Brosious v. Pepsi-Cola Co.

• Decision Date: 19 April 1946
• Docket Number: No. 8905.,8905.
• Parties: BROSIOUS v. PEPSI-COLA CO. et al.
• Court: U.S. Court of Appeals — Third Circuit

155 F.2d 99 (1946)

BROSIOUS v. PEPSI-COLA CO. et al.

No. 8905.

Circuit Court of Appeals, Third Circuit.

Argued October 11, 1945.

Decided April 19, 1946.

Miller Alanson Johnson, of Lewisburg, Pa., on the brief, for appellant.

Arthur T. Vanderbilt, of Newark, N. J. (Snyder, Hull, Leiby & Metzger and Walter H. Compton, all of Harrisburg, Pa., and G. Dixon Speakman and Herbert E. Armstrong, both of Newark, N. J., on the brief), for appellee Pepsi-Cola Co.

Robert Stinson, of Baltimore, Md. (Cloyd Steininger, of Lewisburg, Pa., and Ober, Williams & Stinson, of Baltimore, Md., on the brief), for appellee Cloverdale Spring Co.

Before ALBERT LEE STEPHENS, GOODRICH, and McLAUGHLIN, Circuit Judges.

STEPHENS, Circuit Judge.

In this action William G. Brosious prays a judgment for treble damages, interest thereon, and attorney fees, alleging an illegal conspiracy between two corporations, Pepsi-Cola Company and Cloverdale Spring Company, defendants. Anti-Trust Laws, 15 U.S.C.A. § 15.

At the conclusion of the plaintiff's case, the trial court granted defendants' motion to dismiss the action, holding that the evidence introduced did not support the allegation that a conspiracy had been entered into between the two defendants in unreasonable restraint of trade. No decision was made as to the allegation that the combined transactions of the two defendants were in interstate commerce. Brosious appeals.

The Pepsi-Cola Company is the owner of the registered trade name and trade-mark "Pepsi-Cola" and is the manufacturer or compounder of a certain "concentrate" or syrup made in conformity with a so-called secret formula, which, when combined with sugar and carbonated water, is bottled and sold as a beverage called Pepsi-Cola. Pepsi-Cola Company contracted with Cloverdale Spring Company as its exclusive bottler and distributor of "Pepsi-Cola" for Pennsylvania and other territory. Under the contract the Pepsi-Cola Company sold and shipped its "concentrate" in ten-gallon containers from Long Island, New York, to the Cloverdale Spring Company at Newville, Pennsylvania, where it was warehoused until mixed and bottled as the trade demanded the beverage through jobbers, salesmen and distributors.

The contract between Pepsi-Cola Company and Cloverdale Spring Company, appointing the latter "* * * its exclusive bottler * * *," was in reality an appointment as exclusive distributor in the territory named therein for the trademarked soft drink called "Pepsi-Cola." Briefly stated, the contract provides for the following: The distributor must comply with law; confine its representations to those authorized by Pepsi-Cola Company; purchase the concentrate, the bottles, bottle caps and labels used at fixed prices from Pepsi-Cola Company; mix the ingredients exactly and only as directed by Pepsi-Cola Company; "push vigorously" the wholesale output of Pepsi-Cola at a price fixed by Pepsi-Cola "to the satisfaction of Pepsi-Cola"; and distribute only Cloverdale products. The contract is assignable upon approval of both parties to it.

For a period of about six years or until April, 1941, Cloverdale sold bottled Pepsi-Cola to Brosious for cash at its plant at Newville, Pennsylvania, who resold and distributed it in territory prescribed by Cloverdale within the State of Pennsylvania. Brosious also purchased and re-sold non-alcoholic beverages other than Pepsi-Cola. Sometime in April, 1941, Cloverdale refused to continue supplying Pepsi-Cola to Brosious. Negotiations ensued, in which Cloverdale demanded that Brosious should take at least three counties in Pennsylvania in addition to his former territory, paint his trucks a prescribed color and distribute only the products of Cloverdale. Brosious did not approve of these requirements and took his objections to the officers of Pepsi-Cola Company in New York but to no purpose. He was informed, however, that it was not the policy of Pepsi-Cola Company to tell their "franchise bottlers" what to do, but that when sales drop off in any particular territory, it "steps in," and that it follows the policy of backing up its franchised bottlers and would do so in this case. Brosious refused the proposals and thereafter brought this action, claiming that appellees were acting in conspiracy, and contrary to the law as provided in the Sherman Anti-Trust Act, 15 U.S.C.A. §§ 1-7, 15, "* * * to procure, monopolize and keep within their control to the greatest extent possible * * *" the wholesale distribution of Pepsi-Cola syrup.

At the beginning it is well to note that there is no interlocking directorate or other financial connection as existing between Cloverdale and Pepsi-Cola.

The relief prayed for is based upon 15 U.S.C.A. § 15, which provides: "Any person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws may sue therefor in any district court of the United States in the district in which the defendant resides or is found or has an agent, without respect to the amount in controversy, and shall recover threefold the damages by him sustained, and the cost of suit, including a reasonable attorney's fee."

Section 1 of the Sherman Act, 15 U.S. C.A. § 1, provides: "Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is hereby declared to be illegal; * * *." Section 2 of the Act, 15 U.S.C.A. § 2, provides: "Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a misdemeanor."

It will be noted from the above sections of the anti-trust laws that the combinations, acts in restraint of trade, or conspiracy must be concerned with "commerce among the several States, or with foreign nations." Brosious alleges and argues that Cloverdale's refusal to sell Pepsi-Cola to him except under the terms hereinbefore set out, together with the Pepsi-Cola's treatment of the situation when he presented it to its officers in New York, all in the light of the contract existing between Cloverdale and Pepsi-Cola, constitutes a conspiracy condemned by the Sherman Act. Pepsi-Cola and Cloverdale contend on the contrary that there is nothing in the situation touching interstate commerce and that there is no conspiracy in the premises, nor has there been any act performed by either or both appellees tending to unreasonably restrict trade or commerce.

It appears to us that the first detail to be considered in determining whether or not the facts of the case constitute interstate commerce, or whether or not the facts show an illegal restraint of trade, is the interrelation of Pepsi-Cola and Cloverdale. As we view it, there is nothing in the evidence which by any reasonable interpretation tends to or supports an inference that Pepsi-Cola and Cloverdale were acting in concert in refusing to sell to Brosious. Pepsi-Cola and Cloverdale are two entirely separate and distinct enterprises. It is not asserted that Pepsi-Cola is without the unqualified right to make a contract whereby it sells its product to be distributed under reasonable conditions calculated to protect the good reputation of its product which is sold under a trademarked name. And this right is not affected one way or another by the interstate or intrastate character of the commerce involved. The citation of a very few authorities will suffice upon this point.

In Great Atlantic & Pacific Tea Co. v. Cream of Wheat Co., 2 Cir., 1915, 227 F. 46, 49, the right to sell to none or to all is upheld. "Before the Sherman Act it was the law that a trader might reject the offer of a proposing buyer, for any reason that appealed to him; it might be because he did not like the other's business methods, or because he had some personal difference with him, political, racial, or social. That was purely his own affair, with which nobody else had any concern. Neither the Sherman Act, nor any decision of the Supreme Court construing the same, nor the Clayton Act, has changed the law in this particular. We have not yet reached the stage where the selection of a trader's customers is made for him by the government." See Jax Beer Co. v. Redfern, 5 Cir., 1941, 124 F.2d 172.

In Union Pacific Coal Co. v. United States, C.C., 1909, 173 F. 737, 740, it is said: "If the necessary effect of a combination to engage in or conduct interstate or international commerce is but incidentally and indirectly to restrict competition therein, while its chief result is to foster the trade and to increase the business of those who make and operate it, it does not fall under the ban of this anti-trust law. Authorities cited."

It is the right, long recognized, of a trader engaged in a strictly private business, freely to exercise his own independent discretion as to the parties with whom he will deal. United States v. Colgate & Co., 1919, 250 U.S. 300, 307, 39 S.Ct. 465, 63 L.Ed. 992, 7 A.L.R. 443; Mennen Co. v. Federal Trade Commission, 2 Cir., 1923, 288 F. 774, 780, 30 A.L.R. 1120; Wholesale Grocers' Ass'n v. Federal Trade Commission, 5 Cir., 1922, 277 F. 657, 664; Coca-Cola Bottling Co. v. Coca-Cola Co., D.C.Del., 1920, 269 F. 796; J. B. Lippincott Co. v. Federal Trade Commission, 3 Cir., 1943, 137 F.2d 490, 495; Pittsburgh Plate Glass Co. v. Jarrett, D.C.Ga., 1942, 42 F.Supp. 723, 734.

We conclude that the contract between the appellee corporations, independent of the interstate commerce, was not of itself offensive to the monopoly phase of the Sherman Act.

Brosious, upon meeting with the situation described, appealed to officers of Pepsi-Cola Company, and he contends that the treatment accorded him, together with the contract and the refusal of Cloverdale to sell to him, proves the conspiracy alleged.

We are unable to make anything more out of the interviews...