Cities Service Oil Co. v. Burch

• Decision Date: 30 December 1975
• Docket Number: No. 4,4
• Citation: 29 Md.App. 430,349 A.2d 279
• Parties: , 1975-2 Trade Cases P 60,650 CITIES SERVICE OIL COMPANY v. Francis B. BURCH, Attorney General of the State of Maryland.
• Court: Court of Special Appeals of Maryland

Page 430

29 Md.App. 430

349 A.2d 279, 1975-2 Trade Cases P 60,650

CITIES SERVICE OIL COMPANY v. Francis B. BURCH, Attorney General of the State of Maryland.

No. 4.

Court of Special Appeals of Maryland.

Dec. 30, 1975.

John Henry Lewin, Jr., Baltimore, with whom were Benjamin R. Civiletti and Venable, Baetjer & Howard, Baltimore, on the brief, for appellant.

Thomas M. Wilson, III, Asst. Atty. Gen., with whom were Francis B. Burch, Atty. Gen., and Henry R. Lord, Deputy Atty. Gen., on the brief, for appellee.

Argued before MORTON, DAVIDSON and LOWE, JJ.

DAVIDSON, Judge.

On 19 June 1974, Francis B. Burch, the Attorney General of the State of Maryland, filed a bill of complaint in the Circuit Court of Baltimore City against Cities Service Oil Company (Citgo) and Brooks-Huff Tire Company (Books), alleging the following violations of the Maryland Antitrust Act, ¹ § 38: ²

1) that Citgo used its economic power over its service station dealers to coerce them to enter into contracts to purchase tires, batteries, and accessories exclusively from suppliers designated by Citgo, thereby unreasonably restraining trade;

2) that Citgo used its economic power over the supply of gasoline to compel its dealers to purchase tires, batteries and accessories, whether wanted or not, from Brooks and other designated suppliers, thereby substantially lessening competition and tending to create a monopoly;

3) that Citgo and its designated tires, batteries and accessories suppliers, including Brooks, established a program of systematic reciprocal purchasing, whereby the suppliers purchased from Citgo a dollar amount of tires, batteries and accessories at jobber prices, equal to the dollar amount of tires, batteries and accessories, which they sold at wholesale prices to their allocated Citgo dealers, thereby unreasonably restraining trade; and

4) that Citgo and the designated tires, batteries and accessories suppliers, including Brooks, vertically allocated and divided the wholesale market of tires, batteries and accessories comprised of Maryland Citgo dealers, thereby unreasonably restraining trade.

In the bill of complaint, the Attorney General sought an adjudication of the illegality of the described practices; injunctions against continuation of the allegedly illegal practices; and, as a prophylactic measure to eradicate the anti-competitive effects of the allegedly illegal practices, injunctions, preventing among other things, Citgo and Brooks from engaging in any business activity or commercial transaction with each other for a period of five years.

On 13 September 1974, Brooks filed an answer in which it denied all of the allegations of unlawful acts. On 16 September 1974, Citgo filed an answer in which, in pertinent part, it denied the allegations of unlawful conduct, and steadfastly maintained that its business activities were completely lawful.

On 1 November 1974, Brooks and the Attorney General stipulated that a 'FINAL JUDGMENT AND CONSENT DECREE' should be entered, settling the case between those two parties. The proposed consent decree recited that the parties:

'consented to the entry of this Final Judgment and Consent Decree without trial or adjudication of any issue of fact or law herein, and without this Final Judgment and Consent Decree constituting evidence against or admission by any party with respect to any issue, and without any admission by BROOKSHUFF of any wrongdoing or unlawful conduct.'

It enjoined Brooks from:

(A) entering or continuing any agreement with Citgo whereby Citgo would require or suggest that any Citgo station lessee purchase tires, batteries and accessories from Brooks, for seven (7) years; and (B) engaging in any commercial transaction with Citgo for five (5) years.

The decree provided that Brooks could continue to solicit sales from and conduct business with Citgo service station dealers. The decree expressly disavowed any intention to interfere with Brooks' rights and responsibilities in regard to any purchase orders placed with Citgo prior to the execution of the consent decree. Additionally, the decree provided that Brooks would serve a copy of the decree on each Citgo service station dealer and on the Maryland resident agent for the Goodyear Tire and Rubber Company, within 30 days of entry.

On 4 November 1974, a hearing was held by Judge Joseph C. Howard. Citgo, stating that it was then not prepared to present evidence, requested a 'full hearing.' The parties, including Citgo, presented oral argument on the question of the propriety of the proposed consent decree. On 8 November, all parties filed legal memoranda. On 19 November 1974, the chancellor signed the 'FINAL JUDGMENT AND CONSENT DECREE' previously submitted. On 10 January 1975, the chancellor, after making an express determination that there was no just reason for delay, expressly directed the entry of a final judgment upon the claim against Brooks. ³ It is from this final judgment that Citgo appeals.

I

Citgo initially contends that the Maryland Antitrust Act does not authorize the entry of a judgment by consent without a finding by the court that a violation has been committed. In support of its position, it relies upon Art. 83, § 41(1) of the Act ⁴ which provides:

'The Attorney General, with such assistance as he may from time to time require of the State's attorneys in the several counties and Baltimore City, shall institute proceedings in equity in the circuit court to prevent and restrain violations of § 38 of this subtitle. In such a proceeding, the court shall determine whether a violation has been committed, and shall enter such judgment or decree as it considers necessary to remove the effects of any violation which it finds, and to prevent such violation from continuing or from being renewed in the future. The court, in its discretion, may exercise all equitable powers necessary for this purpose, including but not limited to injunction, divestiture of property, divorcement of business units, and suspension or termination of the right of foreign corporations or associations to do business in the State of Maryland.' (Emphasis added.)

The Attorney General relies upon Art. 83, § 45 of the Act ⁵ which provides:

'A final judgment or decree rendered in any civil or criminal proceeding brought by the Attorney General under this subtitle to the effect that a defendant has violated this subtitle shall be prima facie evidence against such defendant in any action for damages brought by another party against such defendant under subsection (2) of § 41 of this subtitle, ⁶ as to all matters respecting which said judgment or decree would be an estoppel as between the parties thereto: provided, that this section shall not apply to civil consent judgments or decrees entered before any testimony has been taken.' (Footnote and emphasis added.)

He maintains that this section, which inferentially authorizes the entry of consent judgments or decrees before any testimony has been taken, also inferentially authorizes the entry of such a decree without the finding of a violation.

It is the intent of the General Assembly that in construing the Maryland Antitrust Act courts be guided by the interpretation given by the federal courts to federal antitrust acts. ⁷

Section 4 of the Sherman Act, ⁸ which parallels Art. 83, § 41(1) of the Maryland Act, provides that:

'The several district courts of the United States are invested with jurisdiction to prevent and restrain violations of sections 1 to 7 of this title; and it shall be the duty of the several United States attorneys, in their respective districts, under the direction of the Attorney General, to institute proceedings in equity to prevent and restrain such violations. Such proceedings may be by way of petition setting forth the case and praying that such violation shall be enjoined or otherwise prohibited. When the parties complained of shall have been duly notified of such petition the court shall proceed, as soon as may be, to the hearing and determination of the case; and pending such petition and before final decree, the court may at any time make such temporary restraining order or prohibition as shall be deemed just in the premises.' ⁹ (Emphasis added.)

Section 5(a) of the Clayton Act, ¹⁰ which parallels Art. 83, § 45 of the Maryland Act provides that 'A final judgment or decree heretofore or hereafter rendered in any civil or criminal proceeding brought by or on behalf of the United States under the antitrust laws to the effect that a defendant has violated said laws shall be prima facie evidence against such defendant in any action or proceeding brought by any other party against such defendant under said laws or by the United States under section 15a of this title, as to all matters respecting which said judgment or decree would be an estoppel as between the parties thereto: Provided, That this section shall not apply to consent judgments or decrees entered before any testimony has been taken or to judgments or decrees entered in actions under section 15a of this title.' (Emphasis added.)

Although antitrust statutes do not define or expressly authorize consent decrees which involve neither an admission nor a determination that there has been a violation, federal courts have repeatedly recognized that § 5(a) implicitly authorizes the entry of a consent decree without taking testimony or finding that a violation of the Act has occurred. ¹¹ Indeed, because the entry of a consent decree allows the government to obtain immediate injunctive relief without the expense of litigation, and allows the defendant simultaneously to avoid the expense of litigation and a precedent-setting decision which could be used against him in a private antitrust treble damage suit, the great majority of civil antitrust proceedings brought by the federal government culminate in consent decrees. ¹²

We are persuaded by federal authority that Art. 83, § 45 of the Maryland Act implicitly...