# Petition — Hanson v. Shell Oil Co.

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition
- **Published:** January 1, 1977
- **Citation:** 429 U.S. 1074

## Text

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

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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.

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385004_0955%3A1. Public record. Not legal advice.