Lee-Moore Oil Company v. Union Oil Company of California, Lee-Moore Oil Company v. Union Oil Company of California

599 F.2d 1299, 1979 U.S. App. LEXIS 14542
CourtCourt of Appeals for the Fourth Circuit
DecidedMay 21, 1979
Docket78-1208, 78-1209
StatusPublished
Cited by36 cases

This text of 599 F.2d 1299 (Lee-Moore Oil Company v. Union Oil Company of California, Lee-Moore Oil Company v. Union Oil Company of California) is published on Counsel Stack Legal Research, covering Court of Appeals for the Fourth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Lee-Moore Oil Company v. Union Oil Company of California, Lee-Moore Oil Company v. Union Oil Company of California, 599 F.2d 1299, 1979 U.S. App. LEXIS 14542 (4th Cir. 1979).

Opinions

WINTER, Circuit Judge:

After defendant Union Oil Company of California (Union) terminated its supply contract with plaintiff Lee-Moore Oil Company (Lee-Moore), Lee-Moore brought this private antitrust action under § 4 of the Clayton Act, 15 U.S.C. § 15.1 The district court granted Union’s motion for summary judgment on the ground that Lee-Moore’s evidence failed to show that it had suffered any damages compensable under the antitrust laws. We disagree. We think that Lee-Moore’s evidence shows injury which, if proved to have been caused by an antitrust violation, would be recoverable under § 4. We therefore reverse and remand for further proceedings.

I.

The relevant background facts are not in dispute. Lee-Moore was formed as a result of a merger in 1972 of four companies which had been “jobbers” in petroleum products — i. e., distributors who purchased gasoline and other petroleum products from oil suppliers and sold them to retail gas stations. One of the four companies, Johnson Oil Company of Sanford, Inc., purchased products from Union under a contract which automatically renewed itself annually unless either party gave written notice of cancellation at least sixty days prior to the anniversary date. Johnson, in turn, sold these products to retail outlets in North Carolina which operated under the Union brand name.

On September 27, 1972, Union gave timely notice of cancellation of its contract with Johnson (now Lee-Moore), effective December 31, 1972. As a result, Lee-Moore was unable to supply Union-branded products to its customers that operated retail stations [1301]*1301under the Union brand name.2 Its evidence shows that it sought alternative sources of supply among the major oil companies, with little success. Amoco was willing to supply a limited amount, but only for resale to a few specified retail stations, since the area was already almost saturated with Amoco-branded stations. The other major oil companies which Lee-Moore contacted refused to supply Lee-Moore under a jobber contract. Thus, except for the few stations which it could supply with Amoco products, Lee-Moore could offer its retail stations only the unbranded products of independent suppliers. In November 1973, Union resumed sales to Lee-Moore as required by the mandatory allocation program of the Federal Energy Office, and since then it has supplied Lee-Moore with the maximum amount permitted under that program. All products so supplied by Union, however, do not carry the Union brand and can therefore be resold by Lee-Moore only to its stations that have switched to independent brand names.

Lee-Moore brought this antitrust action, alleging that the cancellation of the contract was a violation of §§ 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1-2.3 Lee-Moore alleges a conspiracy among the major oil producers, including Union, to create an artificial oil shortage in early 1973 (well before the Arab oil embargo which occurred later in that year). The shortage was allegedly contrived by the producers’ intentional failure to take advantage of federal regulations permitting an increase in oil imports. Lee-Moore contends that one of the goals of this conspiracy was to drive from the market maverick jobbers, such as Lee-Moore, which, through their promotion of fiercely competitive self-service retail stations, tended to depress the price of major brand products.4 Union’s cancellation of its contract with Lee-Moore was allegedly a part of or in furtherance of this conspiracy. While the termination of a supply contract under proper circumstances is not forbidden by the antitrust laws, it is undisputed that a cancellation in the context of the alleged anticompetitive conspiracy would constitute a per se Sherman Act violation. See, e. g., Klor’s, Inc. v. Broadway-Hale Stores, Inc., 359 U.S. 207, 79 S.Ct. 705, 3 L.Ed.2d 741 (1959).

Lee-Moore’s evidence shows various hardships that resulted from the contract termination. It incurred expenses in seeking new contracts with other major oil producers and in helping its retail station customers in switching from the Union brand to Amoco or to an independent brand. Lee-Moore further claims that when it was forced to purchase gasoline from Amoco or independent producers, it paid at least one cent, and at times from five to twenty cents, more per gallon than the current price of Union gasoline. Moreover, those stations that switched to independent brands lost the advantages of Union goodwill, including Union advertising and the use of Union credit cards. Finally, Lee-Moore alleges that certain retail service stations which had purchased Union products from Lee-Moore were unwilling to switch to an independent brand, and they stopped making any purchases from Lee-Moore. Despite these claimed hardships, Lee-Moore has prospered; both its sales and its profits have increased since cancellation of the Union contract.

In granting summary judgment for Union, the district court held that Lee-Moore had not shown any damages recoverable under § 4. 441 F.Supp. 730 (M.D.N.C.1977). This holding appeared to have two separate bases. First, the court ruled that any injury suffered by Lee-Moore was not “competitive injury,” because at all times Lee-[1302]*1302Moore had available to it alternative sources of supply for gasoline and other products. Second, the court noted that Lee-Moore would have sustained the same damages if Union had lawfully cancelled its supply contraot, and it therefore concluded that Lee-Moore could not recover these damages even if it showed that the cancellation was in furtherance of an illegal conspiracy.

II.

We treat the district court’s bases of decision in inverse order. The district court’s ruling with regard to the identity of damages was as follows:

Anytime a business is forced to change suppliers or brand names, it is going to incur some of these costs. These expenses resulted from the plaintiff’s failure to secure a long-term supply contract with the defendant. There are no allegations to the effect that the defendant forced a year-to-year agreement on the plaintiff or that the defendant used the year-to-year contract as a device to lure the plaintiff into an untenable position. In short, these damages could result from even the lawful termination of a supply agreement.

Id. at 739.

This reasoning is based on what we think is an erroneous view of private damage actions under § 4. If Lee-Moore can show damages caused by Union’s antitrust violation, the fact that Union might have caused the same damages by a lawful cancellation of the contract is irrelevant. It is, of course, an established principle that a supplier may lawfully refuse to deal with a customer, so long as the refusal does not involve an illegal combination or agreement. See, e. g., United States v. Parke, Davis & Co., 362 U.S. 29, 80 S.Ct. 503, 4 L.Ed.2d 505 (1960); United States v. Colgate & Co., 250 U.S. 300, 39 S.Ct. 465, 63 L.Ed. 992 (1919). But we fail to understand how this principle can limit a plaintiff’s right of recovery under § 4 once a Sherman Act violation is established.

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Bluebook (online)
599 F.2d 1299, 1979 U.S. App. LEXIS 14542, Counsel Stack Legal Research, https://law.counselstack.com/opinion/lee-moore-oil-company-v-union-oil-company-of-california-lee-moore-oil-ca4-1979.