Petition — Hanson v. Shell Oil Co.

0 it U. S.

k U

nec 2 1976

Iu the Supreme C

OF THE

Yuited Staten -

MICHAEL RODAK, JR., CLERK

OcTOBER 'TERM, 1976

>

No. 76-756"

C. O. HANSON,

Petitioner,

Vs.

SHELL Orn CoMPANY,

Respondent.

PETITION FOR WRIT OF CERTIORARI

to the United States Court of Appeals

for the Ninth Circuit

JOHN H. Boong,

Suite 420 Russ Building,

235 Montgomery Street,

San Francisco, California 94/04,

FREDERICK P. FuRTH,

Suite 1330 Russ Building

235 Montgomery Street,

San Francisco, California. 94104,

Rowert L. BLUEMLE,

as ait 400 Financial Center,

Phoenix, Arizona 850! 2,

Attorneys for Petitioner.

PERNAU - WALSH PRINTING CO.- 862 MISSION STREET - SAN FRANCISCO, CA 94105

Subject Index

Page

pn ck cdc vts cht senededtbesdadcsekites es aha

ER, CC Se UI eT Ee TT 2

I ES i kc vnc vccke staan éeecdeaseticdectaume 2

Constitutional and statutory provisions involved ........... 2

ee ee sc edegngs 6eeseecabeoncesence 2

Proceedings in the District Court ...............0.eee0e 2

Proceedings in the Court of Appeals ................... 6

Reasons for granting the writ ..............0seeeeeeees wo §

I. The decision below constitutes an evasion of controlling

Gecisioms by this Court .....ccccccccccccccccccccces 8

A. The decision below constitutes a complete usurpa-

tion of Hanson’s right to a trial by jury as

guaranteed by this Court’s opinion in Continental

Ore Co..v. Union Carbide & Carbon Corp., 370

ely ee ED 6 aCUN Soe ck Sede dee Seddedeeves 10

B. The decision below will seriously undermine the

authority of this Court’s opinion in Zenith Radio

Corp. v. Hazeltine Research, Inc., 401 U.S. 321

SNE. b¢4n4546000s00Rbaadsenne duces ncade nese 19

II. The decision below is contrary to the law prevailing

PRMD. witndecccahendsbmunceadeliacuseces 23

Table of Authorities Cited

Cases Pages

Ansul Co. v. Uniroyal, Ine., 448 F.2d 872 (2d Cir. 1971)

eovt. Genet, OG US. BERS Cea? cccccccicwccavccssscs 24

Beacon Theatres, Inc. v. Westover, 359 U.S. 500 (1959) .... 15

Bigelow v. RKO Radio Pictures, Inc., 327 U.S. 251 (1946) 14

Continental Ore Co. v. Union Carbide & Carbon Corp., 370

is GP CED. aclu casecdcdhcnnaucaceunens 9, 10, 11, 17, 18, 19

Continental-Wirt Electronics Corp. v. Lancaster Glass Corp.,

— ke & ge ff. B = eeerrrrre errr re 23, 24

Dimick v. Schiedt, 293 U.S. 474 (1935) ................. 15

Edwards’ Lessee v. Darby, 25 U.S. (12 Wheat.) 206 (1827) 15

Farmington Dowel Products Co. v. Forster Mfg. Co., 421

Pe ee TEE GA GD ha eencbescdcinccennvgcaceceses 2i

ee ©, Pee, Ge Ba, Gee Ce «5 ccckccidcddncscakdécces 15

Norfolk Monument Co., Inc. v. Woodlawn Memorial Gardens,

it. Te ek Se EE bc eena¢edécaeacsbeuncemasess 16

Perma Life Mufflers, Inc. v. International Parts Corp., 392

RD i tet We aro eeP nip Regge 23

Poller v. Columbia Broadcasting System, Inc., 368 U.S. 464

(RE ee Re EET AT Hy EK ee eS 16

Poster Exchange, Inc. v. National Screen Service Corp.,

456 F.2d 662 (5th Cir. 1972), cert. denied, 423 U.S. 1054

SEE cicuka cd cWeuntedieudccene cist uedbbenedeoeuaseee 24

Radovich v. National Football League, 352 U.S. 445 (1957) 23

Story Parchment Co. v. Paterson Parchment Paper Co., 282

es Se ED wok ccuadcteksatdebassathwaehencaenat 8

United States v. Diebold, Inc., 369 U.S. 654 (1962) ........ 16

Zenith Radio Corp. v. Hazeltin.e Research, Inc., 401 U.S. 321

DL ss0athsenaeaaeel 2, 4, 5, 6, 7, 8, 9, 19, 20, 21, 22, 23, 24, 25

Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U.S. 100

GRD 66:56060dcdcucdécdcunenuncsescasuceanedeeesndasen 16

TABLE OF AUTHORITIES CITED

Rules

Federal Rules of Civil Procedure: — Pages

BD TEED. 0 cdc cqndereetee ls ove céeusonnces cececces 6

Sy TE. wiinbe 6 cbsde ee Sed dededadecwedescdeuecetéeces 4

Statutes

ey is ED « oba-dee dO SbNe ek dace Scanséaddcsecccs 2

Texts

Timberlake, Legal Injury Requirements and Proof of Dam-

ages in Treble Damage Actions Under the Antitrust Laws,

30 Geo. Wash. L. Rev. 231 (1961) ..............0.005- 21

In the Supreme Court

OF THE

Anited States

OcToBER TERM, 1976

No.

C. O. HANson,

Petitioner,

Vs.

SHELL Or; ComPANY,

Respondent.

PETITION FOR WRIT OF CERTIORARI

to the United States Court of Appeals

for the Ninth Circuit

Petitioner, C. O. Hanson, prays that a writ of

certiorari issue to review the judgment of the United

States Court of Appeals for the Ninth Circuit entered

in this case on September 3, 1976.

OPINIONS BELOW

_ The opinion of the Court of Appeals (Appendix A)

is not yet reported. The District Court wrote no

opinion and trial was had by jury. The District

Court’s judgment is attached as Appendix B.

2

JURISDICTION

The Court of Appeals entered judgment on Sep-

teniber 3, 1976. The jurisdiction of this Court is in-

voked under 28 U.S.C. § 1254(1).

QUESTIONS PRESENTED

1) Whether the Court of Appeals usurped the

function of the jury by reviewing the evidence to con-

clude that a jury instruction contrary to this Court’s

opinion in Zenith Radio Corp. v. Hazeltine Research,

Ine., 401 U.S. 321 (1971), was harmless error.

2) Whether the Court of Appeals has adopted a

rule of law regarding the statute of limitations for

unascertainable damage which is contrary to the law

in other circuits and contrary to this Court’s opinion

in Zenith Radio Corp. v. Hazeltine Research, Inc., 401

U.S. 321 (1971).

CONSTITUTIONAL AND STATUTORY

PROVISIONS INVOLVED

The applicable constitutional and statutory provi-

sions are set out in Appendix C.

STATEMENT OF THE CASK

Proceedings In The District Court

This action was filed on December 23, 1968, by the

petitioner herein, C. O. Hanson (‘‘Hanson”), the

3

former owner of 17 independent gasoline stations and

a wholesale distribution business in Tucson, Arizona,

against Shell Oil Company, Standard Oil Company of

California, and Gulf Oil Corporation. (R. 1)'

At the conclusion of pretrial proceedings the Dis-

trict Court, on July 27, 1970, granted a motion for

partial summary judgment in favor of defendants

Shell Oil Company and Standard Oil Company of

California as to (a) violations of §7 of the Clayton

Act, 15 U.S.C. §18 and (b) all violations of the

antitrust laws occurring prior to December 23, 1964.

(R. 81-82) Partiai summary judgment was also

granted in favor of defendant Gulf Oil Corporation

as to (a) all antitrust violations occurring prior to

December 23, 1964 (R. 78-79) and (b) violations of $7

of the Clayton Act, 15 U.S.C. §18, resulting from

Gulf’s acquisition of Wilshire Oil Company of Cali-

fornia. (R. 91)

On November 3, 1970, a trial commenced before a

jury, on plaintiff’s claims under §$1 and 2 of the

Sherman Act. (R. 94, 1228) The trial consumed 31

trial days and covered over 6,500 transcript pages. At

the close of the evidence, defendants Shell, Standard

and Gulf moved for directed verdicts. The motions

were granted in their entirety as to Gulf. The motions

of Shell and Standard were granted as to Hanson’s

claims of unilateral attempt to monopolize and as to

1As used herein, R.=Record on Appeal; Tr.—=Transeript ; PX==

Plaintiff’s Exhibit; SX=—Shell Exhibit; StdX=Standard Exhibit ;

and App-=Appendix to this Petition For Writ of Certiorari.

Whether the first or second trial is referred to can be determined

by I=First Trial and Il—Second Trial.

4

Hanson’s charges that Shell and Standard conspired

with: or coerced their dealers to agree to fix the retail

prices at which their dealers sold gasoline. (Tr.I

5915-16)

The District Court overruled the balance of the

motions of Shell and Standard and submitted to the

jury Hanson’s claims (1) that Shell and Standard

conspired to fix the prices at which they sold gasoline

to their dealers in Tucson and (2) that Shell and

Standard conspired to monopolize motor fuel in

Tueson, (Tr.I 5916, 6477-599)

On January 11, 1971, after 8 days of deliberation

(R. 1288-95), the jury returned a verdict in favor

of Hanson and against defendants and awarded Han-

son damages in the sum of $363,181.31. (R. 1295, 291)

Defendants Shell and Standard then moved to set

aside the jury’s verdict and enter judgment notwith-

standing the verdict or, in the alternative, for a new

trial pursuant to Fed. R. Civ. P. 59. (Tr. Verdict

pp. 4-7)

On February 19, 1971, the District Court denied the

motions for judgment potwithstanding the verdict but

granted the motions of Shell and Standard for a new

trial. (Tr. 2/19/71 p. 37)

Thereafter Hanson settled his claims with Standard

(R. 991-92) and on October 19, 1972, a second jury

trial commenced. At the close of the evidence in the

second trial, Hanson requested a jury instruction re-

citing the rule of law as announced in Zenith Radio

Corp. v. Hazeltine Research, Inc., 401 U.S. 321

4)

(1971), that an overt act in furtherance of the

conspiracy was not necessary within the limitations

period. (Tr.II 3895) The District Court rejected

Hanson’s request (Tr.II 3894-96), and the jury was

charged over objection, as follows:

‘*You have heard throughout the trial the refer-

ences to the date December 23, 1964. That date is

important to this lawsuit because Plaintiff may

recover damages only if you find the Defendant

committed overt acts in violation of the anti-

trust laws after December 23, 1964, and if those

acts injured the Plaintiff. I have permitted you to

hear evidence as to other matters before Decem-

ber 23, 1964, but such evidence was admitted only

as background material which the Plaintiff was

permitted to produce for the purpose of attempt-

ing to show the origins of alleged conduct which

Plaintiff charages occurred after December 23,

1964.” (Tr.II 4314; App. A pp. xviii-xix)

The District Court’s instruction embodied the pro-

posed instruction submitted by defendant Shell.

(Tr.II 1138)

The resulting prejudice to Hanson’s right of recov-

ery was compounded by additional erroneous jury

charges which directed that Hanson failed in his

proof if the jury found the asserted injury-producing

antitrust violations had occurred prior to December

23, 1964. The jury was charged, over objection (Tr.IT

1134), as follows:

“Tn this action the Plaintiff has charged the De-

fendant violated various antitrust laws. If you

find that no such violation took place, or if you

6

find that the actions which may have injured

Plaintiff took place prior to December 23, 1964,

you have no damages.” (Tr.II 4314) (Emphasis

supplied. )

‘Since Plaintiff is claiming as damages the en-

tire loss of his business you must find that the

_ loss was due te acts of the Defendant which oc-

curred after December 23, 1964. If you find that

no act of Defendant occurring after December

23, 1964 was a cause of the loss of Plaintiff’s busi-

ness or a part thereof, then Plaintiff is not en-

titled to recover in this action.” (Tr.II 4319)

(Emphasis supplied.)

On November 22, 1972, the jury returned a verdict

in favor of defendant Shell. (R. 1302, 1192) On Sep-

tember 11, 1973, the District Court entered an Order

and Final Judgment pursuant to Fed. R. Civ. P.

54(b). CR. 1804)

Proceedings In The Court Of Appeals

On October 10, 1973, Hanson filed a notice of ap-

peal. (R. 1226) On September 3, 1976, the United

States Court of Appeals for the Ninth Circuit ren-

dered its Opinion (App. A), holding that the jury

instruction was erroneous because of Zenith Radio

Corp, v. Hazeltine Research, Inc., 401 U.S. 321, 339-

40 (1971), but affirming the District Court having

concluded that

“Nevertheless, the error was harmless.” (App. A

p. xix)

The decision of the Court of Appeals must be read

very carefully to realize that it has in effect

7

overruled this Court’s decision in Zenith Radio Corp.

v. Hazeltine Research, Inc., 401 U.S. 321 (1971). This

is so because the Court of Appeals commenced its

discussion of this point with a correct statement of

the Zenith rule.

“Zenith stands for the proposition that a plain-

tiff may recover for acts violstive of the antitrust

laws commited prior to the statute of limitations

date, but that he may only recover those damages

for such acts which accrued and became ascer-

tainable within the period of the statute. See 401

U.S. at 338-42. Thus, the trial court’s instruction

that the jury had to find an overt illegal act

within the period of the statute was in error;

Hanson could have recovered damages accruing

to him after December 23, 1964, if those damages

were not ascertainable before that date and were

caused by illegal conduct occurring entirely be-

fore that date.” (App. A. p. xix)

However, the Court of Appeals then concluded that:

“Nevertheless, the error was harmless.” (App. A

p. xix)

Following this statement, the Court of Appeals sets

forth in three paragraphs and a footnote its reasons

for concluding that the error was harmless. As shown

by the opinion, the Court of Appeals’ conclusion that

the error was harmless was the result of two tragic

errors:

1. The Court of Appeals usurped the power of

the jury and reviewed de novo the evidence of lia-

bility and the evidence of damage without ever

giving Hanson the benefit of all favorable infer-

ences; and

8

2. The Court of Appeals concluded that the

Zemth rule was either wrong or unfair.

REASONS FOR GRANTING THE WRIT

I. THE DECISION BELOW CONSTITUTES AN EVASION OF

CONTROLLING DECISIONS BY THIS COURT.

In the present case Hanson’s evidence established

that in the period between 1960 and 1962, Shell and

Standard, as a result of a series of meetings and dis-

cussions, adopted a pricing policy designed to foster

a series of price wars which would curtail the growth

and ultimately cause the destruction of independent

gasoline sellers. This was a continuing conspiracy but

one which, once the policies and procedures were es-

tablished, was substantially self executing. Hanson

suffered under this war of attrition until July 1966,

when he was forced to close out his business. Hanson’s

future damage claim was predicated on this Court’s

rule in Story Parchment Co. v. Paterson. Parch-

ment Paper Co., 282 U.S. 555 (1931) (the value of the

business assets less salvage value on termination) or,

alternatively, loss of future profits) In both the

first and second trials the District Court held that be-

cause of Hanson’s past profit picture any claim for

loss of future profits was too speculative.

In so ruling the District Court placed this case

squarely within the Zenith rule, to wit: it was not

until July, 1966, that Hanson could reeover dam-

ages for the destruction of his business based on the

value of his assets less what was salvaged on liquida-

tion.

——

9

Hanson was thus placed in the following position:

His conspiracy evidence was concentrated in the pe-

riod prior to December 23, 1964, but his future dam-

age could not be ascertained until after July, 1966.

The Court of Appeals acknowledged that the Dis-

trict Court’s instruction was an improper statement

of the Zenith rule but (1) usurped the function of the

jury in reviewing the evidence without giving

Hanson the benefit of all favorable inferences and

(2) coneluded that it was wrong to allow Hanson to

recover damages accruing in July, 1966 for the de-

struction of his business. In so doing the decision

below ignored the mandate of this Court in Continen-

tal Ore Co. v. Union Carbide & Carbon Corp., 370

U.S. 690, 702 (1962) that “. . . the jury should be

allowed to determine whether respondents’ conduct

materially contributed to the failure [of plaintiff’s

business] . . .” and the mandate of this Court in

Zenith Radio Corp. v. Hazeltine Research, Inc., 401

U.S. 321, 339 (1971) that ‘‘[i]n antitrust and treble-

damage actions, refusal to award future profits as

too speculative is equivalent to holding that no cause of

action has yet accrued for any but those damages

already suffered. In these instances the cause of ac-

tion for futwre damages, if they ever occur, will accrue

only on the date they are suffered; thereafter the

plaintiff may sue to recover them at any time within

four years from the date they were inflicted.”

10

A. The decision below constitutes a complete usurpation of

Hanson’s right to a trial by jury as guaranteed by this

Court’s Opinion in Continental Ore Co. v. Union Carbide &

Carbon Corp., 370 U.S. 690 (1962).

While holding that the jury imstruction of the Dis-

trict Court was harmless error, the Court of Appeals,

in three paragraphs, summarized its own view of Han-

son’s evidence of illegal acts and damages. In review-

ing the facts the Court of Appeals was in effect ruling

that the District Court should have granted a directed

verdict for defendant Shell. Yet the District Court,

which heard the evidence, did not feel it could grant a

directed verdict or judgment notwithstanding the ver-

dict. Nor did the Court of Appeals even attempt to

give Hanson the benefit of all favorable inferences.

In reviewing the evidence of illegal acts the Court

of Appeals said:

“Hanson alleged, and the evidence showed, that

Shell’s conduct, and its relationship with Stand-

ard, were constant throughout the early 1960's,

and until Hanson’s business demise in 1966. If

Shell were committing illegal acts before the cut-

off date, there is no question that it also commit-

ted those same acts after that date. The jury

heard all of the evidence of both pre-and post-De-

cember 23, 1964, conduct, and by failing to find

any illegal conduct after that date, it must have

also found that there was no illegal conduct be-

fore that date. Thus, the instruction was harmless

error.” (App. A pp. Xix-xx)

This statement of the evidence was vigorously

contested by Hanson at the trial. Contrary to the

‘“‘findings” of the Court of Appeals, the conduct of

11

Shell and Standard was not constant during the pe-

riod before and after December, 1964.

Hanson’s evidence showed that in the latter part

of the 1950’s Shell became concerned over its loss of

market share in Southern California and Arizona to

the ‘‘independents, private brands and cut rate mar-

keters”. (PX 13, 14, 15) Shell concluded that in

order to control the growth of the independents and

regain its market share it should adopt a new pricing

policy.

(1) reduce the differential between regular

gasoline and premium gasoline;

(2) competitively price close to the prices of

the independents; and

(3) reduce the “normal” dealer tank margin

prices.

Shell was to announce this price policy ‘‘officially on

May 17, 1961”. (PX 14) Hanson also presented evi-

dence to show that such a price policy would be too

costly to Shell without the cooperation of the industry

leader Standard. :

Evidence of Standard’s conspiratorial cooperation

consisted of documents showing that Standard was in-

ternally considering the same pricing system prior to

Shell’s “official” announcement of May 17, 1961, even

though this system would be costly to Standard. (PX

154, 158; Tr.II 485-86) Hanson also presented evi-

dence that the Standard and Shell marketing execu-

tives in charge of this new pricing policy met several

times at trade association meetings and at each other’s

12

offices (Tr.II 203, 205-7, 505, 519, 538) and further

showed that one of the many subjects discussed was

the increasing market share of the independents.

(Tr. LT 221-22) Finally, Hanson showed that the result

of Standard’s and Shell’s pricing policies, once adopted

in coneert, was to force the independent marketers

and the retail Shell and Standard operators (almost

all of whom were individual owner operators) to en-

gage in vicious price wars which caused a steady loss

of income and volume to Hanson.

It is important to note that most, if not all, of the

overt acts of Shell and Standard occurred prior to

December 23, 1964. Contrary to the findings of the

Court of Appeals, the jury could have reasonably

found that the relationship of Shell and Standard was

not “constant”, but on the contrary, that all of their

illegal overt acts occurred prior to December 23, 1964.

Not content with a de novo review of the evidence

of illegal acts, the Court of Appeals also usurped Han-

son’s right to trial by jury on the question of damage.

The Court said:

‘Second, even under the Zenith rule, Hanson

would have been limited to recovering damages

which he suffered after December 23, 1964. The

evidence concerning the history of Hanson’s busi-

ness fortunes shows that as early as 1962, Hanson

was trying to get out of the business but was un-

able to find anyone willing to buy him out at any

price. His losses were substantial throughout the

following years. The only reasonable conclusion

that can be drawn is that the value of Hanson’s

business in December of 1964 was no greater than

13

its value in 1966 when he closed up shop. Thus,

whatever damage Shell might have done to Han-

son’s business as a result of pre-December 23,

1964, conduct had acerued to Hanson before that

date, and he may not recover those damages

under the Zenith rule.

“Tt cannot be said that in the year and a half

between December 23, 1964, and the time when

Hanson closed his business Shell’s earlier conduct

cost him lost profits which was damage not accru-

ing until after the crucial date. Hanson’s evidence

shows that in the entire fourteen-year history of

his business, there was not one year in which he

showed a profit, and in only three years did he

make enough to cover even part of the value of

his own time and services. The evidence does not

support the notion that Shell’s conspiracy with

Standard, which Hanson alleges began in 1961,

caused him to lose profits in the last year and a

half of a business which never made a profit in its

entire history dating back to 1952. Hanson’s

losses were no greater after the alleged conspir-

acy began than before.” (App. A pp. xx-xxi)

This is a totally one-sided view of the evidence. It

is true that in 1962 and thereafter Hanson tried to

sell his business. But, there was no evidence that the

business was worthless or that he could not have sold

it for “any price”. Even $10 or $1,000 is some price.

On the contrary, Hanson put in evidence from which

the jury might have concluded that his land and build-

ings were extremely valuable assets. (PX II 102-

119H) This evidence shows that in 1962 Hanson had

an invested cost of $275,000 in 17 stations,

14

The Court of Appeals further “found” that Hanson

had not made any money in his business and “there

was not one year in which he showed a profit”—pre-

sumably relving on the tax returns. (SX II 56 A-F,

62) In fact, the tax returns show that Hanson made

a taxable profit in 1958, 1959 and 1960 (SX IT 55),

that from 1952 to 1957 his taxable losses were only

$19,465 and that this was a period in which he took

substantial depreciation deductions and acquired nine

additiona! service stations. (SX II 56 A-F, 62) A

jury could have found that the early period, despite

tax losses, was a period of growth and investment in

which substantial assets were acquired by Hanson.

As this Court has said it is for the jury to “make a

just and reasonable estimate of the damage based on

relevant data, and render its verdict accordingly.”

Bigelow v. RKO Radio Pictures, Inc., 327 U.S. 251,

264 (1946).

When the Court of Appeals took upon itself the

power to evaluate the evidence of illegal acts and dam-

age it established a dangerous precedent which is con-

trary to the sound antitrust policy established by this

Court.

Rulings of this Court, with respect to the purpose

and role of the jury and with respect to the role of

the appellate courts of review, forcefully indicate that

the Court of Appeals usurped the jury’s province as

trier of fact by refusing to remand this cause for a

new trial.

Jury instructions which withdraw from the jury’s

consideration material evidence have, as a matter of

15

sound historical policy, required a new trial and not

review de novo by the appellate court. The crucial

role and exclusive province of the jury as a trier of

fact is well settled and grounded in roots of ancient

origin. This Court acknowledged Blackstone’s char-

acterization of the jury as “the most transcendent

privilege which any subject can enjoy”, and stated

that the “[m]aintenance of the jury as a fact-finding

body is of such importance and occupies so firm a

place in our history and jurisprudence that any seem-

ing curtailment of the right to a jury trial should be

scrutinized with the utmost care.” Dimick v. Schiedt,

293 U.S. 474, 485-86 (1935). In accordance with this

policy, this Court has held that a charge to the jury

which is misleading in that it withdraws from the

jury’s attention the controlling impact of material evi-

dence, requires a reversal. Hall v. Weare, 92 U.S. 500

(1875); Edwards’ Lessee v. Darby, 25 U.S. (12

Wheat.) 206, 210 (1827).

The application of these principles to private dam-

age suits under the antitrust laws is an essential part

of the Congressional plan for making competition

rather than monopoly the rule of trade. Beacon

Theatres, Inc. v. Westover, 359 U.S. 500, 504 (1959).

On more than one occasion this Court has stressed

the importance of a jury trial in antitrust cases.

“We believe that summary procedures should be

used sparingly in complex antitrust litigation

where motive and intent play leading roles, the

proof is largely in the hands of the alleged con-

spirators, and hostile witnesses thicken the plot.

It is only when the witnesses are present and

16

subject to cross-examination that their credibility

and the weight to be given their testimony can

be appraised. Trial by affidavit is no substitute

for trial by jury which so long has been the hall-

mark of ‘even handed justice.’” Poller v. Coluwm-

bia Broadcasting System, Inc., 368 U.S. 464, 473

(1962).

See also Norfolk Monument Co., Inc. v. Woodlawn

Memorial Gardens, Inc., 394 U.S. 700, 702-703 (1969),

and United States v. Diebold, Inc., 369 U.S. 654

(1962).

In Zenith Radio Corp. v. Hazeltine Research, Inc.,

395 U.S. 100, 123 (1969), Justice White stated that

“(t]he authority of an appellate court when review-

ing the findings of a judge as well as those of a jury,

is circumscribed by the deference it must give to de-

cisions of the trier of the fact, who is usually in a

superior position to appraise and weigh the evidence.”

In Continental Ore Co. v. Union Carbide & Car-

bon Corp., 370 U.S. 690 (1962), plaintiff charged

that defendants, attempted and conspired to monopo-

lize trade and commerce in vanadium, and that, as a

proximate consequence of the defendants’ practices,

plaintiff was eliminated from the business of produc-

tion and sale of vanadium. Trial was had before a

jury and a verdict was returned for defendants.

Plaintiff appealed, asserting error as a result of the

trial court’s exclusion of certain evidence and of cer-

tain jury instructions which had the effect of restrict-

ing the impact of the evidence before the jury. The

ene

17

Court of Appeals for the Ninth Circuit held that there

was insufficient evidence to justify a jury finding that

defendants’ illegal acts were in fact the cause of plain-

tiff’s business failure and that a directed verdict for

defendants should have been granted. The Ninth Cir-

cuit also stated that in reaching its conclusion, it had

considered not only all the evidence admitted by the

trial judge, but also all the evidence offered by plain-

tiffs. Nevertheless, this Court reversed and remanded

the cause to the District Court, noting that “. . . the

Court of Appeals either overlooked or interpreted

into insignificance . . .” evidence adduced at trial.

“Undoubtedly, all of the evidence . . . does not

point in one direction and different inferences

might reasonably be drawn from it. There was,

however, sufficient evidence to go to the jury and

it is the jury which ‘weighs the contradictory

evidence and inferences’ and draws ‘the ultimate

conclusion as to the facts.’ Tennant v. Peoria &

P.U.R. Co., 321 US 29, 35, 88 L ed 520, 525, 64

S Ct 409, 15 NCCA NS 647.

“ .. But the evidence relied up by the court can

just as reasonably be read in a manner favorable

to Continental [plaintiff] and it appears that the

court may have misapprehended significant parts

of this record. In any event, the interpretation

and significance of this evidence were for the

jury.” 370 U.S. 690, 700-01. (Emphasis supplied.)

This is not to say that a Court of Appeals has no

power to review evidence to determine whether an

admitted error was prejudicial. But that power must

be exercised with circumspection.

18

The Court of Appeals for the Ninth Circuit should

have reviewed all of the relevant evidence advanced

by Hanson in the light most favorable to him and

afforded him the benefit of all inferences fairly sup-

ported by it. In Continental Ore Co. v. Union Carbide

d& Carbon Corp., 370 U.S. 690 (1962), as in this ease,

plaintiff’s conspiracy claims were tried before a jury,

and a verdict was returned for defendants. As in

this case, on appeal, the Court of Appeals for the

Ninth Circuit held that there was insufficient evidence

to justify a jury finding that defendants’ illegal acts

were in fact the cause of plaintiff’s failure in business

and that a verdict for defendants should have been

directed. This Court reversed and remanded the cause

to the District Court for a new trial.

“The Court of Appeals was, of course, bound to

view the evidence in the light most favorable to

Continental and to give it the benefit of all infer-

ences which the evidence fairly supports, even

though contrary inferences might reasonably be

drawn, From our examination of the rather ex-

tensive record, we have concluded that the Court

of Appeals departed from this rule and erred in

holding that there was insufficient evidence to

support a finding that respondents’ conduct in

fact caused injury to Continental’s business.” 370

U.S. 690, 696-97. (Emphasis supplied.)

By holding that the erroneous jury instruction was

“harmless” even though it effectively withdrew from

the jury’s consideration evidence of pre-December 23,

1964 acts, the Court of Appeals was in essence holding

that a directed verdict for Shell was proper. But, the

19

District Court, which heard the evidence, had already

refused to direct a verdict for defendant Shell. Con-

tinental Ore teaches that Hanson was entitled to a

review of the pre-December 23, 1964, evidence which

afforded him the benefit of all favorable inferences.

Hanson submits that the review of the pre-December

23, 1964, evidence in the decision below failed to ac-

knowledge this standard and the conclusions regard-

ing this evidence were unwarranted.

B. The decision below will seriously undermine the autLority of

this Court's opinion in Zenith Radio Corp. v. Hazeltine Re-

search, Inc., 401 U.S. 321 (1971).

The decision below, if unreviewed, will create a

precedent for avoiding this Court’s pronouncement in

Zenith regarding the statute of limitations and the

accrual of future antitrust damage claims.

In footnote 9 to its opinion (App. A p. xxi), the

Court of Appeals correctly noted that Hanson had

argued “that the full amount of his damages over

the entire life of the conspiracy were not ascertain-

able until he went out of business... .” This argument

was “rejected out of hand” by the Court of Appeals

with the statement:

“What this argument implies is that efficient and

hard-working independent dealers who make a

profit despite illegal conspiracies directed against

them have no remedy, but incompetents who are

forced out of business can recover, trebled, all

losses ever sustained.” (App. A p. xxi).

In this statement the Court of Appeals reveals its

misunderstanding of, or hostility to, the rule of this

Court as expressed in Zenith.

20

As this Court has noted, a plaiutiff who suffers

damages by reason of a continuing conspiracy is en-

titled to recover not only those damages he sustained

within the limitations period, but also all provable

damages which will flow in the future from the acts

of the conspirators. To recover for these damages

plaintiff must sue within four years of the date the

eause of action accrues to him. However, Zenith makes

it clear that if the future damages are unrecoverable

because the fact of their accrual is speculative, the

cause of action for future damages does not accrue

until the damages occur and are provable.

In holding that an antitrust plaintiff can recover

future damages resulting from conspiratorial conduct

which occurred prior to the statute of limitations

period this Court stated:

“ ..[1)f a plaintiff feels the adverse impact of an

antitrust conspiracy on a particular date, a cause

of action immediately accrues to him to recover

all damages incurred by that date and all provable

damages that will flow in the future from the

acts of the conspirators on that date. To recover

those damages, he must sue within the requisite

number of years from the accrual of the action.

On the other hand, it is hornbook law, in anti-

trust actions as in others, that even if injury

and a cause of action have accrued as of a certain

date, future damages that might arise from the

eonduct sued on are unrecoverable if the fact

of their accrual is speculative or their amount

and nature unprovable. .. .

21

“. . [Refusal to award future profits as too

speculative is equivalent to holding that no cause

of action has yet accrued for any but those dam-

ages already suffered. In these instances, the cause

of action for future damages, if they ever occur,

will accrue only on the date they are suffered;

thereafter the plaintiff may sue to recover them

at any time within four years from the date

they were inflicted.” 401 U.S. 321, 339. (Emphasis

supplied.)

The award of damages for the value of a business

which has been forced out of business by antitrust

violations constitutes a recognized alternative to a

claim for lost future profits. Farmington Dowel

Products Co. v. Forster Mfg. Co., 421 F.2d 61 (lst

Cir. 1969). Moreover, the First Circuit in Farming-

ton, recognized that the appropriate point at which

to measure going concern value is the last day at

which the destroyed business was a going concern.’

Despite the impact Zenith has had on clarifying

the extent o* and point in time at which damages

for the destruction of a business because of pre-limita-

tions period conspiratorial conduct are recoverable,

the Court of Appeals nevertheless held that Zenith

2Commentators have recognized that the rule “that the value of

the property taken or destroyed must be determined as of the

time of the taking” has been applied uniformly in eminent do-

main, tax valuation and admiralty collision cases and its appli-

eation to actions involving the destruction of business by antitrust

violations has been urged. E. Timberlake, “Legal Injury Require-

ments and Proof of Damages in Treble Actions Under

The Antitrust Laws”, 30 Geo. Wash. L. Rev. 231, 280 (1961).

99

did not entitle Hanson to the recovery of any dam-

ages :

“... [|W ]hatever damages Shell might have done

to Hanson’s business as a result of the pre-

December 23, 1964, conduct had acerued to Han-

son before that date, and he may not recover

those damages under the Zenith rule.” (App. A

p. xx)

Hanson submits that in accordance with the Zenith

test the full amount of his damages could not be

ascertained until he actually was forced out of busi-

ness. Zenith teaches that where lost future profits

(or any future damages) are speculative, no cause

of action accrues until they become ascertainable. An

award for the value of a destroyed business consti-

titutes a recognized alternative for a claim of future

lost profits. Zenith makes it clear that a plaintiff may

recover the value of a business destroyed by pre-

limitations conspiratorial conduct because that value

remains speculative until the business has been seld

or abandoned. The Court of Appeals in the decision

below failed to distinguish between damages suffered

by Hanson on a dailv basis with respect to his sale

of gasoline and related preducts, and the injury to

the value of his business assets which aecrued when

the business was finally destroyed. Hard working

independent dealers who make a profit despite illegal

conspiracies do have a remedy for lost profits as well

as all other damages either suffered within or specula-

tive until the onset of the limitations period. So too

do hard working independents against whom the

23

impact of the conspiracy is so great that they operate

at a loss and eventually suffer destruction of their

business. |

When the Court of Appeals predicated its conclu-

sion that the instruction, which effectively withdrew

from the jury’s consideration evidence of Shell’s pre-

December 23, 1964 conspiratorial conduct, was harm-

less, it misinterpreted the mandate of this Court.

Hanson urges that the prejudice which resulted war-

rants a new trial with instructions to the jury which

do not contradict the central holding of Zenith.

When the Court of Appeals rejected Hanson’s

argument “out of hand” it was in effect refusing to

follow this Court’s direction in Zenith. The decision

below has created a dangerous anomoly in the anti-

trust laws which will substantially weaken the private

action “as a bulwark of antitrust enforcement”,

Perma Life Mufflers, Inc. v. International Parts

Corp., 392 U.S. 134 (1968), and is contrary to the

policy that the antitrust laws fully “protect the vic-

tims of the forbidden practices as well as the public.”

Radovich v. National Football League, 352 U.S. 445

(1957).

II. THE DECISION BELOW IS CONTRARY TO THE LAW

PREVAILING IN OTHER CIRCUITS

The rule announced in Zenith has received vigorous

application in other circuits. In Continental-Wirt

Electronics Corp. v. Lancaster Glass Corp., 459 F.2d

768 (3rd Cir. 1972), the plaintiff sought damages

24

for an antitrust conspiracy which forced him to sell

his business. The Third Circuit reversed the District

Court’s findings that the claim was barred by the

statute of limitations because the conspiratorial con-

duct occurred prior to the limitations date in light

of this Court’s ruling in Zenith, and stated:

“Waterman [plaintiff] could hardly caleulate, at

least, that portion of its damages relating to the

value of the business when it remained specula-

tive until a sufficient time for reasonable attempts

to sell the business had expired or the sale of

the business had been made. It was only at the

time of resale, when the damages were actually

suffered, that the cause of action accrued and the

statute of limitations began to run.” 459 F.2d 768,

770.

In addition to the Third Circuit, the Second and

Fifth Circuits have applied Zenith vigorously. Poster

Exchange, Ine. v. National Screen Service Corp., 456

F.2d 662, 666-68 (5th Cir. 1972), cert. denied, 423

U.S. 1054 (1976); Ansul Co. v. Uniroyal, Inc., 448

F.2d 872, 885 (2d Cir. 1971), cert. denied, 404 U.S.

1018 (1972).

Without this Court’s guidance in a review of the

decision below, it will be impossible for the courts to

reconcile the conclusion of the Ninth Circuit that the

failure to follow Zenith in this case was harmless error

with the exact opposite conclusion of the Third Circuit

in Continental-W irt.

CONCLUSION

The posture of this case is simple. The evidence

of illegal acts and damage was, as the District Court

held, properly submitted to the jury. The jury was

given an erroneous jury instruction which withdrew

from its consideration evidence of pre-December 23,

1964 acts. This evidence was at the heart of Hanson’s

claim and under Zenith should have been considered

by the jury. The Court of Appeals cannot now sit

as a jury and decide this case. Nor can the Court of

Appeals overrule Zenith. Justice and sound antitrust

policy require that the case be sent back for a new

trial.

For the foregoing reasons this Court should grant

a Writ of Certiorari to review the decision below.

Dated: December 3, 1976.

Respectfully submitted,

JOHN H. Boone,

FREDERICK P. FurTH,

Rosert L. BLUEMLE,

Attorneys for Petitioner.

(Appendices Follow)

APPENDICES

Appendix A

United States Court of Appeals

For The Ninth Circuit

No. 74-1084

C. O. Hanson, !

Plaintiff-A ppellant,

bess :

Shell Oil Company,

Defendant-A ppellee. j

[September 3, 1976]

Appeal from the United States District Court

for the District of Arizona

OPINION

Before: Dunrway and Wriant, Circuit Judges,

and Lvoas,* District Judge

Dunriway, Circuit Judge:

In this aetion appellant Hanson charged appellee

Shell Oi) Company and defendants Standard Oil

Company of California and Gulf Oil Company with

violations of §7 of the Clayton Act, a vertical re-

straint of trade and horizontal restraint of trade,

both under § 1 of the Sherman Act, and attempt and

conspiracy to monopolize under §2 of the Sherman

°The Honorable Malcolm M. Lucas, United States District Judge

for the Central District of California, sitting by designation.

Act. The trial court granted summary judgment to

all defendants based on all acts occurring before

December 23, 1964, and to Gulf on the §7 Clayton

Act charge. At trial, directed verdicts were entered

for all defendants on all remaining claims except for

the horizontal restraint charge under §1 and the

conspiracy charges under §2 of the Sherman Act

against Shell and Standard. The jury returned a

verdict on those two charges for Hanson and awarded

damages of $363,181.31, which when trebled would

exceed $1 million. Defendants Shell and Standard

moved for judgment notwithstanding the verdict or,

in the alternative, a new trial. The court denied the

motions for judgment n.o.v., but granted a new trial

on the two issues that had been submitted to the first

jury. At the new trial, against Shell alone, the second

jury found for the defendants. Hanson now appeals,

asserting error in (1) the granting of the motion for

a new trial, and (2) granting the directed verdict for

Shell on the §1 vertical restraint claim and the § 2

attempt to monopolize claim. He also attacks the

court’s instruction to the second jury concerning acts

occurring before December 23, 1964, and the rejection

of certain evidence. Shell is the only appellee, Han-

son’s claims against Standard having been settled.

We affirm.

I. Statement of the Facts.

Hanson moved to Tucson, Arizona, in 1952, having

assets of less than $7,000. He invested this money in

his first service station under the name of “Hanson’s

iii

Direct Service.” Over the following ten years he ex-

panded his business to include seventeen service sta-

tions along with a distributorship for El Paso Natural

Gas products which he acquired in 1958. Throughout

the entire period from 1952 to 1964, Hanson’s busi-

ness lost money in all but three years, and in those

three years he failed to make enough to equal the

$8,000 that he thought was a reasonable value for

his managerial services. Thus, Hanson’s expansion

was financed entirely through credit, much of which

was unwilling. Hanson admitted at the first trial that

he used money from gasoline sales to acquire new

stations rather than to pay his gasoline bills to his

suppliers. Thus, by 1964, Hanson had turned his just

under $7,000 into seventeen old service stations, one

natural gas distributorship, and hundreds of thou-

sands of dollars of debt.

Hanson’s business was continually short of cash.

By the end of 1964, he owed substantial amounts to

over thirty creditors, and he had exhausted his credit.

Hanson could buy gasoline only on a cash and carry

basis, This. the relatively shoddy condition of his

stations, and his difficulty in keeping station man-

agers, combined to keep Hanson’s monthly gasoline

sales average around 10,00 gallons per station, while

other independent dealers in Tucson were averaging

four to five times that amount. Testimony at the first

trial indicated that with such a low sales volume a

dealer could not continue to operate indefinitely.

Because of these hopeless conditions, beginning in

1962, Hanson attempted to sell his entire business,

iv

but, not surprisingly, he was unable to find any

interested buyers. In July of 1966, Hanson finally

closed out his business. Like many another loser in

the competitive endeavor, he decided to try the anti-

trust laws as a means of shifting his losses to someone

else. He brought the present action against Shell,

Standard, and Gulf on December 23, 1968, two and

one-half years later.

Hanson claims that he was the victim of an endless

series of retail gasoline price wars which plagued the

Tucson market from 1958 to well after Hanson shut

down his business in 1966. He claims that the cause of

these price wars was the policy of Shell and Standard

Oil, by price gouging, to run private brand and inde-

pendent dealers out of the market. He points specif-

ically to a change in Shell’s pricing policy adopted

in 1961 whereby Shell began a program of more vigor-

ous price competition designed to regain the market

share in the Western Region which Shell had lost

in the previous six vears. Hanson claims that in fur-

therance of this plan to seize market strength from the

small private brand and independent dealers, Shell

threatened and coerced its retail dealers to conform

to Shell’s suggested predatory prices, and also en-

listed Standard’s cooperation so that their efforts

could be directed solely at the independents rather

than at each other. The complaint alleged that because

of the vertical restraints placed on the Shell dealers

and the horizontal arrangement with Standard, Shell

violated $641 and 2 of the Sherman Act and thereby

caused Hanson to lose his business.

II. The Directed Verdict on the §1 Vertical

Restraint Claim was Proper.

Hanson claims that Shell violated §1 of the Sher-

man Act by fixing the retail price of gasoline sold

by franchised Shell dealers. This vertical price fixing

was supposedly accomplished through the use of com-

pany-owned stations which could put competitive

pressure on franchised dealers, through the use or

non-use of “dealer assistance,” and through threats

of refusals to deal such as not renewing dealer leases.

After hearing all of the evidence, the trial court di-

rected a verdict for Shell on this claim.

In the absence of fair-trade statutes, vertical resale

price maintenance agreements are per se violations

of §1. Dr. Miles Medical Co. v. John D. Park & Sons

Co., 1911, 220 U.S. 373, 399-400. This is true even

though the agreement be only an implied one. F.T.C.

v. Beech-Nut Packing Co., 1922, 257 U.S. 441, 453.

Tf the agreement between the supplier and his buyer

is reached because of coercive conduct toward non-

complying buyers, such as refusals to deal, a violation

is also made out. Simpson v. Union Oil Co., 1964, 377

U.S. 13, 17. The refusal to deal which gave rise to the

vertical agreement in Simpson was Union Oil’s failure

to renew a dealer’s lease because of his lack of com-

pliance with the company’s suggested resale prices.

Thus, if the evidence presented at the first trial, taken

in the light most favorable to Hanson, could support

a finding that there was a coerced agreement between

Shell and its retail dealers, the directed verdict must

vi

be reversed. Cornwell Quality Tools v. C.T.S. Co., 9

Cir., 1971, 446 F.2d 825, 830.

Hanson points to three different items of evidence

which he claims to be sufficient to require that the

§ 1 vertical restraint claim be submitted to the jury.

First, there was evidence that during the early 1960's

Shell maintained one or two company owned stations

in Tucson which would set the retail price at the

point the company recommended and thus put pres-

sure on the other Shell dealers to comply. There are

a number of reasons why this does not support Han-

son’s case. Hanson claims that Shell’s war against

the independents was waged in the Western Region

encompassing five states, so that the fact that two

company stations were maintained in Tueson, Arizona,

is hardly evidence of coercion of Shell dealers

throughout the relevant market. Moreover, even if

the relevant market were limited to Tucson, two com-

pany-owned stations out of the multitude of Shell

brand stations that existed in Tueson’s eight trade

areas would not be evidence of pressure being put on

the franchise dealers. Hanson’s own witness, a Mr.

Wolken, the largest Shell brand franchisee in Tucson,

testified that to his knowledge there were no company-

owned Shell stations in Tueson. Finally, even if such

pressure did flow from maintaining company-owned

stations, there is no legal or economie reason for find-

ing the use of such market pressures to be violative

of §1.

Hanson next points to Shell’s use of “dealer assist-

ance,” a pricing system whereby Shell lowered its

Vii

“tank wagon price” (wholesale dealer price) to dealers

whenever it recommended that the dealers reduce

their retail prices.’ Hanson contends that by reducing

the tank wagon price whenever it recommended a

lower retail price, Shell put pressure on the individual

dealer to follow the recommendation, because every

other Shell station would be priced below him if he

did not. This argument has no merit. The uncon-

troverted evidence shows that dealer assistance was

provided by Shell in a given area to individual dealers

who asked for it. Dealers asked when they felt forced

to lower their retail prices in order to meet local

competition but felt financially unable to absorb the

entire price reduction out of their margin. Thus, they

asked Shell to give them dealer assistance so that

they could meet competition without extreme financial

sacrifice. The program was not initiated by Shell to

force dealers to fix prices, but was initiated by dealers

to enable them to stay competitive.

If Shell conditioned “dealer assistance” on a deal-

er’s actuallv reducing his retail price, a more serious

look at possible §1 violations would be warranted.

See Lehrman v. Gulf Oil Corp., 5 Cir., 1972, 464 F.2d

26. However, the testimony of Hanson’s witness, Mr.

Wolken, was that the changes in tank wagon price

made by Shell were made for every dealer on request,

1For each of the first four cents in recommended retail price re-

duction, Shell lowered the tank wagon price to its dealers by three-

fourths of a cent. Thus, after a four-cent recommended reduction,

Shell absorbed three cents. After the first four cents, Shell reduced

the tank wagon price on a penny for penny basis absorbing 100%

of all recommended price reductions.

viii

whether or not the requesting dealer suggested

changes in retail price, and the testimony of another

Shell dealer in Tucson, Mr. Mergard, also a witness

for Hanson, verified that Shell’s policy was that any

“dealer assistance” was not predicated on the dealer’s

retail price. Thus, the “dealer assistance” program

could not be construed as an attempt by Shell to regu-

late its dealers’ retail prices.

Finally, Hanson points to the testimony of his wit-

nesses, Messrs. Wolken and Mergard, claiming that it

shows that coercive tactics were used by Shell repre-

sentatives to gain dealer compliance. In fact, the tes-

timony of these two dealers supports Shell, not Han-

son. The only part of Wolken’s testimony which even

arguably supports a claim of coercion involves a bit

of fancy questioning by Hanson’s attorney. After

questioning Wolken on how price conversations with

his Shell representative would generally go, Hanson’s

attorney asked him if Shell had ever threatened to

cancel his lease. Wolken responded that in 1962 his

Shell representative had threatened to cancel his lease

“if I didn’t do as I was told.” Interestingly, the spe-

cific dispute from which the threat arose was never

revealed and Hanson’s attorney never asked that ques-

tion. It is only speculation that the threat arose over

a price controversy. If Hanson is to claim that this

threat was an attempt to regulate retail prices, the

connection between the threat and a price dispute

must be shown. In addition, even though at the heart

of his claim, Hanson was unable to get any other ex-

amples of suggestively coercive conduct from the

largest Shell dealer in Tucson who testified to deviat-

ing from the suggested price ten percent of the time.

The most that can be drawn from Wolken’s testimony

to support Hanson is that on a single occasion a local

company representative warned a single dealer that

his lease might be cancelled over a dispute about an

unknown topic. This gives Hanson’s claim no support.

Mergard’s testimony is no more helpful. He testi-

fied that on a single occasion his Shell representative

told him that they could enter a “period of better co-

operation” if he would get Shell products on the

shelves, put price signs up, and follow recommended

prices. There was no testimony as to what constituted

“bad cooperation” on Shell’s part, whether Mergard

felt pressured into following the recommended retail

price, or whether this was an isolated incident. On

cross-examination, however, Mergard said that despite

his ignoring the recommended retail price for over a

year before his lease renewal date Shell renewed his

lease, and that for two vears he did not regularly fol-

low the price recommendations. Hanson’s reliance on

Mergard’s testimony that he felt that his “dealer as-

sistance” was often delayed is misplaced as well.’

Mergard testified that the reason for the delay was

Shell’s business judgment that the particular trade

area did not qualify for such assistance and not an

attempt to pressure dealers into price compliance.

2It is curious that Hanson should introduce evidence suggesting

Shell often wthheld dealer assistance while accusing Shell of using

it as a means of predatory price gouging.

Both witnesses testified that they were free to post

their own prices based on their own business judg-

ment, and that they did in fact always follow that

judgment.* The directed verdict was proper.‘

III. The Directed Verdict on the § 2 Attempt

to Monopolize Claim was Proper.

Hanson’s claim is that Shell’s pricing policy was an

illegal attempt to monopolize prohibited by § 2 of the

Sherman Act. In his brief, however, Hanson fails to

point to any evidence in the record, and fails to pro-

vide any legal analysis, to support his claim other

than to argue that the grounds upon which the trial

judge based his directed verdict were improper.

Even more extraordinary, however, is Hanson’s fail-

ure to reveal what part of interstate commerce he be-

lieves that Shell was attempting to monopolize. Was

it the wholesale or the retail gasoline market? If the

wholesale market is the focus of his charge, then a

directed verdict was proper because no relationship

between Hanson’s business failure in the retail mar-

ket and Shell’s alleged attempt to monopolize the

3Even had Hanson presented sufficient evidence upon which a

jury eould have found that Shell attempted to coerce dealers into

following the recommended price, his failure to show that any

dealers in fact succumbed to this pressure is an additional basis

for a directed verdict since without such a showing no connection

between Shell’s conduct and Hanson’s retail business difficulties

could be found.

4Gray v. Shell Oil Co., 9 Cir., 1972, 469 F.2d 742, makes it clear

that a supplier may suggest retail prices to its dealers and use

“persuasion” to get them to adopt the suggested prices. No viola-

tion is made out unless plaintiff can show that the supplier’s con-

duct rose to the level of coercion sufficient to deprive the dealers of

their free choice. Hanson made no such showing.

xi

wholesale market was shown. If the attempt was to

monopolize the retail market, Hanson’s case hinges

on his ability to show that Shell attempted to control

retail prices, a fact which, as we have already noted,

Hanson was unable to prove.

Bevond these threshold failures, Hanson also failed

to demonstrate anything which could support a find-

ing that one of the essential elements of an illegal § 2

attempt was present. An “attempt to monopolize” re-

quires that acts be performed with the specific intent

to monopolize. See, ¢.g., American Tobacco Co. v.

United States, 1946, 328 U.S. 781, 809; Swift & Co. v.

United States, 1905, 196 U.S. 375, 396; Cornwell Qual-

ity Tools Co. v. C.T.S. Co., supra, 446 F.2d at 832.

Hanson presented no evidence which would suggest

that the “specific intent” to monopolize existed; he

does not even discuss specific intent in his brief. It is

true that Shell adopted a new pricing policy in 1961

designed to expand its share of the Western ifegion

market, but this reflects no more than Shell’s unwill-

ingness to watch its market share continue to erode as

it had done since 1955. Before the new pricing policy

could get Hanson to the jury as a possible attempt to

monopolize, Hanson had to establish that the new pol-

icy represented “predatory pricing” designed to drive

competitors out of the market and establish monopoly

benefits for Shell. This he has made no attempt to do.

To demonstrate predation, Hanson had to show that

the prices charged by Shell were such that Shell was

foregoing present profits in order to create a market

xii

position in which it could charge enough to obtain

supranormal profits and recoup its present losses. This

could be shown by evidence that Shel! was selling its

gasoline at below marginal cost or, because marginal

cost is often impossible to ascertain, below average

variable cost.5 See International Air Industries, Inc.

v. American Excelsior Co., 5 Cir., 1975, 517 F.2d 714,

723-24; Areeda & Turner, Predatory Pricing and Re-

lated Practices Under Section 2 of the Sherman Act,

1975, 88 Harv. L. Rev. 697, 703-18. Hanson made no

effort to prove that the prices Shell was charging at

either the wholesale or the retail level were below mar-

ginal or average variable costs, and for all that ap-

pears Shell’s new pricing policies were nothing more

than an attempt to gain a larger share of the market

because of its stronger competitive position. If its

prices were above its costs, and nevertheless Shell’s

policies did drive Hanson out of business, this can

only be because Hanson was so inefficient that at prices

at which Shell could make a reasonable profit he could

not. The antitrust laws were not intended, and may

not be used, to require businesses to price their prod-

‘An alternative possibility might be a showing that the defend-

ant charged a price which, although above marginal or average

variable cost, was below its short run profit-maximizing price and

that barriers to entry were great enough to prevent other entry

before the predator could reap the benefits of his oligopolistie or

monopolistic market position. See International Air Industries,

Inc. v. American Excelsior Co., 5 Cir. 1975, 517 F.2d 714, 724.

There is some question, however, whether pricing below a profit

maximizing point which is still above marginal and average variable

costs should be considered predatory ; it only discourages inefficient

new entrants who must have higher prices to survive. See Areeda

& Turner, Predatory Pricing and Related Practices Under Section

2 of the Sherman Act, 88 Harv. L. Rev. 697, 704-09.

ee

ucts at unreasonably high prices (which penalize the

consumer) so that less efficient competitors can stay

in business. The Sherman Act is not a subsidy for

inefficiency. Hanson’s failure to show that Shell’s

prices were below its marginal or average variable

costs was a failure as a matter of law to present a

prima facie case under § 2.°

IV. The Granting of a New Trial on the § 1

Horizontal Restraint and § 2 Conspiracy

Claims was Proper.

Hanson also charged that Shell and Standard en-

tered into an agreement to avoid competition between

themselves and to drive the independent dealers out

of business, and that this conduct was a violation of

$§ 1 and 2 of the Sherman Act. Although at the first

trial the jury returned a verdict for Hanson on these

claims in the amount of $363,181.31, the trial court

concluded that the verdict was against the weight of

the evidence, that the damages were excessive, and

that his instructions on the damages issue were im-

proper. On these grounds, the court ordered a new

trial on both issues. Hanson now argues that this

order was error.

The trial court may grant a new trial, even though

the verdict is supported by substantial evidence, if

®While proof of pricing beiow marginal or average variable cost

is prerequisite to a prima facie showing of an attempt to monopo-

lize, such a showing, if made, would not show a per se violation.

There may be non- predatory and acceptable business reasons for

a firm engaging in such pricing. Plaintiff’s showing of below-cost

pricing merely clears the first hurdle and raises the question of

justification.

xiv

“the verdict is contrary to the clear weight of the evi-

dence, or is based upon evidence which is false, or to

prevent, in the sound discretion of the trial judge, a

miscarriage of justice.” Moist Cold Refrigerator Co.

v. Lou Johnson Co., 9 Cir., 1957, 249 F.2d 246, 256. A

new trial may also be granted when in his judgment

the trial judge finds that the “amount of compensation

awarded is excessive.” Murphy v. United States Dis-

trict Court, 9 Cir., 1944, 145 F.2d 1018, 1020. Absent

a showing that the trial court abused its discretion,

the order granting a new trial will not be reversed on

appeal. Oswald v. Cruz, 9 Cir., 1961, 289 F.2d 488.

Furthermore, reversal is unwarranted unless the trial

court abused its discretion with respect to each ground

upon which it based the order; if any ground is rea-

sonable, the order must be affirmed. Nuttall v. Reading

Co., 3 Cir., 1956, 235 F.2d 546, 548. Our review of the

record convinces us that the trial court did not abuse

its discretion in ordering a new trial on any of the

stated grounds.

A. The Verdict was Against the Weight

of the Evidence.

Hanson’s argument hinges on some documented

meetings between Standard and Shell executives at

an oil trade association meeting and at other times

in San Francisco where their offices are located.

When an illegal conspiracy or agreement to restrain

trade is charged, there must be evidence from which

actual agreement or mutual consent can be found or

inferred. Esco Corp. v. United States, 9 Cir., 1965,

340 F.2d 1000, 1007-08. Thus, evidence of meetings

alone is not sufficient; there must also be evidence

sufficient to permit the jury to infer illegal agree-

ment. We agree with the trial judge that the evidence

that Hanson offered to show such agreement was so

lacking that the verdict against Shell was against

the weight of the evidence.

Hanson attempted to show agreement by introduc-

ing evidence of parallel pricing behavior on the part

of the two oil companies and the willingness of the

companies to share price information. His evidence

was weak, This court has noted that:

Similarity of prices in the sale of standardized

products . . . will not alone make out a prima

facie case of collusive price fixing in violation

of the Sherman Act, the reason being that com-

petition will ordinarily cause one producer to

charge about the same price that is charged by

any other. Independent Iron Works, Inc. v. U.S.

Steel Corp., 9 Cir., 1963, 322 F.2d 656, 665.

In fact, the massive volume of evidence comparing

prices of various dealers and companies in the West-

ern Region and in Tucson showed that Shell’s retail

prices were paralleled by the prices of the other

majors and of independent dealers as frequently as, if

not more frequently than, they were by Standard.

While wholesale price data were much less complete,

there was nothing offered by Hanson te show that

Standard and Shell moved with any more consistency

with one another than with any other supplier.

Likewise, Hanson’s claim that the willingness of

the two companies to share wholesale price informa-

tion demonstrated an agreement is also weak. Unlike

xvi

United States v. Container Corp. of America, 1969,

393 U.S. 333, this case does not involve companies

exchanging secret price information for the purpose

of price stabilization. Here, Shell and Standard were

willing to seek and to reveal wholesale price infor-

mation for the purpose of reducing their prices to

retail dealers requesting “dealer assistance” when

such aid was appropriate. The information was not

secret and was available to anyone requesting it. The

goal of either company was not shown to be price

stabilization, but rather price reductions in order to

help local dealers faced with severe competition. Such

exchange of information does not rise to the level of

an illegal conspiracy, see Gray v. Shell Oil Co., 9 Cir.,

1972, 469 F.2d 742, 746-47, and the trial court did not

abuse its discretion in finding that this, coupled with

the other scant evidence of illegal agreement, was

outweighed by the massive amounts of evidence intro-

duced to show that Shell and Standard were active

competitors, not conspirators.

B. The Damage Award was Excessive.

The trial court also found that because the evidence

was weak in showing that Shell’s pricing policy was

a proximate cause of Hanson’s financial difficulties,

and because the evidence as to Hanson’s actual dam-

ages was misleading and confusing, a new trial was

necessary. Again, we cannot say that this was an

abuse of discretion.

Hanson argues that Shell’s predatory pricing was

the proximate cause of his going out of business, and

xvii

that Shell should be liable for the full value of the

business. Hanson did not, however, produce evidence

tying Shell’s conduct, or even the price wars that

dominated the Tucson market,’ to his business fail-

ure. In fact, the evidence, considered as a whole, points

to the opposite conclusion.

Long before Shell’s new pricing policy, Hanson

was pumping quantities of gasoline far below those

necessary to survive. His stations were old and dilap-

idated. He imposed two middlemen between the

supplier and dealer, thus having trouble keeping his

dealers because the margin that he could offer was

too small. He had inadequate supplies of gasoline

in a town flooded with it because he had gotten over

his head in debts and lost all of his credit. In short,

almost every piece of evidence points to the conelu-

sion that Hanson went broke because of his incompe-

tent and inefficient management. Of all the inde-

pendent dealers in Tucson during the period in issue,

only Hanson was forced out of business, and one such

dealer subsequently took over three of Hanson’s sta-

tions and operated them at a_ substantial profit

despite Shell’s alleged war of genocide on the inde-

pendents, Apparently, only Hanson was affected by

the war. The market share of the other independents

in Tucson rose from 19.5% in 1962 to 30.4% in 1967,

while Shell’s market share fell from 10.2% to 9%

over the same period. Thus, the jury’s finding that

7Apparently Hanson ties Shell's alleged pricing policy to his

problems by claiming that it was this illegal activity which caused

the price wars. The testimony, however, is that it was the inde-

pendents who started the wars.

eee

Shell’s policies were the proximate cause of Hanson’s

troubles was clearly against the weight of the evi-

dence.*

In addition, the evidence presented as to the value

of Hanson’s business was confusing at best and in-

credible at worst. Hanson admitted that the profit and

loss statement for December 1, 1961, to November 30,

1962, upon which he relied heavily, did not reflect

the complete profit picture of the business as required

in Wolf v. National Lead Co., 9 Cir., 1955, 225 F.2d

427, 430-31. Likewise, Hanson’s testimony that his

business was worth $1.00 for every gallon of gasoline

sold per month, even if admissible, was mere asser-

tion, and in light of his long term profit picture was,

to say the least, unreasonable. The trial court was

well within its discretion in granting a new trial

based on its belief that the jury was confused by the

damage evidence and returned an excessive verdict.

V. The Statute of Limitations Issue.

At the second trial on the claimed Shell-Standard

conspiracy, the trial judge instructed the jury:

You have heard throughout the trial the refer-

ences to the date December 23, 1964. That date

is important to this lawsuit because Plaintiff may

recover damages only if you find that the Defend-

ant committed overt acts in violation of the anti-

trust laws after December 23, 1964, and if those

acts injured the Plaintiff. I have permitted you

8In fact, Hanson’s showing was so insubstantial that the trial

eourt’s only possible error was its failure to direct a verdict for

Shell on all counts at the close of the evidence.

xix

to hear evidence as to other matters before De-

cember 23, 1964, but such evidence was admitted

only as background material which the Plaintiff

was permitted to produce for the purpose of

attempting to show the origins of alleged con-

duct which Plaintiff charges occurred after De-

cember 23, 1964. (emphasis added)

Hanson claims that this instruction was in error be-

cause of the Supreme Court’s decision in Zenith Radio

Corp, v. Hazeltine Research, Inc., 1971, 401 U.S. 321,

339-40. We agree that the instruction was a misstate-

ment of the Zenith rule, but the error was harmless.

Zenith stands for the proposition that a plaintiff

may recover for acts violative of the antitrust laws

committed prior to the statute of limitations date, but

that he may only reeover those damages for such acts

which accrued and became ascertainable within the

period of the statute. See 401 U.S. at 338-42. Thus,

the trial court’s instruction that the jury had to find

an overt illegal act within the period of the statute

was in error; Hanson could have recovered damages

accruing to him after December 23, 1964, if those

damages were not ascertainable before that date and

were caused by illegal conduct occurring entirely be-

fore that date. Nevertheless, the error was harmless.

First, the trial court did admit all evidence of

Shell’s pre-December 23, 1964, conduct which Hanson

thought was relevant to his case. Hanson alleged, and

the evidence showed, that Shell’s conduct, and its

relationship with Standard, were constant through-

out the early 1960’s, and until Hanson’s business

demise in 1966. If Shell were committing illegal acts

before the cut-off date, there is no question that it

also committed those same acts after that date. The

jury heard all of the evidence of both pre- and post-

December 23, 1964, conduct, and by failing to find

any illegal conduct after that date, it must have also

found that there was no illegal conduct before that

date. Thus, the instruction was harmless error.

Second, even under the Zenith rule, Hanson would

have been limited to recovering damages which he

suffered after December 23, 1964. The evidence con-

cerning the history of Hanson’s business fortunes

shows that as early as 1962, Hanson was trying to

get out of the business but was unable to find anyone

willing to buy him out at any price. His losses were

substantial throughout the following years. The only

reasonable conclusion that can be drawn is that the

value of Hanson’s business in December of 1964 was

no greater than its value in 1966 when he closed up

shop. Thus, whatever damage Shell might have done

to Hanson’s business as a result of pre-December 23,

1964, conduct had accrued to Hanson before that date,

and he may not recover those damages under the

Zemth rule.

It cannot be said that in the year and a half be

tween December 23, 1964, and the time when Hanson

closed his business Shell’s earlier conduct cost him

lost profits which was damage not accruing until

after the crucial date. Hanson’s evidence shows that

in the entire fourteen-year history of his business,

there was not one year in which he showed a profit,

xxi

and in only three years did he make enough to cover

even part of the value of his own time and services.

The evidence does not support the notion that Shell’s

conspiracy with Standard, which Hanson alleges

began in 1961, caused him to lose profits in the last

year and a half of a business which never made a

profit in its entire history dating back to 1952, Han-

son’s losses were no greater after the alleged con-

spiracy began than before.°

VI. The Court did not Err in Excluding

the Lundberg Surveys.

The court excluded from evidence the Lundberg

Surveys, periodic price listings of the retail prices

of gasoline in a given area at a given time. Hanson

argues that the survey was admissible under the ex-

ception to the hearsay rule permitting market reports

and price listings relied on in the industry to be

admitted under the assumption that they are reliable.

See Commonwealth of Virginia v. State of West Vir-

ginia, 1951, 238 U.S. 202, 212. However, the trial

judge had sound grounds upon which to exclude the

surveys from evidence.

The trial court may reject unreliable price infor-

mation. Herzog v. United States, 9 Cir., 1955, 226

F.2d 561, 564. In this case there is ample evidence

®Hanson’s argument that the full amount of his damages over the

entire life of the conspiracy were not ascertainable until he went

out of business ean be’ rejected out of hand. What this argument

implies is that efficient and hard-working independent dealers who

make a profit despite illegal conspiracies directed against them

have no remedy, but ineompetents who are forced out of business

ean recover, trebled, all losses ever suffered.

ee

upon which the trial court could base a finding of

unreliability. While there is a showing that the sur-

vey was relied upon in the industry, the evidence is

that it was relied upon only for the purpose of dis-

cerning general price trends, and not for the specific

day-to-day pump prices upon which Hanson wanted

to rely. The trial judge’s determination that the day-

to-day prices in the survey had not been shown to be

reliable was proper grounds for his excluding the

evidence,

Hanson also sought to introduce the survey to show

that Shell’s and Standard’s pricing paralleled each

other. As we have seen, even if Hanson could estab-

lish closely parallel pricing patterns between the two

brands, in an industry where prices are likely to be

similar, such evidence does little to establish an illegal

conspiracy. Thus, exclusion of evidence which would

show parallel pricing would be harmless to the plain-

tiff. Moreover, we have held that the trial court prop-

erly directed a verdict in favor of Shell on the issue

of vertical retail price maintenance. If Shell did not

control the retail price at which its dealers sold gaso-

line, evidence of the retail price would show nothing

material about Shell’s behavior. Thus, because of

Hanson’s failure to show that the suppliers controlled

retail prices, excluding evidence of retail prices was

also harmless,

VII. Summary.

We hold that the trial court properly directed a

verdict for Shell on the Sherman Act §1 charge of

vertical combination in restraint of trade and §2

eee

charge of attempt to monopolize. We also hold that

the trial court acted well within its discretion in

granting a new trial on the Sherman Act §1 horizon-

tal combination in restraint of trade and §2 conspir-

acy to monopolize charges. We further hold that,

although the instruction on the statute of limitations

during the second trial was in error, the error was

harmless. Finally, we hold that the trial court prop-

erly refused to admit the Lundberg Survey in evi-

dence.

Affirmed in all respects.

Wriceat, Circuit Judge, concurring:

I concur, but would prefer to dispose of the appeal

on the basis that the plaintiff in this private antitrust

action should fail because he has not established the

necessary ‘‘reasonable probability” of some causal

connection between the defendant’s wrongful act and

some injury to the plaintiff. Flintkote v. Lysfjord,

246 F.2d 368, 392 (9th Cir. 1957). See also Pacific

Coast Agricultural Export Ass’n v. Sunkist, 526 F.2d

1196, 1205-06 (9th Cir. 1975); Gray v. Shell Oil Co.,

469 F.2d 742, 749 (9th Cir. 1972); Siegel v. Chicken

Delight, Inc., 448 F.2d 438, 52 (9th Cir. 1971).

xxiv

Appendix B

United States District Court

for the District of Arizona

No. Civ. 69-145 Tue.—JAW

C. O. Hanson, :

Plaintiff,

vs.

Gulf Oil Corporation, Shell Oil Com-

pany and Standard Oil Company of

California,

_

Defendants. :

[Filed Sept. 11, 1973]

ORDER AND FINAL JUDGMENT PURSUANT

TO RULE 54(b), FED. R. CIV. P.

Each and every claim and issue in the above-

entitled action presented by the complaint herein

against the Shell Oil Company (“Shell”) having now

been resolved in Shell’s favor, and the last outstand-

ing claims and issues having been tried separately to

a jury which returned a verdict for Shell on Novem-

ber 22, 1972; and it being expressly determined that

there is no just reason for delay and expressly

directed that final judgment upon said claims and is-

sues be entered, it is

Ordered, Adjudged and Decreed:

(1) That plaintiff take nothing by his complaint

against Shell, and that Shell have and recover its costs

of suit in the amount of $12,634.94 as taxed by this

Court’s Judgment Order of January 5, 1973;

(2) And further, this Court, expressly determin-

ing, under Rule 54(b) of the Federal Rules of Civil

Procedure, that there is no just reason for delay in

entering final judgment in Shell’s favor, hereby ex-

pressly directs that final judgment dismissing plain-

tiff’s claims against Shell be entered; and the same

hereby is entered.

It is so Ordered this 11th day of September, 1973.

James A. Walsh

United States District Judge

Judgment entered.

W. J. Furstenau, Clerk

By: Louise Clelland, Deputy Clerk

September 11, 1973.

Appendix C corporations in competition with each other.

Every person who shall make any contract or en-

gage in any combination or conspiracy declared

by sections 1 to 7 of this title to be illegal shall be

deemed guilty of a felony, and, on conviction

thereof, shall be punished by fine not exceeding

Section 1 of the Sherman Act, 26 Stat. 209 (1890)

as amended 50 Stat. 693 (1937) ; 69 Stat. 282 (1955),

88 Stat. 1708 (1974), 15 U.S.C. §1 (1975).

Every contract, combination in the form of

trust or otherwise, or conspiracy, in restraint of

trade or commerce among the several States, or

with foreign nations, is declared to be illegal:

Provided, That nothing contained in sections 1 to

7 of this title shall render illegal, contracts or

one million dollars if a corporation, or, if any

other person, one hundred thousand dollars or by

imprisonment not exceeding three years, or by

both said punishments, in the discretion of the

court.

agreements prescribing minimum prices for the Section 2 of the Sherman Act, 26 Stat. 209 (1890)

resale of a commodity which bears, or the label as amended 69 Stat. 282 (1955) ; 88 Stat. 1708 (1974),

or container of which bears, the trademark, brand, 15 U.S.C. §2 (1975).

or name of the producer or distributor of such

commodity and which is in free and open com-

petition with commodities of the same general

class produced or distributed by others, when

contracts or agreements of that description are

lawful as applied to intrastate transactions, under

any statute, law, or public policy now or here-

after in effect in any State, Territory, or the

District of Columbia in which such resale is to

be made, or to which the commodity is to be

transported for such resale, and the making of

such contracts or agreements shall not be an un-

fair method of competition under section 45 of

this title: Provided further, That the preceding

proviso shall not make lawful any contract or

agreement providing for the establishment or

maintenance of minimum -resale prices on any

commodity herein involved, between manufac-

turers, or between producers, or between whole-

salers, or between brokers, or between factors, or

between retailers, or between persons, firms, or

‘‘Every person who shall monopolize, or at-

tempt to monopolize, or combine or conspire with

any other person or persons, to monopolize any

part of the trade or commerce among the several

States, or with foreign nations, shall be deemed

guilty of a felony, and, on conviction thereof,

shall be punished by fine not exceeding one mil-

lion dollars if a corporation, or, if any other per-

son, one hundred thousand dollars or by impris-

onment not exceeding three years, or by both said

punishments, in the discretion of the court.”

Section 4 of the Clayton Act, 38 Stat. 731, $4

(1914), 15 U.S.C. § 15 (1952).

Any person who shall be injured in his busi-

ness 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 con-

eee

troversy, and shall recover threefold the damages

by him sustained, and the cost of suit, including

a reasonable attorney’s fee.

United States Constitution, Amendment VII

In Suits at common law, where the value in contro-

versy shall exceed twenty dollars, the right of trial by

jury shall be preserved, and no fact tried by a jury,

shall be otherwise reexamined by any Court of the

United States, than according to the rules of the com-

mon law.