King & King Enterprises v. Champlin Petroleum Co.

Decision Date14 September 1981
Docket NumberNo. 80-1630,80-1630
Citation657 F.2d 1147
Parties1981-2 Trade Cases 64,209, 8 Fed. R. Evid. Serv. 1206 KING & KING ENTERPRISES, d/b/a King Gas & Oil; and Carl R. King, d/b/a King Gas & Oil, Plaintiffs-Appellees, v. CHAMPLIN PETROLEUM COMPANY, Defendant-Appellant.
CourtU.S. Court of Appeals — Tenth Circuit

Richard W. Giauque, Berman & Giauque, Salt Lake City, Utah (Gary F. Bendinger and James R. Holbrook, Berman & Giauque, Salt Lake City, Utah, with him on the brief), for plaintiffs-appellees.

Cecil E. Munn, Cantey, Hanger, Gooch, Munn & Collins, Fort Worth, Tex. (Charles A. Zubieta, Champlin Petroleum Co., A. Camp Bonds, Bonds, Matthews, Bonds & Hayes, Muskogee, Okl., and Mark C. Hill, Fort Worth, Tex., with him on the brief), for defendant-appellant.

Before SETH, Chief Judge, and BARRETT and DOYLE, Circuit Judges.

WILLIAM E. DOYLE, Circuit Judge.

King & King were plaintiffs below in a private antitrust action which arose under § 1 of the Sherman Act, 15 U.S.C. § 1, 1980. Champlin Petroleum Co. is the defendant and the appellant. The complaint alleged violations of both § 1 and § 2 of the Sherman Act. Also there is a third party action against one Fred Dea Entriken, a former Champlin employee. In this third party claim it is alleged that if Champlin was found liable in the King action that Entriken should be held responsible for the damages which Champlin is required to pay. Entriken filed a fourth party action against Mickey Bowles and Dewey Mason, two of his superiors during the time he was employed by Champlin. There he alleged that he had acted in accordance with instructions and with company policy. Prior to the trial King withdrew his claims against Champlin under § 2 of the Sherman Act for predatory and coercive pricing and refusal to deal. The trial began on April 21, 1980 on King's claim of price fixing under § 1 of the Sherman Act and the issue and amount of damages, and on the third and fourth party claims. The jury found in favor of King on the price fixing claim against Champlin and in favor of Entriken on the third party action. Champlin appeals herein from the judgment against it on the price fixing claim. It does not appeal the judgment on the third party action.

STATEMENT OF THE FACTS

King and King Enterprises is owned by Carl King and Fred King; the company markets gasoline. King Gas and Oil Company operates retail gas stations in Oklahoma, Arkansas and Texas. This latter company is a sole proprietorship which is owned by Carl King. King and King Enterprises supplies gasoline to the King gas stations.

Champlin Petroleum Company is an integrated oil company which refines gasoline and sells gasoline at both levels, retail and wholesale, in Oklahoma, Arkansas and Texas under the brand names of Champlin and Harbor.

When King entered the gasoline market in Oklahoma, Texas and Arkansas, which was in 1966 or 1967, there were three types of retail gasoline marketers. At the top were the major oil companies such as Texaco, Shell and Phillips, which companies were vertically integrated in that they operated refineries and sold gas both at wholesale and retail levels. These companies operated full service gas stations and sold products other than gas, such as batteries, tires, and accessories. They advertised and accepted credit cards.

In the middle were the mini-majors or branded independents such as Champlin, Apco, Consumers and Fina. These stations generally were the full service type. They operated in the same fashion as the majors but did not have the national reputation enjoyed by the majors and sometimes were not vertically integrated. Below the "mini-majors" were full service unbranded independents, such as Hudson Oil Co.

At the time (1966, 1967) King entered the gas market in the states mentioned above, the majors' normal price for regular gasoline was 34.9 cents per gallon. The mini-major normal price for regular gasoline was 32.9 cents per gallon, and the branded independent's normal price for regular gasoline was 31.9 cents per gallon. The difference in the prices of gasoline between the three types of stations was called a "spot." By this is meant that the mini-majors had a two cent spot on the majors and the unbranded independents had a one cent spot on the mini-majors. King was and is a self-service unbranded independent marketer. It decided to take a two cent spot on Hudson and other full service independents, and to charge 29.9 cents per gallon for regular gas. King had determined that this was its optimum price, which would allow it to maximize gross profits and volume of sales. Prior to King's entry in the market there were no unbranded self-service independents who took a spot on the mini-majors and full service unbranded independents. King was an admitted price cutter and was the first self-service marketer to attempt to take such a spot.

GENERAL NATURE OF THE CASE

King alleged that Champlin freely and regularly exchanged market information with its competitors, not including King however, and entered into price fixing agreements with those competitors for the purpose of forcing King, and other self-service unbranded independents who proceeded as King was proceeding in taking a spot on the full service unbranded independents, to eliminate their spot, and, thus, to eliminate price cutting. It was the claim of King that Champlin first tried to dictate King's selling price by threatening to take the price of gas "to the bottom," that is, below King's actual cost for the gas, if King refused to eliminate its spot. When King failed to do so, Champlin and his co-conspirators collusively agreed to lower prices below an acceptable level to King and restore prices to normal once they felt King had suffered by low prices to such an extent that King would be willing to surrender. King alleged that the method employed to accomplish the goals was as follows:

Champlin and its co-conspirators granted competitive price allowances (CPAs) to their dealers. Under the competitive price allowances Champlin and others would guarantee their dealers a certain margin of profit, so that even when the dealers were selling gas at lower than normal prices, the dealers were still able to make a dependable margin of profit. Thus, Champlin and its co-conspirators, rather than their dealers, would absorb the loss caused by the sale of gasoline at lower than normal prices. Champlin and its competitors would recommend that their dealers sell at lower than normal prices and the dealers would still make a profit. Prices would go down in a stairstep pattern with King reducing his prices accordingly to keep his spot. When prices reached the bottom, that is at or near the cost of the gasoline to King, the Champlin dealers were guaranteed a profit because of the competitive price allowances, while King, who did not receive these allowances, was forced to absorb the entire loss caused by the price decreases. This CPA program, of course, cost Champlin and its co-conspirators a great deal of money. Thus, as soon as practicable the companies were anxious to restore the market to its normal level by pulling back the CPAs when it was felt that King had been sufficiently harmed and would be ready to surrender. Therefore the companies conspired to pull their CPAs and fix the price of gasoline at a certain level. As a result of Champlin's price fixing activities, King alleges that it was unable to sell gasoline at its optimum price and was injured thereby.

Champlin, on the other hand, rather than directly addressing King's price fixing claims, appears to have been arguing that: "If King has any cause of action at all, it is one for predatory and coercive pricing; but King doesn't have a claim for predatory and coercive price because ...." The appellant's contentions caused great confusion during the trial of the case for the reason that they were insisting on being allowed to defend a predatory and coercive pricing claim, whereas the only claim that was being litigated by the plaintiffs was one of price fixing. It should be brought out here and now that regardless of appellant's thought that King's claim should have been for predatory and coercive pricing, a claim which it was apparently prepared to defend itself against, the fact remains that King did confine itself to a claim for price fixing at the trial. King had withdrawn its claim based on predatory and coercive pricing prior to trial. So, inasmuch as predatory and coercive pricing was not a claim at the trial, it was not possible for the appellant, Champlin, to offer a defense against such claim. Much of the evidence which appellant sought to introduce at trial was therefore rejected by the trial court. Because of the lack of effective communication between the parties, the lawyers for both spent a great deal of time at the bench arguing evidentiary matters to the judge out of the presence of the jury.

Champlin raises several questions on this appeal:

1. That it was error for the trial court to receive in evidence testimony of Mr. Caldwell, an expert witness called by the plaintiffs, regarding calculations which he made as to the sum total of losses suffered by plaintiffs during the years in question.

2. That it was error to refuse to instruct the jury on the law applicable to predatory and coercive pricing and refusal to deal.

3. That it was error to refuse to present the jury with the question of whether plaintiffs' claim was barred by the statute of limitations.

4. That the court erred in massive exclusions of evidence for the defense, in that the court (a) failed to allow Champlin to deny accusations against it; (b) precluded Champlin from proving its economic incapacity to rig the market; (c) precluded Champlin from refuting predatory pricing claims; (d) precluded Champlin from challenging the Caldwell calculations.

5. That it was error to foreclose Champlin's use of...

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