Burch v. Goodyear Tire & Rubber Co.

• Decision Date: 29 July 1976
• Docket Number: Civ. No. B-75-132.
• Citation: 420 F. Supp. 82
• Parties: Francis B. BURCH, Attorney General of the State of Maryland, Counter-Plaintiff, v. GOODYEAR TIRE AND RUBBER COMPANY, Counter-Defendant.
• Court: U.S. District Court — District of Maryland

420 F. Supp. 82

Francis B. BURCH, Attorney General of the State of Maryland, Counter-Plaintiff, v. GOODYEAR TIRE AND RUBBER COMPANY, Counter-Defendant.

Civ. No. B-75-132.

United States District Court, D. Maryland.

July 29, 1976.

COPYRIGHT MATERIAL OMITTED

Henry R. Lord, Deputy Atty. Gen., Thomas M. Wilson, III, and Charles O. Monk, II, Asst. Attys. Gen., Baltimore, Md., for plaintiff.

Thomas D. Washburn, Ober, Grimes & Shriver, Baltimore, Md., and Marshall Cox, Cahill, Gordon & Reindel, Washington, D. C., for defendant.

MEMORANDUM AND ORDER

BLAIR, District Judge.

This is another of the TBA cases (tires, batteries and accessories). At its inception, this suit was filed by the Cities Service Oil Company against Francis B. Burch, the Attorney General of the State of Maryland, Brooks-Huff Tire Co., and Stidham Tire Co., to enjoin the enforcement of the Maryland Antitrust Act, Annotated Code of Maryland, Art. 83, § 36 et seq.¹ Thereafter, the Attorney General counterclaimed against Cities Service and the Goodyear Tire and Rubber Co., alleging a conspiracy in restraint of trade in violation of Section 1 of the Sherman Act and also alleging illegal brokerage payments in violation of Section 2(c) of the Robinson-Patman Act, 15 U.S.C. § 13(c). The Sherman Act violation is also alleged as a transgression of the Maryland antitrust law, which contains identical provisions governing restraint of intrastate trade. Jurisdiction over the federal claims is based upon Section 16 of the Clayton Act, 15 U.S.C. § 26. Injunctive and declaratory relief is requested in the counterclaim. The Attorney General asserts that the state law claim is pendent to the federal causes of action.

Goodyear moved to dismiss the counterclaim and that motion is the subject of this memorandum and order. After the motion was filed Cities Service and the Attorney General reached an agreed disposition of their dispute dismissing the claims between them with prejudice, but without prejudice to the Attorney General's counterclaim against Goodyear. The Cities Service complaint against Stidham has also been dismissed. Brooks-Huff has moved to dismiss the complaint, contending that the Cities Service claim against it is now moot and an order granting the motion will be entered separately. Neither Stidham nor Brooks-Huff is named as a party in the Attorney General's counterclaim.

Preliminarily, it should be noted that the Attorney General did not request leave of the court to add Goodyear as an additional party to the lawsuit. F.R.Civ.P. 13(h). Goodyear is a proper party, see 6 Wright & Miller, Federal Practice & Procedure: Civil, §§ 1434, 1435, and it asserts no prejudice arising out of the failure to file a Rule 13(h) motion. Hence leave to join Goodyear as a party will be granted.

Counts 1 and 2 of the counterclaim allege that Goodyear and Cities Service entered into a contract, combination or conspiracy to restrain horizontal competition among tire manufacturers and wholesalers and to foreclose competition for the tire replacement market which is represented by Cities Service service station dealers.² Specifically, the Attorney General claims that Cities Service used its economic leverage over its service station dealers to induce the dealers to buy Goodyear tires through one of the designated tire distributors, such as Brooks-Huff or Stidham. Under the arrangement, Goodyear would sell tires to one of the distributors who in turn sold them to the dealers. Rather than bill the distributor, however, Goodyear would bill Cities Service and receive payment from Cities Service, which then billed and received payment from the distributor. In return for delivering the business of the Cities Service station dealers, Goodyear would pay a confidential discount on the price of the tires to Cities Service and would allow Cities Service the use of its distributive network. The Attorney General calls the distribution system "purchase-resale (Goodyear)" and contends that it is an effort to evade a Federal Trade Commission cease and desist order entered against Goodyear in FTC Docket No. 6486 and affirmed in Atlantic Refining Co. v. F.T.C., 381 U.S. 357, 85 S.Ct. 1498, 14 L.Ed.2d 443 (1965), which banned a similar "sales commission" plan as an unfair trade practice in violation of Section 5 of the Federal Trade Commission Act, 15 U.S.C. § 45.

It is claimed that the effect of the "purchase-resale (Goodyear)" plan is to diminish competition between Goodyear and other tire manufacturers in the sale of tires to Cities Service dealers, to horizontally divide the tire replacement market, to restrain competition between sellers of Goodyear tires, and to artificially inflate the price of Goodyear tires sold at the service stations. The artificially inflated prices are absorbed by the citizens of Maryland, the ultimate purchasers of the tires, "all to the detriment of those citizens and the general economy of the State of Maryland." The alleged combination, contract or conspiracy is said to be an unreasonable restraint of trade. Moreover, the alleged confidential discount on the sale of tires is also claimed to contravene the brokerage provisions of the Robinson-Patman Act, also to the detriment of the citizens and general economy of the State of Maryland.

Goodyear argues that the Attorney General lacks standing to maintain this suit under 15 U.S.C. § 26, and even if he has standing, that he has failed to state a claim for which relief may be granted.

Standing

Section 26 of Title 15 provides in pertinent part:

Any person, firm, corporation or association shall be entitled to sue for and have injunctive relief . . . against threatened loss or damage by a violation of the antitrust laws . . . when, and under the same conditions and principles as injunctive relief against threatened conduct that will cause loss or damage is granted by courts of equity . . ..

The essential question is whether, assuming the allegations of the complaint are true, the Attorney General has alleged a type of "loss or damage" for which this court may give injunctive relief. Not contending that the State has suffered any financial loss in its capacity as a consumer, he instead asserts that:

Counter-plaintiff, acting on behalf of the State of Maryland as its Attorney General, has standing to maintain this counterclaim under Section 16 of the Clayton Act . . . as a person within the meaning of that section to secure in its quasi-sovereign capacity as parens patriae, trustee, guardian, and representative of its citizens and general economy injunctive relief against the continuation of the violation of the Antitrust laws. . . .

Counterclaim ¶ 3, p. 12. Goodyear submits that a mere allegation of general injury to the economy of the state is insufficient. Rather, it contends the state must show an injury in its proprietary capacity in addition to damage to the quasi-sovereign interests of the state, and secondly, an injury which affects a quasi-sovereign interest of the state separate and apart from an injury which affects individuals and for which they themselves could bring suit.

The concept of parens patriae standing evolved out of the original jurisdiction of the Supreme Court over cases to which a state is a party under Article III, § 2 of the Constitution, Hawaii v. Standard Oil Co., 405 U.S. 251, 257-259, 92 S.Ct. 885, 31 L.Ed.2d 184 (1972). The purpose of this jurisdiction is to provide a forum for the resolution of controversies involving state governments in lieu of the sovereignty which they yielded upon forming the national government and as a substitute for diplomacy or other means of settling disputes between sovereign nations, Louisiana v. Texas, 176 U.S. 1, 17-19, 20 S.Ct. 251, 44 L.Ed. 347 (1900); North Dakota v. Minnesota, 263 U.S. 365, 372-73, 44 S.Ct. 138, 68 L.Ed. 342 (1923). Because of the origin of the jurisdiction, North Dakota v. Minnesota, supra, and perhaps because of the need to minimize the burden which the original jurisdiction places upon the Court, see, e. g., Pennsylvania v. New Jersey, 426 U.S. 660, 661-663, 96 S.Ct. 2333, 2335, 49 L.Ed.2d 124 (1976); Ohio v. Wyandotte Chemicals Corp., 401 U.S. 493, 497-99, 91 S.Ct. 1005, 28 L.Ed.2d 256 (1971); Oklahoma ex rel. Johnson v. Cook, 304 U.S. 387, 392-93, 58 S.Ct. 954, 82 L.Ed. 1416 (1938), the jurisdiction is confined to the vindication of sovereign or quasi-sovereign interests of the states.

What constitutes a quasi-sovereign interest has not been defined with precision. Though Mr. Justice Holmes once noted that a "state has an interest independent of and behind the titles of its citizens, in all the earth and air within its domain. . . ." Georgia v. Tennessee Copper Co., 206 U.S. 230, 237, 27 S.Ct. 618, 619, 51 L.Ed. 1038 (1907), general statements fail to encompass all matters which have been found to be "quasi-sovereign." The state's interest as parens patriae is most evident when it seeks to preserve its natural resources, e. g., Georgia v. Tennessee Copper Co., supra; North Dakota v. Minnesota, supra; Kansas v. Colorado, 206 U.S. 46, 27 S.Ct. 655, 51 L.Ed. 956 (1907); or when it asks protection for the health of its citizens, e. g., Missouri v. Illinois, 180 U.S. 208, 21 S.Ct. 331, 45 L.Ed. 497 (1901); and New York v. New Jersey, 256 U.S. 296, 41 S.Ct. 492, 65 L.Ed. 937 (1921).

The Court has refused leave to file petitions in which the state is "merely litigating as a volunteer the personal claims of its citizens." Pennsylvania v. New Jersey, 426 U.S. 660, 665, 96 S.Ct. 2333, 2336, 49 L.Ed.2d 124 (1976). In this most recent case, Pennsylvania attempted to recover commuter taxes extracted by New Jersey from Pennsylvania citizens, but the Court refused to hear the case:

Pennsylvania's parens patriae suit against New Jersey represents nothing more than a collectivity of private suits against New Jersey for taxes withheld from private parties. No sovereign or quasi-sovereign interests of Pennsylvania are

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