Commonwealth of Kentucky v. Marathon Petroleum Company LP
MEMORANDUM OPINION AND ORDER by Judge David J. Hale on 12/1/2016 - Marathon's motion to amend order to permit interlocutory appeal (D.N. 48) is DENIED. cc: Counsel(DAK)
UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF KENTUCKY
COMMONWEALTH OF KENTUCKY,
Civil Action No. 3:15-cv-354-DJH
MARATHON PETROLEUM COMPANY,
* * * * *
MEMORANDUM OPINION AND ORDER
This matter is before the Court on Defendant Marathon’s motion to permit interlocutory
appeal of the Court’s June 8, 2016 Memorandum Opinion and Order denying Marathon’s motion
to dismiss. (Docket No. 41) After careful consideration, the Court will deny the motion for the
reasons set forth below.
The Kentucky Attorney General brought this action against Marathon asserting violations
of federal antitrust and state consumer protection laws, and asserting a claim of unjust
enrichment. (D.N. 18, PageID # 167–69) The Commonwealth alleges that Marathon holds a
dominant share of the reformulated gasoline market in Louisville and Northern Kentucky,
allowing Marathon to illegally manipulate the market. (D.N. 18, PageID # 153–54; D.N. 31,
PageID # 255) Marathon filed a motion to dismiss the complaint for failure to state a claim upon
which relief can be granted. (D.N. 28) The Court denied the motion with respect to the federal
antitrust and state consumer protection law claims, dismissing only the unjust enrichment claim.
(D.N. 41, PageID # 444)
The Court previously found that the Commonwealth alleged sufficient facts to support
application of the control exception to the Illinois Brick indirect-purchaser rule at the motion-to1
dismiss stage because the Commonwealth’s complaint claimed that Speedway is a wholly-owned
subsidiary of Marathon. (D.N. 41, PageID # 430; D.N. 18, PageID # 153) Marathon now
challenges the existence and application of the control exception and seeks amendment of this
Court’s prior order to permit interlocutory appeal pursuant to 28 U.S.C. § 1292(b).
Interlocutory appeal pursuant to 28 U.S.C. § 1292(b) requires the moving party to show
that (1) the order involves a controlling question of law; (2) there is substantial ground for
difference of opinion as to that controlling question of law; and (3) an immediate appeal from the
order may materially advance the ultimate termination of the litigation. “It is well-established
that all three statutory requirements must be met for the court to certify an appeal
under § 1292(b).” Lang v. Crocker Park, LLC, No. 1:09 CV 1412, 2001 WL 3297865, at *5
(N.D. Ohio July 29, 2011) (citing White v. Nix, 43 F.3d 374, 376 (8th Cir. 1994)). “Review
under § 1292(b) should be sparingly granted and then only in exceptional cases.” In re City of
Memphis, 293 F.3d 345, 350 (6th Cir. 2002) (citing Kraus v. Bd. of Cty. Rd. Comm’rs, 364 F.2d
919, 922 (6th Cir. 1966)).
A. Controlling Question of Law
The first requirement under § 1292(b) is that the issue presented is a controlling question
of law. According to the Sixth Circuit, “[a] legal issue is controlling if it could materially affect
the outcome of the case.” In re City of Memphis, 293 F.3d at 351 (citing In re Baker & Getty
Fin. Servs., Inc. v. Nat’l Union Fire Ins. Co., 954 F.2d 1169, 1172 n.8 (6th Cir. 1992)).
Additionally, this Court has found that “[a]n issue of law is controlling if its incorrect disposition
amounts to reversible error on appeal.” In re Big Rivers Elec. Corp., 266 B.R. 100, 104 (W.D.
Here, Marathon identifies the controlling issues of law as “(1) whether there is an
ownership/control exception to the Illinois Brick indirect purchaser rule, in the first place; and
(2) if so, what is necessary to establish the applicability of that exception.” (D.N. 48-1, PageID #
522) Marathon argues that these issues “are controlling because their resolution determines
whether the Attorney General can sue for damages in this action.” (Id., PageID # 523)
Illinois Brick and its exceptions provide bright-line rules that determine who can and
cannot sue for antitrust violations. Illinois Brick Co. v. Illinois, 431 U.S. 720, 736, 744–45
(1997). While the Court finds no error in its application of the control exception, the Illinois
Brick issues arguably present controlling questions of law that could materially affect the
outcome of the case or require reversal if incorrectly applied. (See D.N. 48, PageID # 429–31)
However, even if the issues are controlling questions of law, the other two requirements of
§ 1292(b) must still be met for the Court to certify interlocutory appeal.
B. Substantial Ground for Difference of Opinion
The second requirement under § 1292(b) is that there is a substantial ground for
difference of opinion as to the controlling question of law. A substantial ground for difference of
opinion exists when (1) the question is difficult, novel, and either a question on which there is
little precedent or one whose correct resolution is not substantially guided by previous decisions;
(2) the question is difficult and of first impression; (3) a difference of opinion exists within the
Sixth Circuit; or (4) the circuits are split on the question. In re Miedzianowski, 735 F.3d 383,
384 (6th Cir. 2013). Marathon fails to satisfy any of these elements.
Marathon argues that “[t]he Illinois Brick issues in the Court’s Order present substantial
ground for difference of opinion because neither the existence nor the nature of the
ownership/control exception [is] established by Supreme Court or Sixth Circuit precedent.”
(D.N. 48-1, PageID # 524)
First, Marathon asserts that despite application of the control
exception by lower courts, the Supreme Court rejected the existence of any such exception in
Kansas v. UtiliCorp United, Inc., 497 U.S. 199, 216 (1990). (Id.) Second, Marathon asserts that
even if the control exception exists, there is no definitive guidance on its application in the Sixth
Circuit or elsewhere. (Id., PageID # 525)
The Court is unpersuaded. Marathon’s conclusion that UtiliCorp can be read to imply
that no exceptions to the Illinois Brick rule exist is incorrect and contrary to the way a number of
other courts have interpreted UtiliCorp. The petitioners in UtiliCorp asked the Supreme Court to
create an exception to the Illinois Brick rule to permit indirect-purchaser suits in cases involving
regulated public utilities that pass on 100 percent of their costs to their customers. UtiliCorp,
497 U.S. at 208. The Supreme Court refused to do so, stating that “[a]lthough the rationales of
Hanover Shoe and Illinois Brick may not apply with equal force in all instances, we find it
inconsistent with precedent and imprudent in any event to create an exception for regulated
public utilities.” Id. (emphasis added). UtiliCorp was limited to a very specific exception
proposed by the petitioners in that case—one for public utilities. The Supreme Court did not
deny the existence of all exceptions; rather, it simply refused to create a new one.
Furthermore, the Supreme Court acknowledged and analyzed the existing cost-plus
contract exception, which directly refutes Marathon’s interpretation of UtiliCorp. Id. at 217.
This exception applies when an indirect purchaser buys under a pre-existing cost-plus contract.
Id. The cost-plus contract exception was recognized in both Hanover Shoe and Illinois Brick.
Id. (citing Hanover Shoe, Inc. v. United Shoe Mach. Corp., 392 U.S. 481, 494 (1968); Illinois
Brick, 431 U.S. at 736). The petitioner in UtiliCorp tried to argue that the facts of that case fit
within this exception, but the Supreme Court rejected this argument because the respondent did
not sell gas to its customers under a pre-existing cost-plus contract. Id. at 218.
This Court previously interpreted UtiliCorp to hold that the Supreme Court refused to
create new exceptions to Illinois Brick. (D.N. 41, PageID # 431) Other courts have interpreted
UtiliCorp to hold the same. See In re ATM Fee Antitrust Litig., 686 F.3d 741, 748–49 (9th Cir.
2010) (“While the Supreme Court has expressed reluctance in carving out exceptions to the
Illinois Brick rule, limited exceptions do exist.”); Dickson v. Microsoft Corp., 309 F.3d 193,
214–15 (4th Cir. 2002) (following “the Supreme Court’s clear directive in Utilicorp United
against crafting new exceptions to the Illinois Brick rule”); In re Brand Name Prescription Drugs
Antitrust Litig., 123 F. 3d 599, 605 (7th Cir. 1997) (“Utilicorp implies that the only exceptions to
the Illinois Brick doctrine are those stated in Illinois Brick itself . . . .”); Macomb Interceptor
Drain Drainage Dist. v. Kilpatrick, 896 F. Supp. 2d 650, 665 (E.D. Mich. 2012) (acknowledging
that UtiliCorp resisted calls to carve out exceptions to Illinois Brick other than the cost-plus and
control exceptions already recognized); Jersey Dental Labs. v. Dentsply Int’l., Inc., 180 F. Supp.
2d 541, 547 (D. Del. 2001) (“In [UtiliCorp], the Court expressed great reluctance to create any
new exceptions to Illinois Brick.”).
Marathon also argues that, even if there is an control exception, there is no definitive
guidance on the application of that exception. But this argument is also unpersuasive. The
control exception was first recognized in Illinois Brick.
In that case, the Supreme Court
described the cost-plus contract exception and further noted that “[a]nother situation in which
market forces have been superseded and the pass-on defense might be permitted is where the
direct purchaser is owned or controlled by its customer.” Illinois Brick, 431 U.S. at 736 n.16
(citing Perkins v. Standard Oil Co., 395 U.S. 642, 648 (1969); In re W. Liquid Asphalt Cases,
487 F.2d 191, 197, 199 (9th Cir. 1973)). The Sixth Circuit recognized and applied this exception
in Jewish Hospital Ass’n of Louisville, Ky., Inc. v. Stewart Mech. Enters., Inc., 628 F.2d 971 (6th
In that case, the Sixth Circuit concluded that the exception “is limited to
relationships involving such functional economic or other unity between the direct purchaser and
either the defendant or the indirect purchaser that there effectively has been only one sale.” Id. at
975 (citing In re Beef Indus. Antitrust Litig., 600 F.2d 1148, 1162 (5th Cir. 1979)).
The Sixth Circuit was not without guidance in coming to this conclusion. First, the court
considered the “narrow scope of exemptions to the indirect-purchaser rule” emphasized in
Illinois Brick. Second, the court looked at the cases cited by Illinois Brick. Id. In Perkins, the
defendant was a sixty percent owned subsidiary, and in Western Liquid Asphalt, the defendant
controlled its direct customers by acquiring their stock or by arranging to finance their purchases.
Id. The Sixth Circuit had guidance from at least one other circuit as well, as it cited a Fifth
Circuit case that also acknowledged the control exception. Id. In that case, the Fifth Circuit
considered whether the control exception from Illinois Brick applied to a case in which retail
chains were alleged to have conspired with and controlled the meat packers and slaughterers in a
price-fixing scheme. See In re Beef Indus. Antitrust Litig., 600 F.2d at 1160.
Since Jewish Hospial, other circuits have recognized the existence of and applied the
control exception. See In re ATM Fee Antitrust Litig., 686 F.3d at 749; (“While the Supreme
Court has expressed reluctance in carving out exceptions to the Illinois Brick rule, limited
exceptions do exist.”); Howard Hess Dental Laboratory v Dentsply Int’l, 424 F.3d 363, 371–72
(3d Cir. 2005) (explaining and applying the control exception); In re Brand Name Prescription
Drugs Antitrust Litig., 123 F.3d at 605–06 (recognizing the control exception); Royal Printing
Co. v. Kimberly Clark Corp., 621 F.2d 323, 327 n.4 (9th Cir. 1980) (acknowledging that Illinois
Brick created the control exception).
Finally, there are not substantial grounds for difference of opinion when a party merely
disagrees with a court’s order. MidFirst Bank v. Johnston, No. 5:13-mc-49, 2014 WL 694943, at
*4 (N.D. Ohio Feb. 21, 2014); Couch v. Telescope, Inc., 611 F.3d 629, 633 (9th Cir. 2010). In
its motion, Marathon writes that “the Attorney General alleged (inaccurately) that Speedway is a
wholly owned subsidiary of Marathon and sells gasoline directly to natural persons.” (D.N. 481, PageID # 520) Marathon appears to base its disagreement with the Court’s decision, at least
in part, on the premise that the Attorney General’s complaint inaccurately described Marathon’s
corporate structure. But the June 8, 2016 Memorandum Opinion and Order concerned a motion
to dismiss under Federal Rule of Civil Procedure Rule 12(b)(6), and in considering such a
motion, the Court must take the facts alleged by the plaintiff in the complaint as true. (D.N. 41,
PageID # 428–29) That is exactly what the Court did. (See id., PageID # 430–31)
The In re Miedzianowski elements are not satisfied here. See 735 F.3d at 384. This issue
is not novel or one of first impression. Given the extent to which the control exception has been
applied throughout the various circuits, there is adequate guidance on this issue. Furthermore,
there is no difference of opinion within the Sixth Circuit itself, nor are the circuits split on the
existence and application of this exception. Therefore, no substantial ground for difference of
opinion exists, and the second requirement of § 1292(b) is not satisfied.
C. Whether Immediate Appeal Materially May Advance the Ultimate Termination of the
The third requirement of § 1292(b) is that an immediate appeal may materially advance
the ultimate termination of the litigation. “When litigation will be conducted in substantially the
same manner regardless of [the court’s] decision, the appeal cannot be said to materially advance
the ultimate termination of the litigation.” In re City of Memphis, 293 F.3d at 351 (quoting White
v. Nix, 43 F.3d at 378–79).
Marathon argues that “[a] conclusive ruling by the Sixth Circuit on the Illinois Brick
issues will materially advance resolution of this litigation because this case will proceed in a
substantially different manner.” (D.N. 48-1, PageID # 528) It claims that resolution of the
Illinois Brick issues “will narrow the scope of discovery, limit the issues on which experts opine,
narrow the issues for summary judgment, and narrow the issues for any trial.” (Id.) The basis of
this argument is that a different ruling on the Illinois Brick issues would prevent the Attorney
General from seeking damages, thereby eliminating any discovery with respect to damages. (Id.,
PageID # 528–29)
Marathon’s argument is unconvincing. First, contrary to what Marathon insinuates, the
Sixth Circuit has made a conclusive ruling on the Illinois Brick issues to which Marathon refers.
As discussed above, the Sixth Circuit has clearly recognized and applied the control exception
from Illinois Brick. See Jewish Hosp. Ass’n of Louisville, Ky., Inc., 628 F.2d at 975. Second,
Marathon essentially asserts that a change in the scope of discovery could cause the litigation to
proceed in a substantially different manner. (D.N. 48-1, PageID # 528) The Court disagrees.
Not only would an interlocutory appeal delay litigation in this case, but this case would continue
in substantially the same manner regardless of the Court’s decision. See In re City of Memphis,
293 F.3d at 351 (finding the third element of § 1292(b) was not met because the City of
Memphis would pursue its defense in substantially the same manner). Whether or not the
Attorney General can seek damages, this case will require substantial discovery because the
Commonwealth seeks injunctive relief and restitution as well, and the parties will still have to
conduct discovery concerning liability for the alleged antitrust injuries. (D.N. 18, PageID # 171)
Therefore, the Court concludes that interlocutory appeal of the Illinois Brick issues would not
materially advance the ultimate termination of the litigation, and Marathon fails to satisfy the
third element of 28 U.S.C. § 1292(b).
Because Marathon fails to satisfy all three elements of § 1292(b), the Court declines to
amend its order to certify interlocutory appeal. Accordingly, and the Court being otherwise
sufficiently advised, it is hereby
ORDERED that Marathon’s motion to amend order to permit interlocutory appeal (D.N.
48) is DENIED.
December 1, 2016
David J. Hale, Judge
United States District Court
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