Bailey v. Allgas, Inc.

• Decision Date: 29 September 2000
• Docket Number: No. CV 96-B-0631-S.,CV 96-B-0631-S.
• Parties: P. David BAILEY and Doris Bailey, Plaintiffs, v. ALLGAS, INC., et al., Defendants.
• Court: U.S. District Court — Northern District of Alabama

148 F.Supp.2d 1222

P. David BAILEY and Doris Bailey, Plaintiffs, v. ALLGAS, INC., et al., Defendants.

No. CV 96-B-0631-S.

United States District Court, N.D. Alabama, Southern Division.

September 29, 2000.

COPYRIGHT MATERIAL OMITTED

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Romaine S. Scott, III, Garrison Scott Gamble & Rosenthal P.C., L. Vastine Stabler,

Jr., Birmingham, AL, for P. David Bailey, Doris Bailey, plaintiffs.

Lee E. Bains, Jr., N. Lee Cooper, George G. Lynn, Carl S. Burkhalter, Patrick C. Cooper, Maynard, Cooper & Gale, William A. Scott, Jr., Joseph E. Stott, Clark & Scott P.C., Birmingham, AL, Keith M. Benit, Watson & Jernigan, Jackson, MS, for Allgas, Inc., William Ervin, Lampton-Love, Inc., Liquified Petroleum Gas Management, Inc., defendants.

MEMORANDUM OPINION

BLACKBURN, District Judge.

Currently before the court is Defendants' Motion to Strike the Expert Testimony of Gunther and Motion for Summary Judgment filed by defendants Allgas, Inc. ("Allgas"),¹ Lampton-Love, Inc. ("Lampton-Love"), Liquified Petroleum Gas Management, Inc. ("Liquified Petroleum") and William Ervin ("Ervin").² Plaintiffs P. David Bailey ("Bailey") and Doris Bailey (collectively, "plaintiffs") filed suit against defendants alleging claims for violations of the Robinson Patman Act, the Alabama Unfair Trade Practices Act, the Alabama Motor Fuel Marketing Act, and a claim for tortious interference. Upon review of the record, the submissions of the parties, the argument of counsel, and the relevant law, the court is of the opinion that defendants' Motions are due to be granted.

I. FACTUAL AND PROCEDURAL HISTORY

A. Background

Defendant Allgas is in the business of distributing and selling liquid propane gas in Alabama. (Complaint ("Compl.") at ¶ 9; Deposition of Bill Ervin ("Ervin Dep."), included in plaintiff's Second Submission in Opposition to Motion for Summary Judgment, at 46-49, 55-60.) Allgas has six district offices in northern Alabama. (Ervin Dep. at 55-57.) One of Allgas's district offices is located in the town of Altoona, which is in the eastern part of Etowah County, Alabama. (See Ex. B, attached to Joint Motion to Supplement Record on Appeal, filed October 5, 1998.) Defendant Lampton-Love is Allgas's parent company; it does not distribute or sell liquid propane gas in Alabama. (Compl. at ¶ 13; Deposition of Robert Y. Love ("Love Dep."), included in plaintiffs' Second Submission in Opposition to Motion for Summary Judgment, at 12-13.) Defendant Liquified Petroleum is a company related to Allgas; it bills and collects the accounts of Allgas customers. (Compl. at ¶ 14; Love Dep. at 16, 19, 23; Ervin Dep. at 31.) Defendant Ervin is the President of Allgas. (Compl. at ¶ 15; Love Dep. at 43-45; Ervin Dep. at 23.)

In August 1984, Allgas hired Bailey to manage the Altoona district office. (Compl. at ¶ 6; Ervin Dep. at 111-12.) Shortly after becoming manager, Bailey hired as Allgas employees his brother Max Bailey and several relatives. (Ervin dep. at 139-41; Love Dep. at 99-100; Deposition of Pronce David Bailey ("P.D. Bailey Dep."), attached as Ex. C to defendants' Appendix of Evidence, at 28, 166-67.)

The Altoona district employed four truck drivers who delivered gas to Allgas customers. (P.D. Bailey Dep. at 76.) Each driver had his own route covering a specific geographic sector of the district's service area. (Id. at 79-80.) As in most liquid propane businesses, the drivers tended to develop a relationship with their customers. (Id.)

In 1991, Ervin, the President of Allgas, promoted Bailey to manager of Allgas's Gardendale district office in Cullman County, Alabama. (Ervin Dep. at 114; P.D. Bailey Dep. at 32-33.) Around the same time, Ervin also promoted Max Bailey to replace his brother as manager of the Altoona district office. (Deposition of Max Bailey ("Max Bailey Dep."), attached as Ex. D to plaintiffs' Appendix of Evidence, at 29-32.) In October 1993, after a dispute with management at Allgas, Bailey resigned his manager's position at Allgas. Bailey decided to start his own business in competition with Allgas. (Ervin Dep. at 124-28; P.D. Bailey Dep. at 98-100.) In early 1994, Bailey obtained a $400,000 loan from the United States Small Business Administration ("SBA") to fund the business. (Compl. at ¶ 7; P.D. Bailey at 111-15.)

In September of 1994, P.D. Bailey then started his own propane business, Bailey's Propane Gas. (Max Bailey Dep. at 79-81, 83; Compl. at ¶ 8.) The company was headquartered in the town of Susan Moore, which is located not far from Allgas's Altoona district office. (See Max Bailey Dep. at 80; see also Ex. B, attached to Joint Motion to Supplement Record on Appeal, filed October 5, 1998.) Bailey's Propane Gas intended to serve principally Blount County and parts of Etowah, Marshall, Cullman, and St. Clair counties. (Plaintiffs' Response to Interrogatories by Defendant, attached as Ex. G to Defendants' Addendum of Evidence, filed March 24, 1997, at No. 7.) Plaintiffs admit that over eight other companies sold liquid propane in this tri-county area, including Allgas, Amerigas, Country Gas, Dowdle Butane Gas, Empire Gas, Ferrell Gas, Jordan Gas, and Southland Gas. (Id. at No. 8.)

In August, Bailey hired Max Bailey away from his manager's position in the Allgas Altoona office. (Ervin Dep. at 140-41; Max Bailey Dep. at 79-81.) Bailey also hired two other Allgas employees from the Altoona office, and another from the Gardendale office where he had previously worked. (Max Bailey Dep. at 72-81; P.D. Bailey Dep. at 103-10, 115-16; Ervin Dep. at 219-21.) Bailey asked other Allgas employees to come to work for him as well. (Id.)

In mid-August 1994, Allgas dropped the price of gas sold to its residential customers in the Altoona service area from 67 cents to 50 cents per gallon. (Ervin Dep. at 274-80.) Allgas contends that the price was reduced to avoid losing customers to Bailey's Propane Gas, which intended to offer gas at a discount, and reduce the risk of losing the Altoona office's truck drivers. (Id. at 279-81.) Plaintiffs, however, allege that Allgas dropped its prices to drive them out of business. (Compl. at ¶ 10.)

In late December 1994, Allgas began to raise its residential prices in the Altoona office from 50 cents to 65 cents. (Ervin Dep. at 285-86.) In 1995, the Altoona office continued to increase the price of gas in the residential sector.

In August 1995, Bailey's Propane Gas went out of business for which plaintiffs blame Allgas's low gas prices. (Compl. at ¶ 16.) Subsequently, plaintiffs defaulted on the SBA loan of $400,000. (Compl. at ¶ 17.) Allgas argues that the failure of plaintiffs' business was caused by Bailey's mismanagement of the $400,000 loan from the SBA. (Defendants' Memorandum in Support of their Motion to Strike the Expert Testimony of Gunther and their Motion for Summary Judgment, submitted October 22, 1999, at 7.) Allgas also contends that the demise of plaintiffs' business was partly the result of unseasonably warm weather during the winter months of 1994-95, which greatly reduced the demand for liquid propane for heating. (Id.)

B. Proceedings of the Lawsuit

In March 1996, plaintiffs brought this antitrust suit against defendants. Plaintiffs alleged, inter alia, that defendants violated the Robinson-Patman Act by engaging in predatory pricing to drive plaintiffs out of business. On March 13, 1997, pursuant to Fed.R.Civ.P. 26, plaintiffs submitted the expert report of William Gunther ("Gunther"), then Professor of Economics at the University of Alabama. (Expert Report prepared by William D. Gunther, Ph.D. ("Gunther's report"), attached as Ex. E to defs.' Appendix of Evidence.) In his report, Gunther purported to have analyzed core antitrust issues in the case, such as the definition of the relevant product and geographic markets, the market power of Allgas and other competitors, Allgas's purported recoupment of losses, and barriers to entry. (See id.) On March 19, 1997, defendants took Gunther's deposition. (Deposition of William David Gunther, Ph.D. ("Gunther Dep."), attached as Exhibit F to defs.' Appendix of Evidence.) At the deposition, Gunther offered only five documents in support of his opinions. (See id.)

On March 24, 1997, defendants filed a Motion for Summary Judgment. On April 25, 1997, defendants moved to strike the affidavits of Max Bailey and Gunther, which were submitted in support of plaintiffs' Opposition to Summary Judgment. On September 24, 1997, Judge Robert B. Propst denied defendants' Motion for Summary Judgment and Motion to Strike. In denying the motions, Judge Propst did not focus on the issue of the relevant geographic market because defendants had not raised that issue in their motion.

The case was set for trial on March 16, 1998. On February 18, 1998, upon defendants' Motion, Judge Propst informed the parties that he would conduct a Rule 104 hearing relating to Defendants' Motion to Strike the Affidavit of Max Bailey and the Expert Report, Testimony, and Affidavit of Gunther. On March 11, 1998, after briefing by the parties, Judge Propst held a day-long Rule 104 hearing. At the hearing, plaintiffs conceded that an essential element of the Robinson-Patman claim is the relevant geographic market and that they carried the burden of proof on that issue. (Transcript of March 11, 1998 Rule 104 Hearing, attached as Exhibit G to defs.' Appendix of Evidence, at 11-12, 20-21, 32.) Plaintiffs further admitted that expert testimony was necessary to establish the relevant geographic market. (Id.) Thus, if Gunther's testimony on the relevant geographic market was not admitted, plaintiffs could not prove the Robinson-Patman claim.

On March 15, 1998, Judge Propst informed the parties that he wished to continue the Rule 104 hearing in chambers the morning of March 16, the day the trial was to begin. When the hearing resumed, Judge Propst extensively questioned plaintiffs' counsel about the reliability of Gunther's expert report, his deposition,...