United States v. Sharp, 84-0701-CV-W-9.

Decision Date18 June 1986
Docket NumberNo. 84-0701-CV-W-9.,84-0701-CV-W-9.
Citation645 F. Supp. 337
PartiesUNITED STATES of America, Plaintiff, v. Mark SHARP d/b/a Sharp Grocery, Loethen Oil Company Inc., Kerr-McGee Corporation and Kerr-McGee Refining Corporation, Defendants.
CourtU.S. District Court — Western District of Missouri

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Vernon A. Poschel, Asst. U.S. Atty., Kansas City, Mo., F. Henry Habicht, II, Asst. Atty. Gen., Land and Natural Resources Div., U.S. Dept. of Justice, Brian G. Donohue, Atty., Environmental Enforcement Section, U.S. Dept. of Justice, Washington, D.C., Marcia Ginley, Atty. U.S.E. P.A., Denver, Colo., for plaintiff.

Robert L. Hyder, Jefferson City, for Loethen Oil Co., Inc.

Karl F. Schmidt, Stanley A. Reigel, Morrison, Hecker, Curtis, Kuder & Parrish, Kansas City, Mo., for Kerr McGee & Kerr McGee Refining; Thomas R. Cochran, Senior Counsel, Kerr-McGee Chemical Corp., Oklahoma City, Okl., of counsel.

MEMORANDUM ORDER

BARTLETT, District Judge.

Plaintiff seeks to recover civil penalties from defendants Mark Sharp d/b/a Sharp Grocery, Loethen Oil Company, Inc., Kerr-McGee Corporation and Kerr-McGee Refining Corporation for a violation of the unleaded gasoline regulations, 40 C.F.R. § 80.1, et seq., adopted pursuant to § 211(c) of the Clean Air Act, 42 U.S.C. § 7545(c). Plaintiff seeks a civil penalty of $10,000 for each day the violation continued pursuant to § 211(d) of the Clean Air Act, 42 U.S.C. § 7545(d), and 40 C.F.R. § 80.5.

On June 11, 1986, a consent judgment was entered against defendants Mark Sharp d/b/a Sharp Grocery and Loethen Oil Company.

The Violation

Title 40 C.F.R. § 80.22(a) prohibits any retailer from selling or offering for sale gasoline represented to be unleaded unless the gasoline meets the requirements of § 80.2(g). "Unleaded gasoline" is defined in § 80.2(g) as "gasoline which is produced without the use of any lead additive and which contains not more than 0.05 gram of lead per gallon and not more than 0.005 gram of phosphorus per gallon." A "retailer" is defined in § 80.2(k) as "any person who owns, leases, operates, controls, or supervises a retail outlet."

On April 27, 1981, Mark Sharp d/b/a Sharp Grocery, Highway 7, Pleasant Hill, Missouri (hereafter Sharp), was a "retailer" as defined in § 80.2(k). On April 27, 1981, inspectors employed by the Environmental Protection Agency (EPA) sampled gasoline from the two gasoline pumps at Sharp marked "unleaded." Analysis revealed that the gasoline samples taken from both pumps contained .18 gram of lead per gallon of gasoline. The unleaded gasoline sampled by the EPA on April 27, 1981, was offered for sale by Sharp. Therefore, on April 27, 1981, Sharp offered for sale gasoline represented to be unleaded containing more than .05 gram of lead per gallon in violation of § 80.22(a).

Duration of Violation

Prior to the inspection by EPA on April 27, 1981, the last gasoline delivery to Sharp had been a delivery of leaded gasoline on April 21, 1981. No delivery of gasoline, either leaded or unleaded, was made to Sharp from April 21, 1981, to May 6, 1981. Each day from April 21, 1981, to May 6, 1981, gasoline represented to be unleaded was offered for sale at Sharp. Therefore, from April 21, 1981, to May 6, 1981, Sharp offered for sale gasoline represented to be unleaded containing more than .05 gram of lead per gallon in violation of § 80.22(a).

Defendants' Responsibility for the Violation

Title 40 C.F.R. § 80.23(a)(1) provides in part as follows:

Where the corporate, trade, or brand name of a gasoline refiner or any of its marketing subsidiaries appears on the pump stand or is displayed at the retail outlet or wholesale purchaser-consumer facility from which the gasoline was sold, dispensed, or offered for sale, ... such gasoline refiner shall be deemed in violation of § 80.22(a) .

A "refiner" is defined in § 80.2(i) as "any person who owns, leases, operates, controls, or supervises a refinery."

From April 21, 1981, to May 6, 1981, defendants Kerr-McGee Corporation and Kerr-McGee Refining Corporation were "refiners". (Hereafter the defendants will be referred to as "Kerr-McGee.")

A "retail outlet" is defined in § 80.2(j) as "any establishment at which gasoline is sold or offered for sale for use in motor vehicles." Sharp was a retail outlet from April 21, 1981, to May 6, 1981.

Loethen Oil Company was the owner of the pumps and storage tanks at Sharp and the distributor supplying gasoline to Sharp. Donald Loethen, treasurer of Loethen Oil Company, testified that a Kerr-McGee sign was at Sharp and that the pumps were marked with the Kerr-McGee logo. Loethen testified that the Kerr-McGee identification was at Sharp "continuously" from 1974 to November 9, 1984. Also, EPA inspector Kellerstrass testified credibly that on April 27, 1981, Kerr-McGee identification was on display at Sharp. Therefore, from April 2, 1981, to May 6, 1981, a Kerr-McGee "corporate, trade or brand name" was displayed at Sharp.

The conclusion that Kerr-McGee signs were displayed at Sharp is entirely consistent with the agreements between Kerr-McGee and Loethen Oil Company and between Loethen and Sharp. Pursuant to these agreements, Sharp should have been displaying appropriate signs and other advertising media indicating that Kerr-McGee products were being sold.

Mark Sharp testified that he was not certain the "Kerr-McGee" sign was hanging on April 27, 1981. Sharp's inability to remember whether the sign was there on any particular day is on the one hand not surprising in view of the time that has elapsed and on the other hand understandable in view of his self-interest at the time his testimony was obtained. Menetta Belcher, Sharp's employee on duty on April 27, 1981, could not say for sure that the sign was displayed on April 27, 1981, because it blew down at one time. She conceded that she had a poor memory and was unable to correlate convincingly her recollection that the sign had blown down with any specific date. Therefore, Kerr-McGee is liable for the violation of § 80.22(a) unless Kerr-McGee can demonstrate one of the affirmative defenses in § 80.23(b)(2).

Affirmative Defenses

An essential element of any of the affirmative defenses provided in § 80.23(b)(2) is that the violation was not caused by the refiner or its employees or agents. 40 C.F.R. § 80.23(b)(2)(i). Here Kerr-McGee has established that the unleaded gasoline delivered by it to Williams Pipe Line Company had a substantially lower lead content that .05 grams of lead per gallon. Similarly, Kerr-McGee has established that Williams Pipe Line Company would not accept unleaded gasoline from any other refiner with a lead content greater than .01 gram of lead per gallon. Also, Williams would not release any unleaded gasoline from its pipeline system to a wholesaler or distributor if the lead content exceeded .05 gram of lead per gallon. Therefore, even though Kerr-McGee's unleaded gasoline had been commingled by Williams with unleaded gasoline from other refiners when Loethen took possession of the gasoline in question from the Williams terminal in Kansas City, Kansas, it had a lead content under .05 gram of lead per gallon. The contamination occurred at an unknown time and for unknown reason after Loethen took delivery from Williams. Neither Kerr-McGee nor any of its agents or employees caused the violation.

Having satisfied § 80.23(b)(2)(i), Kerr-McGee then relies on two of the affirmative defenses provided in § 80.23(b)(2). First, Kerr-McGee argues that it should escape liability because the violation was caused by an act in violation of law. Kerr-McGee asserts that when Sharp offered for sale non-Kerr-McGee gasoline under the Kerr-McGee brand or logo, Sharp violated both the Trade Mark Act of 1946, 15 U.S.C. § 1051, et seq. (commonly referred to as the Lanham Trade-Mark Act) and Missouri's Merchandising Practices Act, § 407.020 R.S.Mo. Kerr-McGee has failed to demonstrate how the Trademark Act of 1946 was violated by Sharp's selling non-Kerr-McGee gasoline under the Kerr-McGee brand or logo. Title 15 U.S.C. § 1114(1) provides that a violation occurs only "without the consent of the registrant...." Kerr-McGee knew that its gasoline lost its identity when commingled by Williams Pipe Line and knew that Loethen bought gasoline at Williams from the refiner offering the best terms.

Furthermore, Kerr-McGee has not established that Missouri's Merchandising Practices Act, § 407.020 R.S.Mo., was violated by Sharp selling non-Kerr-McGee gasoline even though Sharp represented itself to be a Kerr-McGee station. However, even if there was a violation of § 407.020, Kerr-McGee knew the violation was occurring. Therefore, the violation of § 407.020 is not the type of law violation contemplated by the regulations that would release a refiner from liability for the violation of § 80.22(a).

Finally, Kerr-McGee has not established how the violation of § 80.22(a) "was caused" by the alleged violation of the Trademark Act of 1946 and Missouri's Merchandising Pratices Act as is required by § 80.23(b)(2)(ii). Specifically, Kerr-McGee has not demonstrated by reasonably specific showings that the violation was caused by some other person violating the law because misrepresenting the refiner of the gasoline being sold did not have anything to do with the violation of § 80.23(a). 40 C.F.R. § 80.23(b)(2)(viii).

For these reasons, Kerr-McGee has failed to establish the affirmative defense provided in § 80.23(b)(2)(ii).

Next Kerr-McGee asserts that it should escape liability because:

The violation was caused by the action of a reseller or a retailer supplied by such reseller, in violation of a contractual undertaking imposed by the refiner on such reseller designed to prevent such action, and despite reasonable efforts by the refiner (such as periodic sampling) to insure compliance with such contractual obligation.

40 C.F.R. § 80.23(b)(2)(iii).

The elements of this defense (in addition to...

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