Mullis v. Arco Petroleum Corp.

Decision Date05 August 1974
Docket NumberNo. 73-1625,73-1625
Citation502 F.2d 290
Parties1974-2 Trade Cases 75,180 Perry MULLIS, d/b/a Mullis Petroleum Co., Plaintiff-Appellee, v. ARCO PETROLEUM CORPORATION and Atlantic Richfield Corporation, Defendants-Appellants.
CourtU.S. Court of Appeals — Seventh Circuit

Helen H. Cutner, Philadelphia, Pa., John J. Voortman, Chicago Ill., Richard D. Wagner, Indianapolis, Ind., for defendants-appellants.

James E. Rocap, Jr., Thomas P. Ledgerwood, Indianapolis, Ind., for plaintiff-appellee.

Before SWYGERT, Chief Judge, and STEVENS and SPRECHER, Circuit Judges.

STEVENS, Circuit Judge.

The question presented by this appeal is whether either the Robinson-Patman Act 1 or 2 of the Sherman Act 2 protects a local jobber from an otherwise lawful termination at a time when, because of the existence of an acute shortage, he cannot find another source of supply.

Plaintiff has been a distributor of petroleum products for defendant, ARCO, or its predecessor, Sinclair, in Lawrence County, Indiana, and its environs for the past 20 years. 3 Notwithstanding occasional threats by plaintiff to take his partronage elsewhere, and notwithstanding patronage elsewhere, and notwithstanding emphasizes and plaintiff minimizes, nothing serious enough to cause a rupture in the business relationship occurred until shortly before the 'energy crisis.'

On February 15, 1973, defendant notified plaintiff that his distributorship was cancelled; the termination date, originally set for March 31, 1973, was extended to May 31, 1973. 4 Plaintiff canvassed some 20 other suppliers of petroleum products to obtain a new source, but none would agree to serve him. On May 7, 1973, he commenced this litigation. In his complaint plaintiff described his business, the receipt of the notice of cancellation and the current market situation, and alleged that ARCO's acts constituted 'an attempt to monopolize the marketing area in which plaintiff operates,' and resulted in discrimination against him. After an evidentiary hearing, the district court entered an order enjoining defendant from refusing to furnish petroleum products to the plaintiff until further order of court. Defendant appeals from that order.

There is no question about the sufficiency of plaintiff's proof of irreparable injury. His business, upon which he places a value of $500,000, involves the distribution of approximately 433,000 gallons of gas and 250,000 gallons of fuel oil per month. He services 20 retail gasoline stations, four of which he owns, and also supplies various governmental units, industrial customers and farms in and about Lawrence County, Indiana. Since he sells only ARCO petroleum products, and since he is unable to obtain a new supplier, it is reasonable to infer that termination of his distributorship will terminate his business. 5

Irreparable injury is not in itself a sufficient predicate for the entry of a preliminary injunction. 6 There must also be substantial reason to believe that the conduct of which the plaintiff complains is unlawful and is the cause of his threatened loss. 7 How clear the showing of illegality must be will vary from case to case; no doubt, the greater the urgency and the greater the extent of the impending injury, the more appropriate it may be to retain the status quo temporarily while the court appraises the strength of the legal claim. Thus, the requirement of a 'reasonable likelihood of success' is necessarily a somewhat flexible standard that allows the chancellor room for the exercise of judgment. At the very least, however, plaintiff must demonstrate that his claims are 'so serious, substantial, difficult and doubtful, as to make them a fair ground for litigation and thus for more deliberate investigation." 8

In this case it is perfectly clear that, even if plaintiff is able to prove a violation of the Robinson-Patman Act, there is no causal connection between that violation and his termination. We are also convinced that there is no basis in the record for concluding that ARCO is violating 2 of the Sherman Act. We therefore reverse.

I.

ARCO sells gasoline directly to retail service stations in the Lawrence County area. These stations compete with the 20 stations that are supplied by plaintiff. Plaintiff has asserted that ARCO discriminates in favor of its own retail outlets and against plaintiff in two different ways.

First, in his complaint plaintiff apparently took the position that the termination itself was discriminatory since ARCO planned to continue supplying its own outlets while refusing to sell to him. It has long been settled, however, that such discrimination does not violate the Robinson-Patman Act. 9 For that statute does not require a seller to create or to maintain a customer relationship with any buyer or prospective buyer. 10

Second, on appeal plaintiff's Robinson-Patman claim is solely that a two cent per gallon rebate made available to retailers participating in defendant's so-called 'Mini Service' program illegally discriminated against him. 11 Assuming that to be true, such illegality could be removed without modifying the 'Mini Service' program simply by discontinuing sales to customers, such as plaintiff, who did not participate in that program. Since one method of terminating that illegality would be to terminate plaintiff's distributorship, it is manifest that an assumption that the 'Mini Service' program was illegal does not justify an injuction imposing a continuing business relationship upon these parties. 12 More fundamentally, there is neither a finding nor evidence that plaintiff's termination was in any way connected to the 'Mini Service' program. Accordingly, plaintiff's Robinson-Patman claim does not support the injunction entered by the district court. 13

II.

Alternatively, plaintiff contends that his termination during a period of shortage will totally exclude him from the market and, therefore, violate 2 of the Sherman Act. He characterizes the alleged violation as an attempt to monopolize, although presumably, if his theory were valid, as soon as the termination becomes effective, the attempt would ripen into a completed monopolization. Plaintiff's theory is not entirely clear, but apparently rests upon the premise that the competition which has heretofore existed between plaintiff and defendant in the sale of ARCO products in Lawrence County will be replaced by defendant's monopoly control of such sales after the termination becomes effective. It is first appropriate to identify the reasons why plaintiff's 2 claim would be manifestly insufficient if there had been no shortage, and then to consider the relevance of the shortage.

A.

Whether a complaint alleges monopolization or an attempt to monopolize, it is incumbent upon the plaintiff to define the relevant market in which the defendant's actions are to be appraised. 14 Since the statute has 'both a geographical and distributive significance,' Indiana Farmer's Guide Publishing Co. v. Prairie Farmer Publishing Co., 293 U.S. 268, 279, 55 S.Ct. 182, 185, 79 L.Ed. 356, the market definition must include a description of both the territory encompassed and the product involved. 15

In this case plaintiff has not directly addressed the relevant market issue, but seems to assume that it consists of the sale of ARCO petroleum products in the Lawrence County area. That assumption is not supported by the evidence but is, in fact, contradicted by it. Plaintiff offered no evidence to prove that there are any legal or economic barriers to competition from areas immediately adjacent to Lawrence County. More significantly, there is no proof suggesting that ARCO products are in any way different from other brands of petroleum products available in Lawrence County. Even if we were to assume, without proof, that ARCO's gasoline or fuel oil is not a standardized commodity, either because of physical characteristics of the product or because advertising has enhanced its consumer acceptance, there is no evidence indicating the extent of its differentiation from other brands or the competitive significance of any such possible differentiation. 16 The only relevant evidence in the record proves that ARCO products are in active competition with other brands. 17 Under the kind of economic analysis employed by both the majority and the dissent in United States v. E. I. duPont de Nemours & Co., 351 U.S. 377, 76 S.Ct. 994, 100 L.Ed. 1264, 18 plaintiff clearly failed to prove that sales of ARCO petroleum products in Lawrence County, Indiana, constitute a relevant market. 19

Moreover, if we make the realistic assumption that the relevant market encompasses the sale of competing brands as well as ARCO products, plaintiff's evidence would place ARCO's position in the market far from the monopoly end of the spectrum that separates pure monopoly from pure competition. For the record indicates that at least 20 other suppliers of gasoline and oil sell in Lawrence County, and that ARCO's share of the business is less than 3% Of the total. 20 There is no evidence that its share is growing, and certainly no basis for inferring any dangerous probability that it would ever approach monopoly proportions. 21 In sum, apart from the problem created by the shortage of petroleum, there is not even colorable support in the record for the conclusion that defendant is guilty of violating 2 of the Sherman Act.

B.

Plaintiff apparently contends that the shortage requires a different result in this case because alternative sources of supply were not in fact available to him and, therefore, the relevant market must be narrowly defined to include only ARCO products sold in the Lawrence County area. In appraising the legal significance of the shortage, we first review the evidence in the record and then consider whether taking judicial notice of the severity of the energy crisis which ensued would affect that analysis.

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