Malcolm v. Marathon Oil Co.
| Decision Date | 17 April 1981 |
| Docket Number | No. 77-2515,77-2515 |
| Citation | 642 F.2d 845 |
| Parties | 1981-1 Trade Cases 63,954 Patrick A. MALCOLM d/b/a Spar Oil Company and Spar Oil Company of Georgia, a Corporation, Plaintiffs-Appellants, v. MARATHON OIL COMPANY, Crown Central Petroleum Corporation, Tenneco Oil Company et al., Defendants-Appellees. . Unit B |
| Court | U.S. Court of Appeals — Fifth Circuit |
David R. Aufdenspring, Gary G. Grindler, Atlanta, Ga., for plaintiffs-appellants.
Trammell E. Vickery, John C. Butters, Atlanta, Ga., for Tenneco Oil Co.
Charles L. Gowen, Joseph R. Gladden, Jr., Michael Eric Ross, Atlanta, Ga., for Marathon Oil Co.
Morton A. Sacks, Baltimore, Md., for Crown Central.
Charles Rippin, Edward T. Brennan, Savannah, Ga., for Colonial Oil Ind.
Appeal from the United States District Court for the Middle District of Georgia.
Before GODBOLD, Chief Judge, TUTTLE and HILL, Circuit Judges.
Patrick Malcolm's former occupation qualifies him as a member of a vanishing breed. From 1965 to 1972 he was an independent gasoline retailer who participated in price wars in south Georgia. By 1972 he had 17 stations and plans for further expansion.
Independent gasoline retailers are considered to be mavericks by major brand wholesalers and retailers, because independents post consistently lower prices than major brand retailers. But even among independent retail businesses Malcolm's operation was unusual. Malcolm's "pricing was the key to (his) business." He sought to charge one to two cents per gallon below the price set by other independents. In order to succeed in this marketing strategy Malcolm cut every conceivable expense. He invested little capital in his stations and offered few of the services found at other stations.
Malcolm's career as a gasoline retailer ended in 1972. In August, his last supplier refused to sell him additional gasoline. Malcolm failed to locate a substitute supplier. In September and October of that year his stations exhausted their gasoline supplies. As a result Malcolm's retail gasoline business abruptly concluded in a manner resembling the demise of many other independent gasoline retailers.
Malcolm, however, did not retire quietly. Even before the exhaustion of his gasoline supplies Malcolm considered filing a lawsuit. Shortly after the closing of his business he acted on those plans. On March 14, 1973 he filed a complaint alleging federal antitrust violations by numerous entities including the five present defendants.
Malcolm believed that powerful interests in the gasoline industry desired and achieved his demise. The defendants, predominately marketers of gasoline, had favored relatively high retail prices of gasoline because high retail prices ensured higher wholesale prices and greater profits at all levels of the distribution chain. 1 Malcolm reasoned that his "price cutting" in the retail market disturbed these defendants and others. He then found evidence of communication among the members of the gasoline industry. In discerning a conspiracy from these facts Malcolm apparently adopted the view of Adam Smith who wrote that: "People of the same trade seldom meet together, even for merriment or diversion but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices." A. Smith, The Wealth of Nations 232 (Pelican reprint 1980). This conspiracy which disliked price-cutters, Malcolm alleged, took retaliatory actions against him that violated the antitrust laws in two respects. First he claimed that while he was still in business the defendants conspired to influence the retail market by causing his competitors to drop their prices below his costs. Second, when this first tactic did not drive him from the market, the defendants, Malcolm claimed, conspired with all gasoline suppliers to refuse to sell him gasoline for his stations. For these two alleged antitrust violations Malcolm sought monetary damages.
Malcolm did not succeed in the district court. That court directed a verdict against Malcolm on both counts for two reasons. With respect to each alleged violation the court found that Malcolm had presented insufficient evidence on the fact of injury and the amount of damages. In appealing this ruling Malcolm contends that he did introduce substantial evidence on these questions and that the district court erred in directing a verdict on those grounds.
This Court will limit the scope of its review of this case. The district court ruled the plaintiff's evidence was insufficient only on the issues of injury in fact and amount of damages. That court issued no ruling on whether the defendants violated the antitrust laws. The parties have not fully addressed the alleged conspiracy and substantive violations and, in fact, counsel on both sides agreed in oral argument that because of the scope of the trial court's ruling, this Court must assume that the violations did occur. Thus, this Court will assume that Malcolm sufficiently alleged and proved actions in violation of the antitrust laws and generally will seek only to answer the question: "Given the alleged violations of the antitrust laws, did the plaintiff show substantial evidence of injury and amount of damages?" Upon completion of this review, we believe that the district court erred in ruling that Malcolm introduced insufficient evidence of injury in fact and amount of damages on both claims for antitrust damages.
This Court must focus on the plaintiff's evidence. To avoid a directed verdict, Malcolm must have presented sufficient evidence to create a jury question with respect to each element of his case. As plaintiff, he must introduce what this Court has called "substantial evidence to create a jury question." Boeing Co. v. Shipman, 411 F.2d 365, 375 (5th Cir. 1969) (en banc). Substantial evidence constitutes "evidence of such quality and weight that reasonable and fair-minded men in the exercise of impartial judgment might reach different conclusions." Id. at 374. The Court, however, should view all the evidence "in the light and with all reasonable inferences most favorable to the party opposed to the motion." Id. Thus, this Court must consider all evidence in such a light, and all statements in this opinion reflect that requirement.
This posture of the case requires that the facts be set out in detail.
While Malcolm sold gasoline in certain retail markets, the defendant oil companies competed at various marketing levels within the same geographic area. In this area, the defendants operated at the wholesale level, selling gasoline to wholesalers who would sell to retailers. 2 In addition, the defendants would also supply gasoline directly to retailers in Malcolm's area. Defendant Crown Central also sold gasoline at the retail level in some cities where Malcolm had stations.
The defendants were not always directly competing with Malcolm at the retail level, but activity at the retail level concerned them. The retail prices indirectly affected the defendants' profits. When retail prices dropped the defendants' wholesale business would suffer. If the defendants' retail customers could not meet the lower prices, the defendants would lose volume. If the defendants cut wholesale prices to allow the retailers to meet low prices, and, thus, retain volume, the defendants' profits margins decreased. As a result, the defendants desired non-depressed retail markets.
The pricing practices of retailers would concern the defendants because of this interrelation of the wholesale and retail markets. Because Malcolm was known as a price-cutter who competed against other retailers of defendants' gasoline, his pricing practices would naturally draw their attention. Defendants Tenneco, Marathon and Crown Central without question recognized Malcolm as a price-cutter in the retail gasoline market. One witness stated that among independents Malcolm's stations were recognized as being among the more aggressive price-cutters.
Although we all in the independent business are somewhat price cutters, some are more than others. And Spar (Malcolm's business) was one of a group that seemed to be more than others.
Testimony was heard that Malcolm's competitors considered his pricing practices a cause of depressed prices and discussed the chances of improving the situation. The discussion included soliciting the aid of Malcolm's last two suppliers in a campaign to persuade Malcolm to raise his prices. In addition, employees of defendant Marathon wrote memoranda indicating their belief that Malcolm's pricing practices contributed to depressed prices. Perhaps the most direct such statement by Marathon came near the end of Malcolm's career in the gasoline retail market when one Marathon employee wrote:
Pat Malcolmb (sic) our old marketing thorn from Ty Ty Georgia who in the past under the Spar brand has contributed to numerous bad market conditions, has closed all his stations. (Emphasis added.)
The defendants, it may be inferred, were happy when Malcolm retired from the retail market.
Proof of unsympathetic thoughts, however, will not entitle an antitrust plaintiff to recover. An antitrust plaintiff must show that the defendants' actions violated the antitrust laws in a manner that gives him standing to sue. At trial, Malcolm attempted to show two types of violations by the defendants and others: 1) a conspiracy to injure Malcolm's business by concerted low pricing among his retail competitors who were pushed into this action by their suppliers, including the defendants; and 2) conspiracy among suppliers, including four defendants, to refuse to sell gasoline to Malcolm in order to drive him out of business. Given the parties' assumption that two violations of the laws occurred, plaintiff Malcolm on this appeal only need show injury-in-fact and amount of damages resulting from the defendants' assumed violations of the antitrust laws.
On the pricing count,...
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