269 F. 796 (D.Del. 1920), 389, The Coca-Cola Bottling Co. v. The Coca-Cola Co.

Docket Nº:389.
Citation:269 F. 796
Party Name:THE COCA-COLA BOTTLING CO. v. THE COCA-COLA CO.
Case Date:November 08, 1920
Court:United States District Courts, 3th Circuit, District of Delaware
 
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Page 796

269 F. 796 (D.Del. 1920)

THE COCA-COLA BOTTLING CO.

v.

THE COCA-COLA CO.

No. 389.

United States District Court, D. Delaware.

November 8, 1920

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H. H. Ward, of Wilmington, Del., John A. Sibley and Charles T. Hopkins, both of Atlanta, Ga., and Frank Spurlock and James B. Sizer, both of Chattanooga, Tenn., for complainant.

William S. Hilles and Robert H. Richards, both of Wilmington, Del., Samuel B. Adams, of Savannah, Ga., and Clifford L. Anderson and Robert C. Alston, both of Atlanta, Ga., for defendant.

MORRIS, District Judge.

The defendant, The Coca-Cola Company, a Delaware corporation, taking the position that a contract made between The Coca-Cola Company, a Georgia corporation predecessor in title of the defendant, of the one part, and J. B. Whitehead and B. F. Thomas, through whom complainant claims, of the other part, was a contract at will, with the right in either party to terminate the same upon reasonable notice, gave notice to the complainant that the contract would 'stand terminated' on a specified subsequent day. Thereupon the complainant, denying the contract to be terminable at the will of either party without the consent of the other, filed its bill of complaint, praying for an injunction, a decree for specific performance, and other and general relief. The case is now before the court upon defendant's motion to dismiss the bill, under equity rule 29, and also upon complainant's motion for a preliminary injunction as prayed by the bill. The defendant's motion will be first considered, and, as it must be disposed of solely upon the allegations of the bill, the substance of such allegations, so far as deemed material to a proper consideration of this motion, will be stated.

The Georgia corporation was organized in 1892, and became the sole owner of a secret process or formula under which it manufactured from the time of its organization until the year 1919 a syrup used in making a drink which it called Coca-Cola. It also adopted and used the words 'Coca-Cola' as a common-law trade-mark. By the year 1899 the Georgia corporation had become solely entitled to use the trade-name and trade-mark 'Coca-Cola.' Until the latter year the syrup manufactured by it had been used only as the base for a drink served at soda fountains for immediate consumption. During that

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year a contract was made between J. B. Whitehead and B. F. Thomas, of the first part, and the Georgia corporation, of the second part, which, as amended shortly after its execution, reads (with the exception of the numbers preceding each paragraph, here added for convenience of reference), so far as material to the issues raised by the pending motions, as follows:

'Georgia, Fulton County.

'This agreement, made and executed in duplicate this the twenty-first day of July, 1899, between J. B. Whitehead and B. F. Thomas, of the first part, and The Coca-Cola Company, of the second part, witnesseth:

'(1) That the parties of the first part are to establish in the city of Atlanta, as soon as the necessary machinery and buildings can be obtained, a bottling plant for the purpose of bottling a mixture of Coca-Cola syrup and preparation with carbonic acid and water.

'(2) This plant to be established by said parties of the first part without any expense or liability of any sort against said party of the second part.

'(3) Said parties of the first part further agree to prepare and put up in bottles or other receptacles, a carbonated drink containing a mixture of the Coca-Cola syrup and water charged with carbonic acid gas under a pressure of more than one atmosphere. Said Coca-Cola syrup and said water in said mixture to be used in proportions of not less than one ounce of syrup to eight ounces of water.

'(4) Said parties of the first part further agree to put up and keep and cause to be kept in sufficient quantity to supply the demand in all territory embraced in this agreement, a supply of this carbonated drink. It is expressly agreed that if, receiving notice in writing from the said party of the second part, to do so the parties of the first part shall, not within a period of 90 days from date of receiving said notice, place and keep upon sale at the point designated in said notice a sufficient stock of such preparation or mixture to supply the demand therefor, then the rights herein granted within all the territory within a radius of 100 miles of said point shall be forfeited; and provided, further, that a failure on the part of the parties of the first part to keep and perform the conditions and provisions herein contained shall work a forfeiture of their rights hereunder.

'(5) Said parties further agree to buy all of the Coca-Cola syrup necessary to a compliance with this agreement at a price and upon terms set forth below, directly from the party of the second part.

'(6) The parties of the first part agree not to use any substitute or substitutes for or other syrup or substance, nor to attempt to use or imitate with any article made or prepared by them, Coca-Cola syrup.

'(7) Parties of the first part further agree not to sell or in any way dispose of without the written consent of the parties of the second part in every instance any Coca-Cola, except after it is carbonated and bottled.

'(8) In consideration of these agreements on the part of the parties of the first part the party of the second part agrees to sell Coca-Cola syrup to said parties of the first part at one ($1.00) dollar per gallon. * * *

'(13) Said party of the second part further agrees and hereby grants to said parties of the first part, the sole and exclusive right to use the name Coca-Cola and all the trade-marks and designs for labels now owned and controlled by said party of the second part, upon any bottles or other receptacles containing the mixture heretofore described, and the right to vend such preparation or mixture bottled or put up as aforesaid, in all the territory contained in the boundaries of the United States of America, except the six New England states and the states of Mississippi and Texas. This right to use the name Coca-Cola and the trade-mark and label furnished is to be applied only to the carbonated mixture described, and is not intended to interfere in any way with the business and use of the same as now operated by the party of the second part, nor to apply to the soda fountain business as now operated by various parties. The rights of the parties of the first part under this contract may be by them transferred to a company, the formation of which is

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now contemplated by them to be known as the Coca-Cola Bottling Company, but no transfer of their rights under this contract to any other party or parties, shall be made without the consent of the party of the second part.

'In witness whereof each of the parties has hereunto affixed their signatures.

'J. B. Whitehead. (L.S.) 'B. F. Thomas. (L.S.) 'The Coca-Cola Company, 'Asa G. Candler, Pres. (L.S.)'

Coca-Cola Bottling Company, to which Whitehead and Thomas were authorized by the contract to transfer their rights thereunder, was organized under the laws of the state of Tennessee in December, 1899. Whitehead and Thomas conveyed to it all their rights under the contract and became its principal stockholders. Complying with the contract, Coca-Cola Bottling Company established a plant in the city of Atlanta, Ga., 'for the purpose of bottling a mixture of Coca-Cola syrup and preparation with carbonic acid and water. ' It established another at Chattanooga, Tenn. At each of these plants it commenced at its own expense the production of carbonated bottled Coca-Cola. The demand for the bottled product rapidly increased, both in volume and as to territory. The two plants in Atlanta and Chattanooga were unable to do more than meet the demand in those two cities, and as the contract required that the increased demand should be supplied new plants were necessary. At this stage of the business, with the consent of the Georgia corporation, a division was made of the territory embraced in the contract. Coca-Cola Bottling Company retained the Chattanooga plant and certain of the territory, while the Atlanta plant and the remainder of the territory was acquired by the complainant, The Coca-Cola Bottling Company. Each of these bottling companies thereafter proceeded to carry out in its respective territory all the provisions of the contract. Within a few years the complainant, by the expenditure of much time, money, and energy, procured the establishment of many additional plants, now numbering 588, each supplying a defined area with the bottled drink. The additional plants were established under contracts made, with the consent of the Georgia corporation, between the complainant and the owners of the respective local plants. The value of the physical properties now held and owned by the local bottlers in the territory of the complainant is approximately $10,500,000 (and in the territory of Coca-Cola Bottling Company is approximately $10,000,000), while the value of the tangible properties of the defendant amounts approximately to only $5,000,000. On April 24, 1915, at which time a very large proportion of the local plants had been established, the contract above set out was by mutual consent amended (with the exception of the numbers prior to each paragraph which are here added for convenience of reference), thus:

By striking out paragraph 5 and substituting the following in lieu thereof:

(5) 'Party of the first part agrees to buy from party of the second part such bottlers' syrup as may be necessary to fully supply said...

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