Blanton v. Mobil Oil Corp.

• Decision Date: 13 December 1983
• Docket Number: 82-3394,Nos. 82-3359,s. 82-3359
• Citation: 721 F.2d 1207
• Parties: 1984-1 Trade Cases 65,765 Jerry A. BLANTON, Plaintiff-Appellee/Cross-Appellant, v. MOBIL OIL CORPORATION, a corporation, Defendant-Appellant/Cross-Appellee. Roy H. HEALEY, Plaintiff-Appellee/Cross-Appellant, v. MOBIL OIL CORPORATION, a corporation, Defendant-Appellant/Cross-Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1207

721 F.2d 1207

1984-1 Trade Cases 65,765

Jerry A. BLANTON, Plaintiff-Appellee/Cross-Appellant, v. MOBIL OIL CORPORATION, a corporation,

Defendant-Appellant/Cross-Appellee.

Roy H. HEALEY, Plaintiff-Appellee/Cross-Appellant, v. MOBIL OIL CORPORATION, a corporation,

Defendant-Appellant/Cross-Appellee.

Nos. 82-3359, 82-3394.

United States Court of Appeals,

Ninth Circuit.

Argued and Submitted July 6, 1983.

Decided Dec. 13, 1983.

Robert H. Alsdorf, Kenneth Shear, Armstrong & Alsdorf, Seattle, Wash., for defendant-appellant/cross-appellee.

Stephen R. Morris, Jack D. Fudge, McCutchen, Black, Verleger & Shea, Los Angeles, Cal., for plaintiff-appellee/cross-appellant.

Appeal from the United States District Court for the Western District of Washington.

Before WRIGHT, CHOY and NELSON, Circuit Judges.

CHOY, Circuit Judge:

Jerry Blanton and Roy "Bud" Healey, the plaintiffs below, are former operators and lessees of service stations located in Seattle and owned by defendant Mobil Oil Corporation. Blanton was a Mobil dealer from August 30, 1973, until October 8, 1976. Healey operated his Mobil station from February 19, 1974, until March 8, 1977. Both dealers sued Mobil contending that during their respective tenures, Mobil damaged After a lengthy trial, the jury returned special verdicts in favor of both plaintiffs. The jury found that Blanton had suffered $134,585 in antitrust damages and $94,628 in other damages. Healey was found to have sustained $19,967 in antitrust damages and $11,144 in other damages. By special verdict, the jury found that both Blanton and Healey had been subjected to unlawful tying arrangements, attempted monopolization, breach of contract, and fraud. The jury also found that Blanton had been a victim of coerced resale price maintenance and a group boycott aimed at his separate retail operations. Mobil's post-trial motions for judgment n.o.v. or new trial were denied. Mobil appeals the antitrust and contract/fraud awards. ² Blanton and Healey cross-appeal the court's grant of a directed verdict in favor of Mobil on the FIPA claim.

                their businesses in violation of the Sherman Act, 15 U.S.C. Secs. 1, 2, section 3 of the Clayton Act, 15 U.S.C. Sec. 14, the Washington Consumer Protection Act, Wash.Rev.Code Sec. 19.86.010 et seq., 1 and the Washington Franchise Investment Protection Act ("FIPA"), Wash.Rev.Code Sec. 19.100.010 et seq.    They further alleged in diversity that their individual terminations as Mobil dealers involved fraud and breach of contract under Washington law
                

We affirm the antitrust judgment and reverse and remand both the contract/fraud judgment and the directed verdict on the FIPA claim.

I FACTS

The prime focus of this case is on the methods used by Western Washington Mobil agents to sell motor oil and "TBA & S"--tires, batteries, accessories and specialities--to Mobil dealers who lease their stations from Mobil. This thread knits together almost all charges in this lawsuit, since both Blanton and Healey alleged that their leases were terminated because they refused to purchase Mobil automotive products. The plaintiffs presented substantial evidence that certain Mobil agents used their double role as landlords and salesmen to gain an illegal competitive advantage for Mobil products.

A. Antitrust Claims

1. Tying Arrangements

The jury found that Mobil had imposed an illegal tying arrangement on both Blanton and Healey, a violation of Clayton Act Sec. 3 and a per se violation of Sherman Act Sec. 1. Northern Pacific Railway Co. v. United States, 356 U.S. 1, 78 S.Ct. 514, 2 L.Ed.2d 545 (1958). Mobil motor oil and TBA & S were tied to the lease and gasoline supply contract. Clayton Act Sec. 3 requires that both the tying and tied products be "goods, wares, merchandise, machinery, supplies, or other commodities...." Gasoline as a tying product and motor oil and TBA & S as tied products fall within this definition. See Broussard v. Socony Mobil Oil Co., 350 F.2d 346, 352 (5th Cir.1965). A lease of real property, while not covered by Clayton Act Sec. 3, can be a tying product under Sherman Act Sec. 1. See Northern Pacific.

Blanton and Healey each testified that they were threatened with termination of their dealerships unless they purchased Mobil motor oil and TBA & S. Blanton specifically testified that after he refused to make a large Mobil tire purchase, Mobil representatives made an inspection of his station and cited him for lease violations that included placement of trash in the trash enclosure, an unauthorized handle Other Western Washington Mobil dealers also testified that Mobil marketing representatives had threatened their leases in order to coerce purchases of Mobil products. George Peterson testified that the subject of his lease was raised when a Mobil representative attempted to sell him tires. Dick Page testified that Mobil's area manager asked him who was going to fill his gas tanks and maintain his station if he did not buy Mobil tires. Jimmy Scott was told that if he did not purchase Mobil products, Mobil might have to find a new station operator.

guard on the bathroom door that had been affixed to avoid vandalism, and damage to his personally owned desk. Mobil representatives confirmed the details of the inspection.

The pricing of Mobil products, particularly motor oil, supported the plaintiffs' assertion that Mobil dealers were used as captive consumers of Mobil products. There was unrebutted testimony that Mobil sold its motor oil to dealers at a price substantially above that at which Mobil oil was sold at retail by Safeway grocery stores and independent distributors. In fact, one Seattle area dealer, who owned his station and was thus not subject to any tying arrangement, testified that he found it economically preferable to drive across the Cascade Mountains to purchase Mobil motor oil from a distributor in Yakima than to purchase oil directly from Mobil in Seattle.

While Mobil representatives denied the existence of a tying arrangement, the district manager during the relevant period, Donald Hotsenpiller, did admit that purchases of oil and TBA & S were "considered" when Mobil decided whether to renew a station lease.

2. Resale Price Maintenance

Although it may not be self-evident that resale price maintenance in an effort to reduce prices would be an inevitably pernicious practice, it is well settled that maximum resale price fixing is a per se violation of the Sherman Act Sec. 1. Albrecht v. Herald Co., 390 U.S. 145, 151-54, 88 S.Ct. 869, 872-874, 19 L.Ed.2d 998 (1968). The jury found that Blanton had been coerced into lowering the price of his gasoline 5 or 6 cents per gallon during the last three months of 1974. Blanton's net profits fell during this period. Mobil had argued that the lower retail price was merely suggested, but the jury decided otherwise.

3. Group Boycott

The jury found that Blanton had been damaged by a group boycott as a result of coercion by Mobil. A group boycott, even one aimed against a single merchant, is a per se violation of the Sherman Act. Klor's Inc. v. Broadway-Hale Stores, Inc., 359 U.S. 207, 212-13, 79 S.Ct. 705, 709-10, 3 L.Ed.2d 741 (1959); Ostrofe v. H.S. Crocker Co., 670 F.2d 1378, 1381 n. 3 (9th Cir.1982), vacated on other grounds, --- U.S. ----, 103 S.Ct. 1244, 75 L.Ed.2d 475 (1983).

The evidence on this charge dealt with Mobil's attempts to discourage Mobil dealers from purchasing motor oil and TBA & S from Blanton. Blanton had been designated a "Key Dealer" for Mobil brand tires. In this capacity, Blanton was consigned Mobil tires which were to be available to local dealers on a fill-in basis. However, Blanton was not satisfied with that capacity. He determined that he could sell a range of Mobil products to Mobil dealers at prices below that available to the dealers direct from Mobil. This would be accomplished by purchasing Mobil products from independent distributors. Plaintiff Healey and three other Mobil dealers testified that they had been instructed by Mobil not to purchase Mobil products from Blanton. Mobil's Hotsenpiller stated at trial, "I think also maybe Jerry Blanton wanted to grow bigger than Mobil's policies and procedures would maybe want him to grow." R.T. 1879. Faced with a declining market for his distribution of Mobil products, Blanton abandoned his resale operation. Subsequent to termination of his dealership by Mobil, Blanton returned to selling motor oil and TBA & S from various producers, with considerable success.

4. Other Anticompetitive Acts

Plaintiffs also alleged that Mobil withheld performance of its obligations as landlord to coerce purchases of Mobil products and interfered with the advertising and promotional activities of Mobil dealers.

Several dealers testified that marketing representatives would raise the question of Mobil product purchases when service station maintenance was sought from Mobil. One former marketing representative, James Stueck, testified that he would tell dealers that increased purchases of Mobil TBA & S could expedite station maintenance. Blanton testified that he was told that if Delco could sell him batteries, Delco could paint his station.

Dealers testified that Mobil representatives insisted they curtail advertising and promotion of non-Mobil products. Mobil also placed restraints on the use of advertising for Mobil products.

The jury found in Mobil's favor on the claim of monopolization under section 2 of the Sherman Act. However, the jury did conclude that Mobil had made an attempt to monopolize in violation of section 2 and aggregated all antitrust damages for each plaintiff under the attempt claim.

B. Contract/Fraud Claims

The leases that Blanton signed in 1973 and Healey signed in 1974 contained "evergreen clauses" providing for automatic renewals at current rental rates. However, the clauses had an exception, which stated that the lease "shall terminate at the end of any current period (original or renewal) by...