.C. § 1. The Supreme Court has clearly established that the section is limited to prohibiting unreasonable restraints of trade. See Texaco Inc. v. Dagher, 547 U.S. 1, 5, 126 S.Ct. 1276, 164 L.Ed.2d 1 (2006). Whether a plaintiff pursues a per se claim or a rule of reason claim under § 1, the first requirement is to allege a "contract, combination in the form of trust or otherwise, or conspiracy."

The core of the plaintiff's claims in Aguilar was a per se claim based on an alleged unlawful conspiracy among petroleum companies. The California Supreme Court's opinion in Aguilar states:

Just as the superior court's order granting the petroleum companies summary judgment was not erroneous as to Aguilar's primary cause of action for an unlawful conspiracy under section 1 of the Cartwright Act to restrict the output of CARB gasoline and to raise its price, neither was it erroneous as to her derivative cause of action, which was for an unlawful conspiracy under the unfair competition law for the same purpose.

...

The petroleum companies carried their burden of persuasion to show that there was no triable issue of material fact and that they were entitled to judgment as a matter of law as to Aguilar's unfair competition law cause of action. They did so by doing so as to her Cartwright Act cause of action. Again, they carried their burden of production to make a prima facie showing of the absence of any conspiracy, but she did not carry her shifted burden of production to make a prima facie showing of the presence of an unlawful one.

It is true, as Aguilar argues, that her unfair competition law cause of action is not based on allegations asserting a conspiracy unlawful under the Cartwright Act. But it is indeed based on allegations asserting a conspiracy, specifically, one unlawful at least under the unfair competition law itself. As stated, the petroleum companies showed that there was no triable issue of the material fact of conspiracy....