Rio Vista Oil, Ltd. v. Southland Corp.

• Decision Date: 13 April 1987
• Docket Number: No. C-86-1009J.,C-86-1009J.
• Citation: 667 F. Supp. 757
• Parties: RIO VISTA OIL, LTD., Plaintiff, v. The SOUTHLAND CORPORATION and Citgo Petroleum Corporation, Defendants.
• Court: U.S. District Court — District of Utah

667 F. Supp. 757

RIO VISTA OIL, LTD., Plaintiff, v. The SOUTHLAND CORPORATION and Citgo Petroleum Corporation, Defendants.

No. C-86-1009J.

United States District Court, D. Utah, C.D.

April 13, 1987.

L.R. Gardiner, Jr., Salt Lake City, Utah, for plaintiff.

Peter W. Billings, Jr., Salt Lake City, Utah, Mark J. Spooner and James Sandman, Washington, D.C., for defendants.

MEMORANDUM OPINION AND ORDER

JENKINS, Chief Judge.

This case involves the retail gasoline business, particularly as it exists in Salt Lake County, Utah. In brief, plaintiff Rio Vista Oil, Ltd. (Rio Vista) claims that the defendants The Southland Corporation (Southland) and Citgo Petroleum Corporation (Citgo) have engaged in anticompetitive practices in the retail sale of gasoline in the Salt Lake County area.

This case is now before the court on defendant Citgo's motion to dismiss and/or for summary judgment on the entire complaint, motions of both defendants to dismiss and/or for summary judgment on that portion of count one based on section 1 of the Sherman Act and motions of both defendants to dismiss count two. After consideration of the parties' oral arguments and written briefs, and for reasons set out further herein, this court denies defendants' motions as to count one, and grants in part and denies in part defendants' motion as to count two.

We take the facts as alleged by plaintiff.

Plaintiff Rio Vista operates twenty-six retail "convenience" type outlets that sell gasoline and other petroleum products, along with groceries and snacks. Rio Vista owns no crude oil and does not refine the petroleum products it sells. It purchases gasoline from refineries and sells it, unbranded, in its twenty-six "self-service independent" stations. Twenty-two of the plaintiff's stores are in Utah and four are in Idaho.

Defendant Southland operates the national chain of 7-Eleven stores. Defendant Citgo is an oil refiner which was a wholly-owned subsidiary of Southland from 1983 to October 1, 1986.¹ Citgo brand gasoline is sold in 7-Eleven stores throughout the nation. Although Citgo supplies many of the nation's 7-Eleven stores with gasoline from its refinery in Louisiana, in other parts of the country Southland and Citgo supply the 7-Eleven stores with petroleum products refined by others and obtained at least in part pursuant to exchange agreements. Defendants obtained gasoline for their Utah, Idaho and Colorado 7-Eleven stores from a Utah refinery. They then transported the gasoline from the Utah refinery to stores in the three states for sale by them to retail customers.

Rio Vista claims that Southland, in an attempt to drive independent self-service stations out of business, has deliberately cut its retail gasoline prices in geographic areas where it faces competition from independent stations, specifically in the Salt Lake City area. Rio Vista claims that 7-Eleven gasoline prices in the Salt Lake City area were lower than prices charged by Southland to its customers in other areas and at times were below defendants' cost. Rio Vista claims Southland chose the locations for its stores in Salt Lake City with the intention of driving plaintiff and other independent operators out of business. All this, according to plaintiff, was done for the purpose of destroying competition.

Rio Vista has pleaded three claims for relief. Count one alleges that the defendants' actions amounted to a contract, combination and conspiracy in violation of section 1 of the Sherman Act and an attempt to monopolize in violation of section 2 of that act. Additionally, Rio Vista claims such actions were in violation of the parallel provisions of the Utah Antitrust Act, Utah Code Ann. §§ 76-10-911 through -926. Count two alleges that the defendants have engaged in unlawful price discrimination in violation of section 2 of the Clayton Act as amended by sections 2 and 3 of the Robinson-Patman Act, 15 U.S.C. §§ 13 & 13a. Plaintiff also claims that defendants discriminated in price between different locations within Utah, in violation of the Utah Unfair Practices Act, Utah Code Ann. §§ 13-5-3 & 76-10-903. Finally, Count three is based entirely on Utah state law and alleges below-cost sales in violation of the Utah Unfair Practices Act, Utah Code Ann. §§ 13-5-7 & 76-10-903.

The defendants responded to the complaint by filing the three motions currently before the court. The first of these seeks dismissal of, or in the alternative summary judgment on, the entire complaint with respect to Citgo. This motion is primarily based on Citgo's assertion that it had nothing to do with pricing decisions made in the Salt Lake area. Second, both Citgo and Southland move for dismissal of that portion of count one based on section 1 of the Sherman Act. They argue that since 1983 and until October 1986 Citgo was wholly owned by Southland. Thus, defendants argue, the two entities were legally incapable of conspiring with each other within the meaning of section 1 of the Sherman Act, 15 U.S.C. § 1. Third, both defendants have moved to dismiss count two claiming that the jurisdictional prerequisites for a Robinson-Patman claim have not and cannot be satisfied under the facts alleged in the complaint.

1. Citgo's motion for dismissal or summary judgment with respect to the entire complaint.

Citgo claims, and supports this claim with the affidavit of its vice-president, that it did not participate in any of the sales of gasoline that gave rise to the claims for relief in the complaint. Although the affidavit, if uncontroverted, might well be sufficient for summary judgment, plaintiff has not yet had the opportunity to establish, through adequate discovery, the facts needed to resist a rule 56 motion. Federal Rule of Civil Procedure 56(f) contemplates that motions for summary judgment should not be granted if discovery has not been had and would be helpful. In compliance with that rule, plaintiff has filed an affidavit affirmatively stating the need for adequate discovery. Therefore, the court at this time denies the motion for summary judgment. Likewise, the motion to dismiss must fail. The complaint alleges enough to allow discovery on the issue of Citgo's participation, if any, in the retail sales of gasoline in Utah, Idaho, and Colorado. The parties acknowledge that gasoline is sold under the Citgo brand name in Utah, Idaho and Colorado. Thus there is some evidence of possible participation by Citgo in the fuel's production, purchase, or resale to the public. Moreover, the record before the court does not yet reveal what exchange agreements with Citgo, if any, were involved in the purchases of gasoline from Utah refineries by Citgo and Southland. Considering the facts as pleaded in the light most favorable to the plaintiff, the court concludes that this motion is premature and must be denied at this time.

2. Defendants' motion to dismiss that portion of the complaint based on Section 1 of the Sherman Act.

Both Southland and Citgo have moved for summary judgment or dismissal on the basis that they were legally incapable of "conspiring" with each other within the meaning of section 1 of the Sherman Act. Plaintiff's first claim for relief asserts a claim under sections 1 and 2 of the Sherman Act as well as the corresponding Utah antitrust provisions. However, this motion is directed solely to that portion of count one that attempts to state a claim under section 1 of the Sherman Act, 15 U.S.C. § 1.

Section 1 of the Sherman Act reads in pertinent part: "Every contract, combination in the form of a trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared illegal." 15 U.S.C. § 1. It is now beyond dispute that liability under this section requires concerted action between at least two separate entities. Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752, 768, 104 S.Ct. 2731, 2740, 81 L.Ed.2d 628 (1984); Monsanto Co. v. Spray-Rite Service Corp., 465 U.S. 752, 761, 104 S.Ct. 1464, 1469, 79 L.Ed.2d 775 (1984); Albrecht v. Herald Co., 390 U.S. 145, 149, 88 S.Ct. 869, 871, 19 L.Ed.2d 998 (1968). It is also clear, as defendants point out, that a wholly-owned subsidiary is not, for purposes of Section 1 liability, a separate entity from its parent corporation. Copperweld, 467 U.S. 752, 104 S.Ct. at 2731. During the period that Citgo was 100% owned by Southland, the two corporations were legally incapable of forming, at least between themselves, a "contract, combination ... or conspiracy"² in violation of section 1.

Rio Vista recognizes the Copperweld case places limits on section 1 liability, but argues that a passage in that case establishes that Citgo and Southland are not necessarily entirely immune from liability under that section. In that passage, the Court stated: "It has long been clear that a pattern of acquisitions may itself create a combination illegal under § 1, especially when an original anticompetitive purpose is evident from the affiliated corporations' subsequent conduct.... In United States v. Yellow Cab Co., 332 U.S. 218, 67 S.Ct. 1560, 91 L.Ed. 2010 (1947), the affiliation of the defendants was irrelevant because the original acquisitions were themselves illegal." Copperweld, 467 U.S. at 761, 104 S.Ct. at 2736-37 (emphasis by the Court, footnotes omitted). The Court added in a footnote: "Our point is not that Yellow Cab found only the initial acquisition illegal; our point is that the illegality of the initial acquisition was a predicate for its holding that any postacquisition conduct violated the Act." Id., n. 5. This court reads these passages from Copperweld as leaving a gap in the case's otherwise bright line rule of intraenterprise immunity from section 1 liability. If a combination is formed between two separate entities for the purpose of restraining trade, their subsequent coordinated actions could be part and parcel of an original, illicit combination. Separate economic entities...