Sessions Tank Liners, Inc. v. Joor Mfg., Inc.

• Decision Date: 11 December 1991
• Docket Number: No. CV 84-6363 MRP.,CV 84-6363 MRP.
• Citation: 786 F. Supp. 1518
• Court: U.S. District Court — Central District of California
• Parties: SESSIONS TANK LINERS, INC., d/b/a Southwest Tank Liners, Inc., Plaintiff, v. JOOR MANUFACTURING, INC., SCM Corporation d/b/a Glidden Coatings and Resins, and Does 1 through 10 inclusive, Defendants.

786 F. Supp. 1518

SESSIONS TANK LINERS, INC., d/b/a Southwest Tank Liners, Inc., Plaintiff, v. JOOR MANUFACTURING, INC., SCM Corporation d/b/a Glidden Coatings and Resins, and Does 1 through 10 inclusive, Defendants.

No. CV 84-6363 MRP.

United States District Court, C.D. California.

December 11, 1991.

COPYRIGHT MATERIAL OMITTED

Blecher & Collins, Maxwell M. Blecher, Donald C. Hsu, Donald R. Pepperman, Los Angeles, Cal., for plaintiff.

Farella Braun & Martel, Jerome I. Braun, George H. Kalikman, San Francisco, Cal., Lorenz Alhadeff Lundin & Oggel, Robert D. Rose, San Diego, Cal., for defendants.

OPINION

PFAELZER, District Judge.

In 1981, the Western Fire Chiefs Association ("WFCA") adopted a Uniform Fire Code ("UFC") provision which in effect banned tank lining. The adoption of the provision and the events leading to its adoption adversely affected the business of plaintiff Sessions Tank Liners, Inc. ("Sessions"). In this action, Sessions charges the defendant Joor Manufacturing, Inc. ("Joor") with a violation of § 1 of the Sherman Act, 15 U.S.C. § 1 (1988), on account of Joor's role in these events and the adoption of the model fire code provision. Sessions claims, in addition, that Joor intentionally interfered with its prospective economic advantage.

This case is before the Court on remand from the Ninth Circuit, Sessions Tank Liners, Inc. v. Joor Manufacturing, Inc., 852 F.2d 484, 485 (9th Cir.1988) ("Sessions III"), to determine whether Joor's efforts to influence the WFCA's code-promulgating process are immune from antitrust liability under the doctrine established by the Court in Eastern R.R. Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127, 81 S.Ct. 523, 5 L.Ed.2d 464 (1961) ("Noerr"), United Mine Workers of Am. v. Pennington, 381 U.S. 657, 85 S.Ct. 1585, 14 L.Ed.2d 626 (1965) ("Pennington"), and California Motor Transp. Co. v. Trucking Unlimited, 404 U.S. 508, 92 S.Ct. 609, 30 L.Ed.2d 642 (1972), as interpreted by the Supreme Court in Allied Tube & Conduit Corp. v. Indian Head, Inc., 486 U.S. 492, 108 S.Ct. 1931, 100 L.Ed.2d 497 (1988) ("Allied"), and if not, whether Joor is liable under § 1.

The Court, having conducted a bench trial, concludes that (1) the defendant's actions are not shielded from antitrust liability by the Noerr-Pennington doctrine, (2) the defendant violated § 1 of the Sherman Act, 15 U.S.C. § 1, and (3) the defendant interfered with plaintiff's prospective economic advantage.

FACTS

Joor manufactures and sells tanks for the underground storage of hazardous fluids such as gasoline. Sessions, also known as Southwest Tank Liners, Inc., repairs leaking storage tanks by cutting an opening in them, lining the interior with a protective coating of epoxy, and resealing them.¹ This method of repair does not require that the tank be removed from the ground.

Sessions and Joor compete in the market-place for customers, such as service station owners, who own a leaking tank but require an impermeable one. While the cost of lining an old tank is roughly equivalent to the cost of purchasing a new one, customers often prefer to line their tanks because tank replacement involves the additional cost of the labor necessary to remove and discard the old tank and to install the new one. Moreover, tank replacement often requires a lengthy interruption of business.

In August 1981, the WFCA—a private, non-profit, standard-setting association whose voting membership is limited to public fire officials—adopted its 1982 version of the UFC. The 1982 UFC included a provision, § 79.601(d), which required that leaking tanks either be removed from the ground or abandoned. Although the provision did not have the force of law, the UFC is a highly influential code. Many local governments in California and in other western states ultimately adopted the UFC; and, in localities within these states where the UFC was not enacted as law, public fire officials frequently enforced the Code's provisions on their own, refusing to issue permits for the underground lining of leaking tanks.² Joor's president and owner, Howard Robbins ("Robbins"), was a member of the WFCA subcommittee which drafted UFC § 79.601(d).

In the period of time relevant here, the WFCA enacted UFC provisions such as § 79.601(d) through a three-tiered process. First, subcommittees were established to examine fire-related issues and to draft proposed code provisions based on their findings.³ These subcommittees were generally made up of public fire officials, private industry representatives, and members of other standard-setting organizations, all of whom had the right to vote on subcommittee matters. After a subcommittee completed its work, its proposals were published in two trade journals. The suggested revisions were then reviewed by the Uniform Fire Code Committee—a committee of public fire officials—at its annual meeting. The UFC Committee did not carefully review each proposed amendment, but gave consideration only to those which were the subject of an objection at the annual meeting by a member of the subcommittee which drafted the change.⁴ Absent an objection to a proposal, the UFC Committee voted to recommend it for approval to the WFCA. After the UFC Committee meeting, proposed code changes were published in trade journals with the recommendations of the UFC Committee attached. The full body of the WFCA then voted on the proposed revisions at its annual meeting. Given the number of proposed changes, the length of those changes, and the brevity of the WFCA meeting, it was not contemplated that the WFCA would reexamine every proposal for revision. Like the UFC Committee, the WFCA generally adopted subcommittee revisions unless an objection arose at the WFCA meeting.⁵ If a majority of the WFCA approved a proposed change, the change became part of the UFC. The WFCA revised its code every three years.

In December 1979, Joor's president Robbins volunteered to work on the subcommittee of the UFC Committee charged with revision of Article 79 of the UFC ("Article 79 subcommittee"), and began to attend its meetings. This subcommittee's assignment was to rewrite the 1979 version of Article 79, which established guidelines for the storage and handling of flammable liquids. The purpose of the revision was to make Article 79 consistent with rules established by the National Fire Protection Association ("NFPA"), another private standard-setting organization. The UFC delegated the task of rewriting Article 79 to the subcommittee because the fire officials in the UFC Committee and the WFCA had neither the time nor the technical expertise to draft and revise this section themselves. The subcommittee, in turn, directed Robbins to integrate UFC and NFPA provisions which related specifically to the depth and location of underground storage tanks. Neither the 1979 UFC nor the NFPA rules addressed tank lining or required the removal of leaking tanks from the ground.

The subject of tank lining did not arise in the Article 79 subcommittee until the afternoon of its final meeting on March 17, 1981. There are no agendas, minutes or drafts of revisions prior to March 17, 1981 which refer to tank lining or indicate that tank lining was a subject under consideration or discussion. Moreover, at trial, no study of tank lining was ever produced or referred to as having been the subject of discussion by the Article 79 subcommittee at any time. Although individual members of the subcommittee testified that they talked about tank lining among themselves or with other fire officials outside of the subcommittee, the subcommittee as a body addressed tank lining only on this one occasion. At this March meeting, representatives of Sessions and of Bridgeport Chemical Company were scheduled to deliver a presentation on the tank lining process.⁶ However, the agenda for the meeting, dispatched to subcommittee members in advance, did not indicate that the subcommittee would either consider or vote on any code provision concerning tank lining.

In anticipation of the meeting, and in response to materials which Sessions distributed to the subcommittee, Robbins drafted a letter which was circulated to subcommittee members. Robbins had not been assigned by the subcommittee to address the subject of tank lining or to write this letter. In the letter, Robbins questioned the safety of the lining process and warned that the WFCA could be subject to liability for authorizing use of the process. Robbins did not deny that tank lining could prevent leaking. However, he argued that where there was leakage, there was weakened metal, and lining could not restore the structural integrity of a weakened tank. Even though it is an easily demonstrable fact that leaking tanks do not necessarily involve weakened metal, Robbins made this argument to cause the members of the subcommittee to believe that tanks that had been lined were in danger of structural collapse. Robbins did not reveal that relatively simple tests were available to measure the structural strength of a leaking tank in the ground in order to determine if it required replacement rather than repair. Representatives of Sessions were not provided with a copy of the Robbins' letter prior to their presentation to the subcommittee.

On March 17, 1981, the tank lining proponents made a brief presentation to the Article 79 subcommittee, answered questions, and left the subcommittee meeting. Not having seen Robbins' letter, the proponents were not in a position to effectively refute his arguments. After their departure, Robbins vigorously advocated a UFC ban on tank lining, repeating the concerns he had expressed in his letter about the safety of the lining process. In addition, Robbins advised the subcommittee falsely that lining a tank would "void" the tank's Underwriters Laboratories ("UL") label and, in turn, subject the WFCA to liability.⁷ At the time he made these statements to the subcommittee, Mr. Robbins knew...