United States v. Standard Oil Company of California

• Decision Date: 15 July 1971
• Docket Number: Civ. No. 52334.
• Citation: 330 F. Supp. 371
• Parties: UNITED STATES of America, Plaintiff, v. STANDARD OIL COMPANY OF CALIFORNIA, Defendant.
• Court: U.S. District Court — Northern District of California

330 F. Supp. 371

UNITED STATES of America, Plaintiff, v. STANDARD OIL COMPANY OF CALIFORNIA, Defendant.

Civ. No. 52334.

United States District Court, N. D. California.

July 15, 1971.

Bernard M. Hollander, Donald H. Mullins, William A. Cerillo, U. S. Dept. of Justice, Washington, D. C., Anthony E. Desmond, U. S. Dept. of Justice, San Francisco, Cal., for plaintiff.

William E. Nussman, Thomas J. Klitgaard, Charles A. Storke, Pillsbury, Madison & Sutro, San Francisco, Cal., for defendant.

OPINION AND ORDER

CONTI, District Judge.

This is a civil action brought by the Government charging the defendant, Standard Oil Company of California, with violations of Section 3 of the Sherman Act (15 U.S.C. § 3). The complaint alleges that the defendant has violated said Act by combining to unreasonably restrain and monopolize the distribution and sale of petroleum products in the Territory of American Samoa, and by entering into contracts in unreasonable restraint of that trade. Defendant has moved to dismiss the action for lack of jurisdiction.

Section 3 of the Sherman Act provides in pertinent part:

"Every contract, combination * * * or conspiracy, in restraint of trade or commerce in any Territory of the United States or of the District of Columbia, or in restraint of trade or commerce between any such Territory and another, or between any such Territory or Territories and any State or States or the District of Columbia, or with foreign nations, or between the District of Columbia and any State or States or foreign nations, is declared illegal."

It is apparent that American Samoa is not the "District of Columbia", nor a "State", nor a "foreign nation". Therefore, if the Sherman Act is to extend to Samoa, then such possession must fall within the category of "Territories".

At the time of the Sherman Act (1890), the United States had no insular possessions and Congress could not, therefore, have had Samoa in mind. But this is not determinative so long as the word "territory" as used in the Sherman Act can properly be applied to American Samoa. The issue here is basically the same as was presented in Puerto Rico v. Shell Co., 302 U.S. 253, 58 S.Ct. 167, 82 L.Ed. 235 (1937), wherein the Court stated:

"The only question, therefore, is whether the word "territory", as used in section 3 of the Sherman Act, properly can be applied to a dependency now bearing the relation to the United States which is borne by Puerto Rico (American Samoa)."

The defendant contends that the word "territory", as used in the Sherman Act and many other statutes passed by Congress, applies only to organized territories, that American Samoa is not organized, and that therefore the Sherman Act does not apply to activities in Samoa.

The Government, on the other hand, contends that the word "Territory" in the Sherman Act was used in its most comprehensive sense as including all possessions of the United States, whether organized or not.

Since both parties rely heavily on the Shell case, supra, it seems appropriate to begin with an analysis of that decision. The main issue in that case was whether Puerto Rico could be considered a "Territory" within the meaning of Section 3 of the Sherman Act. Prior to holding that Puerto Rico was such a "Territory" the court discussed its earlier decision of Kopel v. Bingham, 211 U.S. 468, 29 S.Ct. 190, 53 L.Ed. 286 (1909).

In Bingham, the Court was called upon to determine if Puerto Rico was a "territory" within the meaning of § 5278 of the Revised Statutes, which provided for the demand and surrender of criminal fugitives by governors of territories and of states. The Court defined "territory", as used in § 5278, to mean "a portion of the country not included within the limits of any state, and not yet admitted as a state into the Union, but organized under the laws of Congress with a separate legislature under a territorial governor and other officers appointed by the President and Senate of the United States." In conclusion, the court in Bingham further stated that "it may be justly asserted that Puerto Rico is a completely organized territory, although not a territory incorporated into the United States, and that there is no reason why Puerto Rico should not be held to be such a territory as is comprised in § 5278."

Immediately following this discussion of Bingham, the Court in Shell concluded:

"With equal force, it may be said here that there is no reason why Puerto Rico should not be held to be a `territory' within the meaning of section 3 of the Sherman Act. We pointed out in the Atlantic Cleaners & Dyers case Atlantic Cleaners & Dyers v. United States, 286 U.S. 427, 52 S.Ct. 607, 76 L.Ed. 1204 * * * that in the light of applicable history and circumstances it was apparent that Congress meant to deal comprehensively with the subject of contracts, combinations, and conspiracies in restraint of trade, `and to that end to exercise all the power it possessed;' that while Congress in passing section 1 exercised only the power conferred by the commerce clause, in passing section 3 it exercised a general power, unlimited by that clause. We therefore concluded that the word `trade' as used in section 3 should be given a more extended meaning than the same word as used in section 1.

If, as we there determined, Congress intended by the Sherman Act to exert all the power it possessed in respect of the subject matter, — trade and commerce, — it is equally reasonable to conclude that Congress intended to include all territories to which its powers might extend. The same reason which requires the utmost liberality of construction in respect of the word `trade' also requires the same degree of liberality of construction in respect of the word `territory'; and we hold, accordingly, that the word `territory' was used in its most comprehensive sense, as embracing all organized territories, whether incorporated into the United States or not, including Puerto Rico." (Emphasis added).

The United States cites the Shell case for the proposition that Congress, in passing Section 3 of the Sherman Act, exercised all the power it possessed under Article IV, Section 3, Clause 2 of the Constitution of the United States. It is submitted that in so doing, Congress intended Section 3 to apply to all possessions of the United States, whether organized or not.

Standard Oil, on the other hand, points to the specific language in the holding of Shell which states that the word "territory" embraces "all organized territories, whether incorporated into the United States or not. * * *" (Emphasis added).

Although the Shell case is not entirely clear, this court is of the opinion that the Supreme Court interpreted the word "territories" as used in Section 3 to mean only organized territories.

Although the court did say that Congress intended to include within the reach of Section 3 "all territories to which its powers might extend", said statement can only be viewed in the context of the previous discussion of Bingham, supra, and the subsequent language that the word "territory" embraces "all organized territories. * * *" This court is particularly influenced by the fact that the Supreme Court's holding springs directly from its discussion of Bingham. In that case there can be no doubt that "territory", for the purposes of the statute in question, was held to mean an organized territory.

From a perusal of other relevant cases and statutes, it is apparent that Congress has over the years made the distinction between "territories" and other possessions, and that the distinguishing feature is that "territories" are organized pursuant to an Organic Act of Congress. Of particular interest is the case of In Re Lane, 135 U.S. 443, 10 S.Ct. 760, 34 L.Ed. 219 (1890), which was decided just a few months before the passage of the Sherman Act.

In In Re Lane, the defendant was indicted under a carnal knowledge statute and was alleged to have committed the crime "within that part of the Indian Territory commonly known as `Oklahoma'." The statute was applicable to all areas under the jurisdiction of the United States "except the territories." The issue presented was whether the defendant could come within the exception to the law by claiming that the offense was committed within the territory of Oklahoma. In holding that Oklahoma was not a "territory" within the meaning of the exception, the Supreme Court stated:

"* * * we think that the words `except the territories' have reference exclusively to that system of organized government long existing within the United States, by which certain regions of the country have been erected into civil governments. These governments have an executive, a legislative, and a judicial system. They have the powers which all these departments of government have exercised, which are conferred upon them by act of congress; and their legislative acts are subject to the disapproval of the congress of the United States. They are not in any sense independent governments. They have no senators in congress, and no representatives in the lower house of that body except what are called `delegates' with limited functions. Yet they exercise nearly all the powers of government under what are generally called `organic acts', passed by congress, conferring such powers on them. It is this class of governments, long known by the name of `territories', that the act of congress excepts from the operation of this statute. * * *"

The definition of "territory" set out in the Lane case was earlier stated in Ex Parte Morgan, 20 F. 298 (W.D.Ark. 1883). In discussing the meaning of "territory" as used in an extradition statute, the court stated:

"A territory, under the constitution and laws of the United States, is an inchoate state, — a portion of the country not included within the limits of any state, and not yet admitted as a state into the Union, but organized under the laws of congress, with a separate legislature, under a

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