Call Carl, Inc. v. BP Oil Corporation

• Decision Date: 22 October 1975
• Docket Number: Civ. No. 73-1059-Y.
• Citation: 403 F. Supp. 568
• Parties: CALL CARL, INC., a Delaware Corporation, et al. v. BP OIL CORPORATION, a Delaware Corporation, and Standard Oil Company (Ohio), an Ohio Corporation.
• Court: U.S. District Court — District of Maryland

403 F. Supp. 568

CALL CARL, INC., a Delaware Corporation, et al. v. BP OIL CORPORATION, a Delaware Corporation, and Standard Oil Company (Ohio), an Ohio Corporation.

Civ. No. 73-1059-Y.

United States District Court, D. Maryland.

October 22, 1975.

COPYRIGHT MATERIAL OMITTED

Jerry S. Cohen, Herbert E. Milstein, Michael D. Hausfeld, Washington, D. C., William C. Sammons, Morris Rosenberg, Baltimore, Md., for plaintiffs.

Benjamin R. Civiletti, John Henry Lewin, Sr., John Henry Lewin, Jr., Baltimore, Md., for defendants.

JOSEPH H. YOUNG, District Judge.

The plaintiffs in this action are individuals and corporations acting as independent service station operators under one-year franchise agreements with BP Oil Corporation BP. The defendants are Standard Oil of Ohio SOHIO, a major marketer and refiner of gasoline, and its wholly owned subsidiary, BP.

The case went to trial on all issues, and on May 2, 1975, the jury returned a verdict in favor of all plaintiffs and against both defendants in the total amount of $1,265,000 under Count IV of the complaint.

At trial, the defendants moved for a directed verdict on all counts at the end of all evidence, and the Court granted the motion as to Count I. The reasons supporting the directed verdict on Count I are elaborated more fully below.

Defendants have now moved for a Judgment Notwithstanding the Verdict under Fed.R.Civ.P. 50 or in the alternative for a new trial on all issues of Count IV under Fed.R.Civ.P. 59. As hereinafter discussed, the verdict will be set aside and a new trial ordered on the issue of damages unless within fifteen days the plaintiffs file a remittitur as set forth below.

FACTS

For the purpose of clarity, the facts of the case should be set forth briefly. SOHIO purchased BP for a marketing arm on the East Coast at a time when BP was operating at a loss. SOHIO and BP then launched a long-term marketing study which analyzed the principal East Coast markets in which BP owned stations. Lee Hickerson, a SOHIO employee, was transferred to BP as the manager of the market development plan, and took charge of the study. A report on the Washington, D.C. market was presented to BP and SOHIO in November, 1970, and a report on the Baltimore market was presented in March, 1971, followed by reports on other markets, each recommending that BP acquire additional sites and expand its conventional business.

The Hickerson group then presented a new market study of the Philadelphia market which recommended that BP radically alter its conventional marketing approach there in order to offset losses and gain in market share. The report suggested that BP divest itself of its unprofitable stations, institute station/ car wash services, and transform 20 of the high volume stations into company owned and operated high-volume/cut-rate "gas and go" stations. The Philadelphia recommendation was put into effect in 1972, and the plan met with instant success.

Total volume sales did not increase in the Baltimore-Washington area, however, and in late 1972, the Hickerson group re-examined the market situation there and determined that its prior recommendation that BP remain a conventional marketer was incorrect, suggesting instead that the Philadelphia plan might work as an alternative marketing approach in the Baltimore-Washington area.

As a result, on May 9, 1973, Hickerson produced the "BP Northeast Project Report and Recommendation." This report, in substance, recommended that BP adopt the same plan which had operated in Philadelphia in the Baltimore-Washington market. Pursuant to the study, BP ceased operating as a conventional dealer in the Baltimore-Washington market, and proceeded as follows:

1. BP and SOHIO sold one of BP's refineries, its trunk lines in Texas, and properties in Florida, Georgia and the Carolinas;

2. Presently operating high-volume stations and other potential high-volume sites were converted to gas and go stations;

3. Marginal stations were closed and others were operated under the William Penn logo owned by SOHIO; and

4. By letter of September 26, 1973, Charles King, Vice-President of BP, wrote to each of the plaintiffs and other BP dealers, advising them of the new marketing procedures, and cancelling each of their franchise agreements at the end of its term. Each cancellation was timely under the terms of the corresponding contract. BP also presented each of the dealers certain alternatives:

1. becoming BP employees as "I-Managers" of gas and go stations;

2. becoming William Penn dealers; or

3. leaving BP.

Each of the plaintiffs signed a new contract sometime between April and July of 1973. They claim that they were induced to enter into these agreements by the continuing promise that if they did not violate any provisions of the agreements, they could "operate their stations forever." Under Count IV, plaintiffs allege that the defendants' representations were fraudulent insofar as the plaintiffs were induced to enter into franchise agreements by the promise of continuing contracts when the defendants never intended to stand by these promises.

DIRECTED VERDICT ON COUNT I

Count I incorporates two theories of recovery, both based on antitrust law. The first theory is that BP and SOHIO conspired, combined or contracted with dealers vertically to refuse to deal with the plaintiffs in furtherance of a marketing scheme by which BP would fix the price of gasoline at gas and go stations. The second theory of recovery under Count I is that BP and SOHIO conspired horizontally with each other and with other major marketers of gasoline to alter BP's share of the market and to fix prices at gas and go stations. Both forms of conspiracy allegedly constituted unreasonable restraints of trade in violation of Section One of the Sherman Act, 15 U.S.C. ß 1 (1970).

The antitrust count fails in two respects. First, the plaintiffs failed to prove that a conspiracy existed, either horizontally or vertically. Second, even if a conspiracy had existed, plaintiffs failed to show that the outcome of the conspiracy had any anticompetitive effect constituting a restraint of trade in violation of the Sherman Act.

HORIZONTAL CONSPIRACY

The plaintiffs have failed to show even a scintilla of proof that either SOHIO or BP made any agreement on any matter with any other oil marketer. A more difficult problem arises because certain agreements were shown between BP and SOHIO.

The weight of authority is to the effect that affiliated corporations within a single commonly-owned enterprise are separate entities capable of conspiring with each other in violation of the Sherman Act. This is called the "bathtub" or "intra-enterprise" theory of conspiracy. There seems to be general, although not enunciated support for this proposition in Supreme Court cases.

In United States v. Yellow Cab Co., 332 U.S. 218, 67 S.Ct. 1560, 91 L.Ed. 2010 (1947), a company was formed which acquired complete or controlling interests in major taxicab companies and which therefore dominated the ownership of taxi licenses in many major cities. The companies then agreed to control the operation and purchase of cabs in those cities. The affiliated companies argued that they operated within a neutrally integrated enterprise which would prevent any agreement between them from being a conspiracy. The Court disagreed, stating:

. . . An unreasonable restraint on interstate commerce . . . may result as readily from a conspiracy among those who are affiliated or integrated under common ownership as from a conspiracy among those who are otherwise independent. . . . The corporate interrelationships of the conspirators, in other words, are not determinative of the applicability of the Sherman Act.

332 U.S. at 227, 67 S.Ct. at 1565.

In Perma Life Mufflers, Inc. v. International Parts Corp., 392 U.S. 134, 88 S.Ct. 1981, 20 L.Ed.2d 982 (1968), the Supreme Court held that since a parent and subsidiary had availed themselves of the privilege of doing business as separate corporations, the fact of common ownership could not save them from any of the obligations imposed by the law on separate entities. Id. at 141-42, 88 S.Ct. 1981, citing Timken Co. v. United States, 341 U.S. 593, 598, 71 S.Ct. 971, 95 L.Ed. 1199 (1951).¹

Nevertheless, there is certain persuasive authority which holds that a parent and subsidiary cannot conspire in violation of Section One of the Sherman Act if they are not in actual competition in the market. See Ark Dental Supply Co. v. Cavitron Corp., 461 F.2d 1093, 1094 n.1 (3d Cir. 1972); United States v. Arkansas Fuel Oil Corp., 1960 Trade Cas. ? 69,619 (N.D.Okl.1960); contra, TV Signal Co. v. Am. Tel. & Tel. Co., 462 F.2d 1256, 1260 (8th Cir. 1972); Tamaron Distrib. Corp. v. Weiner, 418 F.2d 137, 139 (7th Cir. 1969).

Common sense dictates the conclusion that where conspirators are not competitors in the market in which prices are allegedly being fixed, and there is horizontal competition in that market, then no harm can be done, and therefore no restraint of trade can be accomplished by, an agreement to refuse to deal or to fix prices.²

Plaintiffs, with the burden of proving the existence of a conspiracy, failed to show that BP and SOHIO are in competition in the market, Associated Press v. Taft-Ingalls Corp., 340 F.2d 753, 759 (6th Cir.), cert. denied, 382 U.S. 820, 86 S.Ct. 47, 15 L.Ed.2d 66 (1965), and a directed verdict on the horizontal aspect of the antitrust count was granted.

VERTICAL CONSPIRACY

Plaintiff also failed to prove the existence of a vertical conspiracy. BP and SOHIO did not enter into any agreements with independent dealers to fix prices or to refuse to deal with the plaintiffs. Nor were the plaintiffs forced to become unwilling participants in a scheme which violated the antitrust laws. See, e. g., Perma Life Mufflers, Inc. v. International Parts Corp., 392 U.S. 134, 88 S.Ct. 1981, 20 L.Ed.2d 982 (1968); Albrecht v. The Herald Co., 390 U.S. 145, 150 n.6, 88...