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THOMAS v. AMERADA HESS CORP.

UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF PENNSYLVANIA


January 17, 1975

ROBERT J. THOMAS and JEAN M. THOMAS, his wife, tr/as THE 89-er; and JOSEPH HROBUCHAK and OLGA HROBUCHAK, his wife, tr/as SAVE-WAY
v.
AMERADA HESS CORPORATION, ASHLAND OIL, INC., BRITISH PETROLEUM OIL, INC., CITIES SERVICE CO., CONTINENTAL OIL CO., MURPHY OIL CORPORATION, PHILLIPS PETROLEUM CORP., SOUTHERN FACILITIES, INC., CHEVRON, TENNECO OIL COMPANY, GETTY OIL CO .

The opinion of the court was delivered by: BECHTLE

BECHTLE, District Judge.

This matter is before the Court on the motions of defendants remaining in the action for summary judgment in a private civil action for damages based upon alleged violations of several statutes. These are §§ 1 and 2 of the Sherman Act (15 U.S.C. §§ 1 and 2); § 2 of the Clayton Act, as amended by § 1 of the Robinson-Patman Act (15 U.S.C. § 13); § 3 of the Clayton Act (15 U.S.C. § 14); and, § 210(a) of the Economic Stabilization Act of 1970, 83 Stat. 377 (12 U.S.C. § 1904 note). For reasons hereinafter stated, the motions will be allowed.

 The original complaint, filed May 25, 1973, charged seventeen oil companies, a parent corporation of an oil company, two pipelines, an owner of a petroleum terminal facility, and a distributor of petroleum products *fn1" with combining and conspiring in restraint of trade by monopolizing and attempting to monopolize the Scranton/Wilkes-Barre, Pennsylvania, gasoline market area (Lackawanna and Luzerne Counties) and conspiring to destroy the independent retail segment of that two-county market area by depriving plaintiffs of gasoline.

 Extensive pretrial discovery running into the thousands of pages has been conducted by plaintiffs and defendants, including the deposition of fifteen witnesses, eleven of whom were examined by plaintiffs. Neither side can validly claim a lack of opportunity to show the existence or nonexistence of material fact in support of their claim.

 The plaintiffs are four in number. Two of them, Joseph Hrobuchak and his wife, trading as Save-Way (sometimes hereinafter referred to as "Hrobuchak") are independent marketers of gasoline in the two-county area. The other two, Robert J. Thomas and his wife, trading as The 89-er (sometimes hereinafter referred to as "Thomas") are former independent retail marketers of gasoline in that area. Within that area, there were at least sixteen independent unaffiliated service stations in April of 1973.

 Generally, an independent marketer of gasoline is one who operates a retail gasoline service station under his own trade name, buying unbranded regular-grade gasoline on a load-to-load basis and selling it under the trade name of the station without reference to the trade name or trademark of the supplier. He is a freelancer, staying clear of binding written agreements with his supplier, and thus avoiding exclusive supply requirement conditions and resale restrictions. In this way, he is free to select the supplier that gives him the most advantageous deal possible in the area of price, credit terms, and promptness of delivery. Occasionally, he will deal with more than one supplier to insure a ready volume of gasoline for his station even though the other gives the better bargain. He controls the conditions and appearance of his station and his hours of operation. He resells for cash at prices somewhat lower than that prevailing for regular-grade gasoline sold under a brand name by his nearby competitors.

 In times when scarcity of gasoline exists, unless there is Government intervention, the independents (having no contractually enforceable supply rights against the supplier) are usually the first to suffer by having their gasoline deliveries cut off or drastically reduced because of the suppliers' contractual demands that must be honored first.

 No gasoline refinery is located in the two-county market area. The nearest ones are in Rahway, New Jersey, and Philadelphia, Pennsylvania, approximately 90 and 100 miles away, respectively. Some of the oil companies, such as Arco, Gulf and Sunoco of Pa., bring their own refined products into the area by tank trucks for the benefit of their branded dealers. Others, such as Chevron, which has a refinery in Perth Amboy, New Jersey, and Exxon which has the one in Rahway, transport their products over the Buckeye Pipeline (" Buckeye") *fn2" which starts in Linden, New Jersey, and has multiple terminals in Dupont, Lackawanna County, Pennsylvania. At the pipeline terminals, the products are placed in the local holding tanks of the transporter or the storage facilities of a distributor, such as Southern or Agway Petroleum Corp. ("Agway"). From the holding tanks, the products are loaded into highway tank trucks for delivery to smaller distributors' storage tanks or directly to the retailer.

 Some of the oil companies that have no nearby refinery but desire to sell gasoline in the vicinage have entered into exchange agreements with one or more of the other companies that do have such a facility or ready access to its output. In essence, these agreements provide that company "A", which has a refinery or large storage facilities nearby, is to make available in the area a certain amount of gasoline to company "B" in exchange for the same quantity in another area where company "B" has a refinery, large storage facilities, or access to a ready supply and company "A" does not. These agreements are made on condition that the exchanged product meets the specifications of each party. Allowances are made in the agreements for differences in transportation costs and incidental charges. It is apparent that company "B" could not compete profitably in the area without such an agreement. Sometimes a "B" oil company will assign a portion of the supply to which it is entitled under an exchange agreement to another company in exchange for an equal supply in another part of the country.

 A number of oil companies, such as Arco, Exxon, Getty, Gulf, Sunoco of Pa. and Texaco, sell their products to branded stations only. Several of these companies took affirmative action during the years 1969 to 1973 to insure that their products did not reach the unbranded marketers.

 It is difficult to pinpoint plaintiffs' Sherman and Clayton Acts antitrust claims against the defendants from the allegations of the complaint and the amendments to it. However, from the depositions of plaintiffs and their answers to interrogatories, it is apparent that their basic complaint is that immediately after April, 1973, Thomas was unable to obtain any gasoline for his business from the defendants while Hrobuchak was able to obtain a supply from Ashland but on "a ruinous allocation basis."

 PRESENT DEFENDANTS

 During the pendency of this action, half or eleven of the original twenty-two defendants have been dropped from this case by stipulation of the parties. The remaining defendants are Chevron, Ashland, BP, Southern, Conoco, Murphy, Tenneco, Getty, Phillips, Hess and Cities. With the exception of Southern and Cities, they are integrated oil companies; that is, they are engaged in the exploration, importation, production, refining, transportation, and marketing of petroleum and its products, either by themselves or through subsidiaries.

 Chevron is a California corporation with offices in Perth Amboy, New Jersey, and is a wholly owned subsidiary of Standard Oil Company of California. Since January of 1970, Chevron sold gasoline in the two-county area through some six or seven distributors only. There are twelve to fifteen service stations in the area selling Chevron branded gasoline (both premium and regular grades). Chevron does not operate any of them. They are supplied by distributors of Chevron. All of the gasoline that Chevron distributes in the area either by sale or through exchange agreements comes from its Perth Amboy refinery through Buckeye to its Dupont terminal in Avoca, Pennsylvania. It is by far the largest supplier of unbranded gasoline in the area and has exchange agreements with Agway, BP, Hess and Tenneco. For some time prior to April of 1973 and until the Federal mandatory plan went into effect, Chevron imposed a "voluntary" allocation program on its distributors and companies under exchange agreements.

 Ashland is a Kentucky corporation with its general offices in Ashland, Kentucky. Its nearest refinery is in Buffalo, New York. It sells and distributes gasoline in over 20 states, including Pennsylvania. It is probably the largest supplier of gasoline to private customers in the areas where it distributes gasoline. Only a minor share is sold under the Ashland banner. It has been a supplier in the two-county area for over seven years. By the summer of 1972, it was supplying well over a million gallons of gasoline each month to unbranded gasoline outlets in the area. It obtained the unbranded gasoline it sold in the area under an exchange and terminalling agreement with Agway. Ashland has no contractual arrangements, written or oral, with any of its sixteen customers which obligated either the customer to purchase from Ashland or obligated Ashland to supply the customer on a continuing basis. Prior to imposition of the "voluntary" allocation program by Ashland, customers were free to order gasoline when they saw fit. In October of 1972, Ashland realized it would have less gasoline for distribution in 1973 than in the previous year. It, therefore, instituted an allocation program in that month. Under that program, it continued to supply its regular customers who had purchased gasoline in any of the base period months of May through August, 1972, but on a percentage of the average monthly gallons purchased. For the last three months of 1972 and the first three months of 1973, it was 100% of that average. Thereafter, until the Federal mandatory program went into effect, the limit fluctuated each month between 75% and 50% of the base average. Consequently, in 1973, it delivered less gasoline to its customers than in the corresponding months of 1972. The number of gallons delivered in April, May and June of 1972 were 1,143,659; 1,329,892 and 1,354,890, respectively. For 1973, it was down to 871,845; 804,256 and 552,496, respectively. With the commencement of its voluntary self-imposed allocation program, Ashland refused to take on any new accounts because of the unfair effect this would have on its regular customers who had purchased from Ashland during the base period. During the base period (May through August, 1972), Ashland was supplying at least sixteen independent private brand gasoline stations in the area. Save-Way was one of the sixteen. Between August, 1972, and January, 1973, one of the sixteen became a major brand distributor and voluntarily ceased buying from Ashland. With the exception of a station which discontinued operations because of the death of one of its owners, Ashland continued to supply its remaining customers throughout 1973 on this allocation basis.

 BP is the successor to BP Oil Corporation, a Delaware corporation with its main office in Wilmington, Delaware. BP Oil Corporation entered the market area on March 4, 1969, by purchasing the marketing assets formerly owned by Sinclair Oil Corporation for $400,000,000. At that time, Sinclair Oil had an exchange agreement with Chevron for the supply of gasoline to Sinclair Oil and its customers out of Chevron's Dupont terminal. BP Oil Corporation continued the exchange agreement, since its nearest refinery and terminal are too far removed from the area. Therefore, the gasoline it distributed in the area was obtained from the Dupont terminal. On January 1, 1970, BP Oil Corporation became a wholly owned subsidiary of Sohio. BP, on December 31, 1973, after this action was instituted, acquired all the assets of BP Oil Corporation. BP, as did its predecessor, markets its gasoline through (a) branded distributors, (b) branded dealers, and (c) to the public through company-owned branded service stations. Prior to April 6, 1973, BP Oil Corporation, without benefit of contract, marketed a relatively small amount of unbranded gasoline to unbranded dealers. C. A. Borda Company ("Borda") was such a dealer and its only one in the area.

 Southern was incorporated under the laws of Delaware for the acquisition and construction of terminal facilities. It does not produce, refine, or market petroleum products. Conoco, Murphy, and Tenneco each own one-third of the capitol shares of Southern. In May of 1972, it purchased one of the Buckeye automated terminal and storage facilities in Dupont, Pennsylvania, from Getty. The terminal facility was then leased to the shareholders and, pursuant to an agreement among the three, operated by Conoco. Since the sale, Getty has not obtained gasoline from those facilities nor consigned any gasoline to another defendant.

 Conoco is a Delaware corporation with its main office in Stamford, Connecticut. Although it markets gasoline in many states of the United States, it does not do so in the two-county area. It is the owner of a subsidiary, Kayo Oil Company ("Kayo"), a corporation engaged exclusively in the retailing of gasoline and related products through limited service stations. Kayo operates a number of these stations in the area and they are supplied with gasoline by Conoco. One of the Kayo stations is located on a site across the highway from the Save-Way station in Clark Summit (South Abington), Pennsylvania. The decision to build and operate the station on that site was made by Kayo before Hrobuchak purchased the Save-Way station. In May of 1972, Conoco acquired a one-third interest in Southern for the purpose of reducing its transportation costs in supplying gasoline to the Kayo stations in Pennsylvania. In this area, Conoco gets its gasoline from Chevron under an exchange agreement.

 Tenneco is a wholly owned subsidiary of Tenneco Corporation which, in turn, is a subsidiary of Tenneco, Inc. Its main offices are in Houston, Texas, and the nearest refinery is in Chalmette, Louisiana. In the market area, it is an unbranded wholesale marketer of gasoline. It sells without any restriction as to resale to retail outlets, like plaintiffs, who resell to the public under their own trade name. It has never done business with any of the plaintiffs. Tenneco's primary source of supply of gasoline for distribution in the area is its own refinery in Louisiana. It has exchanged agreements with Conoco, Getty, and Cities.

 Murphy, a Delaware corporation, with its main offices in El Dorado, Arkansas, has not participated in the marketing of gasoline in the area. Its sole connection with the area is as a shareholder owning one-third of the stock of Southern.

 Getty is a Delaware corporation with a refinery in Delaware City, Delaware. In the mid-60's, Tidewater Oil Company decided to reconfigure geographically and to sell only through "Tidewater" branded dealers. In 1967, it terminated the contract of its principal distributor in the area. On September 30, 1967, Tidewater Oil Company merged into Getty, which continued the sales policy of Tidewater but under the Getty name. In 1969, Getty decided to market only "premium" grade gasoline. On March 31, 1972, the eastern marketing and manufacturing functions of Getty were transferred to Getty Eastern Operations, Inc. By April, 1972, only seven Getty branded dealers remained in Lackawanna and Luzerne Counties. All these stations are located at least 25 miles from those of plaintiffs. On February 29, 1972, Getty's refinery in Delaware caught fire and its supply of gasoline for distribution was severely impaired in 1972 and 1973. As a result, it introduced its own allocation program on April 19, 1973, designed to distribute its scarce supply equitably to its then-existing customers.

 Phillips is based in Bartlesville, Oklahoma. It has six domestic crude oil refineries, all of which are located west of the Mississippi River. Around 1961, Phillips initiated an attempt to expand its marketing of gasoline and fuel oil into the northeastern part of the United States, an area which includes the two-county area of Lackawanna and Luzerne. The attempt was implemented largely by contracting with wholesale distributors who purchased the gasoline from Phillips and then resold it to their own customers. Some additional marketing was ultimately done in the area to so-called direct dealers. Phillips supplied two branded wholesalers, Union Petroleum Company and Lapera Oil Company ("Lapera"), and two branded dealers in the area. Phillips obtained its gasoline for the two-county area from Conoco under an exchange agreement. In June of 1972, it began to withdraw from the northeastern sector for economic reasons and not because of a shortage of gasoline supply. By the end of September, 1972, it had stopped supplying these stations by agreement. They are now being serviced by other wholesalers. Three days before the contract to supply Lapera was to expire on December 31, 1972, Lapera petitioned this Court for an extension of the supply but was unsuccessful (C.A. No. 72-652). The case was discontinued with prejudice at the request of Lapera's counsel. Lapera is now being supplied by Amoco, one of the dismissed defendants. Union Petroleum Company ("Union") had a supply contract which could not be terminated by Phillips before August 31, 1973. Union is presently being serviced with gasoline by Phillips under the Federal mandatory allocation programs. The plaintiffs never requested Phillips to supply them with gasoline.

 Hess is a Delaware corporation with offices in New York City and Woodbridge, New Jersey. In 1969, Hess Oil and Chemical Corporation with a refinery in Port Reading, New Jersey, was merged into Hess. One of its subsidiaries operates a large refinery in the Virgin Islands. It does not sell gasoline to any retail outlet in the market area. It does supply Berkshire Oil Company, a distributor located in Reading, Pennsylvania, approximately 75 miles from Scranton. It is able to do this by reason of an exchange agreement with Chevron. Berkshire Oil Company supplies, among other outlets, three service stations in the area displaying the Hess trademark. Hess does not own the three service stations.

 Cities is a Delaware corporation with offices in New York City. It is the parent of the wholly owned subsidiary Cities Service Oil Company ("Citgo") which operates refineries in East Chicago, Indiana, and Lake Charles, Louisiana, and markets Citgo branded gasoline in the two-county area. Citgo has not been made a party defendant to this action. Plaintiffs have set forth no facts nor reasons why this Court should disregard the corporate entity of Citgo.

 OPERATIVE FACTS CONCERNING THE PLAINTIFFS

 Joseph Hrobuchak, with his wife, owns a gasoline service station where they have been selling unbranded gasoline under the trade name Save-Way since May, 1971. The station is located on Routes 6 and 11, in Clarks Summit (South Abington), Lackawanna County, Pennsylvania, five miles north of the City of Scranton. Unlike the other two plaintiffs, the Hrobuchaks have divided the bulk of their wholesale purchases between two principal suppliers of unbranded gasoline (Ashland and Borda) with an occasional purchase from three unbranded distributors. Shortly after receiving the notice from BP that its supply would be cut off as of April 7, 1973, Borda ceased doing business and no longer supplied the Save-Way station with gasoline. Ashland, however, continued to supply the station in accordance with its voluntary allocation program.

 During the base period of Ashland's voluntary program, Hrobuchak had chosen to purchase 43% of his gasoline from Ashland while obtaining the rest from Borda. For the calendar year 1973, Hrobuchak received 329,067 gallons of gasoline from Ashland. This amount was 26,317 gallons over his allotment for that year. The latter amount was, therefore, deducted from the volume which was delivered to the Save-Way by Ashland in 1974.

 After April, 1973, Hrobuchak sought other suppliers to augment his diminished supply, but the oil companies contacted by him were not taking on any new accounts at that time. Some of these companies would not have sold him any gasoline because of their policy of supplying only those stations at which the gasoline would be sold under the supplier's brand name. Hrobuchak was able to make up in part for the loss of the Borda supply and the reduced Ashland monthly shipments by obtaining intermittent tank truck loads from two other sources, Bowman Petroleum and John T. Howe. These supplies were insufficient to meet Hrobuchak's retail sales demand but permitted him to stay open about one-third his previous hours and days. Prior to April, 1973, he was able to get all the regular grade, unbranded gasoline he needed. For the years 1971, 1972, and 1973, Hrobuchak's volume purchases of gasoline, the suppliers, the gross receipts, and net profits from selling gasoline at his Save-Way station were as follows: % Total Gross Year Supplier No. Gals. of Total Gallons Receipts Net Profits 1971 Borda 323,131 52% (Last Ashland 287,328 46% 9 Mos.) Townline Oil Co. 10,700 2% 621,159 $182,347 $8,261 1972 Borda 490,395 51% Ashland 469,252 49% 959,647 $277,954 $13,858 1973 Borda 141,878 20% Ashland 329,067 47% Bowman 176,003 26% Howe 49,800 7% 696,748 $173,000 $15,000

19750117

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