L & L Oil Co., Inc. v. Murphy Oil Corp.

• Decision Date: 07 May 1982
• Docket Number: No. 81-3175,81-3175
• Citation: 674 F.2d 1113
• Parties: 1982-2 Trade Cases 64,725 L & L OIL COMPANY, INC., Plaintiff-Appellant, v. MURPHY OIL CORPORATION, Defendant-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1113

674 F.2d 1113

1982-2 Trade Cases 64,725

L & L OIL COMPANY, INC., Plaintiff-Appellant, v. MURPHY OIL CORPORATION, Defendant-Appellee.

No. 81-3175.

United States Court of Appeals Fifth Circuit.

May 7, 1982.

William M. Lucas, Jr., New Orleans, La., for plaintiff-appellant.

William R. Pitts, Joe B. Norman, New Orleans, La., for defendant-appellee.

Appeal from the United States District Court for the Eastern District of Louisiana.

Before TATE, SAM D. JOHNSON and WILLIAMS, Circuit Judges.

JERRE S. WILLIAMS, Circuit Judge:

This case arises out of Murphy Oil Corporation's drastic reduction and eventual termination of sales of No. 2 diesel fuel to L&L Oil Company. L&L filed suit against Murphy alleging violations of §§ 2(a) and (e) of the Clayton Act as amended by the Robinson-Patman Price Discrimination Act, 15 U.S.C. § 13 et seq. The district court dismissed L&L's suit for failure to state a claim upon which relief could be granted.

In reviewing this action, the facts as alleged in L&L's complaint are taken as true. Murphy is a manufacturer, refiner and distributor of diesel fuel. L&L is engaged in the business of supplying diesel fuel to inland and offshore oil rigs. L&L began purchasing some, but not all, of its No. 2 diesel fuel from Murphy in 1976, and by January of 1979, L&L was purchasing up to 80% of its fuel from Murphy.

Because of the well-known energy shortage, Murphy began in March, 1979, making severe reductions in the quantity of its sales to L&L. In the event of an energy crisis, the custom in the petroleum industry was for a supplier like Murphy to reduce proportionately the quantities sold to all of its customers based upon the quantity the customer bought the previous year in the same month. Instead of following this practice, Murphy drastically reduced the quantities of fuel available to L&L while continuing to supply a high percentage of the needs of other customers. Murphy said it was allocating fuel in this manner because L&L had "shopped around" when fuel was plentiful while other customers remained loyal.

In addition to the quantitative reduction, L&L was required to pick up its fuel by truck instead of by barge as it previously had done. Murphy charged L& L one-half cent per gallon more for the fuel obtained by truck than it charged for fuel obtained by barge. Many of L&L's competitors who continued to receive large quantities of fuel from Murphy were permitted to obtain the fuel by barge and paid one-half cent less per gallon than L&L. In addition to the increased cost of fuel, L&L incurred expenses because the cost of using trucks was higher than the cost of using barges. L&L had to raise the price of its fuel upon resale as a result of this action.

On April 11, 1979, Murphy terminated all sales to L&L. In order to fulfill its obligations to its own customers, L&L was forced to obtain fuel on the "spot market," and sometimes had to pay up to 70% more than the price charged by Murphy. L&L in turn had to charge its customers higher prices. Eventually, L&L was unable to compete in its service area. Because L&L supplied approximately 25% of the fuel in that area, its virtual elimination from the market significantly affected competition.

L&L alleged that Murphy violated § 2(e) of the Robinson-Patman Act which prohibits discrimination in "services or facilities" by requiring L&L to pick up its fuel by truck while competitors were permitted to take delivery by barge. The district court held that "delivery" was not a "service or facility" within the meaning of § 2(e) and thus L&L failed to state a claim for which relief could be granted. ¹ L&L also alleged that Murphy's refusal to deal was in restraint of trade and therefore in violation of § 2(a) of the Act. The district court dismissed this claim as well, holding that a refusal to deal was not actionable under § 2(a).

L&L seeks reversal of both dismissals. Murphy argues in support of the dismissals and offers as an alternative ground for affirmance its contention that L&L's claims are jurisdictionally insufficient. We find the claims to be jurisdictionally sound; however, we affirm the dismissals of both of L&L's allegations for failure to state claims upon which relief could be granted.

Jurisdiction

Murphy challenges the jurisdictional sufficiency of L&L's claims under §§ 2(a) and (e) on the ground that the alleged discrimination did not occur "in commerce." Section 2(a) ² specifically requires that both the plaintiff buyer and defendant seller be "engaged in commerce" and that the discrimination occur "in the course of such commerce." Although § 2(e) does not explicitly state similar requirements, the jurisdictional bases of § 2(a) have been incorporated into § 2(e). Cf. Shreveport Macaroni Manufacturing Co. v. F.T.C., 321 F.2d 404 (5th Cir. 1963); 5 vonKalinowski, Antitrust Laws and Trade Regulation § 34.03(2) (1981).

Murphy contends that the "in commerce" requirement was not met in this case because all of its sales were intrastate. Although Murphy purchased crude oil from outside of Louisiana, its reprocessing of the oil broke the chain of interstate commerce. Once reprocessed, Murphy oil was sold only in Louisiana. Thus, argues Murphy, there were no sales in interstate commerce.

L&L does not deny that Murphy's reprocessing interrupted the chain of interstate commerce. Instead, it argues that the commerce requirement was satisfied because its resales of No. 2 diesel fuel were to out-of-state customers and thus within the "flow of commerce." ³ We agree and hold that the jurisdictional requirement was met.

The Supreme Court has explained that the "in commerce" requirement covers "persons or activities within the flow of interstate commerce ... (defined as) the practical, economic continuity in the generation of goods and services for interstate markets and their transport and distribution to the consumer." Gulf Oil Corp. v. Copp Paving Co., 419 U.S. 186, 195, 95 S.Ct. 392, 398, 42 L.Ed.2d 378 (1974). We have identified three situations in which the "flow of commerce" is established:

(1) Where the goods are purchased by the wholesaler or retailer upon the order of a customer with the definite intention that the goods are to go at once to the customer;

(2) Where the goods are purchased to meet the needs of specified customers pursuant to some understanding with the customers, although not for immediate delivery; and

(3) Where goods are purchased based upon the anticipated needs of specific customers, rather than upon prior orders or contracts.

Hampton v. Graff Vending Co., 516 F.2d 100, 102-03 (5th Cir. 1975).

L&L's purchases from Murphy clearly fell within the definition of "in the flow of commerce." L&L submitted affidavits proving that many of its customers were off-shore, that it had orders for over 50% of each barge load of oil it received from Murphy, and that the remainder was to serve the anticipated needs of retained customers. Thus, the "in commerce" requirement was satisfied.

Section 2(e)

L&L alleged that Murphy discriminated against it in violation of § 2(e) of the Robinson-Patman Act by forcing it to take delivery by truck while other customers were permitted to use barges. ⁴ Section 2(e) prohibits any person from discriminating

in favor of one purchaser against another purchaser or purchasers of a commodity bought for resale, with or without processing, by contracting to furnish or furnishing, or by contributing to the furnishing of, any services or facilities connected with the processing, handling, sale, or offering for sale of such commodity so purchased upon terms not accorded to all purchasers on proportionally equal terms. ⁵

15 U.S.C. § 13(e). In support of its position, L&L cites the Seventh Circuit's opinion in Centex-Winston Corp. v. Edward Hines Lumber Co., 447 F.2d 585 (7th Cir. 1971), cert. denied, 405 U.S. 921, 92 S.Ct. 956, 30 L.Ed.2d 791 (1972), which held that "delivery" is a "service or facility" within the meaning of § 2(e). Murphy insists that the meaning of "services or facilities" is far narrower and only includes promotional and advertising services performed by the seller. Furthermore, even if delivery comes within § 2(e), Murphy contends that L&L's claim fails because the alleged discrimination was in connection with the original sale of the fuel and not the resale as required by § 2(e). Murphy relies upon those cases which have criticized and rejected Centex-Winston.

The definition of § 2(e)'s "services or facilities" presents an issue of first impression to this court. ⁶ The statute itself gives no indication as to the meaning of the terms. Courts have treated § 2(e) problems on a case by case basis tailoring their conclusions to the specific facts of the case before them rather than in conformity with a comprehensive definition of the terms. In promulgating regulations pursuant to § 2(e), the Federal Trade Commission noted the absence of statutory or judicial definition and issued a non-exclusive list of § 2(e) services or facilities. See 16 C.F.R. § 240.5 (1981).

Courts faced with the question of whether delivery constitutes a § 2(e) service or facility have disagreed on the issue. The Seventh Circuit is the only appellate court to have held explicitly that delivery is such a service. In Centex-Winston, supra, a lumber supplier consistently delivered lumber to one purchaser behind schedule while delivering to the purchaser's competitors on time. The court construed § 2(e) broadly and concluded that delivery was encompassed because § 2(e) prohibits any kind of "special favors," 447 F.2d at 587, that affect the resale of the product. Resale was affected by late deliveries because, arguably, the resale would be delayed. Id. at 588. Accord Harper Plastics, Inc. v. Amoco Chemicals Corp., 617 F.2d 468 (7th Cir. 1980); Glowacki v. Borden, Inc., 420 F.Supp. 348 (D.C.Ill.1976).

The Second Circuit implicitly recognized the validity of the Centex-Winston rationale,...