Taggart v. Rutledge

• Decision Date: 23 March 1987
• Docket Number: No. CV 82-96-BU-CCL.,CV 82-96-BU-CCL.
• Citation: 657 F. Supp. 1420
• Court: U.S. District Court — District of Montana
• Parties: John D. TAGGART and Bettie F. Taggart, Plaintiffs, v. David S. RUTLEDGE; Janette G. Rutledge; David Rutledge Distributing Co., Inc.; Conoco, Inc.; and Continental Oil Company, Defendants.

657 F. Supp. 1420

John D. TAGGART and Bettie F. Taggart, Plaintiffs, v. David S. RUTLEDGE; Janette G. Rutledge; David Rutledge Distributing Co., Inc.; Conoco, Inc.; and Continental Oil Company, Defendants.

No. CV 82-96-BU-CCL.

United States District Court, D. Montana, Helena Division.

March 23, 1987.

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Charles E. Petaja, Helena, Mont., Jerome J. Cate, Billings, Mont., for plaintiffs.

Gregory O. Morgan, Bozeman, Mont., Urban L. Roth, Poore, Roth & Robinson, P.C., Butte, Mont., and Jerry Ashby, Houston, Tex., for defendants.

OPINION AND ORDER

LOVELL, District Judge.

This action arises out of Conoco, Inc.'s decision to sell as a "package" its properties in the area of Bozeman, Montana, and the subsequent sale to the plaintiffs of a single station within that package.

Plaintiffs (hereinafter also "Taggarts"), the owners and operators of the Four Corners Conoco station near Bozeman, filed suit in 1982 to recover damages from Conoco, Inc., and Continental Oil Company (hereinafter "Conoco"), and from Conoco jobber David S. Rutledge, for alleged federal antitrust violations as well as numerous alleged state law violations.

Federal subject matter jurisdiction is invoked pursuant to sections 1 and 4 of the Sherman Antitrust Act, 15 U.S.C. §§ 1, 4, and section 4 of the Clayton Act, 15 U.S.C. § 15. Venue is properly placed within the District of Montana pursuant to section 12 of the Clayton Act, 15 U.S.C. § 22, and 28 U.S.C. § 1391(b) and (c).

The matter is before the Court on all parties' cross motions for summary judgment.

FACTS¹

In 1970, plaintiffs John and Bettie Taggart left their home in Illinois and traveled to Montana with the intent of starting a new business. In October, the Taggarts became lessee dealers of a Conoco station known as the "East Main Travel Shoppe" in Bozeman, Montana. In addition to Conoco gasoline products, the Taggarts sold retail convenience store items such as food, refreshments, beer, cigarettes, and souvenirs.

Plaintiffs operated the East Main station until the Spring of 1977. On April 28, 1977, they executed a new Conoco Travel Shoppe Franchise Agreement and moved to the "Four Corners Conoco Travel Shoppe," located approximately seven miles west of Bozeman, at the intersection of the highways to Big Sky Ski Resort and Yellowstone National Park.

During this period of time, Conoco's operation was structured so that all Conoco stations in Montana were owned by Conoco (or leased from third parties) and leased to dealers upon execution of franchise agreements. The franchise agreements prohibited dealers from selling any gasoline as Conoco branded gasoline, except gasoline purchased from Conoco. Conoco gasoline was distributed to the dealers through Conoco "commission agents," who operated bulk plants owned or leased by Conoco. Commission agents derived their income by securing the business of customers (including retail stations, farmers, and various commercial accounts) and delivering Conoco products to those customers. Such agents were not salaried Conoco employees.

David Rutledge commenced employment with Conoco in 1968 in Billings, Montana. From October 1, 1976 until September 30, 1977, Rutledge was a Conoco Sales Manager in Houston, Texas. In the summer of 1977, while vacationing in Montana, Rutledge learned that Conoco's Bozeman commission agent had his agency for sale. Following discussions with the agent, Rutledge agreed to purchase the commission agency for $30,000. Effective October 1, 1977, Rutledge terminated his employment with Conoco and became the Bozeman commission agent.

In January, 1978, the Bozeman area Conoco dealers were informed by letter that Conoco had decided to offer its Montana properties for sale in "packages." This represented implementation in Montana and the Rocky Mountain region of Conoco's MAAP program (Marketing At A Profit), under which Conoco had been selling its bulk plants and service stations throughout the United States since 1976. Initially, the MAAP program excluded the Northwestern Division, of which Montana was a part, except for certain properties in Nebraska and the Dakotas.

Implementation of MAAP in Montana took the Taggarts by surprise because Conoco employees had told them in the past that Conoco would never sell its Montana properties. The letter received by the Taggarts in January 1978, was a form letter used by Conoco to explain to its dealers what the MAAP program involved. Essentially, MAAP consisted of the sale to a single person or entity of all Conoco properties in a given area, including both service stations and bulk plants. The purchaser of the entire package would then become a "jobber" for Conoco, operating out of the bulk plant. Commission agencies were eliminated.

Each Conoco dealer ("incumbent") affected by the package sale was given an opportunity to bid on the package. Conoco personnel traveled to Bozeman in mid-January 1978, to explain the procedures to its area dealers. Several Conoco employees visited the Taggarts at their station to inform them of the MAAP process. Although the parties disagree as to the detail in which the process was explained to plaintiffs, it is undisputed that the Taggarts were told that Conoco's asking price for the Bozeman package was $598,000, plus estimated inventory and accounts receivable of $170,000, or a total of $768,000. All dealers were told that if they wanted additional information on the package they were to submit a signed form to Conoco, upon receipt of which Conoco would provide the information. The Taggarts were informed that the Bozeman package would be sold in its entirety to one person or entity, and that unwanted properties could not be deleted from the package.

The Taggarts, interested primarily in keeping their own station, discussed the package sale with other Bozeman Conoco dealers, including David and Janette Rutledge. Rutledge informed the other area dealers that he intended to bid on the package and, if successful, would sell individual stations to the other dealers. During this time, friction developed between the Taggarts and Rutledge. At one point, Rutledge informed the Taggarts that he would not sell or lease their station to them if he purchased the package.

Afraid of losing their station, the Taggarts considered bidding for the Bozeman properties. They discussed the package with Conoco personnel, and told at least one Conoco employee that they intended to bid one dollar over Conoco's asking price. The Taggarts were then advised to attempt to make a mutually agreeable arrangement with Rutledge. Rutledge received similar advice from Conoco.

On April 5, 1978, the Taggarts and Rutledges executed an Option to Purchase Agreement. Under the terms of this agreement, Rutledge offered to sell the Four Corners station to the Taggarts for $89,000 in consideration for the Taggarts' agreement to refrain from bidding on the package. The agreement was made conditional upon acceptance of Rutledge's bid by Conoco.

By letter dated April 14, 1978, Rutledge submitted a bid of $448,235 for the Bozeman package. Conoco rejected the bid as low, and informed Rutledge he could submit a higher bid. Rutledge was further instructed to delete his bid on a vacant lot owned by Conoco which was not part of the package.

Rutledge submitted a revised bid on April 29, 1979, in the amount of $508,000, plus a separate offer of $35,200 for the vacant lot. This bid was accepted. Before closing, Rutledge negotiated a reduction in the purchase price by $29,000, attributable to a potential claim against Rutledge and Conoco asserted by a former station lessee. The purchase price was thus reduced to $514,200. Shortly prior to closing, Rutledge learned that one of the station lessees who planned to purchase his station from Rutledge had been denied $40,000 financing. Without the $40,000, Rutledge would have been unable to proceed to close the deal with Conoco. Conoco thus agreed to retain title to the parcel represented by the $40,000 shortfall — a parking lot adjacent to the station — and had Rutledge execute a promissory note in that amount. Conoco subsequently sold the parking lot to a third party, and released Rutledge from the note.

The Taggarts did not submit a bid on the Bozeman package, nor were they aware (at the time) of the above-referenced changes negotiated by Rutledge.

On October 12, 1978, the Taggarts and Rutledges entered into a written agreement (hereinafter referred to as the Supply Agreement). Under the terms of this agreement, in consideration for the transfer of Rutledge's interest in the Four Corners station to the Taggarts, the Taggarts agree to purchase all gasoline sold from Four Corners exclusively from Rutledge. The Supply Agreement further provides that the gasoline will be purchased at the price charged by Rutledge to other stations in the area, with cash payment to be made within 24 hours of delivery and receipt of invoice. Rutledge agreeds to pay the Taggarts $10.00 monthly pump rental in addition to a rebate of one cent per gallon of gasoline the Taggarts purchase from Rutledge. The agreement carries a term of five years, and gives Rutledge the exclusive right to terminate it upon 30 days' notice and to renew it for additional periods of five years, not to exceed 15 years in aggregate.

Under the Supply Agreement, the Taggarts are given the right to purchase gasoline from other suppliers in the event that Rutledge is unable to meet their demand. The Taggarts are also entitled to a pro rata share of Rutledge's allocation of gasoline from Conoco, and allowed to terminate the agreement if Rutledge fails to provide such pro rata share. Finally, the Supply Agreement gives Rutledge a right of first refusal in the event the Taggarts desire to sell the property. The Supply Agreement, by its terms, was to be recorded in the office of the Gallatin County Clerk and Recorder.

Pursuant to...