Belliston v. Texaco, Inc.

• Decision Date: 07 March 1972
• Docket Number: No. 71-1064.,71-1064.
• Citation: 455 F.2d 175
• Parties: Thomas E. BELLISTON et al., Plaintiffs-Appellees, v. TEXACO, INC., Defendant-Appellant.
• Court: U.S. Court of Appeals — Tenth Circuit

455 F.2d 175 (1972)

Thomas E. BELLISTON et al., Plaintiffs-Appellees, v. TEXACO, INC., Defendant-Appellant.

No. 71-1064.

United States Court of Appeals, Tenth Circuit.

February 4, 1972.

Rehearing Denied March 7, 1972.

Lawrence Alioto, San Francisco, Cal. (Peter L. Spinetta, San Francisco, Cal., on the brief), for plaintiffs-appellees.

Milton Handler, New York City (Robert F. McGinnis, New York City and Milas C. Bradford, Jr., Denver, Colo., on the brief), for defendant-appellant.

Before SETH, HOLLOWAY and BARRETT, Circuit Judges.

BARRETT, Circuit Judge.

Plaintiffs-appellees are 15 Texaco Service Station dealers in and around the Salt Lake City, Utah, area. They filed suit against Texaco, Inc. alleging anti-trust violations. Trial was to a jury in Salt Lake City. Plaintiffs were awarded treble damages in the amount of $2,623,317. Plaintiffs-appellees shall be referred to as Dealers. Defendant-appellant Texaco, Inc. shall be referred to as Texaco.

The amended complaint contained two counts, alleging four violations. Count one claimed that Texaco violated the Sherman Act, 15 U.S.C. § 1 et seq. in that it: (1) fixed the retail price at which Dealers must sell their gasoline; (2) coerced the Dealers to buy certain tires, batteries and accessories; and (3) conspired with other oil companies to fix the wholesale price of gasoline. The second count alleged that Texaco discriminated against the Dealers in the price of gasoline in violation of the Robinson-Patman Act, 15 U.S.C. § 13(a). Texaco challenged the lower court's jurisdiction to hear the Robinson-Patman complaint in its answer and amended answer. During trial, Texaco again challenged the court's jurisdiction by its motion to dismiss.

Texaco and six other major oil companies were doing business in the Salt Lake City area together with many other independent companies during the period June 27, 1963 through June 27, 1967.

All of the Dealers operated retail service stations. They obtained their gasoline from Texaco. They were typical Texaco stations numbering about sixty in this particular area.

ROBINSON-PATMAN CLAIM

Dealers were awarded $597,011 in damages under 15 U.S.C. §§ 13(a) and 15. They claimed that Texaco sold gasoline to Flinco, a wholesaler, at a price less than that charged the Dealers. Essentially, Dealers had to buy their gasoline from Texaco at a contracted price. That price included trucking charges from American's bulk plant in Salt Lake City to each Dealer's station. Flinco supplied the same services for its stations. It picked up Texaco's gasoline in tank trucks at American's bulk plant and delivered it to various stations. Flinco received from Texaco ½ cent per gallon discount as payment for providing this delivery service above its approximately 4 cents per gallon bulk discount. Flinco owned a number of Texaco stations which it leased to others. At times it was necessary for Flinco to place its own salaried personnel in charge of stations to keep them open. Dealers charge that since Flinco paid less for its gasoline, it was able to sell gasoline from its own stations at a lower price, which it did, thereby injurying Dealers.

Dealers complained of being undersold by Flinco outlets. Although the pump prices for both types of stations were generally uniform, Flinco introduced a "bonus program" in which customers at its outlets were given merchandise and discounts. This program was, in effect, made possible by reason of the bulk discount granted Flinco by Texaco. Flinco sold gasoline to its dealers at 2¢ a gallon lower than Dealers could buy the same gasoline from Texaco. Flinco's Texaco brand stations then gave their customers certificates which could be redeemed for gasoline or other products. They also gave away glassware and chances on a car and a camper. Flinco dealers, in turn, paid for this promotion. It cost each of them about 3¢ per gallon to participate, or a net cost to them of 1¢ per gallon. Dealers claim that this meant that Flinco's Texaco brand stations undersold them even though the retail prices on the pumps were the same for both types of stations.

Before Flinco started the "bonus program", it sponsored "canopy discounts" to customers at its stations. This involved a discount of several cents per gallon from the price showing on the pump. Flinco discontinued this practice when Texaco complained.

Dealers argue that against this background Flinco's 4¢ per gallon wholesale discount was completely unjustified. However, Flinco was required to provide services at its own expense to its outlets which Texaco provided free to its dealers. Flinco (1) provided all of the maintenance for its stations; (2) hired salesmen to take orders from its dealers for products offered; (3) supplied technical advice whenever needed; (4) provided money to pay for needed technical improvements; and (5) provided an accounting service to its dealers. Dealers claim that the ½ cent per gallon rebate was intended to cover all of Flinco's delivery expenses. Flinco was required to deliver gasoline all over the greater Salt Lake City area. This discount did not cover all of Flinco's delivery expenses. It is clear, however, that the total bulk discount to Flinco did create the opportunity for Flinco outlets to undersell Dealers. One of Texaco's employees testified that he was aware of the Flinco "bonus program" but that he was not aware that this meant that Flinco was underselling the Dealers. The first documented complaint received by Texaco from Dealers was a letter dated October, 1966, complaining of Flinco's "bonus program". Flinco's general manager testified that Texaco some time thereafter terminated Flinco's contract (the date is not reflected in the record) because of alleged price cutting. Flinco then instituted a suit against Texaco.

Texaco claims lack of jurisdiction in that all of the alleged discriminatory sales took place in Utah. Texaco contends, and we agree, that the "in commerce" provision of the Robinson-Patman Act has not been satisfied.

Texaco purchased its gasoline on a buy-sell agreement with the American Oil Company. Texaco produced crude oil in Colorado and sold it to American. American then transported this crude oil intermixed with other crude oil via its pipeline to Utah where it was then refined at American's refinery. Texaco then purchased its gasoline, with Texaco's special ingredients, from American. Texaco then distributed the gasoline to its Dealers.

For the "in commerce" provisions of the Robinson-Patman Act to be satisfied, the sales must be in interstate commerce. Standard Oil Co. v. Federal Trade Commission, 340 U.S. 231, 71 S.Ct. 240, 95 L.Ed. 239 (1951); Borden Company v. Federal Trade Commission, 339 F.2d 953 (7th Cir. 1964). Borden holds that it is not enough to show that a defendant is engaged in interstate commerce; rather, it must be established that the sale complained of was one occurring in interstate commerce. This court discussed the "in commerce" requirement of the Robinson-Patman Act in Food Basket, Inc. v. Albertson's, Inc., 383 F.2d 785 (10th Cir. 1967). Albertson's purchased its goods from two wholesalers in Salt Lake City. The wholesalers brought the goods into Utah and held title to them while in storage. Albertson's in turn supplied its retail stores in Salt Lake City. Albertson's sold 49 nationally advertised items at a lesser price in one of its retail stores than it charged in its other retail stores. Plaintiff Food Basket was in competition with the store charging the lower prices. The trial court granted Albertson's motion for summary judgment, holding that the discriminatory sales were not in commerce. This court affirmed, and said:

"It seems safe to assume that if the post-Meade Bread case law is contrary to the language used there, the Supreme Court would have corrected the misinterpretation on repeated applications for certiorari. We take the statute to mean what it says, i. e., that at least one of the discriminatory sales complained of must be in commerce." (Emphasis ours). 383 F.2d at 787.

All of the discriminatory sales took place in the Salt Lake City area. Also see Becker v. Safelite Glass Corporation, 244 F.Supp. 625 (D.Kan.1965) and Flotken's West, Inc. v. National Food Stores, Inc., 312 F.Supp. 136 (E.D.Mo.1970). (The facts are similar to those in Food Basket, Inc. v. Albertson's, Inc., supra. However, here the defendant brought the goods into the state). In Hiram Walker, Incorporated v. A. & S. Tropical, Inc., 407 F.2d 4 (5th Cir. 1969), cert. denied 396 U.S. 901, 90 S.Ct. 212, 24 L.Ed.2d 177 (1969), the Court said:

"Thus, the Robinson-Patman Act is applicable only where the allegedly discriminatory transactions took place in interstate commerce. That is, `. . at least one of the two transactions which, when compared, generate a discrimination must cross a state line . . .\'" (Citation omitted). 407 F.2d at 8-9.

In accord see the Borden and the Standard Oil cases, supra; Food Basket, Inc. v. Albertson's, Inc., supra; and Walker Oil Company v. Hudson Oil Company of Missouri, 414 F.2d 588 (5th Cir. 1969), cert. denied 396 U.S. 1042, 90 S.Ct. 684, 24 L.Ed.2d 686 (1970).

In Abramson v. Colonial Oil Company, 390 F.2d 873 (5th Cir. 1968), cert. denied 393 U.S. 831, 89 S.Ct. 99, 21 L.Ed.2d 101 (1968), a service station owner sued its wholesaler-supplier charging price discrimination. It was held that since the supplier purchased the petroleum products within the state, the acts complained of did not occur in interstate commerce.

The lower court's determination that the gasoline was the same "stuff"—i. e., a petroluem product—that Texaco produced in Colorado, thereby creating an interstate connection, is not valid. Even if this distinction were valid the petroleum products "changed hands". Texaco did not import the crude oil into Utah. Some courts have said that even if the seller brings produce into the state, puts it in a warehouse and then sells to retail outlets...