U.S. v. Cargo Service Stations, Inc.

• Decision Date: 28 September 1981
• Docket Number: No. 80-5415,80-5415
• Citation: 657 F.2d 676
• Parties: 1981-2 Trade Cases 64,305 UNITED STATES of America, Plaintiff-Appellee, v. CARGO SERVICE STATIONS, INC., T. D. McRae, Incorporated, United Petroleum, Inc., Cargo Gasoline Co., Eastern Oil Company, Defendants-Appellants. . Unit B
• Court: U.S. Court of Appeals — Fifth Circuit

Page 676

657 F.2d 676

1981-2 Trade Cases 64,305

UNITED STATES of America, Plaintiff-Appellee, v. CARGO SERVICE STATIONS, INC., T. D. McRae, Incorporated United Petroleum, Inc., Cargo Gasoline Co. Eastern Oil Company, Defendants-Appellants.

No. 80-5415.

United States Court of Appeals, Fifth Circuit.

Unit B

Sept. 28, 1981.

Claude H. Tison, Jr., Tampa, Fla., for Cargo Service Stations, Cargo Gasoline Co. and Eastern Oil Co.

Ralph W. Rinehart, Tampa, Fla., for T. D. McRae, Inc. and United Petroleum, Inc.

Nicholas A. Lotito, Timothy Belz, and John Orr, Attys., Dept. of Justice, Antitrust Div., Atlanta, Ga., John J. Powers, III, Frederic Freilicher, Antitrust Div., Dept. of Justice, Washington, D. C., for plaintiff-appellee.

Appeals from the United States District Court for the Middle District of Florida.

Before FRANK M. JOHNSON, Jr. and HATCHETT, Circuit Judges, and SCOTT ^*, District Judge.

FRANK M. JOHNSON, Jr., Circuit Judge:

Appellants (Cargo Gasoline Company, Cargo Service Stations, Inc., Eastern Oil Company, T. D. McRae, Inc., and United Petroleum, Inc.), eight other corporate entities, and four individuals were charged in a one count indictment with engaging in a continuing conspiracy to fix prices for the retail sale of gasoline in Florida in unreasonable restraint of commerce, in violation of the Sherman Act, 15 U.S.C.A. § 1. Various other persons or entities, including the Florida Independent Gasoline Marketers Association (FIGMA), were named as unindicted co-conspirators. Eight corporate defendants and one individual defendant entered pleas of nolo contendere, which the district court accepted. The eight corporate defendants were sentenced to pay fines ranging from $20,000 to $300,000; the individual defendant was fined $20,000 and sentenced to imprisonment of one year, with eleven months suspended. The other defendants proceeded to trial.

The jury returned verdicts of not guilty with respect to the individual defendants and guilty with respect to the corporate defendants. The corporate defendants, who were fined from $70,000 to $250,000 for a total of $645,000, appeal.

A brief summary of the voluminous evidence presented at trial will suffice for purposes of this opinion. The persons and companies charged in the indictment (hereinafter referred to as conspirators) were independent retail marketers of gasoline in Florida during the period covered by the indictment. Unlike major brand marketers such as Exxon or Texaco, the independent retail marketers did not develop a national image through advertising and did not offer services such as repairs and credit card purchases. Instead, the independents attracted customers on the basis of a lower price, and thus their profits depended on a high volume of trade. The independents were fiercely competitive: a price difference as small as one cent per gallon between two stations in the same general location could result in such a loss of trade from the higher priced station to the lower that the higher priced station might soon cease doing business if its price were not adjusted to meet the competition. This extreme price sensitivity often resulted in "gas wars"; during some gas wars all retailers sold gasoline below cost.

The Government presented twenty-seven witnesses at trial, nineteen of whom were current or former employees of the indicted companies. Other witnesses included executives of the indicted companies' competitors and wholesale suppliers, an individual station operator, and a FIGMA employee. The testimony of the witnesses and documentary evidence, which will be described more fully below, attested to an agreement and a continuous course of action whereby executives of conspirator corporations and FIGMA's director contacted each other to assure coordinated joint price increases, to maintain high prices by challenging "price-cutters," and to stem local price disputes that could lead to gas wars. Appellants, on the other hand, testified that they only exchanged innocent price information and that their activity was necessary to conduct business in the extremely price-sensitive gasoline market.

Five grounds of error are advanced on appeal. First, appellants argue that the evidence was not sufficient to establish that the conspiracy occurred in or affected interstate commerce and thus the conspiracy, if it existed, did not fall within the scope of the Sherman Act. Second, appellants urge that the jury verdict is not supported by sufficient evidence. Third, appellants contend that the district court erred in instructing the jury on the jurisdictional and substantive elements of the offense. Fourth, appellants maintain that the district court erroneously refused them permission to interview the jurors concerning alleged juror misconduct. Last, appellants assert that they are entitled to a judgment notwithstanding the verdict since every person who could have acted as their agent has been acquitted of criminal wrongdoing. We find no merit in these contentions and accordingly affirm the convictions.

We turn first to appellants' contention that the evidence was insufficient to establish that the conspiracy occurred in or affected interstate commerce and thus did not fall within the purview of the Sherman Act. Section 1 of the Sherman Act prohibits conspiracies "in restraint of trade or commerce among the several states." This language has been construed to prohibit restraints that occur in the flow of interstate commerce or that substantially affect interstate commerce. Burke v. Ford, 389 U.S. 320, 88 S.Ct. 443, 19 L.Ed.2d 554 (1967); United States v. Cadillac Overall Supply Co., 568 F.2d 1078, 1082 (5th Cir.), cert. denied, 437 U.S. 903, 98 S.Ct. 3088, 57 L.Ed.2d 1133 (1978). Although in the instant case the indictment alleged that the restraint substantially affected interstate commerce and that it occurred in the flow of interstate commerce, proof of either theory is sufficient to sustain the convictions. Battle v. Liberty National Life Ins. Co., 493 F.2d 39, 48 (5th Cir. 1974), cert. denied, 419 U.S. 1110, 95 S.Ct. 784, 42 L.Ed.2d 807 (1975).

The Sherman Act embodies a Congressional policy to exercise "the utmost extent of (Congress') Constitutional power in restraining trust and monopoly agreements ...." Gulf Oil Corp. v. Copp Paving Co., 419 U.S. 186, 194-95, 95 S.Ct. 392, 397-98, 42 L.Ed.2d 378 (1974) (quoting United States v. South-Eastern Underwriters Ass'n, 322 U.S. 533, 558, 64 S.Ct. 1162, 1176, 88 L.Ed. 1440 (1944)). As has been repeatedly demonstrated, the constitutional power of Congress to regulate commerce is a broad power, even encompassing the growing of wheat for consumption by one's family. Wickard v. Filburn, 317 U.S. 111, 63 S.Ct. 82, 87 L.Ed. 122 (1942); see, e. g., Heart of Atlanta Motel, Inc. v. United States, 379 U.S. 241, 85 S.Ct. 348, 13 L.Ed.2d 258 (1964). The power of Congress includes the power to regulate the movement of persons through more than one state, for this movement is undeniably part of the intercourse that constitutes commerce. E. g., Heart of Atlanta Motel, Inc. v. United States, supra, 379 U.S. at 255-56, 85 S.Ct. at 356-57; Morgan v. Virginia, 328 U.S. 373, 66 S.Ct. 1050, 90 L.Ed. 1317 (1946); Hoke v. United States, 227 U.S. 308, 33 S.Ct. 281, 57 L.Ed. 523 (1913); Passenger Cases, 7 How. 283, 12 L.Ed. 702 (1849). Hence, if an action or practice of defendants affected the movement of persons from one state to another, it affected interstate commerce and is within the scope of the Sherman Act.

The Government presented evidence that one of the conspirators owned outlets at six Days Inn Motels, which were located near interstate highways and which had a substantial number of interstate customers. Furthermore, the evidence showed that other conspirators had stations adjoining interstate highways or near the state boundaries. Finally, one of the conspirators, through its office in St. Louis, issued credit cards to its St. Louis customers and then honored these credit cards at its Florida stations. We think that this evidence, ¹ viewed in light of modern transportation patterns, amply supports a finding that a conspiracy to control the prices of gasoline at these stations would substantially affect interstate commerce. ²

Appellants next urge that the jury verdict is not supported by sufficient evidence. But the verdict of the jury must be sustained "if there is substantial evidence, taking the view most favorable to the Government, to support it." Glasser v. United States, 315 U.S. 60, 80, 62 S.Ct. 457, 469, 86 L.Ed. 680 (1942); see, e. g., United States v. Conway, 632 U.S. 641 (5th Cir. 1980). In its attempt to prove that the persons named in the indictment engaged in a conspiracy to fix prices, the Government presented evidence that on several occasions FIGMA's Executive Director Syd Gervin contacted Cecil Liles, an employee of co-conspirator Key, and asked Liles to "take a look at" Key's outlets in areas where there were "going to be price moves." These contacts occurred a day to a week prior to the proposed price moves. During these contacts Gervin specified the geographic area to be affected by the price move, the date of the move, the exact amount of the price increase, and, on some occasions, the companies involved in the price move. Gervin also asked Liles if he would support the price moves; in most instances, Liles testified, he agreed. At least twelve other witnesses, some who were not indicted as conspirators and others who entered pleas of nolo contendere, testified concerning similar conversations with Gervin. Furthermore, Liles testified that he had numerous direct contacts with his competitors, including agents of appellants; participants in these conversations discussed specific dates for the moves, the amount of the increases and the other competitors who "could be depended upon" to support the price increases. Several witnesses testified about a meeting between appellants and...