Brief for Respondent in Opposition — Aluminum Co. of America v. Woods Exploration & Producing Co.

Supreme Court, US.

* LIBRARY “@ FILED

Stipe SURT, U.S Jun 14 197i

ST TERYER, CLERK

E, ROBER ERVER, CLERS |

Supreme Court af the Ynited States

OCTOBER TERM—1970

70-17%

NO _A~2,

ALUMINUM COMPANY OF AMERICA, ET AL,

Petiltioners,

V..

WOODS EXPLORATION & PRODUCING COMPANY,

ET AL, Respondents

On Writ Of Certiorari To The United States

Court Of Appeals For The Fifth Circuit

BRIEF OF WOODS EXPLORATION &

PRODUCING COMPANY, ET AL, IN

OPPOSITION TO PETITIONERS’

WRIT OF CERTIORARI

MANDELL & WRIGHT

ARTHUR J. MANDELL

1901 First National Life Bldg.

Houston, Texas 77002

LEVERT J. ABLE

1615 First National Life Bldg.

Houston, Texas 77002

Attorneys for Respondents

Alpha Lew Brief Co., M & M Bidg., Houston, Texas 77002

INDEX

Page

IR er er ry 1

RIES Ns SRE ecerAs Ne ee Pees 2

ee, ae pee ee ee 2

Questions Presented ...-—-.—s—s—awwisw“siswsiéw“sswswsiwiwsstiws 2

I, 83080 atu S ox end oe 3

I. By Filing of False and Uunjustifiably Low

Forecasts in order to Reduce Respondents’

Production Allowables, Petitioners subvert-

ed The Railroad Commission’s Scheme of

Setting Allowables on Respondents Wells. .

Argument and Authorities sss.

II. The Relevant Market ...................... 9

III. The Appellate Court Properly Reversed The

Summary Judgment and Remanded for an

Evidentiary Determination ............ 13

(1) Whether or not Petitioners Filed False

Nominations and if so, What Damages

Plainiuffs Sustained Therefrom, and. . 13

(2) Remanded For Trial For The Purpose

of Determining if Respondents’ Allega-

tion With Respect to the Proposed

Extraction Plant Are True and, If So,

The Extent of Damages Flowing There-

Oe ce Catt te Fa eas 13

I od rh CA ee ee ee ee 16

SE ERE Ai Aaah Keg a Ne ire 19-24

II

LIST OF AUTHORITIES

Cases:

American Locomotive Co. v. Harris, 239 F., 234

California v. Federal Power Commission, 369

U.S. 482, 82 S.Ct. 901, 8 L.Ed.2d 54.......

Cherokee Laboratories, Inc. v. Rotary Drilling

Services, Inc., 383 F.2d 97 (Sth Cir. 1967). .

City of Fort Lauderdale v. East Coast Asphalt

Corp., 329 F.2d 871 (Sth Cir. 1964).......

Continental Can Co., 378 U.S. 441, 458, 84 S.Ct.

1738, 12 L.Ed.2d 953, 964 ..............

Denver Petroleum Co. v. Shell Oil Co., 306 F.

Supp. 389 (Dist. Court Colo. 1969). ......

Eastern Railroad Presidents Conference v. Noerr

Motor Freight, Inc., 365 U.S. 127, 81 S.Ct.

i Be, Se Fo eee

Gasoline Products Co., Inc. v. Champlin Re-

fining Co., 283 U.S. 494, 51 S.Ct. 513 .....

Grigsby*v. Coastal Marine Service of Texas, Inc.,

412 F.208 1011 (19GB) ..................

Hardrives Co., Inc. v. East Coast Asphalt Corp.,

329 F.2d 868 (5th Cir. 1964) ............

Klor’s, Inc. v. Broadway Hale Stores, Inc., 359

U.S. 207, 79 S.Ct. 705 (1959), 3 L.Ed.2d

BO ae OL ee eee ea ee

Magenau v. Aetna Freight Lines, Inc., 360 U.S.

Ss ee OE ree en are as

Mandeville Island Farms v. American Crystal

Sugar Co., 334 U.S. 219, 68 S.Ct. 996...

Noel v. United Aircraft Corp., 359 F.2d 671 (5th

Re ear ee An ee eo re

North Texas Producers’ Assoc. v. Metzger Dairies,

Inc., 348 F.2d 189 (C.A. 1965)...........

Okefenokee Rural Electric Membership Corp. v.

Florida Power & Light Co., et al, 214 F.2d

ee Gade, Pe crete cee cs

Page

10, 11

11,13

Il

Cases:

Parker v. Brown, 317 U.S. 341, 63 S.Ct. 307,

fs & ot | eee eee

People of State of California v. Lo-Vaca Gather-

ing Co., 379 U.S. 366, 85 S.Ct. 486 (1965),

fem fae rete rr re ae

Railroad Commission v. Aluminum Co. of Ameri-

ca, 380 S.W.2d, 599 (Tex. 1964).........

The Tug R. A. Turrentine v. American Home As-

surance Company, 279 F.2d 811 (C.A. 5th

Rs I ss a ee tee eee

Trucking Unlimited v. California Motor Trans-

port Company, 432 Fed.2d 755 ...........

United Mine Workers v. Pennington, 381 U.S.

657, 85 S.Ct. 1585 (1965), 14 L.Ed.2d 626. .

United States v. El Paso Natural Gas Co., 376

U.S. 651, 84 S.Ct. 1044 (1964), 12 L.Ed.2d

ENA RAINE LIN eh et os rohit Pe Ace

United States v. First City National Bank of

Houston, 386 U.S. 361, 87 S.Ct. 1688, 18

8 ESP Ot inet tas ae

United States v. Grinnell Corp., et al, 384 U.S.

563, 86 S.Ct. 1698 (1966), 16 L.Ed. 778. .

United States v. Pabst Brewing Co., 384 U.S. 546,

86 S.Ct. 1665, 16 L.Ed.2d 765 (1966).....

United States v. Phillipsburg National Bank &

Trust Co., 399 U.S. 350, 90 S.Ct. 2035 (1970)

Walker Process Equipment v. Food Machine &

Chemical Corp., 382 U.S. 172, 86 S.Gt. 347,

ED Boe ee CRWMOD oc iki se ewes

Woods Exploration & Producing Co., Inc. v.

Aluminum Co. of America, et al, 36 F.R.D.

Se I ec Le ether ioe ch

Woods Exploration & Producing Co., Inc. v.

Aluminum Co. of America, et al, 284 F.Supp.

i er ee

Page

1,4

Cases:

Woods Exploration & Producing Co., Inc. v.

Aluminum Co. of America, et al, 382 S.W.2d

Woods Exploration & Producing Co., Inc. v.

Aluminum Co. of America, et al, 304 F.Supp.

845 (1969)

Woods Exploration & Producing Co., Inc. v.

Aluminum Co. of America, et al, 438 F.2d

1286 (1971)

RULES AND STATUTES

Clayton Act, Section 4, 15 U.S.C.A.

Sherman Act, Section 1, 15 U.S.C.A.

Section 2, 15 U.S.C.A.

Article 6049a, Section 8aa, Vernon Ann. Tex.

Stat.

Article 6049d, Section 8bb, Vernon Ann. Tex.

Stat.

Article 6050, Vernon Ann. Tex. Stat.

Article 6049e, Section 19, Vernon Ann. Tex.

Stat. |

1,4,7

{

2

il

j

no _/ 7/2 _

ALUMINUM COMPANY OF AMERICA, ET AL,

ye

ea pul

get rt

rece Stasis

May, 1971. The jurisdiction of this court is imvoked

under Title 28 U.S.C. 1254(1).

STATUTES INVOLVED

Title 15, §§1 & 2, commonly referred to as the Sherman

Antitrust Law; and § 4, commonly referred to as the

Clayton Act and Articles 6049a, 6049e, 6050 of the Re-

vised Statutes, and RR Comm. Rule 30 are set forth in the

Appendices of this brief, pages 19-24.

QUESTIONS PRESENTED

1. Whether the filing of false and perjured nomination

2. Whether the production, transportation and sale of

natural gas constitutes a part of trade or commerce for

purposes of the Sherman Act.

3. Whether the Appling Field, covering over 4,000

acres and extending in two counties in Texas, constitutes

the relevant geographic market or alternatively,

Whether “the relevant market” consists of the arena

within which the strength of competitive forces is meas-

3

ured, or whether under the facts the relevant area of com-

petition constitutes the part of trade and commerce with

regard to which the power to exclude competition must

be measured.

STATEMENT

Respondents, Woods Exploration & Producing Com-

pany, Stanley Woods, and Southeastern Pipeline Company,

instituted this action in the United States District Court

for the Southern District of Texas, Houston Division,

alleging that Defendants in violation of Sections 1 and 2

the Sherman Act, 15 U.S.C. and Section 4 of the

yton Act have entered into a combination and/or

conspiracy in restraint of trade or commerce and have

monopolized or attempted to monopolize, etc. The acts

charged in furtherance of such conspiracy consisted of:

(1) The filing of false nomination forecasts by de-

fendants with the Texas Railroad Commission so as to

reduce Plaintiffs’ production allowables, and

(2) The thwarting of Plaintiffs’ gas production by De-

fendants’ refusal to deal; Defendants’ harassment and

interference with Plaintiffs’ operations in the drilling and

production of gas;

(3) The thwarting of the agreement with:

(a) Lumar Gas Corporation to construct a liquid

extraction plant;

(b) Graver Oil & Gas Equipment Company and

(c) Marler Construction Company for the erec-

tion of a plant with Southeastern Pipeline

Company to Southeastern’s damage.

4

The trial court sustained a partial motion for summary

judgment eliminating Plaintiffs’ cause of action alleging

it sustained damages by reason of Petitioners having filed

false and perjured nominations before the Railroad Com-

mission, 284 F.Supp. 582. At the end of the trial on the

rest of the remaining issues, the court instructed the jury

not to consider any damages which Plaintiffs might have

suffered from the loss of opportunity to participate in

the construction of a liquid extraction plant and the loss

of profits from an extraction plant which was contracted

to be built for Respondents by Graver or Marler Construc-

tion Company, but submitted to the jury other items of

damage. The jury returned a verdict for Plaintiffs (R.

3341). On post verdict motion for judgment filed both

by Petitioners and Respondents, the court granted Peti-

tioners’ motion for judgment notwithstanding veredicto

denying relief, 304 F.Supp. 845. The Court of Appeals

reversed, 438 F.2d 1286, directing:

1. The District Court to enter judgment for Respond-

ents in the amount found by the jury, reversed the grant

of summary judgment, and

2. Remanded for an evidentiary determination as to

whether or not Defendants in fact, filed false nominations,

and if so, what damages respondents sustained therefrom;

and

3. Further ordered the District Court to hold a trial

for the purpose of determining if Respondents’ allegation

with respect to the proposed extraction plant are true, and

if so, the extent of damages flowing therefrom.

On hotly contested issues of fact, the jury found Alcoa

and Crown monopolized, attempted to monopolize and

conspired with F. E. Appling, Carl Seigesmund or Hous-

ton Pipeline Company to monopolize an appreciable part

5

of the trade and commerce of drilling, producing and

transporting gas from the Appling Field (R. 3327).

Predicated on an affirmative answer on such question, the

jury found that Alcoa and Crown refused to deal with

Stanley Woods, individually, and with Woods Exploration

Woods Exploration & Producing Company was damaged

in the sum of $500.00.

Petitioners, in their statement of the case (pages 6-13

of their petition for cesrtiorari), overstate their case. By

way of example, Petitioners contend that Lavaca Pipeline

Company, a wholly owned subsidiary of Petitioner

Aluminum Corporation of America, did not pur-

chase nor transport gas in the Appling Field for others

than Alcoa, Crown and Pocantico. The uncontraverted

evidence is that it sold its gas to Houston Natural Gas,

to Monsanto, and also purchased gas from and/or trans-

ported gas for other producers in the Appling Field such

as Sun Oil (Tr. 2742) from a subsidiary of Phillips

Petroleum Company and from Layton-Brown (Tr. 2752-

2756). Moreover, under the express provision of Article

6

because its pipeline crossed under and over number of

county lines (Tr. 2741-2742), which makes it a gas

utility or public utility. Therefore, Petitioners’ contention

that it had no duty either to purchase or transport Ap-

pellants’ gas is not supported by either the facts or the

applicable statutory provisions. However, the question

whether Petitioners’ wholly owned subsidiary Lavaca Pipe-

line Company was or was not either a common carrier

or a common purchaser or both, or whether it purchased

gas from other producers of gas in the Appling Field

is wholly immaterial if in fact, as the jury found, that as

a part of their unlawful conspiracy to monopolize and

to restrain the production of gas within the Appling Field,

it refused to deal with Respondents and prevented Lumar

Gas Pipeline Company to enter into an agreement to

build a joint pipeline to Respondents’ damage.

When Respondent Woods became interested in the

Appling Field, he was aware that the Railroad Commis-

sion had set the 1/3rd-2/3rd rule in the Appling Field

and on that basis, Woods and Woods Exploration & Pro-

ducing Company and its investors invested considerable

sums of money to drill these gas wells, projecting the

probable return under the applicable rules existing in that

field. In Railroad Commission v. Aluminum Company of

America, 380 S.W.2d 599 (Tex. 1964), the case cited

by Petitioners, the Supreme Court of Texas took cog-

nizance of the fact that the Aluminum Company of Ameri-

ca sought and aided in the establishing of this very rule

and after.it was set in operation it acquiesced in it for

a long period of time without complaint. The Texas Su-

preme Court held that after such length of time, it

would be inequitable to require the Commission to overturn

the pro-rata formula that has been in effect in this and

7

other fields for years where operators have drilled and

completed wells at great expense in reliance of such

formulas and where conditions had become stabilized.

Railroad Commission of Texas v. Aluminum Corporation

of America, supra.

Petitioners ignore the real question which is how much

more gas Respondents would have produced under the

1/3rd-2/3rds rule had Petitioners not filed perjured and

false nominations. Rule 30 of Texas Railroad Commission

(See Appendix C, p. 21). Therefore, if such false and

perjured nominations, in fact, caused lower allowables,

causing Respondents to produce less gas than they would

have been entitled to produce, it would then be entitled

to whatever damages the proof may show they suffered

as a result thereof.

For a correct factual background, Respondents respect-

fully refer the Court to the opinion of the Court of Ap-

peals, 438 F.2d, pages 1300-1302.

X.

BY FILING OF FALSE AND UNJUSTIFIABLY

LOW FORECASTS IN ORDER TO REDUCE RE-

SPONDENTS’ PRODUCTION ALLOWABLES, PE-

TITIONERS SUBVERTED THE RAILROAD COM-

MISSION’S SCHEME OF SETTING ALLOWABLES

ON RESPONDENTS’ WELLS.

ARGUMENT AND AUTHORITIES

At this posture, Respondents’ allegations that Petitioners

have filed false and perjured nominations in order to sub-

vert the Railroad Commission’s scheme in setting allow-

ables by filing unjustifiably low forecasts in order to reduce .

Petitioners’ production allowable must be taken as true.

8

Petitioners seek to defend their action by stating that this

was a state action and therefore, not subject to the anti-

trust laws. In doing so, Petitioners rely on Eastern Rail-

road Presidents Conference v. Noerr, 365 U.S. 127, 81

S.Ct. 523, 5 L.Ed. 464; Parker v. Brown, 317 U.S. 341,

63 S.Ct. 307, 87 L.Ed. 315; Okefenokee Rural Electric

Membership Corp. v. Florida Power & Light Co., et al,

214 F.2d 413 (Sth Cir. 1954); and United Mine Workers

v. Pennington, 381 U.S. 657, 85 S.Ct. 1585 (1965), 14

L.Ed.2d 626. However, because of the facts as pleaded in this

case, the same argument was rejected by the Texas Court

in Woods Exploration & Producing Co. v. Aluminum

Corp. of America, 382 S.W.2d 343, writ denied, Supreme

Court of Texas, n.r.e., adopting Judge Ingraham’s opin-

ion in which he clearly stated that (36 F.R.D. 107) Re-

spondents did not attack the validity of any order of the

Texas Railroad Commision but are attacking the con-

spiracy under the antitrust laws, one of its manifestations

being the filing of false nominations.

As the opinion of the Court of Appeals reveals, Re-

spondents here have also filed suit in the State Court,

claiming violation of the sta.> antitrust laws. Petitioners

here, defendants in the state court case, filed their motion

for summary judgment contending as they do here, that

this was state action and could therefore not be the basis

for an antitrust suit. The Court of Appeals of Texas re-

versed, 382 S.W.2d 343, 1964. The Texas court in revers-

ing the summary judgment rejecting Petitioners’ conten-

tions, stated as follows, stating:

“Appellees contend by their counterpoint III that

nominations «- other representations made by them

to the Railroad Commission of Texas, whether in-

dividually or in concert. for the purpose of influenc-

9

ing the governmental action of such commission in

fixing gas production allowables, as a matter of law,

cannot constitute a violation of the Texas antitrust

statutes or form the basis or subject matter of an

antitrust damage action.”

The case at bar is much stronger and differs substanti-

ally from Trucking Unlimited v. California Motor Trans-

port Company, 432 Fed.2d 755. In Trucking, the district

court specifically noted that there were no allegations that

defendant’s presentations to the governmental agencies and

the courts were in themselves false, misleading or lacking

in evidentiary or legal support. In the case at bar, how-

ever, the complaint charges that petitioners filed false and

perjured nominations as part of the jury-found conspiracy.

Moreover, the Texas Statutes establishing the Railroad

Commission and its functions specifically provide that the

antitrust and/or monopoly statutes of Texas shall not be

affected thereby’ (See Appendix D, p. 22). In any event,

this court has held that fraudulent statements to a gov-

ernmental agency coupled with violations of Section 2

does not exempt one from the application of the antitrust

laws. Walker Process Equipment v. Food Machine &

Chemical Corp., 382 U.S. 172, 86 S.Ct. 347, 15 L.Ed.2d

247 (1965).

Il.

THE RELEVANT MARKET

Petitioners completely ignore this court’s admonition

that “immunity from antitrust laws is not lightly implied.”

"1. Section 19 of Article 6049e, Vernon’s Annotated Texas Statutes

provide as follows: “Sec. 19—it is especially provided that nothing

herein shall in any manner affect, alter, diminish, change, or modify

the antitrust and/or monopoly statute of this state. And that no pro-

vision of this act shall in any manner directly or indirectly authorize

tho cidatien of cath eatin @ campy Gate, ae”

10

United States v. First City National Bank of Houston, 386

U.S. 361, 87 S.Ct. 1088, 1099, 18 L.Ed.2d 151, quoting

from California: v. Federal Power Commission, 369 U.S.

482, 485, 82 S.Ct. 901, 8 L.Ed.2d 54. In paying no heed

to this court’s decisions in United States v. Pabst Brewing

Co., 384 U.S. 546, 86 S.Ct. 1665, 16 L.Ed.2d 765

(1966); United States v. Continental Can Co., 378 U.S.

441, 458, 84 S.Ct. 1738, 12 L.Ed.2d 953, 964; and Klor’s,

Inc. v. Broadway Hale Stores, Inc., 359 U.S. 207, 79 S.Ct.

705, 3 L.Ed.2d 741 (1959), they argue that the Appling

Field cannot constitute a relevant market first because of

the limited geographic locality and secondly, because it is

a source of supply rather than a market.

As so aptly stated by Judge Goldberg, Petitioners’ argu-

ment fails to recognize that “relevant market” is simply a

shorthand phrase used to describe the “arena in which the

strength of competitive forces is measured.” In Pabst

Brewing case, supra, this court held (pg. 1668):

“Congress did not seem to be troubled about the

exact spot where competition might be lessened; it

simply intended to outlaw mergers which threatened

competition in any or all parts of the country. Proof

of the section of the country where the anticompeti-

tive effect exists is entirely subsidiary to the crucial

question in this and every § 7 case which is whether

a merger may substantially lessen competition any-

where in the United States.”

Respondents here never contended that Petitioners pos-

sess or attempted to possess nationwide monopoly power

over the marketing and/or transportation of natural gas.

Instead, Respondents contended that Petitioners possessed

monopoly power over the extraction and transportation

11

of gas from the Appling Field. With regard to extraction

of gas—which is at the heart of Respondents’ complaint,

the Appling Field is the relevant area of competition. it

is “part of trade and commerce” with regard to which

must be measured the power to exclude competitors. In

Denver Petroleum Company v. Shell Oil Company, 306

F.Supp. 289 (Dist. Court, Colo. 1969), the court in dis-

cussing the relevant market held that one county in New

Mexico, the Basin-Rio Arriba oil production area, was a

relevant market.

Petitioners and their co-conspirators were located and

operated in the Appling Field. The most likely source of

supply for Southeastern Pipeline Company was the Ap-

pling Field. The Appling Field is a separately defined

geographic reservoir and so made by statute. The statute

makes the market demand for the Appling Field a recog-

nized sub-market. The sole and only possible area of com-

petition between Petitioners and Respondents is the pro-

duction and transportation of gas from the Appling Field.

The area which the Petitioners sought to appropriate for

themselves was the Appling Field. Under the facts in this

case, the relevant market is the Appling Field. This court

in United States v. Phillipsburg National Bank & Trust

Co., 399 U.S. 350, 90 S.Ct. 2035 (1970) has held a

relevant market to be a much smaller area.

It is respectfully submitted that under North Texas

Producers’ Association v. Mezger Dairies, Inc., 348 F.2d

189 (C.A. 1965); Klor’s, supra; Mandeville Island Farms

v. American Crystal Sugar Co., 334 U.S. 219, 68 S.Ct.

996, and the cases hereinabove cited there can be no

question but that under the facts in this case, the relevant

market is the Appling Field.

i

for purposes of the Sherman Act, United States v. El Paso

Natural Gas Company, 376 U.S. 651, 657, 84 S.Ct. 1044

(1964), 12 L.Bd.2d 12; United States v. Grinnell Corp.,

et al, 384 U.S. 563, 573, 86 S.Ct. 1698, 16 L.Ed. 778

13

366, 85 S.Ct 486, 13 L.Ed. 2d 537 (1965); Mandeville

Island Farms v. American Crystal Sugar Co., supra;

Cherokee Laboratories, Inc. v. Rotary Drilling Services,

Inc., 383 F.2d 97 (Sth Cir. 1967), cert. den'd 390 U.S.

904, 88 S.Ct. 816, 9th L.Ed. 870; City of Fort Lauder-

dale v. East Coast Asphalt Corp., 329 F.2d 871 (Sth Cir.

1964); Hardrives Company, Inc. v. East Coast Asphalt

Corp. (Sth Cir. 1964), 329 F.2d 868, holds that even

purely local activities may be still violative of the Sherman

Act if it substantially affects interstate commerce market

either directly or through its interplay with other business

THE APPELLATE COURT PROPERLY RE-

VERSED THE SUMMARY JUDGMENT AND RE-

MANDED FOR AN EVIDENTIARY DETERMI-

NATION

(1) WHETHER OR NOT PETITIONERS FILED

FALSE NOMINATIONS AND IF SO, WHAT

DAMAGES PLAINTIFFS SUSTAINED

THEREFROM, AND

(2) REMANDED FOR TRIAL FOR THE PUR-

HURS2 RSH

. i ih Hie cntiily aT

et iti i] ial it

i “1 ail eli tH

iL idle thls wate Hr

ae fi

foe att fi date

15

of the damages suffered by them as a proximate cause of

Petitioners’ jury found illegal acts. The jury in response

to question number 5 predicated as it was on an affirm-

ative answer to question number 1 or 2 found that Peti-

tioners, acting together with F. E. Appling, prevented

Fred Wolcott from signing Respondents’ Exhibit Number

85A. The testimony of the witnesses, Robert L. Topper,

Maurice S. Williams, James S. Simmons and Curt Gal-

lagher proved that the parties have agreed to the building

of an extraction plant with Lumar Pipeline Company and

agreed on all the terms and conditions under which it was

to be erected and how the profits were to be distributed;

that Petitioners thwarted this agreement, to the damage

of Southeastern, that Southeastern reached similar agree-

ments with Graver Oil & Gas Equipment Company, Mar-

ler Construction Company and Sinclair Oil & Gas Com-

pany for the erection of a plant on the Southeastern pipe-

line, and that Petitioners frustrated these agreements to

the damage of Southeastern. The trial court in its charge

to the jury excluded any consideration of damages flowing

from the failure to construct an extraction plant (R.

3321). The evidence which Respondents introduced would

have supported a finding that Southeastern had both the

intention and the preparedness to construct an extraction

plant and that if the jury so found, Southeastern would

be entitled to damages. The Appellate Court properly

remanded that portion of the case for trial so Respondents

may prove, if they can, before a jury what damages they

sustained.

Petitioners protest (page 3 of their Application) that

damages for the loss of the extraction plant cannot be

recovered because Wolcott did not sign the instrument

(Exhibit 85A) is completely void of any merit. First,

16

because there is not a scintilla of evidence that Respond-

ents had anything to do with such signature and, second,

the jury’s answer to question 5 establishes by substantial

evidence that Petitioners and their co-conspirator F. E.

Appling prevented Fred Wolcott from signing Respond-

ents’ Exhibit 85A.

The Magenau v. Aetna Freight Lines, Inc., 360 U.S.

273, 279 (1959) is simply not in point. In Magenau, the

court reversed the case on the liability issue. The question

there being whether a stranger, driving along with the

truck driver to help him because he had trouble with the

truck a number of times, became the servant of the truck

driver’s employer rather than the owners of the truck and

thereforc relegated to the benefits of the workmen's com-

pensation laws of the State of Pennsylvania. But not so

here. In the case at bar, the issue of liability was passed

on by a jury on amply supported evidence. In any event,

Petitioners’ attack is centered on what Petitioners claim

to be an absence of the relevant market, and a lack of

power to monopolize, but such issue was resolved against

Petitioners.

In these days when courts are clogged with litigation

it would be contrary to the bars’ and judicial efforts to

expedite litigation, to remand for a trial on issues already

fully developed and passed upon by a jury gn a case that

has been pending almost nine years and a trial which took

over six weeks.

CONCLUSION

It is clear that the Court of Appeals acted well within

the intent of the Congressional enactment of the Antitrust

Laws of the United States, and its decision entirely ap-

17

propriate under the facts. The questions raised by Peti-

tioners do not warrant a review by this court. Indeed, the

opinion of the Court of Appeals is grounded on sound

legal principles and recognized authority as expressed by

the decisions of this court. It is therefore respectfully

prayed that Petitioners’ application for a writ be denied.

1901 First National Life Bldg.

Houston, Texas 77002

Haan Clee

1615 First National Life Bidg.

Houston, Texas 77002

Attorneys for Respondents

This is to certify that a true correct copy of the

foregoing was served, on the day of June, 1971,

on Messrs. Vinson, Elkins, Searls & Smith, First City Na-

tional Bank Blidg., Houston, Texas 77002, attorneys for

“~- by piecing the a.

Petitioners, by piacing t ond é a properly addressed

same in the

United States mail.

—— MANDELL

19

APPENDIX A

Art. 6049a.

Additional persons as common purchasers

Sec. 8aa. In addition to persons enumerated in Sec-

tion 8, hereof, any and all other persons, association of

persons, or corporations, operating any pipe line, which

may now, or hereafter, purchase crude oil, petroleum, or

natural gas in this State, whether they be common carriers

or affiliated with common carriers or not, shall be a com-

mon purchaser of such crude oil, petroleum or natural gas,

and shall purchase crude oil, petroleum or natural gas,

offered it for purchase without discrimination in favor of

one producer or person as against another as provided in

Section 8 hereof.

Anti-trust laws unaffected

Sec. 8bb. It is expressly provided that no provision of

this Act shall be construed as in any wise modifying,

limiting, changing, repealing, or affecting any part of the

present laws of this State defining and regulating trusts,

monopolies, and conspiracies in restraint of trade; and

that no provision of this Act shall be construed as 2uthoriz-

ing any agreement and/or combination of capital, skill,

or acts and/or any combination or consolidation now

prohibited Sy the Anti-trust Laws of this State and/or the

laws of this State prohibiting trusts, monopolies, and/or

conspiracies in restraint of trade; and that no provision

of this Act is intended or shall be construed as authorizing

any agreement, act, combination, consolidation, or other-

wise, which is now prohibited under the Anti-trust Laws

of this State and/or the laws prohibiting and defining

trusts, monopolies and/or conspiracies in restraint of trade.

SRN pe OO

20

APPENDIX B

Art. 6050.

1. Producing or obtaining, transporting, conveying, dis-

tributing or detivering natural gas: (a) for public use or

service for compensation; (b) for sale to municipalities or

persons or companies, in those cases referred to in para-

graph 3 hereof, engaged in distributing or selling natural

gas to the public; (c) for sale or delivery of natural gas

to any person or firm or corporation operating under

franchise or a contract with any municipality or other legal

subdivision of this State; or, (d) for sale or delivery of

natural gas to the public for domestic or other use.

2. Owning or operating or managing a pipe line for the

transportation or carriage of natural gas, whether for pub-

lic hire or not, if any part of the right of way for said line

has been acquired, or may hereafter be acquired by the

exercise of the right of eminent domain; or if said line or

any part thereof is laid upon, over or under any public

road or highway of this State, or street or alley of any

municipality, or the right of way of any railroad or other

public utility; including also any natural gas utility au-

thorized by law to exercise the right of eminent domain.

21

APPENDIX C

Rule 30. Gas Nominations Required.

(A) Initial Purchasers

All first purchasers of gas produced from wells shall file

by the ninth (9th) day of each month nominations

(Form GN) of requirements for gas to be used by them

from each reservoir during the following month. Pur-

chasers who gather gas from various gas fields and reser-

voirs or who purchase gas at the wellhead of the wells or

purchase gas at a common purchase point must deter-

mine if they are the initial purchaser and, if so, shall file

gas nominations (Form GN). An operator using gas-well

gas for his own operations, either on leases or in a fuel

system, shall file gas nominations (Form GN). Operators

of processing plants who operate field gathering systems

and who are the purchasers of gas at the wellhead shall

file gas nominations (Form GN).

(B) Producer’s Forecast

The operator of one or more wells in a reservoir for

which an allocation formula has been adopted must

submit Producer’s Forecast (Form PF) by the ninth (9th)

day of each month for gas to be produced during the fol-

lowing month. A new vuperator in a reservoir for which a

proration schedule has been issued must submit a Pro-

ducer’s Forecast (Form PF) by the ninth (9th) day of the

month following the month in which his first allowable is

assigned. Each operator in a reservoir for which a prora-

tion schedule has not been issued must submit a Producer’s

Forecast (Form PF) when directed by the Commission or

by the ninth day of the month preceding the month of

schedule.

ein eos

22

APPENDIX D

Art. $049e.

Anti-trust laws —

Sec. 19. It is especially provided that nothing herein

shall in any manner affect, alter, diminish, change or

modify the anti-trust and/or monopoly Statutes of this

State, and that no provision of this Act shall in any

manner directly or indirectly authorize a violation of

such anti-trust and/or monopoly Statutes, and in this con-

nection it is hereby declared and especially provided by

the Legislature of the State of Texas enacting this legis-

lation that notwithstanding the provisions of any other sec-

tions of this Act, it is the legislative intent that no pro-

vision of this Act shall in any manner affect, alter, diminish

or amend any provision of the anti-trust and/or monopoly

Statut.s of this State, or in any manner authorize a vio-

lation of such anti-trust and/or monopoly Statutes; and

it is further especially provided that if any provision of

this Act shall be so construed by any Court of this State

as to in amy manner affect, alter, diminish, or modify

any provision of the anti-trust and/or monopoly Statutes

. Of this State, then in that event any such section, sub-sec-

tion, sentence, or clause or any provision of this Act so

construed as conflicting with said monopoly and/or anti-

trust Statutes, is hereby declared null and void rather

than the anti-trust and/or monopoly Statutes of this State.

The legislative intent herein expressed is to prevail and

take precedence over the provisions of any other section

or sections of this Act, regardless of any statement therein

to the contrary.

23

APPENDIX E

The Court’s instruction to the jury, pages 3299-3301,

3303, 3308 and 3310.

“The purpose of the Sherman Antitrust Act is to

preserve and advance our system of free, competitive

enterprise; to encourage to the fullest extent prac-

ticable free and open competition in the market place,

and to prevent the accomplishment of a monopoly

in any business or industry; all to the ultimate end

that the consuming public might be able to receive

better goods and services at lower costs. It was not

the intent or purpose of the Act to embrace every

conceivable contract or combination which could be

made concerning trade or commerce and to thereby

make any act done anywhere in the whole field of

human activity to be illegal, but it was the purpose

io make those acts and contracts and combinations

illegal which uuduly restrained trade and to forbid

all contracts or acts which had a monopolistic ten-

dency and which unduly interfered with the natural

flow of an appreciable amount of interstate com-

merce. The courts have always recognized that there

are some types of agreements whose validity were

the result of surrounding circumstances. In this area

the criteria adopted by the Courts in any given case

for the purpose of ascertaining :f violations have been

committed is the rule of reason. Therefore, the Courts

are conscious of the fact that the freedom of the

individuc: to contract when not unduly or improperly

exercised is the most efficient means for the preven-

. “tion of a monopoly, because the right to freely con-

tract is the means by which a monopoly would be

inevitably prevented. In other words, the freedom to

contract was and is the essence of freedom from

undue restraint on the rigkt to contract.”

24

“The amount of quantity or value of the interstate

cummerce involved or affected by an unreasonable

restraint of trade is immaterial. The Sherman Anti-

trust Act brands as unlawful any contract or com-

bination or conspiracy, which would operate to re-

strain unreasonably any interstate trade and com-

merce, regardless of how small in amount or quantity

or value.”

The court then defined monopoly:

“The word ‘monopolize,’ as used in the Sherman

Antitrust Act means the power possessed by a com-

bination or conspiracy formed with the intent either

to obtain, or to maintain, the power to remove or

exclude competitors from the field of competition in

a particular business or industry.”

And lastly on this question the court stated:

“You are instructed that when any one has ac-

quired a natural monopoly by means which are

neither exclusionary, unfair, or predatory, he is not

disempowered to defend his position fairly.”

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