Myers v. Shell Oil Co.

• Decision Date: 05 April 1951
• Docket Number: Civ. No. 11260-C.
• Citation: 96 F. Supp. 670
• Parties: MYERS et al. v. SHELL OIL CO. et al.
• Court: U.S. District Court — Southern District of California

96 F. Supp. 670

MYERS et al. v. SHELL OIL CO. et al.

Civ. No. 11260-C.

United States District Court S. D. California, Central Division.

April 5, 1951.

COPYRIGHT MATERIAL OMITTED

Martin, Hahn & Camusi, Los Angeles, Cal., W. P. Camusi, Los Angeles, Cal., for plaintiffs.

McCutchen, Black, Harnagel & Greene, by George Harnagel, Jr., and P. K. Verleger, all of Los Angeles, Cal., for defendant Shell Oil Company.

JAMES M. CARTER, District Judge.

This case concerns the antitrust laws of the United States, in an action between private litigants.

An amended complaint containing 20 causes of action was filed on behalf of a number of plaintiffs against defendant Shell Oil Company. Plaintiffs are operators of retail service stations at which petroleum products supplied by Shell, as hereinafter set forth, are sold to consumers or users. Causes of action numbered 2 and 9 through 20 are identical except as to the parties plaintiff and the amounts of damage alleged. Defendant Shell Oil Company filed a motion for summary judgment under Rule 56, Federal Rules of Civil Procedure, 28 U.S.C.A., in favor of such defendant on each of the causes of action mentioned above. The motion was argued orally and briefs have been filed by counsel.

The second cause of action incorporates by reference paragraphs 2 through 30 of the first cause of action. Plaintiffs allege that jurisdiction is founded on and the causes of action arise out of Sections 1 and 2 of the Sherman Antitrust Act, 15 U.S. C.A. § 1 and § 2, and Section 2 of the Clayton Act, as amended by the Robinson-Patman Act, 15 U.S.C.A. § 13. During the argument and in the briefs filed, counsel for plaintiffs also relied on Section 3 of the Robinson-Patman Act, 15 U.S.C.A. § 13a.

Plaintiffs' prayer for three-fold damages and injunctive and other relief is based on Sections 4 and 16 of the Clayton Act, 15 U.S.C.A. §§ 15, 26.

No attempt will be made in this opinion to summarize in full the amended complaint, but sufficient reference will be made to the pertinent allegations thereof to indicate the basis for the court's ruling. Plaintiffs allege that the Shell Oil Company is engaged in interstate commerce and is doing business within this district; that the various plaintiffs are the owners or holders of the basic leases of real property and improvements used as service stations in Los Angeles, California, and in San Bernardino, California; that defendant Shell is a party to various leases or sub-leases with the plaintiffs whereby the latter operate service stations as sub-lessees of Shell, and that the various sub-leases provide that plaintiffs shall use, handle and sell only the petroleum products supplied by and acquired from Shell Oil Company. It is alleged that under the various lease arrangements, defendant Shell as lessee pays as rent to the plaintiffs as lessors, a certain sum for each gallon of gasoline delivered by Shell to the demised premises.

The amended complaint further alleges that approximately 15% of the crude oil produced by or bought for marketing by defendant Shell and sold in the Western States area (California, Arizona, Nevada, Oregon, Washington, Utah and Idaho) is produced in other states and foreign countries, while approximately 85% of the crude oil used for such purpose is produced from wells located in California; that the crude oil is refined in California and that petroleum products produced therefrom are sold and distributed in interstate commerce.

The amended complaint further alleges that the prices at which gasoline is sold throughout the Western States area is generally established by adding to the Los Angeles price of gasoline the cost of transportation from Los Angeles to the distribution point.

There are other general allegations to the effect that in instances where the defendant Shell owns or leases the land and building constituting the service station, and leases or sub-leases to independent service station operators, Shell secures control of the operation of these service stations through inducements such as nominal rent, rebates, free painting and other favors. As a condition of receiving such consideration, the operator agrees to buy from Shell Oil Company all the gasoline and motor fuel which may be required for resale at the premises involved.

It is also alleged generally that the intended purpose of defendant Shell in entering into the various leasing agreements with independent service station operators was to eliminate competition between Shell and other producers or wholesalers of like products; to deprive operators of retail outlets of the right to purchase petroleum products at prices determined by free competition among the producers, and more particularly to deprive certain retail outlets in Los Angeles of the opportunity of buying petroleum products at competitive prices, thereby directly affecting the retail price structure in the Western States area; and to secure to defendant Shell a monopoly of a substantial number of the retail outlets of petroleum products in the area.

In the second cause of action (incorporated by reference in the others here under consideration), plaintiffs allege that Shell has discriminated against the plaintiffs in the prices at which it sells its petroleum products in the Western States area; that this is accomplished by giving allowances for temperature correction to some independent service station operators but not to plaintiffs, by paying rebates to certain service station operators larger than those paid to plaintiffs, some of the latter not receiving any rebate at all; by requiring some owners-operators who have a sub-lease from Shell to pay a nominal rental per year, while other owners-operators are required to pay a rental based on a certain sum per gallon gasoline sold.

It is further alleged that the effect of the price discriminations has been to destroy competition in the Western States area generally and in the Los Angeles area in particular, in that the operators against whom the price discrimination is directed are unable to compete with the more favored operators, and by eliminating competition between defendant Shell and other wholesalers of petroleum products.

For the purposes of the motion for summary judgment only, defendant Shell admits that the action complained of constituted price discrimination against the plaintiffs. The defendant filed an affidavit in support of the motion which sets forth that during the time referred to in the amended complaint all of the gasoline sold to each of the plaintiffs, and to each of the retail outlets in Los Angeles and San Bernardino, and vicinities, was refined in the State of California. Another affidavit of the defendant sets forth that the service stations in Los Angeles and one in San Bernardino owned by the plaintiffs do not compete with service stations located in any other state. Plaintiffs did not controvert, and apparently do not dispute, the truth of the facts set forth in the affidavits. The contents of the affidavit are therefore admitted for the purpose of deciding the motion for summary judgment.

I.

The defendant contends that a civil action for treble damages and equitable relief will not lie under Section 3 of the Robinson-Patman Act, 15 U.S.C.A. § 13a, because the section is a penal statute exclusively. Plaintiffs action does not fail for this reason. While a decision on this point is not necessary for a decision on the motion for summary judgment, the court is of the opinion that a private civil action for damages and equitable relief will lie under this section. The court is in accord with the ruling and views of Judge Yankwich on this point as expressed in Balian Ice Cream Company, Inc., v. Arden Farms Co., D.C., 94 F.Supp. 796.¹

II.

While it may also not be necessary for the court to pass upon the point in deciding the motion for summary judgment, the court expressly states that its decision is not based upon the ground that the doctrine of pari delicto would operate to preclude a recovery by the plaintiffs.² See Kiefer-Stewart Co. v. Seagram & Sons, 340 U.S. 211, 71 S.Ct. 259, an action for treble damages under the Sherman Act, where the court in substance rejected the doctrine of unclean hands as a defense to a charge of illegal price fixing.³

III.

To prevail in a treble damage action under the Sherman Act, a private litigant must allege and prove, (a) a violation of the Act, and (b) damage to the plaintiff proximately resulting from the acts and conduct which constitute the violation.⁴ Injury alone to the plaintiff is not sufficient to support an action. Shotkin v. General Electric Co., 10 Cir., 171 F.2d 236. A general allegation of conspiracy or combination with resulting injury to the public is likewise insufficient without an allegation that the plaintiff suffered damage or injury as a result of the illegal act. As was stated by the court in Feddersen Motors v. Ward, 10 Cir., 180 F.2d 519, 522: "a general allegation of the forming of such a combination or conspiracy with resulting injury to the public and to the plaintiff is not enough. While detail is not necessary, it is essential that the complaint allege facts from which it can be determined as a matter of law that by reason of intent, tendency, or the inherent nature of the contemplated acts, the conspiracy was reasonably calculated to prejudice the public interest by unduly restricting the free flow of interstate commerce."

IV.

The court concludes that plaintiffs cannot prevail under the Sherman Act. To do so the plaintiffs must allege and show that the commerce involved is in or that the illegal acts complained of affect interstate commerce. From the affidavits filed by the defendant showing the locations of the plaintiffs' service stations and from the court's knowledge of the geographical limits of the state, of which it may take judicial notice, it is obvious that there can be no competition between plaintiffs' service stations and...