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MARATHON PETROLEUM CO. v. LOBOSCO

May 6, 1985

MARATHON PETROLEUM COMPANY, (FORMERLY KNOWN AS MARATHON OIL COMPANY), AN OHIO CORPORATION, PLAINTIFF-COUNTERDEFENDANT,
v.
SAM S. LOBOSCO, DEFENDANT-COUNTERPLAINTIFF.



The opinion of the court was delivered by: Rovner, District Judge.

MEMORANDUM OPINION AND ORDER

This case is before the Court on a motion by the plaintiff, Marathon Petroleum Company ("Marathon"), for summary judgment on the counterclaim. On June 4, 1980, Marathon and the defendant, Sam S. LoBosco ("LoBosco"), executed a written lease for a service station located in Elk Grove Village, Illinois, Pursuant to the lease, LoBosco became a distributor of Marathon products in the Elk Grove area. Under the lease terms, LoBosco agreed not to contaminate, misbrand or otherwise impair products with Marathon's trademark.

In the counterclaim, LoBosco alleges that Marathon agents instructed him to sell Marathon gas, which allegedly contained a special additive, at less than cost in order to compete with nearby Cheker and Speedway gas stations. LoBosco also asserts that Marathon threatened to terminate his lease if he did not sell its product at prices offered by the nearby competitors. Furthermore, LoBosco claims that Marathon wholly or partially owns these competitors.

After September, 1981, LoBosco purchased gasoline, which did not contain the Marathon additive, from an independent supplier. Marathon alleges that LoBosco did not properly debrand the service station in light of the consideration that he was not selling the Marathon gasoline with the additive.

Consequently, on April 12, 1982, Marathon informed LoBosco that it was terminating their lease agreement pursuant to the Petroleum Marketing Practices Act, 15 U.S.C. § 2801, et seq. ("PMPA"). Approximately three months later, Marathon filed its complaint in the instant case. Marathon alleged that it was entitled to damages under: (1) the Lanham Act, 15 U.S.C. § 1051, et seq.; (2) the Illinois Uniform Deceptive Trade Practices Act, Ill.Rev. Stat., ch. 121 1/2, § 311, et seq.; and (3) a claim for breach of contract based on the allegation that LoBosco misbranded Marathon gasoline. Marathon also sought a court order permitting it to repossess the service station.

Judge Aspen ordered an evidentiary hearing on Marathon's motion to evict LoBosco. The hearing was conducted by Magistrate Sussman on October 14, 1982; Findings of Fact and Conclusions of Law were entered on November 29, 1982. The Magistrate found that when LoBosco sold gas that was not Marathon-branded gas, LoBosco failed to properly cover up Marathon's logos; when LoBosco later did attempt to debrand his station, he used methods which did not completely conceal Marathon's trademark. The Magistrate further found that Marathon gave proper notice to terminate the lease pursuant to the PMPA; based on that finding and of LoBosco's breach of the lease due to misbranding, the Magistrate concluded that LoBosco should be evicted. On December 14, 1982, Judge Aspen accordingly adopted Magistrate Sussman's Findings of Fact and Conclusions of Law and entered an order for eviction.

On January 3, 1983, LoBosco filed an amended answer and counterclaim seeking: (1) damages pursuant to the Clayton Act, 15 U.S.C. § 15, for Marathon's alleged violation of the Sherman Antitrust Act, 15 U.S.C. § 1 and 2; (2) a declaration that Marathon misused its trademarks and was not entitled to possession of the station until May 31, 1983, the end of the lease period; (3) a preliminary and permanent injunction to enjoin Marathon from violating the Sherman Act; (4) a declaration that Marathon violated the Illinois Franchise Disclosure Act, Ill.Rev.Stat. ch. 121 1/2, § 701, et seq., for failing to file a franchise disclosure statement; and (5) for rescission of the lease and franchise agreement.

I. Application of the Law of the Case Doctrine.

Marathon contends again, as it did on its previously filed motion to dismiss, that the "law of the case" doctrine, which precludes parties from relitigating the same issues on which the court has already ruled, likewise precludes LoBosco's counterclaim from being considered. Judge Aspen's order of eviction, however, was based on evidence concerning whether LoBosco failed to properly debrand in a manner which terminated the lease and violated the PMPA. The evidentiary hearing in no way litigated the counterclaim's assertions that Marathon violated the Sherman Act, just as it never adjudicated Marathon's Lanham Act claim. The general rule regarding the judicially created law of the case doctrine is that "it is not an inexorable command, and must not be utilized to accomplish an obvious injustice." Velsicol Chemical Corporation v. Mansanto Company, 579 F.2d 1038, 1050 (7th Cir. 1978), quoting Cochran v. M & M Transportation Co., 110 F.2d 519, 521 (1st Cir. 1940).

Although the Magistrate's findings set forth the reasons why the lease in question could be terminated, the evidentiary hearing in no way adjudicated defendant's allegation that Marathon coerced him into selling Marathon gas below cost but at a price competitive with non-Marathon branded stations which were nonetheless owned by Marathon. This allegation of Sherman Act liability is not determined by a prior finding that the lease was breached. Compare, Itin v. Mobil Oil Corporation, 527 F. Supp. 898 (E.D.Mich., S.D. 1981).

Moreover, "[t]he decision of a trial or appellate court whether to grant or deny a preliminary injunction does not constitute law of the case for the purposes of further proceedings and does not limit or preclude the parties from litigating the merits. . . ." Berrigan v. Sigler, 499 F.2d 514, 518 (D.C. Cir. 1974) (footnote omitted). See also 18 Wright & Miller, Federal Practice and Procedure. Jurisdiction, § 4478 at 798-99 (1981). Because the hearing before the Magistrate to determine whether LoBosco should be evicted from the service station was in the nature of a hearing for a preliminary injunction, this Court is not bound by the law of the case doctrine to accept the Magistrate's Findings of Fact as conclusively established. Because the instant motion for summary judgment filed by Marathon in large part relies upon those Findings of Fact, and because LoBosco's evidentiary material submitted in opposition sets up material disputes of fact with respect to those findings, Marathon's motion for summary judgment must be denied.*fn1

The facts as presented by LoBosco are as follows. Before entering into the lease/franchise agreement with Marathon, LoBosco had conversations with Marathon representatives which led him to understand that Marathon would actively assist him in succeeding in his Marathon branded service station business. He understood that upon entering into the relationship with Marathon, he would receive the right to sell automotive equipment and services and petroleum products bearing the Marathon trademark and would benefit from various Marathon programs and services such as advertising, dealer training, credit card service, maintenance of the station, and 30 day credit terms upon the purchase of gasoline and other products. At no time during these conversations was he informed that Marathon had an ownership interest in Cheker and that Marathon wholly owned Speedway. He did not know that Marathon planned a new Cheker and a new Speedway station within a year of his entering into the lease/franchise agreement, that Marathon sells 85% of its gasoline to non-branded direct competitors such as Cheker and Speedway, and that such competitors would purchase gas at a price significantly less than his price. He was assured by Marathon representatives during the negotiations, who referred to his initial lease as a "trial franchise," that he would be able to purchase Marathon gasoline for resale to the public at a profit, that the average station made a resale profit of 13.59%, and that he could not purchase gasoline from any other source because of the non-contamination clause in his lease.

Needless to say, LoBosco's expectations of a profitable business did not come to pass, primarily because, as he contends, Marathon opened up a Cheker and a Speedway station, to which Marathon sold gasoline at much lower prices, in close proximity to his station. LoBosco states that during the summer of 1980 he informed Ken Dainton, his Marathon sales representative, that he could not compete with the ...


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