Mowery v. Standard Oil Co. of Ohio

• Decision Date: 28 October 1976
• Docket Number: No. C 73-97.,C 73-97.
• Citation: 463 F. Supp. 762
• Parties: Earl MOWERY, d/b/a Mowery's Sohio, Plaintiff, v. STANDARD OIL COMPANY OF OHIO, Defendant.
• Court: U.S. District Court — Northern District of Ohio

463 F. Supp. 762

Earl MOWERY, d/b/a Mowery's Sohio, Plaintiff, v. STANDARD OIL COMPANY OF OHIO, Defendant.

No. C 73-97.

United States District Court, N. D. Ohio, W. D.

October 28, 1976.

COPYRIGHT MATERIAL OMITTED

George R. Royer, Toledo, Ohio, for plaintiff.

David A. Nelson, Squire, Sanders & Dempsey, Cleveland, Ohio, Donald F. Melhorn, Jr., Marshall, Melhorn, Bloch & Belt, Toledo, Ohio, for defendant.

OPINION and ORDER

WALINSKI, District Judge.

The case sub judice is a private antitrust action brought by Earl Mowery, formerly the operator of a Standard Oil service station in East Toledo, Ohio, under a Consignment Dealer Agreement,¹ against the Standard Oil Company of Ohio, a vertically integrated corporation which refines, wholesales and retails gasoline throughout the state of Ohio.² Jurisdiction is pursuant to 28 U.S.C. § 1337, as the plaintiff alleges violations of 15 U.S.C. §§ 1 to 7 and 13.

Trial was commenced to a jury on September 7, 1976, and continued time to time. At the close of plaintiff's case, both parties moved for a directed verdict pursuant to Rule 50, Federal Rules of Civil Procedure.

I.

The Court is fully aware of the Supreme Court's admonishment that summary procedures, including directed verdicts, should be used "sparingly in complex antitrust litigation where motive and intent play leading roles * * *." Poller v. Columbia Broadcasting System, Inc., 368 U.S. 464, 473, 82 S.Ct. 486, 491, 7 L.Ed.2d 458 (1962). However, where a plaintiff fails to come forward with enough evidence "to support a reasonable finding in his favor, a district court has a duty to direct a verdict in favor of the opposing party." Chrisholm Bros. Farm Equipment Co. v. International Harvester Co., 498 F.2d 1137, 1139-40 (9th Cir. 1974). Accord, Westinghouse Electric Corp. v. CX Processing Laboratories, 523 F.2d 668, 673 (9th Cir. 1975). The standard to be applied in determining the appropriateness of a directed verdict in an antitrust case is clearly set forth in Chrisholm, supra:

* * * the correct standard is whether or not, viewing the evidence as a whole, there is substantial evidence present that could support a finding, by reasonable jurors, for the nonmoving party. `Substantial evidence is more than a mere scintilla.' The evidence must be examined in the light most favorable to the nonmovant, and there can be no weighing of evidence. Finally plaintiff is entitled to the benefit of all reasonable inferences that may be drawn from its evidence.

Chrisholm, 498 F.2d at 1140 (citations omitted).

Applying this rigorous standard to the instant case, the Court finds the defendant to be entitled to a directed verdict on all counts of the Complaint.

II.

Count I of plaintiff's Amended Complaint alleges that defendant Standard Oil "employed, enacted, and carried out a price fixing policy", such being a per se violation of § 1 of the Sherman Act.³ Plaintiff's Second Count, which is also based on § 1 of the Sherman Act, alleges that defendant "effectuated an illegal and unreasonable restraint of trade."

To establish a violation of § 1 of the Sherman Act, three elements must be shown:

1) a contract, combination or conspiracy,

2) affecting interstate commerce,⁴ and

3) an unreasonable restraint of trade.

As proof of elements one and three, plaintiff introduced evidence which, when viewed in the light most favorable to him, tended to establish the following:

Due to the influx of private brand⁵ gasoline dealers into the Toledo market in the late 1960's and early 1970's, the retail gasoline market became increasingly competitive. The East Toledo market⁶ was particularly competitive, resulting in an extended price war among area dealers. Plaintiff's Exhibits 23 and 25 demonstrate the trend in prices during the relevant period, 1970-73. In early 1970, Sohio company-owned stations typically priced regular gasoline at 36.9 cents per gallon, and independent Sohio dealers typically posted regular gasoline at 37.9 cents per gallon. However, private branders in the same area were setting their pump prices at around 32.9 cents per gallon and were sometimes dropping as low as 30.9 cents per gallon. In 1971, private branders and other major oil company dealers in the East Toledo area began to post regular gasoline around 29.9 to 27.9 cents per gallon, and for a period during 1972, private branders in the area sold as low as 23.9 cents per gallon.

In an effort to remain competitive and maintain its level of gallonage, it became Sohio's policy to adjust the prices at its company-owned stations to within 2 cents of the private branders, although it does not appear that Sohio ever posted below 27.9 cents per gallon during the relevant period. Sohio apparently surveyed the market on almost a daily basis in order to determine where it was necessary to set its price to remain competitive.

During the same period the plaintiff, an independent Sohio dealer, also began to lose gallonage. The plaintiff was obviously faced with a dilemma. To maintain his gallonage, he would have to reduce his pump price. However, if he reduced his pump price while the tank wagon price at which he purchased gasoline from the defendant remained constant, his margin of profit on each gallon of gas sold would be reduced and, barring a significant increase in the gallonage pumped, his gross profit would be reduced as well.

Standard Oil was of course well aware of the plaintiff's dilemma, as it was experiencing the same profit squeeze. And although Standard Oil was under no legal or contractual obligation to assist the plaintiff and its other independent dealers in any way, it did respond to the situation by instituting a Temporary Competitive Allowance Program, hereinafter referred to as TCA.

There is no dispute among the parties as to how the TCA program operated. Beginning in 1970, and continuing through early 1973, Standard Oil offered to its independent dealers "an allowance equal to .7¢ per gallon of gasoline (off posted tank wagon price) for each 1¢ reduction in dealer's retail price commencing at 1¢ below a retail price of 37.9¢ for regular * * *." An allowance was offered down to the level at which company-owned stations were currently setting their pump prices.

TCA's were apparently offered to the independent dealers on a regular basis, each offer designating the price down to which Sohio would give the .7 cents per gallon allowance. Acceptance or rejection of a TCA by the dealer was solely within his discretion. He could reject the TCA, accept a full TCA, or accept a partial TCA; and having once accepted, he could thereafter cancel at any time. Thus, the independent dealer clearly remained free to set the price at his station at whatever price he chose. Under the TCA program, however, he could not receive the allowance off the posted tank wagon price unless he reduced his pump price.

Plaintiff's evidence established that throughout the relevant period, various independent dealers in East Toledo, including himself, did enter into TCA agreements with Standard Oil. Plaintiff seeks to characterize these agreements as illegal price fixing agreements in violation of § 1 of the Sherman Act. It is the plaintiff's further contention that the defendant's conduct caused him to lose gallonage and to eventually go out of business. Accordingly, plaintiff seeks to recover his alleged damages from the defendant.

III.

Although early case law construing § 1 of the Sherman Act appeared to apply a "rule of reason" standard to test the legality of any conduct alleged to be in restraint of trade, the Supreme Court made it clear in United States v. Socony Vacuum Oil Co., 310 U.S. 150, 60 S.Ct. 811, 84 L.Ed. 1129 (1940), that:

Under the Sherman Act a combination formed for the purpose and with the effect of raising, depressing, fixing, pegging, or stabilizing the price of a commodity in interstate or foreign commerce is illegal per se.

310 U.S. at 223, 60 S.Ct. at 844. Accord, United States v. Container Corp. of America, 393 U.S. 333, 89 S.Ct. 510, 21 L.Ed.2d 526 (1969); United States v. McKesson Robbins, 351 U.S. 305, 76 S.Ct. 937, 100 L.Ed. 1209 (1956); United States v. Paramount Pictures, Inc., 334 U.S. 131, 143, 68 S.Ct. 915, 92 L.Ed. 1260 (1948). Cf. Lamb Enterprises, Inc. v. Toledo Blade Co., 461 F.2d 506 (6th Cir.), cert. denied, 409 U.S. 1001, 93 S.Ct. 325, 34 L.Ed.2d 262 (1972). However, to establish a per se violation of § 1 of the Sherman Act, the plaintiff must present "proof that a combination was formed for the purpose of fixing prices and that it caused them to be fixed or contributed to that result * * *." United States v. Socony Vacuum Oil Co., 310 U.S. at 224, 60 S.Ct. at 844.

Viewing the evidence in the light most favorable to the plaintiff, the Court cannot find that the plaintiff has carried his burden of proof in this respect. Plaintiff's own presentation of the evidence proved overwhelmingly that the plaintiff, as well as all other independent dealers under contract with Standard Oil, were free throughout the relevant time frame to set their gasoline prices at whatever level their own good business judgment might lead them to choose. Section 2(a) of the plaintiff's Consignment Dealer Agreement with Standard Oil, introduced into evidence as plaintiff's Exhibit 2, expressly provides that the "dealer plaintiff is authorized to sell the consigned motor fuel at such retail prices as Dealer shall from time to time establish and charge at the station." Indeed, both of the independent dealers testifying at trial, Mr. Mowery and Mr. Losie, testified that they alone set the price of gasoline at their service stations.⁷

Similarly, both Mr. Losie and the plaintiff testified unequivocally at trial that they could accept the TCA offered by Standard Oil or refuse it at any given point in time. In fact, the plaintiff personally testified that he sometimes took the full TCA offered while at other times he refused the TCA, and at yet other times he...