September 1, 1973 to file their Statement. The Plaintiffs did file their Pretrial Statement on August 24, 1973, and Defendant Wagoner, Inc. filed a Request for Admissions by the Plaintiff on that same date. The Plaintiff objected to the Request for Admissions claiming that the installation of the "Blend" pumps was done by Wagoner, Inc. and that Phillips consented to the installation. The Plaintiffs neither admitted nor denied that the installation was done without the control or direction of Phillips, "it being beyond the knowledge of the Plaintiffs." The Plaintiffs further allege that the prices they were charged for the gasoline were based on a sliding scale that Wagoner, Inc. controlled. The retail price set on the pumps was the price paid by the Plaintiffs and this retail price was controlled by Wagoner, Inc., and if the retail price was raised then Wagoner's price to the Plaintiffs automatically went up.
Phillips then filed a Motion for Summary Judgment claiming that under all of the Depositions and Answers to Interrogatories the Plaintiffs had made out an Anti-trust action against Wagoner, Inc. relative to the pricing methods employed by Wagoner, Inc. in its sales of gasoline and diesel fuel to the Plaintiffs. Phillips claimed that they had no contact with the Plaintiffs and that while Phillips did sell products to Wagoner, Inc., they did not sell to the Plaintiffs. Phillips set forth that the Plaintiffs testified repeatedly in depositions that they knew of no act of Phillips which resulted in injury to them and that in their Pretrial Statement the Plaintiffs had outlined the injuries which they had suffered and the method of calculating their damages, but that none of these were caused by Phillips. In addition, Phillips asserted that Plaintiffs' Pretrial Statement alleged that Phillips knew such practices were illegal, benefited from the practices, and continued to renew jobber contracts with Wagoner, Inc. in spite of its alleged knowledge of the illegalities in order to acquire the alleged benefits. Thus, the Swettlens allege Phillips to be a conspirator with Wagoner, Inc.
Defendant Phillips then state their contention that there was no evidence whatsoever that they knew of or understood the details of Wagoner's pricing methods, nor that they had any control over it. They allege, to the contrary, that Phillips knew only of the results of the pricing method, i.e., the price charged by Wagoner, Inc. to the Plaintiffs and the price charged by the Plaintiffs to the public. They allege that Phillips had no knowledge or understanding of how the system operated to establish such prices and, therefore, had no knowledge of its alleged illegality. It was claimed that the full extent of Phillips' knowledge and understanding of the Wagoner pricing system was that set forth in an internal memorandum from L. A. Jensen to D. H. Forehand and the attachments thereto, under date of October 29, 1971. This memorandum and attachments were included as part of the Motion for Summary Judgment. Wherefore, the Plaintiffs having denied that Phillips caused them any injury, and there being no facts alleged which could be presented to the jury in support of the Plaintiffs' allegations concerning liability on the part of Phillips, the Court is requested to grant the Motion for Summary Judgment.
There was also included in the Motion for Summary Judgment the Affidavit of William C. Gilleispie, Marketing Representative of Phillips. In his affidavit Mr. Gilleispie stated that during the periods in question Phillips' products were sold to a jobber in Westmoreland County, Wagoner, Inc., which in turn sold these products to various service station dealers, including the Plaintiffs. He further stated that neither he nor Phillips were involved in the pricing arrangement except insofar as was set forth in the memorandum attached to the Motion for Summary Judgment. This memorandum indicated that Phillips did not know the terms of the lease or the equipment agreement made between the Plaintiffs and Wagoner, Inc., did not know the amount of rent paid by the Plaintiffs to Wagoner, Inc., did not know of the cost of utilities paid by the Plaintiffs, did not know the nature of the accounts as between the Plaintiffs and Wagoner, Inc., did not know Wagoner's method of billing Plaintiffs for gasoline or diesel fuel, did not even know, prior to the commencement of this action, that Wagoner, Inc. kept the keys to the Plaintiffs' pumps. In addition, Mr. Gilleispie stated that the method used by Wagoner, Inc. to price gasoline and diesel fuel was unique and was not used by any other jobber, and was fully understood only by Wagoner's personnel. It was also alleged that he, Gilleispie, never indicated to Wagoner, Inc., to the Plaintiffs or to anyone else, on behalf of Phillips, any approval or disapproval of the Wagoner pricing method. He did not understand it fully enough to comment upon it and further, he did not consider the method to be a matter for concern on the part of Phillips.
It is specifically noted that under the mandate of Rule 56(c), Summary Judgment is to be rendered forthwith if the pleadings, depositions, and answers to interrogatories and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. Under sub-paragraph (e), when a Motion for Summary Judgment is made and supported as provided in the Rules, the adverse party may not rest on the mere allegations of the pleadings, but the response by affidavit or otherwise as provided in the Rule must set forth specific facts showing that there is a genuine issue for trial. If he does not so respond, Summary Judgment, if appropriate, shall be entered against him. Hubicki v. A.C.F. Industries, Inc., 484 F.2d 519 (3rd Cir. 1973).
In reply to the Motion for Summary Judgment, the Plaintiffs filed their Answer and attached thereto seven documents on which the Plaintiffs rely to establish the existence of the material issue. We agree with the Plaintiffs that a persual of all of these documents does set forth a basis of liability against Phillips. It is apparent that in 1965, Wagoner, Inc. became interested in joining with a competitor of Phillips, namely the Sun Oil Company. (Exhibits F and G). George H. Wagoner and Wagoner, Inc. developed a marketing system which was based on a sliding scale which would establish both jobber's and the dealer's (such as the Swettlens) profit margins, depending on retail prices. (Stipulation No. 25.) Phillips, apparently in order to keep Wagoner, Inc. as a jobber, negotiated these profit margins as outlined in Exhibit G of the Plaintiffs' Answer to the Motion for Summary Judgment, which states:
"We (Phillips) have discussed with the Jobber various other sliding scale margins, particularly at the high and low ranges, but this seems to most equitably resolve the question of Dealer and Jobber Margins." (Emphasis added)
Thus, the scheme to control dealer margins at the various price levels was apparently negotiated by Phillips and Wagoner, Inc. In addition, Phillips was aware that exactly the same gasoline was sold out the Blend Pumps and the Standard Pumps at a two cent differential. It was apparent then to Phillips that the Plaintiffs' margin of profit on the same gasoline (received in the pumps from the same delivery truck) was different depending on which pump was used to dispense the gasoline, and this scheme was agreed upon between Phillips and Wagoner, Inc. It is obvious then that the Plaintiffs have evidence to indicate that Phillips is a conspirator along with George Wagoner and Wagoner, Inc. in a price fixing agreement. It is the contention of Phillips that even assuming Wagoner, Inc.'s pricing method was employed in some illegal manner and that Phillips did nothing to stop Wagoner, Inc. from making use of the pricing method, as a matter of law such knowledge and failure to act would not create any legal duty or liability on the part of Phillips. While the legal principle is undoubtedly true that if Phillips was not a participant they could have no liability, it does not answer the Plaintiffs' contention as set forth in the various documents that Phillips negotiated the entire method of procedure with Wagoner, Inc. and would certainly thus become actors in the overall scheme, if such scheme can be considered to be illegal. We must then turn our attention to whether Phillips' actions constituted a "contract combination . . . or conspiracy, in restraint of trade." The applicable legal framework has been well defined.
In the first place, any vertical agreement, express or implied, having the effect of stabilizing prices in the retail market is a substantial threat to the policies of free competition which were the basis for the Sherman Act. Thus, an illegal combination to fix prices results whenever a seller suggests retail price and secures compliance by means in addition to the "mere announcement of his policy, and refuses to deal" if the policy is not complied with. United States v. Parke, Davis & Co., 362 U.S. 29, 80 S. Ct. 503, 512, 4 L. Ed. 2d 505, 515 (1960). The courts have not hesitated to pierce the complexities of real price maintenance schemes in which coercion is used on retail outlets to achieve resale price maintenance and "it matters not what the coercive device is." Simpson v. Union Oil Company of California, 377 U.S. 13, 17, 84 S. Ct. 1051, 1054, 12 L. Ed. 2d 98. Thus, the Plaintiffs' proffered evidence in this case (including all documents) provides a basis for finding that Phillips' conduct toward the Plaintiffs constituted a coercive effort to secure compliance with Phillips' pricing system as agreed upon with George Wagoner and Wagoner, Inc. Retail price schemes are "unlawful under Section 1 of the Sherman Act without any necessity for inquiry in each particular case as to their business or economic justification, their impact in the marketplace or their reasonableness." United States v. Sealy, 388 U.S. 350, 87 S. Ct. 1847, 18 L. Ed. 2d 1238 (1967).
Phillips here, as Gulf did in Lehrman v. Gulf Oil Corporation, 464 F.2d 26 (5th Cir. 1972) takes the position that we deal with "a facially benign business practice, not uniform throughout the area of its use." We conceive, however, that Phillips can have no more success than did Gulf in the Lehrman case where the Court held that the Anti-trust Statutes could be violated considering the application of the pricing system and the harm to the nation's commerce that could be threatened by allowing (Gulf's) behavior to go uncorrected. We think the means here employed went well beyond a mere announcement of a policy or a simple refusal to deal if the suggested prices were not adhered to so that an issue of fact exists as to whether or not there existed an illegal contract, combination or conspiracy (of course, assuming that the Plaintiffs can sustain all of their allegations).
We agree with the Plaintiffs' contention that the philosophy of the Sherman Act is that once a seller sells goods and title passes, the buyer must be free to set whatever price he wishes. The buyer must be free to either raise or lower or leave the price the same.
One of the crucial exhibits offered by the Plaintiffs in their Answer to the Motion for Summary Judgment, and its authenticity is not disputed by the Defendant Phillips, is Exhibit G (the Phillips' inter-office memorandum from their Columbus Office to the Main Office in Bartlesville, Oklahoma, which, in substance, outlined the relationship between Wagoner, Inc. and Phillips, particularly in relation to the interest expressed by Wagoner in Sun Oil Company's form of marketing). The crux of the matter was that while Wagoner made a proposal for the use of blending pumps there was also a detailed part of the agreement indicating the grade, the price, the total margin, the dealer margin and the jobber margin that would apply to the sales of gasoline. In that inter-office memorandum was contained the following:
"We will have to consider, of course, that if this program meets with management's approval and is offered to Wagoner Gas and Oil that we would be placed in the position of offering the same program to our other six jobbers in Western Pennsylvania, or at least, we would find it necessary to condone this practice if the other six jobbers chose to market in this manner, that is, with the blending pump. None have expressed a desire to utilize a blending pump as of this writing. Most could not afford the installation. Therefore, we have two marketing programs in effect in Western Pennsylvania. For reasons of discrimination, we do not believe we could refuse assistance."
In addition, there was contained the following:
"We have discussed with the jobber various other sliding scale margins particularly at the high and low ranges, but this seems to most equitably resolve the question of dealer and jobber margins."
In the opinion of the Court, this tends to show a participation by Phillips, in the absence of explanation as to the extent of control or non-control and the effect on commerce, all of which prevent the granting of the Motion for Summary Judgment. We believe to be most apropos the following which was set forth by the Supreme Court of the United States in United States v. Socony-Vacuum Oil Co., 310 U.S. 150, 60 S. Ct. 811, 84 L. Ed. 1129 at Page 1165 (1939):
"Agreements for price maintenance of articles moving in interstate commerce are, without more, unreasonable restraints within the meaning of the Sherman Act because they eliminate competition, United States v. Trenton Potteries Co., 273 U.S. 392, 71 L. Ed. 700, 47 S. Ct. 377, 50 A.L.R. 989, and agreements which create potential power for such price maintenance exhibited by its actual exertion for that purpose are in themselves unlawful restraints within the meaning of the Sherman Act."