J & S Oil, Inc. v. Irving Oil Corp.
| Decision Date | 04 August 1999 |
| Docket Number | No. Civ.A. 98-60-B.,Civ.A. 98-60-B. |
| Parties | J & S OIL, INC., Plaintiff, v. IRVING OIL CORP., Defendant. |
| Court | U.S. District Court — District of Maine |
Harold Friedman, Karen Wolf, Friedman, Babcock & Gaythwaite, Portland, ME, for plaintiff.
John Hubbard Rich III, David McConnell, Perkins, Thompson, Hinckley & Keddy, Portland, ME, for defendant.
Plaintiff J & S Oil, Inc. ("Plaintiff") brings this antitrust action against Defendant Irving Oil Corp. ("Defendant") alleging predatory price discrimination in violation of 15 U.S.C. § 13(a) (Count I) and unfair trade practices in violation of 15 U.S.C. § 45 (Count II). To these counts, Plaintiff appends state law claims for interference with business relations (Count III), violation of the Unfair Sales Act, Me. Rev.Stat.Ann. tit. 10, § 1201-1209 (Count IV), and breach of contract (Count V). Before the Court is Defendant's Motion for Summary Judgment on Counts I and II of Plaintiff's Complaint and Plaintiff's Motion for Further Discovery. For the reasons set forth below, the Court GRANTS Defendant's Motion for Summary Judgment on Counts I and II and DISMISSES the remaining state claims pursuant to 28 U.S.C. § 1367(c). Plaintiff's Motion for Further Discovery is DENIED.
Summary judgment is appropriate in the absence of a genuine issue as to any material fact and when the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c). An issue is genuine for these purposes if "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A material fact is one that has "the potential to affect the outcome of the suit under the applicable law." Nereida-Gonzalez v. Tirado-Delgado, 990 F.2d 701, 703 (1st Cir. 1993). Facts may be drawn from "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits." Fed.R.Civ.P. 56(c).
The following are the relevant facts presented in a light most favorable to Plaintiff. See McCarthy v. Northwest Airlines, Inc., 56 F.3d 313, 315 (1st Cir.1995).
Both Plaintiff and Defendant are Maine corporations. Plaintiff operates retail gasoline stations in Kennebec County, specifically in the towns of Winslow, Farmingdale, Manchester, and Augusta. In addition, Plaintiff sells refined petroleum products on a wholesale basis to independent gasoline stations and heating oil customers in central Maine.
Defendant operates retail gasoline stations throughout the state of Maine. Within Kennebec County, it has stations in Manchester, Gardiner, Waterville, and Augusta. In addition, Defendant is affiliated with Irving Oil Limited ("Irving Limited"), a refinery in the Canadian province of New Brunswick that converts crude oil into a number of refined petroleum products that it sells to Defendant and other carriers, including Plaintiff. While Defendant purchases refined petroleum from Irving Limited at an internal "accounting price," other carriers buy petroleum from Irving Limited at the "spot" price. The spot price is the price at which the product is available from other refineries selling in New York Harbor and elsewhere.
The predominant sources of the refined petroleum ultimately sold at retail gas stations in Maine are Irving Limited's refinery and refineries selling out of New York Harbor. Thus, no matter what brand name is displayed at retail stations in Maine, it is possible that the original source of the gas is Irving Limited. Between 1995 and 1997, Defendant imported an average of 30.58 percent of all motor gasoline refined by Irving Limited and imported into Maine.1
Plaintiff claims, and for purposes of this Motion Defendant does not dispute, that the gas sold by Defendant at its retail stations in Kennebec County has been priced "below cost" on many occasions since August of 1995. In other words, Defendant sold gas to consumers at a price lower than the price paid by other carriers to purchase gas at wholesale. During this same period, Defendant sold gas at its retail stations outside Kennebec County for prices higher than the below-cost prices it was charging at its stations within Kennebec County.
The market for retail gasoline in Kennebec County has been characterized as moderately competitive since June of 1995 by the Maine Attorney General. In 1995-96, the level of market concentration in Kennebec County decreased by nineteen percent from the prior year and has continued to decrease since then. The volume of retail gasoline sold in Kennebec County by Defendant totaled 7,247,000 gallons in 1995, 7,660,600 gallons in 1996, and 8,316,000 gallons in 1997. In contrast, the volume of retail gasoline sold by Plaintiff in Kennebec County during the same three years totaled 11,178,804 gallons, 11,887,273 gallons, and 11,914,950 gallons respectively.2 Plaintiff opened a new retail station in Augusta in July of 1997.
Plaintiff filed its Complaint in this Court on March 3, 1998. On March 27, 1998, Defendant filed an Answer and United States Magistrate Judge Beaulieu issued a scheduling order setting July 1, 1998 as the deadline for joinder of parties and amendment of the pleadings. The order also directed the parties to complete discovery by September 16, 1998. That deadline was subsequently amended to December 16, 1998.
The parties had a phone conference with the Magistrate Judge on October 22, 1998 to discuss whether Defendant was entitled to limit its response to Plaintiff's request for information on its sales, pricing, costs, and profits to its retail stations in Kennebec County. The Magistrate Judge ruled that Defendant could not limit its disclosure in this manner.
Two months later, on December 23, 1998, Defendant filed the Motion for Summary Judgment that is the subject of this order, as well as a Motion to Bifurcate Discovery in which it sought to limit discovery to the issues of market definition, market share, barriers to entry, and market capacity.
Following a phone conference on December 23, 1998, the Magistrate Judge stayed all discovery pending resolution by this Court of Defendant's Motion for Summary Judgment and Plaintiff's anticipated Motion for Further Discovery.
Plaintiff claims that Defendant's practice of selling its retail gasoline at below-cost prices in Kennebec County constitutes a violation of 15 U.S.C. §§ 13(a) and 45. In its Response to Defendant's Motion for Summary Judgment, Plaintiff concedes that 15 U.S.C. § 45, barring unfair trade practices, provides no private right of action and withdraws that claim. The Court therefore will limit itself to an examination of Plaintiff's price discrimination and state law claims.
Section 2 of the Clayton Act, as amended by the Robinson-Patman Act and codified at 15 U.S.C. § 13(a), prohibits a seller from charging different prices for the same product
where the effect ... may be substantially to lessen competition or tend to create a monopoly in any line of commerce, or to injure, destroy, or prevent competition with any person who either grants or knowingly receives the benefit of such discrimination, or with customers of either of them.
15 U.S.C. § 13(a) (1994). Two types of competitive injury are cognizable under the statute: primary-line injury and secondary-line injury. Primary-line injury refers to injury to competition among the direct competitors of the discriminating seller. See Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209, 220, 113 S.Ct. 2578, 125 L.Ed.2d 168 (1993). Secondary-line injury occurs when a discriminating seller offers the same product to retailers (or wholesalers) at different prices, thereby injuring competition between them. See Jefferson County Pharmaceutical Ass'n v. Abbott Labs., 460 U.S. 150, 178 n. 6, 103 S.Ct. 1011, 74 L.Ed.2d 882 (1983) (O'Connor, J., dissenting).
To establish an injury to competition under a primary-line theory, a plaintiff must demonstrate that (1) the prices complained of are below an appropriate measure of the discriminating seller's costs; and (2) the discriminating seller has a reasonable prospect of eventually recouping the investment it made in below-cost pricing.3 See Bridges v. MacLean-Stevens Studios, Inc., 35 F.Supp.2d 20, 27 (D.Me.1998) (citing Brooke Group Ltd., 509 U.S. at 223-24, 113 S.Ct. 2578).
As set forth in its Complaint, Plaintiff's theory of the case appears to be that Defendant intended to establish itself as the dominant retailer in Kennebec County by eliminating competition from Plaintiff. According to Plaintiff, Defendant's dominance of the retail market for gasoline in many parts of Maine enabled it to charge below-cost prices in Kennebec County. Plaintiff claims that this predatory pricing practice, begun in August of 1995, caused it to lose profits and presents a substantial risk of creating a more highly concentrated market for retail gasoline in Kennebec County and the state of Maine, thereby injuring competition. Though Plaintiff does not identify it as such, the facts alleged, if true, would constitute a primary-line injury.
While Defendant concedes for purposes of summary judgment that its price for retail gasoline in Kennebec Country was below-cost, it asserts that Plaintiff has not established a genuine issue of material fact as to whether Defendant had a reasonable prospect of recouping its investment.4 Plaintiff counters that any failure to establish a genuine issue of material fact with respect to recoupment is due to Defendant's refusal to comply with discovery. Plaintiff argues that consideration of Defendant's Motion for Summary Judgment is consequently premature and moves that the Court allow discovery to continue pursuant to Fed.R.Civ.P. 56(f).
Establishing that a defendant was reasonably likely to recoup its...
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Robinson-Patman Act
...Pa. 2000) (recoupment could not be shown because plaintiff’s market share, sales, and profits increased); J & S Oil v. Irving Oil, 63 F. Supp. 2d 62, 68 (D. Me. 1999) (low barriers to entry prevented recoupment); City of New York v. Coastal Oil, 1998 U.S. Dist. LEXIS 2049, at *17 (S.D.N.Y. ......
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The Role of Recoupment in Predatory Pricing Analyses.
...Heater Co. v. Mestek, Inc., 2000-1 Trade Cas. (CCH) [paragraph] 72,917 (E.D. Pa. 2000); J & S Oil, Inc. v. Irving Oil Corp., 63 F. Supp. 2d 62 (D. Me. 1999); AD/SAT, Inc. v. Associated Press, 920 F. Supp. 1287 (S.D.N.Y. (10.) Brooke Group, 509 U.S. at 226 (quoting Matsushita, 475 U.S. a......