Harvey v. Fearless Farris Wholesale, Inc.

• Citation: 589 F.2d 451
• Decision Date: 10 January 1979
• Docket Number: U-S,No. 77-2442,77-2442
• Parties: 1979-1 Trade Cases 62,465, 25 UCC Rep.Serv. 993 Clyde E. HARVEY and Neil J. Nielsen, co-partners doing business under the name oferve Gas Company, Plaintiffs-Appellants, v. FEARLESS FARRIS WHOLESALE, INC., Fearless Farris Service Stations, Inc., Fearless Farris, Southern, Inc., Fearless Farris, Western, Inc., Fearless Farris of Burley, Inc., and Fearless Farris of Twin Falls, Inc., all being Idaho Corporations, Defendants-Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)

Page 451

589 F.2d 451

1979-1 Trade Cases 62,465, 25 UCC Rep.Serv. 993

Clyde E. HARVEY and Neil J. Nielsen, co-partners doing

business under the name of U-Serve Gas Company, Plaintiffs-Appellants, v. FEARLESS FARRIS WHOLESALE, INC., Fearless Farris Service

Stations, Inc., Fearless Farris, Southern, Inc., Fearless

Farris, Western, Inc., Fearless Farris of Burley, Inc., and

Fearless Farris of Twin Falls, Inc., all being Idaho

Corporations, Defendants-Appellees.

No. 77-2442.

United States Court of Appeals, Ninth Circuit.

Jan. 10, 1979.

Herbert W. Rettig (argued) of Rettig, Rosenberrg & Roberts, Caldwell, Idaho, for plaintiffs-appellants.

Ronald G. Carter (argued) of Carter, Gines & Rice, Boise, Idaho, for defendants-appellees.

Appeal from the United States District Court for the District of Idaho.

Before VAN DUSEN, ^* WRIGHT and GOODWIN, Circuit Judges.

VAN DUSEN, Circuit Judge.

This dispute arose during a nationwide gasoline shortage in 1973. The appeal from summary judgment in favor of defendants raises these questions:

A. Does the evidence show a conspiracy in restraint of trade, in violation of 15 U.S.C. § 1, on the part of corporations, all of which were wholly owned and controlled by a single person?

B. Did an enforceable oral contract of sale exist between the parties, so as to require the seller to allocate a portion of its supplies to the buyer during the period of shortage?

C. Was summary judgment improper on this record?

The district court answered these questions in the negative. ¹

I. HISTORY OF THE CASE

In 1972-73, Clyde E. Harvey and Neil J. Nielsen, plaintiffs-appellants in this case, were partners in retail gasoline service stations, doing business as U-Serve Gas Company ("U-Serve"). Defendant-appellee Fearless Farris Wholesale, Inc. ("Wholesale") was a wholesaler of petroleum products and is wholly owned by Farris C. Lind. The other five named corporate defendants-appellees were retail gasoline service station companies ("Retail Companies"), also wholly owned by Lind.

Wholesale formerly sold its products both to the Retail Companies and to unaffiliated retailers, including U-Serve. Then the fuel shortage of 1973 set in. Beginning in January 1973, Wholesale reduced deliveries to U-Serve; later in that year Wholesale completely cut off U-Serve and six other retail customers, which included J. C. Penney Co., the Seven-Eleven chain, and Circle K. In February 1974, under the federal government's mandatory allocation program, deliveries were partially restored.

Plaintiffs Harvey and Nielsen first filed a complaint against the defendant companies in March 1974. This complaint, as amended in January of 1975, sought recovery in three counts. Count I alleges, Inter alia, a conspiracy in restraint of trade in violation of § 1 of the Sherman Act, 15 U.S.C. § 1. Count II alleges violation of Idaho Code § 28-2-615 (corresponding to § 2-615 of the Uniform Commercial Code), which pertains to a seller's duty to allocate supplies to customers under a contract of sale; Count III charges tortious interference with contractual and business arrangements alleged to exist between plaintiffs and Wholesale.

The defendants moved for summary judgment in July 1974, supporting their motion with affidavits pursuant to F.R.Civ.P. 56. Plaintiffs filed counter-affidavits. In addition, both parties have taken depositions and have filed subsequent affidavits and counter-affidavits.

In a partial summary judgment order of September 5, 1975, the district court granted the defendant companies' motion for summary judgment on the Count I (Sherman Act) claim, but allowed the other two counts of the amended complaint to remain on the merits. Harvey and Nielsen appealed from the partial summary judgment and both parties briefed the Sherman Act issue for this court. However, on February 3, 1977, this court dismissed the appeal for lack of a final order in the district court, remanding the matter for disposition of the remaining two counts. On June 10, 1977, the district court entered a final judgment in favor of defendants on these counts, and this appeal followed.

In accordance with this court's order of February 3, 1977, the parties utilized their briefs prepared in the first appeal for their Sherman Act claim in this second appeal. Both parties, in addition, briefed on this appeal the issues arising under Count II. Plaintiffs did not pursue their Count III claim in briefs or at oral argument on this appeal.

II. SHERMAN ACT CLAIM: INTRA-ENTERPRISE CONSPIRACY

Plaintiffs allege that the defendant companies' course of conduct during the period of fuel shortage constituted a "combination or conspiracy in restraint of trade" prohibited by § 1 of the Sherman Act. ² To prevail on this claim under § 1, plaintiffs ultimately would have to prove that the restraint alleged was an unreasonable one. ³ First, however, they must surmount the threshold hurdle of showing a combination or conspiracy. Defendants argue that plaintiffs have not passed this threshold.

a. Factual Issues

The parties do not dispute the following facts: that the incorporators of all the defendant corporations are the same; that Farris C. Lind is the sole shareholder, President and Board Chairman of Wholesale and of all the Retail Companies; that Lind, his wife Virginia, and Neal R. Olson are the directors of each of these corporations; that Olson is Executive Vice President and General Manager of each corporation; that Virginia Lind has never taken an active part in management of the corporations; and that accounting convenience and tax benefits were the original reasons for doing business through separate corporations.

However, plaintiffs argue that there is at least a genuine issue of fact as to whether two or more persons participated in the decision to cut off supplies to them in 1973. An affidavit of Mr. Olson, dated July 2, 1974, states:

"From the inception of each of the Defendant corporations and of all other business affairs of Farris C. Lind, (Lind) has been and remains the sole party who has made all business decisions, including policy, customer relations, source of supply and customers to whom the products shall be sold. . . . Neal R. Olson has had the responsibility of the day-to-day implementation of the business decisions and policies as set by Farris C. Lind."

Similarly, an affidavit of Mr. and Mrs. Lind, dated February 6, 1975, declares that "Lind is in total and complete control of each of the (defendant) corporations," and specifically that the decision to discontinue supplies to plaintiffs "was a decision made solely by Farris C. Lind," which Lind only subsequently communicated to Mr. Olson.

In an affidavit of September 23, 1974, in an affidavit of August 12, 1975, and in a deposition of January 16, 1975 plaintiff Harvey made statements the substance of which was as follows: that during several years of extensive dealings with Wholesale, Mr. Harvey had always conducted business directly with Mr. Olson and never with Mr. Lind; that Mr. Olson had often made on-the-spot sale agreements with Mr. Harvey and had promised not to cut off plaintiffs' supplies in the event of a gasoline shortage; ⁴ that it was Mr. Olson who advised plaintiffs that Wholesale would not make further deliveries of gasoline in 1973; that neither then nor at any other time was Mr. Harvey informed that Mr. Lind had made the decision or policy which Mr. Olson was carrying out; that Mr. Olson was highly skilled and experienced in the petroleum industry, while Mr. Lind was (in 1975) sick and unable to move freely about. Plaintiffs also point to a deposition taken from Mr. Olson on March 7, 1977, ⁵ wherein he states that he informed customers by telephone as to availability of supplies during the shortage months. In addition, plaintiffs note the provision for three directors under the defendant companies' articles of incorporation and under Idaho Code § 30-139, and urge that the decision to refuse to deal with plaintiffs must necessarily have been made by all three directors.

Since this case is here on appeal from summary judgment, this court must determine whether plaintiffs have raised a genuine issue of material fact within the meaning of F.R.Civ.P. 56(c). We are mindful of the Supreme Court's admonitions that "summary procedures should be used sparingly in complex antitrust litigation where motive and intent play leading roles, the proof is largely in the hands of the alleged conspirators, and hostile witnesses thicken the plot," Poller v. Columbia Broadcasting System, Inc., 368 U.S. 464, 473, 82 S.Ct. 486, 491, 7 L.Ed.2d 458 (1962); See Norfolk Monument Co. v. Woodlawn Memorial Gardens, Inc., 394 U.S. 700, 704, 89 S.Ct. 1391, 22 L.Ed.2d 658 (1969); and that on summary judgment motions "the inferences to be drawn from the underlying facts . . . must be viewed in the light most favorable to the party opposing the motion," United States v. Diebold, 369 U.S. 654, 655, 82 S.Ct. 993, 994, 8 L.Ed.2d 176 (1962); See Mutual Fund Investors v. Putnam Management Co., 553 F.2d 620, 624 (9th Cir. 1977); United States v. Perry, 431 F.2d 1020, 1022 (9th Cir. 1970). Nevertheless, the Poller case, Supra, is not an insurmountable barrier to summary disposition of antitrust complaints, as the Supreme Court later emphasized when it granted summary judgment in First National Bank of Arizona v. Cities Service Co., 391 U.S. 253, 290, 88 S.Ct. 1575, 20 L.Ed.2d 569 (1968). Accordingly, this court has adopted the following rule:

"Once the allegations of conspiracy made in the complaint are rebutted by probative evidence supporting an alternative interpretation of a defendant's conduct, if the plaintiff then fails to come forward with specific factual support of its allegations of conspiracy, summary judgment for the defendant becomes proper."

Mutual Fund Investors, supra, 553 F.2d at 624, quoting ALW, Inc. v. United Airlines, Inc., 510 F.2d 52, 55 (9th Cir. 1975).

Here the defendants have...