North Penn Oil & Tire Co. v. Phillips Petroleum Co.
| Decision Date | 14 May 1973 |
| Docket Number | Civ. A. No. 73-797. |
| Citation | 358 F. Supp. 908 |
| Parties | NORTH PENN OIL & TIRE COMPANY v. PHILLIPS PETROLEUM COMPANY. |
| Court | U.S. District Court — Eastern District of Pennsylvania |
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J. Lawrence Grim, Jr., Grim & Grim, Perkasie, Pa., Michael J. Izzo, Jr., Clark, Ladner, Fortenbaugh & Young, Philadelphia, Pa., for plaintiff.
David Grove, Montgomery, McCracken, Walker & Rhoads, Philadelphia, Pa., for defendant.
This matter comes before the Court pursuant to plaintiff's motion for a preliminary injunction to prevent the defendant from terminating its supply of gasoline and other petroleum products to the plaintiff, a Phillips branded jobber. Plaintiff alleges that the termination by the defendant Phillips Petroleum Co. of plaintiff's supply of gasoline and other petroleum products would be in violation of the federal antitrust laws as well as a breach of contract. Plaintiff also alleges that the defendant should be enjoined from terminating its supply of gasoline and other petroleum products to the plaintiff on the grounds of promissory and equitable estoppel.
Plaintiff originally filed a complaint in the Court of Common Pleas of Bucks County on April 4, 1973 alleging that the defendant's proposed termination of the plaintiff's supply of gasoline and other petroleum products on April 15, 1973 would be in violation of the contractual agreements existing between plaintiff and defendant. The complaint requested, inter alia, that the Court enjoin the proposed termination of the plaintiff's supply of gasoline and other petroleum products. The Court of Common Pleas of Bucks County scheduled a hearing on the motion for a preliminary injunction for Friday, April 6, 1973. On April 5, 1973 this matter was removed, upon petition of the defendant, Phillips Petroleum Co., to this Court. On April 6, 1973 this Court scheduled a hearing on plaintiff's motion for a preliminary injunction for Friday, April 13, 1973. On April 12, 1973 plaintiff filed an amended complaint alleging, inter alia, breaches of contract and violations of the federal antitrust laws. On April 13, 1973, the parties advised the Court that the hearing on the motion for a preliminary injunction would take at least three full trial days and could not, therefore, be concluded on or before April 15, 1973, the date on which defendant's scheduled termination of plaintiff's supply of gasoline and other petroleum products was to take place. Accordingly, the Court, by agreement of the parties, continued the preliminary injunction hearing until April 23, 1973 and temporarily restrained the defendant from terminating plaintiff's supply of gasoline and petroleum products through April 27, 1973. On Friday, April 27, 1973 the Court, again by consent of the parties, extended the temporary restraining order through May 4, 1973.
The Court issues this Memorandum and Order denying plaintiff's motion for a preliminary injunction after hearing the testimony presented by the parties on April 23, 24, 25, 26, 27 and May 2, 1973, after a review of the proposed findings of fact and conclusions of law filed by both parties, and after considering the extensive briefs submitted by both parties.
Plaintiff, North Penn Oil and Tire Company (North Penn), a Pennsylvania corporation with its principal place of business at 135 North Ninth Street, Perkasie, Pennsylvania, is a petroleum products jobber managed and principally owned by Earl J. Gehman. The defendant, Phillips Petroleum Company, a Delaware Corporation with its principal place of business in Bartlesville, Oklahoma, is in the business of, inter alia, producing and purchasing crude oil which it refines into gasolines, oils, lubricants, and other petroleum products for distribution in various parts of the United States.
Since 1947 plaintiff operated as a partnership under the name of North Penn Oil Company, and, in 1951 Mr. Earl Gehman became a partner. Subsequently, the partnership was dissolved and, in 1961, the North Penn Oil & Tire Company was incorporated with Mr. Earl Gehman as its chief executive officer. (NT 30). At the date of its incorporation, North Penn Oil & Tire Company's assets consisted primarily of trucks, accounts receivable, tire inventory, miscellaneous tools and equipment and land. It owned no bulk plant storage facility to receive liquid petroleum products but used bulk plant facilities owned by the Texaco Company. Beginning in April 1961, North Penn became a consignee of the Texaco Company ("Texaco") for the distribution of Texaco retail service station outlets and commercial customers in an area in and around Perkasie, Pennsylvania, of gasoline and other automobile related petroleum products. Because of the limited growth potential in being a consignee, in October 1961 North Penn was considering termination of its consignee relationship with Texaco to become a jobber for a major-branded gasoline and petroleum products company. At this time there was no shortage of gasoline, and there was no difficulty in obtaining supply from almost any major oil company. (NT 33, 34). In October 1961, Phillips Petroleum Company was relatively unknown in the Northeastern United States Market when Jerry Rhoads, a Phillips District Representative, called upon North Penn and initiated conversations concerning the possibility of North Penn becoming a jobber (distributor) for Phillips' gasoline, oils, lubricants, and other petroleum products in an area in and around Perkasie, Pennsylvania. (NT 35-37). At that time, Phillips was actively engaged in efforts to expand its market into the Northeastern area of the United States through a program designated by it as its "March to Maine." The objective of Phillips was to expand its operations to every state. (NT 37).
The contemplated change from consignee status to jobber status for North Penn would require considerable capital investment in the nature of purchase and construction of bulk storage facilities including tanks and warehouse. Also, considerable sales effort would be required to convince existing dealer accounts to switch to the Phillips brand because Phillips at that time was relatively unknown to dealers in the Northeast. (NT 37, 43). In the conversations with Jerry Rhoads, Earl Gehman specifically questioned Rhoads as to whether Phillips was coming into the Northeast to stay, because Gehman specifically indicated that he never wanted to make another product change. In response to Mr. Gehman's questioning, Mr. Rhoads replied that "Phillips never had retreated from an area." (NT 37-38).
After subsequent conversations, a meeting was set up for November 29 1961 between Messrs. Rhoads, Gehman and Doug Hawkland (Rhoads' immediate superior) at the Holiday Inn in Allentown, Pennsylvania (NT 39). At this meeting, plaintiff contends an overall verbal agreement was reached among the parties as to North Penn's becoming a Phillips' jobber. Plaintiff further testified that this oral agreement contemplated that Phillips would finance on a long-term basis the construction of a bulk plant and warehouse facility, with a lease and sublease agreement terminating in 1979, and that Phillips would supply gasoline and petroleum products for an initial contract period of three years, which would be renewable on an annual basis each succeeding year, and would not be terminated except for cause until after the date of termination of the lease and sublease agreement. Mr. Gehman further testified, however, that his understanding that the jobber contract would not be terminated until after the date of the termination of the finance agreement (1979) was based upon statements by Phillips' employees that Phillips had never left a marketing area which it had once entered (NT 193, 209). The Court finds that such statements did not constitute an oral promise that Phillips would not terminate the jobber contract except for cause. Furthermore, Mr. Gehman also testified that he was aware that the Phillips employees at the November 29, 1961 meeting had no authority to bind Phillips (NT 219). Therefore, the Court finds that the Phillips employees with whom the plaintiff had his discussions were not authorized to make any such oral agreement.
On December 6, 1961, Phillips' representatives presented and North Penn executed a standard form "Jobber Sales Contract." This contract in addition to providing for purchase of minimum and maximum amounts of petroleum products contained inter alia the following terms and provisions:
On the same date, December 6, 1961, Phillips presented and North Penn executed a standard form "Lubricating Oil and Grease Contract." This contract, in addition to providing for the purchase of minimum and maximum amounts of lubricating oils and greases, contained, inter alia, the following terms and provisions:
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