Tidmore Oil Co., Inc. v. BP Oil Company/Gulf Products Div., a Div. of BP Oil Co.

• Decision Date: 07 June 1991
• Docket Number: No. 90-7326,90-7326
• Parties: , 1991-2 Trade Cases 69,570 TIDMORE OIL COMPANY, INC., Plaintiff-Appellant v. BP OIL COMPANY/GULF PRODUCTS DIVISION, A DIVISION OF BP OIL COMPANY, Defendant-Appellee.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1384

932 F.2d 1384

60 USLW 2016, 1991-2 Trade Cases 69,570

TIDMORE OIL COMPANY, INC., Plaintiff-Appellant v. BP OIL COMPANY/GULF PRODUCTS DIVISION, A DIVISION OF BP OIL COMPANY, Defendant-Appellee.

No. 90-7326.

United States Court of Appeals Eleventh Circuit.

June 7, 1991.

W. Dennis Summers, Ezra B. Jones, III, Summers, Jones & O'Donnell, P.C., Atlanta, Ga., Joe R. Whatley, Jr., Birmingham, Ala., for plaintiff-appellant.

John E. Goodman, Linda Friedman, Bradley, Arant, Rose & White, Birmingham, Ala., for defendant-appellee.

Appeal from the United States District Court for the Northern District of Alabama.

Before HATCHETT and EDMONDSON, Circuit Judges, and PECKHAM ^*, Senior District Judge.

PECKHAM, Senior District Judge:

Tidmore Oil Company appeals the district court's grant of summary judgment to defendant BP Oil Company. The court granted judgment on Tidmore's first claim (violation of section 1 of the Sherman Act) on the ground that Tidmore had failed to allege the existence of an "agreement" in restraint of trade. The court granted summary judgment on Tidmore's second claim (breach of contract) on the ground that the covenant of good faith and fair dealing, on which Tidmore's claim depended, could not be applied to this contract. We affirm.

I. BACKGROUND

A. Facts

Tidmore Oil Company ("Tidmore") is a wholesaler and retail marketer (known as a "jobber") of Gulf-branded petroleum products. Tidmore distributes gasoline wholesale to numerous locations in nine Alabama counties and retails gasoline directly through a smaller number of outlets in the same area.

BP Oil Company/Gulf Products Division ("BP") is a major refiner and retailer of petroleum products. BP markets its products as a dual distributor through jobbers such as Tidmore and directly through its own company-operated outlets.

In early 1985, BP acquired various properties owned by Gulf Oil Company ("Gulf"), including the right to use and license the Gulf logo and trademark in certain parts of the country. At that time, Tidmore's existing contract with Gulf was re-assigned to BP. Under this contract, BP agreed to supply petroleum products to Tidmore and to permit use of the Gulf brand and logo at approved outlets. Tidmore was also required, by the contract, to obtain BP's permission before using the Gulf brand and logo at any new locations:

PURCHASER will not display or permit the display of any Gulf indicia at any location that has not been previously approved in writing by SELLER for display of Gulf indicia.

In April 1987, BP and Tidmore entered into a new contract, called the "Branded Jobber Agreement", in which BP agreed to continue to supply Tidmore with petroleum products. The Agreement reserved to BP the right to determine the use of the Gulf brand.

8.b. It is a condition of the foregoing license that Seller [BP] must approve each outlet, whether operated by Buyer [Tidmore] or by Buyer's customers, which shall be identified with the Gulf marks and names. Approval will be based on the appearance, location and mode of operation of the outlet. Seller expressly reserves the right to determine the appropriate geographic density of Gulf branded outlets.

This provision differed from that in the original contract, which had left the approval of Gulf outlets entirely in BP's discretion. The 1987 Agreement also provided for the release of all claims that either party might have had or asserted against the other arising out of or in connection with any prior agreements, except as to claims for indebtedness and claims specifically reserved in writing.

In November 1986, while the first agreement was still in effect, BP rejected Tidmore's request to build a Gulf-branded station near the intersection of Highway 280 and Route 119 in the north Shelby County area. BP failed to state any reasons for the denial. When Joe Tidmore asked Ned Barrett (BP's jobber account representative) to justify the rejection, Barrett allegedly responded, "I don't know Joe. I don't make those decisions. I suppose it's too close to Dewberry." Dewberry was the site of a BP-operated Gulf station approximately 2.6 miles away.

In September 1987, BP approved a market plan that detailed the locations of existing and planned BP-operated Gulf stations. Between 1987 and 1988, BP undertook to implement that plan by building three new stations in the north Shelby County area, including a station that was closer to Dewberry than Tidmore's planned station would have been. Concerned that BP was encroaching on its traditional market area, Tidmore requested a meeting with BP representatives. In a series of meetings in February and March 1988, Lance Gremillion, BP's Division Manager of Jobber Sales, Taylor Bassett, BP's General Manager for Jobber Sales, and Joe Tidmore discussed Tidmore's concerns, BP's Market Plan, and possible future sites for Tidmore's Gulf stations. Gremillion indicated that BP would not approve Tidmore's proposed sites and then informed Tidmore that BP would not approve any sites within the area defined as "Metro Birmingham".

B. Procedural History

Based on BP's refusal to approve new Gulf-branded outlets, Tidmore brought this action on December 22, 1988, alleging violations of section 1 of the Sherman Act, 15 U.S.C. Sec. 1; the Petroleum Marketing Practices Act, 15 U.S.C. Sec. 2801 et seq. ("PMPA"); and the parties' Branded Jobbers Agreement.

In its complaint, Tidmore alleged, inter alia, that BP's refusal to authorize use of the Gulf brand imposed nonprice horizontal and vertical restraints in violation of the Sherman Act. Tidmore further alleged that BP's actions constituted a bad faith partial termination of a franchise agreement in violation of the PMPA and a breach of the Branded Jobbers Agreement.

The district court, in separate orders, granted summary judgment for defendant on all three causes of action. The first order embraced the claims under the Sherman Act and the PMPA. ¹ The district court held that Tidmore had failed to satisfy the elements of a section 1 violation because it had alleged no facts to support an inference of concerted action. In the second order, the court granted judgment for defendant on the breach of contract claim based on its conclusion that the covenant of good faith and fair dealing was not applicable to the Branded Jobbers Agreement.

C. Standard of Review

This court reviews the district court's grant of summary judgment de novo. McGahee v. Northern Propane Gas Co., 858 F.2d 1487, 1492-93 (11th Cir.1988), cert. denied, 490 U.S. 1084, 109 S.Ct. 2110, 104 L.Ed.2d 670 (1989). Summary judgment is appropriate only if the pleadings and evidence in the record demonstrate that there is no genuine issue of material fact as to any issue and that the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S.Ct. 2505, 2509-10, 91 L.Ed.2d 202 (1986). Although reasonable inferences to be drawn from the facts must be viewed in the light most favorable to the non-moving party, that party "must present affirmative evidence in order to defeat a properly supported motion for summary judgment" to show that there is a genuine issue for trial. Anderson, 477 U.S. at 257, 106 S.Ct. at 2514; Matsushita Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 587-88, 106 S.Ct. 1348, 1356-57, 89 L.Ed.2d 538 (1986). Summary judgment is proper if, after adequate time for discovery, the non-moving party fails to establish the existence of an element essential to its case and on which that party would bear the burden of proof at trial. Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986). If there is a complete failure of proof on an essential element, there is no longer a genuine issue of material fact. Celotex, 477 U.S. at 323, 106 S.Ct. at 2552.

We also note that the Supreme Court has recently endorsed the use of summary judgment in antitrust cases in order to avoid chilling legitimate competitive behavior. Matsushita, 475 U.S. at 594, 106 S.Ct. at 1360.

II. THE SHERMAN ACT CLAIM

The first count in Tidmore's complaint alleges that the Branded Jobbers Agreement was a contract in restraint of trade in violation of section 1 of the Sherman Act. ² The complaint asserts the existence of both horizontal and vertical restraints. Both claims rely on BP's refusal to authorize new retail sites; specifically, the claims focus on BP's refusal to permit the use of the Gulf sign and the Gulf brand at certain proposed locations.

In reviewing the grant of summary judgment, we will begin by assuming that BP's refusal to authorize new sites limited intrabrand competition in Gulf-branded petroleum products. Section 1, however, does not prohibit every act that has the effect of restraining trade. Its scope is more narrow; the Act prohibits only a "contract, combination ... or conspiracy in restraint of trade." 15 U.S.C. Sec. 1. Despite the different terminology, there is no magic unique to each term. Courts use the words "contract", "combination", and "conspiracy" interchangeably, and sometimes simply refer instead to an "agreement". 6 P. Areeda, Antitrust Law p 1403 (1978). The first inquiry, in any section 1 claim, then, is to locate the agreement that restrains trade.

The classic example of such an agreement is an express conspiracy by competitors to fix prices or allocate territories. United States v. Topco Associates, Inc., 405 U.S. 596, 608, 92 S.Ct. 1126, 1133, 31 L.Ed.2d 515 (1972). An agreement may also be implied by the conduct of the parties. American Tobacco Co. v. United States, 328 U.S. 781, 809, 66 S.Ct. 1125, 1139, 90 L.Ed. 1575 (1946). And, because the Supreme Court has rejected the application of the doctrine of in pari delicto in antitrust actions, an agreement may be challenged even by one of the parties who has acquiesced in the unlawful agreement. Perma Life Mufflers, Inc. v. International Parts Corp., 392 U.S. 134,...