Call Carl, Inc. v. BP Oil Corporation

• Decision Date: 10 February 1975
• Docket Number: Civ. No. 73-1059-Y.
• Citation: 391 F. Supp. 367
• Parties: CALL CARL, INC., a Delaware Corporation, et al. v. BP OIL CORPORATION, a Delaware Corporation, and Standard Oil Company (Ohio), a Ohio Corporation
• Court: U.S. District Court — District of Maryland

391 F. Supp. 367

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

Civ. No. 73-1059-Y.

United States District Court, D. Maryland.

February 10, 1975.

COPYRIGHT MATERIAL OMITTED

Jerry S. Cohen, Herbert E. Milstein, Michael D. Hausfeld, Washington, D. C., William 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.

This action was instituted by individuals and corporations acting as franchised gas station dealers for the BP Oil Corporation. The defendants are Standard Oil of Ohio (SOHIO), an Ohio corporation which is a refiner and marketer of gasoline, and its wholly owned subsidiary, British Petroleum Oil Corporation (BP), a Delaware corporation engaged in the same business.

The plaintiffs have advanced five theories for relief. The first count alleges that the defendants BP and SOHIO violated sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1 and 2 (1970), by conspiring with each other and with others to restrain interstate commerce in the retail sale of BP gasoline and gasoline in general, and by attempting to monopolize the retail sale of BP gasoline in the greater Washington, D. C. area. The plaintiffs allege that the two corporations accomplished this by phasing out all existing dealerships, and replacing them with "high-volume" "gas-and-go" stations, owned and controlled by the defendants, at which the defendants would "fix" the retail price of gasoline. The plaintiffs assert that in furtherance of this plan, the defendants terminated the plaintiff's franchise agreements and left them only the option of becoming employee/managers of "gas-and-go" operations; that defendants terminated all BP credit cards to inhibit sales at plaintiffs' stations; and that defendants refused to allocate premium gasoline to the plaintiffs in order to prevent them from competing with the "gas-and-go" stations.

Count II of the complaint alleges that the defendants tied the sale of BP vehicle accessories to the sale of BP gasoline in violation of Section 3 of the Clayton Act, 15 U.S.C. § 14 (1970), thus prohibiting the plaintiffs from purchasing such accessories on the competitive market.

Count III alleges that in abrogating the plaintiffs' contracts without good cause, the defendants unilaterally breached their contractual agreements with the plaintiffs.

Count IV alleges that the defendants fraudulently misrepresented to the plaintiffs that their franchise contracts would be renewed yearly as long as the plaintiffs performed their contractual obligations successfully. Plaintiffs assert that they relied on these representations in establishing and maintaining retail BP outlets and that the defendants' termination of their contracts was directly contrary to the assertions on which they had relied.

Count V, added by the amended complaint, alleges that the defendants' cancellation of the plaintiffs' contracts and subsequent refusal to allocate gasoline to them violated 10 C.F.R. § 210.62, which requires dealers to allocate gasoline to their retail outlets for the effective dates of the energy regulations on the same basis as during a base period in 1972.

Plaintiffs requested, and the Court granted on June 21, 1974, an injunction preventing the defendants from terminating the plaintiffs' contracts pending the outcome of this litigation. That ruling was upheld by the Fourth Circuit, Call Carl, Inc. v. BP Oil Corp., No. 74-1819 (4th Cir. Apr. 1, 1975).

Defendant SOHIO, after refusing to answer interrogatories and requests for documents, has now moved for a dismissal pursuant to Fed.R.Civ.P. 12 for lack of personal jurisdiction and improper venue on all causes of action raised by the plaintiffs. The defendant has also previously raised the question of improper service of process under Rule 4.

VENUE AND PERSONAL JURISDICTION UNDER COUNTS I AND II

The plaintiffs have the burden of proving jurisdiction and venue in this Court over the defendants under the antitrust counts. Aro Mfg. Co., Inc. v. Automobile Body Research Corp., 352 F.2d 400, 403 (1st Cir. 1965), cert. denied, 383 U.S. 947, 86 S.Ct. 1199, 16 L.Ed.2d 210 (1966); Hayashi v. Sunshine Garden Prod., 285 F.Supp. 632, 633 (W.D.Wash.1967), aff'd sub nom. Hayashi v. Red Wing Peat Corp., 396 F.2d 13 (9th Cir. 1968).

Section 12 of the Clayton Act, 15 U.S. C. § 22 (1970), provides a deceptively simple formula for venue and jurisdiction in antitrust suits:

Any suit, action, or proceeding under the antitrust laws against a corporation may be brought not only in the judicial district whereof it is an inhabitant, but also in any district wherein it may be found or transacts business; and all process in such cases may be served in the district of which it is an inhabitant, or wherever it may be found.

Our inquiry must therefore begin with the question of venue. If venue is appropriate in this jurisdiction, then service of process is authorized in any jurisdiction where SOHIO is found or is an inhabitant.

Section 12 was enacted to enlarge venue and jurisdiction over that which existed by virtue of section 7 of the Sherman Act. Section 12, enacted in 1914, added the phrase "transacts business" to the already existing criteria of being "found" or "doing business."¹ Therefore, even if a corporation is not found or doing business in a jurisdiction, it is subject to venue in an antitrust suit if it is transacting business there.

This provision has received considerable attention in the courts, which have generally construed it as providing plaintiffs with a wide choice of forum, United States v. National City Lines, 334 U.S. 573, 586, 68 S.Ct. 1169, 92 L.Ed. 1584 (1948); Eastman Kodak Co. v. Southern Photo Materials Co., 273 U.S. 359, 372-74, 47 S.Ct. 400, 71 L.Ed. 684 (1927), regardless of harm to the defendant corporations sued under the Act, Ferguson v. Ford Motor Co., 77 F.Supp. 425, 430 (S.D.N.Y.1948), aff'd sub nom. Ford Motor Co. v. Ryan, 182 F.2d 329 (2d Cir.), cert. denied, 340 U.S. 851, 71 S.Ct. 79, 95 L.Ed. 624 (1950). The leading case on the section 12 venue provisions, United States v. Scophony Corp., 333 U.S. 795, 68 S.Ct. 855, 92 L. Ed. 1091 (1948), characterizes judicial construction of the Act as follows:

The Supreme Court in Eastman relieved persons injured through corporate violations of the antitrust laws from the "often insuperable obstacle" of resorting to distant forums for redress of wrongs done in the places of their business or residence. A foreign corporation no longer could come to a district, perpetrate there the injuries outlawed, and then by retreating or even without retreating to its headquarters defeat or delay the retribution due.

333 U.S. at 808, 68 S.Ct. at 862 (footnotes omitted).

It is clear from the pleadings and affidavits submitted here that SOHIO itself does not inhabit, is not found, nor does it transact business in this district.² Nevertheless, plaintiffs' allegations require a more far-reaching and complicated analysis of "transacting business" under section 12. More and more courts, in antitrust cases, are finding that venue over a foreign parent corporation may be based on the activities of its local subsidiary if the relationship between the parent and subsidiary is such that the subsidiary may be considered the agent or alter ego of the parent. See, e. g., United States v. Scophony Corp., 333 U.S. 795, 817, 68 S.Ct. 855, 92 L.Ed. 1091 (1948); Dobbins v. Kawasaki Motors Corp., 362 F.Supp. 54, 64 (D.Or. 1973); Luria Steel & Trading Corp. v. Ogden Corp., 327 F.Supp. 1345, 1347-48 (E.D.Pa.1971); K. J. Schwartzbaum, Inc. v. Evans, Inc., 44 F.R.D. 589, 590-91 (S.D.N.Y.1968); Waldron v. British Petroleum Co., 149 F.Supp. 830, 834-36 (S.D.N.Y.1957).

Notwithstanding the fact that the parent may own all of a subsidiary's stock, and interlocking directorships may exist between the two corporations, it is axiomatic that if a subsidiary maintains its own books and accounts, and makes its own marketing, purchasing, management and other policy decisions, it cannot be held to be acting as an agent of the parent. Hayashi v. Sunshine Garden Prod., 285 F.Supp. 632, 634 (W.D.Wash. 1967).

Of course a precise determination as to when a subsidiary stops being a separate legal entity and when it becomes an alter ego of the parent is impossible. The test of venue turns on the facts of each case; generalizations are, for the most part, impossible, United States v. Scophony Corp., 333 U.S. 795, 816-17, 68 S.Ct. 855, 92 L.Ed. 1091 (1948).

It is not isolated acts, but the totality of the relationship between the parent and the subsidiary which must be considered in determining the control exercised by the parent over the subsidiary. Dobbins v. Kawasaki Motors Corp., 362 F.Supp. 54 (D.Or.1973). The key factor, however, in determining venue is the ability of the parent to influence major decisions of the subsidiary which lead or could lead to violations of the antitrust laws. Flank Oil Co. v. Continental Oil Co., 277 F.Supp. 357, 365 (D.Colo.1967). Section 12 is a venue provision peculiar to antitrust law. It is meant to provide injured plaintiffs with the opportunity to reach large corporate enterprises which seek to insulate themselves through the proliferation of subsidiaries which undertake the marketing, purchasing and selling functions of the parent in the local jurisdiction where the activities of the subsidiary are guided by the parent. Control in such cases is a very elusive phenomenon.

SOHIO, seeking to support its position as a separate legal entity from BP, relies upon Cannon Mfg. Co. v. Cudahy Packing Co., 267 U.S. 333, 45 S.Ct. 250, 69 L.Ed. 634 (1925),³ which is the leading case outside antitrust law on the parent/subsidiary relationship and its impact on jurisdiction and venue, holding that where a...