Court Opinion

ID: 9449706
Source: CourtListenerOpinion
Date Created: 2023-08-04 16:20:03.890081+00
Date Added: 2024-06-11T17:31:56.838003
License: Public Domain

*576HAYNSWORTH, Circuit Judge
(dissenting) .
I am unpersuaded that the views of my Brothers are correct. Though respectful of their views, I am impelled to dissent.
This is no ordinary refusal-to-deal case in which the whole answer is clearly illumined once the case is properly placed with reference to the line that marks the difference between Colgate1 and Parke-Davis.2 Nor is it a case for a mechanical application of the usual rule that damages flowing proximately from a violation of the antitrust laws are recoverable in a civil action. The tie-in arrangement involved is not the usual one, lacking both fairness and economic justification, and the legal consequences of its employment need not be considered without regard to its unusual redeeming qualities. This is not a case in which the asserted right is advanced defensively for the protection of small dealers against the predatory acts of giant suppliers; the asserted right is advanced as a sword to eviscerate the rights of a patient supplier for the unjust enrichment of a studiously and aggressively disloyal dealer.
I have little quarrel with the legal principles advanced by the majority. Our differences stem originally from the difference in the perspectives from which we view largely undisputed facts. The facts, which so greatly influence our judgments, need some restatement from the point of view of the dissenter.
Sinclair was a well-established but far from dominant distributor of petroleum products for industrial, home and automotive uses.3 It was also a distributor of TBA to such an extent that there was evidence that Goodyear TBA had become “synonymous” with Sinclair. Earlier, it had comparable arrangements with Firestone, but at the relevant times, it was operating under contracts, originally negotiated in 1944, with Goodyear. Under these, contracts, it purchased tires, tubes and batteries from Goodyear, upon orders from its franchised dealers, and resold them to its dealers. On other accessories ordered through it, it received commissions of 5-10% from Goodyear on sales to Sinclair dealers.4 In the written 'agreements with Goodyear, it was explicitly stated that Sinclair would assist Goodyear solicitation of Sinclair dealers, but assumed no obligation to do more, and it was expressly understood that Sinclair would not bring pressure of any kind upon any of its dealers who did not buy Goodyear TBA. At the same time, Goodyear reserved the right to make direct sales to Sinclair dealers, particularly those Sinclair dealers who were existing customers of Goodyear, without obligation to Sinclair.
Sinclair’s arrangements with Goodyear display a concern for the independence of *577Sinclair dealers and for independently-established business relations between Sinclair dealers and Goodyear. Still, it is hardly to be denied that under the Goodyear agreements, in effect for many years, Sinclair was a distributor of TBA as it was a distributor of petroleum products. It was not engaged in the manufacture of TBA, but it does not appear, either, that it was the producer of all of the petroleum products it distributed. Unquestionably, its major business was the distribution of petroleum products, but it was also engaged in the related and ancillary business of distributing TBA through substantially the same retail outlets supplying petroleum products to the automotive trade.
That it was a distributor of TBA as well as of petroleum products is demonstrated by the history of its relations with the plaintiff, Osborn. That history introduces Sinclair’s role as lessor which underlies my difference with the majority.
In 1932, Sinclair 5 controlled and operated, as lessee, a service station in the downtown section of Reisterstown, in Baltimore County, Maryland, said to be the most desirable service station site in the area. In that year, it employed Osborn as an attendant at that service station. Later he became its manager, and, in 1936, its sublessee. Osborn continued to operate that station as Sinclair’s lessee until May 31, 1948, when the first lease was effectively cancelled. Before the cancellation date of the first lease, however, a second lease, on a year to year basis, had been negotiated, and that lease became effective on June 1, 1948.
Contemporaneously with the execution of the second lease on May 4, 1948, the parties executed a “Dealers Sales Agreement,” which, in effect, was a requirements contract by which Sinclair agreed to sell and Osborn agreed to purchase his requirements of Sinclair’s petroleum products for resale on the leased premises. At the same time, as more fully disclosed in the earlier opinion of this Court, Osborn placed a substantial order for Goodyear TBA, and there was an understanding that he would purchase in the future larger quantities of Goodyear TBA than theretofore.
In 1953-4, the old service station building was demolished and a new modern building and facilities were erected and installed in the place of the old at a cost to Sinclair in excess of $31,000. The new building and facilities included space and equipment for the storage, handling, sale and installation of TBA as well as of petroleum products. It was not constructed just as a gasoline filling station, but as a retail outlet for TBA as well as of automotive petroleum products.
Under the lease, however, the rental payable by Osborn to Sinclair was computed at the rate of 1% cents per gallon of motor fuels sold. There was a provision for a minimum monthly rental of $400, but that provision was never enforced. Under the lease, Osborn paid no rental measured by his sales of TBA at the service station or by Sinclair’s cost of the space, facilities and equipment provided him for the conduct of the TBA business. However, it is plain that Sinclair expected some return on the TBA business conducted on the premises by reason of anticipated purchases by Osborn through it of Goodyear TBA, with respect to which Sinclair had a gross return of ten per cent.
When, therefore, Sinclair spent substantial capital funds to provide space and equipment for the retail marketing of the TBA it distributed, and undertook to distribute TBA to all of its automotive outlets for petroleum products, it seems unrealistic to say that Sinclair was in the business of distributing petroleum products but not TBA. It was in each of these related and complementary businesses.
Undoubtedly, cancellation of the first lease in 1948 was attributable in part to *578Osborn’s TBA operations. In 1946, he began the operation in Reisterstown of a Firestone store, in which he handled a full line of Firestone TBA. Later, in 1950, he opened another Firestone store in Westminster. Because of his operation of the Firestone stores, he could earn quantity discounts from Firestone, unavailable from Sinclair, if he utilized the service station as an adjunct to his Firestone stores and as an additional outlet for his Firestone TBA. That, he did. It abundantly appears that at the service station he aggressively promoted the sale of Firestone TBA, and that he did not aggressively press the sale of Goodyear TBA. At one time he agreed to carry both and let his customers choose between them, an arrangement which was acceptable to Sinclair. Osborn did not perform that agreement, as clearly appears from the fact that his sales of Firestone TBA at the service station continued at a rate ten times larger than his sales of Goodyear TBA.6 It is thus plain that Osborn was using Sinclair’s service station as an additional outlet for his Firestone stores in competition with his lessor, which was in the competing business of distribution of Goodyear TBA.
That Osborn’s primary concern after 1946 was his Firestone TBA business is illustrated by his insistence that, after his second lease was cancelled in 1956, he could not accept another available service station for it “would not have been suitable for [my] TBA business.” Some months later, in 1957, he did obtain a lease of a Shell station, approximately half a block from the Sinclair station he had previously operated. The Shell station, he said, was a less desirable location as a retail outlet for gasoline, but it was “suitable” for his Firestone TBA business, and, since, he has operated that as another retail outlet for his Firestone stores as well as a retail outlet for Shell gasoline.
Osborn’s sales of gasoline peaked in 1946, reaching a level in that year he never again approached. It was in that year he opened the first of his competing Firestone stores. The facts that his gallonage sharply declined thereafter and that he bought so little Goodyear TBA led to the cancellation of the first lease. Upon his importunities, however, he was. given a “second chance” to do better, and the second lease with the related petroleum requirements contract and TBA understanding were concluded. Though Osborn apparently continued as before, Sinclair, in an effort to improve the productivity to it of its real estate, spent in 1953-4 $31,000 of its funds in the construction of a new gasoline-TBA service station. Osborn’s sales of gasoline and Goodyear TBA did not thereafter attain the expected improvement. In 1955, in fact, Sinclair suffered a net rental loss of $1,586.00 on the Osbom service station; that is, its costs as primary lessee exceeded by that amount its rental receipts from Osborn, its sublessee.
Sinclair would not have suffered such rental losses if Osborn had sold more Sinclair gasoline or it would have been compensated for them if Osborn had sold, from the service station, more Sinclair-Goodyear TBA. Whether his disappointing gallonage was due to preoccupation with his Firestone TBA business conducted at his two Firestone stores and at Sinclair’s service station, we need not speculate, but the fact is, as the District Court found, that Sinclair was abundantly justified in believing that Osborn was selling too little gasoline and too little Sinclair-Goodyear TBA on the leased premises. It, therefore, cancelled the lease.
The humans who represented Sinclair could not disassociate in their minds the separate phases of Osborn’s shortcomings, and they did not undertake to do so. However poor his performance as a retailer of Sinclair’s gasoline, his abys*579mal performance as a retailer of Sinclair-Goodyear TBA could not but have affected their judgment. Necessarily, this was the case in 1948, when the effect of his competing interest in Firestone TBA was apparent, and in all subsequent years. Whether Sinclair acted in 1948, 1956, 1957, or any subsequent year to reclaim its real estate for the purposes for which it acquired it, it could not be expected to act on the basis of Osborn’s indifference in the marketing of Sinclair gasoline without regard to his aggressive antagonism in the marketing of Sinclair-Goodyear TBA.
Under these circumstances, questions arise which require answers which are not supplied by reference to usual refusal-to-deal cases or to cases of unmitigated tie-ins. No one disputes the fact that Sinclair acquired and developed this service station site, at considerable expense to itself, as a retail outlet for its products. Everyone agrees that Sinclair in 1948, or in any year thereafter, could lawfully have terminated Osborn’s lease because of his indifference to Sinclair’s interest. The question then is whether § 1 of the Sherman Act prevents a lessor’s resort to his contractual rights because his lessee compounds indifference to, and neglect of, the interests of his lessor with aggressive defiance of the lessor and its interest. The opinion of the majority does not face the question, but is its teaching that a lessee may obtain legal occupancy of his lessor’s premises upon representations of his intention to serve the lessor’s purposes and, thereafter, by aggressive diversion of the lessor’s real estate to the incompatible purposes of the lessee, gain the right to dwell in the house of the lessor forever, or for a period of time to be determined by a court?
This is not the kind of tying agreement which serves “hardly any purpose beyond the suppression of competition.” 7 Sinclair acquired control of the site and spent substantial sums improving it for the purpose of employing it as an effective retail outlet for the petroleum and TBA- products it distributed. That was a lawful purpose, and there was nothing unlawful in the undertaking ■ to realize it through a sublease to an operator whose anticipated profits would provide an effective incentive for efficient operation and sales promotion. Sinclair’s lawful purpose would be thwarted, however, if the lessee were free to devote Sinclair’s real estate to purposes inconsistent with or antagonistic to Sinclair’s.
Thus the petroleum products requirements contract was executed at the same time as the lease. That requirements contract has not been attacked by the plaintiff, though if Osborn had been operating on premises in which Sinclair had no interest, the requirements contract would be illegal under the explicit holding of Standard Oil Company of California v. United States, 337 U.S. 293, 69 S.Ct. 1051, 93 L.Ed. 1371. It has not been attacked here or elsewhere, for the fact that the supplier, as owner of the fee or primary lessee, controls the real estate makes a large and obvious difference. A supplier cannot lawfully, through requirements contracts, exclude its competitors, from retail outlets owned and controlled by its customers; it can do so from retail outlets owned and controlled by it and operated by its lessees. Thus if Osborn had undertaken to use Sinclair’s service station for the retail marketing of Standard Oil’s gasoline, rather than Sinclair’s, no one suggests that Sinclair could not, for that reason, have exercised its contractual right to cancel the lease at the expiration of the current term.
The TBA understanding is in precisely the same posture as the petroleum products requirements contract. The 1948 lease would not have been executed without it. The only difference is that here there was no requirement of exclusivity. The lessee was free to deal in competing TBA products and was required only to *580handle a reasonable amount of Sinclair distributed Goodyear TBA. Surely, however, the vague and relaxed requirements of the TBA agreement do not bring it into conflict with the antitrust laws when the gasoline requirements contract is not invalidated by its stringent, exclusive terms.
Incidentally, it may be observed that the record is devoid of any basis for a suggestion that there was any tie of TBA to the sale of gasoline, or other petroleum products. In our earlier opinion it was said that the “TBA was tied to the lease and the sale of the gasoline,” which is true in the sense that they were all of the same package, but it is clear that the only tying product was the real estate and its lease. TBA and gasoline were tied to each other only in the sense that each was tied to the lease. Gasoline and TBA were tied products. Neither was a tying product. The plaintiff, indeed, has not claimed that the sale of TBA was tied to the sale of gasoline. He positively affirms the absence of any such tying agreement. He does say that TBA was tied, or attempted by Sinclair to be tied, to the lease, and that is true. Thus, with respect to the tying agreements, TBA and gasoline stood in the same relationship to the lease, and, except that gasoline was more closely tied, the companion agreements are indistinguishable.
Indeed, there is no suggestion in the record that Sinclair ever refused to sell gasoline to Osborn, or that it would not willingly have sold him all the gasoline he would buy for resale on premises controlled by him, and without reference to TBA. All that Sinclair did was to terminate the lease and the related agreements for the supply of merchandise to be resold on the leased premises. Sinclair repossessed its real estate, which it thought, with reason, Osborn had been misusing. It did nothing more.
Under these circumstances, and I see no real room for dispute over the facts, I would have found no violation of the antitrust laws were it not for Sinclair’s coercive pressures upon Osborn, during the term of the lease, in an effort to exact from him a more definite commitment as to TBA and to enforce the agreement it obtained.8 If, however Sinclair ought not to be allowed, during the term of the lease, to coerce acceptance and performance of a more definite agreement more favorable to Sinclair. Osborn’s complete remedy is the recovery of the provable damages he suffered because of his partial, but niggardly, performance of the exacted agreement. Sinclair’s wrong, relatively trivial in comparison with Osborn’s, gave Osborn no vested right to continue his misuse of Sinclair’s real estate, beyond the term of the lease.
If, as appears to me, the original tie of TBA to the lease stands on the same legal footing as the original tie of gasoline to the lease and neither was unlawful, Sinclair had a right to condition a renewal of Osborn’s lease upon his acceptance of a new TBA agreement providing greater protection for Sinclair’s interest and assuring Osborn’s observance of it. Sinclair acted prematurely and, because it did, damages are being imposed upon it, *581but having been penalized for its haste, it ought not to be deprived of its contractual rights, the exercise of which offends no law. If, one month before the expiration of Osborn’s lease, Sinclair had physically seized the service station and excluded Osborn from it, Osborn would have been entitled to the damages he suffered during the remaining month of the term, but to no more. Such a wrong by Sinclair would not have conferred upon Osborn a right to a renewal of the lease. Though Sinclair’s wrong here be termed a violation of the antitrust laws, its later cancellation of the lease was not its product, and denial of its lawful, contractual rights, is not an appropriate penalty.
While one of the coercive measures employed by Sinclair was a threat to cancel the lease, cancellation of the lease was not a product of the threat. The threat and the cancellation were products of Osborn’s misuse of the real estate. If the threat was a premature excess for which Sinclair must make recompense, it did not inject illegality into the cancellation. Had there been no threat, Sinclair would have had the unquestioned right to cancel the lease at the end of the current term. A premature, conditional statement of an intention to exercise the legal right does not work a forfeiture of the right.
In Dantzler v. Dictograph Products, Inc., 4 Cir., 309 F.2d 326, we recently dealt with a somewhat similar problem. At a time when it had two dealers in Charlotte, it supplied services to one which it did not offer the other, Dantzler. Shortly thereafter it terminated Dantzler’s agency. The discrimination in services we held to be a violation of the antitrust laws and Dantzler was allowed to recover the damages he sustained by reason of the discriminatory acts. He was not allowed to recover damages flowing from the termination of his agency, however. Though the termination of his agency was a much more obvious discrimination than the offer of disparate services and its effect upon Dantzler much more calamitous, Dictograph had a right to terminate and its previous violation of the antitrust laws did not make unlawful its exercise of that right.
Emich Motors Corp. v. General Motors Corp., 340 U.S. 558, 71 S.Ct. 408, 95 L.Ed. 534, is inapposite. There, a dealership was cancelled in furtherance of a conspiracy in restraint of trade, an offense for which General Motors had previously been criminally convicted. The Supreme Court was concerned only with an evidentiary question, but it left in effect a judgment awarding damages arising out of the cancellation. Unlike the tie-ins here, however, the criminal conspiracy was without legal or economic justification. It had no redeeming qualities. The cancellation, there, was the product of the conspiracy, while the cancellation of the lease here was the product not of Sinclair’s efforts prematurely to coerce Osborn, but of Osborn’s misuse of Sinclair’s real estate. Emich, of course, involved no question of limitations upon a landowner’s use of his own real estate.
I find nothing in the antitrust laws which prevents the owner of real estate from insisting it be devoted to the lawful purposes of the owner. If the owner overreaches himself by compelling a modification of the agreement during the term of a lease it may be liable for those damages immediately flowing from its overreaching, but it does not lose its right, at the end of the term of the lease, to repossess its own real estate and redevote it to the purposes for which it had been acquired and improved. Particularly, in the light of Osborn’s aggressive diversion of the real estate to the service of his conflicting interests and his consistent subordination of the interests of the lessor, I find no basis for a conclusion that the lessor had no right to cancel the lease in accordance with its terms.
I, therefore, dissent.

. United States v. Colgate & Company, 250 U.S. 300, 39 S.Ct. 465, 63 L.Ed. 992.

. United States v. Parke, Davis & Co., 362 U.S. 29, 80 S.Ct. 503, 4 L.Ed.2d 505.

. It is important to remember that the District Court found, with abundant support, that Sinclair had no monopoly power, engaged in no conspiracy or attempt to monopolize, and did nothing to unreasonably restrain trade in any, product.

. During the Sherwood era, Sherwood did not purchase tires, tubes or batteries, but received commissions on purchase orders for those goods, routed through it by its dealers, as Sinclair did on other accessories. Sherwood passed from the picture in 1955, however, and the governing Goodyear agreements at the time of the cancellation were Sinclair’s, not Sherwood’s.

. Actually Sherwood, Sinclair’s predecessor, but, for convenience, we refer to Sinclair whether the immediate actor was Sinclair or its predecessor-subsidiary, Sherwood,

. There is no suggestion that Firestone enjoys any such public acceptance over Goodyear that, if a choice were given each customer, any such ratio of sale8 could have resulted.

. Standard Oil Company of California v. United States, 337 U.S. 293, 305, 69 S.Ct. 1051, 93 L.Ed. 1871.

. That agreement was to carry both Goodyear and Firestone TBA and let each customer choose between the two.
A reader of the opinion on the first appeal may find in it more than I indicate. Many conferences and a voluminous correspondence among the members of the panel which heard the first appeal influence my understanding of what was intended to be decided on the first appeal. All of that may now be irrelevant, and I accept the result of the first appeal. The present issue of Sinclair’s liability for damages flowing from the lease cancellation, however, involves more than the quantum of the damages. Resolution of the substantive issue should be governed by the facts as they appear in the record, and our view of them need not be limited by what was said or not said in the first opinion. In dealing with them and their legal consequences, as I see them, I have not felt required to conform my statement of the record facts and of my present views to everything that was said in all of its possible implications in the first opinion. Indeed, with the same case now before us again, we are free to modify in any appropriate way anything said in the first opinion.