Quigley v. Exxon Company USA, Civ. No. 74-178.

• Decision Date: 10 May 1974
• Docket Number: Civ. No. 74-178.
• Citation: 376 F. Supp. 342
• Parties: Saltau J. QUIGLEY and Richard B. Uber, Plaintiffs, v. EXXON COMPANY U. S. A., a subsidiary of Exxon Corporation, a corporation, et al., Defendants.
• Court: U.S. District Court — Middle District of Pennsylvania

376 F. Supp. 342

Saltau J. QUIGLEY and Richard B. Uber, Plaintiffs, v. EXXON COMPANY U. S. A., a subsidiary of Exxon Corporation, a corporation, et al., Defendants.

Civ. No. 74-178.

United States District Court, M. D. Pennsylvania.

May 10, 1974.

COPYRIGHT MATERIAL OMITTED

Samuel L. Andes, Lemoyne, Pa., for plaintiffs.

James H. Stewart, Jr., Robert C. Spitzer, Nauman, Smith, Shissler & Hall, Harrisburg, Pa., for defendants.

SHERIDAN, Chief Judge.

Plaintiffs, Saltau J. Quigley and Richard B. Uber, who are independent Exxon service station dealers, brought this action under the Sherman Anti-Trust Act, 15 U.S.C.A. § 1 et seq., requesting preliminary and permanent injunctive relief against the defendants. Specifically, plaintiffs seek to restrain Exxon from opening a new company-operated car wash gasoline station with a base year volume of 853,000 gallons of motor fuel, which, if not enjoined, plaintiffs contend will enable Exxon to restrain trade in the Lemoyne-New Cumberland-Lower Allen-Highland Park area in Cumberland County in violation of Section 1 of the Sherman Act,¹ 15 U.S. C.A. § 1, thereby causing irreparable harm to plaintiffs. Therefore, plaintiffs request that Exxon be permitted to open the new car wash only with a supply of gasoline that is no greater than that allocated to them, and that Exxon be ordered "to fairly and equitably allocate and distribute" its fuel among all retail outlets treating independent and company-operated stations alike. Finally, the complaint alleges that the gasoline sales agreements between Exxon and each of the plaintiffs, which set a minimum volume of fuel which plaintiffs must purchase and a maximum quantity which Exxon is obligated to supply, constitute a restraint of trade in violation of Section 1 and therefore are void.

In accordance with Rule 65(a)(2) of the Federal Rules of Civil Procedure, the case was set down for non-jury trial on the merits, thereby consolidating the trial with the hearing on the preliminary injunction.

I. FINDINGS OF FACT

1. Plaintiff Saltau J. Quigley is an independent dealer who operates an Exxon service station at Fifth and Market Streets in Lemoyne, Cumberland County, Pennsylvania.

2. Plaintiff Richard Uber is an independent dealer who operates an Exxon service station at the intersection of Lowther Road and Carlisle Road in Lower Allen Township, Cumberland County, Pennsylvania.

3. Defendant Exxon Corporation has entered into gasoline sales agreements with each of the plaintiffs which provide that plaintiffs will purchase a minimum gallonage of 50 percent of their 1973 sales and that defendant will supply a maximum gallonage of 105 percent of their 1973 sales. These contracts set the minimum and maximum amounts of gasoline which defendant will sell to plaintiffs from February 15, 1974, to July 1, 1975. Clause 16 of the agreements permits the plaintiffs to terminate the contract at any time upon sixty days written notice to Exxon. Exxon has executed similar sales agreements with its other retail dealers. In 1974, Exxon has not had available any quantity of gasoline in excess of the 105 percent reserve amount.

4. The maximum gallonage set in the sales agreements presently does not restrict or affect in any manner the amount of gasoline supplied to the plaintiffs since their allocation of fuel is regulated by the federal government's mandatory allocation program and hence is determined in accordance with the Emergency Petroleum Allocation Act of 1973, Pub.L. No. 93-159, 87 Stat. 627, and the Federal Energy Office (FEO) regulations promulgated thereunder.

5. Pursuant to FEO regulations, Exxon supplies plaintiffs with a quantity of gasoline equal to their base period volume—i. e., their 1972 gasoline sales —multiplied by a monthly allocation fraction determined by dividing the total quantity of gasoline Exxon has available in any particular month by the total base volume of all those it is obligated to supply.

6. In accordance with FEO regulations, plaintiff Quigley has a base year volume for allocation purposes of 272,000 gallons—the amount of gasoline he sold in 1972—or an average base monthly volume of 22,700 gallons, with a yearly increase of 2.8 percent or 7,600 gallons for his 12.8 percent increase in 1973 sales over 1972, so that his average base monthly volume is 23,300 gallons.² See FEO Reg. §§ 211.1, 211.11, 211.12, 211.13, 39 Fed.Reg.No. 10, pt. III (January 15, 1974).

7. In accordance with the above FEO regulations, supra, plaintiff Uber has a base year volume for allocation purposes of 278,000 gallons—the amount of gasoline he sold in 1972—or an average base monthly volume of 23,200 gallons.

8. Plaintiffs admit and the court finds that they are receiving all the gasoline they are permitted to receive under the FEO regulations. Having supplied the plaintiffs with all the fuel they are entitled to under the government's mandatory allocation program, Exxon cannot legally supply them with additional quantities of gasoline.

9. Defendant Exxon Corporation operates an unincorporated marketing division known as Exxon Company U.S.A.; defendant James K. Muldrow is the division manager of the Harrisburg district, comprising 39 counties in central and northeastern Pennsylvania.

10. In the spring of 1971, defendant Exxon, through its marketing investment program, analyzed the Harrisburg market to determine the best locations for service stations in that area. On the basis of demographic data, projected traffic counts, median income of the area, density of registered vehicles, existing competition in the vicinity, and other data, Exxon determined that the site at the southeast corner of Third and Lowther Streets in Lemoyne was a "preferred representation" location.

11. In 1971, this site was occupied by a BP (British Petroleum) service station. In 1968, the last year of operation of the BP station, it sold 187,000 gallons of gasoline. The BP lease on the location expired December 31, 1971.

12. Defendant Exxon began negotiating for the location in September 1971, and negotiations continued through 1972, during which period other persons were actively engaged in negotiating for a lease on the site. In December 1972, the landlord, William Rittner, decided to negotiate exclusively with defendant Exxon for a lease of the location.

13. In February 1973, the terms of the lease agreement were substantially negotiated to permit Exxon to operate a car wash gasoline station at this location for a period of fifteen years, with three five-year renewal periods, with an initial monthly rental for the first five years of $1,683 per month and a total rental obligation for the first fifteen-year period of $334,310.

14. The lease was executed by defendant Exxon on June 6, 1973. The lease required an investment by the landlord of $88,000 for the erection of the buildings and preparation of the site and an investment by Exxon of $109,000 for the installation of tanks, pumps, and car wash equipment.

15. The "Unnamed Manager of Exxon Service Station in Lemoyne," named as a defendant in the complaint, who will manage this new car wash station, is Louis Bensinger. He has been on Exxon's payroll since February 1974.

16. Defendant Exxon has filed an application with the FEO for approval of a base year volume for allocation purposes of 853,000 gallons and hence an average base monthly volume of 71,100 gallons for the new car wash station. The Federal Energy Office has not yet acted upon this application.

17. The above proposed base year gallonage for the new station was determined by Exxon in the following manner:

(a) The number of car wash customers was calculated—after taking into account the "screening factors" or hurdle criteria of car registration and median family income within a mile and a half radius of the new station and the number of competing car washes in the immediate market area—on the basis of projected traffic counts on the roads the new station fronts. The estimated average daily traffic count for 1971 was 29,700 and is projected at 33,800 for 1974. The estimated daily traffic count for 1973 was 33,000. Using the 33,000 figure, Exxon estimated 7900 car washes per month at the new station.

(b) From its marketing studies and based on its experience with car wash stations, Exxon determined that 10 gallons was the appropriate average gallonage per car wash.

(c) 7900 car washes per month at 10 gallons of gasoline per car wash results in an estimated gallonage of 79,000 gallons per month or 948,000 gallons for 1973. This is the volume of gasoline Exxon estimates the car wash would have sold if it had been operating in 1973.

(d) To determine the 1972 base year volume, Exxon discounted by 10 percent the 948,000 gallons and thus determined that the base year volume for the new station was 853,800 gallons (90 percent of 948,000), which results in an average base monthly volume of 71,100 gallons.³

18. The above method used by Exxon to estimate the gasoline sales volume for the new car wash is reliable. The actual motor fuel sales for Exxon's car washes in the eastern region of the United States have been on the average 116.9 percent of the estimates determined by the same method utilized by Exxon in determining the new car wash's estimated sales volume.⁴

19. The 1972 base year volume of 853,000 gallons with an average base monthly volume of 71,100 gallons is a reasonable base year determination for the new car wash. The amount is not excessive from a marketing standpoint —i e., it is reasonably related to projected consumer demand.

20. The volume of gasoline sold in 1968, its last year of operation, by the BP service station on the site where the new car wash is located does not provide a more reliable basis for estimating the new car wash's sales volume.

21. The method of determining gallonage estimates for various types of motor fuel sales operations is applied without discrimination by Exxon to company-operated stations and...