Davis v. Marathon Oil Co.

• Decision Date: 12 February 1976
• Docket Number: No. 75--1037,75--1037
• Citation: 528 F.2d 395
• Parties: 1975-2 Trade Cases 60,632 Marion DAVIS, Plaintiff-Appellant, v. MARATHON OIL COMPANY, Defendant-Appellee.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 395

528 F.2d 395

1975-2 Trade Cases 60,632

Marion DAVIS, Plaintiff-Appellant, v. MARATHON OIL COMPANY, Defendant-Appellee.

No. 75--1037.

United States Court of Appeals, Sixth Circuit.

Argued April 22, 1975.

Decided Dec. 12, 1975.

Rehearing Denied Feb. 12, 1976.

Thomas F. Bryant, Hinton, Noble & Bryant, Richard A. Betts, Findlay, Ohio, for plaintiff-appellant.

Robert Gosline, Shumaker, Loop & Kendrick, Rolf H. Scheidel, Toledo, Ohio, for defendant-appellee.

Before CELEBREZZE, PECK and McCREE, Circuit Judges.

McCREE, Circuit Judge.

This appeal from an order granting Marathon Oil Company's motion for judgment n.o.v. presents two questions for review: (1) whether the district court erred in holding that reasonable minds could not have found that Marathon Oil Company violated either section 1 of the Sherman Act, ¹ 15 U.S.C. § 1, or section 3 of the Clayton Act, 15 U.S.C. § 14, ² in cancelling appellant's service station lease, and, (2) whether the district court erred in refusing to permit the testimony of five witnesses 'discovered' by appellant only three days before trial despite Marathon's eight month old request for a list of all prospective witnesses. We hold that the district court did not err in entering judgment n.o.v., and that it did not abuse its discretion in refusing to admit the testimony of five witnesses disclosed to Marathon only three days before trial.

Marion Davis, plaintiff-appellant, commenced this action on December 29, 1971, in the United States District Court for the Northern District of Ohio. The complaint charged that Marathon had violated sections 1 and 2 of the Sherman Act and section 3 of the Clayton Act by, inter alia, 'impos(ing) upon its hundreds of lessee-dealers exclusive dealing arrangements which required that the dealers secure their entire requirements of petroleum products and tires, batteries and other automobile accessories exclusively from the defendant . . ..' ³

Nearly two years later, the case went to trial before a jury, and proofs were Shortly thereafter, Marathon moved for a judgment n.o.v. or, in the alternative, for a new trial, and the district court entered an order granting the motion for judgment n.o.v., dismissing the action, and assessing costs against Davis. In its memorandum opinion, the district court stated that 'there was not a scintilla of evidence' to support the jury's verdict. It held, to the contrary, that the evidence demonstrated that Marathon did not require its service station lessees to purchase tires, batteries and accessories (TBA) as a condition of receiving gasoline or of retaining their leases; that Davis purchased TBA from whomever he pleased; and that Davis' lease was terminated because he had been neglecting his service station to pursue other business interests with the consequence that the quality of services at the station deteriorated and it became unprofitable.

submitted from September 24 until October 4, 1973. On September 21, Davis attempted to amend the list of his prospective witnesses that had already been submitted to Marathon by adding five witnesses--two Marathon dealers, his former employee, and two Marathon employees. Marathon moved to preclude the testimony of these additional witnesses and, after argument, the court granted the motion. At the conclusion of appellant's case and again at the conclusion of all the proofs, Marathon moved for a directed verdict. The district court denied the motion. The case was thereupon submitted to the jury upon proper instructions, and it returned a verdict for Davis. Judgment on the verdict was entered on December 1, 1973.

Appellant contends that the evidence was sufficient to permit reasonable persons to find that Marathon had impermissibly tied sales of gasoline to the lessee-operators of its service stations to sales of its TBA. Our examination of the record, however, demonstrates that although the complaint contained allegations of antitrust violations sufficient to withstand a motion to dismiss, appellant's evidence would not permit a reasonable person to find that these allegations had been proved.

' Tying arrangements' have been defined as 'agreements under which the vendor will sell one product only if the purchaser agrees to buy another product as well.' Advance Business Systems & Supply Co. v. SCM Corp., 415 F.2d 55, 60 (4th Cir. 1969), cert. denied, 397 U.S. 920, 90 S.Ct. 928, 25 L.Ed.2d 101 (1970). An illegal tie-in arrangement need not be expressed in a written contract, but the complainant must show that the seller would not make available to a purchaser one commodity unless the purchaser agrees to buy another. Advance Business Systems & Supply, supra; Lessig v. Tidewater Oil Co., 327 F.2d 459, 467--68 (9th Cir.), cert. denied, 377 U.S. 993, 84 S.Ct. 1920, 12 L.Ed.2d 1046 (1964); McElhenney v. Western Auto Supply Co., 269 F.2d 332, 338 (4th Cir. 1959).

A tie-in arrangement may violate either section 3 of the Clayton Act or section 1 of the Sherman Act. Times-Picayune Publishing Co. v. United States, 345 U.S. 594, 73 S.Ct. 872, 97 L.Ed. 1277 (1953); Advance Business Systems & Supply Co., supra. The standards of illegality under the two statutes are similar. The Clayton Act makes it unlawful for a person engaged in commerce to make a sale or contract for the sale of goods on the 'condition, agreement, or understanding' that the 'purchaser thereof shall not use or deal in the goods . . . of a competitor or competitors of the lessee or seller, where the effect of such . . . sale, or contract for sale or such condition, agreement or understanding may be to substantially lessen competition or tend to create a monopoly in any line of commerce.' 15 U.S.C. § 14. (Emphasis added.)

In Northern Pacific Ry. Co. v. United States, 356 U.S. 1, 6, 78 S.Ct. 514, 518, 2 L.Ed.2d 545 (1958) (footnote omitted), the Supreme Court stated a similar standard under the Sherman Act:

Indeed 'tying agreements serve hardly any purpose beyond the suppression In light of these standards, we consider whether there was sufficient evidence presented in this case to permit reasonable minds to conclude: (1) that Marathon violated the Sherman Act by having sufficient economic power to appreciably restrain free competition and imposing upon its lessee-operators a tying arrangement that restrained a 'not insubstantial' volume of interstate commerce, or (2) that Marathon violated the Clayton Act by a tying agreement that tended to 'substantially lessen competition' or 'create a monopoly in any line of commerce.'

of competition.' Standard Oil Co. of California and Standard Stations v. United States, 337 U.S. 293, 305--306 (69 S.Ct. 1051, 1058, 93 L.Ed. 1371). They deny competitors free access to the market for the tied product, not because the party imposing the tying requirements has a better product or a lower price but because of his power or leverage in another market. At the same time buyers are forced to forego their free choice between competing products. For these reasons 'tying agreements fare harshly under the laws forbidding restraints of trade.' Times-Picayune Publishing Co. v. United States, 345 U.S. 594, 606 (73 S.Ct. 872, 879, 97 L.Ed. 1277). They are unreasonable in and of themselves whenever a party has sufficient economic power with respect to the tying product to appreciably restrain free competition in the market for the tied product and a 'not insubstantial' amount of interstate commerce is affected. International Salt Co. v. United States, 332 U.S. 392 (68 S.Ct. 12, 92 L.Ed. 20). Cf. United States v. Paramount Pictures, 334 U.S. 131, 156--159 (68 S.Ct. 915, 928--929, 92 L.Ed. 1260); United States v. Griffith, 334 U.S. 100 (68 S.Ct. 941, 92 L.Ed. 1236). Of course where the seller has no control or dominance over the tying product so that it does not represent an effectual weapon to pressure buyers into taking the tied item any restraint of trade attributable to such tying arrangements would obviously be insignificant at most.

THE PROOFS SUBMITTED AT TRIAL

For the five years before August 1966, Marion Davis was a lessee-operator of Pure Oil Company service stations in Findlay, Ohio. In addition to selling oil products, he operated a trailer and truck rental service and a vehicle washing service, performed motor tune-ups, brake repair, muffler and tail pipe replacements, and sold tires, batteries, and replacement automobile and truck parts.

In July 1966, Marathon Oil Company representatives asked Davis to assume operation of the College Marathon Service Station in Findlay. As a condition of becoming a Marathon lessee, Davis was required to purchase the station inventory that had been ordered but not sold by his predecessor. Davis cancelled his lease with Pure Oil and assumed operation of the Marathon station on August 22, 1966. The Marathon lease, signed four days later, was a standard year-to-year contract containing the usual 30 day termination provision that either lessor or lessee could exercise. It was renewed annually in 1967, 1968, and 1969 until Marathon exercised its right to cancel in 1970.

From 1966 to 1970, Marathon marketed its petroleum products and its sponsored TBA brands primarily in Wisconsin, Michigan, Illinois, Ohio, Kentucky and Florida. The Marathon 'Ohio Region' included the entire state of Ohio, a portion of Kentucky, and a part of interstate highway 'I--75,' from Ohio through Florida. Marathon had over one thousand stations in Ohio, where it ranked either second or third in sales of branded gasoline. Approximately ninety percent of Marathon service stations were owner-operated.

During the four year period in question, Marathon sold to its dealers at wholesale prices certain brands of tires, batteries and accessories (TBA). It sold both 'B. F. Goodrich' and 'Firestone' tires, sponsored 'Delco' batteries, and Marathon encouraged its TBA sales by offering its dealers special promotions, discounts and other incentives, including a bonus...