Filed D.C.

Superior Court 11/08/2013 19:22PM Clerk of the Court

IN THE SUPERIOR COURT OF THE DISTRICT OF COLUMBIA CIVIL DIVISION DISTRICT OF COLUMBIA, Plaintiff, v. EXXONMOBIL OIL CORPORATION, et al., Defendants. ) ) ) ) ) ) ) ) ) ) )

Case No. 2013 CA 005874 B Judge Craig Iscoe Next Event: Initial Scheduling Conference Date: December 13, 2013

DISTRICT OF COLUMBIAS MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO MOTIONS TO DISMISS OF DEFENDANTS EXXONMOBIL OIL CORP., CAPITOL PETROLEUM GROUP, ANACOSTIA PETROLEUM REALTY,LLC AND SPRINGFIELD PETROLEUM REALTY, LLC Defendants ExxonMobil Oil Corp. Capitol Petroleum Group, Anacostia Petroleum Realty, LLC and Springfield Petroleum Realty, LLC have filed two motions to dismiss Plaintiffs District of Columbias (District) Complaint, arguing that the District has no standing to bring its claim, and has failed in its Complaint to state a claim against Defendants. The District files this Memorandum of Points and Authorities in opposition to both Motions filed by Defendants, arguing that the Attorney General has parens patriae authority to seek injunctive relief against enforcement of contractual terms that unlawfully restrict competition at one-quarter of the gasoline stations in the District of Columbia (D.C.). I. INTRODUCTION The District filed this action against Defendants to enjoin Defendants enforcement of marketing agreements for the purchase and sale of gasoline that violate the Districts Retail Service Station Act (RSSA). The RSSA is a remedial statute enacted by the District of Columbia Council (Council) to stop unsavory and non-competitive practices of wholesale

gasoline distributors that had severe detrimental impacts on consumers in the District of Columbia (D.C.) The Council enacted Subchapter III of the RSSA (now codified at D.C. Code 36-303.01, et seq.) to regulate gasoline marketing agreements, in large part to protect retail gasoline dealers from anti-competitive practices by distributors and to enhance honest and fair competition in the distribution of gasoline. Subchapter III includes a provision that prevents marketing agreements from restricting from whom a retail dealer may purchase gasoline. D.C. Code 36-303.01(a)(6). Defendants marketing agreements violate this provision1 by forcing independent retail dealers of Exxon-branded gasoline in D.C. to purchase their Exxon-branded gasoline only from Defendants Anacostia Petroleum Realty, LLC (Anacostia) or Springfield Petroleum Realty, LLC (Springfield). Defendants unlawful marketing agreements have harmed, and continue to harm, D.C.s economy by depriving both retail dealers and gasoline consumers of the benefits of competition that the RSSA seeks to protect. The first issue raised by Defendants Motions to Dismiss (Motions) is: Does the District allege a harm to its quasi-sovereign interest that enables it to sue in its parens patriae capacity to enforce a District law intended to protect the interests of the public, health, safety, and welfare? The District has done so, by alleging that Defendants unlawful marketing agreements deprive D.C. consumers and independent retail dealers of the benefits of competition in the supply of Exxon-branded gasoline. The interest of ensuring competition in the supply of gasoline in D.C.s local economy is a proper quasi-sovereign interest for the District to assert as parens patriae, and indeed is the very interest the Council asserted in passing the RSSA.

The District alleges violations of 36-303.01(a)(6), based on Defendants exclusive supply agreements, and 36-303.01(a)(11), which prohibits marketing agreements that [c]ontain any term or condition which, directly or indirectly, violates this subchapter. 2

Moreover, protecting this type of public interest by enforcing District laws is well within the authority of the District, acting by and through its Attorney General. Defendants challenges to the Districts standing and authority to enforce 36-303.01(a) fail. The second issue raised by the Motions is whether the Districts allegations state a claim that Defendants exclusive supply agreements violate 36-303.01(a). The Districts Complaint identifies the terms of Defendants marketing agreements that violate the express prohibitions of 36-303.01(a), how those terms restrict D.C.s independent retail dealers of Exxon-branded gasoline (independent retail dealers), and how those terms harm competition in D.C. Compl. 6, 15-33. Defendants raise several challenges to the sufficiency of the Districts allegations, including an argument that, strangely relying on an RSSA provision that prevents retailers from misusing a distributors trademark when they sell gasoline, would create a new exemption from retailers right under the RSSA to purchase gasoline from whomever they choose. Defendants implausible readings of the RSSAs language are contradicted by the plain statutory language, its legislative history, and relevant case law. Moreover, inferring a large exemption from the protection offered by 36-303.01(a) would be contrary to the purpose and public policy of the RSSA, which requires that the statute be interpreted liberally to achieve its purposes, and would hobble the RSSAs public policy of protecting the interests of the public, health, safety and welfare. Defendants cannot show that the Districts action against them for violations of 36303.01(a)(6) and (a)(11) fail as a matter of law. The District respectfully requests that the Court deny the Motions.

II. RELEVANT PROVISIONS OF THE RSSA AND ITS LEGISLATIVE HISTORY A. The RSSA Prohibits Exclusive Agreements in the Supply of Gasoline in D.C. D.C. Code 36-303.01 of the RSSA states, in relevant part: (a) . . . For the purposes of this section, the term marketing agreement shall also include any oral or written collateral or ancillary agreement. No marketing agreement shall: * * *

(6) Prohibit a retail dealer from purchasing or accepting delivery of, on consignment or otherwise, any motor fuels, petroleum products, automotive products, or other products from any person who is not a party to the marketing agreement or prohibit a retail dealer from selling such motor fuels or products, provided that if the marketing agreement permits the retail dealer to use the distributor's trademark, the marketing agreement may require such motor fuels, petroleum products, and automotive products to be of a reasonably similar quality to those of the distributor, and provided further that the retail dealer shall neither represent such motor fuels or products as having been procured from the distributor nor sell such motor fuels or products under the distributor's trademark; * . . . . or (11) Contain any term or condition which, directly or indirectly, violates this subchapter. D.C. Code 36-303.01(a). A marketing agreement under the RSSA is: [A]ny written agreement, or combination of agreements, including any contract, lease, franchise, or other agreement, which is entered into between a distributor and a retail dealer and pursuant to which: (A) The distributor agrees to sell, supply, or distribute motor fuel to the retail dealer for the purpose of engaging in the retail sale of such motor fuel at a retail service station; and (B) The retail dealer is granted the right, privilege, or authority, in addition to whatever else may be provided, to: * *

(i) Use any trademark owned, leased, or otherwise controlled by the distributor for the purpose of engaging in the retail sale of motor fuel at a retail service station; or (ii) Occupy a retail service station owned, leased, or otherwise controlled by the distributor for the purpose of engaging in the retail sale of motor fuel. D.C. Code 36-301.01(7). A marketing agreement is an agreement, or combination of agreements, between a distributor and a retail dealer. The RSSA defines Distributor as any person who is engaged in the business of selling, supplying, or distributing on consignment or otherwise, motor fuels or petroleum products to or through retail service stations which it owns, leases, or otherwise controls and who also maintains a marketing agreement with a retail dealer for the sale or distribution of motor fuels or petroleum products to a retail service station, whether or not such distributor owns, leases, or otherwise controls such retail service station. D.C. Code 36-301.01(2). The RSSA defines a Retail dealer as any person, other than an employee of a distributor, who owns, leases, operates, or otherwise controls a retail service station for the purpose of engaging in the retail sale of motor fuel and who also maintains a marketing agreement with a distributor. D.C. Code 36-301.01(13). The RSSAs legislative history notes that the same person may be a retail dealer in one relationship and a distributor in another relationship. D.C. Comm. on Transp. and Envtl. Affairs, Report to the D.C. Council, Bill No. 1-333, the Retail Service Station Act of 1976, and Bill No. 1-39, the Retail Service Stations Act, at 49 (1976) (attached as Exhibit A hereto).2

Defendants submitted excerpts of the Councils Report on the RSSA with their Motions. The District is submitting the Report in its entirety, except for appendices. 5

B. The Council Enacted the RSSA to Promote Competition and Consumer Choice, in the Interests of the Public, Health, Safety, and Welfare The Council enacted the RSSA to end the current unsavory and non-competitive practices of distributors, to foster adequate and meaningful competition in the retail marketing segment of the petroleum industry. Exhibit A hereto at 20. Forc[ing] the retail dealer to abide by functional exclusion dealing arrangements is one such unsavory and non-competitive practice that had and will continue to have severe detrimental impacts on consumers in the District of Columbia. Id. at 19. Subchapter III of the RSSA (called Title II in the legislative history), D.C. Code 36303.01, et seq., serves in part to: enhance the independence of retail dealers in the operation of their retail service stations by reducing the control that distributors may exert on the retail prices and marketing practices on independently operated stations through both the marketing agreement and unjustified threats of termination, cancellation, and non-renewal and , thereby, enhance fair and honest competition and the ability of retail dealers to tailor their operations to the needs, preferences, and conveniences of their local customers. Exhibit A hereto at 28. Title II achieved these purposes by: . . . (6) Prohibiting the inclusion of certain restrictive provisions in marketing agreements . . . (Section 4-201) [now 36303.01(a)(6)]. Id. at 52. The RSSA states that it shall constitute a statement of the public policy of the District of Columbia and that its provisions . . . shall be liberally construed in order to effectively carry out the purposes of this chapter in the interests of the public, health, safety, and welfare. D.C. Code 36-305.01.

III. DEFENDANTS ILLEGAL AGREEMENTS A. Provisions of Defendants Marketing Agreements Prior to 2009, the Exxon-branded gasoline stations in D.C. were owned by, and exclusively supplied by, Exxon. Compl. 2, 15. Exxons exclusive supply arrangements were part of its franchise agreements with the independent retail dealers that operated the Exxon stations. Id. The relevant supply provisions of Exxons franchise agreements have stated: DEALER agrees to buy and receive directly from EXXONMOBIL all of the EXXON-branded gasoline diesel sold by DEALER. Id. 24. Exxons franchise agreements have also granted the independent retail dealers the right to use Exxons proprietary trademarks to sell Exxonbranded gasoline at the dealers stations. Id. 15. In December 2008, Exxon and DAG Enterprises (DAG), a company affiliated with Defendants Capitol Petroleum Group, Anacostia Petroleum Realty, LLC and Springfield Petroleum Realty, LLC (collectively the CPG Defendants), agreed to a purchase and sale transaction for the majority of Exxons D.C. gasoline stations. Id. 3-5, 17-18; Exxon Mem., Paolino Decl. Exh. A. In January 2010, Exxon and DAG agreed to a similar transaction covering Exxons single remaining D.C. gasoline station. Compl. 3-5, 17, 19; Exxon Mem., Paolino Decl. Exh. B. These transactions transferred the relevant features of Exxons supply arrangements to Anacostia and Springfield by: (1) assigning, to Anacostia and Springfield, Exxons exclusive supply rights from its franchise agreements with independent retail dealers; (2) assigning, to Anacostia and Springfield, the right to use Exxons proprietary trademarks to sell Exxon-branded gasoline at the Exxon-branded D.C. gasoline stations; (3) requiring Anacostia and Springfield, as a condition precedent to the transaction, to enter into distribution agreements with Exxon; and (4) transferring ownership of Exxons D.C. gasoline stations to

Anacostia and Springfield. Compl. 3-5, 16-19; Exxon Mem., Paolino Decl., Exh. A-B [Assignments] at 1. Exxons assignment to Anacostia transferred all of Exxons rights, title, interests, duties, and obligations, legal and equitable, from and after the date of this Assignment, under the PMPA franchise agreements . . . and all other agreements constituting the franchise relationship with respect to all but one of Exxons independent retail dealers in D.C. Exxon Mem., Paolino Decl., Exh. A, at 1, 3. Exxons Assignment to Springfield assigned all of Exxons rights, title, duties and interest (including any options) in, to and under the franchise agreement with respect to Exxons one other independent retail dealer in D.C. Id., Exh. B, at 1, 4. The Assignments transferred to Anacostia and Springfield, without exception, Exxons exclusive rights to supply Exxon-branded gasoline to these dealers, and the right to use Exxons proprietary trademarks to sell Exxon-branded gasoline. Id., Exh. A, at 1, 3, 4, Exh. B, at 1, 3, 44; Compl. 4, 15. These assignments were made in consideration of the covenants contained in Anacostias and Springfields respective purchase and sale agreements with Exxon. Id., Exh. A, at 1, Exh. B, at 1. Exxon required Anacostia and Springfield to enter into its standard distribution agreements as a condition precedent to executing the purchase and sale transactions. Compl. 18-19. Exxons distribution agreements state:
Redact

Exxon Mem., Paolino Decl., Exh. C 12(a)(3), Exh. D 12(a)(3) (distribution agreements).
Redact

Redact

Id., Exh.

C 1(a), Exh. D 1(a). The effect of these distribution agreements is to allow only one supplier to supply [Exxon-branded] gasoline to each Exxon-branded gasoline station in D.C. Compl. 5. The distribution agreements also grant Anacostia and Springfield, and their franchised independent dealers, the use of Exxons proprietary trademarks, which are Redac
t

Exxon Mem., Paolino Decl. Exh. C 1(a), Exh. D 1(a). Anacostia has entered into successor versions of these franchise agreements with some of the independent retail dealers. Compl. 4, 25. These successor agreements perpetuate the exclusive supply arrangements by providing: Redact

. . . . Anacostias Contract of Sale (Branded) at 18, 1 (Commodity Schedule) (attached as Exhibit B hereto).3 The successor franchise agreements permit the independent retail dealers to occupy and operate gasoline stations owned by Anacostia and to use Exxons proprietary trademarks for the purposes of selling Exxon-branded gasoline at these stations. Id. at 6, 14; Exxon Mem., Paolino Decl., Exh. A, at 1, 3. B. Illegality of Defendants Marketing Agreements Defendants franchise agreements are marketing agreements, as defined in 36301.01(7). Each of these agreements is between (i) a distributor, engaged in the business of selling, supplying, or distributing gasoline to or through service stations which it owns, leases or otherwise controls, and (ii) a retail dealer. D.C. Code 36-301.01 (2), (7), (13). The Exhibit B hereto is an exemplar of Anacostias successor franchise agreements with D.C. retail dealers. The Complaint references these successor franchise agreements at paragraphs 4 and 25, and thus incorporates those agreements by reference. 9
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agreements are for the sale, supply or distribution of gasoline for the purpose of engaging in the retail sale of gasoline, and grant the retail dealers the ability to occupy and operate the gasoline stations and to use proprietary trademarks in the retail sale of gasoline. See id. 36-301.01(7). These franchise agreements prohibit retail dealers from purchasing Exxon-branded gasoline from any supplier that is not a party to the agreement, see Compl. 4, 6, 15-20, 23-27, and therefore violate the section of the RSSA that forbids a marketing agreement provision that would [p]rohibit a retail dealer from purchasing or accepting delivery of . . . any motor fuels . . . from any person who is not a party to the marketing agreement. D.C. Code 36-303.01(a)(6). And because this RSSA section is part of the RSSAs marketing agreements subchapter, the franchise agreements also violate 36-303.01(a)(11). Defendants franchise agreements, together with Exxons assignments and distribution agreements, are a combination of agreements that contain the requisite traits of marketing agreements: the agreements involve distributors and retail dealers; concern the sale, supply or distribution of gasoline for the purpose of engaging in the retail sale of gasoline; and grant the retail dealers the right to use proprietary trademarks in the retail sale of gasoline and to occupy and operate the gasoline stations. See id. 36-301.01(7). Another reason that the assignments and distribution agreements, in combination with the original and successor franchise agreements, are marketing agreements for purposes of applying 36-303.01(a) is that they have continued the effects of those franchise agreements and, therefore, are collateral or ancillary to them. See id. 36-303.01(a). Exxon transferred its exclusive supply rights to Anacostia and Springfield through the assignments, and now Exxon can enforce those exclusive supply rights through the distribution agreements. Compl. 17-23. The assignments and distribution agreements thus violate 36-

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303.01(a)(6) and (a)(11) because they prohibit independent retail dealers, both directly and indirectly, from purchasing Exxon-branded gasoline from any supplier that is not a party to the agreement. Id. 23. C. Effects of Defendants Marketing Agreements Defendants unlawful marketing agreements have allowed the CPG Defendants to exclude suppliers, other than Anacostia or Springfield, from supplying Exxon-branded gasoline in D.C.; to supply all of the Exxon-branded gasoline sold in D.C.; and to fix the wholesale prices paid for Exxon-branded gasoline in D.C. Compl. 30. The Districts Complaint alleges that Defendants marketing agreements harm residents and other retail customers in D.C.: The CPG companies set the wholesale prices paid for Exxonbranded gasoline in D.C., depriving D.C. residents and others who purchase Exxon-branded gasoline in D.C., including retail customers of the Exxon-branded gasoline stations in D.C., of the benefits of competition in the wholesale supply of Exxon-branded gasoline. Id. 6. The District therefore alleges that Defendants illegal marketing agreements deny independent retail dealers selling Exxon-branded gasoline in D.C., and the many thousands of consumers in D.C. who purchase such gasoline, the benefits of competition in the supply of Exxon-branded gasoline. Id. 33. Moreover, the CPG Defendants, and affiliated companies, are the exclusive gasoline suppliers for about 60% of the 107 retail gasoline stations in D.C. Id. 1, 29. These stations include the 27 Exxon-branded gasoline stations in D.C. currently operated by independent retail dealers, which make up about 25% of all the gasoline stations in D.C. Id. 5, 28-29. Therefore, the effect of Defendants unlawful marketing agreements is to increase, from about 35% to about 60%, the percentage of retail gasoline stations in D.C. where the CPG Defendants are the exclusive suppliers of gasoline.

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IV. ARGUMENT A. The District Has Parens Patriae Standing To Bring An Action For Injunctive Relief Against Widespread Violations RSSA. The District brings this action, by and through its Attorney General, as parens patriae on behalf of the residents, general welfare, and economy of D.C., to enjoin widespread violations of the [RSSA] affecting about one-quarter of the gasoline stations in D.C. Compl. 7. The District, like state and territorial governments, has a distinct interest in ensuring the health and well-being of its people and economy. Parens patriae standing is a judicial construct that provides the states and territories, including the District, with a legal tool necessary to protect this quasi-sovereign interest. Thus, courts permit such governments to have standing as parens patriae when they allege an injury to their quasi-sovereign interest in preventing generalized harm to the physical and economic well-being of their people or economies. The District has alleged its parens patriae standing based on its quasi-sovereign interest in the economic well-being of D.C.s gasoline consumers and the gasoline market, and the injury to the Districts quasi-sovereign interest caused by Defendants unlawful marketing agreements. Because this type of widespread harm is a matter of grave public concern to a state-level government tasked with ensuring the economic well-being of its population, it creates a distinct and separate interest belonging to the state. Georgia v. Pa. R.R. Co., 324 U.S. 439, 451 (1945). Injury to this quasi-sovereign interest is a concrete and particularized harm that satisfies the injury-in-fact requirement of Article III standing. Denial of standing under these circumstances would whittle the concept of justiciability down to the stature of minor or conventional controversies. There is no warrant for such a restriction. Id.

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1. The District brings this action to protect its quasi-sovereign interest in the well-being of its local economy. Although quasi-sovereign interests do not lend themselves to bright-line definitions, they fall into at least one of two categories: an interest in the health, physical and economic wellbeing of the people, or an interest in being treated fairly within the federal system. Alfred L. Snapp & Son, Inc. v. Puerto Rico ex rel. Barez, 458 U.S. 592, 601 (1982) (Snapp). The first category is the relevant one here, as the Districts particular quasi-sovereign interest is in protecting the benefits of competition for its local gasoline market. Compl. 6-7, 33. Concern for economic well-being relates equally to the health of the overall economy and to the economic health of the consuming public. Georgia v. Pa. R.R. Co., 324 U.S. at 443, 447-450. Alleging a quasi-sovereign interest in the economy requires no more rigorous pleading than alleging a quasi-sovereign interest in the public health or the physical well-being of the population.4 A long line of Supreme Court cases define broadly a states quasi-sovereign interest in its economic well-being. In Snapp, the Supreme Court upheld Puerto Ricos right to allege employment discrimination in its parens patriae capacity because Puerto Ricos interest in securing employment among Puerto Rican residents is surely a legitimate object of the Commonwealths concern. 458 U.S. at 609. In Massachusetts v. E.P.A., 549 U.S. 497, 518-21 (2007), the interest of Massachusetts in protecting its coastal lands from the rise in sea level resulting from global warming was a quasi-sovereign interest providing it with standing to challenge the EPAs failure to regulate greenhouse gas emissions. In Georgia v. Pa. R.R. Co.,

Defendants imply otherwise by repeatedly citing to antitrust cases and antitrust standing requirements that are inapposite to the Districts action, particularly when those antitrust actions involve parens patriae actions for damages. Antitrust laws generally differ from other statutes, such as the RSSA, as to the antitrust injury that must be alleged. See, e.g., Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477 (1977). 13

Georgia was entitled to sue, as representative of the consuming public, because the defendantrailroads alleged price-fixing scheme frustrate[d] and counteract[ed] the measures taken by the State to promote a well-rounded agricultural program, encourage manufacture and shipping, provide full employment, and promote the general progress and welfare of its people, in addition to harming the consuming public. 324 U.S. at 444, 449. In Hawaii v. Standard Oil Company, 431 U.S. 251, 261-62 (1972), Hawaii was entitled to sue in its parens patriae capacity for injunctive relief from petroleum overcharges that allegedly harmed its general economy. Case law holds that an interest in an honest marketplace is a cognizable, quasi-sovereign interest. See Louisiana ex rel. Ieyoub v. Borden Inc., No. 94-3640, 1995 U.S. Dist. Lexis 1921 at *6 (E.D. La. Feb. 10, 1995) (Louisiana had parens patriae standing to seek relief from the inflated prices Louisiana school districts and school children paid for defendants milk products because the defendants price-fixing scheme harmed Louisianas quasi-sovereign interest in [an] honest marketplace and in protecting school children generally); Alabama ex rel. Galanos v. Star Serv. & Petroleum Co., 616 F. Supp. 429, 431 (D.C. Ala. 1985) (Alabamas interests in preventing unfair or dishonest competition, monopolies, and price wars was obviously a distinct and quasi-sovereign interest); New York v. Gen. Motors Corp., 547 F.Supp. 703, 703, 707 (S.D.N.Y. 1982) (New York, through its Attorney General, had standing to sue under its consumer protection law to obtain wide-ranging injunctive relief designed to vindicate [its] quasi-sovereign interest in securing an honest marketplace for all consumers that was allegedly injured by GMs repeated and persistent fraudulent and illegal business practices in connection with its sale, warranting, and repair of automobiles.). The Districts action concerns an important consumer product: gasoline. The District alleges that Defendants unlawful marketing agreements deny independent retail dealers selling

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Exxon-branded gasoline in D.C., and the many thousands of consumers in D.C. who purchase such gasoline, the benefits of competition in the supply of Exxon-branded gasoline. Compl. 33 (emphasis added). The benefits of such intra-brand competition would inure to D.C. gasoline consumers who purchase Exxon-branded gasoline, and to the wholesale and retail dealers that participate in supplying Exxon-branded gasoline to the D.C. market. The Districts quasisovereign interest in preserving a competitive market for the supply of Exxon-branded gasoline in D.C., and thereby promoting the general well-being of the D.C. economy, provides it with parens patriae standing. While the Districts parens patriae standing is clear based on Snapp, Massachusetts v. E.P.A., and the other authorities cited above, two additional factors weigh strongly in favor of finding that the District has alleged a quasi-sovereign interest in enforcing the RSSA: (1) whether the asserted parens patriae interest is one that the government would attempt to remedy through the legislative process, Snapp, 458 U.S. at 607; and (2) whether the request is for injunctive relief as opposed to damages, Standard Oil Co., 405 U.S. at 262 (suits for damages may be subject to greater scrutiny given the striking contrast between the potential impact of suits for injunctive relief and suits for damages); United States v. Borden Co., 347 U.S. 514, 519 (1954) (the government is entitled to an injunction against defendant milk producers price fixing scheme even if the same behavior was already subject to a private partys injunction, as the government has interests in the continued protection of the public distinct from those of private plaintiffs.) First, an interest addressed, or furthered, through legislation is likely to be a cognizable quasi-sovereign interest for parens patriae purposes. Snapp, 458 U.S. at 609 (Puerto Rico could sue for violation of the Wagner-Peyser Act and the Immigration and Nationality Act of 1952

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because those laws furthered its interest in securing employment for Puerto Rican workers); Georgia v. Pa. R.R. Co., 324 U.S. at 444, 449; Alabama ex rel. Galanos, 616 F. Supp. at 431 (Alabamas interest in enforcing a state law enacted to protect both independent retailers and the general consuming public from anticompetitive practices obviously was a quasi-sovereign interest). The RSSA, the law the District seeks to enforce in this action, was enacted to enhance competition in the D.C. gasoline market. The RSSAs legislative history states the law was intended to enhance fair and honest competition and the ability of retail dealers to tailor their operations to the needs, preferences, and conveniences of their local customers. Exhibit A hereto at 28 (emphasis added). Section 36-303.01(a) of the RSSA accomplishes this purpose, in part, by prohibiting the inclusion of certain restrictive provisions in marketing agreements. Id. at 29. The Districts quasi-sovereign interest alleged in this action was directly addressed by the Councils passage of the RSSA. Second, the Districts action seeks injunctive relief on behalf of the public, not damages. Compl, 31-33, Prayer for Relief. Accordingly, it avoids the thorny issues posed by parens patriae damages actions. See Puerto Rico ex rel. Quiros v. Alfred L. Snapp & Son, Inc., 469 F. Supp. 928, 931 (W.D. Va. 1979) rev'd on other grounds, 632 F.2d 365 (4th Cir. 1980) aff'd sub nom., Alfred L. Snapp & Son, Inc. v. Puerto Rico ex rel. Barez, 458 U.S. 592 (1982). Furthermore, the Districts particular interest in protecting the consuming public and enhancing competition in the supply of gasoline in D.C. is distinct from the interests of the retail dealers who may seek judicial relief in their individual capacity. Private remedies cannot remove, or be a substitute for, broad injunctive relief sought by a state in its parens patriae capacity, as private decrees likely will not adequately protect[] the public interest. See Borden Co., 347 U.S. at 519.

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Thus, not only does the Districts public-protection interest fall squarely within the wellrecognized economic well-being category of quasi-sovereign interests, but the appropriateness of the District seeking relief as parens patriae is strengthened by the RSSAs explicit recognition of the public interest in enhancing honest competition in D.C.s gasoline supply and by the fact that the District does not seek damages in this case. 2. The District alleges a cognizable injury to its quasi-sovereign interest from the widespread denial of competition in the supply of Exxon-branded gasoline. In addition to alleging the existence of a quasi-sovereign interest, the District must allege an injury to its quasi-sovereign interest that has a sufficiently substantial impact on the local population. See Snapp, 458 U.S. at 607. The District need not quantify the harm to its interest in numbers or percentages, as there are no definitive limits on the proportion of the population of the State that must be adversely affected by the challenged behavior to qualify as a sufficiently substantial portion of the population. Id.; see Pennsylvania v. Kleppe, 533 F.2d 668, 675 (D.C. Cir. 1976) (holding that relevant case law shows that the nature and degree of essential harm can not be characterized with any precision). The primary concern is that the harm is widespread. Snapp, 458 U.S. at 609 (injury is one that carr[ies] a universal sting); Kleppe, 533 F.2d at 675 (substantial generalized economic effects provide injury to the states quasisovereign interest). The District alleges that Defendants exclusive supply agreements affecting about onequarter of the gasoline stations in D.C. violate the RSSA and deny D.C. consumers and independent retail dealers the benefits of competition that the RSSA seeks to protect. Compl. 6, 30-33. The RSSA was enacted to end the current unsavory and non-competitive practices of distributors including forc[ing] [retail dealers]to abide by functional exclusion [sic] dealing arrangements, and to foster adequate and meaningful competition in the retail marketing 17

segment of the petroleum industry [in the District of Columbia]. Exhibit A hereto at 19-20 (emphasis added). The Council determined that 36-303.01 benefits consumers, as well as independent retail dealers, through honest and fair competition. Id. at 28. Defendants use of supply restrictions expressly prohibited by 36-303.01(a)(6) is per se unlawful and removes wholesale competition from the supply of about one-quarter of the retail gasoline stations in D.C. The effect for a substantial portion of the D.C. gasoline market is to replace the competitive wholesale supply system envisioned by the RSSA with a non-competitive wholesale supply system imposed by Defendants. Defendants agreements harm competition in the supply of Exxon-branded gasoline by preventing all such competition.5 The Council itself spoke to the potential severity of the anti-competitive harms addressed by the RSSA. When retailers are subject to agreements that violate the RSSA, independence in the operation of the retail service station as well as [their] competitive influence in the market place are severely limited. Exhibit A hereto at 19 (emphasis added). The legislative history indicates that the RSSA is meant to stem the tide of such non-competitive practices, which will continue to have severe detrimental impacts on consumers in the District of Columbia. Id. (emphasis added). In addition to being potentially severe, the type of injury asserted by the District is sufficiently widespread to implicate the Districts quasi-sovereign interest. In Georgia v. Pa.
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Contrary to Defendants assertions, the Attorney General has never stated that the Districts antitrust investigation of the CPG Defendants found no evidence of harm to competition. CPG Mem. at 3. Instead, the Attorney General stated that its investigation found that gasoline prices did increase in some parts of the city. CPG Mem., Exh. B. The Attorney Generals decision not to bring an antitrust enforcement action is irrelevant to the issues in this action, which concern the Districts parens patriae authority and the lawfulness or unlawfulness of Defendants marketing agreements under the RSSA. Defendants references to antitrust actions brought against them are likewise irrelevant to the issues before the Court. CPG Mem. at 3; Exxon Mem. at 2. 18

R.R. Co., the defendants price-fixing scheme was considered to have widespread effects because: They may affect the prosperity and welfare of a State as profoundly as any diversion of waters from the rivers. They may stifle, impede, or cripple old industries and prevent the establishment of new ones. They may arrest the development of a State or put it at a decided disadvantage in competitive markets. 324 U.S. at 450. The conduct of companies acting within the public sphere may result in severe and widespread economic harm just as it may result in severe and widespread physical harm. See id. ([discriminatory trade barriers] may cause a blight no less serious than the spread of noxious gas over the land or the deposit of sewage in the streams). In Snapp, the Supreme Court held that because employment affected all Puerto Ricans, albeit indirectly, and the defendants discrimination affected employment, the injury from defendants discrimination was widespread. 458 U.S. at 609. Moreover, an injury can be widespread if it affects a broadly-stated category of persons; it need not affect all possible residents or consumers. New York ex rel. Vacco v. Mid Hudson Med. Grp., P.C., 877 F. Supp. 143, 147-48 (S.D.N.Y. 1995). The effects of Defendants unlawful marketing agreements are sufficiently widespread in D.C. to implicate a quasi-sovereign interest. Defendants unlawful marketing agreements deprive consumers of the benefits of competition in the supply of Exxon-branded gasoline whenever and wherever consumers purchase Exxon-branded gasoline in D.C. Compl. 28-30, 33. This impact is substantial, and certainly generalized, as the CPG Defendants Exxonbranded gasoline stations comprise about 25% of the gasoline stations in D.C. Id. 5, 29. Furthermore, as the CPG Defendants and their affiliates are the exclusive suppliers for about 60% of all D.C. gasoline stations, the lack of competition in Exxon-branded gasoline has the indirect effect of further reducing consumer choice in an already concentrated market. Id. 1, 28-30. The impact of this harm to competition is generalized as to D.C. gasoline consumers on 19

any given day: the District alleges that many thousands of consumers are among those affected by the lack of competition in the supply of Exxon-branded gasoline in D.C. Id. 33. Defendants contend that the alleged effects of their conduct are not sufficiently widespread because the Complaint does not allege that all District residents are affected. For example, Defendants contend that any harm does not affect those who only use public transportation or D.C. consumers who purchase their gasoline at stations outside of D.C. CPG Mem. at 19. These contentions miss the mark, however, as the District need not quantify a certain volume of harm or a certain number of consumers harmed to meet its injury-in-fact requirement. Snapp, 458 U.S. at 607. The harm asserted by the District need not affect every consumer in D.C., and the Complaints general characterization of affected persons as consumers in D.C. who purchase [Exxon-branded gasoline] alleges a sufficiently generalized harm. Compl. 33. Thus, the District has parens patriae standing to sue to enjoin Defendants alleged violations of 36-303.01(a), as it has a quasi-sovereign interest in the welfare of its own local economy and a cognizable injury to that interest, and has alleged widespread and generalized harm to consumers in D.C. B. As Parens Patriae, The District Does Not Need Express Statutory Authority To Seek Injunctive Relief Against Marketing Agreements That Violate The RSSA. The District has an unquestioned quasi-sovereign interest in the enforcement of its laws. Snapp, 458 U.S. at 601. Defendants contend that the Districts ability to enforce its own law is limited in this case, however, because Subchapter III of the RSSA, containing 36-303.01(a), does not contain explicit enforcement authority for the District or its Attorney General, and that 36-303.01(a) concerns only private rights. But, as discussed below, 36-303.01(a) does not provide for any express judicial remedy, either public or private, so a private right of action is 20

only implied. In addition, the District may enforce 36-303.01(a), based on the Districts parens patriae standing, the RSSAs public interest purpose, and the Attorney Generals broad powers to litigate in the public interest in D.C. Defendants emphasize that Subchapter III of the RSSA does not provide an explicit right of action for the District, in contrast to certain other parts of the RSSA that do. Defendants contend that the RSSAs text means that the Council intended to deny the District and the Attorney General any ability to enforce 36-303.01.6 CPG Mem. at 20-21. Defendants rely on Connecticut v. Physicians Health Servs. of Connecticut, 287 F.3d 110, 121 (2nd Cir. 2002), for the general proposition that if the cause of action is based on a statute, the statute must authorize an action by the State. CPG Mem. at 11. However, in Physicians Health Servs., the Second Circuit took great care to limit their holding: By holding that the State lacks parens patriae standing because 1132(a)(3) does not expressly provide for such standing, we do not of course intend to imply that states may only sue in their parens patriae capacity when a statute specifically provides for suits by states. [S]tates have frequently been allowed to sue in parens patriae to ... enforce federal statutes that ... do not specifically provide standing for state attorney generals. Physicians Health Servs., 287 F.3d at 121 (quoting New York ex rel Vacco v. Mid Hudson Med. Group, P.C., 877 F.Supp. 143, 146 (S.D.N.Y.1995) (citations omitted)). The Second Circuit also noted that Connecticut was seeking to enforce ERISA, a federal statute, as opposed to a state statute, and that ERISA limited its relief to participants, beneficiaries, and fiduciaries. Id. at 120. Defendants reliance on a federal ERISA case is inapposite to the issue of the Districts authority to enforce its own RSSA. Defendants references to the non-passage of Bill 19-299, the Retail Service Station Amendment of 2011, are unpersuasive. CPG Mem. at 2, Attach. A. Although the Attorney General did support passage of this Bill to assist its efforts to investigate and remedy anticompetitive practices in D.C.s gasoline markets, the non-enactment of the bill does not establish that the Attorney General cannot seek to enjoin the particular practices at issue here. 21
6

The District may enforce the RSSA if it is a real party in interest for the claim asserted. Parens patriae authority is coextensive with the real-party-in-interest requirement. West Virginia ex rel. McGraw v. Comcast Corp., 705 F. Supp. 2d 441, 451 (E.D. Pa. 2010) (common law parens patriae authority is coextensive with the real-party-in-interest requirement, whereas a statutory grant may authorize the State to bring an action without common law parens patriae authority, i.e., without being a real party in interest) (citing Louisiana ex. rel Caldwell v. Allstate Ins. Co., 536 F.3d 418, 427 n.5 (5th Cir. 2008)); Gen. Motors Corp., 547 F. Supp. at 705 n.5 (Because of the States quasi-sovereign interest in securing an honest marketplace, it would have parens patriae standing to bring this action [to enforce its statute] even without the authority provided by [the statute].). In addition to the Districts parens patriae standing, two other factors support a determination that a states enforcement authority is implied in the absence of express authority to sue. First, courts give significant weight to a states or state officials general authority to sue. Massachusetts v. EPA, 549 U.S. at 520. Sufficient authority may be found even if the statute does not expressly apply to States, or specify the particular subject matter the statute is intended to cover. See id. (holding that Massachusetts had procedural right to sue under 42 U.S.C. 7607(b)(1) even though the section makes no mention of who may petition for review of violations of the statute). In Massachusetts v. EPA, the Supreme Court gave significant weight to the existence of a general procedural right to challenge federal agency rulemaking that is arbitrary or capricious. Id. Because Massachusetts had both alleged an injury to a quasisovereign interest and had a general procedural grant to challenge general agency rulemaking, the state had parens patriae standing to challenge the EPAs failure to promulgate regulations that would alleviate global warming. Id. If the regulator has broad authority to protect the

22

public interest, the finding of authority to sue is even clearer. Allstate Ins. Co., 536 F.3d at 428. In Allstate Insurance Company, the Louisiana Attorney general had express constitutional authority to intervene in all civil suits and statutory authority to institute and prosecute any and all suits he may deem necessary for the protection of the interests and rights of the state. Id. at 428-29 (quoting La. Const. art. IV 8). This grant of authority to vindicate the interests of the state supported Louisianas standing to sue as parens patriae in that case. Id. Similarly, the Attorney General for the District of Columbia has been made responsible for upholding the public interest [and] [t]he Attorney General shall have the power to control litigation and appeals, as well as the power to intervene in legal proceedings on behalf of this public interest. D.C. Code 1-301.81. The Attorney General thus has the responsibility, and the authority, to uphold the public interest in D.C. by litigating on behalf of the public. Second, courts give weight to whether the law to be enforced protects the public interest, as determined by the statutory text or legislative history. See Mid Hudson Med. Grp., 877 F. Supp. at 146-49 (the federal ADA authorized suits by New York Attorney General as parens patriae, even though such authority was not expressly provided, because the statute was intended to protect the public from the harm of discrimination on the basis of disability). A public purpose or public implication may arise even where private property or private interests are concerned. See New Hampshire v. Hess, 20 A.3d. 212, 220 (N.H. 2011) (even though pollutants were found in a private well, the State was permitted to seek damages for the cost related to investigating, monitoring, treating, remediating, replacing, or otherwise restoring such wells). The legislative history of Subchapter III shows it is intended to protect the public interest and does not deal exclusively with private rights. A primary purpose of the subchapter is to enhance fair and honest competition and the ability of retail dealers to tailor their operations to

23

the needs, preferences, and conveniences of their local customers. Exhibit A hereto at 28. Furthermore, both the distributors ability to terminate and the retail dealers ability to prevent enforcement of marketing agreements that violate 36-303.01 are designed to protect the general public and serve the needs, preferences, and convenience of the consuming public. Id. at 29. Moreover, the express policy of the RSSA is to favor liberal[] constru[ction] in order to effectively carry out the purposes of this chapter in the interests of the public health, safety, and welfare. D.C. Code 36-305.01. The RSSAs provisions are therefore liberally interpreted to do so. Dege v. Milford, 574 A.2d 288, 292 (D.C. 1990). The District of Columbia Court of Appeals has recognized that remedies must be available to retail dealers under 36-303.01(a), even though express remedies are not enumerated in the Act. See Davis v. Gulf Oil Corp., 485 A.2d 160, 171 n.12 (D.C. 1984). The Court of Appeals stated in Davis: We are certain, nonetheless, that the legislature intended to permit franchisees to seek relief from franchisors violations of [36-303.01](a)(10); the only question is what remedies are appropriate. Id. In contrast to some other parts of the RSSA, the provisions of 36-303.01(a) are not covered by any express judicial remedy, either public or private. Given the RSSAs stated public-protection purpose, it would make little sense for the Court of Appeals to recognize, under 36-303.01(a), an implied private right of action for retail dealers seeking to vindicate their private interests, without also recognizing an implied parens patriae action for the District seeking to vindicate the public interest. Notwithstanding Defendants position to the contrary, the Supreme Court and lower federal and state courts have consistently held that parens patriae standing is an adequate substitute for, or is sufficient to meet, Article IIIs essential standing requirements. Snapp, 458

24

U.S. at 607 (1982); Massachusetts v. E.P.A., 549 U.S. at 518 (2007) (holding strict adherence to traditional standing analysis is improper in parens patriae cases) 7; Maryland People's Counsel v. FERC, 760 F.2d 318, 321 (D.C. Cir. 1985) (quoting Valley Forge Christian Coll. v. Ams. United for Separation of Church and State, Inc., 454 U.S. 464, 472 (1982)). Defendants cite to inapposite decisions involving three situations not relevant to the Districts action: foreign nations suing in U.S. courts; U.S. states suing the federal government; and antitrust, RICO, and other class-action-type cases where damages are sought. Foreign nations cannot assert a quasi-sovereign interest to sue in United States courts in their parens patriae capacity, and they are held to the same Article III injury requirements as any person suing in an individual capacity. See Serv. Emps. Int'l Union Health & Welfare Fund v. Philip Morris, Inc., 249 F.3d 1068, 1073 (D.C. Cir. 2001) (citing Maryland Peoples Counsel, 760 F.2d at 321); Arias v. Dyncorp, 738 F.Supp.2d 46, 53-54 (D.D.C. 2010) (quoting Estados Unidos Mexicanos v. DeCoster, 229 F.3d 332, 336 (1st Cir. 2000)) 8. Defendants representation that the doctrine of parens patriae is merely a form of prudential standing is premised on cases involving a foreign nations attempt to assert a quasi-sovereign interest to achieve standing. In cases where the federal government is the defendant, a state asserting parens patriae standing is subject to more stringent consideration of the sufficiency of the states quasiIn Massachusetts v. EPA, the Supreme Court rejected the very argument in Justice Scalias dissent that the Defendants painstakingly try to make. 549 U.S. at 532 (The Court, in effect, takes what has always been regarded as a necessary condition for parens patriae standinga quasi-sovereign interestand converts it into a sufficient showing for purposes of Article III.). The Defendants would require more for parens patriae standing than for normal standing under Article III. See CPG Mem. at 12-16. In Arias the district court made clear that parens patriae is a doctrine that is reserved for U.S. States. It is a narrowly construed, judicially created exception to the normal rules of standing applied to private citizens in recognition of the special role that a State plays in pursuing its quasi-sovereign interests in the well-being of its populace. 738 F.Supp.2d at 53-54 (citations omitted) (emphasis added). Arias stands for the proposition that more-generalized parens patriae injuries can satisfy Article III standing without meeting the normal particularized-injury requirement. 25
8 7

sovereign interest. Kleppe, 533 F.2d at 676 (clarifying that when a state seeks to suesome branch of the federal government, significant policy concerns, apart from the injury itself, become relevant in determining the States fitness to bring suit). These considerations are not present in this action, as [t]he private nature of the defendant does not, of itself, import any substantial considerations, either pro or con, affecting the question of state standing. Id. Defendants rely most heavily on decisions involving the antitrust laws, class actions, RICO, and damages actions. 9 Defendants try to equate the RSSA with an antitrust statute, and impute to the Districts action the requirement that antitrust plaintiffs plead the antitrust injury in the form of a specific anticompetitive effect. CPG Mem. at 16-19; see Atl. Richfield Co. v. USA Petroleum Co., 495 U.S. 328, 334 (1990). Defendants also cite to Service Employees International Union Health & Welfare Fund, 249 F.3d at 1072, a RICO case, for its discussion of heightened causation requirements that are inapplicable to the Districts action. Finally, in arguing that the District must plead injury-in-fact allegations as to the injuries to D.C. residents, Defendants cite to parens patriae actions seeking damages. CPG Mem. at 15-17. In damages actions, however, where a state is asserting claims on behalf of natural persons in its jurisdiction, courts will inquire particularly into whether the state is asserting an interest more appropriately asserted by a private party. See, i.e., Table Bluff Reservation (Wiyot Tribe) v. Philip Morris, Inc., 256 F.3d 879, 885 (9th Cir. 2001); In re Tobacco Litigation, 83 F. Supp. 2d 125, 134 (D.D.C. 1999) aff'd sub nom. Serv. Emps. Int'l Union Health & Welfare Fund v. Philip Morris, Inc., 249 F.3d 1068 (D.C. Cir. 2001). This consideration is irrelevant to the Districts action for injunctive

Snapp., 469 F. Supp. at 931 (referencing Hawaii v. Standard Oil Co. of California, 405 U.S. 251, 92 (1972) (antitrust damages); California v. Frito-Lay, Inc., 474 F.2d 774 (9th Cir.1973) (class action); West Virginia v. Chas. Pfizer and Co., 440 F.2d 1079 (2d Cir. 1971) (class action); In re Motor Vehicle Air Pollution Control Equipment, 52 F.R.D. 398 (C.D.Cal.1970) (class action); In re Montgomery County Real Estate Litigation, 452 F. Supp. 54 (D.Md.1978)). 26

relief. Furthermore, a state seeking to proceed as parens patriae need not demonstrate the inability of private persons to obtain relief if parens patriae standing is otherwise indicated. Mid Hudson Med. Grp., P.C., 877 F. Supp. at 145, n.1 (quoting Puerto Rico v. Bramkamp, 654 F.2d 212, 217 (2d Cir.1981)). Thus, the District has both parens patriae standing and authority to seek injunctive relief against Defendants alleged violations of the RSSA. C. Defendants Marketing Agreements Violate 36-303.01(a)(6) Of The RSSA Defendants concede that the franchise agreements at issue in this case are marketing agreements under the RSSA. CPG Mem. at 22-26; Exxon Mem. at 9-10, 12. In addition, Defendants never dispute that these agreements create exclusive supply rights in the distributor, whether Exxon (until 2009) or Anacostia (since 2009). See Compl. 3-4, 15, 21-23, 24. Defendants contend, however, that these exclusive supply rights are somehow protected by the language in 36-303.01(a)(6) that restricts retail dealers from selling under the distributors trademark any gasoline that the dealers did not actually purchase from that distributor. But even assuming, for the sake of argument, that the Exxon trademark is considered to be the distributors trademark, the dealers still have the right under 36-303.01(a)(6) to purchase Exxon-branded gasoline from any distributor they choose. The only issue raised by Defendants interpretation of 36-303.01(a)(6) is whether, having purchased Exxon-branded gasoline from another distributor, the dealers (i) are permitted to use the Exxon trademark when selling the Exxon-branded gasoline, or (ii) must sell the Exxon-branded gasoline as if it were unbranded gasoline. However this issue might be resolved, the Complaint has stated a claim for relief because it alleges that Defendants agreements unlawfully prevent dealers from purchasing Exxon-branded gasoline from any available distributor.

27

In any event, Defendants interpretation of 36-303.01(a)(6) rests on the faulty notion that Anacostia and Springfields rights in Exxons trademarks could prevent independent retail dealers from selling any gas under Exxons trademark other than gas purchased from Anacostia or Springfield. However, Exxon deliberately has not given such expansive trademark rights to Anacostia or Springfield, and Defendants interpretation of 36-303.01(a)(6) is inconsistent with the relevant legislative history. 1. Defendants interpretation of 36-303.01(a)(6) ignores the relevant legislative history Defendants argument relies primarily on the statutory language emphasized below: Prohibit a retail dealer from purchasing or accepting delivery of, on consignment or otherwise, any motor fuels, petroleum products, automotive products, or other products from any person who is not a party to the marketing agreement or prohibit a retail dealer from selling such motor fuels or products, provided that if the marketing agreement permits the retail dealer to use the distributor's trademark, the marketing agreement may require such motor fuels, petroleum products, and automotive products to be of a reasonably similar quality to those of the distributor, and provided further that the retail dealer shall neither represent such motor fuels or products as having been procured from the distributor nor sell such motor fuels or products under the distributor's trademark; D.C. Code 36-303.01(a)(6) (emphasis added). The legislative history of 36-303.01(a)(6) sheds light on the meaning of the language upon which Defendants rely. In the bill as introduced, 36-303.01(a)(6) stopped after the phrase reasonably similar quality to those of the distributor. CPG Mem., Attach. C, at 19. The Council decided that additional language was needed because [ 36-303.01(a)(6)] prohibited provisions in marketing agreements requiring exclusive dealing arrangements. However, in the event that a marketing agreement authorized the use of the distributors trademark, this section authorized the distributor to require that all motor fuels and products sold at the retail service station be of a reasonably similar quality to those trademarked motor fuels and products supplied by the distributor. The Committee received several communications which stated that the latter provision would authorize the retail dealer to commingle the distributors 28

motor fuels with competitive products, to violate trademark rights, and to use misrepresentation and deceptive advertising in the sale of motor fuels and other products. This provision was not intended to authorize these illegal practices, but was designed to provide some minimal protection to the distributors trademark. Exhibit A hereto at 43 (emphasis added). The added language was a prohibition against a retail dealer misrepresenting the source of his motor fuels or products. Id. at 40. The Councils analysis of the final version of 36-303.01(a)(6) stated the statute: prohibits exclusive dealing arrangements. This subsection also prohibits such commingling of motor fuels and products as to constitute fraud, misrepresentation, or trademark violations. This section does not authorize a distributor to establish a functional exclusive dealing arrangement by an overly strict interpretation of the phrase reasonably similar quality. Id. at 53 (emphasis added). The legislative history shows that the Council intended to prohibit commingling of gasoline, even if the gasoline was of reasonably similar quality, and to prohibit retail dealers from misrepresenting to consumers that the gasoline was of a particular trademarked brand. This is the minimal protection of a distributors trademark to which the legislative history refers. Exhibit A hereto at 43. None of the potential harms suggested in the legislative history can occur when a retail dealer obtains the same brand of gasoline from a distributor other than the distributor with which the retail dealer has a marketing agreement. Nothing in the legislative history suggests that the Council ever intended the RSSA to prevent dealers from truthfully representing branded gasoline to be the branded gasoline that it is. Defendants omission of any legislative history is telling, because the legislative history squarely contradicts Defendants interpretation. Even where the words of a statute have a superficial clarity, a review of the legislative history or an in-depth consideration of alternative constructions that could be ascribed to statutory language may reveal ambiguities that the court must resolve. Peoples Drug Stores, Inc. v. District of Columbia, 470 A.2d 751, 754 (D.C. 1983) (citations omitted). Courts look beyond the words of the statute if 29

(2) the literal meaning of the statute produces absurd results; (3) the plain meaning construction leads to an obvious injustice; or (4) refusal to adhere to plain meaning is necessary in order to effectuate the legislative purpose of the statute as a whole. Dobyns v. United States, 30 A.3d 155, 159 (D.C. 2011) (citation omitted). Defendants interpretation implicates all of these reasons for considering the legislative history. Also, the RSSA is a remedial statute intended to protect the interests of the public, health, safety, and welfare, and its provisions must be liberally interpreted to fulfill those purposes. D.C. Code 36-305.01; Dege, 574 A.2d at 292. Defendants interpretation of 36-303.01(a)(6) is clearly inconsistent with the legislative history. See Peoples Drug Stores, 470 A.2d at 754 (quoting Dyer v. D.C. Dept of Hous. and Cmty. Dev., 452 A.2d 968, 969-70 (D.C.1982) ([t]he use of legislative history as an aid in interpretation is proper when the literal words of the statute would bring about a result completely at variance with the purpose of the Act)); District of Columbia v. Orleans, 406 F.2d 957, 959 (D.C. Cir. 1968) (the plain meaning doctrine has always been subservient to a truly discernible legislative purpose however discerned, by equitable construction or recourse to legislative history). The statute prevents a retail dealer operating under a marketing agreement involving use of a trademark from selling other-branded and non-branded fuels, even if of a reasonably similar quality, under the branded trademark.10 The statute does not prevent such a dealer from selling branded gasoline under the trademark for that brand.

The Superior Courts Order in the Kazemzadeh case is consistent with the Districts interpretation of 36-303.01, although Kazemzadeh did not present the same issue as the Complaint in this case. Defendants accurately note that the Kazemzadeh Order held that a marketing agreement between retail dealers and BP-branded distributors that required the dealers to purchase all of their gasoline, BP-branded or otherwise, from those distributors violated 36303.01(a)(6). The Court cited to 36-303.01(a)(6)s legislative history stating that the purpose of the trademark language was to provide some minimal protection to the distributors 30

10

2. Anacostia and Springfield have no independent rights in Exxons trademarks Defendants argue that the phrase distributors trademark really means Exxons trademark as owned, leased, or otherwise controlled by Anacostia or Springfield. CPG Mem. at 23 n.16. Defendants assert that D.C. Exxon-branded retail dealers can only use the Exxon trademark by virtue of Defendants illegal franchise agreements with Anacostia and Springfield, and hence can only sell Exxon-branded gas purchased from Anacostia and Springfield. Id. Defendants argument is inherently circular. Other D.C. area distributors have distribution agreements with Exxon and the ability to permit independent retail dealers to use Exxons trademarks to sell Exxon-branded gasoline. Compl. 2, 22. If Defendants were not enforcing their exclusive supply agreements with these independent retail dealers, in violation of the RSSA, then Exxon-branded retail dealers in D.C. could, and would, have supply agreements with the other Exxon-branded distributors in the D.C. area. Exxon-branded independent retail dealers could purchase the same Exxon-branded gasoline that they purchase from Anacostia or Springfield from any Exxon-branded distributor in the D.C. area, and sell it under Exxons trademark. Moreover, the Council understood the difference between a distributors use of its own trademark and a branded jobbers use of a refiners trademark. Defendants supply retail service station[s] . . . operated by an independent dealer under a marketing agreement with a refiner (or a branded jobber) pursuant to which the dealer purchases gasoline directly from the refiner (or

trademark, and held that the RSSA required the retail dealers to be able to purchase and sell nonBP branded gasoline so long as the quality of the fuel is similar and there is no representation that the other brands were obtained from BP or other brands under BPs trademark. (emphasis in original). Kazemzadeh. v. E. Petroleum Corp., No. 2006-CA-9077B, slip op. at 11-12 (Super. Ct. D.C. Aug. 19, 2010). The Courts emphasis on and indicates that the prohibition on selling gasoline under a distributors trademark is consistent with that gasoline being something other than the trademarked brand of gasoline. 31

indirectly through the branded jobber), is granted a right to use the refiners brand name. Exhibit A hereto at 4 (emphasis added). Because the brand name at issue is Exxons, Defendants marketing agreements would not be described by the Council as agreements pursuant to which the dealer obtains motor fuels from the jobber, is granted a right to use a brand name owned by the jobber. See Exhibit A hereto at 4 (emphasis added). Along with the rest of the RSSAs legislative history, these definitions show that the Council understood the distinction between a refiners trademark and a jobbers trademark, and did not intend to conflate the two in 36-303.01(a)(6). Moreover, Defendants own marketing agreements confirm that Anacostia and Springfield have no independent rights to the use or protection of Exxons trademarks. The distribution agreements state:
Redact

Exxon Mem., Paolino Decl., Exh. C 11(k), Exh. D 11(k); see id. Exh. C 11(a), Exh. D 11(a) Redact The distribution agreements also prohibit use of Redact Id. Exh. C 11(i), Exh. D 11(i). Defendants thus did not contract to provide any kind of independent rights in Exxons trademarks to its distributors Anacostia and Springfield. Defendants did contract to prohibit retail dealers from selling the petroleum products of others or unbranded petroleum products under Exxons trademarks:
Redact

32

Redact

Exxon Mem., Paolino Decl., Exh. C 11(a), Exh. D 11(a) (emphasis added). Likewise, Anacostias successor franchise agreements state that the contracting retail dealer Redact Exh. B 14(a). Defendants marketing agreements show that Defendants purposes are consistent with the purposes of 36-303.01(a)(6)s trademark language, and Defendants have structured their business relationship accordingly. The position taken by their Motions, on the other hand, is inconsistent with the legislative purpose of 36-303.01(a)(6) and inconsistent with Defendants own agreements. The reasonableness of a construction can often be tested by considering the consequences of a different one. District of Columbia v. Seven-Up Wash., Inc., 214 F.2d 197, 201 (D.C. Cir. 1954). If the Council really intended 36-303.01(a)(6) to exempt the purchase of branded gasoline from its prohibition on exclusive marketing agreements, it could have done so much more simply, with language such as provided that if the marketing agreement permits the retail dealer to use the distributor's trademark, the marketing agreement may require such trademarked motor fuels, petroleum products, and automotive products to be purchased only from the distributor. There would be no concern about a retail dealers misrepresenting the source of the branded gasoline because the retail dealer could only have purchased the branded gasoline from the distributor that was a party to the marketing agreement. Defendants undoubtedly wish that this was the language and intent of 36-303.01(a)(6), but it is not. The words of the statute and the legislative history show that the Council did not intend this result. 33

Defendants contention that they are exempt from 36-303.01(a)(6)s prohibition on exclusive supply agreements is unsupported by the legislative history, the language of the RSSA, and the parties own agreements. Defendants marketing agreements are subject to 36303.01(a)(6) and violate its terms. D. Exxon Is A Proper Party To The Districts Action Exxon separately claims that it is not subject to liability under the RSSA because it arguably is not a distributor under the RSSA and does not currently have its own marketing agreements under the RSSA. To prevail on its motion, Exxon must establish that its distribution agreements, its assignments of franchise agreements, and its distributors current franchise agreements, in combination, should not be considered marketing agreements. Exxons Motion fails because the District has alleged the facts giving rise to Exxons liability under 36303.01(a)(6) and (11) of the RSSA. The Districts Complaint alleges that Exxon set up a series of unlawful distribution agreements with the operators of the Exxon-branded gasoline stations in D.C., assigned those agreements to the other Defendants, and is now enforcing the agreements or successor agreements through its gasoline-distribution agreements with distributors in the D.C. area. Complaint 15-23. These allegations entitle the District to relief under the RSSA, whether or not Exxon is technically a distributor at this time. Exxon also asserts that the Districts action is barred by the two-year statute of limitations applicable to [a] civil action brought by a retail dealer against a distributor pursuant to this section. D.C. Code 36-303.06(c); Exxon Mem. at 9 n.7. However, this action is not brought by a retail dealer and is not brought pursuant to 36-303.06(c); therefore, the two-year statute of limitations does not apply. Moreover, the general three-year statute of limitations that applies

34

when a limitation is not otherwise specially prescribed does not apply to actions brought by the District of Columbia government. D.C. Code 12-301. 1. Exxon is a party to marketing agreements under the RSSA Exxon contends that since it is not currently a distributor, and since none of its current agreements are directly with a retail dealer, it cannot be considered a party to a marketing agreement. Exxon is wrong: its distribution agreements and assignments are marketing agreements to which it is a party and which, in combination with the franchise agreements, form an unlawful marketing agreement that violates 36-303.01(a). Compl. 6, 22, 32. Exxons unlawful marketing agreements are alleged in paragraphs 15-23 of the Complaint. The District alleges that Exxon was originally a distributor; until 2009, Exxon was the owner and exclusive supplier of all the Exxon-branded gasoline stations in D.C. and maintained that exclusivity through its standard gasoline-distribution agreements with all of [Exxons] gasoline distributors in and around D.C. Id. 15-16. Exxons gasoline-distribution agreements prohibited its distributors from supplying Exxon-branded gasoline to a D.C. gasoline station already supplied by Exxon or another Exxon-branded distributor. Id. 16. Pursuant to purchase and sale agreements, between December 2008 and February 2010, Exxon (1) transferred its exclusive supply rights and its real estate rights for Exxon-branded gasoline stations in D.C. to Anacostia and Springfield; and (2) as a condition precedent to the assignment, required Anacostia and Springfield to enter into Exxons standard gasolinedistribution agreements. Id. 17-19. Exxon has, and had, distribution agreements with its other branded distributors in the D.C. area that likewise prohibit those distributors from supplying Exxon-branded gasoline to a gasoline station already supplied by another Exxonbranded distributor. Id. 16. Exxon thus maintained the exclusive supply rights for D.C.

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Exxon-branded retail dealers found in Exxons franchise agreements with independent retail dealers, having substituting Anacostia or Springfield as the distributors, and Exxon continues to enforce this exclusivity through its distribution agreements with Anacostia and Springfield. Id. 20-22, 5. Accordingly, Exxons assignments of these dealer-franchise agreements to Anacostia or Springfield, in combination with Exxons standard gasoline-distribution agreements with its distributors in and around D.C., have been and are marketing agreements within the meaning of D.C. Code 36-301.01(7). Id. 22. Exxons, Anacostias, and Springfields: dealer-franchise and gasoline-distribution agreements, individually and in combination, are marketing agreements that, in violation of the [RSSAs] 36-303.01(a)(6) and (a)(11), prevent the approximately 27 independent retail dealers that operate Exxonbranded gasoline stations in D.C. from buying Exxon-branded gasoline from suppliers other than those affiliated with the CPG Defendants. Id. 6. The RSSA provides that multiple agreements may constitute unlawful marketing agreements, as long as the multiple agreements violate the RSSA. A marketing agreement under the RSSA can be any written agreement, or combination of agreements, including any contract, lease, franchise, or other agreement. D.C. Code 36-301.01(7). For purposes of D.C. Code 36-303.01(a), a marketing agreement includes any oral or written collateral or ancillary agreement. Blacks Law Dictionary defines ancillary as supplementary; subordinate and collateral as Supplementary; accompanying, but secondary and subordinate. Blacks Law Dictionary 101, 297 (9th ed. 2009). A collateral contract may be an agreement made before or at the same time as, but separately from, another contract. Id. at 367. Exxon contends that each agreement constituting a marketing-agreement combination must be between a distributor and retail dealer, due to the RSSAs definition of the parties to a 36

marketing agreement. Exxon Mem. at 9-11. However, the statutory language in 36-303.01(a) does not require a combination of agreements to be merely a collection of marketing agreements, but provides that collateral or ancillary agreements may violate that section as well. Exxons plain-meaning argument fails. Exxon also contends that even if the definition of marketing agreement is ambiguous, the RSSAs legislative history limits marketing agreements to one or more of the following agreements: a retail service station lease, a trademark agreement, and a motor fuel supply agreement. Exhibit A hereto at 49. Once more, Exxons argument is undone by its selective citation of the RSSA and its legislative history. The legislative history Exxon cites does not address the phrase or other agreement in 36-301.01(7)s definition of marketing agreement as any written agreement, or combination of agreements, including any contract, lease, franchise, or other agreement. It likewise is silent on the expansion of marketing agreements to include any oral or written collateral or ancillary agreement for purposes of liability under 36-303.01(a). The legislative historys discussion of the types of agreements that may compose a marketing agreement could not have been intended to be exhaustive, given the language of 36-303.01(a) and 36-301.01(7). Moreover, Exxons distribution agreements are both trademark agreements and motor fuel supply agreements, and the assignments simply transfer those types of rights from Exxon to Anacostia or Springfield. Exxon Mem., Exh. A, at 1, 3, 4, Exh. B, at 1, 3, 4, Exh. C, 1(a), Exh. D, 1(a); Compl. 17-22. The Districts allegations that the assignments and distribution agreements are unlawful marketing agreements do not conflict with the legislative history. If the RSSAs provisions regarding the types of documents that constitute marketing agreements violating 36-303.01(a)(6) and (a)(11) are given their ordinary meaning, it is clear

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that the RSSA does not have the plain meaning Exxon claims. Carter v. State Farm Mut. Automobile Ins. Co., 808 A.2d 466, 471 (D.C. 2002) (quoting Davis v. United States, 397 A.2d 951, 956 (D.C. 1979).) Exxons Motion raises at most a question of fact regarding the interpretation of documents constituting marketing agreements, but that issue need not be resolved to deny Exxons Motion. See Howard University v. Best, 484 A.2d 958, 966-67 (D.C. 1984). Exxon fails to show, as a matter of law, that the District has not alleged a combination of agreements, including the assignments and distribution agreements, that violate 36303.01(a)(6) and (a)(11). In fact, the District has sufficiently alleged that the distribution agreements and the assignments are part of a combination of agreements constituting Defendants unlawful marketing agreements. Basic contract interpretation principles hold that a combination of agreements may include agreements between different parties or those executed at different times. See 17A C.J.S. Contracts 401 (2013) (Two or more documents may be construed as one contract even though the parties are not all the same, such as where some of the documents are executed by parties who do not have a part in executing the others, provided that the agreements in question relate to the same subject matter.); TVT Records v. Island Def Jam Music Grp., 412 F.3d 82, 89-90 (2d Cir. 2005) (holding that two separate contracts intended to effectuate the same result were parts of the same agreement, even though one agreement was not fully executed). Here, the assignments and distribution agreements were executed as part of a series of purchase and sale transactions that transferred Exxons exclusive supply arrangements to Anacostia and Springfield and left Exxon with the ability to enforce the exclusivity provisions. Compl. 15-19. The existence of multiple agreements instead of one, and the substitution of Anacostia and Springfield as the distributors under the franchise agreements, simply means

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there is now a combination agreements and a combination of current and former distributors restricting independent retail dealers ability to purchase Exxon-branded gasoline. Id. 6, 23, 33. Upholding Exxons interpretation of the RSSA would elevate form over substance, allowing Exxon to escape RSSA liability while actively maintaining the exclusive supply arrangements it set up in D.C. The D.C. Court of Appeals has declined to interpret the RSSA so narrowly, holding it must be interpreted liberally to effectuate its public interest purposes. Dege v. Milford, 574 A.2d 288, 290 n.3 (D.C. 1990). While interpreting another provision of 36303.01(a), the Court of Appeals stated: We also note that the position advanced by [defendant] would enable a franchisor to easily undermine the purposes of the RSSA. Cf. Barnes v. Gulf Oil Corp., 795 F.2d 358, 362 (4th Cir.1986) ([a] franchisor cannot circumvent the protections the [comparable federal act] affords a franchisee by the simple expedient of assigning the franchisor's obligation to an assignee. Id.; see Kazemzadeh, slip op. at 13-14 (holding that a purchase and sale agreement was a marketing agreement under the RSSA because it contained the types of terms required of marketing agreements). The result would be equally untenable in this action. 2. Exxons marketing agreements contain exclusive dealing terms in violation of 36-303.01(a) Exxons final contention is that the RSSA does not apply to its agreements because the agreements do not exclude competition by their terms. Exxon Mem. at 11-13. But the District has sufficiently pleaded that the agreements, in combination with other agreements, effectively restrict from whom independent retail dealers in D.C. may purchase Exxon-branded gasoline, in violation of D.C. Code 36-303.01(a). Exxon claims that neither the assignments nor the distribution agreements create an exclusive relationship for the retail dealers. Exxon Mem. at 12. But the assignments 39

transferred, to Anacostia and Springfield, Exxons franchise rights to exclusive relationships with the independent retail dealers. The franchise agreements stated, in relevant part: DEALER agrees to buy and receive directly from EXXONMOBIL all of the EXXON-branded gasoline diesel sold by DEALER. Compl. 21-28. The assignments therefore violate 36303.01(a)(6) and (a)(11) by setting up unlawful marketing agreements between Exxons distributors and Exxons retail dealers. Exxons distribution agreements violate the RSSA by operating to enforce Anacostias and Springfields exclusive supply rights with independent retail dealers. The distribution agreements, titled Market Development and Representation, provides in relevant part:
Redact

Exxon Mem., Paolino Decl. Exh. C, 12(a)(3), Exh. D, 12(a)(3). Redact

Id. Exh. C, 1(a), Exh. D, 1(a). The distribution agreements have operated to prevent any D.C.-area Exxon-branded distributor, other than Anacostia or Springfield, from supplying the independent retail dealers in D.C., ever since the 2009-2010 purchase and sale transactions. Compl. 5. 18-19. The distribution agreements thus have the same impact on the retail dealers rights, and are equally violative of the RSSA, as the franchise agreements. Compl. 6, 23. Exxons marketing agreements prohibit independent retail dealers, and the consumers who purchase Exxon-branded gasoline from these dealers, from the benefits of competition in the supply of Exxon-branded gasoline. The Court should deny Exxons Motion. 40

V. CONCLUSION For the reasons stated herein, Defendants Motions to Dismiss the Districts Complaint should be denied. A proposed Order is submitted with this Opposition. Respectfully submitted, IRVIN B. NATHAN Attorney General for the District of Columbia ELLEN A. EFROS Deputy Attorney General, Public Interest Division /s/ Bennett Rushkoff BENNETT RUSHKOFF (Bar #386925) Chief, Public Advocacy Section /s/ Catherine A. Jackson CATHERINE A. JACKSON (Bar #1005415) NICHOLAS A. BUSH (Bar #1011001) Assistant Attorneys General Office of the Attorney General 441 Fourth Street, N.W., Suite 600-S Washington, DC 20001 (202) 442-9864 catherine.jackson@dc.gov

Dated: November 8, 2013

Attorneys for the District of Columbia

CERTIFICATE OF SERVICE I hereby certify that on November 8, 2013, I caused copies of the foregoing District of Columbias Memorandum of Points and Authorities in Opposition to Motions to Dismiss of ExxonMobil Oil Corp., Capitol Petroleum Group, Anacostia Petroleum Realty, LLC and Springfield Petroleum Realty, LLC and the attached Proposed Order to be served by the Courts electronic service on counsel for the parties in this action.

/s / Bennett Rushkoff Bennett Rushkoff (Bar #386926)

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