In re Coordinated Pretrial Proceedings, etc.

• Decision Date: 26 August 1980
• Docket Number: MDL No. 150 WPG.
• Citation: 497 F. Supp. 218
• Parties: In re COORDINATED PRETRIAL PROCEEDINGS IN PETROLEUM PRODUCTS ANTITRUST LITIGATION.
• Court: U.S. District Court — Central District of California

497 F. Supp. 218

In re COORDINATED PRETRIAL PROCEEDINGS IN PETROLEUM PRODUCTS ANTITRUST LITIGATION.

MDL No. 150 WPG.

United States District Court, C. D. California.

July 29, 1980.

Order August 26, 1980.

COPYRIGHT MATERIAL OMITTED

Robert K. Corbin, Atty. Gen., Kenneth R. Reed, Chief Counsel, Antitrust Section, Asst. Atty. Gen., David B. Goldstein, Asst. Atty. Gen., Antitrust Division, Phoenix, Ariz., for State of Arizona.

George Deukmejian, Atty. Gen. by Michael Ivan Spiegel, Wayne M. Liao, William S. Clark, Deputy Attys. Gen., Dept. of Justice, State of California, San Francisco, Cal., for State of California.

Jones & Dunne, Stephen L. Dunne, San Diego, Cal., for State of Florida.

James Kirkham Johns, Chief Counsel, Antitrust Division, Salem, Or. by Michael G. Hanlon, Asst. Atty. Gen., Antitrust Division, for State of Oregon.

Slade Gorton, Atty. Gen. by Thomas L. Boeder, Senior Asst. Atty. Gen., Jay Uchida, Asst. Atty. Gen., Consumer Protection and Antitrust Division, State of Washington, Seattle, Wash., for State of Washington.

Hughes, Hubbard & Reed, Otis Pratt Pearsall, John A. Donovan, Philip H. Curtis, New York City, and Donald A. Bright, Howard S. Fredman, Barbara A. Hindin, General Litigation Attys., Los Angeles, Cal., and Hughes, Hubbard & Reed, Ronald C. Redcay, Los Angeles, Cal., for defendant Atlantic Richfield Co.

Milbank, Tweed, Hadley & McCloy, Adlai S. Hardin, Jr., New York City, for defendant Amerada Hess Corp.

Procopio, Cory, Hargreaves & Savitch, Robert G. Russell, Jr., Paul B. Wells, San Diego, Cal., for Cities Service Company-Cities Service Oil Co.

Latham & Watkins, Fredric J. Zepp, John D. Demorest, Los Angeles, Cal., and Tom Burton, Bruce Merrill, General Attys., Houston, Tex., for Continental Oil Co. McCutchen, Black, Verleger & Shea, Philip K. Verleger, David A. Destino, Lisa C. Woods, John C. Mueller, Los Angeles, Cal., and C. Kenneth Roberts, John Chiles, James A. Drexler, Houston, Tex., and Rosemary Stein, New York City, for defendant Exxon Corp.

Dechert, Price & Rhoads by Robert A. Cohen, New York City, and Philip J. Englund, House Counsel, Los Angeles, Cal., for defendant Getty Oil Co.

John E. Bailey, Harry P. Davis, Jr., Joan B. Oxford, George E. Jarvis, Law Dept., Houston, Tex., for defendant Gulf Oil Company-U.S.

Donovan, Leisure, Newton & Irvine by Andrew J. Kilcarr, Washington, D.C., Charles F. Rice, New York City, Vincent Tricarico, Maureen O'Bryon, Washington, D.C., and Sheppard, Mullin, Richter & Hampton by Don T. Hibner, Jr., Los Angeles, Cal., for defendant Mobil Oil Corp.

Sullivan & Cromwell, John Dickey, Richard Menaker, New York City, and Adams, Duque & Hazeltine, John H. Brinsley, Catherine H. Ruddy, Los Angeles, Cal., and Phillips Law Department, Neal Lehman, Bartlesville, Okl., for Phillips Petroleum Co.

Kadison, Pfaelzer, Woodard, Quinn & Rossi, Lawrence A. Cox, Los Angeles, Cal., for defendant Powerine Oil.

Howrey & Simon, William Simon, William O'Brien, Washington, D. C., for defendant Shell Oil Co.

Pillsbury, Madison & Sutro, Richard J. MacLaury, Robert P. Taylor, Robert A. Mittelstaedt, David C. Stegall, San Francisco Cal., for Standard Oil Company of California.

M. J. Keating, Chicago, Ill., and Paul, Hastings, Janofsky & Walker, Oliver F. Green, Jr., Los Angeles, Cal., for Standard Oil Company (Indiana).

J. King Rosendale, Cleveland, Ohio, and Payne, Hilgendorff, Morehouse & Shafer, Paul C. Shafer, Jr., Fairfield, Conn., for Standard Oil Company (Ohio).

Robert M. Dubbs, Radnor, Pa., and Pepper, Hamilton & Sheetz, John G. Harkins, Philadelphia, Pa., for Sun Oil Co.

MEMORANDUM OF DECISION REGARDING STANDING AND ILLINOIS BRICK

WILLIAM P. GRAY, District Judge.

The states of Arizona, California, Florida, Oregon and Washington have brought actions against several major oil companies, alleging violations of federal and state antitrust laws. These cases have been consolidated in this court for pretrial proceedings. The defendants have moved to dismiss certain portions of the complaints on the grounds that the plaintiffs lack standing to sue under the antitrust laws or that the rule in Illinois Brick v. Illinois, 431 U.S. 720, 97 S.Ct. 2061, 52 L.Ed.2d 707 (1977) precludes the plaintiffs from proving certain types of damages.

The motions to dismiss are directed against two causes of action set forth in the complaints.¹ The first cause of action in each complaint accuses the defendants of conspiring to restrain or monopolize interstate commerce in "the production, transportation, and refining of crude oil and the distribution and marketing of refined petroleum products." The complaints allege that this was accomplished by using the existing structure of the petroleum industry, together with horizontal agreements and concerts of action in violation of sections 1 and 2 of the Sherman Act. The second cause of action asserts that the defendants combined or agreed to restrain or monopolize commerce by creating "an artificial scarcity of crude oil and refined petroleum products within the United States" and in each plaintiff state. The plaintiffs complain that they, and those on whose behalf they sue, have been damaged by the price increases for refined petroleum products that resulted from the alleged antitrust violations.

I. STANDING TO SUE FOR DAMAGES

A. Clayton Act § 4

Each of the plaintiff states alleges that it is a purchaser or consumer of petroleum products. With the possible exception of Florida,² the plaintiffs' claims as purchasers are limited to purchases of refined petroleum products as opposed to crude oil. The claims for damages are made under Clayton Act § 4 which provides:

"Any person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws may sue therefor in any district court of the United States ... and shall recover threefold the damages by him sustained, and the cost of suit, including a reasonable attorney's fee." 15 U.S.C. § 15 (1976).

In addition to the claims made on their own behalf, the states also assert claims as parens patriae under Clayton Act § 4C (15 U.S.C. § 15C) and as representatives of two classes of consumers. The first consumer class consists of all government entities that purchase refined petroleum products within the respective plaintiff states. The second class is composed of all other consumers of refined products within such plaintiff states.

Standing to sue under Clayton Act § 4 consists of two elements. The claimant must show that the alleged violation of the antitrust laws (1) directly caused injury (2) to the claimant's "business or property." Defendants' motions first challenge whether the plaintiffs as consumers are injured in their business or property within the meaning of the statute. This court previously has concluded that consumers are persons injured in their business or property (see the memorandum of decision dated September 15, 1977). Since then, the Supreme Court has reached the same conclusion on that issue in Reiter v. Sonotone Corp., 439 U.S. 1065, 99 S.Ct. 830, 59 L.Ed.2d 30 (1979).

The remaining issue with regard to standing is whether the plaintiffs have alleged injury within the meaning of section 4. The Fifth and Ninth Circuits, in which the various consolidated cases arise, agree that the appropriate test for injury is the so-called "target area" test.³ Tugboat, Inc. v. Mobile Towing Co., 534 F.2d 1172 (5th Cir. 1976); In re Multidistrict Vehicle Air Pollution M.D.L. No. 31, 481 F.2d 122 (9th Cir.), cert. denied sub nom. Morgan v. Automobile Manufacturers Association, 414 U.S. 1045, 94 S.Ct. 551, 38 L.Ed.2d 336 (1973). The "target area" is "that area of the economy which is endangered by a break-down of competitive conditions in a particular industry." Karseal Corporation v. Richfield Oil Corporation, 221 F.2d 358, 362 (9th Cir. 1955). To apply the target area test, the area of the economy affected by the alleged violation must be identified, and then it must be determined whether the claimed injury occurred within that area. In re Multidistrict, 481 F.2d at 129.

The first cause of action in the complaints of Arizona, California, Florida, Oregon and Washington alleges restraint of trade and monopolization in the petroleum industry as a result of the vertically integrated structure of that industry and certain horizontal combinations. The effects of these alleged violations are set forth most fully in the Washington complaint as follows:

"These violations of the Sherman Act have had the following effects, among others:

a. The acquisition and control by defendants of substantially all foreign crude oil imports into PAD V the West Coast market area.

b. The acquisition or control by defendants of all California crude oil production.

c. The acquisition or control by defendants of substantially all pipeline transportation of crude oil within California and PAD V.

d. The elimination of competition in the production of crude oil within California.

e. Arbitrary and artificial prices at which crude oil is purchased and sold within California.

f. Reduced competition in the sale of refined products within Washington and elsewhere in PAD V.

g. Increases in prices of refined products to artificial and noncompetitively high levels within Washington and elsewhere in PAD V."

Washington and the other state plaintiffs claim that they were damaged by the effect of antitrust violations on the prices they paid for petroleum products. They are not purchasers of crude oil; they do not use pipelines or other transportation facilities for crude oil; nor do they produce crude oil or market it. Therefore, the alleged injury could occur only in the "target area" described in paragraphs (f) and (g) above, the refined product market, and the plaintiffs have standing to sue for damages only as to those violations which affected this market.

The second cause of action in these five complaints asserts that the defendants conspired to restrain trade and...