U.S. v. Hayter Oil Co., Inc. of Greeneville, Tenn.

• Citation: 51 F.3d 1265
• Decision Date: 17 April 1995
• Docket Number: 94-5712 and 94-5713,Nos. 94-5670,s. 94-5670
• Parties: 1995-1 Trade Cases P 70,956 UNITED STATES of America, Plaintiff-Appellant, Cross-Appellee, v. HAYTER OIL COMPANY, INC. OF GREENEVILLE, TENNESSEE, d/b/a Marsh Petroleum Company, and Sonny Wayne Marsh, Defendants-Appellees, Cross-Appellants.
• Court: United States Courts of Appeals. United States Court of Appeals (6th Circuit)

Page 1265

51 F.3d 1265

1995-1 Trade Cases P 70,956

UNITED STATES of America, Plaintiff-Appellant, Cross-Appellee, v. HAYTER OIL COMPANY, INC. OF GREENEVILLE, TENNESSEE, d/b/a Marsh Petroleum Company, and Sonny Wayne Marsh Defendants-Appellees, Cross-Appellants.

Nos. 94-5670, 94-5712 and 94-5713.

United States Court of Appeals Sixth Circuit.

Argued March 23, 1995.

Decided April 17, 1995.

John J. Powers, III, John P. Fonte (argued and briefed), U.S. Dept. of Justice, Antitrust Div., Washington, DC, William D. Dillon, William G. Traynor, U.S. Dept. of Justice, Antitrust Div., Atlanta, GA, for U.S.

Frank A. Johnstone (argued and briefed), Wilson, Worley, Gamble & Ward, Kingsport, TN, Roger W. Dickson, Miller & Martin, Chattanooga, TN, E.C. Heininger (briefed), Greeneville, TN, for Hayter Oil Co., Inc. of Greeneville, Tenn., dba Marsh Petroleum Co.

Frank A. Johnstone, Wilson, Worley, Gamble & Ward, Kingsport, TN, John T. Milburn, Rogers, Rogers, Laughlin, Nunnally & Hood, E.C. Heininger, Greeneville, TN, for Sonny Wayne Marsh.

Before: MILBURN and NORRIS, Circuit Judges; MILES, ^* District Judge.

MILBURN, Circuit Judge.

In this case of first impression, the United States of America appeals the sentences imposed on defendant Hayter Oil Co., Inc. and defendant Sonny Wayne Marsh following their jury convictions for conspiracy to fix gasoline prices in violation of the Sherman Act, 15 U.S.C. Sec. 1. Defendants cross-appeal the underlying jury convictions. On appeal, the issues are (1) whether the district court erroneously interpreted the Antitrust Guideline, United States Sentencing Guideline ("U.S.S.G.") Sec. 2R1.1, and (2) whether the evidence was sufficient to prove that defendants were participants in a conspiracy that existed within the five-year statute of limitations. For the reasons that follow, we affirm in part and reverse in part.

I.

A.

This case arises out of a conspiracy to control retail gasoline prices in the Greeneville, Tennessee, area between 1984 and 1989 in violation of the Sherman Act. At the time, there were over 50 retail gasoline outlets and at least ten gasoline distributors in the Greeneville market. However, the market was controlled during the period of the conspiracy by a small group of dealers or "jobbers" who purchased gasoline at the pipeline terminal in Knoxville, Tennessee, transported it to Greeneville, and sold it through their own retail outlets or to owners of other retail outlets. Among those involved in the conspiracy were defendant Hayter Oil Company, Inc. of Greeneville, Tennessee, doing business as Marsh Petroleum Company ("Hayter Oil"), and its president, defendant Sonny Wayne Marsh.

The retail price-fixing conspiracy began after Robert Leonard, a Johnson City, Tennessee-based dealer, opened a new gas station in Greeneville in May 1984. Leonard decided that when he opened his new location he would meet the lowest price in town, which at the time was at a gas station owned and operated by Pilot Oil Company ("Pilot"). As a result, a price war erupted that drove retail gasoline prices down. In June 1984, the primary competitors in the Greeneville market held a meeting at a truck stop to discuss the low prices. At the meeting, the dealers, including defendant Marsh, discussed how they could raise the retail gasoline prices and agreed to support each other with a price increase. Because Pilot was a large corporation with national operations, the dealers did not believe they could approach it with their price-fixing scheme. They viewed Pilot as a potential problem because if Pilot did not raise its pump prices in response to their price increase, the gas stations located near Pilot would be pressured to meet Pilot's lower prices. Nevertheless, the dealers chose to ignore Pilot and agreed to raise their pump prices by three to four cents per gallon. When the dealers left the meeting, as Leonard explained, "we had the deal to fix the prices." J.A. 223.

Although gasoline prices initially went up as agreed following the meeting, they gradually decreased. As a result, the dealers had several subsequent meetings to shore up prices that had eroded as a result of dealers cheating or reducing their prices in response to Pilot's lower prices. A few months after the meeting at the truck stop, the dealers met at the home of John Thomas, who owned 30% of Hayter Oil (which at the time was doing business as Marsh & Thomas Petroleum) until he sold his share to defendant Marsh in September 1987, which made defendant Marsh the sole owner. At this meeting, all the dealers "agreed that the price was too cheap," and "it was understood that the price was going to increase the first part of the week." J.A. 182-83. The prices moved up on Monday or Tuesday of the following week. About a month later, the dealers met again at Thomas' home and agreed to make another effort to increase the prices. There was another meeting at a cafeteria, at which the dealers did not discuss any details about the gasoline prices because they were in an open room with too many other people walking in and out of the room.

In 1985, the dealers stopped having group meetings and began using telephone calls and one-on-one meetings to coordinate price increases. The dealers continued with their price-fixing activity "all of the way through the biggest part of '88." J.A. 255. Once grand jury subpoenas relating to a price-fixing conspiracy in Johnson City were issued on January 4, 1989, the telephone calls and meetings about price fixing in Greeneville stopped. According to Leonard, no one in east Tennessee continued to fix the gasoline prices after that date. During this period, the typical price increase in the Greeneville market was between two and seven cents per gallon and would last anywhere from a day or two to several weeks before starting to drop.

Either defendant Marsh or Thomas attended all the group meetings that were held during 1984. Leonard testified that between 1984 and 1988, he had several one-on-one meetings and had frequent telephone conversations with defendant Marsh to discuss gasoline prices. Similarly, between 1984 and 1988, Warren Broyles talked with either defendant Marsh or Thomas at least 30 to 35 times to discuss and agree on retail gasoline prices. Defendant Marsh also talked to another dealer, J. Fred Meyers, about gasoline prices on numerous occasions. At times, Marsh would drop the prices at two small gas stations he owned in Jonesboro, Tennessee, in order "to get [Leonard's] attention to get the Greeneville market to go back up," because Leonard also owned a large volume gas station in Jonesboro. J.A. 269-70.

B.

On July 21, 1993, a federal grand jury returned a one-count indictment against defendant Hayter Oil Company, Inc. of Greeneville, Tennessee, doing business as Marsh Petroleum Company, and its president, defendant Sonny Wayne Marsh. The indictment charged that beginning as early as 1984 and continuing through the end of 1988, defendants engaged in a conspiracy to fix, raise, and maintain the retail prices of gasoline sold in the Greeneville, Tennessee, area in violation of the Sherman Act, 15 U.S.C. Sec. 1.

This case was tried before a jury, which convicted both defendants. After denying defendants' renewed motions for a judgment of acquittal or, in the alternative, a new trial, the district court sentenced both defendants pursuant to the Antitrust Guideline, U.S.S.G. Sec. 2R1.1. ¹ The district court began by instructing counsel that it intended to impose sentences consistent with the fine it had imposed in an earlier case against Appalachian Oil Company for conspiring to fix retail gasoline prices in the Johnson City market. See United States v. Appalachian Oil Co., No. 2:91-CR-78, 1993 WL 773572 (E.D. Tenn. Nov. 18, 1993). In Appalachian Oil, the district court based the fine on sales made only during periods when the conspiracy was generally successful in raising or maintaining prices. Id. slip op. at 4-5. Accordingly, defendant Hayter Oil's counsel argued that because the "conspiracy to set prices was relatively ineffective, was sporadic, [and] was not honored at times by all those who were supposed to be in the conspiracy," the conspiracy was effective only 40 weeks, "at the outside," out of the entire conspiracy period. J.A. 297, 298. The government responded that under the Antitrust Guideline, the volume of commerce is the defendant's total sales of the commodity at issue during the duration of the conspiracy. The government also submitted an affidavit of Leonard stating that "there was never a substantial period of time when retail prices of gasoline sold at stations in the area were not affected by the agreement between jobbers." Affidavit of Robert Leonard (quoted in Appellant's Brief at 9).

In the district court's memorandum opinion, it recognized that evidence on the effectiveness of a conspiracy is irrelevant in determining guilt but stated that it is required at sentencing. Thus, it concluded that the "volume of commerce" referred to in the Antitrust Guideline consists only of sales made during those periods that the government demonstrated that the conspiracy was "in effect." Presumably, because the district court intended to impose fines consistent with those in Appalachian Oil, it deemed a conspiracy to be in effect for sentencing purposes only when it was successful in raising or maintaining prices.

The district court found that the price-fixing activities were in effect only 40 weeks over the entire conspiracy period of 234 weeks, which is 17.094% of the time. Thus, the district court concluded that the affected volume of commerce for purposes of the Antitrust Guideline was $723,398, which is 17% of the $4.231 million of gasoline sold by defendant Hayter Oil during the conspiracy period. The fines the district court imposed were consistent with this volume of commerce calculation--$50,000 for defendant Marsh and $289,359 for defendant Hayter Oil. ²...