Coastal Fuels v. Caribbean Petro

April 6, 1993
UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
No. 92-2301
COASTAL FUELS OF PUERTO RICO, INC.,
Plaintiff, Appellant,
v.
CARIBBEAN PETROLEUM CORPORATION, ET AL.,
Defendants, Appellees.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
[Hon. Juan M. Perez-Gimenez, U.S. District Judge.]
Before
Breyer, Chief Judge,
Selya and Cyr, Circuit Judges.
Michael S. Yauch with whom John F. Malley, III, McConnell,
Valdes, Kelly, Sifre, Griggs & Ruiz-Suria and Neil O. Bowman were on
brief for Coastal Fuels of Puerto Rico, Inc.
Ruben T. Nigaglioni with whom Jorge A. Antongiorgi, and Ledesma,
Palou & Miranda were on brief for Caribbean Petroleum Corporation.
Juan F. Doval with whom Jorge R. Jimenez and Miguel Garcia Suarez
were on brief for Harbor Fuel Service, Inc. and Caribbean Fuel Oil
Trading, Inc.
April 6, 1993
1
BREYER, Chief Judge. Coastal Fuels of Puerto Rico
buys marine fuel oil in San Juan and resells that oil to
ocean-going liners at berth in San Juan Harbor. It brought
this antitrust action against its local fuel oil supplier,
Caribbean Petroleum Corporation ("CAPECO"), and two of its
competitors, both of whom CAPECO supplies. Coastal
basically claims that ever since October 1991, when Coastal
entered the San Juan market, CAPECO has charged Coastal's
two competitors prices that are significantly lower than the
prices it charges Coastal. This unjustified price
difference, says Coastal, violates the Robinson-Patman Act,
15 U.S.C. 13, and the Sherman Act, 15 U.S.C. 1. Coastal
asked the district court to enter a preliminary injunction
"requiring CAPECO to provide fuel oil to Coastal on terms
and conditions no less favorable than those made available"
to Coastal's competitors. The district court decided not to
enter the injunction. Coastal appeals. We affirm the
decision.
In deciding whether to issue a preliminary
injunction, a district court must ask whether the plaintiff
is likely to succeed on the merits, whether the plaintiff
will otherwise suffer irreparable harm, whether the benefits
of an injunction will, on balance, outweigh the burdens, and
whether an injunction is consistent with the "public
interest." Planned Parenthood League v. Bellotti, 641 F.2d
1006, 1009 (1st Cir. 1981); Boston Celtics Ltd. Partnership
v. Shaw, 908 F.2d 1041, 1048 (1st Cir. 1990). This court
will normally give the district court considerable leeway in
making its decision, at least where, as here, the decision
rests upon an exercise of judgment and a record that is
incomplete. Indeed, normally we will reverse the district
court's decision on such matters only if we are convinced
that it "abused its discretion" or committed a "clear error"
of fact or related law. See, e.g., Massachusetts Ass'n of
Older Americans v. Sharp, 700 F.2d 749, 751-52 (1st Cir.
1983). We can find no such error in the present case.
For one thing, Coastal's "likelihood of success on
the merits," is, at best, uncertain. On the one hand,
Coastal presented witnesses who testified to facts
indicating significant price differences. They said that:
(1) After Coastal entered the San Juan market, the
resale prices charged by its competitors (to the
ships) dropped by nearly $1 per barrel;
(2) Coastal's competitors' resale prices were at,
or below, the prices CAPECO charged Coastal;
(3) Coastal, though it had expected to earn
profits, lost $1.3 million during its first ten
months of operations;
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(4) CAPECO (perhaps by mistake) once sent Coastal
an invoice showing a price of $1.45 per barrel
less than the price CAPECO charged Coastal;
(5) Two CAPECO executives told Coastal executives
that CAPECO was charging Coastal's competitors
lower prices than CAPECO charged Coastal.
On the other hand, the record is not at all
specific about the prices charged. Nowhere does it contain
figures, or even estimates, of the actual prices either
Coastal, or Coastal's competitors paid for fuel oil. At the
same time, it contains other evidence that militates against
an eventual finding of unlawful behavior. Cross-examination
of Coastal's witnesses revealed that, when CAPECO officials
told them CAPECO charged Coastal's competitors less, the
officials immediately added that the price differences
reflected "different contract" terms. The evidence also
shows that CAPECO's per barrel prices diminished as
customers ordered in greater volumes -- a kind of volume-
related pricing apparently commonplace in the oil industry.
Coastal apparently paid "spot sales" prices for oil, and it
may have bought in somewhat lower volumes. The Robinson-
Patman Act does not prohibit volume-related price
differences that reflect genuine cost differences. See 15
U.S.C. 13(a); FTC v. Morton Salt Co., 334 U.S. 37, 48
(1948); Frederick M. Rowe, Price Discrimination Under the
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Robinson-Patman Act, ch. 10 at 265-321 (1962). Nor does it
prohibit price differences between spot sales and long-term
contract sales that reflect different market conditions.
See Texas Gulf Sulphur Co. v. J. R. Simplot Co., 418 F.2d
793, 806-08 (9th Cir. 1969); Rowe, supra, 4.2 at 50, ch.
11 at 322-29.
It may well be that, at trial, Coastal would
produce more specific price information, CAPECO would fail
to demonstrate "cost justification," and, the potential
cost, or market, related differences between "spot" and
"contract" sales would evaporate. But, the opposite may also
prove true. At this stage, a court could reasonably want to
see more evidence -- insisting that the plaintiff make a
somewhat stronger, more specific, showing of a likely
violation of law, including a probability of overcoming what
the evidence now shows as plausible defenses -- before
finding a likelihood of success on the merits. See, e.g.,
Atari Games Corp. v. Nintendo of America, Inc., 975 F.2d
832, 837 (Fed. Cir. 1992) (plaintiff must show "likelihood
that it will overcome . . . defense"); New England Braiding
Co. v. A.W. Chesterton Co., 970 F.2d 878, 882-83 (Fed. Cir.
1992) (same). But cf. Dallas Cowboys Cheerleaders, Inc. v.
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Scoreboard Posters, Inc., 600 F.2d 1184, 1188 (5th Cir.
1979).
For another thing, the district court did not err
in finding that Coastal would not suffer "irreparable harm"
that a later damage award could not avoid. On the one hand,
Coastal presented two witnesses who testified to such harm.
These Coastal executives said, for example, that:
(1) "[F]uel from CAPECO is the only practical way
to purchase fuel in the harbor."
(2) "[I]t's absolutely imperative that you have
the supply from CAPECO refinery it's the only
locally produced product from San Juan harbor, and
without that access on equal basis to that supply
you cannot compete in San Juan harbor."
(3) "[W]e are sustaining losses in here, . . . I
feel it's damaging our trade mark, and our brand
and our reputation, and I don't think we can
continue doing business like this."
(4) Withdrawal from San Juan Harbor "would serve
irreparable damage upon Coastal's name which goes
back to 1915 in the form of serving [marine] . . .
fuel in 20 other ports that we supply. . . ."
On the other hand, cross-examination revealed that
Coastal is a subsidiary of a large firm (of the same name)
that sells marine fuel in 20 other ports; that, on at least
three occasions, Coastal has imported marine fuel to San
Juan (for resale) from its parent company's refinery in
Aruba; that CAPECO stored at least some of this imported
fuel oil for Coastal in CAPECO's San Juan facilities; that
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Coastal also, on at least one occasion, purchased fuel oil
from Sun Oil, apparently in Puerto Rico; and that Coastal's
witnesses (despite their assurances that importation was not
possible) were not familiar with the relevant prices.
Given this record, we cannot second-guess the
district court's judgment that Coastal had shown neither an
inability to survive (during the course of the litigation)
on imported oil, nor a potential loss of "goodwill" that a
later damage award could not readily compensate. Appellants
presently point out that the courts possess the power to
issue a business-preserving injunction, at least where a
future damage remedy may prove inadequate. Compare, e.g.,
Semmes Motors, Inc. v. Ford Motor Co., 429 F.2d 1197, 1205
(2d Cir. 1970) (injunction proper to prevent termination of
business) and Jacobson & Co. v. Armstrong Cork Co., 548 F.2d
438, 444-45 (2d Cir. 1977) (injunction proper to prevent
loss of customers) with Kenworth of Boston, Inc. v. Paccar
Financial Corp., 735 F.2d 622, 625 (1st Cir. 1984) (no real
threat of business closure) and Goldie's Bookstore, Inc. v.
Superior Court of California, 739 F.2d 466, 472 (9th Cir.
1984) (insufficient evidence of "goodwill" loss). But, we
also agree with the district court that plaintiff failed to
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demonstrate the existence of circumstances that would
require the exercise of that power in this case.
The upshot is a preliminary injunction record that
tends to show price differences, that is unclear about
amounts, that suggests the existence of significant
defenses, and that is not particularly convincing in respect
to "irreparable harm." Were "price differences" an
unmitigated evil, the case for a preliminary injunction
would be stronger. But, as we have previously stated, those
who wrote the Robinson-Patman Act had pro-competitive (as
well as pro-competitor) objectives in mind. See Monahan's
Marine Inc. v. Boston Whaler, Inc., 866 F.2d 525, 529 (1st
Cir. 1989). And, price differences, based upon cost
savings, will sometimes have a pro-competitive impact. Cf.
id. (recognizing anti-competitive dangers of forbidding
selective, but non-predatory, price cutting). Thus, we
understand the district court's hesitancy to issue a
preliminary injunction, not only without a stronger showing
of "irreparable harm," but also without knowing more about
the facts of the case. Its decision, in our view, is
lawful.
We add two further points. First, Coastal's
complaint also asserts that CAPECO and Coastal's competitors
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violated the Sherman Act, 15 U.S.C. 1. Coastal's request
for a preliminary injunction, however, rested almost
entirely upon its Robinson-Patman Act claim. And, Coastal,
on this appeal, does not contend that it has made an
evidentiary showing sufficient to warrant a preliminary
injunction on the Sherman Act claim. Cf. Monahan's Marine,
866 F.2d at 529 ("evidence of a violation of the Robinson-
Patman Act, showing injury only to competitors, does not
automatically show a violation of the Sherman Act as well").
Second, all three defendants (CAPECO and Coastal's
two competitors) asked the district court to dismiss
Coastal's Robinson-Patman Act claims on the ground that
Coastal could not show that either a high-price sale to
Coastal, or a low-price sale to a competitor, took place "in
[interstate] commerce." 15 U.S.C. 13(a); Standard Oil Co.
v. FTC, 340 U.S. 231, 236-37 (1951); Mayer Paving & Asphalt
Co. v. General Dynamics Corp., 486 F.2d 763, 766 (7th Cir.
1973), cert. denied, 414 U.S. 1146 (1974); I Phillip Areeda
& Donald F. Turner, Antitrust Law, 233 at 248 (1978);
Rowe, supra, 4.9 at 79. The district court denied the
motion. The defendant competitors ask us now to say that,
in doing so, the court was wrong.
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We do not reach the interstate commerce question
in the context of this appeal. The legality of the order
from which Coastal appeals -- the denial of the preliminary
injunction -- does not depend upon the "in commerce" issue.
The parties that wish to raise the issue, the competitors,
are defendants; and, they have not filed a notice of appeal.
Fed. R. App. P. 3, 4. And, in any event, the order of which
they complain, the refusal to grant their motion to dismiss,
is not an appealable order. See Rodriguez v. Banco Central,
790 F.2d 172, 177 (1st Cir. 1986) (criteria for an
appealable collateral order).
For these reasons, the decision of the district
court is
Affirmed.
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