Petition — Crown Central Petroleum Corp. v. Phillips

FILED

NOV 26 1979

MICHASL

IN THE

Supreme Court of the United States

OctoBeR TERM, 1979

No. 8°79 - 83]

CROWN CENTRAL PETROLEUM CORPORATION,

Petitioner,

v.

JOHN T. Pures, Jr., Conrado Frank TUMMINELLO,

CHARLES Puiuip FRettaG and CARROLL CHARLES MYERS

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

JAMES H. KELLEY

WiLuiAM D. APPLER

ARTHUR WINEBURG

MATTHEW WESTON-DAWKES

Berason, BorKLAND, MarRGoLis

& ADLER

Eleven Dupont Circle, N.W.

Washington, D.C. 20036

Telephone: (202) 462-5930

Morton A. Sacks

CaBLE, McDAnreL, Bowle

& Bonp

One North Charles Street

Baltimore, Maryland 21201

Telephone: (301) 752-3650

November 26, 1979

Press or Byron S. ADAMS PRINTING, INC., WASHINGTON, D. C.

TABLE OF CONTENTS

Page

EEE ees ere 2

I ns ska aces cde sivisicdcessccecs 2

SPPATUTES EBVORVED . oon cece cece econ. ee aas i es 3

SRE OP HE CRG anni c cca pawwccccccccccceses 3

REASONS FOR GRANTING THE WRIT ...........0+000005 7

Nee SUA Weweeerseeseesceae 17

TABLE OF AUTHORITIES

CasEs:

Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S.

IE TS Ee ee ee 15

Florida Power Corp. v. Granlund, 78 F.R.D. 441 (M.D.

eee er khaphtebcnsencnness 11, 16

Gas-A-Tran of Arizona v. American Oil Co., 1977-2

Drees Cas, §G1,70e (DD. Aris. 1977) ... 2... even see 13

Gray v. Shell Oil Co., 469 F.2d 742 (9th Cir. 1972),

cert. denied, 412 U.S. 943 (1973) ............6..

Hanover Shoe v. United Shoe Machinery Corp., 392

cide beh sea peste s sees aes 6, 12, 15

Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977) .. 6, 7, 8, 9,

10, 12, 18, 15

In Re Fine Paper Antitrust Litigation, 82 F.R.D. 143

ota Cel kha ANd dence eescenes 11

In Re Independent Gasoline Antitrust Litigation, 79

ee EE I BOGE) voce caienccecsecocecce 5

In Re Sugar Industry Antitrust Litigation, 579 F.2d

es ed eeckbescaceertes 11

Mid-West Paper Products Co. v. Continental Group,

Inc., 596 F.2d 563 (3d Cir. 1979) ..........0000. 11

ii Table of Authorities Continued

Page

Phillips v. Crown Central Petroleum Corp., 376 F.

Supp. 1250 (D. Md. 1973), permanent injunction

granted, 395 F.Supp. 735 (D. Md. 1975), vacated,

506 F.2d 702 (4th Cir. 1977), affirmed, 602 F.2d 616

Co De Pyeerers ee creer ee rr eer eer 4

Phillips v. Crown Central Petroleum Corp., 426 F.Supp.

SEA I OEE) in ood be eek pw ekadee ChEB ER Aes 5

The Hecht Co. v. Southern Union Co., 1979-1 Trade

ee yas | er re rey een 11

STATUTES:

Be ES WKAN OAs 655 CAE eee seG Lee kee Ek 3,4

Et gh) rere eee see ea eae ee weary ee ere 3,4

Be Se hing 654. vKih ed cawnedsanedsaeebaneaseuel 4

a EE ROS re ray ee wet Pek) Sark 4

Sy Se, MOR 5 ooh beb cee iach ho eee ven vesnens 2

MISCELLANEOUS:

2 Areeda & Turner, Antitrust Law § 334c ............ 16

_ mament, 47 Fordham L. Rev. 1025 (1979) .......... 9

S. Rep. No. 96-239, 96th Cong., 1st Sess. (1979) ...... 9

IN THE

Supreme Court of the United States

OctToBER TERM, 1979

No. 79-

CROWN CENTRAL PETROLEUM CORPORATION,

Petitioner,

v.

JoHN T. Puriuips, Jr., CorRaDO FRANK TUMMINELLO,

CHARLES Puiuip FReITAG and CARROLL CHARLES MYERS

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

Crown Central Petroleum Corporation (Crown)

petitions for a writ of certiorari to review the judg-

ment and opinion of the United States Court of Ap-

peals for the Fourth Circuit entered on July 2, 1979.

2

OPINIONS BELOW

The divided opinion of the Court of Appeals (Pet.

App. A, infra, pp. 1-36) is reported officially at 602

F.2d 616, and unofficially at 1979-2 Trade Cas. 1 62,743.

The opinions of the district court on liability (Pet.

App. OC, infra, pp. 38-190) and damages (Pet. App. D,

infra, pp. 101-137) are reported officially at 395 F.

Supp. 735 and 426 F. Supp. 1156, and unofficially at

1975-1 Trade Cas. 160,335 and 1977-1 Trade Cas.

1 61,396.

JURISDICTION

The court of appeals entered judgment on July 2,

1979. A timely petition for rehearing and suggestion

for rehearing en banc was denied, one judge dissent-

ing, on August 27, 1979 (Pet. App. B, infra, p. 37).

The jurisdiction of this Court is invoked under 28

U.S.C. 1254(1).

QUESTION PRESENTED

The district court found a conspiracy whereby deal-

ers who purchased gasoline from Crown were required

to charge artificially high retail prices to consumers,

but it also found that there was no illegal agreement

as to the wholesale prices charged by Crown and paid

by the dealers. Nevertheless, the dealers were held

entitled to recover damaget measured by the differ-

ences between the wholesale prices they were actually

charged and the wholesale prices which, it was as-

sumed, they would have been charged if there had

been no artificial increase in retail prices. The Court

of appeals affirmed these findings and holdings. The

question presented is:

coca Sencnsabeanseroeanecainaaiaited aa aiiiall

3

Whether, in light of this Court’s decision in [/linois

Brick Co. v. Illinois, 431 U.S. 720 (1977), prohibiting

the offensive or defensive use of a ‘‘ passing on’’ dam-

ages theory, gasoline dealers who were charged whole-

sale prices that were not the object of any price-fixing

conspiracy may recover overcharge damages from a

gasoline refiner who conspired to fix retail selling

prices, on a theory that the wholesale prices paid by

the dealers were influenced by the retail prices they

charged to consumers.

STATUTES INVOLVED

Section 1 of the Sherman Act, 15 U.S.C. 1, provides

in relevant part:

Every contract, combination in the form of

trust or otherwise or conspiracy, in restraint of

trade or commerce among the several states, or

with foreign nations, is declared to be illegal...

Section 4 of the Clayton Act, 15 U.S.C. 15, states:

Any person who shall be injured in his business

or property by reason of anything forbidden in

the antitrust laws may sue therefor in any district

court of the United States in the district in which

the defendant resides or is found or has an agent,

without respect to the amount in controversy, and

shall recover threefold the damages by him sus-

tained, and the cost of suit, including a reasonable

attorney’s fee.

STATEMENT OF THE CASE

Petitioner Crown is an independent refiner and mar-

keter of gasoline and other oil products which are sold

to consumers primarily through dealer-operated sta-

tions. Four of its dealers who had been threatened with

4

non-renewal of their leases brought suits for monetary

damages and injunctive relief, alleging that Crown had

consp:ed to stabilize both the retail prices for gaso-

line cha. ged to consumers and the wholesale prices for

that gasoline paid by its dealers.’

After a trial on liability, the district court concluded

that Crown had entered into an unlawful agreement

with its competitors to stabilize retail prices, and in

furtherance of that agreement, had illegally controlled

its dealers’ retail prices. Phillips v. Crown Central

Petroleum Corp., 395 F. Supp. 735, 742, 746, 760 (D.

Md. 1975) (Pet..App. C, pp. 46, 54, 83). The court,

however, expressly found that ‘‘[n]o evidence was

produced of similar agreements to fix wholesale prices,

and this Court does not find that Crown engaged in a

horizontal conspiracy to fix wholesale prices.’’ Id. at

757, n. 7 (Pet. App. C, pp. 77, n. 7).

Although the dealers were not purchasers of gasoline

at the fixed retail prices, the district court believed

they had made a sufficient showing of ‘‘a direct causal

connection’’ between the retail price fix and injury

to themselves, reasoning that

Had Crown not engaged in horizontal price-

fixing with its competitors, the retail market in

* This conduct allegedly violated §1 of the Sherman Act, and

§§4 and 16 of the Clayton Act, 15 U.S.C. 1, 15, 26. Jurisdiction

was assumed under 28 U.S.C. 1337. The district court entered a

preliminary injunction against the lease terminations, Phillips v.

Crown Central Petroleum Corp., 376 F. Supp. 1250 (D. Md.

1973), and permanent injunction, 395 F. Supp. 735 (D. Md.

1975), which was initially vacated, 556 F.2d 702 (4th Cir. 1977),

and ultimately affirmed by the court of appeals, 602 F.2d 616,

629-31 (4th Cir. 1979) (Pet. App. A, pp. 21-25; Pet. App. ©,

pp. 39-40, 100). No issue with regard to the propriety of the in-

junction is presented here.

pi Salih AaRS Matt all “i eitivichens sec aunancnuaeseaiaeaee

4)

the Baltimore metropolitan area would not have

been artificially stabilized. Increased competition

would undoubtedly have led to lower retail prices

and in turn to lower wholesale prices charged by

Crown to plaintiffs.

Id. at 768 (Pet. App. C., p. 98).? It determined the

dealers’ injury should be measured as the difference

between the actual wholesale prices they were charged

and the reduced wholesale prices which presumably

would have resulted if the retail price had been allowed

to drop to competitive levels, Phillips v. Crown Cen-

tral Petroleum Corp., 426 F. Supp. 1156, 1161-62, 1169

(D. Md. 1977) (Pet. App. D, pp. 107-110, 125).*

The court of appeals, in approving the overcharge

award as the proper measure of damages, concluded it

was possible to determine the effect of the artificially

high retail prices on the wholesale prices the dealers

paid because, under Crown’s method for establishing

wholesale prices, there was a predetermined relation-

ship between those retail prices and the wholesale

prices dealers were charged. Under this method, each

2 Paradoxically, the district court also based a damage award on

the fact that:

Plaintiffs also suffered injury when they were prohibited

from raising their retail prices by Crown’s illegal vertical

agreements. Their property was diminished by their inability

to raise prices when they chose to do so, and each plaintiff

thus suffered injury.

Id., emphasis supplied.

8’The district court expressly rejected Crown’s argument that

awarding damages to a party which had not paid the retail over-

charge would subject Crown to possible double liability if, as was

the case here, consumer plaintiffs who were the object of the

price-fixing conspiracy brought a class action for damages. 426

F. Supp. at 1168, n. 16 (Pet. App. D, p. 123, n. 16); see In re

Independent Gasoline Antitrust Litigation, 79 F.R.D. 552 (D.

Md. 1978).

6

retail price increase of one cent resulted in ‘‘the deal-

er’s gross profit margin [being] increased one-fourth

of one cent while Crown’s wholesale price was in-

creased by three-fourths of one cent.’’ Accordingly,

the court decided that a wholesale overcharge per

gallon could be computed from the illegally fixed retail

price, and when multiplied by the gallons of gasoline

each dealer sold would constitute the damages suffered.

602 F.2d at 632 (Pet. App. A, pp. 26-27).*

Crown had argued that because the district court

found only a conspiracy to fix retail prices, which were

not charged to the dealers, their recovery could not

be based on the retail overcharge but was limited in-

stead to whatever lost profits they could prove. In this

connection, Crown had observed that Hanover Shoe,

Inc. v. United Shoe Machinery Corp., 392 U.S. 481

(1968), did not address the right of recovery accruing

to a purchaser at a level of distribution different from

that at which the price was fixed (Crown Br. at 66-70;

Crown Reply Br. at 22-25). Nevertheless, the court of

appeals believed that Crown was simply asserting a

‘‘pass on’’ defense, and held that the decision in Han-

over Shoe required its rejection. 602 F.2d at 633 (Pet.

App. A, pp. 28-30).

The court of appeals construed Illinois Brick Co.

v. Lilinots, 431 U.S. 720, 735-36 (1977), as holding that

*In contrast to its approval of ‘‘horizontal’’ damages passed

back from the fixed retail price to the wholesale price, the court of

appeals found the separate award of ‘‘vertical damages’’ to be

“‘seriously flawed’’ and ‘‘without foundation’’ in the record. 602

F.2d at 634 (Pet. App. A, p. 30-34). The ‘‘vertical damages’’

were based on the district court’s conclusion that Crown’s refusal

to let its dealers sell at a price above the fixed price reduced their

profits, and the court of appeals pointed out that this contra-

dicted the basis for the award of overcharge damages. /d.

Peed ahh eS A ote MR tei

th

7

a purchaser who buys at a price which bears some re-

lationship to the fixed price at another level of the

distribution chain, can recover overcharge damages if

his purchase is made directly from a party to the con-

spiracy. On that ‘‘passing back’’ basis, it concluded

that these dealers were appropriate parties to recover

part of the retail overcharge, despite its earlier finding

that the dealers had clearly benefited from the con-

spiracy :

Since the higher the price the wider the dealer’s

margin, each dealer had a substantial incentive to

comply with Crown’s directions about retail prices,

and there was no counter incentive since there was

general agreement that maintenance of these

prices did not cause a loss of retail sales.

602 F.2d at 632 (Pet. App. A, p. 26-27).

REASONS FOR GRANTING THE WRIT

The court of appeals’ decision stands Illinois Brick

squarely on its head by allowing a purchaser who is

only indirectly affected by a fixed price charged else-

where in the distribution chain to recover a part of the

resulting overcharge by ‘‘passing back’’ that over-

charge to his concededly unfixed price. Such recovery

by the indirectly injured individual is completely at

odds with Illinois Brick’s admonition that only the

direct purchaser at the illegal price is a proper party

to sue, that such direct purchaser is entitled to the

entire overcharge, and that no one else may recover

any part of the overcharge even though it indirectly

affects the price the other party paid.

As well, the result reached here will create the same

policy difficulties that led this Court to fashion the

8

Illinois Brick rule. The court must perform the dif-

ficult and uncertain analysis of tracing the retail over-

charge back through the distribution chain and then

measuring its impact upon the wholesale price; a sub-

stantial risk of double recovery is created since the

*‘passing back’’ defense would apparently not be avail-

able to Crown in suits by direct purchasers at the fixed

retail price; and there will be a diminished basis for

private enforcement of the antitrust laws since the

recovering party normally will have little incentive

to bring suit because he benefits by receiving the fixed

retail price.® 431 U.S. at 729-47.

Clearly, such a substantial departure from the hold-

ing of and policies behind Hanover Shoe and Illinois

Brick warrants review by the Court. Given the fre-

quency of resale price maintenance schemes, the right

of a middleman in the distribution system, who comes

between the price-fixing manufacturer or distributor

and the party who pays the overcharge directly, to a

portion of the illegal overcharge is an important and

recurring one. Illinois Brick suggests that recovery

in circumstances similar to that here should be barred

(431 U.S. 736, n. 16), and this case is an appropriate

one to recognize that fact. Moreover, insofar as the

court of appeals’ decision permits recovery by a party

dealing directly with the price-fixer and bars recoverv

by the other parties who actually paid the full amount

of the illegal overcharge, it is flatly in conflict with

several decisions allowing such purchasers to recover.

*The dealers here brought suit only because of the happen-

stance that they were threatened with termination of their leases,

and the principal focus of the case in its initial stages was injune-

tive relief to prevent these terminations.

Ce Oe Te eee Oe ee ee Te ee

Le SOA RL ER CN INE a AB ae i en lly STN se

——

ee, OE Oe See OR

Ee, Carew er anes ae vant Sine

9

1. This Court held in Illinois Brick that, regardless

of whether their prices were affected by the price-

fixing scheme, indirect purchasers were not entitled

to sue for a portion of the illegal overcharge passed

on to them. Instead, only ‘‘the overcharged direct pur-

chaser, and not others in the chain of manufacture or

distribution, is a party ‘injured in his business or prop-

erty’. ..’’ and thereby entitled to recover the full

amount of the overcharge. 431 U.S. at 729.

Although Illinois Brick and Hanover Shoe each

involved a factual situation in which the conspirators

who fixed the prices also were the parties who made

the sales at those prices, with the consequence that

only a party purchasing directly from members of the

conspiracy could qualify as ‘‘the overcharged direct

purchaser’’, this does not justify a conclusion that this

Court was establishing a rule restricting recovery to

purchasers in privity with a conspirator, rather than

a policy of broader applicability.* Clearly, the party

* Significantly, much of the criticism of Jllinois Brick proceeds

directly from the incorrect assumption that a rule of privity was

established there. For example, the Majority Report accompany-

ing S. 300, the Senate Bill that would reverse Illinois Brick,

clearly expressed such an understanding:

Subsection 4I(1) explicitly overrules the holding of Illinois

Brick Co. v. Illinois, supra, by removing the artificial requi-

site of ‘‘privity’’ between the plaintiff and the defendant in

an antitrust action.

S. Rep. No. 96-239, 96th Cong., Ist Sess. 34 (1979). Many com-

mentators have pointed out that such a rigid ‘‘privity’’ rule does

not properly serve the policies underlying either Section 4 of the

Clayton Act or Jllinois Brick itself in all factual contexts. See,

e.g., Comment, Congressional Authorization of Indirect Purchaser

Treble Damage Claims: The Illinois Brick Wall Crumbles, 47

Fordham L. Rev. 1025 (1979).

10

who purchases at the fixed price satisfies the policy

concerns (see below) that were the basis for Illinois

Brick, regardless of whether he purchased from a

member of the conspiracy or from a seller who had

been compelled by the conspirators to charge the higher

price. Cf. 431 U.S. at 736, n. 16. The fact that the

purpose of the conspiracy is to fix prices charged by

sellers who are not members of the conspiracy does

not affect in any way either the nature of the injury

suffered by the purchaser who pays the fixed price

or the relative ease of computing such purchaser’s

damages. On the other hand, construction of the term

‘overcharged direct purchaser’’ as meaning only the

purchaser who buys from a member of the conspiracy,

rather than the purchaser who buys at the fixed price,

without regard to who is the seller, leads to a direct

conflict with the policy concerns expressed in Illinois

Brick.

It is submitted that Illinois Brick establishes a rule

of policy which permits recovery by the party who

suffers the direct injury by first paying the illegally

fixed price, and bars recovery by those who are injured

indirectly by the incidental effects of that illegal price

on other prices. A party who purchases directly from

a member of the conspiracy, but who does not pay the

illegal price, is only injured indirectly and therefore is

not entitled to share in the recovery any more than

the indirectly injured plaintiffs in I/linois Brick were

entitled to a share.

The court of appeals’ decision allowing recovery here

not only conflicts with the rationale of Illinois Brick

but is inconsistent with other lower court decisions

recognizing that Illinois Brick extends beyond the

particular facts of that case. The Third Circuit has

snabeiciiesdeaisai

11

permitted recovery of an overcharge by a plaintiff who

did not purchase directly from a member of the con-

spiracy but instead purchased from a wholly-owned

subsidiary of one of the members. In re Sugar Indus-

try Antitrust Intigation, 579 F.2d 13, 18-19 (3d Cir.

1978). (‘To adopt any other view would invite eva-

sion’’ of the antitrust laws.) Subsequently, the same

court held that a purchaser from a subsidiary could

recover for the overcharge when it can ‘‘establish

facts that warrant holding [the parent] legally ac-

countable for [the subsidiary’s] activities in that as a

consequence of [the parent’s] domination, the subsidi-

ary’s prices were determined in accordance with the

general price-fixing conspiracy.’’ Mid-West Paper

Products Co. v. Continental Group, Inc., 596 F.2d 563,

589 (3rd Cir. 1979) ;’ Cf. The Hecht Co. v. Southern

Union Co., 1979-1 Trade Cas. 162,647 at 77,655 (D.

N.M. 1979); Florida Power Corp. v. Granlund, 78

F.R.D. 441, 443-4 (M.D. Fla. 1978).

These decisions simply cannot be reconciled with

the approach adopted by the Fourth Circuit. The

plaintiff-dealers here, though purchasing directly from

Crown, were not charged the fixed retail price, and in-

stead only paid wholesale prices which were influenced

by the fixed retail price. These plaintiff-dealers resold

at the fixed retail price, as required by Crown, and it

was their customers who paid the full amount of the

* See also In re Fine Paper Antitrust Litigation, 82 F.R.D.

143, 153 (E.D. Pa. 1979) (‘‘[T]he existence of defendant-owned

subsidiaries and the participation by those subsidiaries in an over-

all horizontal conspiracy among mill defendants may be relevant

to the determination of whether purchasers from those subsidi-

aries are direct purchasers for purposes of inclusion in the nation-

wide direct purchaser class ...’’).

12

illegal overcharge. The court of appeals, however, mis-

construed the ‘‘direct purchaser’’ language of Illinots

Brick to mean that only a party who purchased di-

rectly at the price fixed by the conspiracy was entitled

to recover. This error—allowing the dealers to recover

on the basis of the retail overcharge they did not pay

—required tracing the effect of the retail price fix to

the wholesale prices paid by the dealers as the means

of determining how much of the overcharge was

‘passed back’’ to them, the very problem that led this

Court to fashion the rule of Illinois Brick.

2. This decision permitting recovery by a dealer who

was not the purchaser at the illegally fixed price nulli-

fies the policies on which Illinois Brick expressly rests.

First, it was this Court’s perception there and in

Hanover Shoe that there would be substantial ‘‘uncer-

tainties and difficulties in analyzing price and out-put

decisions ‘in the real economic world rather than an

economists’ hypothetical model’ ’’, so that ‘‘the costs

to the judicial system and the efficient enforcement of

the antitrust laws of attempting to reconstruct those

decisions in the Courtroom’’ were unacceptable. 431

U.S. at 732, 737, 741-743. The difficulties of tracing the

effect of retail prices ‘‘passed back’’ to some impact

earlier in the distribution chain, as here, are no less

than those involved in determining how much of an

impact was ‘‘passed on’’ in Illinois Brick.

Nevertheless, the court of appeals approved a trac-

ing backward from the retail overcharge to a presumed

wholesale overcharge based upon a relationship be-

tween retail and wholesale price increases during the

conspiracy period. This approach required the assump-

tions that this fixed relationship would not have ex-

13

isted in the absence of the conspiracy and that, except

for the conspiracy, a dealer who charged a higher re-

tail price would have been charged the same wholesale

price as a dealer who charged a lower retail price, an

assumption not shown to be true. In any event, this

type of economic assumption is precisely the sort of

analysis which Illinois Brick eschewed.

Second, this Court decided in Jilinois Brick to for-

bid the use of ‘‘pass-on’’ theories because the alterna-

tive, allowing parties other than the directly over-

charged purchaser to recover, raised ‘‘the possibility

of inconsistent judgments obtained by conflicting claim-

ants .. .’’ 431 U.S. at 737, n. 18. Now the court of

appeals, by approving a ‘‘passing back’’ of the retail

overcharge, has resurrected the possibility of incon-

sistent judgments. Another court, faced with a suit

by the dealers’ customers against Crown, could easily

conclude that those customers, the direct purchasers

at the fixed price, were entitled to recover the full

amount of the retail overcharge which they unquestion-

ably paid. See Gas-A-Tron of Arizona v. American

Oil Co., 1977-2 Trade Cas. 1 61,789 at 73,245 (D. Ariz.

1977). Crown would have no assurance that it could

use the ‘‘ pass back’’ defensively in such a suit to reduce

the customers’ recovery from it. The court of appeals

decision, therefore, exposes Crown to the possibility

of being held liable for the same overcharge to both the

dealers and their customers, ‘‘a serious risk of multi-

ple lability’? for Crown which Illinois Brick sought

to avoid. 431 U.S. 730.°

* There is a related difficulty with the court of appeals’ ap-

proach. Offensive use of a passing-back theory was expressly

permitted to demonstrate and measure the effect of the over-

charge on the dealers’ wholesale prices. Yet, disregarding the

14

Third, this Court believed that allowing suits by

direct purchasers who could recover the full amount

of the overcharge best served ‘‘the longstanding policy

of encouraging vigorous private enforcement of the

antitrust laws.’ 431 U.S. at 745. Disregarding, this .

policy, the court of appeals has actually weakened pri-

vate antitrust enforcement by allowing the dealers to

recover on the basis of the retail overcharge. Assum-

ing that the court of appeals would not countenance

multiple liability for Crown, the dealers’ customers

have been removed as potential plaintiffs. Yet the

dealers, the only parties who can recover for the over-

charge, have little incentive to sue unless their dealer-

ships are in danger of being terminated, because their

profit margins are augmented by the conspiracy. More-

over, the dealers cannot recover the entire retail over-

charge, since only part (34) can be traced back to their

wholesale price.

Finally, the court of appeals’ decision is difficult to

reconcile in light of its assumption that retail sales

remained constant despite the higher fixed price. 602

F.2d at 632 (Pet. App. A, pp. 26-27). Since the dealers

shared in the increased prices their total profits were

higher under the conspiracy than they would have

been under competitive conditions. To award the deal-

ers substantial damages under these circumstances is

clear directive of /dfinois Brick that ‘‘pass-on’’ type theories must

be available for both offensive and defensive use, the court did not

allow Crown to use the same methodology to contest whether the

dealers had suffered any injury. Such a ruling is patently unfair,

especially in this case where the court of appeals observed that a

pass-on of any wholesale overcharge was ‘‘insisted on’’ by Crown

and the dealers’ own damages proof assumed no loss of gallonage

from the alleged conspiracy. 602 F.2d at 632, 633 (Pet. App. A,

pp. 26-27, 28).

*

15

to ignore the language of Clayton Act § 4, which re-

quires that a person ‘‘be injured in his business or

property”’ to recover. See, e.g., Brunswick Corp. v.

Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 486-87 (1977) ;

Gray v. Shell Oil Co., 469 F.2d 742, 748-49 (9th Cir.

1972), cert. denied, 412 U.S. 943 (1973).

In contrast to the adverse effect on Illinois Brick

policies which results from the court of appeals’ deci-

sion, these policies are furthered if the parties who

actually paid the illegally fixed price, rather than these

middleman dealers, are deemed the appropriate parties

to recover the overcharge.’ The customers would be

entitled to recover the entire amount of the overcharge,

50 “the amount of the recovery would reflect the actual

injury suffered’? and there would be no need for

complex tracing and allocation procedures. They would

thus have the strongest incentive to sue, along with any

dealers threatened with termination for noncompliance

with the illegal scheme. Consequently, there would be

two groups of potential plaintiffs, together able to

recover for all the harm flowing from the conspiracy,

but without the danger of multiple liability.

3. This is an appropriate case to resolve the reach

of Illinois Brick in circumstances where, unlike that

case and Hanover Shoe, the party which dealt directly

with the conspirator was only indirectly injured (if at

all), while the directly injured party did not purchase

from the defendant. We submit that the court of ap-

peals, through ‘‘{uJndue emphasis on privity’’, has

awarded damages based on the retail overcharge to the

* While the dealers should still be permitted to recover dam ges

° . a

in the amount of their lost profits due to the conspiracy, it was

undisputed in this case that there were no such losses.

16

wrong party,” and in so doing, has violated virtually

every important precept of Illinois Brick, which

should apply here despite the slightly different fac-

tual context of this case.”

In particular, this case involves a factual situation

which is recurrent: resale price maintenance where

the resale price is fixed by the reseller’s supplier. If

(as the court of appeals concluded) the reseller is the

proper party to bring suit, those customers who actu-

ally paid the fixed price will presumably be left with-

out a remedy. The ‘“‘result would be a loophole in the

antitrust laws that would provide immunity for any

price-fixing manufacturer which, for whatever rea-

sons, finds it useful to conspire to fix prices’’ with its

resellers. Florida Power Corp. v. Granlund, supra,

78 F.R.D. at 444.

10 See 2 Areeda & Turner, Antitrust Law § 334¢ at 165 (1978).

11 The dealers were permitted to recover, based on a complicated

‘‘passing back’’ calculation, without making any showing that

they suffered injury as a result of the conspiracy and in the face

of their concession that they benefited from the conspiracy. The

dealers’ customers, who were clearly injured in the full amount

of the overcharge and have a strong incentive to sue, would ap-

parently be barred from recovery unless Crown is to be exposed

to multiple liability. Crown may be subject to multiple liability in

any event, if another court decides the dealers’ customers can re-

cover the overcharge, since Crown cannot use the ‘‘trace back’’

defensively. Even if multiple liability could be completely avoided

by tracing and allocating the retail overcharge, such a procedure

is precisely what Illinois Brick was designed to avoid.

17

CONCLUSION

For the foregoing reasons, the petition for a writ

of certiorari should be granted.

Respectfully submitted,

JAMES H. KELLEY

WILLIAM D. APPLER

ARTHUR WINEBURG

MATTHEW WESTON-DAWKES

BeEroson, BorKLAND, MarGoLis

& ADLER

Kleven Dupont Circle, N.W.

Washington, D.C. 20036

Telephone: (202) 462-5930

Morton A. Sacks

CaBLE, McDantet, Bowie

& Bonp

One North Charles Street

Baltimore, Maryland 21201

Telephone: (301) 752-3650

November 26, 1979

APPENDIX

la

APPENDIX A

Untrep States Court or APPEALS,

Fourts Circuit.

Nos. 77-1780, 78-1078.

Joun T. Puriurps, Jz., Corrapo Frank TuMMINELLO,

CuHarLEs Puiip F'Re1TaG, aND CarRoLL CHARLES MYERs,

Plaintiff s-A ppellees,

v.

Crown CentTRAL PetroLeuM CoRPORATION,

Defendant-A ppellant.

Argued Oct. 2, 1978.

Decided July 2, 1979.

Before Haynswortu, Chief Judge, Cowrn,* Senior Judge,

and WipENER, Circuit Judge.

Cowen, Senior Judge:

Defendant Crown Central Petroleum Corporation

(Crown), is an independent wholesaler of gasoline and

other oil: products in the Maryland marketing area. Plain-

tiffs are four of Crown’s independent dealers. The plain-

tiffs brought private antitrust actions against Crown,

charging violations of 15 U.S.C. §§1, 15, and 26 (§1 of the

Sherman Act, and §§4 and 16 of the Clayton Act). The

complaints alleged that Crown entered into a horizontal

conspiracy with its competitors to stabilize the retail price

of gasoline in Maryland; that Crown forced its independent

dealers into a vertical price-fixing agreement to control

the retail price of gasoline; that Crown entered into tying

* Wilson Cowen, Senior Judge of the Court of Claims, sitting

by designation.

2a

agreements with its dealers which required that only Crown

brands of motor oil could be sold, and that these conspiracies

and agreements supported and reinforced each other to

create an elaborate and pervasively illegal system of reduc-

ing competition and restraining trade in the Maryland gaso-

line market. After a trial, the district court found Crown

_liabie on most of these charges and issued an injunction

which required the defendant to enter into new 3-year leases

with each of the plaintiffs and forbade Crown from cancel-

ling the leases (or refusing to renew them) for any retalia-

tory or illegal reason. The determination of money damages

was reserved for a separate trial.

Three days after the permanent injunction issued, the

attorney for the plaintiffs notified the court that one plain-

tiff, Corrado Frank Tumminello, had committed perjury,

both in pretrial proceedings and during the course of the

trial. Tumminello had also fabricated business records to

support his perjured testimony. Crown moved for various

forms of relief based on the discovery of perjury; but the

district court, after considering the motions and the evi-

dence, reaffirmed all of its previous actions except the per-

manent injunction (which was vacated with respect to

Tumminello to protect “the integrity of the court” and

otherwise continued) and one finding of fact (which was

stricken). Crown appealed to this court all of the district

court’s rulings in favor of the plaintiffs.

While this appeal was pending, the district court held a

separate trial to determine the quantum of money damages.

On February 17, 1977, the court awarded plaintiffs total

treble damages of $434,310 and attorneys’ fees of $200,000.

Phillips v. Crown Central Petroleum Corp., 426 F.Supp.

1156 (D.Md.1977). An appeal from the damage award

followed.

In Phillips v. Crown Central Petroleum Corp., 556 F.2d

702 (4th Cir. 1977), we vacated the permanent injunction

without prejudice and remanded the case to the district

3a

court with instructions to hold a hearing regarding the

extent of Tumminello’s perjury. Consideration of all the

other issues on appeal was stayed pending the outcome

of this hearing, which was held on July 22, 1977. After

the hearing the district court struck some of its findings of

fact, but reaffirmed its previous decision in all important

respects. Crown now appeals against to this court, challeng-

ing the manner in which the remand hearing was conducted

and renewing its appeals on all the previous rulings of the

district court.

I. The Remand Hearing

We turn first to the objections raised by the defendant

to the proceedings on remand from the original appeal.

To understand the posture of this aspect of the case, some

factual background is necessary.

Plaintiff Tumminello testified at trial and in pretrial

proceedings to several events which tended to prove the

existence of a horizontal conspiracy among Crown and its

competitors to fix prices. According to his testimony, he had

on at least four occasions refused to raise his retail gasoline

price when instructed to do so by Crown representatives.

Those representatives told him at those times that he had

to raise his price because his delay was “screwing up the

arrangement” with the other oil companies. This testimony

poo the basis for several of the district court’s findings

of fact.

After the first permanent injunction issued, an account-

ant examining Tumminello’s business records was unable

to square the written account books with Tumminello’s

story of one of the episodes described above (the one al-

leged to have taken place on April 24, 1971). Tumminello

finally admitted to his counsel that he had lied about the

incident; destroyed the genuine business records for that

day, and fabricated new records that would support his

false story. He continued to stand by his other testimony.

4a

The defendant filed motions pursuant to Rules 52(b),

59(a), and 60(b) of the Federal Rules of Civil Procedure,

asking the court to dismiss all of the claims of every plain-

tiff, or to grant a new trial or other extensive discretionary

relief. The district court simply struck the finding of fact

which dealt with the spurious incident and reaffirmed its

judgment in all other respects. On appeal from this deci-

sion, we stayed consideration of the merits of the case until

the district court could conduct a “plenary hearing,” “re-

appraise the case,” and then determine the appropriate

findings and conclusions. Phillips v. Crown Central Petro-

leum Corp., supra, 556 F.2d at 705. By so doing we inti-

mated no view on the soundness of the conclusion reached

by the district court (a finding that the perjury was limited

and did not infect large areas of the case); we simply in-

structed the court to hear Tumminello ore tenus and receive

such other evidence as might be required to assess the full

impact of the perjury on the case as it stood.

The remand hearing took place July 22, 1977. Prior there-

to Crown took a 2-day deposition of Tumminello and this

was offered in evidence. However, Crown had previously

indicated that it did not intend to call Tumminello to testify

but would rely instead on his deposition. In view of the

explicit directions from this court, the district court di-

rected plaintiff to call Tumminello, who testified and was

cross-examined extensively in open court by Crown. Crown

also called as a witness, Mr. Barry Owens, an employee of

Crown’s counsel, who had performed the analysis of Tum-

minello’s records. Crown introduced exhibits and a deposi-

tion in testimony. The trial court denied the requests of

both parties to call a large number of witnesses on the issue

of horizontal price fixing on the ground that such action

would transform the remand hearing into a new trial. The

trial judge also denied Crown’s request to recall to the

stand several of Crown’s witnesses who had testified in the

1974 trial, plus another witness, James C. Blackman, who

had testified previously only by deposition. The court con-

5a

cluded that the hearing of such testimony was not required

by our order. In an opinion filed August 19, 1977, the dis-

trict court denied all of Crown’s post-trial motions and re-

affirmed the court’s former findings and conclusions, except

for two findings of fact which were stricken in view of the

testimony given at the remand hearing.

The defendant raises several objections to the conduct

of the remand proceedings. Most of them can be traced to a

disagreement over the precise nature of the hearing con-

templated by this court when we issued the remand order.

The district court enunciated in this way the question to

be answered at the hearing:

The question ultimately presented at the remand

hearing was essentially a narrow one, namely, whether

Tumminello is now telling the truth or whether he is

now lying in confirming on the stand under oath sub-

stantially all his prior testimony. * * *

The defendant argues that this approach is somehow in-

consistent with our instruction to “reappraise the case and

* * * determine the appropriate findings and conclusions”

in light of the evidence adduced at the hearing. We do not

agree. The difficulty we found with the case on the first

appeal was that the trial judge had not heard testimony

from Tumminello since the disclosure of his perjury and

it was uncertain how pervasive his perjury may have been.

Therefore, we were reluctant to affirm findings of fact

based, in part at least, on the testimony of an admitted

perjurer until Tumminello was examined ore tenus and the

district court had an opportunity to reassess his testimony.

On review, we find that the purpose of the remand order

was fulfilled to the extent that no reversal is required on

account of the conduct of the remand hearing. The trial

court’s refusal to again hear four Crown witnesses who

were implicated in varying degrees by Tumminello’s testi-

mony was not error, since the district court had previously

6a

found their testimony uncorroborated, and since only one

of them, John W. Conway, was involved in the particular

incident which Tumminello admitted he had fabricated. To

put it in another way, the district court would have been

required to hear these witnesses again only if Tumminello’s

perjury extended into areas other than those covered by his

frank admission. Since the trial judge decided that the re-

mainder of Tumminello’s testimony was credible, he had no

need to rehear the testimony of these witnesses.’

Taking a slightly different tack, Crown argues that on

remand the district court should have applied the maxim

Crown argues strenuously that the district court erred in re-

fusing to hear in open court the testimony of James C. Blackman,

one of the witnesses Crown wished to call at the remand hearing

to refute Tumminello’s testimony. Blackman testified at the trial

only by deposition, and the trial judge never had an opportunity

to observe his demeanor on the stand. But the conflict between

Tumminello and Blackman was very limited, and may have been

nonexistent. Tumminello testified that on some occasions Black-

man told him that pricing arrangements had been made with the

other independent oil companies. Blackman denied making those

statements. The only evidence of the statements other than Tum-

minello’s direct testimony was a notation made by him after a

telephone call with Blackman, which recorded that Blackman had

told him that ‘‘everybody is going up.’’ Tumminello later ad-

mitted that he would interpret such a statement to mean that

there was a pricing agreement with competiors, so both witnesses

may have been telling the truth. Furthermore, Blackman’s sup-

posed conflict with Tumminello closely resembled the conflicts be-

tween Tumminello and several other Crown witnesses who gave

live testimony; the trial judge gave no credence to the testimony

of any of those witnesses, and there is no reason to believe that

one more witness repeating the same tale would have any further

effect on the judge’s determination of credibility. Finally, Crown

could have presented Blackman in person at the first trial as a

witness if his testimony on this point had been as important as

Crown now claims it was. For all these reasons, we are persuaded

that although the trial judge might have been wiser to hear Black-

man in person, he did not commit reversible error by refusing

to do so.

7a

falsus in uno, falsus in omnibus, reinforced by the judicially

enunciated observation that “intentional falsification of ma-

terial records presumptively destroys the weight of the

offender’s evidence as to the entire case.” Gratsos v. Moise

Bay, 287 F.2d 706, 707 (4th Cir. 1961). Crown argues that

the testimony which Tumminello admitted was false dif-

fered in no material respect from much of his other testi-

mony, and that therefore all of that other testimony should

be regarded as suspect until corroborated. Even if we were

inclined to utilize the maxim cited above, which this court

has at various times labeled “worthless,” [Virginia Ry. Co.

v. Armentrout, 166 F.2d 400, 406 (4th Cir. 1948)], “inap-

propriate,” [United States v. Harris, 346 F.2d 182, 185

(4th Cir. 1965)], and “always treacherous,” [Phillips v.

Crown Central Petroleum Corp., supra, 556 F.2d at 705],

we would not adopt the defendant’s reasoning, since the

maxim has always been purely informatory, never manda-

tory. Norfolk and Western Ry. Co. v. McKenzie, 116 F.2d

632, 635 (6th Cir. 1941). The district court could have de-

cided, on the basis of Tumminello’s perjury, that he was

unworthy of belief on other points as well. The court did

not choose to do so, and we cannot say on the record before

us that the refusal was error. The court found the rest of

Tumminello’s testimony to be substantiated and corrobor-

ated by other evidence of record, and we conclude that

Crown has failed to show that the district court’s findings

on these issues are clearly erroneous.

Crown’s other objections to the conduct of the remand

hearing—that it was scheduled at a time inconvenient to

Crown’s. counsel, that prehearing discovery was not as

extensive as it might have been, and that the videotape of

Tumminello’s remand deposition should have been received

in evidence—all pertain to maters traditionally left to the

trial judge’s informed discretion, and we decline to disturb

such rulings absent a showing of abuse. That showing was

not made here.

8a

II. The Horizontal Price-fixing Findings

Since we find that no reversible error was committed in

the conduct of the remand hearing, the remaining issues

must be decided on the record as finally reaffirmed by the

trial judge after that proceeding. We have reviewed that

ample record, assisted by able briefs from counsel for both

sides, and we find therein sufficient evidence to support the

trial judge’s findings that a horizontal conspiracy to fix

prices existed and that Crown participated in that con-

spiracy.

Several employees and officers of Crown testified to tele-

phone calls between Crown and its competitors; the subject

of those calls was retail pricing. Wilbur Pressler, Crown’s

Manager of Administration (Marketing), testified that he

called Ashland Oil and Refining Company and Meadville Oil

Company about the retail prices being charged by some of

. those companies’ gas stations, because those stations “were

engaged in price competition that could seriously affect

sales of the Crown station” near them. Pressler came close

to admitting that his motive for making those calls was to

stop the price competition among the retail gas stations

concerned. Pressler also testified that he received phone

calls from the Society of Independent Gasoline Marketers

of America (SIGMA) concerning future retail price moves

in the Maryland gasoline market. Pressler believed these

calls to be “improper,” and testified that he did not encour-

age SIGMA, but the calls continued. Crown itself was not a

member of SIGMA. Archie Garrison, who was Pressler’s

predecessor as Manager of Administration, also admitted

that he made telephone calls to competitors to discuss retail

prices being charged by particular gas stations. Garrison

called Hess Oil Company when Hess stations were hurting

Crown sales by posting lower prices, asking Hess officials

to “look into it.” James C. Blackman, Crown’s Mid-Atlantic

Regional Office Manager, acknowledged that he had called

officers of Petroleum Marketing Corporation (PMC), an-

9a

other Crown competitor, asking them when PMC was plan-

ning to change its retail prices. Joseph J. Gilboy, Crown’s

Virginia District Manager, testified that he had received

calls from PMC, asking him to raise Crown’s retail gasoline

prices and informing him in advance of PMC’s price moves.

When asked whether he returned calls to PMC, Gilboy

equivocated. Telephone records confirm the placing of calls

between Crown and each of the competitors mentioned

here.

These calls were verified by the testimony of the officers

of the competitors who participated in them. Irving Gross-

man, Price Coordinator for Hess, testified that he received

calls from Crown and other oil companies informing him of

prospective retail pricing actions, and understood these

calls to be explanations of those actions. Henry R. Wain-

wright, Vice President of PMC, admitted that he made calls

to the other oil companies to discuss future price moves

and stated specifically that he talked to John W. Conway of

Crown about pricing in the Maryland area.

Other evidence in the record lends support to the dist: ict

court’s findings. Tumminello’s testimony (which was found

credible by the trial judge) that officers of Crown had told

him of an agreement with the other oil companies is cor-

roborated by the testimony of Earl Burch, a Crown sales

representative, who stated that he also received this in-

formation from his superiors at Crown. On several occa-

sions, Blackman was able to predict the day and hour of

competitors’ price changes, since he sent field agents to

watch other gas stations to see whether the price changed

when he thought it would. Blackman’s explanation for his

prescience was that his knowledge was “based on compe-

petition in the area, what we had seen * * *.” Finally, there

was the testimony of Howard Knox. We have reserved dis-

cussion of Knox’s testimony to the end of this review of

the evidence, because it is vigorously assailed by Crown.

10a

Howard Knox was Administrative Aide and secretary to

two vice presidents of PMC, Wainwright and Ferguson.

Knox testified that the vice presidents for whom he worked

called all the independent dealers, including Crown, just

before a planned price hike to find out whether the other

dealers were going to “go along” with it. He was in a posi-

tion to hear the officers actually speaking with the other

conspirators. These telephone calls took place during 1970

and 1971, while Knox was working for PMC. Knox himself

took some messages from other independents to relay to his

superiors, and he testified that he took such a message from

Crown. Knox stated that he called Crown himself “six or

seven times” to advise Crown of proposed changes in gaso-

line prices. The district court, in finding the existence of

a horizontal conspiracy, accorded “particular weight” to

Knox’s testimony.

Crown attacks Knox’s testimony on several grounds.

First, no particular dates for any of the phone calls Knox

described were given, nor could Knox recall the details (as

opposed to general tenor) of the price-fixing communica-

tions. Crown also suggests that Knox had a “bone to pick”

with one of his superiors at PMC, implying that he had a

strong motive to fabricate damaging testimony. Both of

these objections, however, relate to the credibility of the

witness, and the district court resolved them adversely to

Crown. In the light of the whole record, we decline to upset

the trial judge’s resolution of these issues.

Crown’s frontal attack on Knox is based on his subse-

quent testimony in other proceedings, particularly a depo-

sition taken in a subsequent civil action against PMC.

Counse} for Crown attended the deposition and participated

in the cross-examination, apparently for the purpose of

discrediting Knox and obtaining ammunition to use in the

present proceeding. Four salient points emerge from this

deposition :

lla

1. In his testimony before the trial judge in the present

case, Knox said that he had no ill feelings at all toward

any representative of PMC. In his deposition, he admit-

ted that he had ill feelings toward Mr. Ralls of PMC.

To that extent, his testimony before the district court

in the present case was false.

2. Knox was confronted at the deposition with tele-

phone records and company price-changing records for

the periods of time he was employed by PMC and was

unable to correlate particular price changes with par-

ticular telephone calls to competitors. The strong impli-

cation, according to Crown’s counsel, was that such

a correlation was impossible, but without the records

before us we cannot resolve the question.

3. Knox testified before the district court in the pres-

ent case that he telephoned Crown to suggest price

changes and that Crown representatives would later

call him back to give their assent. In his deposition he

admitted that, many times, the assent would be given in

the same conversation. To that extent, his testimony

before the district court in this case conflicted with the

deposition.

4. Knox stoutly reaffirmed in his deposition that the

calls he described actually took place largely as he had

explained them in this case.

The district court ruled that the deposition evidence was

not properly a part of the record before him and refused

to consider it. The court also found that even if the deposi-

tion were admitted “it would not affect the weight which

this Court has accorded the trial testimony of the witness

Knox.” We are disposed to agree with the district court’s

ruling [cf. Curtis Publishing Co. v. Butts, 351 F.2d 702, 717

(Sth Cir. 1965), aff’d 388 U.S. 130, 87 S.Ct. 1975, 18 L.Ed.2d

1094 (1967)], since the evidence merely affected the weight

to be accorded Knox’s testimony and would not have

12a

changed the result in this case. The trial judge found that

the admission of the deposition in evidence would not

change any finding of fact. The trial judge has made this

credibility determination and we have been shown no con-

vincing reason to disturb it.

A formidable array of evidence thus supports the district

court’s finding that Crown participated in an elaborate con-

spiracy among independent oil dealers to -fix the retail

price of gasoline in the Baltimore area in the early 1970's.

It is settled law that

Under the Sherman Act a combination formed for

the purpose and with the effect of raising, depressing,

fixing, pegging, or stabilizing the price of a commodity

in interstate or foreign commerce is illegal per se. * * *

United States v. Socony-Vacuum Oil Co., 310 U.S. 150, -

223, 60 S.Ct. 811, 844, 84 L.Ed. 1129 (1940).

Therefore, the district court’s finding of liability on the

charge of horizontal price fixing must be affirmed unless

Crown can demonstrate that the finding is clearly erroneous

or that Crown has a legal defense. It has done neither.

Crown argues that each of the pieces of evidence support-

ing the horizontal conspiracy finding is so small and un-

convincing that the evidence as a whole does not amount to

proof that a conspiracy existed. We are not constrained,

however, to be so microscopic in our examination of the

record. As the Supreme Court wrote in Continental Ore

Co. v. Union Carbide, 370 U.S. 690, 699, 82 S.Ct. 1404, 1410,

8 L.Ed.2d 777 (1962) :

* * * In cases such as this, plaintiffs should be given

the full benefit of their proof without tightly compart-

mentalizing the various factual components and wip-

ing the slate clean after scrutiny of each. “... [T]he

character and effect of a conspiracy are not to be judged

by dismembering it and viewing its separate parts, but

13a

only by looking at it as a whole. [citation omitted.] and

in a case like the one before us, the duty of the jury

[and, therefore, of the trial judge in the case at bar]

was to look at the whole picture and not merely at the

individual figures in it.” American Tobacco Co. v.

United States, 147 F.2d 93, 106 (6th Cir. 1944).

Taken as a whole, the evidence presented at trial and re-

viewed above affords adequate support for the conclusion

that Crown participated in a horizontal price-fixing con-

spiracy. Crown has pointed to a few minor points in the

findings of fact (such as that Crown employees were proud

of the price stability in the Maryland market) which may be

slightly inaccurate. But minor flaws in the record are to be

expected in a case of this size and complexity, and we hold

that these errors (if errors they were) are harmless. The

major findings of fact are fully supported by the record.

Crown next maintains that the district court failed to

consider the objective evidence Crown introduced to explain

and justify its pricing policies and changes. Evidence of

the pricing patterns of the major oil companies, plus evi-

dence from legitimate sources of the availability of infor-

mation regarding gasoline prices charged by independent

companies, says Crown, disprove the existence of a con-

spiracy, because the pricing policies could have arisen legiti-

mately. This argument sidesteps the district court’s finding

that these pricing policies did not arise legitimately; the

trial judge was as free to disregard this evidence as he

would have been to disregard the contrary evidence (sup-

porting the conspiracy finding) which Crown now asks us to

ignore. The district court did not err in failing to accord

conclusive weight to Crown’s evidence of independent pric-

ing justification.

Finally, Crown argues briefly that the telephone calls ad-

mittedly made by its officers about gasoline prices were le- - *

gitimate inquiries to avoid potential Robinson-Patman Act

l4a

violations. Passing over the obvious rejoinder that price

discrimination claims under the Robinson-Patman Act arise

only when prices decrease (and these calls were often asso-

ciated with price increases), it is enough to point out that

only one witness at trial (Wilbur Pressler) mentioned the

Act as a possible justification for the pricing calls, and he

failed to keep records of the calls which would be the nat-

ural object of anyone genuinely concerned over Robinson-

Patman violations. The district court was justified in reject-

ing this tenuous contention.

III. The Vertical Price-fixing Findings

In addition ‘o the horizontal agreement among the inde-

pendent oil companies to stabilize retail prices, the district

court also found the existence of a vertical conspiracy by

means of which Crown controlled its dealers’ retail prices.

Crown asserts that this finding is based on a misinterpre-

tation of the evidence presented at trial, and that no vertical

conspiracy existed.

We note first that the district court found a “pervasive

web of illegality,” and that the division of a price-fixing

scheme such as that found here into “horizontal” and “ver-

tical” components is, in some measure, an abstraction.? The

horizontal agreement would have been worthless if Crown

had not the power to control the retail prices charged by

its dealers. The point of the horizontal conspiracy was to

stabilize the retail price market, and an agreement with

competitors to hold retail prices steady would not work

without control over those prices. The existence and dura-

tion of the horizontal conspiracy, then, is itself some meas-

ure of proof that Crown was able to control the retail

2 The difficulties generated by this abstraction are illustrated by

the parties’ semantic wrangling—and the trial judge’s partial con-

fusion—over which damages are attributable to which part of the

conspiracy, a problem discussed more fully below.

15a

prices its dealers charged. Crown recognizes this when it

argues that the vertical price-fixing must fall if the horizon-

tal case is not proved. Since we have upheld the finding of

horizontal price fixing, the reverse is true: the vertical

price-fixing conspiracy finding is buttressed by tlie finding

of the horizontal conspiracy.

Turning to the substantive evidence, we find in the record

ample support for the district court’s finding of vertical

price fixing. The most convincing piece of hard evidence is

a memorandum dated October 9, 1968, which Crown Vice

President John I. Loving wrote to Crown Regional Man-

ager T. H. Cahir (with copies to Garrison and Pressler).

The memorandum outlined the agreement to be reached

with a new independent dealer. The first paragraph of the

outline read:

Gross gasoline margins of 4.75¢ and 5.25¢ house brand

and premium, respectively. Margins on both grades to

escalate up or down 14¢ per gallon with each 1¢ on the

pump (base posting = 29.9¢ and 33.9¢). This does not

apply to postings increased due to a tax increase. Mini-

mum margin will be 3.75¢ and 4.25¢. Above under-

standing to be verbal. Pump postings at Crown’s dis-

cretion.

This single piece of evidence demonstrates that Crown was

to control both the retail price being set and the dealer’s

profit margin, which was to be keyed directly to the preset

retail price. Its insistence on a verbal agreement also sug-

gests some consciousness of wrongdoing on the part of

Crown’s officers.

Crown attempts to circumvent the devastating implica-

tions of this memorandum by maintaining that the docu-

ment was an internal communication which decribed

Crown’s method of calculating its wholesale price from a

previously determined “suggested” retail price. This argu-

ment must fail, since the document by its own terms is a

description of the agreement to be reached with the dealer,

l6a

not a guide to wholesale price calculation. Furthermore, the

phrase “pump postings at Crown’s discretion” is hardly

consonant with the notion of a “suggested” price; it sounds

more like a fiat than a suggestion.

A second highly probative piece of evidence is a clause

in Crown’s standard dealer lease which provided that any

dealer’s lease could be cancelled on 5-days’ notice for any

reason, or for no reason at all. Short-term leases have been

found to be inherently coercive devices, and when used to

promote price-fixing schemes they become patently illegal.

The Supreme Court wrote in Atlantic Refining Co. v. FTC,

381 U.S. 357, 368, 85 S.Ct. 1498, 1505, 14 L.Ed.2d 443 (1965),

that

* * * Among the sources of leverage in [the oil com-

pany’s] hands are its lease and equipment loan con-

tracts with their cancellation and short-term provisions.

Only last Term we described the power implications of

such arrangements in Simpson v. Union Oil Co., 377

U.S. 13, 84 S.Ct. 1051, 12 L.Ed.2d 98 (1964), and we

need not repeat that discussion here. * * ®

The inherently coercive leases found unacceptable in Simp-

son were simply 1-year renewable leases with no 5-day can-

cellation clause like that found here.

Of course, the mere existence of the clause does not prove

an antitrust violation. It must be shown that the clause

was used to further an illegal scheme. An abundant show-

ing was made in this case. Plaintiffs Phillips and Freitag

were threatened with abrupt cancellations if they failed to

comply with Crown’s “suggested” retail prices. So were

Margaret Kling, David Horner, and William O’Hara, three

Crown dealers who are not parties to this suit.

Furthermore, all four plaintiffs, and other nonparty wit-

nesses, testified to considerable pressure by Crown to in-

sure compliance with Crown’s retail pricing policies. On

17a

one occasion, a Crown representative actually changed the

prices on Tumminello’s pumps during his absence from his

station. Other testimony could be cited, but what we have

discussed establishes that the trial judge permissibly found

the existence of an extensive (and largely successful) ver-

tical price-fixing conspiracy. Consequently, the district

court’s finding of liability on the vertical price-fixing con-

spiracy count is affirmed.

IV. The Motor Oil Tying Agreement

Crown prohibited its dealers from selling any brands of

motor oil other than Crown’s own. The district court held

that this prohibition was an illegal tying agreement in viola-

tion of section 1 of the Sherman Act (15 U.S.C. §1). Be-

cause we feel that the district court misinterpreted the

emerging law of tie-ins in franchise settings, we reverse

on this issue.

A per se tying violation is shown when three elements

exist : The fact of a tying agreement, the affecting of a “not

insubstantial” amount of interstate commerce, and suffi-

cient economic power in the market for the tying product

for the seller to restrain competition in the market for

the tied product. Northern Pacific Ry. Co. v. United States,

356 U.S. 1, 5, 78 S.Ct. 514, 2 L.Ed.2d 545 (1958). The first of

these elements is uncontested; the district court’s finding

that the second existed is supported by substantial evidence

and should not be disturbed. The difficulty centers on the

third element—the seller’s economic power in the market

for the tying product.

The district court nowhere identified what it considered

to be the tying product in this case. It is possible that

either Crown gasoline or Crown service station leases were

deemed to be the tying product. Without inquiring at length

into the market for either, the court simply observed that

Crown’s power to impose the tie-in was amply demonstrated

18a

by the fact that it had done so, The court was probably

guided by remarks in past tying cases that the oil com-

pany’s plenary economic power over its dealers is inherent

in the structure and economics of the petroleum distribution

system. Federal Trade Commission v. Texaco, Inc., 393

U.S. 223, 226, 89 S.Ct. 429, 21 L.Ed.2d 394 (1968).

But that comment, and others like it, were made in cases

where the tied product was not purchased directly from

the seller of the tying product. Slightly different consid-

erations apply when the tying agreement is part of an

otherwise valid franchise arrangement, since the very es-

sence of a franchise is the purchase of several related prod-

ucts in a single of several related products in a single com-

petitively attractive package. A thorough discussion of the

law of tying agreements in franchise settings is found in

Ungar v. Dunkin’ Donuts of America, Inc., 531 F.2d 1211,

1224 (3d Cir. 1976). The Third Circuit, faced with the

problem of deciding whether class action plaintiffs had to

show that they were each individually coerced by the exer-

cise of dominant market power, analyzed the problem in

this way:

* * © Under the district court’s theory a class of fran-

chisees could prove a per se illegal tying arrangement

by establishing: (1) that the franchisor was econom-

ically dominant over its franchisees; (2) that the fran-

chisor offered for sale, and sold, more than one product

to its franchisees; and (3) that the franchisor had a

policy to persuade franchisees to buy its products.

It is difficult to conceive of a franchisor-franchisee

relationship in which this could not be established. The

very nature of the franchise institution contemplates

the presence of a comparatively strong financial en-

tity—the franchisor—that makes available to a rela-

tively weaker financial entity—the franchisee—an at-

tractive business opportunity at a relatively modest

initial investment. * * °

19a

This analysis makes clear that it is the seller’s power in

the lease market that must be examined (since no dealer

could obtain or keep a Crown lease without agreeing to the

tie-in) to see if the necessary economic power existed. Such

an inquiry was outlined in Bogosian v. Gulf Oil Corp., 561

F.2d 434 (3d Cir. 1977), where the court observed:

* * * Plaintiffs could show, for example that the de-

fendants controlled a majority of existing service sta-

tions and that because zoning restrictions and high cap-

ital costs make development of new stations difficult,

the defendants have sufficient market dominance over

existing stations to impose a tie-in. [561 F.2d at 454.]

No showing of this kind was made in this case. The only

relevant evidence in the record is that Crown’s service sta-

tions captured about 4 percent of the gasoline market in the

Baltimore area. And this figure is of doubtful relevance to

power in the lease market. Lacking any other evidence on

this point, it is clear that plaintiff’s tying claim must fall

for failure of proof. Accordingly, the motor oil tying agree-

ment did not violate section 1 of the Sherman Act; the

plaintiffs are not entitled to damages, and the district

court’s holding on this issue is reversed.

As an alternate ground for our decision, we note that

even if gasoline, not the lease, is viewed as the tying prod-

uct, plaintiff’s claim would still fail. In Osborn v. Sinclair

Refining Co., 286 F.2d 832 (4th Cir. 1960), we held that an

oil company whose share of the market was more than 10

percent had sufficient economic power to support a finding

of an illegal tying agreement where the tied product was

not purchased from the lessor as part of the franchise

agreement, rather from a third party which paid a com-

mission to the lessor. The Osborn case probably represents

a showing very close to the minimum permissible, and the

case before us simply does not fall within the Osborn rule

either quantitatively (4 percent ar opposed to 10 percent)

20a

or qualitatively (tied product produced by a seller-land-

owner as opposed to third party producer). Cf. the Supreme

Court’s remarks about market share in United States Steel

Corp. v. Fortner Enterprises, 429 U.S. 610, 614, 97 S.Ct.

861, 51 L.Ed.2d 80 (1977). Thus, while we hold that the

tying product in this case is the service station lease, the

result we reach would not differ if the tying product were

gasoline.

V. The Refusals to Renew

Crown also attacks the district court’s finding that

Crown’s refusal to renew the leases of the plaintiff’s in due

course constituted an unlawful refusal to deal, because the

refusals were in furtherance of a price-fixing scheme which

violated the antitrust laws. Crown argues that the testimony

of its witnesses showed that there was a valid business pur-

pose for each of the terminations, unrelated to any antitrust

violations. Plaintiffs respond that the supposed “business

reasons” were just fabrications, and that until they began

to protest Crown’s illegal pricing policies, there had been

no reason to refuse the renewal of their leases.

The determination of motive, especially in a cloudy area,

is a matter peculiarly within the province of the trier of

fact. We conclude that the trial judge did not err in decid-

ing as he did, for there was substantial evidence to support

his conclusion. Plaintiffs’ past good records in the opera-

tion of their stations, the extensive evidence that operators

with more serious problems than the plaintiffs were never

terminated, and the evasiveness on the stand of Edward T.

Gillespie, Crown’s main witness on this matter, are suffi-

cient to uphold the finding of the district court.

*** A refusal to deal based upon a contract provision

[permitting termination or nonrenewal] is, in respect

to the antitrust laws, no different from the right of

traders generally to select their customers. In either

case, the right is limited to situations where the seller

2la

has not put together an arrangement in restraint of

trade. * * * Osborn v. Sinclair Refining Company, 324

F.2d 566, 575n (4th Cir. 1963).

VI. The Permanent Injunction

On December 15, 1975, the district court issued a manda-

tory injunction which granted to each of the four plaintiffs

a 3-year lease on the premises occupied by him, beginning

with the date of the court’s order. The defendant was also

enjoined from refusing to renew the leases at the end of the

3-year term for any retaliatory reason related to the plain-

tiffs’ success in the litigation or for any other reason pro-

hibited by the antitrust laws. In this appeal, defendant ar-

gues that the injunction should be dissolved by this court

on the ground that the plaintiffs have not demonstrated, and

the district court has not found, that legal remedies were

inadequate to compensate the plaintiffs for damages result-

ing from antitrust violations.

This court vacated the permanent injunction without

prejudice when the case was first appealed, since we were

unsure of the extent of Tumminello’s perjury and we were

hesitant to continue in effect an injunction which might

be based largely on perjured testimony. We did not suggest

at the time that there was an inadequate basis for the in-

junction as it then existed ; indeed, we noted that the district

court had “a substantial basis, apart from Tumminello’s

testimony, to support his injunction * * *.” Phillips v.

Crown Central Petroleum Corp., supra, 556 F.2d at 705.

We reaffirm that statement now. The district court has

expressly found (opinion of October 24, 1975):

* * * Crown’s proclivity for persistently disregarding

the antitrust laws * * * belies any finding that a termi-

nation of the leases today, or in the near future, would

be based on lawful reasons. [citations omitted.] This

Court finds clear evidence indicating a danger of recur-

rent violations. * * *

22a

The district court permissibly concluded that a permanent

injunction was necessary to shield the plaintiffs from the

effects of future antitrust violations by Crown. A future in-

jury of uncertain date and incalculable magnitude is irrep-

arable harm, and protection from such an injury is a legiti-

mate end of injunctive relief. Zenith Radio Corp. v. Hazel-

tine Research, Inc., 395 U.S. 100, 130, 89 S.Ct. 1562, 23

L.Ed. 129 (1969); United States v. Gypsum Co., 340 U.S.

76, 89, 71 S.Ct. 160, 95 L.Ed. 89 (1950); Advance Business

Systems & Supply Co. v. SCM Corp., 415 F.2d 55 (4th Cir.

1969), cert. denied 397 U.S. 920, 90 S.Ct. 928, 25 L.Ed.2d

101 (1970).

After this court’s decision of April 6, 1977, defendant’s

counsel wrote to the trial judge as follows:

As we construe the Fourth Circuit opinion, the Court

of Appeals contemplated a hearing of the type re-

quested in Crown’s motion, i. e., a hearing limited to the

falsity of Tumminello’s testimony beyond the admitted

perjury, submission of new proposed findings and briefs

and reevaluation of the evidence in the record * °.

[Emphasis supplied. ]

However, on the same day defendant filed with the district

court a motion for hearing on the issuance of a preliminary

injunction, contending that since the permanent injunction

had been vacated, it was plaintiffs’ burden to show the

propriety of any new relief, and stating that in view of the

developments that had occurred since the issuance of the in-

junction, plaintiffs could not meet that burden. Crown

agreed that the district court had the power to enter a

short-term restraining order pending discovery in prepara-

tion for an evidentiary hearing.

On April 26, 1977, after hearing oral argument of counsel,

the trial judge issued an oral opinion denying the defen-

dant’s request for an evidentiary hearing and stating that

23a

a preliminary injunction would be entered without preju-

dice to defendant’s right to dissolve the same as to one or

more of the plaintiffs. It was the district court’s interpreta-

tion of our decision that the status quo should be main-

tained until a decision was made on the principal question

covered by this court’s remand. An order was entered on

the same day, vacating the permanent injunction as to

plaintiffs Phillips, Freitag and Myers. By that time, Tum-

minello had been removed from his filling station because

of his perjury and on the basis of the district court’s de-

cision that equitable relief should not be invoked prospec-

tively for his benefit.

On May 12, 1977, defendant filed a motion to vacate the

preliminary injunction as to plaintiffs Myers, Phillips and

Freitag. Myers relinquished his station voluntarily on May

11, 1977, and the preliminary injunction was dissolved as

to him by order dated June 27, 1977.

As previously stated, the district court on August 19,

1977, issued its decision and opinion in which it resolved

the issues regarding the effect of Tumminello’s perjury

and ordered that plaintiffs Phillips and Freitag were en-

titled to a permanent injunction as provided in the order

of December 15, 1975.

On August 29, 1977, Crown filed a motion to amend the

order of August 19, 1977, and the district court responded

by memorandum and order of October 13, 1977, setting

forth its interpretation of our decision of April 6, 1977.

The order stated that the district court had found that the

perjury of Tumminello was in fact limited and that a solid

factual structure remained for the issuance of the perma-

nent injunction. The order further provided that if events

occurring since December 15, 1975, required a modification

of the relief granted, Crown should file a motion to modify

or dissolve the permanent injunction on the basis of facts

which were not then of record. The court’s order stated that

it had invited Crown to do just that.

24a

On November 15, 1977, Crown filed a motion to vacate

or modify the permanent injunction which was ordered

August 19, 1977, and at the time the parties filed their briefs

herein, discovery was proceeding as a result of the filing

of that motion.

Crown did not timely appeal from the order of April

26, 1977, which reentered the preliminary injunction, but

now argues that the trial judge committed reversible error

in renewing the injunction without a hearing to determine

whether equitable relief was still warranted. Crown con-

tends that it should have been afforded an opportunity to

demonstrate that the conditions had changed so much that a

permanent injunction was no longer required, and that

the trial judge’s order shifted the burden of proof from

plaintiffs to defendant. When the term “vacated without

prejudice” as used in our order is viewed in isolation, it

cannot be said that Crown’s contention is frivolous or

wholly without merit. However, one must carefully consider

all of the court’s decision of April 6, 1977, to determine

what this court intended when the injunction was vacated.

The vacation “without prejudice” was a procedural device

in the nature of a stay which was intended to permit the

district court to determine the extent of Tumminello’s per-

jury before the injunction became final. This is clear from

the following portion of this court’s previous opinion:

* * * It is possible that the perjury was limited, and

there remains a solid structure for the injunction. * *

Hence, we conclude that the District Court should have

granted defendant’s motion to vacate or stay the in-

junction and to conduct a hearing as prayed. Phillips v.

Crown Central Petroleum Corp., supra, 556 F.2d at 705.

[Emphasis supplied. ]

We did not intend, after it had resolved the primary issue

on remand, to require the district court to disregard all of

the evidence upon which it had relied in issuing the injunc-

25a

tion, nor to obligate plaintiffs to file a new application for

equitable relief as though no evidence in support thereof

had ever been introduced in this protracted litigation. Ad-

mittedly, it would have been more appropriate and more

consistent with this court’s intentior. if the order of remand

had “stayed” rather than “vacated” the injunction. How-

ever, on review of the whole record, we conclude that the

district court properly interpreted and applied our deci-

sion and order of April 6, 1977, and that the district court

did not err in the reentry of the preliminary injunction in

order to maintain the status quo pending resolution of the

controversy arising out of Tumminello’s perjury. We hold

also that after this issue was disposed of, the district court

correctly decided that the record provided a solid basis for

making the injunction permanent as to plaintiffs Phillips

and Freitag.

If as defendant asserts, conditions prevailing since De-

cember 15, 1975, require a modification or dissolution of the

injunction, that issue can be determined by the trial court

on the basis of Crown’s pending motion to vacate or modify

the injunction ordered August 19, 1977.

VIII. Damages

Excluding the tie-in damages, damages were assessed in

favor of the four plaintiffs aggregating $431,310 after being

tripled. On the basis of testimony of plaintiffs’ witness, Dr.

Carl F. Christ, and exhibits prepared by him, the district

court found substantial “horizontal damages” and “vertical

damages.” The terms appear to be related to the horizontal

and vertical conspiracies alleged, but the theories underly-

ing the assessment of damages are only loosely related to

the facets of the conspiratorial scheme. The “horizontal

damages” assessment was based upon a finding that Crown’s

wholesale prices to the plaintiffs during the conspiracy

period were higher than a competitive price, while the

26a

vertical damages award was premised upon the theory that

Crown prevented its dealers from charging higher retail

prices. We think the award of “horizontal damages” sus-

tainable, but the award of “vertical damages” inconsistent

and unsupportable.

A.

Dr. Christ reasoned, and the district court found, that

the conspiratorial limitation of competition among distribu-

tors enabled Crown to impose retail price requirements

upon its dealers. It is true that during the period of the

conspiracy there were no price wars between the retail out-

lets of the conspirators, except that one of Crown’s retail

outlets, Station P57 was in immediate competition with a

Phillips station located at the same intersection. Phillips

was not a member of the conspiracy, and, during the fiye-

year period during which the conspiracy operated, the retail

price of Crown gasoline at Station P57 was usually lower

and never higher than Crown’s imposed retail price upon

the plaintiffs." Crown gave the plaintiffs some incentive tn

maintain the imposed retail prices, for the wholesale prices

charged to the plaintiffs moved in a predetermined rela-

tionship with their retail prices. Each increase in the retail

price at the pump was divided between the dealer and

Crown on a one to three basis. Thus, if there were an

increase in the retail price of one cent a gallon, the dealer’s

gross profit margin was increased by one-fourth of one

cent while Crown’s wholesale price was increased by

three-fourths of one cent. Since the higher the price the

wider the dealer’s margin, each dealer had a substantial

incentive to comply with Crown’s directions about retail

prices, and there was no counter incentive since there was

* Occasionally, Station P57 did not have the lowest Crown price

in town. For convenience, however, we will consistently refer to

the lowest charging station as P57.

27a

general agreement that maintenance of these prices did not

cause a loss of retail sales.

Dr. Christ reasoned that the retail prices at Station P97

reflected the competitive price of gasoline in the Baltimore .

area. Since those priceg at Station P57 were never above

and usually were lower than the retail price imposed upon.

the plaintiffs, Dr. Christ computed the daily differentials.

Applying the three to one ratio by which retail price in-

creases and decreases were shared, he computed what the

wholesale price to the plaintiffs would have been if their

retail prices had been the same as those charged at Station

P57. Applied to the actual gallonage sold by each dealer, he

arrived at a sum by which the district court found that

Crown’s wholesale prices to these dealers had resulted in

overcharges which could not have been exacted without the

horizontal and vertical conspiracies.

Dr. Christ’s “horizontal” damages represent compensa-

tion to the plaintiffs from the bottom end of their margin

diminution. Here there is no error in calculation, since the

wholesale price calculated by Dr. Christ for Station P57

(or any other station that happened to be charging the

lowest price on a particular day) is presumably the price

that Crown actually charged to that station. This price is &

good yardstick for determining that wholesale price Crown

should have been charging to all of its dealers, and the

damages plaintiffs sustained for being charged an artifi-

cially high wholesale price were correctly calculated as sim-

ply the difference between the actual wholesale price

charged to each plaintiff and the lower price charged to

another station, multiplied by the total number of gallons

purchased.

Crown’s other arguments attacking the horizontal award

all go to the specificity of the supporting evidence and the

appropriateness of the standards used by the trial judge.

Crown claims, for instance, that Station P57 was in an ex-

28a

ceptional, competitive situation, that Crown accorded that

station special treatment, and that it is wrong to suppose

that Crown could have charged P57’s “unrealistically low”

wholesale price to all its dealers. We reject this contention,

and others like it, because

* * * a defendant whose wrongful conduct has rendered

difficult the ascertainment of the precise damages suf-

fered by the plaintiff, is not entitled to complain that

they cannot be measured with the same exactness and

precision as would otherwise be possible. * * * Eastman

Co. v. Southern Photo Co., 273 U.S. 359, 379, 47 S.Ct.

400, 405, 71 L.Ed. 684 (1927).

If Station P57’s wholesale price was unrealistic or aberrant,

Crown has only itself to blame for not being able to point

to another station whose price was more normal. The dis-

trict court was entitled to use what it correctly perceived to

be the best approximation of what the wholesale prices

should have been.

One issue concerning the horizontal damages merits fur-

ther attention. In Hanover Shoe, Inc. v. United Shoe Mach.

Corp., 392 U.S. 481, 88 S.Ct. 2224, 20 L.Ed.2d 1231 (1968),

the Supreme Court held that a defendant-monopolist who

increased the plaintiff’s costs could not defend by asserting

the plaintiff had passed on the extra costs to its buyers. The

Court thus rejected, as a general rule, assertion of a “pass-

ing on” defense. This seems to us a classic pass-on case.

Crown charged its retailers too much for gas; its retailers

in turn, charged consumers too much for the gas it bought

at artificially high prices. There are two differences be-

tween this case and more common pass-on situations. First

through the vertical price fix, the pass-on was “insisted

upon” by the wholesaler; it was not voluntarily and unilat-

erally effected by the retailer. Second, during the conspi-

racy period, the retail price and wholesale price moved in a

fixed relation.

29a

Crown relies on Obron v. Union Camp Corp., 477 F.2d

542 (6th Cir. 1973), affirming 355 F.Supp. 902 (E.D.Mich.

1972), which permitted assertion of the pass-on defense

where the scheme of distribution was “comparable to a

‘cost-plus’ contract.” Id. at 543. There the dealer bought at

5% less than the wholesaler’s list price and invariably

resold at the list price. “Thus, whatever price [the whole-

saler] imposed on the plaintiff, the plaintiff passed on to

his customer plus 5%.” Id. This case is different. It is true

that the dealers’ retail prices moved in a fixed proportion

to the wholesale price. But, unlike Obron, no cost-plus

arrangement insured that this immutable ratio would apply

even in the absence of a conspiracy. Indeed, a free market

surely would and did disrupt it. See Pl. Ex. 69, Table D (in-

dicating that wholesale and retail prices did not move in a

fixed relation in the post-conspiracy period). Thus we can-

not say with certainty that the wholesale overcharges did

not injure the Crown dealers. We know that absent a con-

spiracy Crown’s wholesale prices would have been lower.

We do not know what the dealers would have charged at

retail. If, in fact, a conspiracy-imposed increase in retail

prices did not significantly reduce sales, it would not have

been surprising if the dealers had “found” those advan-

tageous prices in a free market. Thus Crown’s pass-on argu-

ment runs afoul of the specific teaching of Hanover Shoe:

“Byven if it could be shown that the buyer raised his price

in response to, and in the amount of, the overcharge and

that his margin of profit and total sales had not declined,

there would remain the nearly insuperable difficult of dem-

onstrating that the particular plaintiff could not or would

not have raised his prices absent the overcharge or main-

tained the higher price had the overcharge been discon-

tinued. ... [E]stablishing the applicability of the passing-

on defense would require a convincing showing of each of

these virtually unascertainable figures.” Hanover Shoe, Inc.

30a

v. United Shoe Mach. Corp., 392 U.S. 481, 493, 88 S.Ct.

2224, 2231, 20 L.Ed.2d 1231 (1968).*

B.

Dr. Christ undertook to compute what he called “vertical

damages” by examining the dealers’ gross profit margins

on a daily basis during the post-conspiracy period begin-

ning April 3, 1973 and ending August 24, 1973. He compared

these with the “theoretical” gross profit margins which, he

says, would have prevailed if the conspiracy had remained

in operation during that period of almost five months. He

assumed that, if the conspiracy had continued until August

24, 1973, the wholesale prices charges would have been

. There is another reason for not applying the cost-plus contract

exception. In Hanover Shoe, the court recognized that the pass-on

defense might sometimes apply ‘‘—for instance, when an over-

charged buyer has a pre-existing ‘cost-plus’ contract.’’ 392 U.S

at 494, 88 S.Ct. at 2232. After Hanover Shoe, some courts opted

for a broad reading of this directive, applying the cost-plus con-

tract exception to similar arrangements. See Obron, supra; State

of Vest Virginia v. Chas. Pfizer & Co., 440 F.2d 1079 (1971). In

Illinois Brick Co. v. Illinois, 431 U.S, 720, 97 S.Ct. 2601. 52 L.Ed

2d 707 (1977 ), however, the Court seemingly read Hanover Shoe

as extending the exception only to rare situations in which the

middleman had a pre-existing cost-plus contract with his buyer

defining the amount to be purchased. ‘‘In such a situation the

purchaser is insulated from any decrease in its sales as a result

of attempting to pass-on the overcharge, because its customer is

committed to buying a fixed quantity regardless of price. The effect

of the overcharge is essentially determined in advance, without

reference to the interaction of supply and deimand.”’ Id. at 736

97 S.Ct. at 2070. In light of this restrictive rationale the cost-plus

exception ought not to be applied here. See Mid-West Paper Prods

ae igre Group, Inc., 596 F.2d 573 (8d Cir., 1979).

ere, 0 viously the Crown dealers had no -existi

contracts with motorists. Indeed, there was “sae

The ‘‘cost-plus’’ arrangement arose solely out of Crown’s price-

fixing policies. No dealer was ‘‘i

> . insulated from any d in i

sales’? when Crown raised retail prices. sis tat

3la

those actually charged during the period beginning April

3, 1973. He then computed a theoretical retail price on the

- basis of the relationship between wholesale and retail prices

during the conspiracy period.’ He found that the dealer’s

actual gross profit margins during the post-conspiracy pe-

riod were slightly higher than what they would have been

if his assumptions about prices were valid. This difference

he converted to a post-conspiracy per-gallon gain which he

then applied as a multiplier to all of the gallonage sold

during the five-year conspiracy period.

The computation is seriously flawed. There is no basis

for an assumption that wholesale prices during the post-

conspiracy period were exactly what they would have been

if the conspiracy had continued in effect. The district court

found that the operation of the conspiracy resulted in

higher wholesale prices than would have prevailed without

the conspiracy. The court based a very substantial damage

award upon the basis of the finding that the wholesale

charges were excessive. There is no reason to suppose that,

after removal of the leverage provided by the horizontal

conspiracy, Crown maintained the economic power to main-

tain its wholesale prices at levels above competitive prices.

Actual price figures establish that in the post-conspiracy

period wholesale prices did not move with retail prices.

The explanation which most readily suggests itself is that

Crown no longer possessed the power to exact excessive

charges to the extent that it had during the period of the

censpiracy.

Moreover, while the testimony showed that during the

conspiracy period wholesale and retail prices moved in a

predetermined relationship, the control was the retail price,

not the wholesale price. On the three-to-one basis, if retail

’ Christ did not explain what he did in this way. He simply

identified ‘‘theoretical margins’’ at the various actual wholesale

prices. Of course, one can compute the hypothetical retail price

by simply adding the actual wholesale price to the theoretical

margin. In effect, this is all Christ did.

32a

prices moved up or down, the wholesale prices were ad-

justed. There is nothing in the record to suggest that inde-

pendent movement of wholesale prices would have been

similarly reflected in a movement of retail prices. Thus,

Christ’s attempt to hypothesize retail prices based on

wholesale price movements is without foundation.

The most serious flaw in the use of the computation, how-

ever, was the demonstrable falsity in its assumption that

the conspiracy had exerted a general depressing effect upon

retail prices during the five-year period of the conspiracy.

Clearly, this was Christ’s assumption, for in five months’

worth of post-conspiracy margin comparisons, there is not

a single instance in which an hypothesized retail price ex-

ceeded the actual retail price.

The whole thrust of the plaintiffs’ proof and the district

court’s findings was that Crown’s price fixing kept retail

prices up. Dr. Christ testified that the price fixing raised the

retail price level, and the district court found that he had

convincingly shown that without Crown’s illegal restraints

the retail price for gasoline would have been lower. Indeed,

this was the basic premise upon which horizontal damages

were awarded, since it was assumed that, without the con-

spiracy, retail prices charged by these plaintiffs would have

been comparable to those charged by Station P57. The

lowest price was posited to be a competitive retail price.

Horizontal damages were awarded as a direct function of

the extent to which the plaintiffs’ prices exceeded the lower

price. Nctably, the plaintiffs’ prices were never lower.

Crown is one of the minor distributors of gasoline. Its

retail outlets, as those of other minor distributors, attract

customers from the retail outlets of the major distributors

by offering gasoline at somewhat lower prices. Before the

conspiracy period, however, competition between the minors

had resulted in price wars during which the differential

between prices charged by the majors and the minors would

33a

widen to the point that the major distributors would put

into effect retaliatory price cuts, thus lowering the ceiling

to which the prices charged by dealers for the products of

the minors could rise. The whole purpose of the conspiracy

was to put an end to that kind of competitive effect. As long

as the conspiracy was in operation, the endeavor of the

conspirators was to maintain retail prices for their products

at a level sufficiently below the retail price of the products

of the major distributors to attract customers, but not so

low as to affect the retail pricing of the products of the

major distributors. Thus, the whole purpose of the con-

spiracy was to maintain retail prices above competitve

levels.

The district court did find that on two occasions Crown

vetoed retail price increases proposed by its dealers. If they

suffered losses on that account, it is possible that they

might be recoverable, but clearly the effects of these occur-

rences were transitory. Clearly, Christ has not attempted to

measure any transitory effect of the restraints that Crown

placed upon retail price increases, for he applied the multi-

plier to all of the gallons of gasoline sold throughout the

entire period of the conspiracy, including gallons sold at

inflated prices. Oddly, he did not seem to recognize that he

was contradicting himself and the basis upon which horizon-

tal damages were sought.

Clearly, comparisons of the dealers’ actual gross profit

margins during the post-conspiracy period with an entirely

theoretical profit margin based upon competitive wholesale

prices cannot be used to compensate any possible loss of

sales during the conspiracy period. Dr. Christ himself testi-

fied that the actual gallonage sold was a reasonable approx-

imation of what would have been sold in the absence of a

conspiracy. If any such loss of sales because of the mainte-

nance of higher retail prices had been suspected, it surely

could not be measured by any data extrapolated from the

post-conspiracy experience. Nor can damages be awarded

34a

on the basis of any such data with its essential inference

that during the conspiracy period there had been a general

depression, rather than a general inflation, of retail prices.

The wholly inconsistent awards of horizontal and vertical

damages under these circumstances cannot stand.

IX. Attorneys’ Fees

There was an award of $200,000 as attorneys’ fees for

the plaintiffs. The amount of the damage award in the dis-

trict court was a highly relevant consideration in fixing the

amount of the attorneys’ fees. Since we have determined

that plaintiffs are not entitled to recover any part of the

damages awarded to them by the district court as “Vertical

Damages” and “Motor Oil Damages,” this reduction in the

damage award requires that there be an appropriate re-

duction in the amount allowed for attorneys’ fees. Appro-

priate for consideration, too, is the fact that plaintiffs, their

lawyers, and their expert, Dr. Christ, complicated the com-

putation of damages by confusing injections of inconsistent

premises and assumptions. The district court is, therefore,

directed to make redetermination of the amount that should

be awarded as attorneys’ fees on the basis of these addi-

tional considerations.

X. Conclusion

The judgment is affirmed in part and reversed in part

and the case remanded for further proceedings consistent

with this opinion.

Winener, Circuit Judge, concurring and dissenting :

While I concur with the substantive holdings of the panel

in this complicated case, I respectfully dissent on the issue

of whether the district court properly conducted the remand

hearing. I simply do not feel that the trial court complied

with our remand order requiring “a full hearing” to deter-

35a

mine the true extent of Tumminello’s perjury, and an “ex-

amination thereafter of the findings, conclusions, and in-

junction.” 556 F.2d 702, 705 (4th Cir. 1977).

On remand, the district court heard Tumminello testify

as to the extent of his perjury, and held that the remainder

of his testimony should be credited. In so doing, the district

court credited Tumminello’s testimony over the testimony

of several Crown officials, including James C. Blackman,

who had testified only by deposition at the trial. The de-

fendant requested, among other things, that Blackman be

allowed to testify in person at the remand hearing, but the

district court denied this request. I believe the denial of

this request was error. The court credited an admitted per-

jurer who admitted to the manufacture of false evidence in

this very case over a Crown witness without ever viewing

the demeanor of the latter. Of course, issues of credibility

are often peculiarly within the province of the trier of fact

and normally are within the scope of only limited appellate

review. However, this rule has as its principal rational

foundation the opportunity of the trier of fact to view the

live testimony of both witnesses and then credit one over

the other. It is the opportunity to hear the witness testify

and observe his manner and demeanor on he stand which

places the district court in a better position to judge credi-

bility than that of an appellate court which must rely on a

cold paper record.

In the case at bar, the district court credited live testi-

mony over evidence taken by deposition, but the live testi-

mony was from a witness whose admitted perjury with re-

spect to certain parts of his testimony was the reason the

case was remanded in the first place. I believe the district

court was obliged to hear the live testimony of Blackman

before making a credibility determination. It may be that

after so doing the district court would yet have credited

Tumminello, or it may be that even if Tumminello’s testi-

mony had not been credited the other evidence in the case

36a

might support a plaintiff’s judgment. But the district court

did not in terms base its holding on the sufficiency of evi-

dence other than Tumminello’s to support its finding, and,

since it refused to hear Blackman, I would remand the case

once again, this time for a new trial, and would give the

defendant the opportunity to request trial by jury were it

so advised.

37a

APPENDIX B

Unitep States Court or APPEALS

For THE FourtH Circuit

No. 77-1780

No. 78-1078

Joun T. Puruips, Jr., Corrapo Frank TuMMINELLO,

Cares Puiu FReirac AND CARROLL CHARLES MyYERs,

Plaintiff s-A ppellees,

versv'3

Crown CENTRAL PETROLEUM CoRPORATION,

Defendant-A ppellant.

Order

Filed August 27, 1979

Upon consideration of the petition for rehearing and the

suggestion of rehearing en banc, and there having been no

request for a poll of the court on the suggestion of rehearing

en banc,

Ir Is Now Onverep that the petition for rehearing be, and

it hereby is, denied,

With the concurrence of Judge Cowen.

Judge Widener would grant rehearing.

/s/ Cusment F’, Haynsworts, JR.

Chief Judge, Fourth Circuit

August 24, 1979

38a

APPENDIX C

Unirep States District Court,

D. Marytanp

Civ. Nos. 73-303-H, 73-304-H, 73-504-H and 73-506-H.

Joun T. Puriups, Jr., Plaintiff,

v.

Crown CentTraL PETROLEUM Corporation, Defendant.

Corrapo Frank TuMMINELLO, Plaintiff,

We

Crown Centra, PetroLEuM Corporation, Defendant.

Cuartes Purtup Frerraa, Plaintiff,

v.

Crown Cen

TRAL PeTRoLEuM Corporation, Defendant.

CARROLL CHARLES Myers, Plaintiff,

v.

Crown Centrat PetroLeum Corporation, Defendant.

May 20, 1975.

ALEXANDER Harvey, II, District Judge:

These consolidated cases involve various antitrust claims

asserted by four independent gasoline service station deal-

ers against their supplier-landlord. Each of the four plain-

tiffs operates in the Baltimore metropolitan area a filling

station leased from his supplier, defendant Crown Central

Petroleum Corporation (hereinafter ‘*Crown’’). Each has

filed a separate action in this Court seeking treble dam-

ages, attorney’s fees, costs and injunctive relief under

39a

Section 1 of the Sherman Act and Sections 4 and 16 of the

Clayton Act, 15 U.S.C. §§1, 15 and 26.’

In language that is almost identical, the four complaints

allege an illegal horizontal conspiracy between Crown and

its competitors, an illegal vertical agreement between Crown

and each plaintiff and an illegal tying agreement between

Crown and each plaintiff. Specifically, it is alleged (1)

that in recent years Crown has unlawfully combined and

conspired with certain competitors to raise, fix, stabilize

and maintain wholesale and retail gasoline prices in the

Baltimore metropolitan area; (2) that since plaintiffs have

been lessees of their stations, Crown has unlawfully fixed

and determined the retail prices for the sale by plaintiffs

of gas and oil; (3) that Crown has unlawfully required

plaintiffs to purchase motor oils from it; and (4) that

Crown has unlawfully restricted plaintiffs as to types of

other products sold at their stations through vending ma-

chines or otherwise and as to the sources from which

such other products could be purchased.

After each suit was filed, Crown notified each plaintiff

that his lease would not be renewed.’ Plaintiffs thereupon

filed a combined motion for a preliminary injunction under

§ 16 of the Clayton Act, 15 U.S.C. §26, seeking to enjoin

Crown from terminating or not renewing their leases,

pending the final determination of these actions. Follow-

ing extensive discovery, a hearing was held on such motion,

and this Court ruled that a preliminary injunction should

be entered to prevent irreparable harm to plaintiffs and

1 Represented by the same attorneys, two of the plaintiffs filed

suit in April 1973, and the other two filed suit in May 1973. All

four cases were consolidated for all purposes, including trial, pur-

suant to Rule 42(a), F.R.Civ.P.

' 2 Ag noted hereinafter, a new lease was tendered to plaintiff

Myers and actually signed by him, subject to certain conditions.

Crown refused to accept such conditions, and Myers’ lease, like

the others, was not renewed.

40a

to maintain the status quo during the pendency of this

litigation. Phillips v. Crown Central Petroleum Corpora-

tion, 376 F.Supp. 1250 (D.Md.1973). Under the terms of

this Court’s preliminary injunction of September 20, 1973,

plaintiffs have continued to operate their service stations

subject to the provisions of Crown’s current Lease and

Dealer Agreement, under which all of Crown’s dealers in

Maryland now operate their stations. |

Many of the background facts involved in this litigation

are set forth in this Court’s previous Opinion, which is

reported at 376 F.Supp. 1250-1258. However, the only issue

involved there was plaintiffs’ right to a preliminary in-

junction and the only claims considered were that plaintiffs

were not being renewed because they had refused to comply

with illegal directives from Crown to fix their retail prices

of gas and oil and because they had insisted on their right

to sell products other than those designated by Crown.

Because of the urgent necessity that plaintiffs’ right

to continue as dealers during the pendency of the litigation

be determined at the earliest possible date, the motion

was decided without an evidentiary hearing and on the

affidavits, exhibits and deposition filed by the parties.

In its Opinion, this Court noted that there were numerous

conflicts between affidavits submitted by the plaintiffs and

those filed on behalf of Crown. 376 F.Supp. at 1254. Find-

ings were made on the basis of the record then before the

Court, and the right was reserved to the parties to relitigate

fully at trial all the factual issues. As a result of such

findings, this Court concluded that plaintiffs at trial would

probably be able to establish that their leases were not

renewed because they had objected to illegal coercive pres-

sures brought by defendant against each of them. 376 F.

Supp. at 1256.

Following extensive additional discovery and pre-trial

proceedings, these consolidated cases were tried by this

4la

Court sitting without a jury.* With the agreement of the

parties, the Court ordered a bifurcated trial, with all issues

of liability being tried first and all issues of remedy Te-

served for a later trial if this Court were to find liability.

The trial lasted some four weeks. The numerous wit-

nesses included, of course, the plaintiffs themselves and

various officers and representatives of Crown. The testi-

mony was sharply conflicting as to most factual issues.

Proposed findings of fact were filed by the parties before

the trial and supplementary proposed findings after the

trial. In making the detailed findings of fact set forth

hereinafter, this Court has generally credited the testimony

of the plaintiffs and the witnesses called on their behalf

and has therefore accepted many more of plaintiffs’ pro-

posed findings than defendant’s.* The accounts given by the

plaintiffs of their dealings with Crown are corroborated

by other evidence in the case and in particular by the testi-

mony of witnesses who had no particular stake in the out-

come of this litigation.» Throughout the lengthy trial,

various non-party witnesses called by plaintiffs generally

gave a description of Crown’s operating methods and rela-

tions with its dealers and competitors which was similar

to that given by the plaintiffs in their testimony.

’ Plaintiffs had originally requested a jury but thereafter waived

their right to a jury trial.

*Some proposed findings of both plaintiffs and defendant were

rejected by the Court because they were not supported by the

credible evidence. Others were not accepted because they were not

pertinent to a resolution of the legal issues presented or because

they were duplicative of other findings.

5 Included among these were the witnesses Knox, O’Hara, Kling,

Horner and Mech.

42a

ISSUES

It is agreed that the following iss

ues are

the Court in this case: ‘i pees i

1. Did Crown violate the er'’.ust laws b ing i

horizontal price-fixing? y engaging in

2. Did Crown violate the antitrust 1 ing i

aws b

vertical price-fixing? eet becncsn sea

3. Did Crown violate the antitrust laws by imposing

unreasonable restraints on the plaintiffs as to their free-

dom to purchase and sell motor oils, antifreeze vending

machine items and other products?

4. If the antitrust laws were violated in one or more

of these respects, did such violation cause Crown not to

renew the leases of plaintiffs or did the plaintiffs suffer

other injury as a result of such violation?

FINDINGS OF FACT

(a) General Findings

3. Crown Central Petroleum Corporation is a Maryland

corporation with its principal office in Baltimore Mary-

land. Crown operates a refinery located in Houston Texas

and markets gasoline through service stations trading

under the Crown name located in fourteen Eastern and

Gulf Coast states. In 1972 and 1973, Crown’s gross reve-

nues were $183 million and $213 million respectively, while

net profits after taxes were $1.3 million and $8.4 million

respectively. For the six months ended June 30 1974

revenues increased 2.2 fold, year to year. :

2. Crown is generally referred to in the etrol i

dustry as an ‘‘independent”’ gasoline aneanie as bay

oil companies, including Ashland Oil Company, Hess Oil

Company, Petroleum Marketing Corporation (PMC)

Meadville Corporation and Hudson Oil Company. PMC

43a

operates the ‘‘Scot’’ stations and Meadville operates the

‘‘Saveway”’ stations. Gasoline sold at service stations sup-

plied by the independents is generally sold at prices lower

than the prices charged at service stations supplied by

the ‘‘Major’’ oil companies, including Exxon, American

Oil, Gulf and Citgo.

3. In 1968, Crown altered its method of marketing gaso-

line in the Maryland market. At this time, Crown began to

sell its gasoline through the so-called ‘‘multipump’’ mar-

keting concept. This involved the sale of gasoline and motor

oil at discount prices in modern, well-lighted, clean and

uncluttered service stations featuring fast, efficient service

by neatly-groomed attendants. Before 1968, Crown had it-

self owned and operated its service stations in the Balti-

more area. In changing its method of operation, Crown

felt that an independent dealer would be better able than

a company employee to maintain supervisory control over

the station’s attendants and facility and that this would

serve to enhance Crown’s image of clean appearance and

fast service. Through its multipump outlets, Crown has

continually increased its share of the Maryland gasoline

market. In 1968, Crown’s total sales of gasoline in Mary-

land amounted to less than 2% of the market. For the year

1972, it had raised its share to 4%.

4. By 1973, in the Maryland market, Crown was the

largest of the independent gasoline marketers and its 5%

share of gallonage sales was the fifth largest market share

of all gasoline marketers, including the ‘‘major’’ oil com-

panies. By that date, it was surpassed, insofar as its share

of the market was concerned, only by Exxon, American

Oil, Shell and Gulf.

5. The independent dealers would lease their stations

from Crown, purchase petroleum products from Crown

and hire and maintain their own attendants.

44a

6. Hach Crown dealer would execute a lease, a dealer

contract and an Equipment Loan Agreement. Prior to 1973,

each of these instruments was for terms of one year and

renewed itself for successive one-year terms, if not termi-

mated. The contracts and leases were cancellable on five

days’ notice.

7. Since July 1, 1973, when the Maryland Gasoline Prod-

uct Marketing Act went into effect, Crown and its dealers,

other than plaintiffs, have entered into new contracts with

terms ranging up to three years.

8. Crown has found that its dealers have, for the most

part, maintained clean, attractive stations and provided

fast, efficient service. Sales at Crown’s multipump stations

have continued to grow under dealer operation, with the

result that Crown’s sales, profits and share of the Mary-

land market have increased. At the same time, such opera-

tion of multipump stations has proved to be profitable for

the dealers.

9. Each plaintiff is an independent Crown service station

dealer and has operated his Crown service station pursuant

to leases and contracts with Crown. Plaintiff Phillips op-

erated a Crown service station located at Garrison and

Wabash Avenues in Baltimore City during the period De-

cember 21, 1970 until January 1971. Since January 25

1971, Phillips has operated the Crown service station le:

cated at Ritchie Highway and Old Annapolis Road. Plain-

tiff Tumminello has operated the Crown service station lo-

cated at 5838 Belair Road since March 1969. During the

period 1964 until March 1969, Tumminello was employed

by Crown first as a Sales Representative and then as a

Sales Supervisor. Plaintiff Freitag has operated the Crown

service station located at Harford Road and Northern

Parkway since November 25, 1970. Plaintiff Myers has

operated the Crown service station located at Quarterfield

and Old Stage Roads since August 18, 1970.

45a

10. Each plaintiff originally operated under a renewable

one-year lease and contract. Plaintiff Phillips was offered

and accepted a six-month lease and contract in December

1972. He filed his suit in this Court on April 3, 1973. He

was notified on May 11, 1973 that his lease and contract

would be allowed to expire. Plaintiff Tumminello was of-

fered and accepted a six-month lease and contract in Feb-

ruary 1973. He filed his suit in this Court*on April 3, 1973.

He was notified on May 11, 1973 that his lease and contract

would be allowed to expire. Plaintiff Freitag filed his suit

in this Court on May 18, 1973. By letter dated August 2,

1973, Freitag was notified by Crown that it would not

enter into a new lease and contract with him upon the

expiration of his present lease and contract on November

25, 1973. The lease and contract of plaintiff Myers were

successively renewed for one-year terms in August 1971

and August 1972.

11. After he filed suit on May 18, 1973, plaintiff Myers

was offered a Branded Service Station Lease and Dealer

Agreement by Crown of the type under which all present

Maryland Crown dealers now operate. Myers executed the

Lease and returned it to Crown. However, because he

believed certain provisions of the lease were illegal, he

reserved the right to challenge in this suit the legality of

the new lease. For this reason, Crown refused to accept the

Lease and Agreement which had been signed by Myers.

12. During the time that plaintiffs have operated their

Crown service stations, each plaintiff has devoted sub-

stantial efforts and has invested substantial amounts of

time and money to promote the sale of gasoline, motor oils

and other products at his station. As a result of the efforts

of each plaintiff, each has substantially improved the gal-

lonage sales at his service station. Plaintiffs Tumminello

and Freitag have received awards and commendations for

the attractive appearance of their stations. Gasoline sales

at both Freitag’s and Phillips’ service stations have been

46a

above the average of all Crown dealers in the Baltimore

market, and Tumminello’s sales have been only slightly

below those of the average Crown dealer. Myers’ sales

have also been satisfactory.

13. Plaintiffs’ satisfactory performance as Crown service

station dealers has previously been recognized by Crown.

(b) Findings Concerning H orizontal Price-Fiaing

‘14. Beginning at least as ealry as 1968, Crown has com-

bined with competing independent suppliers, including,

among others, PMC, Hess, Ashland and Meadville, to arti-

ficially maintain retail gasoline prices in the Baltimore

metropolitan area. Crown has conspired with the above-

named suppliers, among others, in the Baltimore metro-

politan area, both to eliminate retail price disturbances

which threatened to become major price wars, and to initi-

ate joint retail price increases.

15. On the morning of January 26, 1972, Crown District

Manager Jack Conway and Crown Sales Representative

Michael Corbett visited Crown dealer John Gibson at his

service station located at 2650 Patapsco Avenue and dis-

cussed with him low retail prices charged by a competing

Scot station operated by PMC located at Patapsco Avenue

and Potee Street. Conway made a long distance telephone

call from Gibson’s service statinn and dialed 202-223-5440

the telephone number of PMC. Conway identified to PMC

Retail Sales Manager and Vice President Henry Wain.

wright the competing Scot service station and complained

that it was posting a low retail price. Later that same day

PMC increased the retail price charged at the Scot service

station which was then competing with Gibson’s Crown

station. On other occasions, Conway contacted a repre-

sentative of PMC for the purpose of effecting joint retail

price increases.

16. Similarly, PMC initiated telephone communications

with Crown in order to effectuate joint retail price in-

’

47a

creases at competing Crown and PMC supplied Scot service

stations. Joseph Gilboy, Crown District Manager, received

repeated requests from representatives of PMC, including

Wainwright, to increase vetail prices charged at Crown

service stations.

17. On various occasions, Gilboy received telephone calls

from representatives of PMC informing him that PMC

was going to institute retail gasoline price changes at par-

ticular Scot stations. On these occasions, Gilboy was given

advance notice of future retail price moves by Scot stations,

before these price changes were made known to the public.

18. Since 1970, Wilbur G. Pressler, Crown’s Manager

of Administration, Marketing Department, has repeatedly

communicated by telephone with represcntatives of other

independent suppliers, including Irving Grossman of Hess,

Joe Davis of Ashland and Joseph Jerome of Meadville,

in order to eliminate retail price disturbances within the

Baltimore market. Pressler repeatedly telephoned Irving

Grossman, who handled the pricing for Hess in Baltimore,

to complain about Hess branded service stations which

posted lower retail prices in the Baltimore metropolitan

area than competing Crown stations. On one occasion,

when Grossman attempted to justify a low retail price

charged by a Hess service station located on Ritchie High-

way by identifying a competing Peco independent service

station which was also charging the same price, Pressler

told Grossman that the actions of the Peco service station

did not justify Hess’ low retail price and that Grossman

was really reaching out for a reason for a lower price.

In the Patapsco Avenue area, a Crown station competed

with stations of Midway, Hess and Ashland. Retail prices

had been stabilized in that area shortly before January

1973, when the price structure was endangered by a double

‘stamp promotion at the Saveway service station. The Ash-

land-supplied Bi-Lo service station in the area retaliated

by lowering its retail price. Other independent gasoline

48a

marketers, including Crown and Hess, were well aware of

the importance of ending the price war on Patapsco Ave-

nue. They feared that major oil companies which supplied

Stations located in the Patapsco Avenue area would react

to the price disturbance by instituting voluntary allow-

ances to their service stations which were losing volume

to the discounting independents. If the major oil companies

granted such voluntary allowances, such allowances would

be in effect over a much larger portion of the Baltimore

area and would depress retail prices charged at inde-

pendent service stations throughout the broad geographic

area of the Baltimore market. Crown Vice President Jack

Loving instructed Wilbur Pressler, Crown’s Manager of

Administration, Marketing Department, to telephone Ash-

land’s Vice President Joe Davis, to complain that the Bi-Lo

service station was charging low retail prices and thereby

threatening the stabilization of retail prices in the Patapsco

area, Davis told Pressler that the price reduction at the

Bi-Lo station was occasioned by Saveway’s glasses or

stamp promotion at its Patapsco Avenue station. Pressler

also related Crown’s complaint concerning Saveway’s pro-

motion to Joseph Jerome, Vice President of Meadville

by telephoning Jerome at his office in New J ersey. Pressler

told Jerome that he had just spoken with Ashland and

further informed him of Ashland’s claim that Saveway

had precipitated the price disturbance by its promotion at

its Patapsco Avenue service station. Pressler felt that a

continuation of the price cutting would hurt the entire

market, and his intent in making these calls was to eliminate

the price competition in the area of western Baltimore.

19. A dealer-operated Crown service station is located

near the intersection of York Road and Padonia Road in

Timonium, Maryland. This station competed with nearby

Hess, Phillips and Scot service stations. Sometime in

1971, in an effort to stabilize retail prices in the area which

was then experiencing a price war, some one from Crown’s

marketing department telephoned the office of Phillips

49a

Petroleum in Maplewood, New Jersey for the purpose of

causing the competing Phillips station to raise its retail

prices. However, Crown was unable to induce Phillips

Petroleum to participate in curing this price depression.

It was reported to Crown’s Vice President of Sales, J. 1.

Loving, that the telephone call to Phillips had yielded:

‘‘No action. No results. No action.’’

20. From April 1969 until August 1971, Howard E. Knox

was Administrative Aide and Secretary to Theodore Fer-

guson and Henry Wainwright, officers of PMC. Through-

out the term of Knox’s employment, PMC engaged in

constant communication with its competitors, including

Crown, Saveway and others, for the purpose of fixing retail

gasoline prices. On orders from Wainwright and Ferguson,

Knox personally spoke with Crown District Managers

Joseph Gilboy and John Conway. During these conversa-

tions, Knox would tell Gilboy and Conway that PMC in-

tended to either raise or lower its prices at a given time

and date and in a certain distributing area. Knox would

ask if Gilboy or Conway would agree to go along with

PMC on its price rise or decrease, as the case might be.

In each case that Knox could recall, either Gilboy or Con-

way called back and told Knox that they agreed. Knox

had similar discussions with Mort Sands of Meadville

and with representatives of other competing companies,

in which he would advise these competitors of an impend-

ing Scot price change and would receive assurances that

their competing service stations would institute similar

price changes. Knox was also instructed to place telephone

ealls for his superiors. Although Knox did not participate

in these conversations, their substance was the same as

the calls described as having been made by Knox himself.

Because his desk was located close to Ferguson’s, Knox

was able to frequently overhear Ferguson’s conversation

with competing gasoline suppliers.

21. While Henry Wainwright was Retail Sales Manager

and Vice President of retail marketing for PMC from 1970

50a

to date, he had repeated telephone conversations with rep-

resentatives of Meadville, Hess and Crown for the purpose

of discussing retail prices throughout PMC’s marketing

area.

22. Since at least as early as 1964 and continuing through

1973, independent gasoline suppliers in the Maryland mar-

keting area have used an industry organization, the Society

of Independent Gasoline Marketers of America (SIGMA),

as a vehicle to fix and stabilize retail prices charged at inde-

pendent service stations. SIGMA executives repeatedly

telephoned representatives of Crown, PMC and Hess to

inform them that certain competing oil companies intended

to increase retail prices by a certain amount at a certain

time. Pressler of Crown received telephone calls from.

SIGMA executives Howard Teak and Richard Reynolds,

during which they gave him advance notice that particular

competitors intended to effectuate price changes. Following

such a communication, Crown would increase the retail

prices charged at service stations which it supplied.

23. In addition to coordinating retail gasoline price in-

creases among the independent gasoline marketers, includ-

ing Crown, SIGMA was also utilized to cure smaller pockets

of depressed retail pricing. Irving Grossman of Hess uti-

lized SIGMA as an intermediary to complain to his com-

petitors concerning low retail prices which they charged

at their service stations. On one occasion, Howard Teak at

SIGMA relayed to Mary and Robert Hudson, principals

of Hudson Oil Company, at Grossman’s request, his com-

plaint that Hudson wanted to destroy local markets by

discount pricing. Unlike Crown, PMO, Hess and other in-

dependent gasoline marketers in the Maryland area, Hud-

son refused to participate in efforts of its competitors to

cure retail price disturbances, but instead avoided, on most

occasions, discussions wits SIGMA and its competitors.

24. Beginning at least as early as the spring of 1969

and continuing until at least as late as the summer of 1971,

Sla

Ferguson ¢nd Knox of PMC received various telephone

calls from Teak. On occasion, Teak would inform Knox

that the major oil companies were ‘‘going up’’ by one or

two cents within one or two days. Upon being informed

of SIGMA’s message, Ferguson would instruct Knox to

increase the retail prices charged by PMC’s Scot branded

service stations by a like amount. In addition, Ferguson

would either instruct Knox to telephone the other inde-

pendent suppliers or would himself telephone them, so

that they might increase the retail prices charged at the

service stations which they supplied by a like amount at

the same time. Among the individuals so contacted by Fer-

guson or Knox were representatives of Crown, Meadville,

Hess and others.

25. During his employment with Crown from 1964 until

1969, plaintiff Tumminello learned that Crown had agree-

ments with other oil companies through which Crown could

effectuate joint retail price increases within the Baltimore

market. Gilboy informed Tumminello that he had succeeded

in increasing retail prices charged by a competitive Field

service station in York, Pennsylvania. On several occasions,

Crown District Manager Clark Corcorai instructed Tum-

minello to observe a Scot station on York Road in Balti-

more to confirm an increase in its retail prices which would

occur at 3:00 P.M. on that afternoon. On each occasion,

Tumminello reported to Corcoran that the Scot service

station had increased its price as Corcoran had said it

would. On occasion, Corcoran assigned Tumminello to

observe price changes at a Saveway service station located

on Pulaski Highway. In each instance, Tumminello con-

firmed to Corcoran that the Saveway station had actually

changed its retail price as predicted.

26. On November 24, 1970, after becoming an independ-

ent dealer, Tumminello was telephoned by Crown office

manager Chris Blackman, who instructed him to increase

the retail price which he charged for gasoline by one cent

52a

per gallon. Blackman told Tumminello that an agreement

had been reached among Crown, PMC, Hess and others

to increase the retail gasoline price in Tumminello’s mar-

keting area by one cent per gallon at 3:00 P.M. that after-

noon. Tumminello telephoned plaintiff Freitag, who at that

time managed the company-operated Harford Road Crown

service station. Freitag informed Tumminello that he had

been instructed by Conway to increase the retail prices

charged by the Harford Road Crown station at 3:00 P.M.

27. On at least one occasion, Margaret E. Kling, who

was the independent operator of the Crown service station

in York, Pennsylvania, from mid-1970 until early 1972, was

instructed by Crown representative Donald Head to in-

crease her retail gasoline prices. When Mrs. Kling objected

to this increase, Head assured her that competing inde-

pendent gasoline service stations in the area would be sim-

ilarly increasing their prices.

28. On other occasions throughout the period during

which Tumminello has been a Crown dealer, he has been

instructed by Crown representatives that he must increase

the retail prices charged at his service station to effectuate

agreements reached among Crown and other independent

suppliers. In February 1973, Blackman telephoned Tum-

minello and ordered him to increase his retail gasoline

price because an arrangement had been made with com-

petitors for a joint retail price increase. In August 1972,

while Tumminello was vacationing in Wildwood, New

Jersey, Head instructed Tumminello’s attendant, Allen

Mech, to increase the retail gasoline prices charged [at]

Tumminello’s service station. Mech protested that he could

not increase retail prices without Tumminello’s permission

and later that day telephoned Tumminello in Wildwood,

New Jersey, to report Head’s instruction. Tumminello in-

structed Mech not to change the retail prices until he re-

turned. The next day, Tumminello learned from Mech that

Head had returned to the station and physically changed

53a

the retail prices posted at Tumminello’s station. When

Tumminello telephoned Blackman to complain concerning

the price increases, Blackman informed him that various

competitors had agreed with Crown to increase the retail

price of gasoline, and that the price increase had been in

accordance with that agreement.

29. From 1964 until 1973, Irving R. Grossman was mar-

keting coordinator for Hess and was responsible for its

pric.ng throughout Hess’ marketing area. Throughout that

period, Grossman repeatedly received telephone calls from

representatives of various independent suppliers, including

Pressler and Garrison of Crown, Ferguson and Curlett

of PMC, Mort Sands and Joseph Jerome of Meadville,

and Gene Hays and Jack Allard of Ashland, among others,

concerning retail price disturbances. Typically, his callers,

including Pressler, Cahir and Garrison, would identify by

location particular Hess service stations which were posting

retail prices lower than ose charged by service stations

supplied by the caller’s company. The purpose of these

repeated telephone conversations between Crown and Hess

was to minimize price competition between Crown and its

competitors. Grossman knew that information was being

supplied to him by Crown and other competitors so that

Hess would not act unilaterally to lower its retail prices.

Grossman also received calls from representatives of Crown

and other competitors, informing him in advance of retail

price increases which would occur at a specific time. Such

increases might relate to service stations which were iden-

tified or to broader geographic areas in and around Balti-

more.

30. Throughout the period 1964 until 1973, Grossman

repeatedly received telephone calls from representatives

of SIGMA, including Teak, Teak’s successor, Cavin, and

Teak’s assistant, Reynolds, concerning retail price in-

creases involving Crown and the other independent sup-

pliers in the Baltimore market. Grossman continued to

54a

receive telephone calls from Crown and other independent

suppliers and from SIGMA concerning retail price in-

creases until he ceased his employment with Hess in 1973.

31. Donald F. Sheneman has been Mid-Atlantic District

Manager for Petroleum Marketing Corporation since March

1972. Throughout that period, Sheneman repeatedly ini-

tiated and received telephone calls from representatives

of various competing independent suppliers, including Con-

way, Sterner and others of Crown, Brown of Bi-Lo, Gross-

man of Hess and Clayton of Meadville, for the purpose

of effecting retail price increases and to cure retail price

disturbances in the Maryland market. Sheneman had sim-

ilar conversations with Richard Reynolds of SIGMA.

32. Effectuation of its agreements with other independent

suppliers for joint retail price increases for the elimination

of pricing conditions which threatened to become major

price disturbances required that Crown control the prices

at which its dealers, including plaintiffs, sold gasoline at

retail to the public. Through such agreements and its policy

of fixing its dealers’ retail prices, Crown and such other

independent suppliers of gasoline have been largely suc-

cessful in maintaining retail gasoline prices charged by

independently supplied service stations at artificially main-

tained levels. Since as early as March 1970, Maryland has

been free of extensive price war conditions. Crown’s acts

have contributed to the artificial stabilization of the Mary-

land market. |

(c) Findings Concerning Vertical Price-Fixing

33. From the time of the inception of Crown’s dealer

operated multipump service station program, it has been

Crown’s intention to control the retail gasoline prices

charged by independent multipump service station op-

erators.

55a

34. Mr. J. I. Loving, Vice President of Sales of Crown,

transmitted a memorandum dated October 9, 1968 to Mr.

T. H. Cahir, one of Crown’s Regional Managers, which

outlined the various conditions and operating procedures

under which Crown’s independent multipump service sta-

tion dealers would operate. One of the conditions set forth

in the memorandum was that the retail gasoline prices

charged at the station in question would be at Crown’s

discretion.

35. The memorandum of October 9, 1968 provided in

pertinent part as follows:

‘‘Confirming our understanding with respect to the

above, it will be satisfactory to conclude an agreement

with Mr. Bell [a new Crown dealer] along the follow-

ing lines:

‘*(1) Gross gasoline margins of 4.75¢ and 5.25¢

housebrand and premium, respectively. Margins on

both grades to escalate up and down 14¢ per gallon

with each 1¢ on the pump (base posting = 29.9¢ and

33.9¢). This does not apply to postings increased due

to a tax increase. Minimum margin will be 3.75¢ and

4.25¢. Above understanding to be verbal. Pump post-

ings at Crown’s discretion.’’

36. Before becoming an independent Crown service sta-

tion dealer, plaintiff Tumminello was employed by Crown

as a Sales Representative, and subsequently as a Sales

Supervisor. During the period from late 1968 through early

1969, Tumminello was instructed by Crown to explain

Crown’s operating procedures to the new independent

Crown multipump dealers. Tumminello had seen a copy of

Loving’s memorandum of October 9, 1968. In accordance

with instructions from Crown, Tumminello explained to

new Crown multipump dealers Donald Bell and William

O’Hara that Crown alone would set the retail gasoline

prices charged at their respective service stations.

56a

37. On or about May 27, 1969, shortly before he com-

menced the operation of his station, independent Crown

service station dealer John G. Brenner met with Crown

Sales Representative George Bamford, and Bamford dis-

cussed with him the contents of Loving’s memorandum.

38. Crown’s method of computing the wholesale price

at which its independent dealers purchase gasoline from

it differs from the method employed by major gasoline

marketers. Major oil companies customarily charge their

dealers a predetermined wholesale price, commonly re-

ferred to in the industry as a ‘‘dealer tankwagon price.”’

When competitive conditions require that the wholesale

price to the dealer be lowered, the dealer is granted a

discount from the dealer tankwagon price, commonly re-

ferred to as a ‘‘voluntary allowance.’’ Crown, however,

determines the price which it charges its dealers for gaso-

line by deducting a predetermined margin from the actual

retail price to be posted by the dealer.

39. Crown’s marketing philosophy is based on the belief

that it is economically imperative that Crown dealers post

retail prices within approximately two cents of the retail

prices posted by Crown’s major brand competitors. It is

believed that if a Crown dealer were to post a retail price

lower than two cents below the major brand competition,

the majors might react by lowering their own prices to

meet this competition. In such event, other independent

competitors of Crown such as PMC, Hess and Meadville

might also react by lowering their prices as well, thus

precipitating a price war. If a dealer were to raise his

prices to a level above the accepted differential, his gal-

lonage sales, and thus Crown’s sales, might decrease.

40. In addition, Crown wished to control its dealer retail

pricing in order to implement the terms of agreements

made between Crown and other competiting gasoline mar-

keters to institute similar retail gasoline price increases

at designated times.

57a

41. Internal memoranda of Crown indicate that Crown,

on various occasions, required its independent dealers to

change their retail gasoline prices at times and by amounts

dictated by Crown.

42. Until mid-1973, when Crown revised the form of its

leases and dealer contracts, the written instruments under

which all independent Crown service station dealers leased

their stations from Crown contaired a five-day cancella-

tion clause. This clause provided that Crown could termi-

nate the dealer’s lease for any reason upon five days’

notice to the dealer.

43. Crown was well aware of the effect that the five-day

cancellation provision of its leases had upon its dealers

and used the cancellation provision to obtain compliance

with its pricing policies, including its requirement that

Crown alone determine dealer retail gasoline pricing.

44. During the time that plaintiff Tumminello has op-

erated his Crown service station, various Crown repre-

sentatives have instructed him to raise or to lower his

retail gasoline prices to specified levels at specified times.

Crown representatives, including Sales Representatives

Donald Head and Michael Corbett, and District Managers

Edward Gillespie, John Conway and Clark Corcoran, have

instructed Tumminello that he could not independently

raise or lower his retail gasoline prices without first ob-

taining permission from Crown. When he objected to

Crown’s retail pricing directives, Tumminello was threat-

ened with cancellation or non-renewal of his service station

lease. In addition, Tumminello was informed by Crown, at

the time of various retail price changes, that other com-

peting gasoline marketers had agreed with Crown to insti-

tute similar retail gasoline price changes at service stations

which they supplied.

45. In November 1970, Chris Blackman, Crown’s Re-

gional Office Manager, instructed plaintiff Tumminello to

58a

increase his retail gasoline prices by one cent at 3:00 P.M.

that day. Blackman told Tumminello that other competitors

had also agreed to raise their retail gasoline prices by

one cent at 3:00 P.M. However, plaintiff Tumminello did

not change his prices as he was instructed to do by Black-

man. Subsequently, Tumminello received a telephone call

from Crown District Manager Conway, who told him to

increase his retail prices in accordance with Crown’s in-

structions. Conway reiterated that arrangements had been

made with other oil companies to effect a uniform price

increase. The next day, Tumminello changed his retail gaso-

line prices as directed to do by Crown for fear of losing

his station.

46. In April 1971, plaintiff Tumminello decided to in-

dependently lower his retail gasoline prices, without a cor-

responding reduction in Crown’s wholesale price in order

to better compete with a nearby competing Esso service

station. This Esso service station had been posting retail

gasoline prices lower than those posted by Tumminello.

Shortly after Tumminello altered his prices, a Crown sales

representative visited his station and told him that he

could not lower his prices without Crown’s approval. After

such sales representative left his station, Tumminello re-

ceived a telephone call from District Manager Conway who

instructed him to raise his retail gasoline prices to their

previous level immediately or his lease would be cancelled

on five days’ notice. For fear of losing his station, Tum-

minello increased his prices tu their prior level at 3:00.

P.M. that day. The competing Esso service station con-

tinued to post retail gasoline prices lower than those posted

by Tumminello until at least September 1971, causing a

substantial loss of gasoline sales at his station.

47. On one occasion in 1972, a Crown sales representative

physically changed the prices posted on Tumminello’s gaso-

line pumps. In August 1972, while Tumminello was away

from his station, Crown Sales Representative Donald Head

59a

visited the station and told the shift manager, Allen Mech,

that the retail prices were going up and to contact plain-

tiff. Shortly thereafter, Mech telephoned Tumminello and

was told not to change the retail prices at that time. Later

that evening, Head returned to the station. Mech told Head

that Tumminello intended to wait until the next day to raise

his prices. Head instructed Mech that everyone was going

up and that the prices at Tumminello’s station were going

to be increased. Head then proceeded to change the pricing

mechanism in the gasoline pumps himself while Mech

changed the price sign.

48. On February 20, 1973, plaintiff Tumminello received

a telephone call from Blackman, who instructed him to raise

his retail gasoline prices by one cent because competitors

were going to institute similar price increases. Tumminello

then spoke to Crown District Manager Edward Gillespie,

who confirmed Blackman’s statement concerning the inten-

tions of competing gasoline marketers. However, Tummi-

nello did not change his prices in accordance with Crown’s

instructions at that time. Shortly thereafter, Sales Repre-

sentative Donald Head visited Tumminello’s station and

when told that the instruction had been received from

Crown to increase the prices, asked him why his prices had

not increased. Tumminello told Head that if he increased

his prices, he would be posting prices higher than his com-

petition. Head then told Tumminello that his lease was com-

ing up for renewal soon and that if Tumminello did not

change the price, he (Head) would have to report it. At

3:00 P.M. the next day, Tumminello raised his prices in

accordance with Crown’s direction.

49. In early 1973, Tumminello was called to a meeting

with Crown District Manager Edward Gillespie and Sales

Representative Donald Head at the Friendship Inn. During

the meeting, Gillespie told Tumminello that Crown would

not renew his existing lease, but would instead give him a

lease for only six months’ duration because Tumminello had

60a

been a “troublemaker” by not following Crown’s pricing

policies and by objecting to other Crown policies. Gillespie

stated that the basic reason for the six-month lease was be-

cause Tumminello always fought Crown on pricing. When

Tumminello explained that he had resisted Crown’s pricing

directives only because they put him in an uncompetitive

position, Gillespie told him that if Crown told him to raise

his prices, he must do so. Gillespie assured him, however,

that if he went along with all of Crown’s policies and did not

argue about changing prices when Crown instructed him to

do so, his lease would be extended for another year at the

expiration of this six-month term.

50. During the time that plaintiff Phillips has operated

his Crown service station, Crown representatives have in-

structed him when to raise and when to lower the retail

gasoline prices posted at his station. Phillips was aware

that if he did not obey these instructions, his service station

lease might be cancelled on five days’ notice or might not

be renewed. On several occasions when Phillips was in-

structed to change his prices by Crown, he was also in-

formed that competing service stations would be instituting

similar price changes.

51. On May 17, 1971, Crown District Manager John Con-

way telephoned Phillips and ordered him to lower his retail

gasoline prices by one cent, effective at 3:00 P.M. that day.

In an effort te delay reducing his price, Phillips told Con-

way that; he did not know how to change the pricing mech-

anism. Conway told Phillips that if he was going to remain

a Crown dealer, he would have to learn to change his retail

gasoline prices when Crown told him to change them. Phil-

lips changed his prices as instructed.

52. On one occasion during the summer of 1971, Crown

Sales Representative John Nugent visited Phillips’ station

and told the attendant that Crown had decided to raise the

retail price of gas. Nugent told the attendant that a com-

peting service station would be similarly increasing its

6la

prices. Plaintiff increased his retail gasoline prices as in-

structed by Crown. However, his competition did not in-

crease his prices. Plaintiff ccmplained to Conway and asked

for permission to lower his prices, which was later given to

him. Plaintiff then lowered his prices.

53. As a result of his resistance to Crown’s pricing di-

rectives and other restrictive marketing policies, plaintiff

Phillips, like plaintiff Tumminello, was called to a meeting

attended by Sales Representative Head and District Man-

ager Gillespie. This meeting, held on December 19, 1972,

was convened only five days after Crown had discovered

plaintiff Phillips selling Quaker State motor oil out of his

back room. During the meeting, Gillespie informed Phillips

that his present service station lease was being cancelled

and that he was being given a “probationary” lease of only

six months’ duration. Gillespie also informed Phillips dur-

ing the meeting that a Crown dealer in Rockville was going

to be terminated because he did not set retail prices at

levels specified by Crown.

54. During the time that he has been a Crown service

station dealer, plaintiff Freitag has been similarly in-

structed by various Crown representatives to raise or to

lower his retail gasoline prices. On several occasions, plain-

tiff was told by Crown that efforts were being made to

effect similar price changes at competing service stations.

Crown representatives also instructed Freitag that unless

he posted the retail gasoline prices dictated to him by

Crown, his service station lease would be terminated or

would not be renewed.

55. At the time that Freitag commenced the operation of

his station, nearby competing Fisca and Red Head service

stations were posting retail gasoline prices equal tc those

posted by him. However, by the end of January 1971, those

stations had lowered their prices two cents below Freitag’s

prices. Throughout the period from mid-January until May

62a

or June of 1971, Freitag continually requested permission

from his Crown Sales Representatives and District Man-

ager Conway to lower his retail prices to meet his competi-

tion, even though Freitag did not expect Crown to lower its

wholesale price to him. On each occasion permission was

refused. In response to several of these requests, Conway

told Freitag that he had been in contact with the suppliers

of the competing Fisca and Red Head stations in an effort

to cause those stations to raise their retail gasoline prices.

56. In July 1971, Freitag was instructed by a Crown em-

ployee to raise his retail gasoline prices by three cents.

When he objected, Freitag was told that competing Red

Head and Fisca service stations in his area were also going

to increase their retail gasoline prices by the same amount.

Freitag did raise his prices as he was instructed to do by

Crown and subsequently noticed that the nearby Fisca and

Red Head service stations did increase their prices as

Crown had indicated they would.

57. On October 25, 1972, Freitag unilaterally raised his

retail gasoline prices by two cents, even though he had

not obtained prior permission from Crown. That night,

Sales Representative Head observed Freitag’s unilateral

price increase and telephoned District Manager Gillespie at

sometime after midnight to inform him of Freitag’s price

move. The next day, Head visited plaintiff’s station and told

him that Crown management was disturbed about the price

increase. Shortly after this conversation, Freitag reduced

his prices.

58. Crown has imposed the same pricing restrictions upon

plaintiff Myers as have been imposed upon the other plain-

tiffs. During the time that Myers has operated his Crown

service station, various Crown representatives have in-

structed him to raise or lower his retail gasoline prices. It

has been made clear to Myers that unless he followed

Crown’s policies, including pricing, he would lose his ser-

vice station. He has also been instructed by Crown that he

63a

is not permitted to ind »endently change his retail gasoline

prices without first obt.ining permission from Crown.

59. In late July 1971, Crown instructed plaintiff Myers

to increase his retail gasoline prices by two cents. Myers

raised his price in accordance with Crown’s instructions,

but then observed that his retail gasoline prices were higher

than those posted by a nearby Crown service station op-

erated by plaintiff Phillips. Following this price increase,

Myers noticed that his gallonage sales were decreasing. He

also found that many of his customers were complaining

about the higher prices and were indicating that they would,

in the future, purchase gasoline from plaintiff Phillips.

Myers then telephoned Crown District Manager John Con-

way, informed him of his decreasing gallonage and custo-

mer dissatisfaction and requested permission to lower his

retail gasoline prices. Permission was refused.

60. In July 1972, Myers was instructed by Crown to raise

his retail gasoline prices by one cent, which he did immedi-

ately. |

61. On August 10, 1972, Crown Sales Representative

Michael Corbett telephoned Myers at his home in the eve-

ning and informed him that Crown’s wholesale gasoline

price would be increased by three-quarters of a cent and

asked whether Myers had the proper numerals to post on

his large price sign to reflect his new retail gasoline prices.

Corbett also indicated that the price increase would include

other oil companies. The next day, Crown Office Manager

Chris Blackman reiterated Corbett’s pricing instructions

to Myers. However, Myers did not increase his prices at

that time. Later in the day, Myers complained to Crown

Manager of Administration, W. G. Pressler, about the fact

that his competitors had not increased their prices, but was

told again that the price increase would include other oil

companies. In- order to offset his loss of gallonage result-

ing from the price increase, Myers raised his retail price for

64a

Crown regular gasoline by two cents, thus increasing his

margin of profit. The next day, Sales Representative Cor-

bett visited Myezs’ station and asked him why he was post-

ing a retail gasoline price one cent above Crown’s “sug-

gested” price. Later, he received a telephone call from

Blackman, who stated that he thought Myers did not under-

stand Crown’s pricing program. Blackman explained that

Crown was “suggesting” a price one cent lower than that

actually posted by Myers. On August 14, 1972, Myers met

with Phillip Sterner, Crown Regional Manager. During the

meeting, Sterner suggested to Myers that he lower his price

to conform to Crown’s suggested price and state that if he

did not do so, Crown management would think him to be a

“wise guy”. The next day, Sterner visited Myers’ station

and after observing that Myers had not changed his price,

told Myers that he thought he had agreed to lower his price

to the level suggested by Crown. Shortly after Sterner’s

visit, Myers lowered his price.

62. Other present and former independent Crown service

station dealers have been subjected to the same pricing

restrictions as have been imposed upon plaintiffs. Crown

has required that these present and former dealers post

only the retail gasoline prices authorized by Crown and has

made clear to each of these dealers that deviation from

Crown’s pricing policies would jeopardize their continued

occupancy of their stations.

63. David Horner was the independent operator of the

Crown service station located at 6315 Reisterstown Road

from September 1970 until late April 1974. Ever since he

became a Crown service station dealer, Horner was in-

structed by Crown when to raise and when to lower his

retail gasoline prices. He understood that he was required

by Crown to change his prices as he was instructed to do.

With one exception, Horner always followed Crown’s pric-

ing directives.

65a

64. On August 23, 1973, Horner received a telephone call

from Crown Sales Representative Sylvester Bollinger, who

recommended that Horner reduce his retail gasoline prices

because Crown was going to reduce its wholesale price at

that time. However, Horner decided to leave his retail

prices at their existing levels and thereby enjoy a greater

margin of profit. On August 24, a Crown employee tele-

phoned one of Horner’s employees to determine his retail

gasoline price postings. Later that day, Horner received a

telephone call from Crown District Manager Edward Gil-

lespie, who asked him to lower his price. Horner told Gilles-

pie he intended to leave his prices at their prior levels over

the weekend in order to obtain a greater margin of profit

but would consider reducing his prices following the week-

end. Gillespie then reiterated his request that Horner lower

his prices. On August 25, Horner was visited at his station

by the President of Crown, Henry Rosenberg, who asked

Horner, “What’s with the price?” After Horner explained

his reasons for not reducing his prices to levels suggested

by Crown, Rosenberg told him that he had been away from

the station a lot iately. That night, Horner’s station was in-

spected by Crown Sales Representative Lee DelPrete. Hor-

ner received the first unsatisfactory inspection report which

he had ever received since becoming a Crown dealer. Horner

lowered his prices to levels recommended by Crown the

following Monday morning.

65. William J. O’Hara has been the independent opera-

tor of the Crown service station located at 10615 Reisters-

town Road, Owings Mills, Maryland, continuously since

December 8, 1968. During the time that he has operated

his service station, he was instructed when to raise and

when to lower his retail gasoline prices. He was told that

Crown alone would determine his retail posting, and be-

cause of threats which he received from Crown, O’Hara

refrained from posting retail prices other than those dic-

tated by Crown.

66a

66. Shortly before commencing the operation of his serv-

ice station, O’Hara attended a meeting at the Crown dis-

trict office on Pennington Avenue, Baltimore, Maryland.

During this meeting, Crown Regional Manager Thomas

Cahir, District Manager Clark Corecivan and Sales Rep-

resentative Tumminelle informed O’Hara that Crown would

set and control the retail price of gasoline sold at his

station.

67. In the spring of 1970, O’Hara was told by a repre-

sentative of Crown to raise his retail gasoline prices by

one cent. O’Hara objected to this increase, claiming that

he would lose business to a competing Hess station. He

was told that Crown had already talked Hess into going

up. O’Hara did as instructed, but during the following

months observed that his station was losing gallonage to

the competing Hess service station which posted lower

prices than O’Hara’s. During this time, O’Hara was visited

by Crown’s President, Henry Rosenberg. O’Hara com-

plained to Rosenberg of his loss of gallonage and was told

that Crown was working on the situation.

68. In July 1971, District Manager Conway telephoned

O’Hara and instructed him to increase his retail gasoline

prices by two cents at 3:00 P.M. that day. O’Hara objected,

telling Conway that such an increase would make him two

cents higher than a competing Hess station. Conway told

him not to worry because Crown had already talked to Hess

and they were going to go up, too. O’Hara increased his

price as instructed at the appointed time, but Hess did not

change. Later that night, Sales Representative Donald

Head telephoned O’Hara and instructed him to drop his

retail gasoline prices by one cent immediately. O’Hara

again changed his prices as instructed by Crown.

69. In August 1973, Crown Sales Representative Lee

DelPrete telephoned O’Hara and told him that Crown was

going to reduce its wholesale gasoline price by three-

67a

quarters of a cent and suggested that O’Hara reduce his

retail gasoline price by one cent. O’Hara objected to this

price change, and told DelPrete that he would not change

his prices without doing some checking. At 11:30 that night,

DelPrete again telephoned O’Hara and asked if he had

changed his mind about lowering his prices. Again, O’Hara

told DelPrete that he would not lower his price. DelPrete

informed O’Hara that he would submit to Crown a report

containing the names of all of those Crown dealers who

did not move their prices. The next day, Crown District

Manager Edward Gillespie telephone O’Hara and asked

why he would not lower his price in accordance with

Crown’s instructions. A heated argument ensued, during

which Gillespie cursed at O’Hara and told him to do what

he wanted but that his (Gillespie’s) day would come. The

following day, O’Hara received an unacceptable service

station inspection report, one of only a few such unaccept-

able reports that he had received in six years. O’Hara then

lowered his price to that suggested by Crown. Several

days later, O’Hara received an acceptable service station

report.

70. During the period from mid-1970 until early 1972,

Margaret E. Kling was the independent operator of the

Crown service station in York, Pennsylvania. Throughout

the time that she operated her Crown service station, Mrs.

Kling was told by Crown representatives when to raise

and when to lower her retail gasoline prices. A sales rep-

resentative would telephone Mrs. Kling and tell her to

raise her retail gasoline price at a particular hour, such

as 3:00 P.M. Mrs. Kling was also told by Crown that she

was required to. post only retail gasoline prices dictated

by Crown and could ‘not independently raise or lower her

retail gas

This text is long and has been trimmed here. Open the source document for the complete record.