Standard Oil Co.(Kentucky) v. Humble Oil & Refining Co.

• Citation: 363 F.2d 945
• Decision Date: 06 September 1966
• Docket Number: No. 21674.,21674.
• Parties: STANDARD OIL COMPANY (KENTUCKY), Appellant, v. HUMBLE OIL & REFINING COMPANY, Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)

363 F.2d 945 (1966)

STANDARD OIL COMPANY (KENTUCKY), Appellant, v. HUMBLE OIL & REFINING COMPANY, Appellee.

No. 21674.

United States Court of Appeals Fifth Circuit.

July 1, 1966.

Rehearing Denied September 6, 1966.

Beverly W. Pattishall, W. Thomas Hofstetter, Chicago, Ill., Robert W. Thompson, Jr., Gulfport, Miss., William E. Suddath, Jr., Jackson, Miss., Francis R. Kirkham, James B. Atkin, Harlan M. Richter, San Francisco, Cal., Charles G. Middleton, Jr., Louisville, Ky., Francis R. Kirkham, Pillsbury, Madison & Sutro, San Francisco, Cal., Woodson, Pattishall & Garner, Chicago, Ill., Middleton, Seelbach, Wolford, Willis & Cochran, Louisville, Ky., Watkins & Eager, Jackson, Miss., Mize, Thompson & Mize, Gulfport, Miss., of counsel, for appellant.

Leslie D. Taggart, Ronald O. Thomas, Nicholas J. Stathis, New York City, M. M. Roberts, Hattiesburg, Miss., Dillard W. Baker, Houston, Tex., George F. Woodliff, Jackson, Miss., Francis X. Clair, New York City, Watson, Leavenworth, Kelton & Taggart, New York City, Heidelberg, Woodliff & Franks, Jackson, Miss., of counsel, for appellee.

Before RIVES and THORNBERRY, Circuit Judges, and GARZA, District Judge.

RIVES, Circuit Judge:

The Humble Oil & Refining Company is a wholly-owned subsidiary of Standard Oil Company of New Jersey.¹ Humble sought a declaratory judgment against Standard Oil of Kentucky² allowing Humble to use its Esso trademark in the five-state area³ historically inhabited by Kentucky. Kentucky counterclaimed seeking to prevent the use by Humble of the Esso trademark or tradename in its area.⁴ Two basic issues are raised. First, would Humble be guilty of unfair competition if it used the Esso mark in Kentucky's area? Second, has Kentucky through previous contracts given up its right, if any, to prevent the use by Humble of the Esso mark and name?

The district court found that Kentucky had contracted away its rights and entered a judgment for Humble. We reverse.

I.

To understand the unique problems engendered by the Standard Oil name and reputation, it is necessary to understand the history of that name. What came to be known as the Standard Oil Trust⁵ began its growth in 1870. By 1899 Standard Oil was the dominant name in the American oil industry. A holding company, Standard Oil of New Jersey, was formed, and through it the vast Standard Oil holdings were controlled after 1899.⁶ Through extensive national advertising and high quality products, Standard Oil achieved a nationwide reputation for excellence.

The "system of marketing * * * adopted by the Standard Oil Trust was one by which the country was divided into districts and the trade in each district in oil was turned over to a designated Standard Oil constituent corporation within the combination, and all others were excluded * * *."⁷ In 1911 the Supreme Court held that the Trust violated the Sherman Antitrust Act and ordered it dissolved. Standard Oil Co. of New Jersey v. United States, 221 U.S. 1, 31 S.Ct. 502, 55 L.Ed. 619 (1911).

Under the method of operation employed by the Trust before 1911, Standard Oil of Kentucky had the exclusive common-law right to use the Standard name and marks within its five-state area just as Standard Oil of New Jersey had the exclusive right to use the Standard name and marks in its area.⁸ After the dissolution of the Trust, each of the original subsidiaries retained its respective exclusive right.

In 1927 Standard Oil of New Jersey (a New Jersey corporation) transferred its marketing operations to a subsidiary Standard Oil of New Jersey (a Delaware corporation). The Delaware corporation later changed its name to Esso Standard Oil Company and was so known from 1948 until 1960. In that year Esso Standard Oil became part of Humble.

The Standard Oil name has immense value as a marketing aid and has been the subject of numerous suits over who has the right to use it in a given territory. Until this case was decided by the court below, all of the reported cases had a single common denominator: the right to use the Standard Oil name and reputation belonged exclusively to the local Standard Oil company that first inhabited the trade area.⁹ Standard Oil Company (Sohio) v. Standard Oil Company (of Indiana), 252 F.2d 65 (10 Cir. 1958); Esso v. Standard Oil Co. (of Indiana), 98 F.2d 1 (8 Cir. 1938); Standard Oil Co. of Colorado v. Standard Oil Co. (of Indiana), 72 F.2d 524 (10 Cir. 1934), cert. den., 293 U.S. 620, 55 S.Ct. 216, 79 L.Ed. 708, Standard Oil Co. of New Mexico v. Standard Oil Co. of California, 56 F.2d 973 (10 Cir. 1932); Standard Oil Co. of Maine v. Standard Oil Co. of New York, 45 F.2d 309 (1 Cir. 1930); Esso Standard Oil Co. v. Standard Oil of New England, 170 F.Supp. 71 (D.N.H.1958); Standard Oil Co. (of Indiana) v. Standard Oil of North Dakota, 123 F.Supp. 227 (D.N.D.1954); Esso Standard Oil Co. v. Bazerman, 99 F. Supp. 983 (E.D.N.Y.1951); Standard Oil of New York v. Standard Oil of Maine, 38 F.2d 677 (D.Maine1930), aff'd, supra, 45 F.2d 309; Standard Oil Co. (of Indiana) v. Michie, 34 F.2d 802 (E.D.Mo.1929).

Prior to the dissolution of the Trust in 1911 and after the creation of the several entirely separate companies, with each one operating under the same name in different geographic areas of the United States, some of the companies adopted various pseudonyms for Standard Oil. Thus we find Standard Oil referred to as the "SO Company,"¹⁰ "SO Co.," "SOHIO,"¹¹ "KYSO,"¹² "SOCONY,"¹³ "CALSO,"¹⁴ and "ESSO."¹⁵ The public generally has come to associate all of these names with the prestige of Standard Oil.

Until recently Humble made no attempt to independently enter the marketing area of Kentucky. This may be attributed to the long history of friendly relations between the two companies and Kentucky's unusual position in the oil industry. Unlike other major oil companies, including the numerous Standard Oil companies, Kentucky was not a vertically integrated company. By that we mean Kentucky did not produce and refine its own crude oil but restricted its operations to the marketing level. Prior to the dissolution of the Trust, Kentucky received its products from Standard Oil of New Jersey. Following the dissolution Kentucky continued through successive supply contracts to receive the majority of its requirements through the Standard of New Jersey family of corporations.

In 1958 the United States brought an antitrust suit against Kentucky and Humble¹⁶ in an effort to dissolve this relationship and compel competition. Kentucky then explored the possibility of merging with Humble. But this, in the opinion of Humble, was not possible under the antitrust laws. Therefore, in 1960 Kentucky turned its attention to the possibility of merging with Standard of California, thus insuring that its source of supply would not be cut off or become dependent on a competitor. In 1961 the Government approved the merger with California and a consent decree in the case against Kentucky and Humble was entered.¹⁷ It was only natural that, with its access to the lucrative five-state market through Kentucky impaired, Humble should enter the market itself.

Nine days after the consent decree in the antitrust suit was entered, Humble opened its first Esso station in the five-state area. At the time this case went to trial, over 776 Esso stations were in operation and their proliferation has not ceased.

It is difficult to discern whether the district court held that absent the contractual relationship of the parties, Humble could have entered the five-state area using the Esso name. If the district court so held it was plainly wrong. The court below made numerous findings of fact, some of which are conflicting, as well as detailed findings of law. The factual findings are so interwoven with the district court's contract theory, it is impossible to believe that they were meant to apply to the issue of unfair competition taken alone. If they were, we hold that the findings on such issues as public confusion between Esso and Standard Oil are clearly erroneous.

The record in this case reveals the high degree of confusion that prevailed in the five-state area. In advertising a new subdivision in Mississippi, it was proudly proclaimed that the subdivision was near "the new $175,000,000 Esso plant at Pascagoula." The only error in this full page ad was that the plant belonged to Kentucky, not Humble. The State Times newspaper in Jackson, Mississippi, printed an article on why Kentucky chose Mississippi over Louisiana for its new plant. Titling the article, which discussed a letter from Kentucky Standard's president, the newspaper gratuitously added this touch, "Letter Tells Why Esso Chose State."¹⁸ The record recounts many more occasions where announcers or newsmen made similar mistakes, not realizing Esso did not mean Standard — that is, Standard of Kentucky. But these mistakes merely reflect the general confusion on this score.

Kentucky received both complaints and accolades intended for Humble's Esso stations. Job applicants called them seeking employment at Esso stations. Esso's merchandise was sometimes misdelivered to Kentucky. Patrons attempted to register for Esso contests or asked for prizes offered by Esso at Kentucky's service stations.¹⁹ Many of Kentucky's patrons used their credit cards at Esso stations believing they were affiliated with Kentucky. Esso kept a record of some of these persons and at an opportune time sent them Esso credit cards. Many persons, thinking Esso and Standard were the same, destroyed their old Kentucky credit cards believing the new Esso cards had replaced them.

Upon receiving two separate bills, one from Esso and one from Kentucky, many of Kentucky's customers attempted to pay both with a single check or complained about the dual billing. The list of Esso's bills for work or services provided to Humble, or letters, wires and checks intended for Humble, which were mistakenly sent to Kentucky included items from such companies and...