Exxon Corp. v. Superior Court

• Decision Date: 14 January 1997
• Docket Number: No. H015001,H015001
• Court: California Court of Appeals Court of Appeals
• Parties: , 1997-1 Trade Cases P 71,677, 97 Cal. Daily Op. Serv. 373, 97 Daily Journal D.A.R. 558 EXXON CORPORATION, Petitioner, v. SUPERIOR COURT of Santa Clara County, Respondent; Shirley Cheng KOUTNEY et al., Real Parties in Interest.

Page 195

60 Cal.Rptr.2d 195

51 Cal.App.4th 1672, 1997-1 Trade Cases P 71,677,

97 Cal. Daily Op. Serv. 373,

97 Daily Journal D.A.R. 558

EXXON CORPORATION, Petitioner, v. SUPERIOR COURT of Santa Clara County, Respondent;

Shirley Cheng KOUTNEY et al., Real Parties in Interest.

No. H015001.

Court of Appeal, Sixth District, California.

Jan. 14, 1997.

As Modified on Denial of Rehearing Feb. 13, 1997.

Review Denied May 14, 1997.

Alan L. Martini, Sheuerman & Martini, San Jose, John M. Rochefort, Kurt Osenbaugh, Eugene A. Burrus, McClintock, Weston, Benshoof, Rochefort, Rubalcava & MacCuish, Los Angeles, for Petitioner.

Tony J. Tanke, Tanke & Willemsen, Belmont, Allen Ruby, Ruby & Schofeld, San Jose, Joseph W. Cotchett, Bruce L. Simon, The Law Office of Cotchett & Pitre, Burlingame, for Real Parties in Interest.

WUNDERLICH, Associate Justice.

Defendant Exxon Corporation petitions for writ of mandate following the trial court's denial of its motions for summary adjudication on various causes of action, primarily antitrust violations. The key question is whether or not for purposes of the Cartwright Act the relevant market for assessing anti-competitive behavior is all gasoline or Exxon gasoline. The trial court concluded the relevant market is a factual question, such that Exxon gasoline could be shown to be the relevant market. We disagree and thus grant Exxon's petition for writ of mandate.

BACKGROUND

Plaintiffs, 35 Exxon franchisee service station dealers, filed a complaint against Exxon stating 16 causes of action for Cartwright Act violations, business torts, and related claims. The factual essence of these claims is that the plaintiff dealers are locked into franchise relationships with Exxon and have invested considerable money and effort in acquiring their service stations, but the terms of the agreements make it difficult for them to compete both with independent dealers and with Exxon-owned stations. This is because Exxon compels the franchisees to buy all their Exxon gasoline from Exxon at a price considerably higher than the "rack price" at which Exxon sells the gasoline to independent jobbers. ¹ The franchisees claim they are at a competitive disadvantage in competing with these jobbers, with company-owned stations, and with independent operators who can all obtain fuel more cheaply than can plaintiffs. ² Further, the jobbers are forbidden to resell their Exxon fuel to plaintiffs as franchisees. Plaintiffs claim the price discrepancies between their cost and that of the jobbers have no reasonable relationship to the value of any distribution services which the jobbers perform in marketing the product. Although the agreements with Exxon do not preclude plaintiffs from selling other brands of gasoline, they may not do so unless they put in separate tanks and pumps, an economically prohibitive arrangement.

In making their Cartwright Act claims of both horizontal and vertical restraints, plaintiffs maintain that the relevant market is not the motor fuel market (all gasoline), but only the wholesale market for Exxon brand fuel. This allegation is crucial because the parties are agreed that Exxon does not own a dominating share of the petroleum market and therefore is not in a position to monopolize or dominate that market. It does, however, have a natural monopoly over its own product, and it is that dominance and control which plaintiffs challenge.

Plaintiffs also alleged violations of oral promises not to withdraw the Exxon credit card from the California market and to remodel or repair certain service stations. Exxon contends such alleged promises are inconsistent with the express language of the parties' integrated agreements.

Exxon moved for summary adjudication of several causes of action. The trial court granted summary adjudication of plaintiffs' first cause of action, for horizontal restraint, because there was no evidence of an agreement to restrain trade between Exxon and its jobbers. However, on the other causes of action, the trial court agreed with plaintiffs that triable issues of fact existed.

The trial court denied the motion for summary adjudication of the vertical restraint claim because, in its opinion, whether the product is "all gas" or "Exxon gas" is a question of fact, and whether there is consumer preference for Exxon gas as a single brand is also a question of fact. The court In denying the motion for summary adjudication of the claims based on the agreements of the parties, the trial court found questions of fact existed whether the claimed integrated contract was inconsistent with plaintiffs' allegations that Exxon breached promises to continue its credit card in effect and to remodel and repair certain stations. However, the court did grant Exxon's motion for summary adjudication of the "Seaman's " cause of action for tortious breach of implied covenant [Seaman's Direct Buying Service, Inc. v. Standard Oil Co. (1984) 36 Cal.3d 752, 206 Cal.Rptr. 354, 686 P.2d 1158], because a franchise relationship is commercial in nature and does not give rise to tort liability for breach. (Harris v. Atlantic Richfield (1993) 14 Cal.App.4th 70, 17 Cal.Rptr.2d 649.)

                cited Corwin v. Los Angeles Newspaper Service Bureau, Inc.  (1971) 4 Cal.3d 842, 94 Cal.Rptr. 785, 484 P.2d 953, holding that the relevant market is a triable issue on the question of the reasonableness of restraints.  For this same reason, the court also denied the motions for summary adjudication of the plaintiffs' monopoly claim and their price overcharging claim.  The court similarly denied summary adjudication of the claim of tortious interference or breach of the implied covenant, because there are factual issues.  (Citing Della Penna v. Toyota Motor Sales, U.S.A., Inc.  (1995) 11 Cal.4th 376, 45 Cal.Rptr.2d 436, 902 P.2d 740.)   The factual issues referenced are the same as those cited regarding existence of the relevant market.  Plainly, the trial court believed that because the claim for tortious interference stands or falls on a showing of an antitrust violation, the same facts which produce dispute as to those issues produce dispute as to the tort claims
                

Exxon then filed a statutory petition for mandate, claiming the trial court erred in failing to grant summary adjudication. (Code Civ.Proc., § 437c, subd. (l).) We issued an alternative writ of mandate, and the parties responded. We are now called upon to determine if in fact the trial court was correct in denying Exxon's motions for summary adjudication of certain issues, or whether summary adjudication should have been granted. The definition of the relevant market is the critical issue.

DISCUSSION

I Summary Adjudication

The trial court must grant summary adjudication where the moving party establishes the right to the entry of judgment as a matter of law. (Code Civ.Proc., § 437c, subd. (c); Union Bank v. Superior Court (1995) 31 Cal.App.4th 573, 579, 37 Cal.Rptr.2d 653.) "Summary judgment is mandatory where no triable issues exist as to a material fact, and if the documentation submitted on the motion entitles the moving party to judgment as a matter of law. (Code Civ.Proc., § 437c, subd. (c).) When, as here, defendants seek summary judgment, their supporting documentation must either establish a complete defense to the plaintiff's action or demonstrate an absence of an essential element of the plaintiff's case. When defendants establish the foregoing, and the plaintiff's opposing documentation does not show either a triable issue of fact with respect to the defense or that an essential element exists, summary judgment should be granted. [Citations.] These general principles also apply to an appellate court's review of a summary judgment ruling, which is conducted de novo. [Citations.]" (Thompson v. Halvonik (1995) 36 Cal.App.4th 657, 661, 43 Cal.Rptr.2d 142.) For summary judgment to be granted, "[t]he moving party must show that under no possible hypothesis within the reasonable purview of the allegations of the complaint is there a material question of fact which requires examination by trial. [Citations.]" (Chevron U.S.A., Inc. v. Superior Court (1992) 4 Cal.App.4th 544, 548, 5 Cal.Rptr.2d 674.)

Although Exxon initially complains that the trial court order did not meet the requirements of Code of Civil Procedure section 437c, subdivision (g) in that it insufficiently specifies what evidence is in conflict, we believe that absent a demand for greater specificity in the trial court, the order suffices procedurally. (See Haskell v. Carli (1987) 195 Cal.App.3d 124, 129-130, 240 Cal.Rptr.

439; see also Miller v. Lakeside Village Condominium Assn. (1991) 1 Cal.App.4th 1611, 1621, 2 Cal.Rptr.2d 796.)

We note also that plaintiffs object to consideration by writ review because certain causes of action remain, regardless of our decision, and thus a trial will go forward even if we grant the writ. However, we conclude pre-trial review is appropriate here, where the issues ruled on by the trial court contain the heart of plaintiffs' case and the trial might well be simplified if we find the trial court erred. ³

Preliminarily, it is important to emphasize what this case is not about: plaintiffs have not alleged any cause of action for price discrimination (under the federal Robinson-Patman Act or the California Unfair Practices Act) nor have they sued all major oil companies in an attempt to demonstrate a conspiracy or concerted action. Nor do we have before us individual claims of unconscionable contracts (franchise agreements). And we stress that this case concerns a franchise relationship, a specific and highly regulated contractual business arrangement.

II Antitrust Causes of Action

The Cartwright Act (Bus. & Prof.Code, § 16700 et seq.), as the Sherman Antitrust Act (15 U.S.C. § 1 et seq.), was enacted to promote free market competition and to prevent conspiracies or agreements in restraint or monopolization of trade. ⁴ Restraint of trade may be...