R.L. Jordan Oil Co. of North Carolina, Inc. v. Boardman Petroleum, Inc.

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
R. L. JORDAN OIL COMPANY OF 
NORTH CAROLINA, INCORPORATED,
Plaintiff-Appellant,
v.
 No. 01-1296
BOARDMAN PETROLEUM,
INCORPORATED, a Georgia
Corporation,
Defendant-Appellee.

Appeal from the United States District Court
for the District of South Carolina, at Spartanburg.
Henry M. Herlong, Jr., District Judge.
(CA-98-2892-7)
Argued: September 25, 2001
Decided: December 3, 2001
Before LUTTIG, WILLIAMS, and GREGORY, Circuit Judges.
Vacated and remanded with instructions by unpublished per curiam
opinion.
COUNSEL
ARGUED: Matthew A. Henderson, HENDERSON, BRANDT &
VIETH, P.A., Spartanburg, South Carolina, for Appellant. William
Marvin Grant, Jr., GRANT & LEATHERWOOD, P.A., Greenville,
South Carolina, for Appellee. ON BRIEF: Joshua M. Henderson,
2 R. L. JORDAN OIL CO. v. BOARDMAN PETROLEUM, INC.
HENDERSON, BRANDT & VIETH, P.A., Spartanburg, South Caro-
lina, for Appellant. R. Perry Sentell, III, KILPATRICK STOCKTON,
L.L.P., Augusta, Georgia, for Appellee.
Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).
OPINION
PER CURIAM:
R.L. Jordan Oil Company of North Carolina, Inc. (Jordan Oil)
appeals from the district court’s decision holding that Boardman
Petroleum, Inc. (Boardman) did not violate the South Carolina Unfair
Trade Practices Act (UTPA), S.C. Code Ann. § 39-5-10 et seq. (1995
& Supp. 2000), by selling gasoline below cost to maintain a two-cent
price differential with a brand name competitor. The record on appeal
does not provide sufficient information for us to confirm that the dis-
trict court had jurisdiction over Jordan Oil’s complaint. Moreover, we
believe that the novel question of state law at issue in this case is one
that would be best resolved by the Supreme Court of South Carolina.
Accordingly, we vacate the district court’s judgment and remand with
instructions to confirm the existence of subject matter jurisdiction
and, if jurisdiction exists, to certify the question of state law at issue
in this case to the Supreme Court of South Carolina.
I.
Both Jordan Oil and Boardman operated convenience stores in the
Southeast. Jordan Oil, incorporated in South Carolina, operated
approximately fifty-eight "Hot Spot" convenience stores in South
Carolina, North Carolina, and Georgia. Boardman, incorporated in
Georgia, operated approximately seventy "Smile Gas" stores in the
Southeast; approximately twenty-eight of those were located in South
Carolina.
R. L. JORDAN OIL CO. v. BOARDMAN PETROLEUM, INC. 3
Two of Jordan Oil’s Hot Spot convenience stores were located in
Spartanburg County, South Carolina, along Interstate Highway 26,
one at the intersection with U.S. Highway 221 and the other at U.S.
Highway 292. Both of these Hot Spot convenience stores were
located within five miles of Smile Gas convenience stores operated
by Boardman. The present controversy arises out of a price war
involving these four stores.
In July 1998, Jordan Oil began selling Shell brand gasoline at its
Hot Spot convenience stores. Not long after the Shell logo and colors
went up at Jordan Oil’s stores, Boardman lowered the price of regular
unleaded gasoline at its Smile Gas stores, setting it at two cents per
gallon below the price of the Shell brand gasoline. Jordan Oil
responded with its own price reduction, matching Boardman’s prices.
Boardman, however, lowered its prices again, reestablishing a two-
cent per gallon price differential. This cycle of price adjustments con-
tinued downward until both parties were selling gas below cost. The
parties continued to sell below cost until early October 1998.
II.
On September 2, 1998, Jordan Oil filed a complaint in state court
alleging that Boardman, in violation of the UTPA, sold gasoline
below cost, causing economic injury to Jordan Oil. Jordan Oil sought
both injunctive relief and treble damages but did not enumerate its
actual damages in its complaint.
On October 2, 1998, Boardman removed the case to the United
States District Court for the District of South Carolina. Boardman
filed an answer and a counterclaim alleging that Jordan Oil had vio-
lated the UTPA and seeking treble damages for the economic injury
caused by Jordan Oil. Boardman later estimated that it lost $49,000
on the sale of regular gasoline during the period that both parties were
selling below cost.
In its answer, Boardman argued that section 325 of the UTPA, S.C.
Code Ann. § 39-5-325 (1995 & Supp. 2000), violated the due process
of law provision of the South Carolina Constitution. S.C. Const. Art.
1, § 3. No state court had addressed whether this provision of the
UTPA violated the South Carolina Constitution. The district court,
4 R. L. JORDAN OIL CO. v. BOARDMAN PETROLEUM, INC.
therefore, certified this question to the Supreme Court of South Caro-
lina. The Supreme Court of South Carolina adopted the "reasonable
relationship standard" for reviewing challenges to state statutes on
substantive due process grounds. See R.L. Jordan Co. v. Boardman
Petroleum, Inc., 527 S.E.2d 763, 765 (S.C. 2000). Prior to this deci-
sion, South Carolina had applied the substantive due process analysis
employed by the United States Supreme Court during the Lochner
era. See Lochner v. New York, 198 U.S. 45 (1905).
Upon remand to the district court, the parties agreed to forgo a trial
by stipulating to facts. Based upon these stipulated facts, the district
court entered judgment in favor of Boardman on December 8, 2000.
The district court concluded that Boardman’s conduct was not cov-
ered by the UTPA because the UTPA did not apply to independent
gasoline retailers and furthermore, even if Boardman’s conduct were
covered under the UTPA, Boardman was not in violation because the
statute allows a retailer to sell below cost to "meet competition."
III.
Before we reach the merits of Jordan Oil’s appeal, we first must
determine whether diversity jurisdiction is proper.1 To satisfy the
requirements of federal diversity jurisdiction, a civil action must be
between "citizens of different States" and the amount in controversy
must exceed $75,000. 28 U.S.C.A. § 1332(a)(1) (West 1993 & Supp.
2001).
Looking first at the diversity of citizenship requirement, it is clear
from the facts above that the parties, both corporations, were incorpo-
rated in different states, Jordan Oil in South Carolina and Boardman
in Georgia. In addition to its state of incorporation, however, a corpo-
1
Although neither party addressed this issue, we are required to clarify
subject matter jurisdiction to determine whether we have the power to
hear the case. Long v. Silver, 248 F.3d 309, 314 n.2 (4th Cir. 2001); see
also Owens-Illinois, Inc. v. Meade, 186 F.3d 435, 442 n.4 (4th Cir.
1999)("[Q]uestions of subject matter jurisdiction must be decided ‘first
because they concern the court’s very power to hear the case.’") (quoting
2 James Wm. Moore et al., Moore’s Federal Practice § 12.30[1] (3d ed.
1998)).
R. L. JORDAN OIL CO. v. BOARDMAN PETROLEUM, INC. 5
ration is also a citizen "of the State where it has its principal place of
business." 28 U.S.C.A. § 1332(c)(1). There are two methods to ascer-
tain the principal place of business of a corporation. "One approach
makes the ‘home office,’ or place where the corporation’s officers
direct, control, and coordinate its activities, determinative. The other
looks to the place where the bulk of corporate activity takes place."
Mullins v. Beatrice Pocahontas Co., 489 F.2d 260, 262 (4th Cir.
1974). These tests have been termed the "nerve center test" and the
"place of operations test," respectively. Peterson v. Cooley, 142 F.3d
181, 184 (4th Cir. 1998). We "have endorsed neither [test] to the
exclusion of the other." Id; see also Commissioner of Internal Reve-
nue v. Soliman, 506 U.S. 168, 191 n.14 (1993) (Stevens, J., dissent-
ing) (recognizing that "some courts regard[ ] the home office as the
principal place of business and others regard[ ] it as the place where
the principal operations of the corporation are conducted").
At oral argument, the parties stated that they were unaware of
whether the district court had made a determination concerning their
principal places of business. The issue of subject matter jurisdiction,
however, is not affected by the parties’ inattention because the "par-
ties cannot waive lack of subject matter jurisdiction by express con-
sent, or by conduct, or even by estoppel . . . ." 13 Charles Alan Wright
et al., Federal Practice & Procedure § 3522 (1984). Accord Insurance
Corp. of Ireland, Ltd. v. Companie des Bauxites de Guinee, 456 U.S.
694, 702 (1982) ("[N]o action of the parties can confer subject-matter
jurisdiction upon a federal court. Thus, the consent of the parties is
irrelevant, . . . principles of estoppel do not apply, . . . and a party
does not waive the requirement by failing to challenge jurisdiction
early in the proceedings."). Therefore, it must be determined, for
example, whether Boardman’s activities in South Carolina, constitute
the bulk of its operations, which would destroy diversity if the place
of operations test applies.
We also are unable to determine, based on the facts before us,
whether the amount in controversy requirement has been met.
Removal is authorized for "any civil action brought in a State court
of which the district courts of the United States have original jurisdic-
tion." 28 U.S.C.A. § 1441. The issue, therefore, is whether Jordan Oil
has alleged that more than $75,000 is in controversy. Jordan Oil, in
6 R. L. JORDAN OIL CO. v. BOARDMAN PETROLEUM, INC.
its complaint, did not specify its alleged damages.2 According to the
stipulated facts, Boardman lost approximately $49,000 on the sale of
regular unleaded gasoline. Combining sales from all grades, however,
the Boardman stores operated at a profit. We do not reach the issue
of how Boardman’s overall economic gain affects its claim for dam-
ages because it appears, although we have not decided, that Board-
man’s counterclaim may not be used in calculating the amount in
controversy. See 14B Charles Alan Wright et al., Federal Practice and
Procedure § 3725 (3d ed. 1998) ("The traditional rule has been that
no part of the required jurisdictional amount can be met by consider-
ing a defendant’s counterclaim."). But see id. ("There are cases allow-
ing and cases denying removal on the basis of a compulsory
counterclaim."). The parties also stipulated that Jordan Oil paid on
average three cents per gallon more than Boardman for the gasoline
it retailed and that Jordan Oil lowered its prices to match Boardman’s
price. The lack of any information on Jordan Oil’s sales, however,
prevents this court from determining whether the amount in contro-
versy was sufficient for diversity jurisdiction.3
To ensure that the requirements for diversity jurisdiction are satis-
fied, we must remand to the district court to make the appropriate
findings of fact to enable it to ascertain, using one of the two methods
outlined above, the principal place of business of each party and to
determine the amount in controversy.
IV.
We now turn to the merits of Jordan Oil’s appeal, which will be
relevant only if the district court finds that diversity jurisdiction
exists. Jordan Oil argues that the state law issue in this case, interpre-
2
Boardman has the burden of establishing that the amount in contro-
versy is jurisdictionally sufficient. See Mulcahey v. Columbia Organic
Chems. Co., 29 F.3d 148, 151 (4th Cir. 1994) ("The burden of establish-
ing federal jurisdiction is placed upon the party seeking removal.").
3
When calculating the amount in controversy, the district court should
consider any special or punitive damages, such as treble damages, avail-
able to Jordan Oil under the UTPA. See Saval v. BL Ltd., 710 F.2d 1027,
1033 (4th Cir. 1983); 14B Charles Alan Wright et al., Federal Practice
and Procedure § 3702 (3d ed. 1998).
R. L. JORDAN OIL CO. v. BOARDMAN PETROLEUM, INC. 7
tation of the UTPA, is both novel and dispositive and therefore should
be certified to the Supreme Court of South Carolina. We agree.
In Grattan v. Board of School Commissioners, 805 F.2d 1160,
1164 (4th Cir. 1986), we explained that "[a] federal court’s certifica-
tion of a question of state law to that state’s highest court is appropri-
ate when the federal tribunal is required to address a novel issue of
local law which is determinative in the case before it." See also Lang-
ley v. Pierce, 993 F.2d 36, 37-38 (4th Cir. 1993) ("Because the resolu-
tion of the contentions of the parties is a matter of South Carolina law,
and it appears to us that there is no controlling precedent on point in
the decisions of the Supreme Court of South Carolina, we believe [it]
proper to certify to the Supreme Court of South Carolina for decision
the question in this case under S.C. App. Ct. R. 228.").
The UTPA provides, in pertinent part, the following:
Except as otherwise permitted to meet competition as pro-
vided by this chapter, it is declared an unfair trade practice
and unlawful for any person who is in the retail business of
selling motor fuel to sell motor fuel of like grade and quality
at retail at a price which is below the cost of acquiring the
product plus taxes and transportation where the intent or
effect is to destroy or substantially lessen competition or to
injure a competitor.
S.C. Code Ann. § 39-5-325(A). Whether or not Boardman engaged in
an unfair trade practice when it sold regular gasoline below cost
depends on what it means to "meet competition." Boardman claims
it reduced its price to maintain a two-cent per gallon differential
between its price and the price of Jordan’s Shell gasoline. If meeting
competition is limited to matching a competitor’s price, then Board-
man was in violation of the UTPA. If, however, meeting competition
allows a retailer to compensate for other competitive factors, such as
brand names, then Boardman’s actions did not violate the statute.4 Cf.
4
It appears that Boardman’s counterclaim, alleging that Jordan Oil vio-
lated the UTPA, fails under either reading because Jordan Oil reduced its
price below cost only to match Boardman’s price, never to a price below
Boardman. (J.A. at 69.)
8 R. L. JORDAN OIL CO. v. BOARDMAN PETROLEUM, INC.
Federal Trade Commission v. Sun Oil Co., 371 U.S. 505, 508 (1963)
("The two-cent-per-gallon difference in price between McLean and
SuperTest represented the ‘normal’ price differential then prevailing
in the area between ‘major’ and ‘non-major’ brands of gasoline. This
‘normal’ differential represents the price spread which can obtain
between the two types of gasoline without major competitive reper-
cussions."); Borden’s Farm Products Co. v. Ten Eyck, 11 F. Supp.
599, 601 (S.D.N.Y. 1935) (L. Hand, J.) ("[C]ommercially the ‘adver-
tised’ brands had come in the minds of the public to mean a different
grade of milk. The public may have been wrong; all milk is subject
to the same tests; it may have been right; certainly it was, if the plain-
tiff’s protestations in its advertisements are true. But right or wrong,
that is what it believed, and its belief was the important thing."). We
were unable to locate any controlling precedent on the interpretation
of "meet competition" under section 325(A) of the UTPA. As this
novel issue of state law is dispositive of the present case, it should be
certified to the Supreme Court of South Carolina pursuant to Rule 228
of the South Carolina Appellate Court Rules.
V.
In summary, we vacate the judgment of the district court and
remand with instructions to determine whether there is diversity of
citizenship and whether the amount in controversy exceeds the juris-
dictional amount. If jurisdiction exists, the district court is directed to
certify the issue concerning whether an independent retailer can "meet
competition" by selling below cost at a price that is two cents below
the price of the national brand competitor under the UTPA.
VACATED AND REMANDED WITH INSTRUCTIONS