Flank Oil Co. v. Continental Oil Co.

• Decision Date: 12 December 1967
• Docket Number: Civ. A. No. 8883.
• Parties: FLANK OIL CO., a corporation, doing business as Oriental Refining Co., Plaintiff, v. CONTINENTAL OIL CO., a Delaware corporation, Standard Oil Co. (Indiana), a corporation, American Oil Co., a corporation, Gulf Oil Corp., a Pennsylvania corporation, Standard Oil Co. (New Jersey), a corporation, and Humble Oil & Refining Co., a corporation, Defendants.
• Court: U.S. District Court — District of Colorado

277 F. Supp. 357

FLANK OIL CO., a corporation, doing business as Oriental Refining Co., Plaintiff, v. CONTINENTAL OIL CO., a Delaware corporation, Standard Oil Co. (Indiana), a corporation, American Oil Co., a corporation, Gulf Oil Corp., a Pennsylvania corporation, Standard Oil Co. (New Jersey), a corporation, and Humble Oil & Refining Co., a corporation, Defendants.

Civ. A. No. 8883.

United States District Court D. Colorado.

December 12, 1967.

Creamer & Creamer, George Louis Creamer, Denver, Colo., for plaintiff.

Holland & Hart, J. G. Holland, W. C. McClearn, and Gordon G. Greiner, Denver, Colo., for defendant Standard Oil Co. (New Jersey).

SUBSTITUTED MEMORANDUM OPINION AND ORDER

WILLIAM E. DOYLE, District Judge.

This is a private antitrust suit under Sections 4 and 16 of the Clayton Act, 15 U.S.C. §§ 15 and 26, alleging that sundry defendants have violated Sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1 and 2, and Section 2(a), (c), (d), (e) and (f) of the Clayton Act as amended by the Robinson-Patman Price Discrimination Act, 15 U.S.C. § 13(a), (c), (d), (e) and (f). The plaintiff is seeking to enjoin further alleged violations and recover treble damages.

The matter now before the court is defendant Standard Oil of New Jersey's motion to quash service of process and to dismiss the complaint for lack of jurisdiction and venue.¹ A ruling on the motion requires construction of Section 12 of the Clayton Act, 15 U.S.C. § 22, which section prescribes the tests for venue and service of process on corporations 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." Emphasis added

The issue of jurisdiction resolves itself into a question of whether venue is properly laid in this district (i. e., whether the defendant "transacts business" in Colorado), and the issue of adequate and proper service turns on whether the defendant is "found" in Colorado. Standard Oil of New Jersey (herein called "Standard") contends that it is neither "transacting business" nor "found" in Colorado.

The plaintiff ("Flank") contends that Standard is amenable to both jurisdiction and process in this district because of its close relationship with its wholly-owned subsidiary, Humble Oil & Refining Company ("Humble"), which is admittedly "transacting business" and "found" in Colorado. Flank, in reliance upon this contention, served process on Standard by serving an agent of Humble in Colorado.

The distinction between "transacting business" and "found" in Section 12 is an artless one, which has created some difficulties in judicial interpretation. See Eastman Kodak Co. v. Southern Photo Materials Co., 273 U.S. 359, 47 S.Ct. 400, 71 L.Ed. 684 (1927); Intermountain Ford Tractor Sales Co. v. Massey-Ferguson Limited, 210 F.Supp. 930 (D.Utah 1962). The legislative history clearly indicates that the addition of the phrase "transacts business" to the venue clause was intended to broaden the old requirement that a corporation must be "found" in a district before venue was proper. Similarly, it is clear that Congress, by its failure to add this broader wording to the service-of-process clause, intended to carry forward preexisting law, so that in some situations service in a district might be invalid, even though venue in the district is established. Eastman Kodak Co. v. Southern Photo Materials Co., 273 U.S. 359, 47 S.Ct. 400, 71 L.Ed. 684 (1927); 1 Moore's Federal Practice (2d ed.) 1670-71. However, even though it is clear that some distinction does exist between the venue and service requirements of Section 12, the nature and meaning of that distinction is somewhat of a mystery. A number of courts have held that "transacting business" is a looser and broader concept than "doing business" under other statutes, while the word "found" is essentially equivalent to "doing business." See, e. g., Fooshee v. Interstate Vending Co., 234 F.Supp. 44 (D.Kan.1964); Goldlawr, Inc. v. Shubert, 169 F.Supp. 677 (E.D.Pa.1958); Riss & Co. v. Association of American Railroads, D.C., 24 F.R.D. 7. At least one court has held that "transacting business" is the same as "doing business" under the general venue section, 28 U.S.C. § 1391. Alex Friedman v. United States Trunk Co., 204 F.Supp. 366 (S.D.N.Y.1962). A number of courts have recognized the distinction, but at the same time have refused to find it crucial in deciding concrete cases. United States v. Scophony Corporation of America, 333 U.S. 795, 68 S.Ct. 855, 92 L.Ed. 1091 (1948); Fooshee v. Interstate Vending Co., 234 F.Supp. 44 (D.Kan.1964); Intermountain Ford Tractor Co. v. Massey-Ferguson Limited, 210 F.Supp. 930 (D.Utah 1962), aff'd per curiam 325 F.2d 713 (10th Cir. 1963), cert. den. 377 U.S. 931, 84 S.Ct. 1334, 12 L.Ed.2d 296 (1964). We have also concluded that the distinction between "transacting business" and "found" is not crucial in this case, and that Jersey Standard's contacts with Colorado are legally sufficient to support both venue and service within the district.

The facts which we find important in arriving at this result are as follows. Standard is no longer an operating company; it is a holding company with investments directly or indirectly in over 300 subsidiary and affiliated companies, most of whom are engaged in one or more operational phases of the petroleum and chemical industries. Standard's subsidiaries operate in more than 100 countries, and the market value of its outstanding shares is approximately $13,800,000,000. It employs about 1,600 persons, all of whom are engaged in supervising its investments in its subsidiaries. For many years, Jersey Standard has had no employee, agent, office, real property, bank account, telephone listing, or meeting of directors or shareholders in Colorado, has made no sales or shipments of merchandise in or to Colorado, has done no advertising in and paid no business taxes to Colorado. The absence of such contacts merely emphasizes that Standard has no direct relationship with Colorado, aside from its relationship to Humble.²

Humble was incorporated in 1959 and soon became the principal operating United States affiliate of Jersey Standard. The latter acquired Humble's stock, contributed a subsidiary pipeline company, and merged Humble with two other Standard subsidiaries, Carter Oil Company and Esso Standard Oil Company. Humble is now a fully integrated petroleum company, engaged in exploration for and production of crude oil and natural gas, and in refining, transporting and marketing petroleum products and petrochemicals in the United States. At the end of 1964, it had over 35,000 employees and total assets of slightly more than four billion dollars. Its principal place of business is Houston, Texas, but it is qualified to do business in Colorado, has an office in the State, and has approximately 200 employees engaged in exploration, production and marketing in Colorado. Humble is admittedly subject to venue and process in this district under Section 12 of the Clayton Act.

It is Flank's contention that Humble is the "alter ego" of Standard and that the two corporations should be treated as one for purposes of venue and service of process. In support of this, Flank points to the following: (a) Standard owns 100% of Humble's stock; (b) Standard effectively chooses all of Humble's directors (a list of proposed directors is approved by Standard and a general proxy is then granted to designated officers of Humble); (c) Humble's financial reports and account procedures conform to guidelines suggested by Standard, and Humble's balance sheet is consolidated with Standard's; (d) Standard loans money to Humble at current prime rates to fulfill short-term cash needs, and invests cash reserves deposited with it by Humble; (e) Standard has contributed more than $150,000,000 in assets to Humble in the form of a subsidiary pipeline company, and merged Humble with two other Standard subsidiaries; (f) Standard makes available to each of its affiliates (including Humble) the results of its research and that of other affiliates in technology and related fields; (g) Humble is required to submit its projected annual budget to Standard's "Investment Advisory Committee" for its approval, along with other periodic financial statements and operating results;³ (h) Standard designates one of its directors as the "Contact Director" for Humble and designates another director as his alternate; these men are consulted by Humble's chief executive officers from time to time, receive and evaluate information concerning Humble's financial affairs and operating results, and make recommendations on important policy matters, such as new business ventures, large planned capital investments, corporate financing, corporate reorganizations, relations with other Standard affiliates, and similar problems; (i) Humble's "Contact Directors" keep the president and board of directors of Standard currently informed on the important activities of Humble; (j) Standard is allocated all crude oil imports and Humble then acquires the oil by license under Standard's quotas, as required by the regulations of the Oil Import Administration.⁴

Standard states that each of Humble's employees is responsible to his superior in the Humble organization and is in no way supervised by or reports to any employee of Standard or any of its affiliates; that no director or officer of Humble has ever been a director or officer of Standard while so employed by Humble; and that Humble's management is solely responsible for the day-to-day operation of its business, including accounting, advertising, economics and planning, employee relations, engineering, government relations, law, public...