Edward J. Sweeney & Sons, Inc. v. Texaco, Inc.
| Decision Date | 03 November 1980 |
| Docket Number | No. 79-2468,79-2468 |
| Citation | 637 F.2d 105 |
| Parties | 1980-81 Trade Cases 63,611 EDWARD J. SWEENEY & SONS, INC., and Mission Gas Oil Company, Inc. and Petroleum Products Co., Appellants, v. TEXACO, INC. |
| Court | U.S. Court of Appeals — Third Circuit |
Mitchell A. Kramer (argued), Steven Kapustin, Kramer & Salus, Philadelphia, Pa., for appellants.
Randall B. Robinson, White Plains, N. Y. (argued), Kaye, Scholer, Fierman, Hays & Handler, New York City, Duane, Morris & Heckscher, Philadelphia, Pa., for appellee Texaco, Inc.; Milton J. Schubin, Randolph S. Sherman, Ira S. Sacks, New York City, Jane D. Elliott, Philadelphia, Pa., of counsel.
Thomas A. Rothwell, Mark J. Yeager, Washington, D. C., for amicus curiae Small Business Legislative Council.
Before ALDISERT and SLOVITER, Circuit Judges, and RAMBO, District Judge. *
The major question for decision in this appeal by unsuccessful plaintiffs in an anti-trust action is whether they established a prima facie case of a "contract, combination, ... or conspiracy, in restraint of trade ..." in violation of § 1 of the Sherman Act, 15 U.S.C. § 1. Sweeney, a wholesale and retail distributor of Texaco fuels, and two of its wholesale customers attempted to prove that Texaco unlawfully conspired with other fuel distributors and retailers to fix the retail price of Texaco motor fuel. Determining that appellants had failed to introduce evidence from which a jury could infer the existence of a conspiracy, the district court directed a verdict in favor of Texaco.
The district court also directed a verdict against appellants on their claims that Texaco violated § 2 of the Sherman Act, 15 U.S.C. § 2, and § 2(a) of the Clayton Act, as amended by the Robinson-Patman Act, 15 U.S.C. § 13(a). In addition, the district court dismissed damage claims against Texaco raised by Mission Gas Oil Company and Petroleum Products Company. The court granted Texaco's prayer for injunctive and declaratory relief against Sweeney concerning Sweeney's practice of misrepresenting non-Texaco fuel as Texaco fuel. Sweeney, Mission, and Petroleum Products appeal these adverse rulings. We conclude that the district court did not err and, therefore, we affirm.
We need recite only those facts essential to this appeal because of the extensive elaboration already undertaken by the district court. Edward J. Sweeney & Sons, Inc. v. Texaco, Inc., 478 F.Supp. 243, 249-51 (E.D.Pa.1979). Appellant Edward J. Sweeney & Sons, Inc., is a wholesaler and distributor of Texaco motor fuels in Eastern Pennsylvania and Southern New Jersey. In addition to its wholesale business Sweeney owns several retail gasoline stations. Mission Gas Oil Company, Inc., and Petroleum Products Company are distributors who purchase fuel from Sweeney. The defendant Texaco, Inc., refines and sells gasoline and other petroleum products.
After several years as a consignee and wholesaler for other companies, Sweeney became a Texaco wholesaler and distributor in 1958. In 1963 Sweeney and Texaco entered into the distributor agreement at the heart of this litigation. Part of the agreement provided that Sweeney would haul its own fuel. When it sells motor fuel to distributors, Texaco charges a price that includes the cost of delivering the product to the distributor's bulk plant. If the distributor picks up fuel at Texaco's plant, however, as Sweeney did, it receives a discount or hauling allowance. The discount equals the lowest amount it would cost Texaco to deliver the fuel from a designated distribution point to the purchaser's bulk plant by common carrier, contract carrier, or Texaco company truck. Texaco initially designated its terminal in Westville, New Jersey, as Sweeney's pick-up point. Accordingly, Sweeney received a hauling allowance equal to the common carrier rate for trips between Westville and its bulk plant located in Pottstown, Pennsylvania.
Sweeney used the hauling allowance to its advantage. Between 1965 and 1970 Sweeney acquired several retail gasoline stations in addition to ones it already owned. The newly acquired stations were located within a twenty mile radius of Texaco's Westville, New Jersey, terminal. Sweeney picked up fuel in Westville and transported it directly to these stations. This practice enabled Sweeney to receive an allowance for hauling fuel from Westville to Pottstown, roughly fifty miles, while hauling it less than twenty miles. Receiving the greater allowance effectively lowered Sweeney's cost for gasoline which in turn allowed Sweeney to lower its retail prices.
Use of the hauling allowance was just one part of Sweeney's retail marketing strategy. A second major part was "no-frills" retailing. Prior to 1965, Sweeney's retail stations offered complete automobile repair and maintenance services in addition to fuel. Sometime in 1965 or 1966, Sweeney's stations began eliminating these services, becoming "gas and go" outlets. The lowered overhead at these stations allowed Sweeney to reduce its retail prices further. Unlike other discount outlets which sold gas under their own names, Sweeney's stations sold fuel under the Texaco name. Sweeney offered gasoline at a price between one and three cents lower than the price at which other retailers in the area offered major brand gasoline. After Sweeney adopted this no-frills retail sales practice, its retail sales and profits increased steadily.
Sweeney's prosperity did not augur well with competing Texaco retailers. Beginning in 1966, some of these retailers complained to Texaco that Sweeney's discount pricing was hurting their businesses. Sweeney contends that Texaco conspired with these retailers to terminate Sweeney's distributorship or to reduce its hauling allowance and thereby force Sweeney to raise its prices. Sweeney cites Texaco's actions in 1970 and 1971 as evidence of this alleged conspiracy.
The evidence disclosed that as early as 1966 Texaco had reviewed the status of Sweeney's hauling agreement. Texaco found that it could save at least $2,158 annually by supplying Sweeney from Macungie, Pennsylvania, rather than from Westville, New Jersey, due to Macungie's proximity to the Sweeney plant. When it learned of Texaco's consideration of a change to Macungie, Sweeney objected and Texaco postponed its decision on the matter.
By 1970, the economics of supplying Sweeney out of Westville had changed drastically. Instead of $2,158, Texaco's loss attributable to supplying Sweeney from Westville had risen to more than $58,000 annually. Texaco informed Sweeney in December, 1970, that it was changing Sweeney's supply point from Westville to Macungie under a provision in the hauling agreement permitting Texaco to terminate the agreement or to change the pick-up point. Nevertheless, Sweeney refused to go along with the change to Macungie. Texaco then notified Sweeney that it was terminating Sweeney's distributor and hauling agreements in sixty days, effective February 28, 1971.
After it received the termination notice, Sweeney attempted but failed to obtain an alternate source of supply. Sweeney then negotiated with Texaco. As a result of the negotiations, Sweeney's distributor's agreement was not terminated and the parties agreed on a compromise hauling arrangement on March 1, 1971.
Under the new hauling agreement, Sweeney continued to pick up at Westville until May 31, 1971, and received the allowance it had been getting for the distance from Westville to Pottstown. Thereafter, Sweeney picked up fuel at Macungie and received a hauling allowance based on the Macungie to Pottstown rate. Texaco also agreed that after May 31, 1971, Sweeney could pick up fuel at either location, at Sweeney's option, although the hauling allowance for all purchases would be based on the Macungie to Pottstown trip. This agreement mitigated the effect of the change in the hauling allowance by permitting Sweeney to continue supplying its southern New Jersey stations from nearby Westville.
After this new hauling agreement became effective, Sweeney began delivering non-Texaco fuel to Texaco brand stations in trucks bearing the Texaco trademark. Texaco learned of Sweeney's commingling and conducted a thorough investigation of Sweeney's operations using Texaco security personnel. The investigation confirmed Texaco's suspicion of Sweeney's pervasive trademark violations.
On December 17, 1971, Daniel A. Doherty, Texaco's Manager for the Philadelphia Region, told Texaco's Vice President of Sales, United States, of his decision to terminate Sweeney's distributor and hauling agreements. Doherty based his decision primarily on Sweeney's trademark violations and misrepresentations. In addition, Doherty explained that Sweeney's stations failed to maintain Texaco's brand integrity image, quality, and prestige standards. Sweeney's stations were the subject of an inordinate number of consumer complaints about service. Credit card users, a particularly valued segment of the market, complained of credit card irregularities at Sweeney's stations. Coupled with Sweeney's practice of representing non-Texaco fuel as Texaco fuel, this evidence of Sweeney's failure to meet Texaco's standards led Doherty to believe that Sweeney was damaging Texaco's valuable trademark and image.
Texaco notified Sweeney that effective February 29, 1972, it would terminate both the 1963 distributor agreement and the March 1, 1971, hauling agreement. Although Sweeney tried again to obtain an alternate source of supply, it was again unsuccessful. After various negotiations, Texaco agreed to supply Sweeney until it gave a ten day notice of its intention to discontinue Sweeney's supply. No termination notice has been given, and Texaco continues to provide Sweeney with fuel.
The present litigation followed these events. Sweeney charged that Texaco conspired in violation of § 1 of the Sherman Act, 15 U.S.C. § 1, with the dealers who complained...
To continue reading
Request your trial
-
In re Mid-Atlantic Toyota Antitrust Litigation
...have read the phrase "as an alliterative compound noun, roughly translated to mean `concerted action.'" Edward J. Sweeney & Sons, Inc. v. Texaco, 637 F.2d 105, 111 (3rd Cir.1980) (quoting Bogosian v. Gulf Oil Corp., 561 F.2d 434, 445-46 (3rd Cir.1977), cert. denied, 434 U.S. 1086, 98 S.Ct. ......
-
U.S. v. Gibbs
...of independent evidence" test of United States v. Trotter, 529 F.2d 806, 811-12 (3d Cir.1976). See also Edward J. Sweeney & Sons, Inc. v. Texaco, 637 F.2d 105, 115-17 (3d Cir.1980), cert. denied, 451 U.S. 911, 101 S.Ct. 1981, 68 L.Ed.2d 300 (1981).Several other circuits have adopted a more ......
-
Reborn Enterprises, Inc. v. Fine Child, Inc., 82 Civ. 2451 (ADS).
...exercise of independent business judgment and emasculate the terms of the statute.'" Id. (quoting Edward J. Sweeney & Sons, Inc. v. Texaco, Inc., 637 F.2d 105, 111 n. 2 (3d Cir.1980), cert. denied, 451 U.S. 911, 101 S.Ct. 1981, 68 L.Ed.2d 300 (1981). Reborn claims that unity of purpose amon......
-
Cemar, Inc. v. Nissan Motor Corp. In USA
...between competing distributors and a manufacturer or supplier may be per se unlawful. For example, in Edward J. Sweeney & Sons, Inc. v. Texaco, Inc., 637 F.2d 105 (3d Cir.), cert. denied, 451 U.S. 911, 101 S.Ct. 1981, 68 L.Ed.2d 300 (1981), Sweeney alleged that his hauling allowance as a Te......
-
Table of Cases
...863 (Cal. Ct. App. 2005), 128, 129 Edison Elec. Inst. v. Henwood, 832 F. Supp. 413 (D.D.C. 1993), 96 Edward J. Sweeney & Sons v. Texaco, 637 F.2d 105 (3d Cir. 1980), 22, 50, 52 Empire State Pharm. Soc’y v. Empire Blue Cross & Blue Shield, 778 F. Supp. 1253 (S.D.N.Y. 1991), 28 England v. Chr......
-
Robinson-Patman Act
...(10th Cir. 1991); Shreve Equip. v. Clay Equip. Corp., 650 F.2d 101, 105-06 (6th Cir. 1981); Edward J. Sweeney & Sons v. Texaco, Inc., 637 F.2d 105, 120 (3d Cir. 1980); FLM Collision Parts, Inc. v. Ford Motor Co., 543 F.2d 1019, 1025-26 (2d Cir. 1976); Precision Printing Co. v. Unisources Wo......
-
Pricing Issues
...even if it results in different prices based on the location of the distributor’s delivery site. Edward J. Sweeney & Sons v. Texaco, Inc., 637 F.2d 105, 119-22 (3d Cir. 1980). 115. See, e.g. , Nat’l Dairy Prods. Corp. v. FTC, 412 F.2d 605, 608-09 (7th Cir. 1969) (two-for-one offer); R.J. Re......
-
Section 2 of The Sherman Act
...F.3d 1080, 1087 (D.C. Cir. 1998); Smith v. N. Mich. Hosps., 703 F.2d 942, 954 (6th Cir. 1983); Edward J. Sweeney & Sons v. Texaco, Inc., 637 F.2d 105, 117 (3d Cir. 1980); Photovest Corp. v. Fotomat Corp., 606 F.2d 704, 711-12 (7th Cir. 1979). The model instruction follows Spectrum Sports in......