Kentucky v. Marathon Petroleum Co.

• Decision Date: 01 June 2020
• Docket Number: Civil Action No. 3:15-cv-354-DJH-CHL
• Citation: 464 F.Supp.3d 880
• Parties: Commonwealth of KENTUCKY, Plaintiff, v. MARATHON PETROLEUM COMPANY LP et al., Defendants.
• Court: U.S. District Court — Western District of Kentucky

464 F.Supp.3d 880

Commonwealth of KENTUCKY, Plaintiff,

v.MARATHON PETROLEUM COMPANY LP et al., Defendants.

Civil Action No. 3:15-cv-354-DJH-CHL

United States District Court, W.D. Kentucky, Louisville Division.

Signed June 1, 2020

Anne Nardacci, John F. Dew, Michael I. Endler, Robert C. Tietjen, Boies Schiller & Flexner LLP, Albany, NY, Elizabeth U. Natter, Todd E. Leatherman, Benjamin A. Long, Kentucky Attorney General, John Christian Lewis, Office of Attorney General - Office of Consumer Protection, Frankfort, KY, Helen M. Maher, Rosanne C. Baxter, Boies Schiller & Flexner LLP, Armonk, NY, Jonathan Edward Farmer, John H. Ruby & Associates, Joseph P. Donohue, Dinsmore & Shohl LLP, Louisville, KY, Michael M. Merley, Nicholas A. Gravante, Jr., Boies Schiller & Flexner LLP, New York, NY, Robert R. Sparks, Ronald R. Parry, Theresa L. Nelson, Strauss Troy Co., LPA, Cincinnati, OH, for Plaintiffs.

Jason Emil Cellier, John M. Majoras, Shalini Beth Goyal, Tiffany D. Lipscomb-Jackson, Jones Day, Columbus, OH, Matthew C. Blickensderfer, Frost Brown Todd LLC, Cincinnati, OH, Michelle K. Fischer, Zachary D. Trotter, Jones Day, Cleveland, OH, Sheryl G. Snyder, Theresa A. Canaday, Frost Brown Todd LLC, Louisville, KY, for Defendant Marathon Petroleum Company LP.

Jason Emil Cellier, John M. Majoras, Shalini Beth Goyal, Tiffany D. Lipscomb-Jackson, Jones Day, Columbus, OH, Theresa A. Canaday, Frost Brown Todd LLC, Louisville, KY, Zachary D. Trotter, Michelle K. Fischer, Jones Day, Cleveland, OH, Matthew C. Blickensderfer, Frost Brown Todd LLC, Cincinnati, OH, for Defendants Marathon Petroleum Corporation, Speedway, LLC.

MEMORANDUM OPINION AND ORDER

David J. Hale, Judge

The Commonwealth of Kentucky alleges that Defendants Marathon Petroleum Corporation, Marathon LP, and Speedway LLC violated federal antitrust laws by overcharging consumers for gasoline. (Docket No. 88) Marathon Petroleum Corporation asserts that the Court may not exercise personal jurisdiction over it and moves for summary judgment on that ground. (D.N. 156) Following oral argument, the Court directed the parties to file supplemental briefs addressing the impact of the Clayton Act's nationwide service-of-process provision on the Court's jurisdiction over Marathon Petroleum Corporation. (D.N. 224) For the reasons stated below, the Court finds that it has personal jurisdiction over Marathon Petroleum Corporation and will therefore deny Marathon Petroleum Corporation's motion for summary judgment on personal-jurisdiction grounds. The Court will, however, grant Defendants' motion to exclude the Commonwealth's expert witness, Dr. Michael Sattinger (D.N. 191), and therefore also grant Defendants' motion for summary judgment on the merits. (D.N. 195)

I.

The factual background is nearly unchanged since the Court's ruling on Marathon Petroleum Corporation's motion to dismiss (D.N. 147); thus, only a brief summary of the facts is necessary here.

Marathon Petroleum Corporation, together with its subsidiaries Marathon LP and Speedway LLC, is one of the largest petroleum-product refiners, marketers, and transporters in the United States. (D.N. 88, PageID # 1093) "Marathon" is the largest refiner in the Midwest and owns the only refinery in Kentucky. (Id. , PageID # 1089) It is also the largest gasoline supplier in Kentucky and largest reformulated gasoline (RFG) supplier in Louisville and Northern Kentucky. (Id. )

The Commonwealth claims that Marathon's market share "has allowed [Marathon] to illegally manipulate and attempt to manipulate the market for RFG in ... Louisville and [Northern Kentucky] (hereinafter "LNK.")." (Id. ) Specifically, the Commonwealth contends that Marathon maintains its market dominance through a variety of contractual arrangements, including the anticompetitive use of specialized supply agreements known as exchange agreements. (See D.N. 147 (summarizing the practices the Commonwealth alleges violate antitrust law); see also infra , Part III.B., for detailed definition of exchange agreements) As a result of these practices, the Commonwealth asserts, Marathon has caused the wholesale and retail prices of RFG to be substantially higher in Kentucky than those found in comparative competitive markets. (Id. , PageID # 1101)

The Commonwealth filed this suit against Marathon LP on May 12, 2015, alleging violations of the Sherman Antitrust Act and the Clayton Act. (D.N. 1) On November 7, 2017, the Commonwealth amended its complaint to add Marathon Petroleum Corporation and Speedway, LLC as defendants, invoking the Clayton Act. (D.N. 88) Marathon Petroleum Corporation moved to dismiss for lack of personal jurisdiction and failure to state a claim. (D.N. 92) Marathon Petroleum Corporation's personal-jurisdiction argument hinged on the company's allegedly insufficient contacts with the forum state. Marathon Petroleum Corporation claimed that as a parent corporation it has no direct connections with Kentucky and that Kentucky's long-arm statute thus does not allow this Court to exercise jurisdiction over Marathon Petroleum Corporation. The Court denied the motion to dismiss. (D.N. 147) Marathon Petroleum Corporation now seeks summary judgment, again arguing that it lacks the necessary contacts with the forum state. (D.N. 156)

The Court heard oral argument on the motion for summary judgment on October 18, 2019. (D.N. 224) After the hearing, the Court directed the parties to file supplemental briefs addressing the application of 15 U.S.C. § 22 and the Sixth Circuit's holding in Carrier Corp. v. Outokumpu Oyj , 673 F.3d 430 (6th Cir. 2012), to the parties' positions on personal jurisdiction. (D.N. 224) Specifically, the Court asked the parties to address whether personal jurisdiction was proper in this action anywhere within the United States because of the Clayton Act's national service-of-process provision. See Carrier Corp. , 673 F.3d at 449–50 (holding that under the Clayton Act, "personal jurisdiction exists whenever the defendant has ‘sufficient minimum contacts with the United States’ to satisfy the due process requirements under the Fifth Amendment"); see also In re Auto. Refinishing Paint Antitrust Litig. , 358 F.3d 288, 297–98 (3d Cir. 2004) (finding that nationwide service of process is appropriate under the Clayton Act if the defendant has sufficient minimum contacts with the United States). In its supplemental brief, Marathon Petroleum Corporation argues for the first time that venue in the Western District of Kentucky is improper under the Clayton Act, and that proper venue is a prerequisite to application of the nationwide service-of-process provision addressed in Carrier . (D.N. 228) Neither party addressed venue in its briefs on the motion for summary judgment, so the Court bases its conclusions on the legal arguments presented in the post-hearing briefs.

II.

A. Clayton Act

Because the Court must decide whether it can exercise personal jurisdiction over Marathon Petroleum Corporation before it may rule on the substantive motions, the Court will consider Marathon's motion for summary judgment on personal jurisdiction first.

Marathon argues that for the Clayton Act's nationwide service-of-process provision to apply, the Act's venue provision must also be satisfied. The Clayton Act prohibits numerous business practices that can result in antitrust injury to consumers. Both the nationwide service-of-process provision discussed above and the Clayton Act's venue provision are found in 15 U.S.C. § 22, which states:

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 [venue provision]; and all process in such cases may be served in the district of which it is an inhabitant, or wherever it may be found [nationwide service-of-process provision].

15 U.S.C. § 22.

In their post-hearing briefs, the parties focus on the circuit split regarding whether the venue and service-of-process provisions of the Clayton Act should be read together or separately—i.e., whether the provisions are "coupled" or "decoupled" for purposes of statutory interpretation. Marathon argues that the provisions must be read together and that because the Commonwealth cannot establish venue under the Clayton Act, the nationwide service-of-process provision is irrelevant and the case must be dismissed for lack of personal jurisdiction. (D.N. 228, PageID # 15232 (citing KM Enter., Inc. v. Glob. Traffic Techs., Inc. , 725 F.3d 718, 733–34 (7th Cir. 2013) (holding that venue and service provisions of the Clayton Act must be read together)).) The Commonwealth argues that the venue and service-of-process provisions of the Clayton Act can be read separately and that the Court may exercise personal jurisdiction over Marathon Petroleum Corporation via the Clayton Act's service-of-process provision because venue is appropriate under the general venue statute, 28 U.S.C. § 1391. (D.N. 231, PageID # 15261 (citing Go-Video, Inc. v. Akai Elec. Co. , 885 F.2d 1406, 1408 (9th Cir. 1989) (holding that the venue and service provisions of the Clayton Act may be considered separately))) The Sixth Circuit has not yet considered this discrete question. And district courts in the circuit are, as noted by the parties, divided on the issue. Compare Hyland v. Homeservices of Am., Inc. , No. 3:05-cv-612-R, 2007 WL 1959158 (W.D. Ky. June 28, 2007) (finding "proper venue is still required in order to confer personal jurisdiction" under the Clayton Act), with Ky. Speedway, LLC v. Nat'l Ass'n of Stock Car Auto Racing, Inc. , 410 F. Supp. 2d 592, 601 (E.D. Ky. 2006) (adopting reasoning of Go-Video and decoupling Clayton Act's service-of-process and venue provisions). The Court need not weigh the competing approaches here, because as explained below, Marathon Petroleum Corporation waived any challenge to venue by not raising it in its first affirmative pleading.

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