Source: http://openjurist.org/657/f2d/1147
Timestamp: 2015-11-28 11:53:02
Document Index: 613566773

Matched Legal Cases: ['§ 1', '§ 1', '§ 1', '§ 2', '§ 2', '§ 1', '§ 1', '§ 1']

657 F2d 1147 King King Enterprises v. Champlin Petroleum Company | OpenJurist
657 F. 2d 1147 - King King Enterprises v. Champlin Petroleum Company HomeFederal Reporter, Second Series 657 F.2d.
657 F2d 1147 King King Enterprises v. Champlin Petroleum Company 657 F.2d 1147
1981-2 Trade Cases 64,209, 8 Fed. R. Evid. Serv. 1206
KING & KING ENTERPRISES, d/b/a King Gas & Oil; and Carl R.King, d/b/a King Gas & Oil, Plaintiffs-Appellees,v.CHAMPLIN PETROLEUM COMPANY, Defendant-Appellant.
No. 80-1630.
Argued March 19, 1981.Decided Aug. 3, 1981.Rehearing Denied Sept. 14, 1981.
Richard W. Giauque, Berman & Giauque, Salt Lake City, Utah (Gary F. Bendinger and James R. Holbrook, Berman & Giauque, Salt Lake City, Utah, with him on the brief), for plaintiffs-appellees.
Cecil E. Munn, Cantey, Hanger, Gooch, Munn & Collins, Fort Worth, Tex. (Charles A. Zubieta, Champlin Petroleum Co., A. Camp Bonds, Bonds, Matthews, Bonds & Hayes, Muskogee, Okl., and Mark C. Hill, Fort Worth, Tex., with him on the brief), for defendant-appellant.
King & King were plaintiffs below in a private antitrust action which arose under § 1 of the Sherman Act, 15 U.S.C. § 1, 1980. Champlin Petroleum Co. is the defendant and the appellant. The complaint alleged violations of both § 1 and § 2 of the Sherman Act. Also there is a third party action against one Fred Dea Entriken, a former Champlin employee. In this third party claim it is alleged that if Champlin was found liable in the King action that Entriken should be held responsible for the damages which Champlin is required to pay. Entriken filed a fourth party action against Mickey Bowles and Dewey Mason, two of his superiors during the time he was employed by Champlin. There he alleged that he had acted in accordance with instructions and with company policy. Prior to the trial King withdrew his claims against Champlin under § 2 of the Sherman Act for predatory and coercive pricing and refusal to deal. The trial began on April 21, 1980 on King's claim of price fixing under § 1 of the Sherman Act and the issue and amount of damages, and on the third and fourth party claims. The jury found in favor of King on the price fixing claim against Champlin and in favor of Entriken on the third party action. Champlin appeals herein from the judgment against it on the price fixing claim. It does not appeal the judgment on the third party action.
King and King Enterprises is owned by Carl King and Fred King; the company markets gasoline. King Gas and Oil Company operates retail gas stations in Oklahoma, Arkansas and Texas. This latter company is a sole proprietorship which is owned by Carl King. King and King Enterprises supplies gasoline to the King gas stations.
Champlin Petroleum Company is an integrated oil company which refines gasoline and sells gasoline at both levels, retail and wholesale, in Oklahoma, Arkansas and Texas under the brand names of Champlin and Harbor.
When King entered the gasoline market in Oklahoma, Texas and Arkansas, which was in 1966 or 1967, there were three types of retail gasoline marketers. At the top were the major oil companies such as Texaco, Shell and Phillips, which companies were vertically integrated in that they operated refineries and sold gas both at wholesale and retail levels. These companies operated full service gas stations and sold products other than gas, such as batteries, tires, and accessories. They advertised and accepted credit cards.
In the middle were the mini-majors or branded independents such as Champlin, Apco, Consumers and Fina. These stations generally were the full service type. They operated in the same fashion as the majors but did not have the national reputation enjoyed by the majors and sometimes were not vertically integrated. Below the "mini-majors" were full service unbranded independents, such as Hudson Oil Co.
At the time (1966, 1967) King entered the gas market in the states mentioned above, the majors' normal price for regular gasoline was 34.9 cents per gallon. The mini-major normal price for regular gasoline was 32.9 cents per gallon, and the branded independent's normal price for regular gasoline was 31.9 cents per gallon. The difference in the prices of gasoline between the three types of stations was called a "spot." By this is meant that the mini-majors had a two cent spot on the majors and the unbranded independents had a one cent spot on the mini-majors. King was and is a self-service unbranded independent marketer. It decided to take a two cent spot on Hudson and other full service independents, and to charge 29.9 cents per gallon for regular gas. King had determined that this was its optimum price, which would allow it to maximize gross profits and volume of sales. Prior to King's entry in the market there were no unbranded self-service independents who took a spot on the mini-majors and full service unbranded independents. King was an admitted price cutter and was the first self-service marketer to attempt to take such a spot.
GENERAL NATURE OF THE CASE
King alleged that Champlin freely and regularly exchanged market information with its competitors, not including King however, and entered into price fixing agreements with those competitors for the purpose of forcing King, and other self-service unbranded independents who proceeded as King was proceeding in taking a spot on the full service unbranded independents, to eliminate their spot, and, thus, to eliminate price cutting. It was the claim of King that Champlin first tried to dictate King's selling price by threatening to take the price of gas "to the bottom," that is, below King's actual cost for the gas, if King refused to eliminate its spot. When King failed to do so, Champlin and his co-conspirators collusively agreed to lower prices below an acceptable level to King and restore prices to normal once they felt King had suffered by low prices to such an extent that King would be willing to surrender. King alleged that the method employed to accomplish the goals was as follows:
Champlin and its co-conspirators granted competitive price allowances (CPAs) to their dealers. Under the competitive price allowances Champlin and others would guarantee their dealers a certain margin of profit, so that even when the dealers were selling gas at lower than normal prices, the dealers were still able to make a dependable margin of profit. Thus, Champlin and its co-conspirators, rather than their dealers, would absorb the loss caused by the sale of gasoline at lower than normal prices. Champlin and its competitors would recommend that their dealers sell at lower than normal prices and the dealers would still make a profit. Prices would go down in a stairstep pattern with King reducing his prices accordingly to keep his spot. When prices reached the bottom, that is at or near the cost of the gasoline to King, the Champlin dealers were guaranteed a profit because of the competitive price allowances, while King, who did not receive these allowances, was forced to absorb the entire loss caused by the price decreases. This CPA program, of course, cost Champlin and its co-conspirators a great deal of money. Thus, as soon as practicable the companies were anxious to restore the market to its normal level by pulling back the CPAs when it was felt that King had been sufficiently harmed and would be ready to surrender. Therefore the companies conspired to pull their CPAs and fix the price of gasoline at a certain level. As a result of Champlin's price fixing activities, King alleges that it was unable to sell gasoline at its optimum price and was injured thereby.
Champlin, on the other hand, rather than directly addressing King's price fixing claims, appears to have been arguing that: "If King has any cause of action at all, it is one for predatory and coercive pricing; but King doesn't have a claim for predatory and coercive price because ...." The appellant's contentions caused great confusion during the trial of the case for the reason that they were insisting on being allowed to defend a predatory and coercive pricing claim, whereas the only claim that was being litigated by the plaintiffs was one of price fixing. It should be brought out here and now that regardless of appellant's thought that King's claim should have been for predatory and coercive pricing, a claim which it was apparently prepared to defend itself against, the fact remains that King did confine itself to a claim for price fixing at the trial. King had withdrawn its claim based on predatory and coercive pricing prior to trial. So, inasmuch as predatory and coercive pricing was not a claim at the trial, it was not possible for the appellant, Champlin, to offer a defense against such claim. Much of the evidence which appellant sought to introduce at trial was therefore rejected by the trial court. Because of the lack of effective communication between the parties, the lawyers for both spent a great deal of time at the bench arguing evidentiary matters to the judge out of the presence of the jury.
Champlin raises several questions on this appeal:
1. That it was error for the trial court to receive in evidence testimony of Mr. Caldwell, an expert witness called by the plaintiffs, regarding calculations which he made as to the sum total of losses suffered by plaintiffs during the years in question.
2. That it was error to refuse to instruct the jury on the law applicable to predatory and coercive pricing and refusal to deal.
3. That it was error to refuse to present the jury with the question of whether plaintiffs' claim was barred by the statute of limitations.
4. That the court erred in massive exclusions of evidence for the defense, in that the court (a) failed to allow Champlin to deny accusations against it; (b) precluded Champlin from proving its economic incapacity to rig the market; (c) precluded Champlin from refuting predatory pricing claims; (d) precluded Champlin from challenging the Caldwell calculations.
5. That it was error to foreclose Champlin's use of depositions of parties and managing agents.
In general it is also argued by Champlin that it suffered from the prejudice and animosity shown by the trial judge toward it. From the examination of the record we do not believe that the latter claim has any justification whatsoever. The record discloses that the judge was very patient indeed with Champlin's lawyers. It is true that he ruled against them in many instances but in many instances he was fully justified in doing so.
DEFINITION AND EVIDENCE IN SUPPORT OF CONTENTION OF
PLAINTIFFS THAT DEFENDANT WAS GUILTY OF PRICE FIXING
Section 1 of the Sherman Act provides in pertinent part that:
Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade of commerce among the several states, or with foreign nations, is declared to be illegal....
Price fixing agreements are per se violations of § 1 of the Sherman Act. Catalano, Inc. v. Target Sales, Inc., 446 U.S. 643, 100 S.Ct. 1925, 64 L.Ed.2d 580 (1980); United States v. United States Gypsum Co., 438 U.S. 422, 98 S.Ct. 2864, 57 L.Ed.2d 854 (1978); United States v. Container Corp. of America, 393 U.S. 333, 89 S.Ct. 510, 21 L.Ed.2d 526 (1969); United States v. Socony-Vacuum Oil Co., 310 U.S. 150, 60 S.Ct. 811, 84 L.Ed. 1129 (1940), reh. den. 310 U.S. 658, 60 S.Ct. 1091, 84 L.Ed. 1421; Bryan v. Stillwater Board of Realtors, 578 F.2d 1319 (10th Cir. 1977); Cernuto, Inc. v. United Cabinet Corp., 595 F.2d 164 (3rd Cir. 1979); United States v. Sigma, 1980 1 Trade CAS. P 63,097 (4th Cir. 1979).
If the defendants' purpose was to fix prices, it is not material that they had reasonable goals for doing so. United States v. Socony-Vacuum Oil Co., supra; United States v. McKesson and Robbins, Inc., 351 U.S. 305, 76 S.Ct. 937, 100 L.Ed. 1209 (1956). In Socony-Vacuum Oil the Supreme Court considered an alleged conspiracy to raise gasoline prices for the purpose of stabilizing the market. The Court found that the defendant's purpose was to fix prices, and the evidence showed that the conspiracy at least contributed to the rise in prices. The Court stated that the fact that other factors may also have contributed to the price rise was not material. It was held that even if the purpose of the conspiracy was to eliminate the evils within the system, with an aim of establishing more reasonable and more fair prices, the conspiracy was nevertheless violative of the Sherman Act. The Court held there exists no justification for price fixing in a free economy. Therefore, the Court found that it was permissible to exclude evidence seeking to show the reasonableness of the conspiracy, since such evidence is irrelevant under the Sherman Act. The Court stated that an agreement among competitors to follow a practice of buying surplus gas on the spot market for the purpose of preventing prices from falling sharply was unlawful, regardless of how reasonable it was believed to be, even though there was not shown to be a direct agreement among the conspirators in the actual prices which were being maintained.
In McKesson and Robbins, supra, the Supreme Court said:
It makes no difference whether the motives of the participants are good or evil; whether the price fixing is accomplished by express contract or by some more subtle means; whether the participants possess market control; whether the amount of interstate commerce affected is large or small; or whether the effect of the agreement is to raise or decrease prices.
76 S.Ct. at 940. The Supreme Court further stated:
Congress has marked the limitations beyond which price fixing cannot go. We are not only bound by those limitations but we are bound to construe them strictly, since resale price maintenance is a privilege restrictive of a free economy. (citation omitted).
Id. at 943-44.
Illegal price fixing includes informal and indirect, as well as formal and direct, agreements to exchange price information or fix prices. Catalano, Inc. v. Target Sales, supra; United States v. Container Corporation of America, supra. In Catalano, the charge was that respondent wholesalers secretly agreed to sell to retailers only if payments were made in advance or upon delivery. That is, the wholesalers agreed to limit all credit sales, whereas before the agreement the wholesalers had competed with one another in regard to the granting of credit and the terms thereof. The majority of the court of appeals held that the agreement to withhold credit did not constitute price fixing. The dissent disagreed on the ground that the extension of interest free credit is an indirect price reduction, and elimination of such credit was thus a method of raising prices. The Supreme Court agreed with the dissent, and reversed the decision of the court of appeals. The Supreme Court stated that the mere fact that a practice entailing a risk of obvious anticompetitive impact "may turn out to be harmless in a particular set of circumstances will not prevent it being declared illegal per se." 100 S.Ct. at 1928.
Furthermore, in Container Corporation of America, supra, the defendant's activity included an agreement to exchange price information, but no agreement to adhere to a price schedule as in United States v. Socony-Vacuum Oil Co., supra. The Supreme Court's holding was that the result of this reciprocal exchange of price information was to stabilize prices, since when one competitor received knowledge of another competitor's price, he ordinarily matched that price. The holding was that this reduction of price competition constituted price fixing. The Court said "(p)rice is too critical, too sensitive a control to allow it to be used in even an informal manner in order to restrain competition." 89 S.Ct. at 513. See also, American Column and Lumber Co. v. United States, 257 U.S. 377, 42 S.Ct. 114, 66 L.Ed. 284 (1921).
The Supreme Court's strict enforcement of the prohibition against suppressing competition is emphasized in National Society of Professional Engineers v. United States, 435 U.S. 679, 98 S.Ct. 1355, 55 L.Ed.2d 637 (1978). There the Court held that an agreement among competitors to refuse to discuss prices with customers until after negotiations had resulted in the selection of an engineer restricted trade within the meaning of § 1 of the Sherman Act. The Court reached this conclusion even though the defendant's activity was not express price fixing. Thus the ruling was that the agreement operated as an absolute ban to competitive bidding, as a result of which customers were deprived of the ability to compare prices when selecting engineering services.
It has also been held that price fixing can be shown by direct or circumstantial evidence. Interstate Circuit, Inc. v. United States, 306 U.S. 208, 59 S.Ct. 467, 83 L.Ed. 610 (1939); Edward J. Sweeney and Sons v. Texaco, 637 F.2d 105 (3rd Cir. 1980); Cackling Acres, Inc. v. Olson Farms, Inc., 541 F.2d 242 (10th Cir. 1976), cert. denied, 429 U.S. 1122, 97 S.Ct. 1158, 51 L.Ed.2d 572 (1977). In Interstate Circuit, the Supreme Court stated that "(i) t is elementary that an unlawful conspiracy may be and often is formed without simultaneous agreement on the part of the conspirators." See 306 U.S. at 227, 59 S.Ct. at 474. In Sweeney, the court held that direct proof of an express agreement is not a requisite, that the plaintiff may rely on an inference of a common understanding drawn from basic evidence, although not from mere speculation.
It is also a requisite that the evidence is to be considered as a whole to determine whether a price fixing conspiracy existed and whether defendants were part of that conspiracy. Continental Ore Co. v. Union Carbide and Carbon Corp., 370 U.S. 690, 82 S.Ct. 1404, 8 L.Ed.2d 777 (1962); Cackling Acres v. Olson Farms, supra. In Cackling Acres it was said by this court that "a conspiracy must be judged by its constituent parts and the jury must look at the alleged conspiracy in its totality. A conspiracy may be implied by a course of conduct and other circumstantial evidence." 541 F.2d at 245. This proposition is somewhat fundamental. However, it is entitled to be particularly considered in the case at bar because much of the evidence deals with the raising of prices rather than the lowering of prices. Yet, the fact that there was a secret and well organized effort to fix prices certainly establishes that the defendants were engaged in both as part of the whole scheme. Thus, both the direct and circumstantial evidence in this case overwhelmingly supports the plaintiffs allegations that there was price fixing. A summary of the evidence shows without question that this is true.
One of the witnesses, Dea Entriken, who was formerly assistant Regional Manager of Product Pricing at Champlin, testified at some length that his job at Champlin required him to call competitors and arrange to pull their CPAs and raise the retail price of gas to a certain level at a certain date. Two of Champlin's competitors, Jim Ozment and Robert Alves, also testified to talking with Entriken on the phone for that purpose. Becky Rhoads, who was one of Champlin's pricing clerks, testified that Entriken and his immediate supervisor, Dewey Mason, Champlin's Regional Manager of Product Pricing, were talking to competitors on the phone and were agreeing on prices. Gail Campbell, another of Champlin's pricing clerks, testified that Entriken and Mason were talking with others on the phone in an effort to restore the gas market to normal.
Records which were kept by Entriken during the course of his employment at Champlin, including notes made while he was talking on the phone, revealed his conversations with competitors on the matter of setting future prices. The notes showed such statements as "all are committed," and such and such a company "will move to 31.9," and these companies "will 31."
There was a "talk/no talk" document which had been prepared by Mason and given to Entriken. Entriken testified that the purpose of this document was to distinguish those competitors it was safe to talk with about prices, because they would maintain the confidentiality of the conversations, from those Entriken should not talk with for the opposite reason. Bob Parker of FINA was originally on the "no talk" column. Later, Mason gave Entriken a note which said it was now okay for Entriken to talk to Parker. Entriken testified that after receiving that note he talked with Parker about future price moves.
Mason himself testified that he spent a great deal of time talking to competitors, in an effort to find out what was happening in the market. Mason, however, denied giving and receiving specific information about future price moves.
Entriken and Mason each had approximately 500-1200 phone conversations per month with competitors.
The evidence showed price uniformity between Champlin and its competitors during the relevant period.
Fred King and Sam Olson, King's former supervisor, testified that Champlin and its co-conspirators called them many times to attempt to convince King to eliminate its spot, and King refused.
This evidence strongly supports King's claim that Champlin was involved in a collusive effort to attempt to force King to eliminate its spot by first bringing prices down, and then agreeing to bring prices up, so that King could not sell gas at optimum prices. See