Twin Ports Oil Co. v. Pure Oil Co., 11902.

• Decision Date: 20 May 1941
• Docket Number: No. 11902.,11902.
• Citation: 119 F.2d 747
• Parties: TWIN PORTS OIL CO. v. PURE OIL CO.
• Court: U.S. Court of Appeals — Eighth Circuit

119 F.2d 747 (1941)

TWIN PORTS OIL CO. v. PURE OIL CO.

No. 11902.

Circuit Court of Appeals, Eighth Circuit.

May 20, 1941.

Ernest A. Michel, of Minneapolis, Minn. (Tom Davis, Carl L. Yaeger, and John P. Devaney, all of Minneapolis, Minn., George H. Lommen, of Eveleth, Minn., Fred Ossanna, of Minneapolis, Minn., and Walsh & Walsh, of St. Paul, Minn., on the brief), for appellant.

David T. Searls, of Chicago, Ill. (S. A. Mitchell, of Chicago, Ill., R. D. Shewmaker, of St. Louis, Mo., L. E. Isaksen, of Madison, Wis., R. L. Wagner, of Chicago, Ill., Harry S. Stearns, of St. Paul, Minn., Vinson, Elkins, Weems & Francis, of Houston, Tex., Thompson, Mitchell, Thompson & Young, of St. Louis, Mo., Thomas, Orr & Isaksen, of Madison, Wis., and Stearns & Stearns, of St. Paul, Minn., on the brief), for appellee.

Before WOODROUGH, JOHNSEN, and VAN VALKENBURGH, Circuit Judges.

VAN VALKENBURGH, Circuit Judge.

This is an action to recover treble damages by the plaintiff, appellant here, an oil jobber in Duluth, Minnesota, for losses alleged to have been sustained by it due to violation, by appellee and other major oil companies, of the Sherman Anti-Trust Law. Act July 2, 1890, 26 Stat. 209, 15 U.S.C.A. §§ 1-7, 15 note. The case is based upon the government prosecution and conviction of various oil companies, including appellee, upon the charge of a price fixing conspiracy consisting of a concerted buying program for the purchase of gasoline from independent refiners in the East Texas and Mid-Continent fields, for the purpose of increasing the tank-car spot price. United States v. Socony-Vacuum Oil Company, Inc., et al., 310 U.S. 150, 60 S.Ct. 811, 84 L.Ed. 1129. It is alleged in the indictment that this, in turn, had the effect of increasing the retail price of gasoline in the Mid-Western Area.

In its complaint appellant alleged that for some months prior to April 1, 1933, it was a jobber engaged in the selling of gasoline, oils, and allied products in the City of Duluth, Minnesota, and vicinity; and had for more than ten years, as such jobber, dealt in its business with appellee; that by reason of the confidence engendered by such relationship, it had taken steps to increase and expand its business and holdings; and on said first day of April, 1933, had entered into a contract and agreement with appellee whereby appellant was allotted certain fixed territory as to the distribution and sale of certain products, gasoline, etc., which it agreed to purchase from the Pure Oil Company. That under the terms of said contract the margin which the appellant was to receive for the handling and sale of gasoline for said Pure Oil Company was approximately 6.83 cents per gallon, based upon the agreements and stipulations in said contract contained.

In its first amended complaint appellant defined this margin as follows:

"That as used in this complaint, and in all Exhibits annexed hereto, the term `margin' did and does mean the difference between the retail price of gasoline fixed by the defendants and the tank car price fixed by the defendants for gasoline, free on board railway tank cars at Tulsa, Oklahoma, plus all rail freight from Tulsa, Oklahoma, regardless of point of origin, to destination, plus State and Federal gasoline taxes."

In its brief counsel for appellant concede that the word "margin" was thus defined in its original complaint, but state that it was not defined in its amended amended complaint, and insist that the case was not tried on the "margin theory". Instead, it urges that the case was tried upon the "illegal exacting theory" stated in paragraph 16 of the amended amended complaint, wherein it was alleged that the defendant: "did artificially raise and fix said tank car prices of gasoline in said spot market and did artificially raise and fix said spot market tank car prices of gasoline and did and have at all times herein mentioned maintained said prices at artificially high and non-competitive levels and at levels agreed upon among defendants and that defendants did intentionally increase and fix the tank car prices of gasoline contracted to be sold and which were sold in interstate commerce to plaintiff and other jobbers in said Mid-Western Area."

It is to be observed that nothing in this last quotation, nor claimed in the amended amended complaint, withdraws or contradicts the definition of "margin" contained in the original complaint, nor is any effect of the conspiracy stated further than the artificial raising of tank car prices of gasoline in the spot market, which mean the prices of gasolines free on board railway tank cars, — that is, the prices which appellant and those similarly situated would have to pay. Nothing in this quotation contains reference to any necessary effect upon the selling price by appellant, nor upon its margin as a jobber.

To determine the theory upon which the case was tried we have recourse to the testimony and evidence contained in the record. In the stipulation, made August 22, 1940, to limit the issues to be heard when the case should come on regularly for trial, the definition of "margins" was again expressly stated thus:

"The term `margins', as used in this stipulation, means the difference between the retail price of gasoline, less taxes, inspection fee and commission paid to reseller and the basic tank car price paid by plaintiff plus freight."

October 8, 1940, plaintiff sought further to amend its complaint after the stipulation previously had been signed and after that stipulation had been presented to the court at a pre-trial hearing. The following colloquy took place between court and counsel:

"Mr. Searls (for defendant): Isn't it true that you claim your injury relates to margins in this case?

"Mr. Michel (for plaintiff): Yes, it relates to margins.

"Mr. Searls: And you have defined `margin' in the stipulation?

"Mr. Michel: Yes.

"Mr. Searls: And that is a definition that you put into the stipulation?

"Mr. Michel: Yes, and the margin would have been different but for the conspiracy.

"Mr. Searls: In other words you claim your injury relates to margin as defined in the stipulation?

"Mr. Michel: Yes. We want to show — we want this broad enough — that if it had not been for the conspiracy our margin would have been greater, and we think under the very liberal interpretation of the new rules, we should be permitted to do this.

"The Court: Well, how are you going to be prejudiced by the amendment as offered, Mr. Searls?

"Mr. Searls: If the Court please, I do not raise any question about notice. I was given notice two weeks ago. The only question I raise is that it does not seem to me it is proper for the plaintiff to amend his complaint after signing this stipulation.

"The Court: Of course I think, Mr. Michel, that according to the stipulation, you have indicated that your damages are solely to be found in the lessening of your margins, and the consequent injury upon your business.

"Mr. Michel: Yes, and we want to show how they were lessened.

"The Court: Then you do not depart from that theory of damages? In other words, that the immediate result of this conspiracy was a lessening of your margins?

"Mr. Michel: Yes, that is our theory.

"The Court: But you contend that even though there was a reflected increase in the retailers' price, that the stabilization of price and the fixing of price in some way affected your margins — is that right?

"Mr. Michel: Yes, that is our point.

"The Court: And you are following along the same theory with reference to damage, in that it refers exclusively to the lessening of margins?

"Mr. Michel: Yes.

"The Court: Well, if that is his position, I think I will allow the amendment."

It is conceded that the price of gasoline at the service stations, such as those operated by appellant, was determined and fixed by the Standard Oil Company. Neither party to this action had any voice in this determination. The margin of the jobber was the difference between this retail price, less taxes, inspection fee and commission, and the basic tank car price paid by appellant, plus freight.

Following in the record is the deposition testimony of Mr. Axel E. Friedman, one of the organizers and one of the principal stockholders of the appellant corporation:

"In the contract that the Twin Ports Oil Company had with The Pure Oil Company there is a price provision which has a guaranteed margin. It is a protection to the purchaser. It is a guarantee of a certain gross profit regardless of what happens to the price. It was given by The Pure Oil Company to Twin Ports Oil Company and guaranteed that Twin Ports Oil Company would have a margin of profit of 5¢ below the service station price as fixed by the Standard Oil Company of Indiana at Duluth. Pure guaranteed that they would so bill us that we would always have at least a margin of profit of 5¢ per gallon. This was written in the contract. I do not know of any time when Pure failed to give us 5¢ margin. The Pure Oil Company increased the amount of that guaranteed margin. I do not know that there is any provision in the contract for giving us a greater margin than 5¢.

"Q. Now, after this contract was executed you allowed your dealers a larger margin, didn't you? A. When the larger margin was put in effect, yes.

"Q. When you did that then the Pure Oil Company increased the amount of their guaranteed margin to you to five and a half cents? A. They did.

"Q. That was a half a cent more than the five cents provided for in the contract? A. Yes.

"Q. Now, let us see what that means. You have stated that the Standard Oil Company determined your service station price. A. They did.

"Q. If you had a guaranteed margin below the price posted by the Standard Oil Company, that gave you the assurance of getting that amount of profit, didn't it? A. That is true.

"Q. The contract went on to provide, `If the price of Purol-Pep Gasoline determined as above should...