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SANO PETRO. CORP. v. AMOCO

September 13, 1960

SANO PETROLEUM CORPORATION, Plaintiff,
v.
AMERICAN OIL COMPANY, Defendant



The opinion of the court was delivered by: ZAVATT

This is an action for damages brought by Sano Petroleum Corp. ('Sano'), a former wholesale distributor of gasoline, *fn1" against American Oil Co. ('American'), a refiner of gasoline and one of the 'major oil companies' whose activities are nation-wide. The complaint is grounded upon section 2 of the Clayton Act, as amended by the Robinson-Patman Act, 15 U.S.C.A. § 13, and section 4 of the Act, 15 U.S.C.A. § 15, which are quoted elsewhere in this opinion. In substance, the plaintiff alleges in its complaint that price discriminations practiced by American were such as to substantially lessen competition and tended to create a monopoly and tended to destroy, injure and prevent competition, and that the plaintiff was injured in its business and property within the meaning of the Robinson-Patman Act. However, at the trial and in its post-trial memorandum, the plaintiff stresses injury, destruction or prevention of competition rather than creation of a monopoly or substantial lessening of competition. The complaint prays for treble damages in the sum of $ 1,500,000 but, in the plaintiff's post-trial memorandum, the alleged normal damages have been reduced to a total of $ 48,329.48 which, trebled, amounts to $ 144,988.44. The plaintiff also seeks reasonable attorneys' fees to be fixed by the court. The defendant denies the material allegations of the complaint and asserts a counterclaim for the sum of $ 2,084.44 with interest from April 15, 1954 as the unpaid balance for goods sold or delivered by the defendant to the plaintiff. The plaintiff admits that the defendant is entitled to recover on its counterclaim.

In order to appreciate the facts it is necessary to have a picture of how American markets its gasoline and the part that Sano played therein. *fn2" American's gasoline comes mainly by ocean tanker from the producing fields of the Southwest and arrives at American's terminal in Carteret, New Jersey, from which it is barged to various bulk plants which serve as distribution points for particular localities. For example, American's bulk plant in the Greenpoint section of Brooklyn services the whole of Long Island as well as the southern part of Manhattan. American markets its gasoline from these bulk plants in two different ways. Firstly, it markets through distributors, each having its own tank trucks and its own territory, who receive gasoline at an American bulk plant and resell it to dealers and commercial consumers in their respective territories. In the industry a distributor is one who purchases gasoline from a supplier, such as American, and resells the same either to a dealer or to a consumer; a dealer is one who purchases gasoline either directly from a supplier such as American, or through a distributor, such as Sano, and resells it to the ultimate consumer; a consumer is one who purchases gasoline either from a supplier or a distributor or a dealer for his own use and not for resale. Secondly, it sells directly to some large commercial consumers. As to such sales, American generally hired an agent to transport its gasoline, in trucks owned by the agent, to the place of business of these customers. *fn3" Thus, American's general pattern of marketing (which appears to be the general pattern in the industry) is supplier -- distributor -- dealer -- consumer, with the pattern shortcircuited in the case of large consumers, to whom American sells directly. The pattern just outlined is not rigid and there is nothing to prevent a supplier, such as American, from selling directly to a retail dealer. *fn4" Nor is there anything in the abstract that prevents a distributor, such as Sano, or even a retail dealer, from selling to large commercial consumers.

In the distribution of American's gasoline, Sano served a dual function. Beginning in 1936, Sano acted as a wholesale distributor, buying gasoline from American and reselling it to its own customers in its 'non-exclusive' territory of Brooklyn and Queens. In addition, Sano served as a cartage agent of American, delivering gasoline in behalf of American to American's own large commercial consumer accounts in the Brooklyn-Queens-Nassau area. Sano contends that the discriminatory prices, on which it grounds its complaint, were charged during the period from April 10, 1948 to April 10, 1953. During this period, hereinafter called 'the period in question', there was in effect a contract between Sano and American under which Sano agreed to buy from American and American agreed to sell to Sano all of Sano's requirements of gasoline for resale. Sano's customers were, in the main, service stations or dealers who sold American gasoline at retail, although Sano did have some consumer accounts. The contract limited Sano's resale of American gasoline to the territory of Brooklyn and Queens. In fact, however, Sano had a few customers outside of this area. Sano's right to sell American gasoline in the Brooklyn-Queens area was not exclusive, i.e. the contract did not prevent American from selling to other distributors in the Brooklyn-Queens area or from selling directly to its own customers in that area. During the period in question American did not sell to other distributors for resale in the Brooklyn-Queens area but it did sell directly to its own accounts in that area. In the main, it is because of direct sales by American to its own accounts in this area that plaintiff seeks damages. In the distribution of its gasoline throughout other Boroughs of New York City and the rest of the Metropolitan area, American followed a similar pattern of non-exclusive distributors and cartage agents. One of these distributors picked up gasoline at American's bulk plant in Brooklyn, to a limited extent and for a limited period of time, for resale outside the area. Others picked up gasoline from American's bulk plants in Mount Vernon, New York and elsewhere and sold it to its customers outside of the area.

 By the terms of the distributorship contract, the quantities of gasoline to be sold by American to Sano to fulfill its entire requirements for resale to customers of Sano was specified to be the quantities that Sano needed for resale to customers whose names were set forth in a schedule attached to the contract. If Sano wanted to add a new customer, it was required to obtain approval of American. During the period in question Sano added forty new customers. There was no evidence at the trial as to whether American ever disapproved a potential customer whose name was submitted to it by Sano. At the trial it appeared that, whenever Sano dropped a customer it served written notice upon American and that, during the period in question, it so dropped thirty-four of its named customers. There was no evidence that any customer of Sano ever became a customer of American, or vice versa, during the period in question. Although the contract did not specifically require Sano to solicit new customers, such a requirement may be fairly inferred from the provision of the contract which required Sano to use reasonable efforts to increase the sale of American products in the Brooklyn-Queens area.

 The contract did not establish a fixed selling price. Rather, it provided a formula for determining the selling price by reference to a fluctuating price known as the 'posted tank wagon price'. This tank wagon price is the price at which American suggests its purchasers should sell American gasoline to their retail dealers. During the period in question, the price to Sano was this tank wagon price less a discount fluctuating between 2.5 cents and 3 cents per gallon and Sano purchased a total of 15,091,107 gallons of 'American' brand of the defendant's gasoline.

 American's price to other distributors in other parts of the Metropolitan area was similarly determined. However, the discount given and therefore the net price to all distributors throughout the entire Metropolitan area was not the same. The only sales to other distributors on which the plaintiff bases any part of its claim to damages were those by American to the distributor Uneeda Gas and Oil Corp ('Uneeda'). Uneeda was American's non-exclusive distributor in the northern Manhattan-Bronx area and maintained its own bulk plant in Mount Vernon, New York. It bought American gasoline at American's terminal in Carteret, New Jersey, and transported the same in its own barges to its bulk plant. It received the same distributor's discount from the posted tank wagon price as that granted to Sano. But, in addition, Uneeda was granted an additional discount of 1/2 cent per gallon for picking up the gasoline in its own barges and delivering it to its own bulk plant. Sano does not claim that this added discount is not cost justified. However, from April 10, 1948 to December 31, 1949, Uneeda picked up daily at American's Brooklyn bulk plant one truckload (1,500 to 1,920 gallons) of gasoline on which it was granted the same additional discount of 1/2 cent per gallon that it received on the gasoline that it barged from Carteret, New Jersey. During this period Uneeda purchased from American a total of 3,747,706 gallons of 'American' brand gasoline of which 259,440 gallons were picked up at American's Brooklyn plant. The additional discount allocable to the gasoline picked up at the Brooklyn plant amounted to $ 1,297.20. None of the gasoline purchased by Uneeda from American was resold in the Brooklyn-Queens area. All of it was sold in Uneeda's non-exclusive area in the northern Manhattan-Bronx area. There is no proof that Sano sold 'American' brand gasoline in Uneeda's area. During this period Sano purchased from American 5,200,379 gallons of 'American' brand gasoline.

 American's price to its large commercial consumers in the Brooklyn-Queens area was also at a discount from the posted tank wagon price. *fn5" The discount differential (between the discount granted to Sano and the discount granted to large commercial consumer accounts of American) as to which Sano complains are the discounts granted by American to Metropolitan Distributors, Inc. ('Metropolitan') and Swift & Co. ('Swift'). As to sales to Metropolitan, Sano complains of price discrimination during the period January 1, 1950 to April 10, 195o. However, since Sano computes its damages on the basis of the number of gallons that it bought from American rather than the number of gallons that American sold to any alleged favored buyer and since it complains of discounts granted to Swift from January 19, 1953, the court, in order to prevent a duplication of alleged damages, construes Sano's complaint with reference to the sales to Metropolitan to cover the period January 1, 1950 to and including January 18, 1953. During this period Metropolitan purchased from American approximately 6,000,000 gallons of 'American' brand of gasoline and Sano purchased approximately 9,000,000 gallons of the same brand of gasoline. Metropolitan was a truck rental concern. *fn6" The price at which it leased its trucks to its customers included gasoline and service. If one of its lessees bought gasoline elsewhere (as it had a right to do) instead of having it supplied by Metropolitan, Metropolitan credited it for the gallonage so purchased on the basis of Metropolitan's cost of gasoline rather than the retail price which the lessee paid at some retail gasoline station. *fn7" Metropolitan never resold any of its gasoline to dealers or others, unless the terms of its truck-rental leases must be deemed to constitute a sale of gasoline to these lessees. During the period in question American was not the only major oil company supplying gasoline to Metropolitan. It was a price conscious company and shopped around for the most favorable terms. It had its own tank trucks and pursuant to the terms of the contract with American took delivery of 'American' brand gasoline at American's bulk plant in Brooklyn where title to the gasoline passed. The normal discount from the posted tank wagon price allowed to Metropolitan differed from that allowed to Sano as follows: Period Metropolitan Sano ////-- // ////////-- //-- 1-1-50 to 4-24-50 1.75 cents 2.5 cents 4-25-50 1.75 " 3.0 " 4-26-50 to 9-14-50 1.75 " 2.5 " 9-15-50 to 5-12-52 1.75 " 2.6 " 5-13-52 to 6-30-52 1.85 " 2.6 " 7-1-52 to 1-18-53 1.90 " 2.6 " However, by a separate contract dated three days later than the contract to purchase, Metropolitan was paid 1 cent per gallon 'cartage' for picking up its own gasoline at the Brooklyn bulk plant of American whereas Sano (which likewise picked up its own gasoline at the same bulk plant) was given no such allowance. Under the terms of the contracts to sell between American and Metropolitan and American and Sano 'delivery' was completed and title passed at American's bulk plant. The cartage contract between American and Metropolitan *fn8" was not what it purported to be. The court construes the contract to sell and the cartage contract between American and Metropolitan as one transaction and to constitute a discount allowance to Metropolitan greater than that granted to Sano. Metropolitan paid less per gallon as follows: Metropolitan's Period Differential / ///-- //////////-- 1-1-50 to 4-24-50 .25 cents 4-25-50 (.25 cents) 4-26-50 to 9-14-50 .25 cents 9-15-50 to 5-12-52 .15 " 5-13-52 to 6-30-52 .25 " 7-1-52 to 1-18-53 .30 "

 Sano also complains of price discrimination by American in its direct sales of gasoline to Swift, a meat packer with several plants in the Metropolitan area. As to these sales the period involved is January 19, 1953 through April 10, 1953. American sold its 'American' brand of gasoline to Swift at the normal discount of 2 cents. During this period American sold the same brand of gasoline to Sano at a discount of 2.6 cents. However, although Sano picked up its purchases of gasoline at American's bulk plant in Brooklyn, American delivered the gasoline purchased by Swift to its plants within the Brooklyn-Queens area. These deliveries were made by various cartage agents of American, including Sano, at a cost to American of 1.1 cents per gallon. Thus, American made 1/2 cent per gallon less on its sales to Swift than on its sales to Sano, and Sano claims this 1/2 cent as a discrimination in price against it. There is no evidence as to the number of gallons of gasoline so sold by American to Swift. During this period, however, American sold to Sano 609,910 gallons of 'American' brand gasoline. There is no evidence that Swift resold any of the gasoline which it purchased from American or that customers of Sano are in competition (actual or potential) with either Swift or Swift's customers.

 Section 2(a) of the Clayton Act, as amended by the Robinson-Patman Act, 15 U.S.C.A. § 13(a) provides:

 'It shall be unlawful for any person engaged in commerce, in the course of such commerce, either directly or indirectly, to discriminate in price between different purchasers of commodities of like grade and quality, where either or any of the purchases involved in such discrimination are in commerce, where such commodities are sold for use, consumption or resale within the United States * * * and where the effect of such discrimination may be substantially to lessen competition or tend to create a monopoly in any line of commerce, or to injure, destroy, or prevent competition with any person who either grants or knowingly receives the benefit of such discrimination, or with customers of either of them: Provided, That nothing contained (herein) shall prevent differentials which make only due allowance for differences in the cost of manufacture, sale, or delivery resulting from the differing methods or quantities in which such commodities are to such purchasers sold or delivered: * * * And provided further, That nothing contained (herein) shall prevent persons engaged in selling goods, wares, or merchandise in commerce from selecting their own customers in bona fide transactions and not in restraint of trade: * * *.'

 Section 4 of the Act, 15 U.S.C.A. § 15, provides:

 'Any person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws may sue therefor in any district court of the United States in the district in which the defendant resides or is found or has an agent, without respect to the amount in controversy, and shall recover threefold the damages by him sustained, and the cost of suit, including a reasonable attorney's fee.'

 The parties are in agreement and the evidence supports the conclusion that American is a person engaged in commerce; that, in the course of such commerce, it sold gasoline of like grade and quality to the different purchasers hereinabove described at different prices that all of the sales and purchases were in commerce; that the gasoline so sold was sold for use, consumption, or resale ...


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