United States v. Blue Chip Stamp Company

• Decision Date: 18 August 1967
• Docket Number: No. 63-1552.,63-1552.
• Citation: 272 F. Supp. 432
• Parties: UNITED STATES of America, Plaintiff, v. BLUE CHIP STAMP COMPANY, Alexander's Markets, Lucky Stores, Inc., Market Basket, Purity Stores, Inc., Ralphs Grocery Company, Safeway Stores, Incorporated, Thriftimart, Inc., Thrifty Drug Stores Co., Inc., and Von's Grocery Co., Defendants. Independent California Service Station Operators, Plaintiffs in the action of Twyman, et al. v. Blue Chip Stamp Company, et al.; Raley's, a corporation; Thrifty Shoppers Scrip Co., Petitioners for Intervention.
• Court: U.S. District Court — Central District of California

272 F. Supp. 432

UNITED STATES of America, Plaintiff, v. BLUE CHIP STAMP COMPANY, Alexander's Markets, Lucky Stores, Inc., Market Basket, Purity Stores, Inc., Ralphs Grocery Company, Safeway Stores, Incorporated, Thriftimart, Inc., Thrifty Drug Stores Co., Inc., and Von's Grocery Co., Defendants.

Independent California Service Station Operators, Plaintiffs in the action of Twyman, et al. v. Blue Chip Stamp Company, et al.; Raley's, a corporation; Thrifty Shoppers Scrip Co., Petitioners for Intervention.

No. 63-1552.

United States District Court C. D. California.

August 18, 1967.

Jack Corinblit, J. J. Brandlin, Los Angeles, Cal., for Raley's, Inc.

David B. Gold, Leon Schiller, San Francisco, Cal., for Thrifty Shoppers Scrip Co.

Howard, Prim, Smith, Rice & Downs, Howard M. Downs, Stuart R. Pollak, A. James Robertson, II, San Francisco, Cal., for Independent California Service Station Operators.

O'Melveny & Myers, William W. Alsup and Allyn O. Kreps, Los Angeles, Cal., for Blue Chip Stamp Co., Von's Grocery Co., Alexander's Markets, Ralphs Grocery Co., Thrifty Drug Stores Co., Inc., Lucky Stores, Inc., and Safeway Stores, Inc.

Donahue, Richards & Gallagher, Joseph A. Woods, Jr., Oakland, Cal., for Lucky Stores, Inc.

Pillsbury, Madison & Sutro, William E. Mussman and David T. Steffen, San Francisco, Cal., for Safeway Stores, Inc.

Thelen, Marrin, Johnson & Bridges, Gordon Johnson and Paul R. Haerle, San Francisco, Cal., for Purity Stores, Inc.

McCutchen, Black, Verleger & Shea, G. Richard Doty, Kenneth Owen, Los Angeles, Cal., for Market Basket.

William J. Currer, Jr., Los Angeles, Cal., for Thriftimart, Inc.

Stanley E. Disney, James M. McGrath, Lawrence W. Somerville, Richard W. Leusebrink, Antitrust Division, Department of Justice, Los Angeles, Cal., for United States of America.

Thomas C. Lynch, Wallace Howland, San Francisco, Cal., for State of California, amici curiae.

Burke, Williams & Sorensen, James T. Bradshaw, Jr., Martin J. Burke, Los Angeles, Cal., for California Grocers Ass'n, amici curiae.

OPINION DENYING MOTIONS TO INTERVENE AND TO VACATE CONSENT DECREE

FERGUSON, District Judge.

On June 5, 1967, the court approved and signed a consent decree in this antitrust action. Subsequent thereto Petitioners for Intervention filed motions which seek—

(a) to intervene as a matter of right under Rule 24(a) of the Federal Rules of Civil Procedure;

(b) to be permitted to intervene under Rule 24(b); and

(c) to vacate the consent decree of June 5, 1967.

At the conclusion of argument on July 31, 1967, the court orally announced its decision, and by minute order denied the motions. This opinion is written in order to permit a studied examination of the court's views.

BACKGROUND

On December 26, 1963, the United States filed its complaint alleging that Blue Chip Stamp Company, Thrifty Drug Stores Co., Inc. (the largest pharmacy chain in California) and eight grocery chains (whose 1962 sales constituted 30 percent of all sales of grocery stores in California) had since 1955 engaged in a conspiracy in restraint of trade, and had monopolized the trading stamp business in California, in violation of Sections 1 and 2 of the Sherman Act (15 U.S.C. §§ 1 and 2). The complaint sought an injunction against continuation of the activities charged and asked that the defendant retailers be enjoined in the future from using Blue Chip stamps.

After the case was filed, the Government and the defendants engaged in detailed negotiations to settle the litigation by consent decree. These negotiations extended over two years in time, and the Government afforded an opportunity to all defendants and to all other parties expressing an interest in the case to be heard. As a result of these negotiations, three separate consent decrees were proposed, each of which was lodged with this court. In order that interested parties might have time to study each proposed decree and to make known their views with respect to it, there was annexed to each decree a stipulation providing that all signatory parties consented to entry of the given decree after 30 days unless the Government withdrew its consent during the 30-day period.

On July 22, 1966, the first proposed decree was lodged with the consent of all parties except defendants Market Basket and Thriftimart. The two non-consenting defendants, as well as the State of California, Certified Grocers Association and California Grocers Association (all non-parties), raised objections to the decree before the 30-day period had expired. The Government then withdrew its consent and the decree was withdrawn.

Following further negotiations, a second decree was drafted and lodged with the court on October 28, 1966. The annexed stipulation to the decree was signed by the Government and all defendants except Market Basket and Thriftimart. The Government and the consenting defendants filed briefs in support of the decree. The two non-consenting defendants, and the California Grocers Association, Certified Grocers Association, S & H Stamp Company and the State of California filed briefs in opposition to entry of the decree. On December 13, 14 and 15, 1966, this court held hearings, and all parties favoring or opposing the decree were given opportunity to be heard. At the conclusion of the hearings, the court refused to sign the proposed decree and outlined certain requirements it believed essential to any decree settling the case.

On April 28, 1967, a third decree was lodged, consented to by all defendants. The court ordered notice should be given to all parties previously appearing in the case, including parties amici curiae. Argument was set for June 5, 1967. Such notice was given. Briefs in favor of this third proposed decree were filed by the Government, all defendants and also by the State of California, the California Grocers Association and Certified Grocers Association, who had been active in opposing the earlier decrees. Briefs amici curiae in opposition to the proposed decree were filed by the petitioners herein, by S & H Stamp Company and by Gold Bond Stamp Company. After a study of the briefs and consideration of the oral arguments, the court signed and entered the proposed decree on June 5, 1967.

DESCRIPTION OF PETITIONERS

Independent California Service Station Operators are plaintiffs in the case of Twyman, et al v. Blue Chip Stamp Co., et al., Civil No. 66-1522-F, now pending before this court. The complaint therein alleges substantially the same violations as those alleged in the Government complaint (violation of Sections 1 and 2 of the Sherman Act). Likewise, the Government complaint is incorporated in the petition to intervene. The service station operators suing in Twyman and seeking to intervene here claim that by virtue of the Blue Chip trading stamp monopoly, a customer demand has been created for trading stamps, so that service station operators must give trading stamps. It is alleged that by being thus forced to give trading stamps and by being forced to obtain said trading stamps from a monopoly, the service station operators are damaged. Their complaint seeks threefold damages under the provisions of 15 U.S.C. § 15.

Thrifty Shoppers Scrip Co. is a stamp company which competes with Blue Chip. It has filed an action in this court, Thrifty Shoppers Scrip Co. v. Blue Chip Stamp Co., Civil No. 67-596-F, against the same defendants as are here, alleging injury in its efforts to compete in the trading stamp business in California due to the restraints of trade and the monopolization by the defendants. Thrifty seeks threefold damages.

Raley's, Inc., a retail grocery chain, also is the plaintiff in a civil action now pending before this court. A 2% stockholder of Blue Chip, Raley's is suing on behalf of said company and other stockholders. Raley's, et al. v. Alexander's Markets, et al., Civil No. 64-660-F. Named as defendants are Blue Chip, the other defendants in the Government suit, and certain individual shareholders of Blue Chip Stamp Company. Raley's complaint alleges violation of Sections 1 and 2 of the Sherman Act and prays for money damages, for a decree requiring the defendants to sell their stock in Blue Chip Stamp Company and for an injunction prohibiting the defendant shareholders from participating in future profits of Blue Chip. In 1966 Raley's commenced using Gold Bond stamps. From 1959 to 1966 it had used its own stamps; prior to 1959 it had used Blue Chip.

RULE 24

The applicable rule is Rule 24, Federal Rules of Civil Procedure:

Rule 24. Intervention.

"(a) INTERVENTION OF RIGHT. Upon timely application anyone shall be permitted to intervene in an action: (1) when a statute of the United States confers an unconditional right to intervene; or (2) when the applicant claims an interest relating to the property or transaction which is the subject of the action and he is so situated that the disposition of the action may as a practical matter impair or impede his ability to protect that interest, unless the applicant's interest is adequately represented by existing parties."

"(b) PERMISSIVE INTERVENTION. Upon timely application anyone may be permitted to intervene in an action: (1) when a statute of the United States confers a conditional right to intervene; or (2) when an applicant's claim or defense and the main action have a question of law or fact in common. When a party to an action relies for ground of claim or defense upon any statute or executive order administered by a federal or state governmental officer or agency or upon any regulation, order, requirement, or agreement issued or made pursuant to the statute or executive order, the officer or agency upon timely application may be permitted to intervene in the action. In exercising its discretion the court shall consider whether the intervention will unduly delay or prejudice the adjudication of the rights of the original parties."

QUESTIONS PRESENTED

The questions presented are whether petiti...