O'Byrne v. Cheker Oil Co., s. 83-1412

• Decision Date: 09 February 1984
• Docket Number: Nos. 83-1412,83-1910,s. 83-1412
• Parties: 1984-1 Trade Cases 65,852 James C. O'BYRNE, et al., Plaintiffs-Appellants, v. CHEKER OIL COMPANY and Marathon Oil Company, Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 159

727 F.2d 159

1984-1 Trade Cases 65,852

James C. O'BYRNE, et al., Plaintiffs-Appellants, v. CHEKER OIL COMPANY and Marathon Oil Company, Defendants-Appellees.

Nos. 83-1412, 83-1910.

United States Court of Appeals Seventh Circuit.

Argued Dec. 9, 1983.

Decided Feb. 9, 1984.

Merle L. Royce, Chicago, Ill., for plaintiffs-appellants.

Sherwin J. Malkin, Ronald W. Teeple, Bergstrom, Davis & Teeple, Chicago, Ill., for defendants-appellees.

Before CUMMINGS, Chief Judge, BAUER and COFFEY, Circuit Judges.

CUMMINGS, Chief Judge.

This lawsuit originated in March 1976 when five Illinois Cheker gasoline service station operators filed suit against Cheker and Marathon oil companies alleging that they conspired to drive plaintiffs out of business and that Cheker sought to impose a price squeeze on plaintiffs by charging them excessive wholesale prices while simultaneously increasing their costs of operation. In June 1976, we upheld the district court's refusal to issue a preliminary injunction prohibiting Cheker from terminating plaintiff Sam Mangialardi's gasoline service station lease which had expired on March 31, 1976. In our unpublished order, we noted that defendants had made no retail price suggestions to plaintiffs since March 1974 and that Cheker would hardly have engaged in the so-called price squeeze to eliminate Mangialardi since it could achieve the same result by not renewing his lease. In addition, this Court concluded that plaintiffs had shown no injury by Cheker's agreement with three plaintiffs and a number of other dealers to set Cheker's wholesale price at 3 cents below the price the dealers would have to charge to remain competitive. This Court observed that even though Cheker president Richard P. Small admittedly preferred company-operated stations for reasons of efficiency, of all its dealers wishing to renew their leases only Mangialardi's lease was not renewed, thus indicating that Cheker's plan to go direct "was not the cause of the refusal to renew Mangialardi's lease" (App. 56). In affirming the denial of the preliminary injunction, we added that the mere refusal to deal with Mangialardi "violates no law" (App. 57).

In May 1978, we reversed and remanded a summary judgment entered in favor of Cheker because there were disputed facts as to whether releases given by plaintiffs to Cheker in the leases between them and Cheker were valid (App. 58-63). That issue is no longer before us. ¹

In the following month, plaintiffs filed their first amended complaint against Cheker and Marathon for violation of the federal antitrust laws and tortious interference with business. This pleading alleged that Cheker was 50% owned by Marathon and that they compete with each other in marketing gasoline and related products at wholesale and retail levels. Plaintiffs claimed that the defendants were also competitors in the retail sale of gasoline and related products through their company stations "not only with each other, but also with plaintiffs and other independent dealers of both Cheker and Marathon" (App. 6).

Count I of the amended complaint asserted that the defendants violated Section 1 of the Sherman Act (15 U.S.C. Sec. 1) by conspiring to distribute through company-operated stations and to have Cheker become the major retail outlet of the two. In Count I plaintiffs requested $600,000 in damages (including trebling under Section 4 of the Clayton Act (15 U.S.C. Sec. 15)), attorney's fees and injunctive relief.

In Count II Cheker, with the assistance of Marathon, is alleged to sell gasoline and related products to plaintiffs and other dealers at discriminatory prices in violation of Section 2(a) of the Robinson-Patman Act (15 U.S.C. Sec. 13(a)). In this Count, plaintiffs sought $450,000 in damages (again including trebling), as well as attorney's fees and injunctive relief.

In Illinois common law Count III, the defendants' conspiracy is said to have had the intent and purpose to interfere with plaintiffs' businesses, damaging them in the amount of $200,000. Still again attorney's fees and injunctive relief were sought.

Judge Shadur handed down opinions and orders on September 4 and December 4, 1981, granting summary judgments to Marathon and Cheker respectively. In the first opinion, which concerned plaintiffs and Marathon, the court held that none of plaintiffs' evidence showed that Marathon conspired with Cheker but that the uncontradicted evidence showed that Cheker's president Richard P. Small made all its business operating decisions and that its own board of directors "really runs the show" (App. 92). According to the district court, plaintiffs presented no evidence that defendants divided up any markets but did show that Marathon specialized in full-service operations while Cheker always specialized in limited-service, lower-priced stations. Summary judgment was also awarded to Marathon with respect to Counts II and III because plaintiffs had failed to prove a conspiracy in restraint of trade between the defendants or that Marathon had assisted Cheker in the violations alleged in those Counts.

In his second opinion, which granted summary judgment to Cheker, the district judge reasoned that since no conspiracy had been shown between Marathon and Cheker, Cheker was entitled to summary judgment under the federal antitrust laws (Count I) and the state common law of tortious interference (Count III). Summary judgment was also rendered for Cheker under Robinson-Patman Act Count III because any price differentiations did not have the requisite adverse effect on competition. 530 F.Supp. 70 (N.D.Ill.1981).

In May 1982, the district court handed down another memorandum opinion and order granting summary judgment to Cheker on its counterclaim against plaintiffs O'Byrne and Erwin for $31,944.38 and $15,189.62 respectively for service-station back rent. 539 F.Supp. 278 (N.D.Ill.1982). The correctness of these three summary judgments is before us in appeal No. 83-1412.

In a memorandum opinion and order of April 12, 1983, the district court entered summary judgment in favor of Cheker on its counterclaim for $6,330.52 for gasoline which plaintiff O'Byrne had purchased from Cheker in 1979. Plaintiff O'Byrne has appealed from that fourth judgment in appeal No. 83-1910.

We affirm all four summary judgments and therefore conclude that the district court properly denied plaintiffs' May 1982 motion to reconsider its judgment ordering plaintiffs O'Byrne and Erwin to pay their delinquent rent. The district court was also correct in denying plaintiffs' August 1982 request to vacate the first three summary judgments and in denying O'Byrne's April 1983 motion for reconsideration of the fourth summary judgment which was in favor of Cheker on its counterclaim against O'Byrne for unpaid gasoline.

I. Sherman Act Count

A. Summary judgment in Marathon's favor

In the first of the seven memorandum opinions and orders involved in this appeal, Judge Shadur granted Marathon's motion for summary judgment. The gist of the first Count of the amended complaint against Marathon and Cheker was that Marathon and Cheker conspired to eliminate the competition of the five plaintiff dealers and to drive them out of business. This was supposedly pursuant to the defendants' scheme to force plaintiffs into becoming company stations or to drive them out of business by placing such independent dealers in a cost and profit squeeze "pursuant to a joint plan and conspiracy between CHEKER and MARATHON that CHEKER become the major retail outlet of the two, and that both, to the extent they are both in the retail business, change to company-operated stations" (Count I, par. 26). Defendants' practices allegedly caused each plaintiff to lose money "through excessive rentals, lost profits and lost income, increased costs of doing business as well as personal inconvenience and hardship" (Count I, par. 34). In his opinion granting Marathon summary judgment on the Sherman Act Count, Judge Shadur noted that both companies were engaged as wholesalers and retailers of petroleum products and that in 1968 Marathon acquired 50% of Cheker's outstanding stock, with the other 50% retained by Richard P. Small, Cheker's founder and chief executive officer.

The district court found that Cheker sells gasoline at wholesale through station-lessee dealers and at retail through its own stations. Cheker stations only sell gasoline and at prices lower than full-service stations. In contrast, Marathon dealers do not emphasize relatively low gas prices but attract customers by providing credit and a full complement of services.

Since 1975, Cheker selects three and Marathon selects the other three of the Cheker directors. However, the district judge noted that Small was responsible for devising Cheker's general operating policies and retained responsibility for its day-to-day operations. The district judge also found that Cheker's policy of converting dealer stations to company stations and steps to implement that policy were fully the design of Small and not discussed beforehand with Marathon. Marathon's affidavits and deposition testimony showed that Marathon played no part in Cheker's conversion from distribution through middlemen to direct retail sales.

Although this lawsuit was filed in March 1976 and plaintiffs had until August 31, 1980 to complete their discovery, the district court concluded that plaintiffs adduced no evidence contradicting defendants' evidence that owner-manager Small "really runs the [Cheker] show" (App. 92) or that defendants divided up any markets. Instead the evidence showed, according to Judge Shadur, that "Marathon has always specialized in full-service operations and Cheker has always specialized in the limited-service, lower-priced stations" (App. 92).

Although it is true that summary judgment is ordinarily inappropriate to dispose of alleged antitrust violations, summary judgment is appropriate where, as here, there is...