Savon Gas Stations Number Six, Inc. v. Shell Oil Company

• Decision Date: 24 September 1962
• Docket Number: No. 8626.,8626.
• Citation: 309 F.2d 306
• Parties: SAVON GAS STATIONS NUMBER SIX, INC., and A. & H. Transportation, Inc., Appellants, v. SHELL OIL COMPANY, Appellee.
• Court: U.S. Court of Appeals — Fourth Circuit

309 F.2d 306 (1962)

SAVON GAS STATIONS NUMBER SIX, INC., and A. & H. Transportation, Inc., Appellants, v. SHELL OIL COMPANY, Appellee.

No. 8626.

United States Court of Appeals Fourth Circuit.

Argued May 29, 1962.

Decided September 24, 1962.

Lawrence I. Weisman, and David M. Blum, Baltimore, Md. (Nyburg, Goldman & Walter, Baltimore, Md., on the brief), for appellants.

William Simon, Washington, D. C. (John Bodner, Jr., Washington, D. C., S. R. Vandivort, San Francisco, Cal., and Howrey, Simon, Baker & Murchison, Washington, D. C., on the brief), for appellee.

Before SOPER, HAYNSWORTH and BRYAN, Circuit Judges.

SOPER, Circuit Judge.

This suit was brought by two affiliated Maryland corporations, Savon Gas Stations No. 6, Inc., and A. and H. Transportation, Inc., which are engaged in the business of buying and transporting refined petroleum products and selling them at retail at filling stations in the Baltimore area. The defendant is the Shell Oil Company, a Delaware corporation, which is engaged in the production and marketing of petroleum products on an international scale, and also in the retail sale of such products in filling stations in Baltimore.

The gist of the complaint is that Shell on October 13, 1954, in the course of its business entered into an illegal contract in unreasonable restraint of trade with the owners of Middlesex Shopping Center, one of the larger retail shopping centers in the Baltimore area. The Shopping Center is situated on a triangular tract of land in Baltimore bounded by Eastern Boulevard, Essex Avenue and Marlyn Avenue. Under the agreement Middlesex erected a filling station for Shell on property owned by it fronting on the Boulevard, adjacent to the Shopping Center, and leased it to Shell under a covenant that during the term of the lease Middlesex would not use or permit the use of its other property in the triangular area for the purpose of a gas station which would compete with the business being conducted by Shell on the leased premises.

It is charged that the plaintiffs were injured through the enforcement of this covenant two years later when, on August 31, 1956, they opened a filling station on property owned by them fronting on the Boulevard adjacent to the Shopping Center on the side opposite to the Shell Station, and engaged in the sale of gasoline at prices lower than those charged by Shell. The Savon Station was so constructed as to receive traffic from the Boulevard and also to permit the flow of traffic between the rear of the station and the parking area of the Shopping Center without using the street; and the owners of the respective properties entered into an agreement to avail themselves of this situation. Under this agreement the customers of the Shopping Center could cross the station to gain access to the street and the customers of the station could have direct access to the parking area of the Shopping Center. This arrangement increased the sales at the Savon Station but it was terminated when Shell invoked the restrictive covenant in its earlier agreement of lease and induced Middlesex to abandon its agreement with Savon and to erect barriers between the Savon Station and the Shopping Center so as to prevent the free passage of vehicles between the two areas. Savon claims that by reason of this action its sales dropped off substantially and caused the losses, for which it seeks damages in this suit.

The specific charge of illegality is made in the first count of the complaint that the lease agreement between Middlesex and Shell constituted an unreasonable restraint of trade in violation of §§ 1 and 2 of the Sherman Anti-Trust Act, 15 U.S.C.A. §§ 1 and 2. Section 1 provides in effect that every contract or conspiracy in restraint of trade or commerce among the several states or with foreign nations is illegal. Section 2 provides that every person who shall monopolize or conspire with any other person to monopolize any part of such trade or commerce shall be guilty of a misdemeanor and be punished by a fine not exceeding $50,000, or imprisonment not exceeding one year, or both.

The second count of the complaint charges that the wrongful and unlawful acts of the defendant, Shell, constitute not only a violation of the anti-trust laws but also an interference with the contractual rights of the plaintiff in violation of the common law of the state of Maryland.

The case was submitted to the District Judge on motion of the defendant for summary judgment or dismissal upon the allegations contained in the complaint and in certain depositions and affidavits of the parties. Finding the facts to be undisputed, he entered judgment for the defendant and dismissed the complaint. He was of the opinion that the restraint of trade involved in enforcement of the covenant in the lease did not occur in interstate commerce and had no substantial effect upon such commerce as asserted in the first paragraph of the complaint; and he also held that the restrictive covenant in the lease was not in violation of the common law of Maryland as alleged in the second count of the complaint.

The undisputed facts bearing upon the business activities of the parties which are set forth in the allegations of the complaint or in the depositions and affidavits considered by the court, are shown in the following recital.

Shell is engaged in interstate commerce on a national and international scale, producing, refining and marketing petroleum products. In the instant case it secured from Middlesex a lease on the gas station adjacent to the Shopping Center under which all other dealers in petroleum products were excluded from other property in the area owned by Middlesex. It pursues this policy elsewhere.

Savon Gas Stations No. 6, Inc., and A. and H. Transportation, Inc., the plaintiff corporations, may be considered as a single unit for our purposes since they are under a common ownership and have the same president. They are engaged in the business of buying and selling petroleum products. The goods are bought for the most part from the Arrow Oil Company, an affiliated corporation with the same president, which buys the goods in Maryland from producers or dealers who in turn import the goods from outside the state. Some of the goods are bought directly from out-of-the-state producers. The plaintiffs own and operate 8 service stations, 6 in Baltimore and 2 in the counties of Maryland. These stations make annual sales of 6,000,000 gallons amounting to $1,500,000. The Savon Station, which the plaintiffs operate adjacent to the Shopping Center has annual sales of 300,000 gallons amounting to $75,000 per year, a monthly average of 25,000 gallons at $6,250. At the commencement of business, the station's sales averaged 29,000-30,000 gallons per month, but after the barrier was erected and direct access to the parking area of the Shopping Center was denied sales dropped to 15,000-20,000 gallons per month. In each of the five years preceding the trial of the case the station lost approximately $20,000. All of the other stations with the exception of 2 are operated at a profit. In Maryland there are in all from 2500 to 2700 service stations selling between seventy and ninety million gallons of gasoline per month.

The plaintiffs' depositions show that the competitive area for the sale of petroleum products in the neighborhood of the Shopping Center is included in a radius of three blocks from the Center. Within this area there are at least ten service stations in which virtually all of the wellknown gasoline brands, including Esso, Socony, Mobil, Tidewater, Texaco, Sun, Crown, Atlantic, Sinclair, as well as Shell and Savon, are sold.

The plaintiffs' case is pitched upon the theory that both the Federal Anti-Trust Statutes and the common law of Maryland are...