Blaylock v. Cheker Oil Co.
| Decision Date | 02 December 1976 |
| Docket Number | Nos. 76-2149,76-2294,s. 76-2149 |
| Parties | 1976-2 Trade Cases 61,216 Gary BLAYLOCK et al., Plaintiffs-Appellees, v. CHEKER OIL COMPANY, an Illinois Corporation, Defendant-Appellant. |
| Court | U.S. Court of Appeals — Sixth Circuit |
Sherwin J. Malkin, Malkin & Gottlieb, Chicago, Ill., for appellant.
Samuel D. Carpenter, Verdervoort, Cooke, McFee, Christ, Carpenter & Fisher, Battle Creek, Mich., for appellees.
Before EDWARDS, LIVELY and ENGEL, Circuit Judges.
Cheker Oil Company (Cheker) appeals from a preliminary injunction and an order holding it in contempt of the preliminary injunction.
This action was filed on November 24, 1975 by three lessees of service stations owned by Cheker and located in neighboring communities in Michigan. The gravamen of the complaint was that Cheker began enforcing lease provisions which required the payment of minimum monthly rentals only after the energy crisis of 1973-1974 created a severe shortage of gasoline. It was charged that although the leases had always required such payments Cheker had not previously enforced these provisions. The complaint charged that Cheker was in violation of a regulation issued by the Federal Energy Administration (FEA) pursuant to the Emergency Petroleum Allocation Act of 1973, 15 U.S.C. § 751 et seq. (EPAA), as amended. Jurisdiction was also asserted under the Sherman Act, the Clayton Act and diversity of citizenship.
The FEA regulation referred to in the complaint requires that suppliers deal with purchasers of allocated products in accordance with "normal business practices in effect during the base period. . . . " 10 C.F.R. § 210.62(a). Sub-section (c) of Section 210.62 provides, in part:
(c) Any practice which constitutes a means to obtain a price higher than is permitted by the regulations in this chapter or to impose terms or conditions not customarily imposed upon the sale of an allocated product is a violation of these regulations. . . .
The complaint stated that the plaintiffs had filed a complaint with the Chicago office of the Federal Energy Office (FEO) but that a preliminary injunction was required to prevent irreparable injury during the pendency of the FEO proceedings.
The complaint also charged, without specificity, that Cheker's actions constituted violations of Sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1 and 2; and of Section 3 of the Clayton Act, 15 U.S.C. § 14. In another count recovery was sought for breach of contract. The leases between the three plaintiffs and Cheker were filed as exhibits with the complaint. The identical (except as to amount of minimum rent) leases were for one year and all expired on August 31, 1974. Each provided for a rental of two cents per gallon for each gallon of gasoline sold on the premises, with a minimum stated monthly rental. Rent was payable daily, with any deficiency in the minimum rent for a given month being due on the first day of the following month. Each lessee was required to make a deposit of $1,000 with Cheker as security for faithful performance of the terms of the lease. No lessee was required to purchase petroleum products from Cheker, and Cheker was not required to furnish any such products. The leases contained no provisions with respect to prices in the event purchases were made by the lessees from Cheker.
None of the provisions of this lease shall be construed as reserving or granting to LESSOR any right to exercise any control over the business or operations of LESSEE conducted on the leased premises, or to direct in any respect the manner in which such business and operations shall be conducted. The entire control and direction of LESSEE'S business on the leased premises shall be and remain with LESSEE. . . .
Among other things it was alleged that Cheker had dictated prices that the plaintiffs were required to charge for retail sales of gasoline.
The parties attempted to negotiate a settlement of their differences, but these negotiations were not successful, and the plaintiffs filed a "Petition for Preliminary Injunction Order" on February 4, 1976. The prayer of this petition was that Cheker be required to continue to sell and deliver gasoline to the plaintiffs at prices and terms discussed but never agreed to by the parties. The basic disagreement was whether prices to the plaintiffs should be "pegged" to those charged at a single company-operated Cheker station or to the average price charged by four such stations. Before the district court acted on the petition for preliminary injunction the plaintiffs filed an amended complaint charging in great detail a conspiracy between Cheker and Marathon Oil Company to create a monopoly in violation of the Sherman Act, a "tying arrangement" by Cheker in violation of the Clayton Act and price discrimination in violation of the Robinson-Patman Act (Section 2(a) of the Clayton Act as amended, 15 U.S.C. § 13(a)). Though the district court did not sign an order permitting the amendment under Rule 14, Fed.R.Civ.P., it is obvious that the court treated the amendment as properly filed.
After Cheker had responded to the petition for a preliminary injunction the district court conducted a hearing. On August 17, 1976 a preliminary injunction issued, effective ten days thereafter. The injunction is reproduced as Exhibit 1 in the appendix to this opinion. Cheker filed a notice of appeal and a motion for stay of paragraph (d) of the preliminary injunction pending appeal. On September 3, 1976 the plaintiffs filed a motion for contempt order. Following a hearing the district court issued a contempt order which is reproduced as Exhibit 2 in the appendix to this opinion. The notice of appeal was amended to include an appeal from the contempt order.
The district court denied Cheker's motion for stay of paragraph (d) of the preliminary injunction. The parties agreed at a hearing before a judge of this court to maintain the status quo pending appeal. The issues related to the preliminary injunction and contempt order were argued at a consolidated hearing before this panel.
In its findings of fact and conclusions of law the district court held that there was a likelihood that the plaintiffs would be able to succeed on their breach of contract claim under Michigan law and on their claim for violation of the federal energy regulations. Paragraphs (a), (b) and (c) of the preliminary injunction were based on these findings and conclusions. Paragraph (d) of the preliminary injunction, which deals with prices, was based on the conclusion of the district court that the plaintiffs had made such a showing of Robinson-Patman Act violations as to create a likelihood of success on this issue.
Without in any way expressing or intimating an opinion on the merits of the issues related to the duty of plaintiffs to pay minimum rents, the court concludes that the district court did not act improvidently in including paragraphs (a), (b) and (c) in the preliminary injunction. Though the leases did not require Cheker to sell and deliver gasoline to the plaintiffs, it is reasonable to require that deliveries may not be withheld due to nonpayment of minimum rent pending determination of the minimum rent issue in light of the emergency legislation and regulations relied upon by the plaintiffs.
The general function of a preliminary injunction is to maintain the status quo pending determination of an action on its merits. Washington Capitols Basketball Club, Inc. v. Barry, 419 F.2d 472 (9th Cir. 1969); District 50 United Mine Workers v. International Union, 134 U.S.App.D.C. 34, 412 F.2d 165 (1969); Fall v. Copperweld Speciality Steel Co.,380 F.Supp. 1277 (N.D.Ohio 1974). By including paragraph (d) in the preliminary injunction the district court went far beyond freezing the parties in their positions at the time this action was commenced. The "last, uncontested status preceding commencement of the controversy," Washington Capitols v. Barry, supra, involved no agreement with respect to pricing of gasoline.
In order to be entitled to a preliminary injunction a party must demonstrate a substantial likelihood of success on the merits when the case is tried. Cincinnati Electronics Corp. v. Kleppe, 509 F.2d 1080 (6th Cir. 1975); Garlock v. United Seal, Inc., 404 F.2d 256 (6th Cir. 1968). The inclusion of paragraph (d) in the preliminary injunction was based on the district court's determination that the plaintiffs had demonstrated a violation by Cheker of the Robinson-Patman Act. The district court predicated this holding on evidence that Cheker sold gasoline to customers at five company-operated stations, located from two to thirty-two miles from plaintiffs' stations, at prices below the prices at which plaintiffs could sell at a profit after a reasonable mark-up of Cheker's prices to them. Our review of authoritative decisions leads to the conclusion that the district court erred in concluding that plaintiffs had demonstrated the requisite probability of success on this issue. See Mullis v. Arco Petroleum Corp., 502 F.2d 290, 294 (7th Cir. 1974); American Oil Co. v. McMullin, 508 F.2d 1345, 1353 (10th Cir. 1975); Reines Distributors, Inc. v. Admiral Corp., 256 F.Supp. 581 (S.D.N.Y.1966). In view of the fact that paragraph (d) goes beyond a restoration of the status quo and imposes new obligations on Cheker not required by its previous contractual relationship with the plaintiffs and our conclusion on the likelihood of success under the Robinson-Patman Act, we are compelled to hold that the district court abused its discretion and acted improvidently in its inclusion of paragraph (d) in the preliminary injunction.
The contempt proceedings were instituted after plaintiffs began withholding one cent per...
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