Osborn v. Sinclair Refining Company

171 F. Supp. 37, 1959 U.S. Dist. LEXIS 3534, 1959 Trade Cas. (CCH) 69,365
CourtDistrict Court, D. Maryland
DecidedFebruary 24, 1959
DocketCiv. 9769
StatusPublished
Cited by4 cases

This text of 171 F. Supp. 37 (Osborn v. Sinclair Refining Company) is published on Counsel Stack Legal Research, covering District Court, D. Maryland primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Osborn v. Sinclair Refining Company, 171 F. Supp. 37, 1959 U.S. Dist. LEXIS 3534, 1959 Trade Cas. (CCH) 69,365 (D. Md. 1959).

Opinion

THOMSEN, Chief Judge.

This is a private antitrust suit under 15 U.S.C.A. § 15. Plaintiff claims that his service station lease and dealer’s sales agreement were cancelled by defendant (Sinclair) in furtherance of an attempt by Sinclair to monopolize the sale of tires, batteries and accessories (TBA) to its service station dealers in Maryland and/or a combination or conspiracy between Sinclair and Goodyear Tire and Rubber Company (Goodyear) to restrain trade in those products.

Facts.

Sinclair is a refiner and distributor of petroleum products in interstate commerce.

Sherwood Bros., Inc. (Sherwood), which had originally been an independent distributor of petroleum products in Maryland, became a wholly owned subsidiary of Sinclair in 1935. Thereafter it sold Sinclair petroleum products in most of Maryland and in small areas of adjacent states until the end of 1955, when Sherwood was merged into Sinclair. Since January 1, 1956, Sinclair has conducted, through its Sherwood Division, the business which had previously *39 been conducted by Sherwood. The term Sherwood will be used herein to include both Sherwood Bros., Inc., and the Sherwood Division of Sinclair unless the context otherwise requires.

Before it became a subsidiary of Sinclair, Sherwood had operated service stations with its own employees. About 1936, as a result of the enactment of the Wage and Hour and Social Security laws by Congress and of laws imposing “chain store taxes” in many states, Sinclair and Sherwood changed to a policy of leasing service stations to dealers. Thereafter Sinclair and Sherwood sought to avoid such control over their service station operations as would make them liable under those statutes.

Plaintiff was employed by Sherwood in 1932 as an attendant, and later as manager of its service station in Reisterstown, Baltimore County, Maryland, at the point where the Westminster and Hanover Roads join to form Reisterstown Road. In 1936 plaintiff leased the station from Sherwood; that lease was cancelled in 1948, and a new lease was executed, which continued on a year to year basis until May 31, 1956, when it was cancelled by Sherwood.

Goodyear is a manufacturer of tires and other products and a distributor of a full TBA line, which includes, besides tires and batteries, all sorts of car and home merchandise, from spark plugs to spot lights and from children’s toys to motor boats and room coolers. Practically all Goodyear TBA sold in Maryland is manufactured outside the state.

Total sales of gasoline in Maryland were 638,000,000 gallons in 1952, 817,-000,000 gallons in 1956. During the same period Sherwood’s tax paid sales in Maryland increased from 77,000,000 to 87,000,000. Fourteen competitive brands of gasoline were sold in Maryland, sixteen of tires and tubes, fourteen of batteries, and numerous brands of oil filters, fan belts, spark plugs, and other TBA items.

In 1954-56 there were over 2,300 service station dealers in Maryland, including 1,000 in the metropolitan Baltimore marketing area, who were primarily engaged in selling gasoline, but also sold TBA. There were about 200 other TBA dealers in the state, half of them in the Baltimore area. There were some 300 service station dealers in Maryland selling Sinclair products, including some 200 in the metropolitan Baltimore district. About 300 other outlets — stores, garages, etc.— sold Sinclair petroleum products.

In 1956 there were 28 establishments selling gasoline in Reisterstown and the surrounding area, of which 22 sold various brands of TBA; there was one automotive supply store. On the Reisterstown Road, in Reisterstown proper, there were two Sinclair stations, two Esso stations, one Sunoco station, and a third large Sinclair outlet.

Goodyear sold TBA to a large number of contract dealers, such as tire stores and service stations, which had a sufficient volume of business to qualify for the various discounts allowed to dealers. All such dealers were billed by Goodyear at the list price less the applicable discount based on the volume of the dealer’s purchases, except that in some cases a greater discount was allowed to meet competition. In addition, Goodyear paid bonuses (really additional discounts) based on total annual purchases. The contract dealers sold retail to consumers and wholesale to smaller service station dealers, tire dealers, truck operators and commercial consumers. Goodyear itself operated stores, which sold wholesale and retail.

While Sherwood operated service stations with its own employees it sold Firestone TBA through those stations. After the stations were leased to dealers Sherwood had an oral arrangement with Firestone under which it received a commission from Firestone in connection with promotion and sale of Firestone products through its lessee-dealers. Sinclair had similar oral arrangements with Goodyear. Some time after Sherwood had become a subsidiary of Sinclair, Sherwood terminated its arrangement *40 with Firestone and made a similar oral arrangement with Goodyear.

In 1944 the Sherwood-Goodyear agreement was reduced to writing in the form of a letter from Goodyear to Sherwood, which read in part as follows:

“We now confirm discussions with you relative to services to be rendered by you during the balance of the year 1944, and thereafter from month to month unless cancelled by •either party on thirty (30) days’ written notice to the other, in promoting the sale of Goodyear tires (casings and tubes), batteries and merchandise listed in Sections I, II and III of our Car and Home Supply Catalog as supplemented from time to time (referred to herein as car and home merchandise), through .such independent resale outlets as are otherwise engaged in or propose to engage in the sale of your products and as are agreed upon in writing with you from time to time.
“During the period mentioned it is understood that you will actively assist us in selling and in promoting the sale of the above merchandise to such customers, and at our request from time to time you will have your field representatives call upon these customers in company with our salesmen and otherwise, and will cooperate and assist us in our efforts to promote and encourage the sale of such merchandise by the customers to whom such sales shall be made by us. The right to accept or reject any order received from any customer shall at all times rest with us.
“You will see that your field offices work energetically with us with the view to assisting us to the fullest practicable extent in perfecting arrangements with all such customers. You will at all times maintain adequate, qualified personnel to render the services called for hereunder regularly and efficiently.”

• The agreement provided that Goodyear should pay Sherwood a 10% commission on tires and batteries sold to Sherwood dealer outlets, a 7%% commission on such products sold to Sherwood distributors, and commissions of 5% to 10% on car and home merchandise. Sherwood was prohibited from paying any part of these commissions to its customers.

Also in 1944 the first written agreements were entered into between Sinclair and Goodyear.

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Related

Campbell Distributing Co. v. Jos. Schlitz Brewing Co.
208 F. Supp. 523 (D. Maryland, 1962)
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207 F. Supp. 856 (D. Maryland, 1962)
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205 F. Supp. 60 (D. Maryland, 1962)
S. Kriete Osborn v. Sinclair Refining Company
286 F.2d 832 (Fourth Circuit, 1961)

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Bluebook (online)
171 F. Supp. 37, 1959 U.S. Dist. LEXIS 3534, 1959 Trade Cas. (CCH) 69,365, Counsel Stack Legal Research, https://law.counselstack.com/opinion/osborn-v-sinclair-refining-company-mdd-1959.