Appendix — Exxon Corp. v. Governor of Maryland

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SUPREME COURT OF THE

OCTOBER TERM, 1977

Nos. 77-10, 77-11, 77-22, 7

77-47, and 7744

Exxon Coarorarion and PHiLurs

Preraoueunm Company.

Sau On Company. '

Continaentar Om Coan and

Kayo On Company.

Gour On OCopporarion,

ASHLAND On. Inc. Cosmsonweattn On.

Rerwinc Company, Inc. and Prraoteum

MARKETING CORPORATION.

Appellants.

Governoa Or Tee Stare OF Manyiann. ef al,

Appedees.

APPEAL FROM THE

COURT OF APPEALS OF MARYLAND

APPENDIX

Volume I — Pages | - 424

APPEALS DOCKETED JULY |. 8 AND 11, 1977

PROBABLE JURISDICTION NOTED OCTOBER 3. 1977

awe OC |: CU ORS OP 6 ae

TABLE OF CONTENTS

DOCKET ENTRIES:

Circuit Court for Anne Arundel County .............

Court of Appeals of Maryland .............05005>

BILL OF COMPLAINT FOR DECLARATORY

JUDGMENT AND INJUNCTIVE RELIEF

(EXXON CORPORATION) .........---5-0eeeee

ANSWER (TO EXXON BILL OF COMPLAINT) .........

BILL OF COMPLAINT FOR DECLARATORY

JUDGMENT AND INJUNCTIVE RELIEF

(CONTINENTAL OIL COMPANY AND

KAYO OIL COMPANY) .........656 ccc eee eeees

ANSWER (TO CONTINENTAL AND KAYO BILL

Ce GEE cece ccceccccccscccccccceces

BILL OF COMPLAINT FOR DECLARATORY

JUDGMENT AND INJUNCTIVE RELIEF

(SHELL OIL COMPANY)... «we eee ee ee ee eee

ANSWER (TO SHELL BILL OF COMPLAINT) .........

AMENDMENT TO ANSWER (TO SHELL BILL OF

GENE ccc ccc ccc ese ce ce secccscccccce

BILL OF COMPLAINT FOR DECLARATORY

JUDGMENT AND INJUNCTIVE RELIEF

(GULF OIL CORPORATION) ..........--- 505 e6-

ANSWER (TO GULF BILL OF COMPLAINT) .........

KILI. OF COMPLAINT FOR DECLARATORY

JUDGMENT AND INJUNCTIVE RELIEF

(PHILLIPS PETROLEUM COMPANY) ............

ANSWER (TO PHILLIPS BILL OF COMPLAINT) ......

BILL OF COMPLAINT FOR DECLARATORY

JUDGMENT AND INJUNCTIVE RELIEF

(ASHLAND OIL, INC.) .. 2 2. 6 ee ee ee eee

ANSWER (TO ASHLAND BILL OF COMPLAINT) ......

ORDER ENTERED AT PRE-TRIAL CONFERENCE

FOR STAY OF ENFORCEMENT ...............

Page

(a)

EXNON'’S MOTION FOR PARTIAL SUMMARY

JUDGMENT (PARAGRAPHS D AND F OF

Wee Alcea heeeceees

SHELL'S MOTION FOR PARTIAL SUMMARY

JUDGMENT (PARAGRAPHS D AND F OF

Wee GED ccccccccescccnsbesessedsaenensces

GULF’S MOTION FOR PARTIAL SUMMARY

JUDGMENT (PARAGRAPHS D AND fF OF

THE ACT)

ANSWER TO MOTIONS FOR PARTIAL SUMMARY

JUDGMENT (PARAGRAPHS D AND F OF

THE ACT)

AFFIDAVIT OF HAROLD J. SCHULZ ..............

MOTION FOR LEAVE TO APPEAR AND

PRESENT MEMORANDA AND ARGUMENT

AS AMICI CURIAR ..nccccccccces

PRE-TRIAL ORDER

History of Litigation

ef © *e © *© © *

DUS GES cw cccccc eee seeneseessces

DUE co ec ccccceccebccsceccseseeseenees

Supulation of General Facts:

Legislative History of Chapter 854 ..........4..

Retail Marketing in Maryland ................

Stipulation of Facts Pertaining To:

Dees nn cob 66s 6606046966 6bb CER WER S

AFFIDAVIT OF JAMES M. PATTERSON, Ph.D........

Paec

(tt)

Page

PMC and Commonwealth ........ ecosescseccess Me

Sr 2) eS es Se - + 257

STIPULATION AND CONSENT ORDER ......... coe oO

TESTIMONY:

Richard T. Harvin —

DEE eo wcee cc ec eeeeeeonceoeeses Seevestews 303

Cyeme nw ccc cece —WETTTTEPTTLIL TTL 323

iPr s se eee ee a ° 344

Jack William Chandler —

DE, can ge 6e6b ee ee6ee ctessesseesvgsegs 345

GHOER ccc cc ccc ccc cece cccccseseeecesess 358

Theodore Levitt —

oo. ae néeeeees+eu Serrrcr tT 361

Ge, lnk och s+ cb ecoeseeseoccocoesceoeesete 384

errr ie ee 416

PED «nn pb 66600606 060046606 6660085 04060808 416

Cross (Reid) .......- s eosanbeees seeeeeues 422

Cross (Preston) ......-.- wYYTTITT TTT. 423

Charles Horace Berry —

SN gd ob 666 00 6666 000866 6H6S4 CON WO CeEE 425

Gon. 6 06646660060 060006060006086800608% 439

Colin P. Carter —

BE cc ces esc rece soscveedscboseevecede 443

ee re a ee oéeeese 447

Theodore E. Ferguson —

Bese ccc ccc ccc ccosesececececessecees 448

CE lncemcasenesceteceaeoteses adenses . 460

Matityahu Marcus —

PP rrvrrverreerrrrrreiiit Tt 466

GS lcccecccces TUTTLE TT oeeccee 482

Charles J. Luellen —

Bbreet ccccccccrccrccece Cceccccccceseeses 496

ae eceocsecececesesons ecdgoeoee 511

Mary Hudson Vandegrift —

BN ccc cco ceseecscececeoecoseeseeeneces 515

ee WUTTTOTICITTT TTT 520

Page

John H. Lichtblau —

ED wmeshoce web eseeseseneanesteeesees 521

—s_sBRPUTITELELILITITTTLTTTT TTT 533

John King Coleman —

HE | weeeccococeeceséindcsecenseesueiss 541

SPD « wectecoseseceéeesnéecereees 563

ECD ciecccoecscesceceveceseuee 570

CPC cevndccoedeceeeeeeoeeeeeest 570

ME «bee heccdeccoddecoconeeeseeeeens 571

SE CEs pb ce cceecceseceecccesbbece 572

Arthur E. Price —

ME eee eccecacsece TETTETILECTILCICC TT 577

SGD. «tc cceeesvocceceenssebentes 582

James M. Patterson —

PETS VITITITEPEPT CLT TTT TT ee 583

ee ee eer eo 596

SOUP GD cccccccccconsscccsccesenece 623

ETT TES TT ETT CTT Te eT ee 636

Ee 640

EXHIBITS:

Plaintiffs’ No. 3 — Kayo Oil Company Maryland Stations . . . 643

Plaintiffs’ No. 4 — Affidavit of George W. Ruppersberger .. . 644

Plaintiffs’ No. 8 — Affidavit of Robert G. Kelvey ....... 654

Plaintiffs’ No. 10(a) — Letter of Counsel re Affidavit

CS Ger A Tl ccc ccc cect ceececcecens 658

Plaintiffs’ No. 10(c) — Affidavit of Walter D. Naughton ... 659

List of Other Exhibits of Plaintiffs ................. 686

Defendants’ A — Letter of the Honorable Marvin Mandel,

Governor of Maryland, dated June 13, 1973, to the

Honorable Louis L. Goldstein, Comptroller of the

Pee ©6606 0h64 6S OSCE OE SE MEDS Sebccocoees 687

Defendants’ B — Retail Service Station Dealer Question-

naire and Cover Letter of the Honorable Louis L.

SS eee 689

(v)

Page

Defendants’ C — Major Oil Company Questionnaire ...... 694

Defendants’ D — Results and Analysis of Service

Station Dealers Questionnaire ........22eeeeeeee 698

Defendants’ E — Analysis of Major Oil Companies

Questionnaire .........+++. jvmwbb 0666060600 705

Defendants’ F — Draft of Proposed Legislation Submitted

to the Honorable Marvin Mandel, Governor of Maryland

by the Honorable Louis L. Goldstein, Comptroller of

verre rrrr rrr Terr TTrie ree eee 721

Defendants’ G — Letter of the Honorable Louis L. Gold-

stein, Comptroller of the Treasury, dated January 7,

1974 to the Honorable Marvin Mandel, Governor of

CRUE oc cece eee bees ste eesesoeccconcese 723

Defendants’ H — Senate Bill 465 ........220ee ee eees 724

Defendants’ I — House Bil] 918 ..... cece ee eeeecces 726

Defendants’ K-1 — Statement of James E. Grady, Public

Affairs Manager, Exxon Company, U.S.A., Eastern

Region, Before Senate Economic Affairs Committee .. .729

Defendants’ K-2 — Statement of James E. Grady, Public

Affairs Manager, Exxon Company, U.S.A., Eastern

Region, Before House Economics Matters Committee . . . 738

Defendants’ K-3 — Statement of Shell Oil Company on

Maryland House Bill 918 .......2- 5c eee eee eeeees 746

Defendants’ K-4 — Statement of Vic Rasheed before the

Economic Matters Committee ....+- +++ eee eens 755

Depositions of Charles H. King and J. D. Campbell,

B.P. Oil Corporation, Filed October 20, 1975 ......... 762

OPINIONS:

Memorandum of the Circuit Court for Anne Arundel

County dated October 14, 1975 appears in the

Joint Appendix to Jurisdictional Statements at

pages 49a to 5la.

Memorandum of Opinion of the Circuit Court for

Anne Arundel County dated January 27, 1976

appears in the Joint Appendix to Jursidictional

Statements at pages 53a to 134a.

(vt)

Opinion of the Court of Appeals of Maryland dated

February 18, 1977 is printed at 279 Md. 410

(advance reports) and at 370 A.2d 1102 and

appears in the Joint Appendix to Jurisdictional

Statements at pages la to 44a.

Supplemental Opinion of the Court of Appeals of

Maryland dated April 13, 1977 is printed at

279 Md. 456 (advance reports) and at 372 A.2d

237 and appears in the Joint Appendix to Juris-

dictional Statements at pages 45a to 48a.

CHRONOLOGICAL LIST OF

RELEVANT DOCKET ENTRIES

IN THE CIRCUIT COURT FOR

ANNE ARUNDEL COUNTY

Equity Nos. 22,069; 22,091;

22,216; 22,461; 22,502; 22,562

June 17, 1974

June 28, 1974

July 5, 1974

July 8, 1974

August 5, 1974

September 3, 1974

October 22, 1974

October 25, 1974

and 22,551

Bill of Complaint for Declaratory

Judgment and Injunctive Relief

and Exhibit (Exxon Corporation)

Bill of Complaint for Declaratory

Judgment and Injunctive Relief

and Exhibit (Continental Oil Com-

pany and Kayo Oil Company)

Answer (to Exxon Bill of Com-

plaint)

Stipulation regarding Stay of En-

forcement

Answer (to Continental and Kayo

Bill of Complaint)

Bill of Complaint for Declaratory

Judgment and Injunctive Relief

and Exhibit (Shell Oil Company)

Answer (to Shell Bill of Com-

plaint)

Amendment to Answer (to Shell

Bill of Complaint)

November 14, 1974

January 23, 1975

February 3, 1975

February 5, 1975

February 14, 1975

March 5, 1975

March 2u, 1975

March 26, 1975

March 31, 1975

April 1, 1975

April 8, 1975

May 5, 1975

Order consolidating Exxon, Conti-

nental and Shell cases

Bill of Complaint for Declaratory

Judgment and Injunctive Relief

(Gulf Oil Corporation)

Answer (to Gulf Bill of Com-

plaint)

Order consolidating Gulf with Exx-

on, Continental and Shell

Bill of Complaint for Declaratory

Judgment and Injunctive Relief

(Phillips Petroleum Company)

Answer (to Phillips Bill of Com-

plaint) :

Bill of Complaint for Declaratory

Exhibit (Petroleum Marketing

Corporation and Commonwealth

Oil Refining Company, Inc.)

Bill of Complaint for Declaratory

Judgment and Injunctive Relief

(Ashland Oil, Inc.)

Order consolidating Ashland with

Exxon, Continental, Shell and Gulf

Order consolidating Phillips with

Exxon, Continental, Shell, Gulf and

Ashland

Answer (to Petroleum Marketing

and Commonwealth Bill of Com.

plait)

Answer (to Ashland Bill of Com-

plaint)

Case called for Hearing on Pre-

May 5, 1975

May 20, 1975

May 29, 1975

June 19, 1975

July 7, 1975

Trial Conference in Open Court

before Judge E. Mackall Childs.

Counsel heard, Court signed order

Order Entered at Pre-Trial Confer-

ence regarding non-enforcement

of the provisions of Chapter 854

of the Laws of Maryland pending

outcome of the case

Joinder of Ashland in Pre-Trial

Stipuleti

Shell's Motion for Partial Sum-

mary Judgment as to Paragraphs D

and F of Chapter 854 of the Laws

of Maryland, 1974, Memorandum

of Points and Authorities In Sup-

port of Motion and Affidavit of

Walter D. Naughton

Exxon's Motion for Partial Sum-

mary Judgment as to Paragraphs D

and F of Chapter 854 of the Laws

of Maryland, 1974 and Memoran-

dum in support thereof

Gulf’s Motion for Partial Sum-

mary Judgment as to Paragraphs D

and F of Chapter 854 of the Laws

of Marylana, 1974, and Affidavit

Answer to Motions for Partial

Summary Judgment of Plaintiffs

Exxon, Shell, and Gulf

Defendants’ Memorandum in Sup-

port of Their Response and Oppo-

sition to Plaintiffs’ Motions for

Partial Summary Judgment

July 7, 1975

July 28, 1975

August 11, 1975

August 22, 1975

September 9, 1975

Affidavit of James M. Patterson,

Ph.D.

Order consolidating Petroleum

Marketing and Commonwealth

with Exxon, Continental, Shell,

Gulf, Phillips and Ashland

Joinder of Petroleum Marketing

and Commonwealth in Pre-Trial

Stipulati

Plaintiffs’ (Shell, Continental, Kayo,

Gulf, Phillips and Ashland) Motion

for Partial Summary Judgment as to

Paragraphs B and C of Chapter 854,

Laws of Maryland, 1974

Memorandum in Support of Plain-

tiffs’ Motion for Partial Summary

Judgment

Case called for Hearing on Motion

of Exxon, Shell and Gulf for

Partial Summary Judgment as to

Paragraphs D and F of Chapter

854, in Open Court before Judge

E. Mackall Childs, Counsel heard.

Court will hold under advisement.

Argument on Paragraph F delayed

pending action on Federal Alloca-

tion Act

Motion of Day Enterprises, Inc.,

et al. for Leave to Appear and

Present Memoranda and Argument

as Amicus Curiae and Exhibits

Memorandum of Amici Curiae in

support of the Constitutional va-

lidity of Article 56 Sections 157

September 22, 1975

October 9, 1975

October 10, 1975

October 14, 1975

October 15, 1975

October 16, 1975

E(B) and (C) of the Annotated

Code of Maryland

Defendants’ Answer to Motion for

Partial Summary Judgment filed

by the Plaintiffs Shell, Continen-

tal, Kayo, Gulf, Phillips, and Ash-

land and Memorandum of law in

support of Defendants’ Answer

Pre-Trial Order and appendices A,

B, C, D, E and F

Appendix G to Pre-Trial Order

Case called for Hearing on Merits

in Open Court before Judge E.

Mackall Childs. Prior to Testi-

mony, Court orally granted Plain-

tiffs’ Motion for Partial Summary

Judgment. Testimony taken. Case

continued te October 15, 1975

Memorandum declaring Paragraph

D of Chapter 854 of the Laws of

Maryland, 1974, invalid

Case continued on merits in Open

Court before Judge E. Mackall

Childs. Testimony taken. Case

continued to October 16, 1975

Case continued on merits in Open

Court before Judge E. Mackall

Childs. Testimony taken. At con-

clusion of Plaintiffs’ testimony,

State moved to stay proceedings

pending appeal of Court's ruling as

to Paragraph “D". Court denied

motion. Testimony continued to

October 17, 1975

October 20, 1975

January 27, 1976

February 2, 1976

February 23, 1976

March 15, 1976

April 18, 1977

June 23, 1977

Case continued on Merits in Open

Court before Judge E. Mackall

Childs. Testimony taken. State

continued case to October 20,

1975 for purpose of oral argu-

ments of Counsel

Case continued on Merits in Open

Court before Judge E. Mackall

Childs. Counsel heard. Court will

hold under advisement

Memorandum of Opinion by

Judge E. Mackall Childs declaring

Chapter 854 of the Laws of

Maryland, 1974 and Chapter 608

of the Laws of Maryland, 1975

unconstitutional and void

Order for Appeal by Marvin Man-

del, Governor, et al.

Motion of Defendants to Stay the

Judgment of Court entered Janu-

ary 27, 1976 and Memorandum of

Points and Authorities

Stipulation and Consent Order

granting continuance of Order of

Court entered May 5, 1975

Order by Judge E. Mackall Childs

tion and Injunction dated January

27, 1976

Notice of Appeal to the Supreme

Court of the United States by

Shell

June 27, 1977

July 1, 1977

July 11, 1977

Notice of Appeal to the Supreme

Court of the United States by

Exxon and Phillips

Notice of Appeal to the Supreme

Court of the United States by

Continental and Kayo

Notice of Appeal to the Supreme

Court of the United States by

Gulf

Notice of Appeal to the Supreme

Court of the United States by

Ashland

Notice of Appeal to the Supreme

Court of the United States by

Petroleum Marketing and Com-

monwealth Oil -

COURT OF APPEALS OF MARYLAND

September Term, 1976

February 17, 1976

April 5, 1976

September 15, 1976

February 18, 1977

No. 10

Petition for Writ of Certiorari to

the Court of Special Appeals of

Maryland

Order Granting Writ of Certiorari

Oral Argument

Court of Appeals of Maryland

Opinion and Judgment by J. Eld-

ridge

March 17, 1977

March 18, 1977

March 21, 1977

March 24, 1977

April 13, 1977

Motion for Stay of Mandate, To

Prohibit Enforcement of Chapter

854 of the Laws of Maryland,

1974, as Amended by Chapter

608 of the Laws of Maryland,

1975, and For Other Relief (and

Proposed Order)

Motion for Reconsideration by

Exxon Corporation, Shell Oil

Company, Gulf Oil Corporation,

and Phillips Petroleum Company

Motion for Reconsideration by

Petroleum Marketing Corporation

and Commonwealth Oil Refining

Company, Inc.

Motion for Reconsideration by

Continental Oil Company and

Kayo Oil Company

Motion for Reconsideration by

Ashland Oil, Inc.

Answer of Appellants to Motion

for Stay of Mandate, to Prohibit

Enforcement of Chapter 854 of

the Laws of Maryland, 1974, as

Amended by Chapter 608 of the

Laws of Maryland, 1975, and For

Other Relief

Opinion by J. Eldridge denying

Motions for Reconsideration and

Motion for Stay of Mandate

Mandate

June 23, 1977

June 27, 1977

June 27,1977

June 29, 1977

July 1, 1977

July 11, 1977

Notice of Appeal to the Supreme

Court of the United States of

Shell Oil Company

Notice of Appeal to the Supreme

Court of the United States of

Exxon Corporation and Phillips

Petroleum Company

Notice of Appeal to the Supreme

Court of the United States of

Continental Oil Company and

Kayo Oil Company

Notice of Appeal to the Supreme

Court of the United States of Gulf

Oil Corporation

Amended Notice of Appeal to the

Supreme Court of the United

States of Exxon Corporation and

Phillips Petroleum Company

Notice of Appeal to the Supreme

Court of the United States of

Ashland Oil, Inc.

Notice of Appeal to the Supreme

Court of the United States of

Petroleum Marketing Corporation

and Commonwealth Oil Refining

Company, Inc.

In the Circuit Court for Anne Arundel County

Equity No. 22,069

Exxon Corporation,

Plaintiff,

Marvin Mandel, Governor, et al.,

Defendants.

BILL OF COMPLAINT FOR DECLARATORY

JUDGMENT AND INJUNCTIVE RELIEF

Filed June 17, 1974

Exxon Corporation (““Exxon”’), plaintiff herein, by its

attorneys, brings this action under the Uniform Declara-

tory Judgments Act, Section 3-403 of the Courts and

Judicial Proceedings Article, Annotated Code of Mary-

land (1974 Edition), to obtain a declaratory judgment

that Chapter 854 of the Laws of Maryland of 1974,

amending Article 56, §157E of the Annotated Code of

Maryland (1957 Edition, as amended), is unconstitutional

and invalid and to obtain injunctive relief against the

defendants, Marvin Mandel, Governor of the State of

Maryland, Francis B. Burch, Attorney General of the

State of Maryland, and Louis L. Goldstein, Comptroller

of the Treasury of the State of Maryland, prohibiting

each of them from enforcing the provisions of the Act.

Exxon declares and alleges as follows:

The Parties

1. Exxon, incorporated under the laws of the State

of New Jersey, is a producer and refiner of petroleum

products and owns and operates retail service stations in

the State of Maryland. Exxon believes it is the leading

supplier of gasoline in Maryland selling to dealers,

wholesalers, the public and others approximately 19

percent of all the gasoline sold in Maryland. All of the

gasoline sold by Exxogin Maryland is transported into

the state from refineries located beyond the boundaries

of the state.

2. Exxon sells substantial quantities of gasoline and

other petroleum products and other goods and services at

the retail level both in local markets in Maryland and to

persons, such as interstate travelers, common carriers,

airlines, and the shipping industry, operating exclusively

in interstate commerce in Maryland.

3. There are approximately 483 independent dealer

stations in Maryland buying Exxon branded gasoline

directly from Exxon. In addition, Exxon has 35

company-operated stations in Maryland. Of the 35

company-operated stations, 12 are Exxon “Car Care

Centers.” In addition to marketing gasoline, Car Care

Centers sell automobile products, such as tires, batteries

and accessories, and provide a complete range of

automobile maintenance and repair services. Each Car

Care Center requires large initial and sustained capital

investment in land, buildings and equipment.

4. The defendant, Marvin Mandel, Governor of the

State of Maryland, is charged under the Constitution of

the State of Maryland with the responsibility of enforcing

the laws of the State of Maryland. He is sued herein in his

official capacity.

5. The defendant, Francis B. Burch, Attorney Gen-

eral of the State of Maryland, is authorized to seek

injunctions against persons who violate Article 56 of the

Annotated Code of Maryland (1957 Edition, as

amended). He is sued herein in his official capacity.

6. The defendant, Louis L. Goldstein, Comptroller of

the Treasury of the State of Maryland, is charged with

the responsibility of administering the laws regulating the

sale of petroleum products in the State of Maryland and

of directing any persons willfully marketing petroleum

products in the State of Maryland in violation of Article

56 of the Annotated Code of Maryland, and the rules and

regulations promulgated pursuant thereto, to cease such

violations. He is sued herein in his official capacity.

Motor Fuel Inspection Law

7. Article 56, Subtitle: Motor Fuel Inspection Law,

Annotated Code of Maryland, §157A to §157U (1957

Edition, as amended) provides for the regulation of the

sale of petroleum products in the State of Maryland.

Pursuant to Article 56, §157B, the Comptroller of the

Treasury administers the provisions of the Motor Fuel

Inspection Law. He is authorized to promulgate rules and

regulations for the administration and enforcement of the

Subtitle. Section 157B provides further with respect to

enforcement of the Subtitle:

(b) Whenever the Comptroller of the Treasury

shall find any person... willfully marketing petro-

leum products in violation of this article and rules

and regulations promulgated pursuant hereto, he

shall direct them to cease such violation. If, after

such direction, the violation continues, the Comp-

troller shall refer the matter to the Attorney General

who is authorized to apply to the circuit court

having jurisdiction over the offender for an injunc-

tion against the continuance of any such violations.

The appropriate circuit court shall have jurisdiction,

upon hearing and for cause shown, to grant such

temporary or permanent injunction restraining fur-

ther violations as the circumstances appear to

require.

8. Article 56, §157F(g), imposes criminal penalties

for violation of the Subtitle. One who violates any

provision of the Subtitle is guilty of a misdemeanor and

upon conviction thereof is punishable by a fine of not

more than $5,000 or by imprisonment of not more than

six months, or by both fine and imprisonment.

9. Senate Bill 465, enacted by the General Assembly

at its 1974 session, was signed into law by Governor

Mandel on May 31, 1974 and has become Chapter 854 of

the Laws of Maryland of 1974 (the “Act”). A copy of

the Act is attached hereto as Plaintiff’s Exhibit No. 1.

The Act becomes effective July 1, 1974 and amends

Article 56, §157E by adding to §157E the following

provisions:

(B) After July 1, 1974, no producer or refiner of

petroleum products shall open a major brand,

secondary brand or unbranded retail service station

in the State of Maryland, and operate: it with

company personnel, a subsidiary company, or a

commissioned agent.

petroleum products shall operate a major brand,

secondary brand, or unbranded retail service station

in the State of Maryland, with company personnel, a

subsidiary company, or a commissioned agent.

(D) Every producer, refiner, or wholesaler of

petroleum products supplying gasoline and special

fuels to retail service station dealers shall extend all

voluntary allowances uniform!v to all retail service

station dealers supplied.

(E) Every producer, refiner, or wholesaler of

petroleum products supplying gasoline and special

fuels to retail service station dealers shall apply all

equipment rentals uniformly to all retail service

station dealers supplied.

(F) Every producer, refiner or wholesaler of

petroleum products shall apportion uniformly all

gasoline and special fuels to all retail service station

dealers during periods of shortages on an equitable

basis, and shall not discriminate among the dealers

in their allotments.

(G) The Comptroller may adopt rules or regula-

tions defining the circumstances in which a producer

or refiner temporarily may operate a previously

dealer-operated station.

(H) The Comptroller may permit reasonable

exceptions to the divestiture dates specified by this

section after considering all of the relevant facts and

reaching reasonable conclusions based upon those

facts.

Constitutional Defects in the Act

10. As more fully set forth below, Chapter 854 of

the Laws of Maryland of 1974 is unconstitutional and,

therefore, null and void for the following reasons:

a. The Act bears no substantial relation to the

health, safety, morals, or welfare of the people of the

State of Maryland or to any other legitimate objective of

the Legislature and therefore goes beyond the police

power of the State and denies to Exxon due process of

law in violation of Article 23 of the Maryland Declaration

of Rights and the Fourteenth Amendment to the United

States Constitution.

b. The Act singles out refiners and producers of

petroleum products and totally prohibits them from

engaging in certain lawful business activities, i.e. the retail

sale of gasoline, while other major elements of the oil

industry who are not refiners or producers, and all other

business entities, are not subject to the prohibitions of

the Act. The Act thus denies plaintiff, and others

similarly situated, equal protection of the laws in

violation of Article 23 of the Maryland Declaration of

Rights and the Fourteenth Amendment to the United

States Constitution.

c. The Act, by regulating certain pricing and

distribution practices of producers, refiners, and whole-

salers, without regulating the same practices by other

persons or business entities, denies plaintiff, and others

similarly situated, equal protection of the laws in

violation of Article 23 of the Maryland Declaration of

Rights and the Fourteenth Amendment to the United

States Constitution.

d. The Act constitutes a taking of part or all of

plaintiff’s substantial investment in retail service stations

and a part or all of its return on investment without just

compensation and for private use in violation of Article

III, §40 of the Maryland Constitution, Article 23 of the

Maryland Declaration of Rights, and the Fourteenth

Amendment to the United States Constitution.

e. The failure of the Act to set forth any standards

to guide the unlimited discretion granted thé Comptroller

of the Treasury by the Act affords no protection to the

plaintiff against arbitrary or unreasonable exercise of the

Comptroller’s authority and constitutes an unlawful

delegation of authority in violation of Article 23 of the

Maryland Declaration of Rights and Article III of the

Maryland Constitution.

f. The Act in several respects is so vague and

ambiguous that there is virtually no way that plaintiff can

determine whether or not it is subject to violation of the -

criminal provisions which are applicable to the Act and,

therefore, denies plaintiff due process of law in violation

of Article 23 of the Maryland Declaration of Rights and

the Fourteenth Amendment to the United States

Constitution.

g. The Act discriminates against and unduly bur-

dens interstate commerce and is invalid under the

Commerce Clause of Article I, 88 of the United States

Constitution.

h. Paragraph F of the Act conflicts with the Federal

Emergency Petroleum Allocation Act of 1973 and is

therefore invalid under the Supremacy Clause of Article

VI of the United States Constitution.

i. Paragraph D of the Act conflicts with 15 U.S.C.

§13 (the Robinson-Patman Act) and is therefore invalid

under the Supremacy Clause of Article VI of the United

States Constitution.

The Act Denies Plaintiff Due Process of Law

and Is Discriminatory |

11. In prohibiting producers or refiners from opening

and operating retail service stations after July 1, 1974

and, in prohibiting producers or refiners from operating

retail service stations after July 1, 1975, the Act requires

plaintiff and others similarly situated to divorce them-

selves totally from the retail service station business.

Plaintiff has been in the retail service station business in

Maryland for over twenty years. No valid public purpose

is served by eliminating the right of producers or refiners

to engage in the lawful enterprise of operating retail

service stations or by restricting free and open competi-

tion. There is no probative evidence to support the

proposition that the operation of retail service stations by

refiners or producers has anti-competitive effects or

otherwise adversely affects the health, safety, morals or

welfare of the citizens of the State, nor does the Act

contain any such findings.

12. By prohibiting refiners and producers from

operating retail service stations, the Act removes a class

of competitor from not only the retail gasoline service

station market, but also the increasingly significant

automobile service and repair market and the retail

market for such products as tires, batteries, and

automobile accessories. Further, by removing producers

and refiners from the retail gasoline market and by

requiring producers, refiners, and wholesalers to extend

all voluntary allowances and equipment rentals uniformly

to all retail service station dealers across the State,

regardless of the relevant trading area, the opportunity

for normal and lawful price competition is in fact

restricted by the Act for the benefit of some dealers.

13. The Act goes far beyond what is required in

order to meet any possible proper legislative objective

such as promotion of price competition, prevention of

monopolies, or even protection to independent service

station dealers from unreasonable or arbitrary termina-

tion. Existing state and federal law, including other

legislation enacted at the 1974 Session of the General

Assembly (see Chapter 852), provide for far less

restrictive alternatives for achieving any such legitimate

objective. Thus, the means selected by the General

Assembly bear no real and substantial relationship to any

legitimate object sought to be obtained.

The Act Constitutes an Unconstitutional Taking

14. By prohibiting refiners and producers from

operating service stations in the State of Maryland, the

Act denies Exxon the right to earn a reasonable rate of

return on its investment and takes Exxon’s property

without compensation and for private use.

15. The Act establishes an arbitrary July 1, 1975

divestiture date, within which one-year period Exxon

believes that it will be difficult, if not impossible, to enter

into satisfactory contractual arrangements with suitable

dealers. Exxon will lose substantial portions of its

investment in those service stations which will have to be

closed if satisfactory arrangements with a dealer cannot

be worked out prior to the imposed deadline.

The Act Constitutes an Unlawful

Delegation of Authority

16. Paragraph G of the Act delegates to the

Comptroller of the Treasury the power to adopt rules and

regulations defining the circumstances in which a

producer or refiner “temporarily may operate a previ-

ously dealer-operated station.” Paragraph H of the Act

delegates to the Comptroller the power to “permit

reasonable exceptions to the divestiture dates after

considering all of the relevant facts. ...” Those delega-

tions of authority contain no legislative guidelines and

grant to the Comptroller unlimited discretion either to

permit. or forbid Exxon from engaging in a lawful

business. The delegation of such unbridled authority to

an executive or administrative official constitutes an

unlawful delegation of legislative authority and a denial

of due process of law and is void.

The Act ts Unconstitutionally Vague

17. Paragraph D of the Act provides that every

producer, refiner and wholesaler shall extend all “volun-

tary allowances” uniformly to all “dealers supplied.” The

term “voluntary allowances” is the critical operative

language of that paragraph of the Act and is not defined.

It is unclear what is encompassed by that term. Nor is it

clear what dealers are encompassed by the term “deaiers

supplied.” In addition, the Act provides no guidance as to

the meaning of the word “uniformly,” 2 word used in

Paragraphs D, E, and F of the Act. The ambiguity and

vagueness of the terms may produce results that it is

unlikely that the Legislature wished to produce. In light

of the severe criminal penalties imposed by Article 56,

§157F, Annotated Code of Maryland (1973 Cumulative

Supplement), which are applicable to the Act amending

§157E, and the vagueness of the terms referred to, the

Act is unconstitutionally vague.

The Act ts Preempted by the Federal Emergency

Petroleum Allocation Act of 1973

18. Section 4(a) of the Federal Emergency Petro-

leum Allocation Act of 1973, Pub. L. 93-159, 87 Stat.

627, directs the President of the United States to

promulgate “a regulation providing for mandatory alloca-

tion of [petroleum products], in amounts... and at

prices specified in (or determined in a manner prescribed

by) such regulation.” The Act also contains a preemption

provision. Section 6(b) provides that:

The regulation under section 4 and any order issued

thereunder shall preempt any provision of any

program for the allocation of crude oil, residual fuel

oil, or any refined petroleum product established by

any State or local government if such provision is in

conflict with such regulation or any such order.

The Petroleum Allocation and Price Regulations promul-

gated by the Federal Energy Office (the “FEO”)

pursuant to section 4(a) of the Act (39 Fed. Reg. 1923,

as amended) establish a comprehensive regulatory scheme

governing the pricing and the allocation of the supply of

petroleum products on a national scale.

19. Under 10 C.F.R. §212.82(f) and §212.93(a) of

the Petroleum Allocation and Price Regulations, the base

price for sales for both refiners and resellers “is the

weighted average price at which the item was lawfully

priced in transactions with the class of purchaser

concerned on May 15, 1973” (with adjustments not

pertinent here). (Emphasis added.) Sections 212.82(f)

and 212.93(d) provide that in computing the base price

charged to a “class of purchaser” a refiner or reseller

“may not exclude any temporary special sale, deal or

allowance in effect on May 15, 1973.” “Class of

Purchaser” is defined in § 12.31 to mean:

purchasers or lessees to whom a person has charged

a comparable price for comparable property or

service pursuant to customary price differentials

between those purchasers or lessees and other

purchasers or lessees.

“Customary price differential’’ includes:

a price distinction based on a discount, allowance,

add-on, premium, and an extra base on a difference

in volume, grade, quality, or location or type of

purchaser, or a term or condition of sale or delivery.

(Emphasis added)

The Regulations thus expressly require refiners and sellers

to reflect any allowances in effect on May 15, 1973 in

determining the base price charged to their purchasers,

and the Regulations expressly sanction price differentials

and different allowances based on such differences as

volume, lc zation, or type of purchaser. The requirement

of Paragraph D of the Act, amending Article 56, § 157E,

that all voluntary allowances be extended “uniformly”’ is,

therefore, in conflict with the Regulations and is

preempted by them in accordance with §6(b) of the

Emergency Petroleum Allocation Act of 1973.

20. Paragraph D of the Act amending §157E of

Article 56 also conflicts with another section of the

Petroleum Allocation and Price Regulations. 10 C.F.R.

§210.62 provides that a supplier may not “modify

any... normal business practice so as to result in

circumvention of any provision of this chapter.” (Empha-

sis added.) The granting of legally sanctioned price

differentials and allowances is a normal business practice.

Compliance with Paragraph D’s requirement that allow-

ances be extended uniformly would, therefore, be a

deviation from a normal business practice and would have

the effect of frustrating or impairing the objectives of the

Regulations to the extent that the price differentials and

allowances are part of the mechanism sanctioned by the

Regulations for controlling the price of petroleum

products.

21. Section 4(b) of the Emergency Petroleum Alloca-

tion Act provides that the mandatory allocation regula-

tion promulgated by the FEO, shall, to the maximum

extent practicable, provide for, among other factors,

preservation of an economically sound and competitive

petroleum industry, equitable distribution of petroleum

products at equitable prices, and the minimization of

economic distortion, inflexibility and unnecessary inter-

ference with market mechanisms. The Act thus requires

the federal allocation mechanism to recognize and

reconcile, to the “maximum extent practicable,” numer-

ous factors which may, at times, conflict with each other.

10 C.F.R. §211 et seq. (as amended, 39 Fed. Reg.

15959) of the Petroleum Allocation Regulations issued

by the FEO establishes a scheme for petroleum allocation

based on each supplier’s total allocable supply for each

allocated product and the base period volume for each

purchaser of the supplie: Under 10 C.F.R. §211.10,

each supplier’s allocation fraction (which fraction varies

for each supplier) is applied to the base period volume of

each of the purchasers of the supplier. Sections 211.13

and 211.14 of the Regulations provide for adjustments to

the amount of a petroleum product allocable to a

purchaser, based on such factors as unusual growth, new

customers, regional imbalances in the supply of petro-

leum products, and the need to allow suppliers some

reasonable discretion and leeway in the logistics of

supply. Every pricing and allocation determination made

pursuant to the Regulations, such as base prices, base

period volumes, adjustments to base prices and base

period volumes, and the reallocation to different regions

or areas can be challenged by either the supplier or the

purchaser through the FEO Regional Office by proced-

ures detailed in the Regulations. Pursuant to §211.15, a

state may create a state Office of Petroleum Allocation

which can operate under authority delegated by the FEO.

Thus, the basic allocation and allocation adjustment

determinations are governed exclusively by the Regula-

tions and the federal agency. The requirement of

Paragraph F of the Act amending Article 56, §157E, that

petroleum products be apportioned “uniformly’’ is,

therefore, in conflict with the Regulations and is

preempted by them in accordance with §6(b) of the

Emergency Petroleum Allocation Act of 1973.

The Act Conflicts with the Robinson-Patman Act,

15 U.S.C. $13

22. The requirement of Paragraph D of the Act that

all producers, refiners, and wholesalers of petroleum

products “extend all voluntary allowances uniformly to

all retail service station dealers supplied” conflicts with

both the spirit and the language of 15 U.S.C. $13 (the

Robinson-Patman Act) and Article 83, §38, Annotated

Code of Maryland (1973 Cumulative Supplement) (part

of the Maryland anti-trust law). Under both the federal

and state anti-trust laws, unlawful price discrimination

can only result from a price difference which adversely

affects competition. Paragraph D of the Act requires all

allowances to be made on a state-wide basis regardless of

any rationale or justification for the granting of any form

of allowance on a more limited geographic basis. This

provision of the Act therefore conflicts with and is

preempted by the federal law.

23. Exxon has no adequate remedy at law.

24. In view of the aforementioned allegations, an

actual controversy exists between the parties and

antagonistic claims are present between the parties which

will result in imminent and inevitable litigation. The

controversy can be determined by a declaratory decree

setting forth the rights of the parties and by the grant of

injunctive relief, all as hereinafter requested.

WHEREFORE, Exxon respectfully prays that this

Court:

1. Assume jurisdiction over the parties hereto pur-

suant to the Uniform Declaratory Judgment Act, and set

this case down for prompt hearing for the purpose of

determining the validity and rights of the parties under

Chapter 854 of the Laws of Maryland of 1974.

2. Award plaintiff declaratory relief pursuant to the

Uniform Declaratory Judgment Act y declaring that

Chapter 854 of the Laws of Maryland of 1974 is

unconstitutional, illegal, invalid, and of no force and

effect.

3. Issue a temporary injunction pendente lit» pro-

hibiting Marvin Mandel, Governor of the State of

Maryland, Francis B. Burch, Attorney General of the

State of Maryland, and Louis L. Goldstein, Comptroller

of the Treasury of the State of Maryland, or their

successors from enforcing in any way againe’ the

plaintiff, the provisions of the Act.

4. Issue a permanent injunction prohibiting Marvin

Mandel, Governor of the State of Maryland, Francis B.

Burch, Attorney General of the State of Maryland, and

Louis L. Goldstein, Comptroller of the Treasury of the

State of Maryland, or their successors from enforcing in

any way against the plaintiff, the provisions of the Act.

5. Grant such other and further relief as shall be

deemed necessary and appropriate.

/s/ William L. Marbury,

/s/ Lewis A. Noonberg,

Piper & Marbury

Attorneys for the Plaintiff.

Of Counsel:

Richard P. Delaney.

PLAINTIFF’S EXHIBIT NO. 1

Certified to be a true and correct copy of Chapter 854 of

the Acts of the General Assembly of Maryland 1974.

/s/Carl N. Everstine

Carl N. Everstine, Director

State Department of Legislative

SENATE BILL No. 465. Reference

Introduced by Senator Pine (Departmental)

Read and Examined by Proof Reader:

Proof Reader.

Sealed with the Great Seal and presented to the

Governor, for his approval this day of

at o'clock, m.

Secretary

APPROVED

By the Governor

May 31 ’74

CHAPTER 854

AN ACT concerning

Licenses — Retail Service Stations

FOR the purpose of prohibiting producers{[,]] or

refiners[[, and wholesalers] ] of petroleum products

from operating retail service stations permitting the

Comptroller to adopt rules or regulations which

define the circumstances fn which a producer or

refiner may operate temporarily ¢ previously dealer-

operated station, requiring the Comptroller fo

permit certain exceptions to the divestiture dates of

fonsidering all of the relevant facts and reaching

certain conclusions and regulating voluntary allow-

ances and rental agreements.

FY repealing and re-enacting, with arnendments,

Article 56 — Licenses

Section 157E

Annotated Code of Maryland

(1972 Replacement Volume and 1973 Supplement)

EXPLANATION: CAPITALS INDICATE MATTER

ADDED TO EXISTING LAW. [Brackets] indicate

matter stricken from existing law. [[Double

brackets]] indicate matter stricken out of bill.

Underlining indicates amendments to bill.

SENATE BILL No. 465

SECTION 1. BE IT ENACTED BY THE GENERAL

ASSEMBLY OF MARYLAND, That Section 157E $f

Article 66 — Licenses, #f the Annotated Code of

Maryland {1972 Replacement Volume and 1973 Supple-

ment) pe and it is hereby repealed and re-enacted, with

amendments, to read as follows:

Article 56 — Licenses

157E.

{A) For the purpose of this law all gasoline and

special fuels gold or offered or exposed for sale shall be

subject to inspection and analysis as hereinafter provided.

All motor fuel wholesalers, diesel fuel sellers, heating oil

distributors, manufacturers, refiners, jobbers and retail

service station dealer before selling or offering for sale

any gasoline: other motor vehicle fuels, or special fuels

finder whatever name designated for power and heating

purposes shall file with the Comptroller of the Treasury a

declaration or statement fhat they desire to sell such

products in this State and shall furnish fhe name, brand

or trademark of the products which they desire to sell

fogether with the name and address of the supplier

thereof and that dll such products are in conformity with

the specifications established by the Comptroller of the

Treasury, as purchased from the supplier and he will

make no alteration to any such product received from the

supplier.

(B) AFTER JULY 1, 1974, NO PRODUCER({[,] ]

OR REFINER [[OR WHOLESALER OF PETROLEUM

PRODUCTS SHALL OPEN AND OPERATE WITH

COMPANY PERSONNEL, A RETAIL SERVICE STA-

TION UNDER A MAJOR BRAND, SECONDARY OR

UNBRANDED STATION]] OF PETROLEUM PRO-

DUCTS SHALL OPEN A MAJOR BRAND, SECON-

DARY BRAND OR UNBRANDED RETAIL SERVICE

STATION IN THE STATE OF MARYLAND, AND

OPERATE IT WITH COMPANY PERSONNEL, A SUB-

SIDIARY COMPANY, OR A COMMISSIONED AGENT.

OR REFINER [{[OR WHOLESALER OF PETROLEUM

PRODUCTS SHALL OPERATE ANY CLASS OF RE-

TAIL SERVICE STATION JN THE STATE OF MARY-

LAND]] OF PETROLEUM PRODUCTS SHALL OP.

ERATE A MAJOR BRAND, SECONDARY BRAND, OR

UNBRANDED RETAIL SERVICE STATION IN THE

STATE OF MARYLAND, WITH COMPANY PERSON-

NEL, A SUBSIDIARY COMPANY, OR A COMMIS-

SIONED AGENT.

(D) EVERY PRODUCER, REFINER, OR WHOLE-

SALER OF PETROLEUM PRODUCTS SUPPLYING

GASOLINE AND SPECIAL FUELS TO RETAIL SER-

VICE STATION DEALERS SHALL EXTEND ALL

VOLUNTARY ALLOWANCES UNIFORMLY TO ALL

RETAIL SERVICE STATION DEALERS SUPPLIED.

(E) EVERY PRODUCER, REFINER, OR WHOLE-

SALER OF PETROLEUM PRODUCTS SUPPLYING

GASOLINE AND SPECIAL FUELS TO RETAIL SER-

VICE STATION DEALERS SHALL APPLY ALL

EQUIPMENT RENTALS UNIFORMLY FO ALL RE-

TAIL SERVICE STATION DEALERS SUPPLIED.

(F) EVERY PRODUCER, REFINER OR WHOLE-

SALER OF PETROLEUM PRODUCTS SHALL APPOR-

TION UNIFORMLY ALL GASOLINE AND SPECIAL

FUELS TO ALL RETAIL §$ERVICE STATION

DEALERS DURING PERIODS OF SHORTAGES ON

AN EQUITABLE BASIS, AND SHALL NOT DISCRIMI-

NATE AMONG THE DEALERS IN THEIR ALLOT-

MENTS. :

{G) THE COMPTROLLER MAY ADOPT RULES

OR REGULATIONS PEFINING THE CIRCUM-

STANCES IN WHICH A PRODUCER OR REFINER

TEMPORARILY MAY OPERATE A PREVIOUSLY

DEALER-OPERATED STATION.

(H) THE COMPTROLLER MAY PERMIT REASON-

ABLE EXCEPTIONS TO THE DIVESTITURE DATES

SPECIFIED BY THIS SECTION AFTER CONSIDER-

ING ALL OF THE RELEVANT FACTS AND REACH-

ING REASONABLE CONCLUSIONS BASED UPON

THOSE FACTS.

SECTION 2. AND BE IT FURTHER ENACTED, That

this Act shall take effect July 1, 1974.

Approved:

Governor.

President of the Senate.

Speaker of the House of Delegates.

ANSWER

(To Exxon Bill of Complaint)

Filed July 5, 1974

[Caption Omitted in Printing]

The Defendants, Governor of Maryland, Attorney

General of Maryland and Comptroller of the Treasury of

Maryland, by their attorneys, Francis B. Burch, Attorney

General, and Jon F. Oster, Assistant Attorney General, in

answer to the Bill for Declaratory Judgment and

Injunctive Relief, and each and every paragraph thereof

say:

1. That they admit the allegations contained in

paragraph 1.

2. That they admit that Exxon sells gasoline and

other petroleum products at the retail level in Maryland,

but are without knowledge and information sufficient to

form a belief as to the truth of the remaining allegations

contained in paragraph 2.

3. That they admit the allegations contained in

paragraph 3 but are without knowledge and information

sufficient to form a belief as to the truth of the

allegations contained in the last sentence in paragraph 3

of said Bill.

4. That they admit the allegations contained in

paragraphs 4 through 9, inclusive.

5. That they deny the allegations contained in

paragraph 10 of said Bill, specifically answering:

(a) That the Act bears a substantial relation to the

economic welfare and continuing existence of the retail

service station dealers and bears a substantial relation to

providing a market place where retail dealers can compete

with each other as independent businessmen and reduces

the dominance, direction and influence of the petroleum

producers and refiners in the retail market. The Act as

such is a legitimate objective of the Legislature and a

valid exercise of the police power of the State.

(b) That the Act does not deny plaintiff equal

protection of the laws in violation of Article 23 of the

Maryland Declaration of Rights and the Fourteenth

Amendment to the United States Constitution because

the classification of producers and refiners of petroleum

products is an existing and recognized classification in the

law and bears a rational relationship to a legitimate state

purpose in preserving the retail service station dealer as an

independent businessman.

‘ plaintiff’s property without compensation and for private

use in violation of Article III, §40 of the Maryland

Constitution, Article 23 of the Maryland Declaration of

Rights and the Fourteenth Amendment to the United

States Constitution.

(d) That the Act does not constitute an unlawful

delegation of authority in violation of Article 23 of the

Maryland Declaration of Rights and Article III of the

Maryland Constitution.

(e) That the Act is not so vague as to deny plaintiff

due process in violation of Article 23 of the Maryland

Declaration of Rights and the Fourteenth Amendment of

the United States Constitution.

(f) That the Act does not discriminate against nor

unduly burden interstate commerce so as to be invalid

under the Commerce Clause of Article I, §8 of the

United States Constitution.

(g) That the Act does not conflict with any Federal

statute and, therefore, is not invalid under the Supremacy

Clause of Article VI of the United States Constitution.

6.(a) That they deny the allegations contained in the

first sentence of paragraph 11 and state that paragraphs

(B) and (C) of Chapter 854 prevent a producer or refiner

from operating a retail service station but do not require

that they “divorce themselves totally from the retail

service station business” as alleged.

(b) That they are without knowledge sufficient to

form a belief as to the truth of the allegations contained

in the second sentence of paragraph 11 of said Bill.

third and fourth sentences of paragraph eleven. The

Legislature, after hearing testimony of the tremendous

financial influence and control exercise by the producers

and refiners over the operation of retail service stations

has deemed that it is in the public interest to preserve the

retail dealer and to prohibit retail operation by vertically

integrated producers and refiners.

7. That they deny the allegations contained in

paragraphs 12 through 14, inclusive, of said Bill.

8. That they admit that July 1, 1975 is established

by the Act as the date by which divestiture must take

place, but deny tse other allegations contained in

paragraph 15 of said Bill. That they state further that

they have been advised and know of responsible and

experienced retail service station dealers who are pre-

pared to operate the Exxon Car Care Centers upon what

they believe will be a profitable basis for Exxon and

themselves provided that the terms of their leases from

Exxon are negotiated at arms length and are fair and

equitable to both lessee and lessor.

9. That they admit the allegations contained in the

first two sentences of paragraph 16 and deny the

allegations contained in the third and fourth sentences of

paragraph 16.

10. That they admit the allegations contained in the

first sentence of paragraph 17. That they admit the

allegations of the second, fourth and fifth sentences of

paragraph 17 in that the terms “voluntary allowances”

and “dealers supplied” and “uniformly” are undefined by

the Act, but deny that such terms are unclear as alleged

in the third and fourth sentences of paragraph 17. That

they further deny the allegations contained in the fifth,

sixth and seventh sentences of paragraph 17 of said Bill.

11. That they admit the allegations contained in

paragraph 18.

12. That they admit the allegations contained in the

first five sentences of paragraph 19 as to the provisions of

the Petroleum Allocation and Price Regulations but deny

the allegations contained in the last sentence of paragraph

19 of said Bill because the effect of the federal

regulations is to make any allowance extended by Exxon

to any “class of purchaser” on said date mandatory for

the duration of the regulations. Section D of the Act

refers solely to voluntary allowances and thus there is no

conflict and no preemption under Section 6(b) of the

Federal Emergency Petroleum Act.

13. That they deny the allegations contained in

paragraph 20 as to any conflict between Chapter 854 and

10 C.F.R. §210.62. The complete sentence from which

plaintiff has extracted its quotation and added its

em phasis is as follows:

“However, no supplier may require or impose more

stringent credit terms or payment schedules on

purchasers than the normal business practice of the

supplier for that class of purchaser (e.g. COD

purchasers) during the base period, nor may any

supplier modify any other normal business practice

so as to result in circumvention of any provision of

this Chapter.”

They also deny that the uniformity requirement of

paragraph D of the Act in any way conflicts with 10

C.F.R. §210.62 because paragraph (b) of that regulation

requires in part that “[n]o supplier shall engage in any

form of discrimination among purchasers of any allocated

product.”

14. That they admit the allegations in paragraph 21

to the extent that paragraph F of the Act may be

preempted by the Federal Emergency Petroleum Alloca-

tion Act.

15. That they deny the allegations in paragraph 22

and say that the precise terms of paragraph D of the Act

do not conflict with the spirit and the language of 15

U.S.C. §13 (the Robinson-Patman Act) and Article 83

§38, Annotated Code of Maryland (1973 Cumulative

Supplement) which prohibit anti-competitive pricing and

practices. The Robinson-Patman Act is designed to

prevent anti-competitive price discriminations and para-

graph D is not in conflict with that objective.

16. That they admit paragraphs 23 and 24.

Further answering:

17. That they state that the statute in question is a

legitimate exercise of the police power of the State in

preserving the existence of the retail dealer as an

independent businessman and in reducing the control and

dominance of the vertically integrated petroleum pro-

ducer and refiner in the retail market.

18. That they state that the tremendous financial

power of the vertically integrated producers and refiners

and the fact that they can operate retail stations permit

them to offer retail dealers short term company-drafted

leases with cancellation clauses without cause on a “take

it or leave it” basis. The short term lease is the vehicle by

which the vertically integrated petroleum producer and

refiner such as Exxon can exercise control over the retail

market and discipline price conscious and competitively

oriented retail dealers.

19. That they state that the vertically integrated

petroleum producer and refiner does not have to make its

profit through retail sale but can make its profit through

producing, refining, wholesaling and transportation. Con-

sequently companies such as Exxon can afford to

conduct their retail operations at a loss and to engage in

price wars that are ruinous to many retail dealers and

costly to the cc’ suming public in areas without price

wars who may pzy an inflated price to finance such wars.

20. That they state that price wars and the tremen-

dous financial power of the petroleum producers and

refiners such as Exxon have led to economic chaos in the

retail service station business and impaired the capacity

and capability of many retail dealers to render the

complex range of services which modern motoring

conditions require.

21. That they state that the price wars have

financially ruined many retail dealers who have only one

location in which to compete whereas the petroleum

producer and refiner such as Exxon can compete over a

wide range of territory and thus compensate for losses in

a particular area. As a result of the economic hardship

from price wars the turnover ratio and failure ratio of

retail service station dealers is higher than any other

principal business classification. Furthermore, while the

total number of active service stations has been decreas-

ing, Certain areas are saturated and overbuilt with service

stations. A final result of price wars can be a reduction in

meaningful competition and a general increase in prices

to a level that would otherwise have existed.

22. That they state that in this State the Gasoline

Tax Division of the Comptroller of the Treasury found

that the turnover ratio for dealerships in retail. service

stations was 39.1 percent for the two year period from

January 1, 1972 through December 31, 1973 and that

there were 303 fewer service stations to serve the public

at the end of the same period.

23. That they state that as a result of the gasoline

shortage in 1973 when retail dealers were suffering

supply problems, lease cancellations and were altering

their hours of operation, the Governor of Maryland

directed the Gasoline Tax Division of the Comptroller of

the Treasury to undertake a study of the retail gasoline

situation during June, July and August 1973. The

Gasoline Tax Division found that the retail service

stations that were company owned and operated had no

difficulty in securing the gasoline they could sell whereas

other retail dealers were not supplied with all of the

gasoline they could sell. The Gasoline Tax Division also

found that certain producers and refiners other than

Exxon had terminated leases of retail dealers and

converted the outlets to company operated “Gas and

Go” stations which provided no lubrication or repair

services for the public.

WHEREFORE, having fully answered the Bill of

Complaint for Declaratory Judgment and Injunction, and

having shown cause why a permanent injunction prohibit-

ing the Defendants from enforcing Chapter 854 of the

Laws of Maryland of 1974 should not be issued, the

Defendants respectfully pray that any stipulations en-

tered into by either party pursuant to this action be

vacated and that the Petition for Declaratory Judgment

and Injunctive Relief be dismissed without leave to

amend, with costs to be paid by Plaintiff.

/s/ Francis B. Burch,

Attorney General,

/s{ Jon F. Oster,

Assistant Attorney General,

Attorneys for Defendants.

[Certificate of Service Omitted in Printing]

in the Circuit Court for Anne Arundel County

Equity No. 22,091

Continental Oil Company, et al.,

Plaintiff,

Marvin Mandel, Governor, et al.,

Defendants.

BILL OF COMPLAINT FORD! = \RATORY JUDGMENT

AND INJUNCTIV« RELIEF

Filed June 28, 1974

Continental Oil Company (“Conoco”) and Kayo Oil

Company (“Kayo”), plaintiffs herein, by their attorneys,

bring this action under the Uniform Declaratory Judg-

ments Act, Section 3-403 of the Courts and Judicial

Proceedings Article, Annotated Code of Maryland (1974

Edition), to obtain a declaratory judgment that Chapter

854 of the Laws of Maryland of 1974, amending Article

56, §157E of the Annotated Code of Maryland (1957

Edition, as amended), is unconstitutional and invalid and

to obtain injunctive relief against the defendants, Marvin

Mandel, Governor of the State of Maryland, Francis B.

Burch, Attorney General of the State of Maryland, and

Louis L. Goldstein, Comptroller of the Treasury of the

State of Maryland, prohibiting each of them from

enforcing the provisions of the Act. Plaintiffs declare and

allege as follows:

The Parties

1. Conoco, incorporated under the laws of the State

of Delaware, is a producer and refiner of petroleum

products, but does not operate branded retail service

stations in the State of Maryland. Conoco does not sell

branded gasoline to dealers or jobbers in Maryland. All of

the gasoline sold by Conoco in Maryland is manufactured

at Conoco’s refinery at Westlake, Louisiana, and is then

delivered into Conoco’s Baltimore Terminal via the

Colonial Pipe Line, a common carrier pipeline which

operates in interstate commerce.

2. Kayo, incorporated under the laws of the State of

Delaware, is a wholly owned subsidiary of Conoco, and

owns and operates retail service stations in the State of

Maryland. Kayo does not presently, nor has it ever, sold

any gasoline to dealers or jobbers in Maryland. Kayo has

always sold its gasoline to the motoring public directly

through employee operated gasoline outlets. Kayo has

never sold its gasoline to the motoring public through

dealer operated service stations in Maryland or in any

other state. All gasoline sold by Kayo in Maryland is sold

to Kayo by its parent corporation, Conoco, and is

transported into the state from a refinery located beyond

the boundaries of the State of Maryland as described in

paragraph one (1).

3. Kayo sells substantial quantities of gasoline and

other petroleum products at the retail level both in local

markets in Maryland and to persons, such as travelers,

some of whom operate in interstate commerce.

4. Kayo has 15 company-operated stations in Mary-

land. Each such station operates as a limited service retail

unit in dispensing gasoline to the motoring public.

Although each retail unit requires a large investment for

land, buildings and equipment, Kayo stations have

consistently sold gasoline at a lower cost to consumers

than major branded dealers because of the cost efficien-

cies realized through its high volume limited service mode

of operation. Kayo has been known throughout the

industry as a “low price marketer”, affording the

motoring public a high quality product at a price

consistently lower than most prevailing prices.

5. The defendant, Marvin Mandel, Governor of the

State of Maryland, is charged under the Constitution of

the State of Maryland with the responsibility of enforcing

the laws of the State of Maryland. He is sued herein in his

official capacity.

6. The defendant, Francis B. Burch, Attorney Gen-

eral of the State of Maryland, is authorized to seek

injunctions against the persons who violate Article 56 of

the Annotated Code of Maryland (1957 Edition, as

amended). He is sued ‘1erein in his official capacity.

7. The defendant, Louis L. Goldstein, Comptroller of

the Treasury of the State of Maryland, is charged with

the responsibility of administering the laws regulating the

sale of petroleum products in the State of Maryland and

of directing any persons willfully marketing petroleum

products in the State of Maryland in violation of Article

56 of the Annotated Code of Maryland, and the rules and

regulations promulgated pursuant thereto, to cease such

violations. He is sued herein in his official capacity.

Motor Fuel Inspection Law

8. Article 56, Subtitle: Motor Fuel Inspection Law,

Annotated Code of Maryland, §157A to §157U (1957

Edition, as amended) provides for the regulation of the

sale of petroleum products in the State of Maryland.

Pursuant to Article 56, §157B, the Comptroller of the

Treasury administers the provisions of the Motor Fuel

Inspection Law. He is authorized to promulgate rules and

regulations for the administration and enforcement of the

Subtitle. Section 157B provides further with respect to

enforcement of the Subtitle:

(b) Whenever the Comptroller of the Treasury

shall find any person... willfully marketing petro-

leum products in violation of this article and rules

and regulations promulgated pursuant hereto, he

shall direct them to cease such violation. If, after

such direction, the violation continues, the Comp-

troller shall refer the matter to the Attorney General

who is authorized to apply to the circuit court

having jurisdiction over the offender for an injunc-

tion against the continuance of any such violations.

The appropriate circuit court shall have jurisdiction,

upon hearing and for cause shown, to grant such

temporary or permanent injunction restraining fur-

ther violations as the circumstances appear to

require.

9. Article 56, §157F(g), imposes criminal penalties

for violation of the Subtitle. One who violates any

provision of the Subtitle is guilty of a misdemeanor and

upon conviction thereof is punishable by a fine of not

more than $5,000 or by imprisonment of not more than

six months, or by both fine and imprisonment.

10. Senate Bill 465, enacted by the General Assem-

bly at its 1974 session, was signed into law by Governor

Mandel on May 31, 1974 and has become Chapter 854 of

the Laws of Maryland of 1974 (the “Act’’). A copy of

the Act is attached hereto as Plaintiffs’ Exhibit No. 1.

The Act becomes effective July 1, 1974 and amends

Article 56, §157E by adding to §157E the following

provisions:

(B) After July 1, 1974, no producer or refiner of

petroleum products shall open a major brand,

secondary brand or unbranded retail service station

in the State of Maryland, and operate it with

company personnel, a subsidiary company, or a

commissioned agent.

petroleum products shall operate a major brand,

secondary brand, or unbranded retail service station

in the State of Maryland, with company personnel, a

sul -idiary company, or a commissioned agent.

(D) Every producer, refiner, or wholesaler of

petroleum products supplying gasoline and special

fuels to retail service station dealers shall extend all

voluntary allowances uniformly to all retail service

station dealers supplied.

(E) Every producer, refiner, or wholesaler of

petroleum products supplying gasoline and special

fuels to retail service station dealers shall apply all

equipment rentals uniformly to all retail service

station dealers supplied.

(F) Every producer, refiner or wholesaler of

petioleum products shall apportion uniformly all

gasoline and special fuels to all retail service station

dealers during periods of shortages on an equitable

basis, and shall not discriminate among the dealers

in their allotments.

(G) The Comptroller may adopt rules or regula-

tions defining the circumstances in which a producer

or refiner temporarily may operate a previously

dealer-operated station.

(H) The Comptroller may permit reasonable

exceptions to the divestiture dates specified by this

section after considering all of the relevant facts and

reaching reasonable conclusions based upon those

facts.

Constitutional Defects in the Act

11. As more fully set forth below, Chapter 854 of

the Laws of Maryland of 1974 is unconstitutional and,

therefore, null and void for the following reasons:

a. The Act bears no substantial relation to the

health, safety, morals, or welfare of the people of the

State of Maryland or to any other legitimate objective of

the Legislature and therefore goes beyond the police

power of the State and denies to Conoco and Kayo due

process of law in violation of Article 23 of the Maryland

Declaration of Rights and the Fourteenth Amendment to

the United States Constitution.

b. The Act singles out refiners and producers of

petroleum products and totally prohibits them from

engaging in certain lawful business activities, i.e., the

retail sale of gasoline, while other major elements of the

oil industry who are not refiners or producers, and all

other business entities, are not subject to the prohibitions

of the Act. The Act thus denies plaintiffs, and others

similarly situated, equal protection of the laws in

violation of Article 23 of the Maryland Declaration of

Rights and the Fourteenth Amendment to the Unite

States Constitution.

c. The Act, by regulating distribution practices of

producers, refiners, and wholesalers, without regulating

the same practices by other persons or business entities

denies plaintiff, and other similarly situated, equal

protection of the laws in violation of Article 23 of the

Maryland Declaration of Rights and the Fourteenth

Amendment to the United States Constitution.

d. The Act constitutes a taking of part or all of

plaintiff Kayo’s substantial investment in retail service

stations and a part or all of Kayo’s retum on investment

without just compensation and for private use in

violation of Article III, §40 of the Maryland Constitu-

tion, Article 23 of the Maryland Declaration of Rights,

and the Fourteenth Amendment to the United States

Constitution.

e. The failure of the Act to set forth any standards

to guide the unlimited discretion granted the Comptroller

of the Treasury by the Act affords no protection to the

plaintiffs against arbitrary or unreasonable exercise of the

Comptroller’s authority and constitutes an unlawful

delegation of authority in violation of Article 23 of the

Maryland Declaration of Rights and Article III of the

Maryland Constitution.

f. The Act in several respects is so vague and

ambiguous that there is virtually no way that plaintiffs

can determine whether or not they are subject to

violation of the criminal provisions which are applicable

to the Act and, therefore, denies plaintiffs due process of

law in violation of Article 23 of the Maryland Declaration

of Rights and the Fourteenth Amendment to the United

States Constitution.

g. The Act discriminates against and unduly bur-

dens interstate commerce and is invalid under the

Commerce Clause of Article I, §8 of the United States

Constitution.

h. Paragraph F of the Act conflicts with the Federal

Emergency Petroleum Allocation Act of 1973 and is,

therefore, invalid under the Supremacy Clause of Article

VI of the United States Constitution.

The Act Denies Plaintiff Due Process

of Law and ts Discrimimatory

12. In prohibiting producers or refiners from opening

and operating retail service stations after July 1, 1974,

and, in prohibiting producers or refiners from operating

retail service stations after July 1, 1975, the Act requires

plaintiffs and others similarly situated to divorce them-

selves totally from the direct operation of retail serv-

ice station business. Kayo has been in the retail

service station business in Maryland for approximately

ten years. No valid public purpose is serviced by

eliminating the right of producers or refiners to engage in

the lawful enterprise of operating retail service stations or

by restricting free and open competition. There is no

probative evidence to support the proposition that the

operation of retail service stations by refiners or

producers has anti-competitive effects or otherwise

adversely affects the health, safety, morale or welfare of

the citizens of the State, nor does the Act contain any

such findings.

13. By prohibiting refiners and producers from

operating retail service stations, the Act will remove from

the retail gasoline service station market a class of

competitor which has become a significant competitive

factor in said market; that of the company-operated retail

service station which passes the savings realized by

streamlined operations along to the consumer. Because of

Kayo’s national marketing concept, that of company

owned. and operated retail gasoline stations, the Act will

have the effect of forcing Kayo to dispose of its Maryland

stations to buyers who might not find it economically

feasible to continue operating the sites as retail gasoline

outlets. The loss of even part of Kayo’s Maryland stations

will adversely affect the public in that there will be fewer

distribution points at which the motoring public can

conveniently purchase gasoline for lower than average

prices. Further, by removing producers and refiners from

the retail gasoline market, the opportunity for normal

and lawful price competition is in fact restricted by the

Act for the benefit of some dealers.

14. The Act goes far beyond what is required in

order to meet any possible proper legislative objective

such as promotion of price competition, prevention of

monopolies, or even protection to independent service

station dealers from unreasonable or arbitrary termina-

tion. Thus, the means selected by the General Assembly

bear no real and substantial relationship to any legitimate

object sought to be obtained.

The Act Constitutes an Unconstitutional Taking

15. By prohibiting refiners and producers from

operating service stations in the State of Maryland, the

Act denies Conoco and its subsidiary, Kayo, the right to

earn a reasonable rate of return on its investment and

takes plaintiffs’ property without compensation and for

private use.

16. All Kayo’s stations were either built or re-

modeled as limited service, company operated outlets and

are wholly unsuitable for dealer operations which require

facilities for storage of tires, batteries and accessory

inventories as well as facilities for the repair and service

of automobiles. Based upon these facts and Kayo’s

concept of operation, Kayo will not be able to operate

these stations with dealers and will be forced to dispose

of the stations.

The Act Constitutes an

Unlawful Delegation of Authority

17. Paragraph G of the Act delegates to the

Comptroller of the Treasury the power to adopt rules and

regulations defining the circumstances in which a

producer or refiner “temporarily may operate a previ-

ously dealer-operated station.” Paragraph H of the Act

delegates to the Comptroller the power to “permit

reasonable exceptions to the divestiture dates after

considering all of the relevant facts...” Those delega-

tions of authority contain no legislative guidelines and

grant to the Comptroller unlimited discretion either to

permit or forbid plaintiffs from engaging in a lawful

business. The delegation of such unbridled authority to

an executive or administrative official constitutes an

unlawful delegation of legislative authority and a denial

of due process of law and is void.

The Act ts Unconstitutionally Vague

18. Paragraph F of the Act provides that every

producer, refiner and wholesaler shall “apportion uni-

formly all gasoline and special fuels to all retail service

station dealers during periods of shortages on an

equitable basis, and shall not discriminate among the

dealers in their allotments.” It is unclear what is

encompassed by the term “apportion uniformly”. The

Act provides no guidance as to the meaning of the term

“apportion uniformly”. The ambiguity and vagueness of

that term may produce results that it is unlikely that the

Legislature wished to produce. In light of the severe

criminal penalties imposed by Article 56, §157F,

Annotated Code of Maryland (1973 Cumulative Supple-

ment), which are applicable to the Act amending §157E,

and the vagueness of the term referred to, the Act is

unconstitutionally vague.

The Act ts Preempted by the Federal Emergency

Petroleum Allocation Act of 1973

19. Section 4(a) of the Federal Emergency Petro-

leum Allocation Act of 1973, Pub. L. 93-159, 87 Stat.

627, directs the President of the United States to

promulgate “‘a regulation providing for mandatory alloca-

tion of [petroleum products], in amounts... and at

prices specified in (or determined in a manner prescribed

by) such regulation.” The Act also contains a preemption

provision. Section 6(b) provides that:

The regulation under section 4 and any order issued

thereunder shall preempt any provision of any

program for the allocation of crude oil, residual fuel

oil, or any refined petroleum product established by

any State or local government if such provision is in

conflict with such regulation or any such order.

The Petroleum Allocation and Price Regulations promul-

gated by the Federal Energy Office (the “FEO”)

pursuant to section 4(a) of the Act (39 Fed. Reg. 1923,

as amended) establish a comprehensive regulatory scheme

governing the pricing and the allocation of the supply of

petroleum products on a national scale. .

20. Section 4(b) of the Emergency Petroleum Alloca-

tion Act provides that the mandatory allocation regula-

tion promulgated by the FEO, shall, to the maximum

extent practicable, provide for, among other factors,

preservation of an economically sound and competitive

petroleum industry, equitable distribution of petroleum

products at equitable prices, and the minimization of

economic distortion, inflexibility and unnecessary inter-

ference with market mechanisms. The Act thus requires

the federal allocation mechanism to recognize and

reconcile, to the “maximum extent practicable,” numer-

ous factors which may, at times, conflict with each other.

10 C.F.R. §211 et seq. (as amended, 39 Fed. Reg.

15959) of the Petroleum Allocation Regulations issued

by the FEO establishes a scheme for petroleum allocation

based on each supplier’s total allocable supply for each

allocated product and the base period volume for each

purchaser of the supplier. Under 10 C.F.R. §211.10,

each supplier’s allocation fraction (which fraction varies

for each supplier) is applied to the base period volume of

each of the purchasers of the supplier. Sections 211.13

and 211.14 of the Regulations provide for adjustments to

the amount of a petroleum product allocable to a

purchaser, based on such factors as unusual growth, new

customers, regional imbalances in the supply of petro-

leum products, and the need to allow suppliers some

reasonable discretion and leeway in the logistics of

supply. Every pricing and allocation determination made

pursuant to the Regulations, such as base prices, base

period volumes, adjustments to base prices and base

period volumes, and the reallocation to different regions

or areas can be challenged by either the supplier or the

purchaser through the FEO Regional Office by pro-

cedures detailed in the Regulations. Pursuant to § 211.15,

a state may create a state Office of Petroleum Allocation

which can operate under authority delegated by the FEO.

Thus, the basic allocation and allocation adjustment

determinations are governed exclusively by the Regula-

tions and the federal agency. The requirement of

Paragraph F of the Act amending Article 56, §157E, that

petroleum products be apportioned “uniformly” is,

therefore, in conflict with the Regulations and is

preempted by them in accordance with 6(b) of the

Emergency Petroleum Allocation Act of 1973.

21. Plaintiffs have no adequate remedy at law.

22. In view of the aforementioned allegations, an

actual controversy exists between the parties and antag-

onistic claims are present between the parties which will

result in imminent and inevitable litigation. The contro-

versy can be determined by a declaratory decree setting

forth the rights of the parties and by the grant of

injunctive relief, all as hereinafter requested.

WHEREFORE, plaintiffs respectfully pray that this

Court:

1. Assume jurisdiction over the parties hereto pur-

suant to the Uniform Declaratory Judgments Act, and set

this case down for prompt hearing for the purpose of

determining the validity and rights of the parties under

Chapter 854 of the Laws of Maryland of 1974.

2. Award plaintiffs declaratory relief pursuant to the

Uniform Declaratory Judgments Act by declaring that

Chapter 854 of the Laws of Maryland of 1974 is

unconstitutional, illegal, invalid, and of no force and

effect.

3. Issue a temporary injunction pendente lite prohib-

iting Marvin Mandel, Governor of the State of Maryland,

Francis B. Burch, Attorney General of the State of

Maryland, and Louis L. Goldstein, Comptroller of the

Treasury of the State of Maryland, or their successors

from enforcing in any way against the plaintiffs, the

provisions of the Act.

4. Issue a permanent injunction prohibiting Marvin

Mandel, Governor of the State of Maryland, Francis B.

Burch, Attorney General of the State of Maryland, and

Louis L. Goldstein, Comptroller of the Treasury of the

State of Maryland, or their successors from enforcing in

any way against the plaintiffs, the provisions of the Act.

5. Grant such other and further relief as shall be

deemed necessary and appropriate.

/s/Wilbur D. Preston, Jr.

/s/Stanley B. Rohd

Whiteford, Taylor, Preston, Trimble

and Johnston

Sun Life Building—8th Floor

Baltimore, Maryland 21201

752-0987

Attorneys for plaintiffs

Of Counsel:

A. T. Biggers

P.O. Box 2197

Houston, Texas 77001

(713) 225-1511

and

J. Robert Fisher

5 Greenway Plaza East

Houston, Texas 77046

(713) 6274019

ANSWER

(To Continental and Kayo Bill of Complaint)

Filed August 5, 1974

[Caption Omitted in Printing]

The Defendants, Governor of Maryland, Attorney

General of Maryland and Comptroller of the Treasury of

Maryland, by their attorneys, Francis B. Burch, Attorney

General, and Jon F. Oster, Assistant Attorney General, in

answer to the Bill for Declaratory Judgment and

Injunctive Relief and each and every paragraph thereof,

say:

1. They admit the allegations contained in the first

sentence of paragraph 1. They have no knowledge of the

allegations contained in the second sentence, however

they believe and therefore aver that Continental Oil

Company (“Conoco”) sells both premium and regular

gasoline in the State of Maryland which is comingled

under a terminal agreement with the Ashland Oil

Company, and that since June 1, 1974, Conoco has

entered into a terminal agreement with the Sun Oil

Company to comingle unleaded regular gasoline. The

Defendants deny the allegations contained in the third

sentence of paragraph 1 that all of the gasoline sold by

Conoco in Maryland is manufactured at Conoco’s

refinery at Westlake, Louisiana and state that Conoco has

terminal and exchange agreements in Maryland with

other oil companies and, therefore, its gasoline becomes

fungible under the exchange agreements.

2. They admit the allegations contained in paragraph

2 except for the allegation that all of the gasoline sold by

Kayo in Maryland has been refined at the Westlake

refinery.

3. Answering paragraph 3, the Defendants state that

Kayo’s percentage of the Maryland market for the sale of

gasoline and other petroleum products at the retail level

is approximately one-half of one percent. The Defendants

have no knowledge as to whether or not persons

purchasing gasoline and other petroleum products from

Kayo operate in interstate commerce.

4. The allegations contained in paragraph 4 are

admitted, however, the Defendants state further that the

reasons that Kayo can operate as a “low price marketer”

are that it markets fungible gasoline and does not incur

other cost factors such as providing service facilities,

credit cards, advertising programs and additives.

5. They admit the allegations contained in para-

graphs 5 through 10, inclusive.

6. They deny the allegations contained in paragraph

11 of said Bill, specifically answering:

(a) The Act bears a substantial relation to the

economic welfare and continuing existence and employ-

ment of the independent retail service station dealers and

their employees and bears a substantial relation to

providing a market place where retail dealers can compete

with each other as independent businessmen. The Act

reduces the dominance, direction and influence of the

petroleum producers and refiners in the retail market.

The Act as such is a legitimate objective of the

Legislature and a valid exercise of the police power of the

State.

(b) The Act dozs not deny Plaintiff equal protec-

tion of the laws in violation of Article 23 of the Maryland

Declaration of Rights and the Fourteenth Amendment to

the United States Constitution because the classification

of producers and refiners of petroleum products is an

existing and recognized classification in the law and bears

a rational relationship to a legitimate state purpose in

preserving the retail service station dealer as an inde-

pendent businessman.

- (c) The Plaintiff is one of the 21 major oil

producing and refining companies in the United States

which control virtually all of the production and refining

of gasoline in the United States.

(d) The Act does not constitute a taking of

plaintiff’s property without compensation and for private

use in violation of Article III, §40 of the Maryland

Constitution, Article 23 of the Maryland Declaration of

Rights and the Fourteenth Amendment to the United

States “onstitution.

(e) The Act does not constitute an unlawful

delegation of authority in violation of Article 23 of the

Maryland Declaration of Rights and Article Ili of the

Maryland Constitution.

(f) The Act is not so vague as to deny Plaintiff due

process in violation of Article 23 of the Maryland

Declaration of Rights and the Fourteenth Amendment of

the United States Constitution.

(g) The Act does not discriminate against nor

unduly burden interstate commerce so as to be invalid

under the Commerce Clause of Article I, §8 of the

United States Constitution.

(h) The Act does not conflict with any Federal

statute and, therefore, is not invalid under the Supremacy

Clause of Article VI of the United States Constitution.

7.(a) They deny the allegations contained in the first

sentence of paragraph 12 and state that paragraphs (B)

and (C) of Chapter 854 prevent a producer or refiner

from operating a retail service station but do not require

that they “divorce themselves totally from the retail

service station business’’ as alleged.

(b) They admit the allegations in the second

sentence of paragraph 12 of said Bill.

and fourth sentences of paragraph 12. The Legislature,

after hearing testimony of the tremendous financial

influence and control exercised by the producers and

refiners over the operation of retail service stations has

deemed that it is in the public interest to preserve the

retail dealer and to prohibit retail operation by vertically

integrated producers and refiners.

8. They deny the allegations contained in paragraph

13 and state that Kayo can lease its service stations with

the same type of operation on a profitable basis and

further state that, in fact, other major oil companies at

the present time are leasing service stations that employ

the same type of operation as Kayo company owned and

operated stations.

9. They deny the allegations contained in paragraphs

14 and 15.

10. They deny the allegations contained in paragraph

16 and state that they are advised that there are

responsible and experienced independent retail service

station dealers who are prepared to operate Kayo outlets

on the same concept of operation as that employed by

Kayo upon what they believe will be a profitable basis for

Kayo and themselves.

11. They admit the allegations contained in the first

two sentences of paragraph 17 and deny the allegations

contained in the third and fourth sentences of paragraph

17.

12. They admit the first sentence in paragraph 18

and deny the remainder of the paragraph. The Defend-

ants state further that the purpose of Paragraph F of the

Act is to insure that all independent retail service station

dealers have an equal share of gasoline during periods ‘of

shortages.

13. They admit the allegations contained in para-

graph 19.

14. They admit the allegations contained in para-

graph 20 to the extent that Paragraph F of the Act may

be preempted by the Federal Emergency Petroleum

Allocation Act.

15. They admit the allegations contained in para-

graphs 21 and 22.

Further answering:

16. They state that the statute in question is a

legitimate exercise of the police power of the State in

preserving the existence of the retail dealer as an

independent businessman and in reducing the monopo-

listic and anticompetitive control by the vertically

integrated petroleum producer and refiner in the retail

market.

17. They state that the tremendous financial power

of the vertically integrated producers and refiners permit

them to merge the monopolistic and competitive levels of

the petroleum industry and to subject independent retail

service station dealers to price squeezes and unfair

competitive pressure which they have neither the

resources nor capacity to resist.

18. They state that the vertically integrated petro-

leum producer and refiner does not have to make its

profit through retail sales but can make its profit through

producing, refining, wholesaling and transportation. Con-

sequently, companies such as Conoco can maximize the

profits earned at the noncompetitive and less competitive

levels.

19. They state that price wars and the tremendous

financial power of the petroleum producers and refiners

such as Conoco have led to economic chaos in the retail

service station business and impaired the capacity and

capability of many retail dealers to render the complex

range of services which modern motoring conditions

require.

20. They state that the price wars have financially

ruined many retail dealers who have only one location in

which to compete whereas the petroleum producer and

refiner such as Conoco can compete at several levels and

compete over a wide range of territory and thus

compensate for losses at a particular level or in a

particular area. As a result of the economic hardship from

price wars the turnover ratio and failure ratio of retail

service station dealers is higher than any other principal

business classification. A final result of price wars can be

a reduction in meaningful competition and a general

increase in prices to a level that would otherwise have

existed.

21. They state that while the total number of active

service stations has been decreasing, certain areas are

saturated and overbuilt with service stations. The

producers and refiners such as Conoco have concentrated

on developing company owned and operated retail

outlets that can pump high gallonage and abandoned low

gallonage retail stations to the detriment of the general

public in certain geographical areas.

22. They state that in this State the Gasoline Tax

Division of the Comptroller of the Treasury found that

the turnover ratio for dealerships in retail service stations

was 39.1 percent for the two year period from January 1,

1972 through December 31, 1973 and that there were

303 fewer service stations to serve the public at the end

of the same period.

23. They state that as a result of the gasoline

shortage in 1973 when retail dealers were suffering

supply problems, lease cancellations and were altering

their hours of operation, the Governor of Maryland

directed the Gasoline Tax Division of the Comptroller of

the Treasury to undertake a study of the retail gasoline

situation during June, July and August 1973. The

Gasoline Tax Division found that the retail service

stations that were company owned and operated had no

difficulty in securing the gasoline they could sell whereas

other retail dealers were not supplied with all of the

gasoline they could sell.

WHEREFORE, having fully answered the Bill of

Complaint for Declaratory Judgment and Injunction, and

having shown cause why a permanent injunction prohibit-

ing the Defendants from enforcing Chapter 854 of the

Laws of Maryland of 1974 should not be issued, the

Defendants respectfully pray that this action be vacated

and that the Petition for Declaratory Judgment and

Injunctive Relief be dismissed without leave to amend,

with costs to be paid by Plaintiff.

/s/Francis B. Burch

Attorney General

/s/Jon F. Oster

Assistant Attorney General

[Certificate of Service Omitted in Printing]

In the Circuit Court for Anne Arundel County

No. 22,216

Shell Oil Company,

Plaintiff,

Marvin Mandel, Governor of the State

of Maryland, et al.,

Defendants.

BILL OF COMPLAINT FOR'DECLARATORY

JUDGMENT AND INJUNCTIVE RELIEF

Filed September 3, 1974

Shell Oil Company (“Shell”) brings this civil action

against the above-named defendants and complains and

alleges as follows:

Parties

1. Plaintiff Shell. Oil Company is a corporation

organized and existing under the laws of the State of

Delaware with its principal offices at One Shell Pjaza,

Houston, Texas. Plaintiff is a producer of crude oil and a

refiner of petroleum products and operates with com-

pany personne’ a retail service station in the State of

Maryland. Sheli owns, has adopted and uses in commerce

the federally registered trademark of “Shell.” Shell is

authorized to do business in the State of Maryland and is

a supplier of gasoline and other petroleum products in

Maryland, selling to motorists, other consumers, dealers,

wholesalers, and others. All of the gasoline sold by Shell

in Maryland is transported into the State in a continuous

flow of interstate commerce from refineries located

outside the boundaries of the State.

2. Shell sells quantities of gasoline and other petro-

leum products and other goods and services at retail to

motorists and other consumers both in local Maryland

markets and to persons, such as interstate travelers,

common carriers, airlines, and the shipping industry, who

use such petroleum products in interstate or foreign

commerce with Maryland.

3. There are approximately 196 independent dealer

stations in Maryland buying Shell branded gasoline

directly from Shell. In addition, Shell has one (1)

company-operated service station. This station required a

large initial capital investment in land, building and

equipment and this investment must be continuously

sustained. In addition to marketing gasoline, this com-

pany-operated station sells automobile products, such as

tires, batteries and accessories.

4. The defendant, Marvin Mandel, Governor of the

State of Maryland, is charged under the Constitution of

the State of Maryland with the responsibility of enforcing

the laws of the State. He is sued herein in his official

capacity.

5. The defendant, Francis B. Burch, Attorney Gen-

eral of the State of Maryland, is authorized to seek

injunctions against persons who violate Article 56 of the

Annotated Code of Maryland (1957 Edition, as

amended). He is sued herein in his official capacity.

6. The defendant, Louis L. Goldstein, Comptroller of

the Treasury of the State of Maryland, is charged with

the responsibility of administering the laws regulating the

sale of petroleum products in the State of Maryland and

of directing any persons willfully marketing petroleum

products in the State of Maryland in violation of Article

56 of the Annotated Code of Maryiand, and the rules and

regulations promulgated pursuant thereto, to cease such

violations. He is sued herein in his official capacity.

II.

Jurisdiction and Venue

7. The jurisdiction of this Court is invoked under the

Uniform Declaratory Judgment Act, Section 3-405 of the

Courts and Judicial Proceedings Article, Annotated Code

of Maryland (1974 Edition), to obtain a declaratory

judgment that Chapter 854 of the Laws of Maryland of

1974, amending Article 56, §157E of the Annotated

Code of Maryland (1957 Edition, as amended), is

unconstitutional and invalid and to obtain injunctive

relief against the defendants, Marvin Mandel, Governor of

the State of Maryland, Francis B. Burch, Attorney

General of the State of Maryland, and Louis L. Goldstein,

Comptroller of the Treasury of the State of Maryland,

prohibiting each of them from enforcing the provisions

of the Act.

8. Defendants Marvin Mandel and Louis L. Goldstein

have their places of business and official residences in

Anne Arundel County and, therefore, venue is proper in

this Court pursuant to Section 6-201 of the Courts and

Judicial Proceedings Article, Annotated Code of Mary-

land (1974 Edition).

Ill.

Nature of the Controversy

9. Article 56, Subtitle: Motor Fuel Inspection Law,

Annotated Code of Maryiand §157U (1957 Edition, as

amended), provides for the regulation of the sale of

petroleum products in the State of Maryland. Pursuant to

Article 56, §157B, the Comptroller of the Treasury

administers the provisions of the Motor Fuel Inspection

Law. He is authorized to promulgate rules and regulations

for the administration and enforcement of the Subtitle.

Section 157B provides further with respect to enforce-

ment of the Subtitle:

(b) Whenever the Comptroller of the Treasury

shall find any person .. . willfully marketing petro-

leum products in violation of this article and rules

and regulations promulgated pursuant hereto, he

shall direct them to cease such violation. If, after

such direction, the violation continues, the Comp-

troller shall refer the matter to the Attorney General

who is authorized to apply to the circuit court

having jurisdiction over the offender for an injunc-

tive against the continuance of any such violations.

The appropriate circuit court shall have jurisdiction,

upon hearing and for cause shown, to grant such

temporary or permanent injunction restraining fur-

ther violations as the circumstances appear to

require.

10. Article 56, §157F(g), imposes criminal penalties

for violation of the Subtitle. One who violates any

provision of the Subtitle is guilty of a misdemeanor and

upon conviction thereof is punishable by a fine of not

more than $5,000 or by imprisonment of not more than

six months, or by both fine and imprisonment.

11. Senate Bill 465, enacted by the General Assem-

bly at its 1974 session, was signed into law by Governor

Mandel on May 31, 1974 and has become Chapter 854 of

the Laws of Maryland 1974 (the “Act’’). A copy of the

Act is attached hereto as Exhibit A. The Act became

effective July 1, 1974 and amended Article 56, §157E

by adding to §157E the following provisions:

(B) After July 1, 1974, no producer or refiner of

petroleum products shall open a major brand,

secondary brand or unbranded retail service station

in the State of Maryland and operate it with

company personnel, a subsidiary company, or a

commissioned agent.

petroleum products shall operate a major brand,

secondary brand, or unbranded retail service station

in the State of Maryland, with company personnel, a

subsidiary company, or a commissioned agent.

(D) Every producer, refiner, or wholesaler of

petroleum products supplying gasoline and special

fuels to retail service station dealers shall extend all

voluntary allowances uniformly to all retail service

station dealers supplied.

(E) Every producer, refiner, or wholesaler of

petroleum products supplying gasoline and special

fuels to retail service station dealers shall apply a'l

equipment rentals uniformly to all retail service

station dealers supplied.

(F) Every producer, refiner, or wholesaler of

petroleum products shall apportion uniformly all

gasoline and special fuels to all retail service station

dealers during periods of shortages on an equitable

basis, and shall not discrimimate among the dealers

in their allotments.

(G) The Comptroller may adopt rules or regula-

tions defining the circumstances in which a producer

or refiner temporarily may operate a previously

dealer-operated station.

(H) The Comptroller may permit reasonable

exceptions to the divestiture dates specified by this

section after considering all of the relevant facts and

reaching reasonable conclusions based upon those

facts.

12. If the Act is not declared unconstitutional, Shell

and its officers, agents and employees will be subject to

criminal prosecution in Maryland because of its afore-

mentioned operation. Alternatively, Shell will be unable

to continue in the business of selling petroleum products

at retail in Maryland and it will be required to close or to

seek to dispose of or to lease its Maryland facility. In

addition, Shell, although having no present intention of

converting all or any part of its independent lessee

stations to company-operated facilities, does have plans

to build large costly innovative units in Maryland which

can be effectively operated only as company operated

stations. The Act not only will prohibit the evolution of

such plans, but, more significantly, it will totally

eliminate Shell’s retail competition in the Maryland

markets and it will be harmful to the interests of both

Maryland motorists and petroleum product consumers in

interstate or foreign commerce who are required to

purchase such products in Maryland. Shell accordingly

has an actual and present need for the declaratory and

injunctive relief which is sought herein. Shell has no

adequate remedy at law.

IV.

Constitutional Defects In the Act

13. In prohibiting producers and refiners from

opening and operating after July 1, 1974, and operating

after July 1, 1975 retail service stations with company

personnel, a subsidiary company or a commissioned

agent, the Act requires plaintiff and others similarly

situated to divorce themselves from the retail service

station business. No valid public purpose is served by

eliminating the right of producers or refiners to engage in

the !awful enterprise of operating retail service stations or

by restricting free and open competition. There is no

basis to support the proposition that the operation of

retail service stations by refiners or producers has

anticompetitive effects or otherwise adversely affects the

health, safety, morals or welfare of the citizens of the

State, nor does the Act contain any such findings. On the

contrary, such operations enhance competition and a

denial of this right will lessen competition to the

detriment of the consumer and contrary to the public

policy of both the State of Maryland and the United

States. It is only through a network of dealer operated

service stations as supplemented by company operated

stations that the consumer will receive those benefits

which can only result from such complementary systems

of distribution.

14. The Act bears no substantial relation to the

health, safety, morals or welfare of the people of the

State of Maryland or to any other legitimate objective of

the Legislature. It is an improper and invalid exercise of

the police power of the State and denies to Shell due

process of Law in violation of Article 23 of the Maryland

Declaration of Rights and the Fourteenth Amendment to

the Constitution of the United States.

15. The Act goes far beyond what is required in

order to meet any possible proper legislative objectives

such as promotion of price competition, prevention of

monopolies, or even protection to independent service

station dealers; indeed, its primary purpose is to restrict

competition. Existing state and federal law provide for

far less restrictive alternatives for achieving any such

legitimate objective of this legislation, and this legislation

is contrary to the purpose and spirit of other legislation

designed to promote competition. The Act is not only

unreasonable and unduly oppressive, but it is patently

beyond any legitimate necessities. Thus, the means

selected by the Legislature bear no real and substantial

relationship to any legitimate object sought to be

obtained.

16. The Act discriminates against refiners and produ-

cers and prohibits them from engaging in certain lawful

business activities, i.ec., from opening and operating after

July 1, 1974 and operating after July 1, 1975 retail

service stations with company personnel, a subsidiary

company or a commissioned agent while other major

elements of the petroleum industry, all business entities

who sell petroleum products but are not producers or

refiners, and all other business entities are not subject to

the prohibitions of the Act. The Act thus denies plaintiff,

and others similarly situated, equal protection of the laws

in violation of Article 23 of the Maryland Declaration of

Rights and the Fourteenth Amendment to the United

States Constitution.

17. The Act, by regulating certain business and

distribution practices of refiners, producers and whole-

salers, without regulating the same practices by other

persons or business entities, denies plaintiff, and others

similarly situated, equal protection of the laws in

violation of Article 23 of the Maryland Declaration of

Rights and the Fourteenth Amendment to the United

States Constitution.

18. The Act contains classifications, applications,

and distinctions which are arbitrary, capricious, and

without reasonable basis in law or in fact, in that, among

other things:

(a) it precludes producers and refiners, and their

subsidiaries, from engaging in retail sale of their

petroleum products whereas all other persons and

business entities may engage in retail sale of their

own products;

(b) it allows producers and refiners, and their

subsidiaries, to operate their retail service stations

under a tertiary brand;

(c} it allows producers and refiners, and their

subsidiaries, to sell unlimited amounts of gasoline

and petroleum products to retail bulk purchase

accounts, such as the State, other governmental

units and private business, and thereby does not

limit such retail sales to consumers; and

(d) it prohibits independent refiners and pro-

ducers, among others, from entering into the retail

service j.ation market and independent marketers,

among others, from entering into production and

refining.

The Act denies to plaintiff equal protection of the laws

in violation of Article 23 of the Maryland Declaration of

Rights and the Fourteenth Amendment to the Constitu-

tion of the United States.

19. By prohibiting refiners and producers from

opening and operating after July 1, 1974 and operating

after July 1, 1975 retail service stations with company

personnel, a subsidiary company or a commissioned

agent, the Act removes a class of competitor from not

only the retail gasoline service station market, but also

the increasingly significant automobile service and repair

market and the retail market for such products as tires,

batteries, and automobile accessories. Further, by remov-

ing such producers and refiners from the retail gasoline

market and by requiring producers, refiners and whole-

salers to extend all voluntary allowances and equipment

rentals uniformly to all retail service station dealers across

the State, regardless of the relevant trading area, the

opportunity for normal and lawful price competition is

restricted in fact by the Act, contrary to federal

legislation such as Section 2(b) of the Robinson-Patman

Act, for the benefit of some dealers.

20. The Act constitutes a taking of part or all of

plaintiff’s substantial investment in its retail service

station business and a part or all of its return on

investment without just compensation and for private use

in violation of Article 23 of the Maryland Declaration of

Rights, Article III, Section 40 of the Maryland Constitu-

tion and the Fourteenth Amendment to the United

States Constitution.

21. By prohibiting refiners and producers from

opening and operating after July 1, 1974 and operating

after July i, 1975 retail service stations with company

personnel, a subsidiary company or a commissioned

agent, the Act not only establishes an arbitrary divorce-

ment date, but also denies Shell the right to earn a

reasonable rate of return on its investment and takes

Shell’s property without compensation and for private

use.

22. Paragraph G of the Act delegates to the

Comptroller of the Treasury the power to adopt rules and

regulations defining the circumstances in which a

producer or refiner “temporarily may operate a previ-

ously dealer-operated station.” Paragraph H of the Act

delegates to the Comptroller the power to “permit

reasonable exceptions to the divestiture dates after

considering all of the relevant facts.” Those delegations

of authority contain no legislative guidelines and grant to

the Comptroller unlimited discretion either to permit or

forbid Shell from engaging in a lawful business; yet the

delegated authority does not extend to a situation such as

an independent dealer unexpectantly leaving a station

with the result that both the consumer, through

inconvenience and disruption of service, and the in-

coming dealer, through loss of clientele, incur hardship

and economic loss due to the temporary but now

_ necessary closing of the station. The delegation of such

unbridled authority to an executive or administrative

official constitutes an unlawful delegation of legislative

authority and denies to Shell due process of law in

violation of Article 23 of the Maryland Declaration of

Rights and Article III of the Maryland Constitution.

23. The Act is so vague and ambiguous that plaintiff

cannot determine whether it is subject to violation of the

criminal provisions applicable to the Act. Therefore,

plaintiff is denied due process of law in violation of

Article 23 of the Maryland Declaration of Rights and the

Fourteenth Amendment to the Constitution of the

United States.

24. Paragraph B of the Act provides:

(B) After July 1, 1974, no producer or refiner of

petroleum products shall open a major brand,

secondary brand or unbranded retail service station

in the State of Maryland, and operate it with

company personnel, a subsidiary company, or a

commissioned agent.

Paragraph C of the Act provides:

petroleum products shall operate a major brand,

secondary brand, or unbranded retail service station

in the State of Maryland, with company personnel, a

subsidiary company, or a commissioned agent.

Nowhere within these paragraphs or the Act are the terms

“major brand”, “secondary brand”, “‘unbranded”, “‘ser-

vice station”, and “subsidiary company” defined.

The ambiguity and vagueness of these terms is

demonstrated, inter alia, by the question of whether

“service station” is limited to those stations which have

available vehicular related services, such as repairs and

accessories, or includes those stations which merely

provide gasoline facilities or those stations which provide

gasoline facilities, but derive the major percentage of

their revenue from the sale of groceries or other

nonpetroleum related products. In light of the criminal

and civil penalties imposed for violations of the Section,

and the vague and ambiguous terms identified herein,

paragraphs B and C of the Act deny plaintiff due process

of law in violation of Article 23 of the Maryland Declara-

tion of Rights and the Fourteenth Amendment to the

Constitution of the United States.

25. Paragraph D of the Act provides:

(D) Every producer, refiner, or wholesaler of

petroleum products supplying gasoline and special

fuels to retail service station dealers shall extend all

voluntary allowances uniformly to all retail service

station dealers supplied.

Paragraph E of the Act provides:

(E) Every producer, refiner, or wholesaler of

petroleum products supplying gasoline and special

fuels to retail service station dealers shall apply all

equipment rentals uniformly to all retail service

station dealers supplied.

Nowhere within these paragraphs or the Act are the terms

“voluntary allowances”, “equipment rentals”, “‘uni-

formly” and “retail service station dealers supplied”

defined.

The ambiguity and vagueness of these terms is

demonstrated, for example, by the question of whether

“equipment rentals” is limited to include hand tools or

storage tanks or gasoline pumps or lifts or the entire

service station facility; \whether “voluntary allowances”

encompasses the granting of rent relief to a dealer so that

he may avoid the full economic impact of a temporary

road closing or a fire which temporarily prevents

acceptance of repair work; whether “uniformly” is to be

measured in terms of cents per gallon or a strict monetary

basis per item of equipment; whether “uniformly” is used

in the context of the various stratas of retail operations,

that is in the relationship to the comparison between a

sparcely patronized single pump operation and a sophi«ii-

cated, high volume operation; and in other respects. [he

ambiguity and vagueness of these terms may produce

results that it is unlikely the Legislature wished to

produce. In light of the criminal and civil penalties

imposed for violations of the Act and the vague and

ambiguous terms identified herein, paragraphs D and E of

the Act deny plaintiff due process of law in violation of

Article 23 of the Maryland Declaration of Rights and the

Fourteenth Amendment to the Constitution of the

United States.

26. Section 4(a) of the Federal Emergency Petro-

leum Allocation Act of 1973, Pub. L. 93-159, 87 Stat.

627, directs the President of the United States to

promulgate “‘a regulation providing for mandatory alloca-

tion of [petroleum products], in amounts... and at

prices specified in (or determined in a manner prescribed

by) such regulation.” The Act also contains a preemption

provision. Section 6(b) provides:

The regulation under section 4 and any order issued

thereunder shall preempt any provision of any

program for the allocation of crude oil, residual fuel

oil, or any refined petroleum product established by

any State or local government if such provision is in

conflict with such regulation or any such order.

The Petroleum Allocation and Price Regulations pruinul-

gated by the Federal Energy Office pursuant to section

4(a) of the Act (39 Fed. Reg. 1923, as amended)

establish a comprehensive regulatory scheme governing

the pricing and the allocation of the supply of petroleum

products on a national scale.

27. Under 10 C.F.R. §212.82(f) and §212.93(a) of

the Petroleum Allocation and Price Regulations, the base

price for sales for both refiners and resellers “‘is the

weighted average price at which the item was lawfully

priced in transactions with the class of purchaser

concerned on May 15, 1973” (with adjustments not

pertinent here) (emphasis added). Sections 212.82(f) and

212.93(d) provide that in computing the base price

charged to a “class of purchaser” a refiner or reseller

“may not exclude any temporary special sale, deal or

allowance in effect on May 15, 1973.” “Class of

Purchaser”’ is defined in § 212.31 to mean:

purchasers or lessees to whom a person has charged

a comparable price for comparable property or

service pursuant to customary price differentials

between those purchasers or lessees and other

purchasers or lessees.

“Customary price differential” includes:

a price distinction based on a discount, allowance,

add-on, premium, and an extra base on a difference

in volume, grade, quality, or location or type of

purchaser, or a term or condition of sale or delivery.

(Emphasis added)

The Regulations thus expressly require refiners and sellers

to reflect any allowances in effect on May 15, 1973 in

determining the base price charged to their purchasers,

and the Regulations expressly sanction price differentials

and different allowances based on such differences as

volume, location, or type of purchaser. The requirement

of Paragraph D of the Act, amending Article 56, §157E,

that all voluntary allowances be extended “uniformly”,

is, therefore, in conflict with and preempted by the

Regulations in accordance with section 6(b) of the

Emergency Petroleum Allocation Act of 1973 and it is

invalid under Article VI, Clause 2 of the Constitution of

the United States.

28. Under 10 C.F.R. §210.62 of the Petroleum

Allocation and Price Regulations, it is provided that a

supplier may not “modify any... normal business

practice so as to result in circumvention of any provision

of this chapter.” Compliance with the requirements of

paragraph D of the Act would be a deviation from Shell's

normal business practices and would have the effect of

frustrating or impairing the objectives and the implemen-

tation of the Act which provides for, among other

factors, preservation of an economically sound and

competitive petroleum industry, equitable distribution of

petroleum products at equitable prices, and the minimiza-

tion of economic distortion, inflexibility and unnecessary

interference with market mechanisms. Therefore, para-

graph D is in conflict with and preempted by the

Regulations in accordance with section 6(b) of the

Emergency Petroleum Allocation Act of 1973 and it is

invalid under Article VI, Clause 2 of the Constitution of

the United States.

29. Section 4(b) of the Emergency Petroleum Alloca-

tion Act provides that the mandatory allocation regula- —

tion promulgated by the FEO, shall, to the maximum

extent practicable, provide for, among other factors,

preservation of an economically sound and competitive

petroleum industry, equitable distribution of petroleum

products at equitable prices, and the minimization of

economic distortion, inflexibility and unnecessary inter-

ference with market mechanisms. The Act thus requires

the federal allocation mechanism to recognize and

reconcile, to the “maximum extent practicable,” numer-

ous factors which may, at times, conflict with each other.

Under 10 C.F.R. §211 et seq. (as amended, 39 Fed.

Reg. 15959) of the Petroleum Allocation Regulations

issued by the FEO, a scheme is established for petroleum

allocation based on each supplier’s total allocable supply

for each allocated product and the base period volume

for each purchaser of the supplier. Under 10 C.F.R.

§211.10, each supplier’s allocation fraction (which

fraction varies for each supplier) is applied to the base

period volume of each of the purchasers of the supplier.

Sections 211.13 and 211.14 of the Regulations provide

for adjustments to the amount of a petroleum product

allocable to a purchaser, based on such factors as unusual

growth, new customers, regional imbalances in the supply

of petroleum products, and the need to allow suppliers

some reasonable discretion and leeway in the logistics of

supply. Every pricing and allocation determination made

pursuant to the Regulations, such as base prices, base

period volumes, adjustments to base prices and base

period volumes, and the reallocation of different regions

or areas can be challenged by either the supplier or the

purchaser through the FEO Regional Office by proced-

ures detailed in the Regulation. Pursuant to §211.15, a

state may create a state Office of Petroleum Allocation

which can operate under authority delegated by the FEO.

Thus, the basic allocation and allocation adjustment

determinations are governed exclusively by the Regula-

tions and the federal agency. The requirement of

Paragraph F of the Act amending Article 56, §157E, that

petroleum products be apportioned “uniformly” is,

therefore, in conflict with and preempted by the

Regulations in accordance with section 6(b) of the

Emergency Petroleum Allocation Act of 1973 and it is

invalid under Article VI, Clause 2 of the Constitution of

the United States.

30. The requirement of Paragraph D of the Act that

all producers, refiners, and wholesalers of petroleum

products “extend all voluntary allowances uniformly to

, 73

all retail service station dealers supplied” conflicts with

both the spirit and the language of the Robinson-Patman

Act, 15 U.S.C. $13, and the Maryland antitrust laws,

Article 83, Section 38, Annotated Code of Maryland

(1973 Cumulative Supplement). Under both the federal

and state antitrust laws, unlawful price discrimination can

only result from a price difference which adversely

affects competition. Paragraph D of the Act requires all

allowances to be made on a state-wide basis regardless of

any rationale or justified geographic basis. This provision

of the Act is, therefore, in conflict with and preempted

by the federal law and it is invalid under Article VI,

Clause 2 of the Constitution of the United States.

31. Under the Lanham Act, 15 U.S.C. §1051,

Congress fully regulated the registration and use of

trademarks in interstate and foreign commerce. It

expressed its intention “to protect registered marks used

in such commerce for interference by State, or territorial

legislation” 15 U.S.C. §1127. Congress also exhausted its

constitutional powers in the regulation of trademarks

when it defined “commerce” for purposes of the Lanham

Act as meaning “all companies which may lawfully be

regulated” 15 U.S.C. §1127. Thus, Congress has mani-

fested its intention to use its complete power under the

Commerce Clause of the United States Constitution to

regulate and protect trademarks and it has expressly

prohibited any interference by state action within that

field. The Act, which prohibits Shell from opening and

operating after July 1, 1974 and operating after July 1,

1975 retail service stations with company personnel, a

subsidiary company or a commissioned agent, is pre-

empted by the federal law and is invalid under Article VI,

Clause 2 of the Constitution of the United States.

$2. The Lanham Act, under 15 U.S.C. §1057,

provides the registrant of a trademark with the exclusive

right to use the mark in commerce. The Act deprives

Shell of the right to use the “Sheil” trademark, which it

owns, uses and has adopted, to open and operate after

July 1, 1974 and operate after July 1, 1975 retail service

stations with company personnel, a subsidiary company

or a commissioned agent. The Act thereby conflicts with

the Lanham Act and, therefore, it is invalid under Article

VI, Clause 2 of the Constitution of the United States.

33. The Act discriminates against and unduly bur-

dens interstate commerce and is invalid under the

Commerce Clause of Article 1, Section 8 of the United

States Constitution. The excessive burden and discrimina-

tion are demonstrated by, among others, the following

examples: the Act prohibits producers and refiners from

entering the retail gasoline market in Maryland while at

the same. time it prevents a retail gasoline company in

Maryland from entering into productien or refining

anywhere; the Act will cause a displacement of market

share from Shell and others similarly situated to those

companies not prohibited from engaging in the retail

service station business; and the Act, by freezing and

sterilizing the retail gasoline market, will reduce or

eliminate, to the detriment of the consumer, those

benefits accorded through a fully competitive market

system.

34. The Act places unconstitutional conditions on

doing business in the State of Maryland in violation of

Article 23 of the Maryland Declaration of Rights and the

Fourteenth Amendment to the Constitution of the

United States.

35. In view of the aforementioned allegations, an

actual controversy exists between the parties, antagonis-

tic claims are present between the parties and immediate

and irreparable injury, loss and damage will result to Shell

unless the defendants are preliminarily enjoined from

enforcing the Act until there is a final determination of

this lawsuit. The controversy can be determined by a

declaratory decree setting forth the rights of the parties

and by the grant of injunctive relief, all as hereinafter

requested.

WHEREFORE, Shell respectfully prays that this Court

(a) Assume jurisdiction over the parties hereto

and the subject matter hereof;

(b) Enter a judgment and decree declaring that

Chapter 854 of the Laws of Maryland of 1974 is

unconstitutional, illegal, invalid and of no force and

effect;

prohibiting Marvin Mandel, Governor of the State of

Maryland, Francis B. Burch, Attorney General of

the State of Maryland, and Louis L. Goldstein,

Comptroller of the Treasury of the State of

Maryland, or their successors from enforcing in any

way against the plaintiff, the provisions of the Act.

(d) Issue a permanent injunction prohibiting

Marvin Mandel, Governor of the State of Maryland,

Francis B. Burch, Attorney General of the State of

Maryland, and Louis L. Goldstein, Comptroller of

the Treasury of the State of Maryland, or their

successors from enforcing in any way against the

plaintiff, the provisions of the Act; and

(e) Grant such other and further relief as shall be

deemed necessary and appropriate.

/s/ William Simon,

/s/ Robert G. Abrams,

Howrey, Simon, Baker &

Murchison, .

/s/ George W. Shadoan,

Shadoan & Mack, c

ANSWER

(To Shell Bill of Complaint)

Filed October 22, 1974

[Caption Omitted in Printing]

The Defendants, Governor of Maryland, Attorney

General of Maryland and Comptroller of the Treasury

of Maryland, by their attorneys, Francis B. Burch,

Attorney General, and Jon F. Oster, and John A.

Woodstock, Assistant Attorneys General, in answer to

the Bill for Declaratory Judgment and Injunctive

Relief, and each and every paragraph thereof say:

1. That they admit the allegations contained in

paragraph 1.

2. That they admit that Shell sells gasoline and

other petroleum products at the retail level in

Maryland, but are without knowledge and information

sufficient to form a belief as to the truth of the

remaining allegations contained in paragraph 2.

3. That they admit the allegations contained in

paragraph 3 but are without knowledge and informa-

tion sufficient to form a belief as to the truth of the

allegations contained in the third sentence in paragraph

4. That they admit the allegations contained in

paragraphs 4 through 6, inclusive.

5. That they admit this Court has jurisdiction

under the Uniform Declaratory Judgment Act as

alleged in paragraph 7.

6. That they admit the allegations contained in

paragraphs 8 through 11, inclusive.

7. That they admit that if Shell does not comply

with the provisions of the Act, Shell will be subject to

criminal prosecution but deny the allegations con-

tained in the second and fourth sentences of paragraph

12. They are without knowledge and information

sufficient to form a belief as to the truth of the

allegations contained in the third sentence of para-

graph 12. They admit the allegations contained in the

fifth sentence of paragraph 12.

8. (a) That they deny the allegations contained in

the first sentence of paragraph 13 and state that

paragraphs (B) and (C) of Chapter 854 prevent a

producer or refiner from operating a retail service

station but do not require that they “divorce

themselves totally from the retail service station

business”’ as alleged.

(b) That they deny the allegations contained in

the second through fourth sentences of paragraph 13.

The Legislature, after hearing testimony of the

tremendous financial influence and control exercised

by the producers and refiners over the operation of

retail service stations has deemed that it is in the public

interest to preserve the retail dealer and to prohibit

retail operation by vertically integrated producers and

refiners.

9. That they deny the allegations contained in

paragraph 14 of said Bill, specifically answering:

(a) That the Act bears a substantial relation to

the economic welfare and continuing existence of the

retail service station dealers and bears a substantial

relation to providing a market place where retail

dealers can compete with each other as independent

businessmen and reduces the dominance, direction and

influence of the petroleum producers and refiners in

the retail market. The Act as such is a legitimate

objective of the Legislature and a valid exercise of the

police power of the State and does not deny to Shell

due process of law in violation of Article 23 of the

Maryland Declaration of Rights and the Fourteenth

Amendment to the Constitution of the United States.

10. That they deny the allegations contained in

paragraph 15.

11. That they deny the allegations contained in

paragraphs 16, 17 and 18, specifically answering that

the Act does not deny plaintiff equal protection of the

laws in violation of Article 23 of the Maryland

Declaration of Rights and the Fourteenth Amendment

to the United States Constitution because the classifi-

cation of producers and refiners of petroleum products

is an existing and recognized classification in the law

and bears a rational relationship to a legitimate state

purpose in preserving the retail service station dealer as

an independent businessman.

12. That they deny the allegations contained in

paragraph 19.

13. That they deny the allegations contained in

paragraph 20, specifically answering that the Act does

not constitute an unlawful delegation of authority in

violation of Article 23 of the Maryland Declaration of

Rights and Article III] of the Maryland Constitution.

14. That they deny the allegations contained in

paragraph 21.

15. That they admit the allegations contained in

the first two sentences of paragraph 22 and deny the

allegations contained in the third and fourth sentences

of paragraph 22.

16. That they deny the allegations contained in

paragraph 23, specifically answering that the Act is not

so vague as to deny plaintiff due process in violation of

Article 23 of the Maryland Declaration of Rights and

the Fourteenth Amendment of the United States

Constitution.

17. That they admit the allegations contained in

paragraph 24 as to the provisions of the Act but deny

that the Act is so vague as to deny plaintiff due process

of law in violation of Article 23 of the Maryland

Declaration of Rights and the Fourteenth Amendment

of the United States Constitution.

18. That they admit the allegations contained in

the first two sentences of paragraph 25 as to the

provisions of the Act. That they admit the allegations

of the third sentence of paragraph 25 in that the terms

“voluntary allowances”, “equipment rentals”, “uni-

formly”, and “retail service station dealers supplied”

are undefined by the Act, but deny that such terms are

unclear as alleged in the fourth, fifth and sixth

sentences of paragraph 25 of said Bill.

19. That they admit the allegations contained in

paragraph 26.

20. That they admit the allegations contained in

the first five sentences of paragraph 27 as to the

provisions of the Petroleum Allocation and Price

Regulations but deny the allegations contained in the

last sentence of paragraph 27 of said Bill because the

effect of the federal regulations is to make any

allowance extended by Shell to any “class of pur-

chaser” on said date mandatory for the duration of the

regulati6ns. Section D of the Act refers solely to

voluntary allowances and thus there is no conflict and

no preemption under Section 6(b) of the Federal

Emergency Petroleum Act.

21. That they deny the allegations contained in

paragraph 28 as to any conflict between the Act and

10 C.F.R. §210.62. The complete sentence from

which plaintiff has extracted its quotation is as

follows:

“However, no supplier may require or impose more

stringent credit terms or payment schedules on

purchasers than the normal business practice of the

supplier for that class of purchaser (e.g. COD

purchasers) during the base period, nor may any

supplier modify any other normal business practice

so as to result in circumvention of any provision of

this Chapter.”

They also deny that the uniformity requiremnt of

paragraph D of the Act in any way conflicts with 10

C.F.R. §210.62 because paragraph (b) of that regulation

requires in part that “[n]o supplier shall engage in any

form of discrimination among purchasers of any allocated

product.”

22. That they admit the allegations in paragraph 29

to the extent that paragraph F of the Act may be

preempted by the Federal Emergency Petroleum Alloca-

tion Act.

23. That they deny the allegations in paragraph 30

and say that the precise terms of paragraph D of the Act

do not conflict with the spirit and the language of 15

U.S.C. §13 (the Robinson-Patman Act) and Article 83

§38, Annotated Code of Maryland (1973 Cumulative

Supplement) which prohibit anticompetitive pricing and

practices. The Robinson-Patman Act is designed to

prevent anti-competitive price discriminations and para-

graph D is not in conflict with that objective.

24. That they admit the allegations contained in

paragraphs 31 and 32 as to the provisions of the Lanham

Act but deny that there is any conflict between the

provisions of that Act and the Maryland Act.

25. That they deny the allegations contained in

paragraphs 33 and 34.

26. That they admit the allegations. contained in

paragraph 35 of the Bill.

Further answering:

27. That they state that the statute in question is a

legitimate exercise of the police power of the State in

preserving the existence of the retail dealer as an

independent businessman and in reducing the control and

dominance of the vertically integrated petroleum pro-

ducer and refiner in the retail market.

28. That they state that the tremendous financial

power of the vertically integrated producers and refiners

and the fact that they can operate retail stations permit

them to offer retail dealers short term company-drafted

leases with cancellation clauses without cause on a “take

it or leave it” basis. The short term lease is the vehicle by

which the vertically integrated petroleum producer and

refiner such as Shell can exercise control over the retail

market and discipline price conscious and competitively

oriented retail dealers.

29. That they state that the vertically integrated

petroleum producer and refiner does not have to make its

profit through retail sales but can make its profit through

producing, refining, wholesaling and transportation. Con-

sequently companies such as Shell can afford to conduct

their retail operation at a loss and to engage in price wars

that are ruinous to many retail dealers and costly to the

consuming public in areas without price wars who may

pay an inflated price to finance such wars.

30. That they state that price wars and the tremen-

dous financial power of the petroleum producers and

refiners such as Shell have led to economic chaos in the

retail service station business and impaired the capacity

and capability of many retail dealers to render the

complex range of services which modern motoring

conditions require.

31. That they state that the price wars have

financially ruined many retail dealers who have only one

location in which to compete whereas the petroleum

producer and refiner such as Shell can compete over a

wide range of territory and thus compensate for losses in

a particular area. As a result of the economic hardship

from price wars the turnover ratio and failure ratio of

retail service station dealers is higher than any other

principal business classification. Furthermore, while the

total number of active service stations has been decreas-

ing, certain areas are saturated and overbuilt with service

stations. A final result of price wars can be a reduction in

meaningful competition and a general increase in prices

to a level than would otherwise have existed.

32. That they state that in this State the Gasoline

Tax Division of the Comptroller of the Treasury found

that the turnover ratio for dealerships in retail service

stations was 39.1 percent for the two year period from

January 1, 1972 through December 31, 1971 and that

there were 303 fewer service stations to serve the public

at the end of the same period.

33. That they state that as a result of the gasoline

shortage in 1973 when retail dealers were suffering

supply problems, lease cancellations and were altering

their hours of operation, the Governor of Maryland

directed the Gasoline Tax Division of the Comptroller of

the Treasury to undertake a study of the retail gasoline

situatio.. during June, July and August 1973. The

Gasoline Tax Division found that the retail service

stations that were company owned and operated had no

difficulty in securing the gasoline they could sell whereas

other retail dealers were not supplied with all of the

gasoline they could sell. The Gasoline Tax Division also

found that certain producers and refiners other than Shell

had terminatea leases of retail dealers and converted the

outlets to company operated “Gas and Go” stations

which provided no lubrication or repair services for the

public.

WHEREFORE, having fully answered the Bill of

Complaint for Declaratory Judgment and Injunction, and

having shown cause why a permanent injunction prohibit-

ing the Defendants from enforcing Chapter 854 of the

Laws of Maryland of 1974 should not be issued, the

Defendants respectfully pray that any stipulations en-

tered into by either party pursuant to this action be

vacated arid that the Petition for Declaratory Judgment

and Injunctive Relief be dismissed without leave to

amend, with costs to be paid by Plaintiff.

/s/ Francis B. Burch,

Attorney General,

/s/ Jon F. Oster,

Assistant Attorney General,

/s/ John A. Woodstock,

Assistant Attorney Geieral,

Attorneys for Defendants.

(Certificate of Service Omi:. Printing}

AMENDMENT TO ANSWER

(To Shell Bill of Complaint)

Filed October 25, 1974

[Caption Omitted in Printing]

The Defendants, Governor of Maryland, Attorney

General of Maryland and Comptroller of the Treasury of

Maryland, by their attorneys, Francis B. Burch, Attorney

General, and Jon F. Oster, an! John A. Woodstock,

Assistant Attorneys General, amend their Answer to the

Bill For Declaratory Judgment and Injunctive Relief

previously filed in this Court to state:

1. That they admit the allegations contained in the

sixth sentence of paragraph 12.

2. That, for the reasons stated in paragraph 8(b) of

their previously filed answer, they also deny the

allegations contained in the fifth sentence of paragraph

13 of plaintiff’s Bill of Complaint.

3. That they deny the allegations contained in

paragraph 20, specifically answering that the Act does

not constitute an unlawfui taking of property in violation

of Article 25 of the Maryland Declaration of Rights and

Article III of the Maryland Constitution.

/s/ Francis B. Burch,

Attorney General,

/s/ Jon F. Oster,

Assistant Attorney General.

[Certificate of Service Omitted in Printing}

MT ET Mee en

In the Circuit Court for Anne Arundel County

Equity No. 22,461

Gulf Ol Corporation,

Plaintiff,

Marvin Mandel, Governor, et al.,

Defendants.

BILL OF COMPLAINT FOR DECLARATORY

JUDGMENT AND INJUNCTIVE RELIEF

Filed January 23, 1975

Gulf Oil Corporation (“Gulf’’), plaintiff herein, by its

attorneys, brings this action under the Uniform Declara-

tory Judgments Act, Section 3-403 of the Courts and

Judicial Proceedings Article, Annotated Code of Mary-

land (1974 Edition), to obtain a declaratory judgment

that Chapter 854 of the Laws of Maryland of 1974,

amending Article 56, §157E of the Annotated Code of

Maryland (1957 Edition, as amended), is unconstitutional

and invalid and to obtain injunctive relief against the

defendants, Marvin Mandel, Governor of the State of

Maryland, Francis B. Burch, Attorney General of the

State of Maryland, and Louis L. Goldstein, Comptroller

of the Treasury of the State of Maryland, prohibiting

each of them from enforcing the provisions of the Act.

Gulf declares and alleges as follows:

The Parties

1. Gulf, a Pennsylvania corporation, is a producer

and refiner of petroleum products, owns and operates

one retail service station in the State of Maryland, and

anticipates owning and operating additional retail service

stations in the State of Maryland. Gulf has done business

in Maryland for more than thirty years, and believes it is

the third leading supplier of gasoline in Maryland, selling

to dealers, wholesalers, the public and others approxi-

mately nine percent of all the gasoline sold in Maryland.

All of the gasoline sold by Gulf in Maryland is

transported into the state from refineries located beyond

the boundaries of the state.

2. Gulf sells substantial quantities of gasoline and

other petroleum products and other goods and services at

the retail and wholesale levels both in local markets in

Maryland and to persons, such as interstate travelers,

common carriers, airlines, and the shipping industry,

operating exclusively in interstate commerce in Maryland.

3. There are approximately 221 independent dealer

stations in Maryland buying Gulf branded gasoline

directly from Gulf, of which approximately 105 lease

stations from Gulf and 116 own their own stations or

lease them from parties other than Gulf. The present and

anticipated company-operated stations in addition to

marketing gasoline, sell and anticipate selling automobile

products, such as tires, batteries and accessories, and

provide and anticipate providing a complete range of

automobile maintenance and repair services, and require

and anticipate requiring large initial and sustained capital

investment in land, buildings and equipment.

4. The defendant, Marvin Mandel, Governor of the

State of Maryland, is charged under the Constitution of

the State of Maryland with the responsibility of enforcing

the laws of the State of Maryland. He is sued herein in his

official capacity.

5. The defendant, Francis B. Burch, Attorney Gen-

eral of the State of Maryland, is authorized to seek

injunctions against persons who violate Article 56 of the

Annotated Code of Maryland (1957 Edition, as

amended). He is sued herein in his official capacity.

6. The defendant, Louis L. Goldstein, Comptroller of

the Treasury of the State of Maryland, is charged with

the responsibility of administering the laws regulating the

sale of petroleum products in the State of Maryland and

of directing any persons willfully marketing petroleum

products in the State of Maryland in violation of Article

56 of the Annotated Code of Maryland, and the rules and

regulations promulgated pursuant thereto, to cease such

violations. He is sued herein in his official capacity.

Motor Fuel Inspection Law

7. Article 56, Subtitle: Motor Fuel Inspection Law,

Annotated Code of Maryland, §157A to §157U (1957

Edition, as amended) provides for the regulation of the

sale of petroleum products in the State of Maryland.

Pursuant to Article 56, §157B, the Comptroller of the

Treasury administers the provisions of the Motor Fuel

Inspection Law. He is authorized to promulgate rules and

regulations for the administration and enforcement of the

Subtitle. Section 157B provides further with respect to

enforcement of the Subtitle:

“(b) Whenever the Comptroller of the Treasury

shall find any person . . . willfully marketing petro-

leum products in violation of this article and rules

and regulations promulgated pursuant hereto, he

shall direct them to cease such violation. If, after

such direction, the violation continues, the Comp-

troller shall refer the matter to the Attorney General

who is authorized to apply to the circuit court

having jurisdiction over the offender for an injunc-

tion against the continuance of any such violations.

The appropriate circuit court shall have jurisdiction,

upon hearing and for cause shown, to grant such

temporary or permanent injunction restraining fur-

ther violations as the circumstances appear to

require.”

8. Article 56, §157F(g), imposes criminal penalties

for violation of the Subtitle. One who violates any

provision of the Subtitle is guilty of a misdemeanor and

upon conviction thereof is punishable by a fine of not

more than $5,000 or by imprisonment of not more than

six months, or by both fine and imprisonment.

9. Senate Bill 465, enacted by the General Assembly

at its 1974 session, was signed into law by Governor

Mandel on May 31, 1974 and has become Chapter 854 of

the Laws of Maryland of 1974 (the “Act’’). The Act

became effective July 1, 1974 and amended Article 56,

§157E by adding to § 157E the following provisions:

89 \

(E) Every producer, refiner, or wholesaler of

petroleum products supplying gasoline and special

fuels to retail service station dealers shall apply all

equipment rentals uniformly to all retail service

station dealers supplied.

petroleum products shall apportion uniformly all

gasoline and special fuels to all retail service station

dealers during periods of shortages on an equitable

basis, and shall not discriminate among the dealers

in their allotments.

(G) The Comptroller may adopt rules or regula-

tions defining the circumstances in which a producer

or refiner temporarily may operate a previously

dealer-operated station.

(H) The Comptroller may permit reasonable

exceptions to the divestiture dates specified by this

section after considering all of the relevant acts and

reaching reasonable conclusions based upon those

facts.

(B) After July 1, 1974, no producer or refiner of

petroleum products shall open a major brand,

secondary brand or unbranded retail service station

in the State of Maryland, and operate it with

company personnel, a subsidiary company, or a

commissioned agent.

petroleum products shall operate a major brand,

secondary brand, or unbranded retail service station

in the State of Maryland, with company personnel, a

subsidiary company, or a commissioned agent.

(D) Every producer, refiner or wholesaler of

petroleum products supplying gasoline and special

fuels to retail service station dealers shall extend all

voluntary allowances uniformly to all retail service

station dealers supplied.

Constitutional Defects in the Act

10. As more fully set forth below, Chapter 854 of

the Laws of Maryland of 1974 is unconstitutional and,

therefore, null and void for the following reasons:

a. The Act bears no substantial relation to the

health, safety, morals, or welfare of the people of the

State of Maryland or to any other legitimate objective of

the Legislature and therefore goes beyond the police

power of the State and denies to Gulf due process of law

in violation of Article 23 of the Maryland Declaration of

Rights and the Fourteenth Amendment to the United

States Constitution.

b. The Act singles out refiners and producers of

petroleum products and totally prohibits them from

engaging in certain lawful business activities, i.e., the

retail sale of gasoline, while other major elements of the

oil industry who are not refiners or producers, and all

other business entities, are not subject to the prohibitions

of the Act. The Act thus denies plaintiff, and others

similarly situated, equal protection of the laws in

violation of Article 23 of the Maryland Declaration of

Rights and the Fourteenth Amendment to the United

States Constitution.

c. The Act, by regulating certain pricing and

distribution practices of producers, refiners, and whole-

salers, without regulating the same practices by other

persons or business entities, denies plaintiff, and others

similarly situated, equal protection of the laws in

violation of Article 23 of the Maryland Declaration of

Rights and the Fourteenth Amendment to the United

States Constitution.

d. The Act constitutes a taking of part or all of

plaintiff’s substantial investment of its retail service

station and a part or all of its return on investment

without just compensation and for private use in

violation of Article III, §40 of the Maryland Constitu-

tion, Article 23 of the Maryland Declaration of Rights,

and the Fourteenth Amendment to the United States

Constitution.

e. The failure of the Act to set forth any standards

to guide the unlimited discretion granted the Comptroller

of the Treasury by the Act affords no protection to the

plaintiff against arbitrary or unreasonable exercise of the

Comptroller’s authority and constitutes an unlawful

delegation of authority in violation of Article 23 of the

Maryland Declaration of Rights and Article III of the

Maryland Constitution.

f. The Act in several respects is so vague and

ambiguous that there is virtually no way that plaintiff can

determine whether or not it is subject to violation of the

criminal provisions which are applicable to the Act and,

therefore, denies plaintiff due process of law in violation

of Article 23 of the Maryland Declaration of Rights and

the Fourteenth Amendment to the United States

Constitution.

g. The Act discriminates against and unduly bur-

dens interstate commerce and is invalid under the

Commerce Clause of Article I, §8 of the United States

Constitution.

h. Paragraph F of the Act conflicts with the Federal

Emergency Petroleum Allocation Act of 1973 and is

therefore invalid under the Supremacy Clause of Article

VI of the United States Constitution.

i. Paragraphs B and C of the Act conflict with the

overriding federal antitrust policy of imposing restraints

or divestitute only after a judicial showing of a specific

violation, and therefore, is preempted by federal antitrust

laws under the Supremacy Clause of Article VI of the

United States Constitution.

j. Paragraph D of the Act conflicts with 15 U.S.C.

§13 (the Robinson-Patman Act) and is therefore invalid

under the Supremacy Clause of Article VI of the United

States Constituis. .

k taragr. ./. D, E and F of the Act constitute a

law impairing the obligation of contracts in violation of

Article I, § 10 of the United States Constitution.

The Act Denies Plaintiff Due Process

of Law and is Discriminatory

11. In prohibiting producers or refiners from opening

and operating retail service stations after July 1, 1974,

and in prohibiting producers or refiners from operating

retail service stations after July 1, 1975, the Act requires

plaintiff and others similarly situated to divorce them-

selves totally from the retail service station business.

Plaintiff has been in the retail service station business in

Maryland for over 30 years. No valid public purpose is

served by eliminating the right of producers or refiners to

engage in the lawful enterprise of operating retail service

stations or by restricting free and open competition.

There is no probative evidence to support the proposition

that the operation of retail service stations by refiners or

producers has anti-competitive effects or otherwise

adversely affects the health, safety, morals or welfare of

the citizens of the State, nor does the Act contain any

such findings.

12. By prohibiting refiners and producers from

operating retail service stations, the Act removes a class

of competitor from not only the retail gasoline service

station market, but also the increasingly significant

automobile service and repair market and the retail

market for such products as tires, batteries, and

aut mobile accessories. Further, by removing producers

ari refiners from the retail gasoline market and by

re juiring producers, refiners, and wholesalers to extend

ali voluntary allowances and equipment rentals uniformly

to all retail service station dealers across the State,

regardless of the relevant trading area, the opportunity

for normal and lawful price competition is in fact

restricted by the Act for the benefit of some dealers.

13. The Act goes far beyond what is required in

order to meet any possible proper legislative objective

such as promotion of price competition, prevention of

monopolies, or even protection to independent service

station dealers from unreasonable or arbitrary termina-

tion. Existing state and federal law, including other

legislation enacted at the 1974 Session of the General

Assembly (see Chapter 852), provide for far less

restrictive alternatives for achieving any such legitimate

objective. Thus, the means selected by the General

Assembly bear no real and substantial relationship to any

legitimate object sought to be obtained.

The Act Constitutes an Unconstitutional Taking

14. By prohibiting refiners and producers from

operating service stations in the State of Maryland, the

Act denies Gulf the right to earn a reasonable rate of

return on its investment and takes Gulf’s property

without compensation and for private use.

15. The Act establishes an arbitrary July 1, 1975

divestiture date, within which one-year period Gulf

believes that it will be difficult, if not impossible, to enter

into a satisfactory contractual arrangement. Gulf will lose

substantial portions of its investment if it is forced to

close its company-operated service station before a

satisfactory arrangement with a dealer can be worked

out.

The Act Constitutes an

Unlaw ful Delegation of Authority

16. Paragraph G of the Act delegates to the

Comptroller of the Treasury the power to adopt rules and

regulations defining the circumstances in which a

producer or refiner “temporarily may operate a previ-

ously dealer-operated station.” Paragraph H of the Act

delegates the Comptroller the power to “permit reasona-

ble exceptions to the divestiture dates after considering

all of the relevant facts...." Those delegations of

authority contain no legislative guidelines and grant to

the Comptroller unlimited discretion either to permit or

forbid Gulf from engaging in a lawful business. The

delegation of such unbridled authority to an executive or

administrative official constitutes an unlawful delegation

of legislative authority and a denial of due process of law

and is void.

The Act is Unconstitutionally Vague

17. Paragraph B of the Act provides:

(B) After July 1, 1974, no producer or refiner of

petroleum products shall open a major brand,

secondary brand or unbranded retail service station

in the State of Maryland, and operate it with

company personnel, a subsidiary company, or a

commissioned agent.

Paragraph C of the Act provides:

petroleum products shall operate a major brand,

secondary brand, or unbranded retail service station

in the State of Maryland, with company personnel, a

subsidiary company, or a commissioned agent.

Nowhere within these paragraphs or the Act are the terms

“major brand”, “secondary brand”, “unbranded”, “‘ser-

vice station”, and “subsidiary company” defined.

The ambiguity and vagueness of these terms is

demonstrated, inter alia, by the question of whether

“service station” is limited to those stations which have

available vehicular related services, such as repairs and

accessories, or includes those stations which merely

provide gasoline facilities or those stations which provide

gasoline facilities, but derive the major percentage of

their revenue from the sale of groceries or other

non-petroleum related products. In light of the criminal

and civil penalties imposed for violations of the Section,

and the vague and ambiguous terms identified herein,

paragraphs B and C of the Act deny plaintiff due process

of law in violation of Article 23 of the Maryland

Declaration of Rights and the Fourteenth Amendment to

the Constitution of the United States.

18. Paragraph D of the Act provides:

(D) Every producer, refiner, or wholesaler of

petroleum products supplying gasoline and special

fuels to retail service station dealers shall extend all

voluntary allowances uniformly to all retail service

station dealers supplied.

Paragraph E of the Act provides:

(E) Every producer, refiner, or wholesaler of

petroleum products supplying gasoline and special

fuels to retail service station dealers shall apply all

equipment rentals uniformly to all retail service

stations dealers supplied.

Paragraph F of the Act provides:

(F) Every producer, refiner, or wholesaler of

petroleum products shall apportion uniformly all

gasoline and special fuels to all retail service station

dealers during periods of shortages on an equitable

basis, and shall not discriminate among the dealers

in their allotments.

Nowhere within these paragraphs are the terms “retail

service station dealers”, “voluntary allowances”’, “equip-

ment rentals”, “uniformly” and “retail service station

dealers supplied” defined.

The ambiguity and vagueness of these terms is

demonstrated, for example, by the question of whether

“cquipment rentals” is limited to include hand tools or

storage tanks or gasoline pumps or lifts or the entire

service station facility; whether “voluntary allowances”

encompasses the granting of rent relief to a dealer so that

he may avoid the full economic impact of a temporary

road closing or a fire which temporarily prevents

acceptance of repair work; whether “uniformly” is to be

measured in terms of cents per gallon or a strict monetary

basis per item of equipment; whether “uniformly” is used

in the context of the various stratas of retail operations,

that is in the relationship to the comparison between

sparcely patronized single pump operation and a sophisti-

cated, high volume operation; and in other respects. The

ambiguity and vagueness of these terms may produce

results that it is unlikely the Legislature wished to

produce. In light of the criminal and civil penalties

imposed for violations of the Act and the vague and

ambiguous terms identified herein, paragraphs D, E and F

of the Act deny plaintiff due process of law in violation

of Article 23 of the Maryland Declaration of Rights and

the Fourteenth Amendment to the Constitution of the

United States.

The Act ts Preempted by the Federal Emergency

Petroleum Allocation Act of 1973

18. Section 4(a) of the Federal Emergency Petro-

leum Allocation Act of 1973, Pub. L. 93-159, 87 Stat.

627, directs the President of the United States to

promulgate “a regulation providing for mandatory alloca-

tion of [petroleum products], in amounts... and at

prices specified in (or determined in a manner prescribed

by) such regulation.” The Act also contains a preemption

provision. Section 6(b) provides that:

The regulation under section 4 and any order issued

thereunder shall preempt any provision of any

program for the allocation of crude oil, residual fuel

oil, or any refined petroleum product established by

any State or local government if such provision is in

conflict with such regulation or any such order.

The Petroleum /.llocation and Price Regulations promul-

gated by the Federal Energy Administration, formerly

called the Federal Energy Office (the “FEO”’’), pursuant

to section 4(a) of the Act (39 Fed. Reg. 1923, as

amended) establish a comprehensive regulatory scheme

governing the pricing and the allocation of the supply of

petroleum products on a national scale.

19. Under 10 C.F.R. §212.82(f) and §212.93(a) of

the Petroleum Allocation and Price Regulations, the base

price for sales for both refiners and resellers “‘is the

weighted average price at which the item was lawfully

priced in transactions with the class of purchaser

concerned on May 15, 1973” (with adjustments not

pertinent here). (Emphasis added.) Sections 212.82(f)

and 212.93(d) provide that in computing the base price

charged to a “class of purchaser’ a refiner or reseller

“may not exclude any temporary special sale, deal or

allowance in effect on May 15, 1973.” “Class of

Purchaser”’ is defined in § 212.31 to mean:

purchasers or lessees to whom a person has charged

a comparable price for comparable property or

servi

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