Arnott v. American Oil Co.

• Decision Date: 29 November 1979
• Docket Number: No. 79-1150,79-1150
• Citation: 609 F.2d 873
• Parties: 1979-2 Trade Cases 62,967 George ARNOTT, Appellee, v. The AMERICAN OIL COMPANY, a corporation, Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 873

609 F.2d 873

1979-2 Trade Cases 62,967

George ARNOTT, Appellee, v. The AMERICAN OIL COMPANY, a corporation, Appellant.

No. 79-1150.

United States Court of Appeals Eighth Circuit.

Submitted June 16, 1979.

Decided Oct. 24, 1979.

Rehearing and Rehearing En Banc Denied Nov. 29, 1979.

Maurice R. Glover, Chicago, Ill., argued and Timothy J. Nimick, Woods, Fuller, Shultz & Smith, Sioux Falls, S. D., on brief, for appellant.

Michael F. Pieplow and Edwin E. Evans, Davenport, Evans, Hurwitz & Smith, Sioux Falls, S. D., for appellee.

Before HEANEY, BRIGHT and STEPHENSON, Circuit Judges.

STEPHENSON, Circuit Judge.

Defendant-appellant, American Oil Company (Amoco), appeals from a judgment entered against it by the district court ¹ upon a jury verdict of $100,000 (trebled by the court under the antitrust laws to $300,000 plus attorney fees and costs) and punitive damages of $25,000. Numerous issues are raised, including insufficiency of the evidence to create submissible jury issues on plaintiff's claims. We affirm on condition that plaintiff-appellee, George Arnott, file a remittitur of all damages exceeding $125,000 plus interest and costs.

This action involves the relationship between a major oil company, Amoco (often referred to in the record as Standard Oil), and George Arnott, one of its service station dealers. On August 6, 1973, Amoco terminated Arnott as a Standard Oil dealer by terminating his lease and evicting him from the service station. Arnott's complaint alleged, and the jury found in answer to special interrogatories accompanying the general verdict, that (1) Amoco was guilty of false and fraudulent representations in inducing Arnott to execute the service station lease agreement; ² (2) Amoco breached the fiduciary duty owed to Arnott by terminating his lease without good cause and by not dealing with Arnott in good faith during the term of the lease agreement; (3) Amoco was guilty of a retail price-fixing combination in violation of the antitrust laws; and (4) Amoco breached its promise to pay certain legal fees and expenses in the amount of $393.75 incurred by Arnott in a state court action involving a suit brought by Amoco against Arnott and the former lessee of the service station in question. ³

I. Facts.

The record when viewed most favorably to the jury verdict for Arnott discloses the following. In October 1971 Arnott was operating a Standard Oil station in Minneapolis, Minnesota, ⁴ when he was approached by Amoco's sales manager for the Sioux Falls district, Dick Lucas, about operating a Standard station at an interstate location in Sioux Falls, South Dakota. Arnott declined. He was again contacted by Lucas in late 1971 and, as a result, flew to Sioux Falls. Lucas showed Arnott projected profit figures on the service station which were considerably better than those from Arnott's Minneapolis station. Arnott agreed to make the change. He entered into a lease agreement dated February 18, 1972, for a one-year period. It was then a standard policy of Amoco to issue only one-year leases, but there was also evidence at the trial that these leases were routinely renewed on an annual basis if the dealer operated the station in a reasonable manner. Arnott testified that it was his understanding that as long as he operated the station in a reasonable manner and it was a profitable venture for himself and Standard Oil, he could have it for as long as he wanted, which was in accord with his experience as a Standard Oil dealer.

The lease required the service station to remain open twenty-four hours a day. There was no specific agreement that Amoco would supply any specified amount of gasoline to the station. The lease was later amended in certain details. At the time the lease was executed, Arnott was given a written Statement of Policy issued by Amoco which set out the dealer-company relationship. Arnott was familiar with it as it was read as a part of the dealer indoctrination schools which Arnott attended and was followed by Amoco at Arnott's prior Standard Oil stations.

The Statement of Policy contained several provisions which were repeatedly violated by Amoco employees. ⁵ The Policy provisions which the record discloses were violated by Amoco may be summarized as follows: (1) Arnott would be an independent businessman who would have the right to run his station free from coercion or pressure on the part of any company representative; (2) no company representative would bring any pressure to bear on Arnott if he chose to handle competitive brands of motor oils; (3) with respect to tires, batteries, and accessories, Arnott would have complete freedom to buy these products from whomever he chose; the company would not tolerate coercion, harassment, or improper pressure of any kind by its salesmen in the sale of these products; (4) Arnott would have the absolute right to set his own resale price with respect to all Standard Oil products, including gasoline, and would be free to display and promote all products as he saw fit; and (5) Arnott would not be pressured into participating in advertising, sales promotions, or merchandising programs sponsored by the company.

On several occasions when Arnott placed competitive brands on display along with Standard Oil products, he was instructed by Amoco to remove the same. On one occasion Arnott purchased and placed on display Goodyear tires. Amoco's highest ranking dealer representative in South Dakota, Jack Reutschler, told Arnott that he should return the Goodyear tires and display only Atlas tires (Standard's brand) if he wanted to continue to operate the station. Arnott returned the Goodyear tires and discontinued selling them. Furthermore, Arnott's purchase of Standard's motor oil from a local wholesale distributor was discontinued by the wholesaler on instructions of Amoco, thereby requiring Arnott to purchase motor oil directly from Amoco. Arnott was also required to purchase Green Stamps, which he did at a cost of $3,000. Amoco threatened nonrenewal of his lease if he refused to do so. During the time Arnott operated his station, he received telephone calls from Amoco representatives instructing him to raise or lower his retail gasoline prices. When he deviated from Amoco pricing directives, Arnott was threatened with nonrenewal of his lease.

In addition, the evidence discloses that during the course of the lease agreement Amoco misrepresented the benefits to be received by Arnott for the installation of a carwash. Arnott was persuaded to purchase a carwash from Amoco for $15,430. In turn, a lease rider effective June 1, 1972, was entered into whereby Arnott was to receive a minimum monthly rebate. On October 13, 1972, Amoco cancelled the carwash rider agreement and presented Arnott with a new lease that substantially increased the amount of gallonage sales necessary before a rebate could be realized. This had the effect of reducing by one-half the monthly rental rebate paid to Arnott under the carwash agreement. In addition, the carwash installation necessitated the removal of a car hoist in one of the service bays. An Amoco representative stated that a new hoist compatible with the carwash would be installed. The new hoist was never received, and thus the station's capacity for mechanical work was reduced by half.

The difficulties Arnott had with Amoco over the misrepresentations made orally and those contained in the Statement of Policy and the carwash agreement described above took place during the first year Arnott operated the station. On one occasion a representative of Amoco suggested that Arnott move to a new location which was less desirable. Arnott refused to consider it.

Arnott signed a new lease agreement on December 8, 1972, effective February 19, 1973, for an additional one-year term. Arnott was not given a copy of the executed lease until June 1973. During the interim from February through May 1973 Arnott operated the station without a lease. He was advised by Amoco representatives that he was on probation and would not be given a lease unless he agreed to abide by the prices set by Amoco and to participate in their promotional programs. Arnott agreed to be cooperative in order to secure the lease renewal.

However, the problems continued. Amoco representatives visited the station twice a week. If matters were not handled to their satisfaction, Arnott was reminded that if he wanted to continue at his location, he would have to comply with Amoco's requirements.

The severe nationwide gas shortage which occurred in the spring of 1973 brought additional problems. On May 1, 1973, Amoco established an allocation program for each Standard Oil dealer. Arnott followed the allocation program and limited sales to customers. Nevertheless, he often exceeded his daily allocations and on several occasions ran out of gasoline.

Eventually Amoco's representative, Dick Lucas, suggested a program whereby Arnott was to place signs up in the daytime indicating that he was out of gasoline and then in the evening, when the service stations downtown would close, he was to remove the signs and sell gasoline. The purpose was to send motorists downtown in the daytime. Arnott refused because the costs were prohibitive. His main product was gasoline. To remain open during the daytime for oil changes and grease jobs was too costly.

During the last two weeks of his operation Arnott ran out of gasoline most evenings and eventually closed the station because it was not profitable to remain open. In addition, customers became very irate after pulling into the station only to find gasoline unavailable.

Arnott advised Amoco of his situation and that he was closing down from 10:00 p. m. to 6:00 a. m. However, Amoco advised Arnott that he was in violation of the lease in failing to maintain a 24-hour operation.

Arnott became frustrated, and on July 17, 1973, he signed a cancellation agreement to voluntarily leave the station. Later in the day he...