Coca-Cola Bottling Co. of Shreveport v. COCA-COLA COMPANY

• Decision Date: 29 April 1983
• Docket Number: 83-120.,Civ. A. No. 83-95
• Citation: 563 F. Supp. 1122
• Parties: COCA-COLA BOTTLING COMPANY OF SHREVEPORT, INC., et al., Plaintiffs, v. The COCA-COLA COMPANY, A Delaware Corporation, Defendant. ALEXANDRIA COCA-COLA BOTTLING COMPANY, LTD., et al., Plaintiffs, v. The COCA-COLA COMPANY, A Delaware Corporation, Defendant.
• Court: U.S. District Court — District of Delaware

563 F. Supp. 1122

COCA-COLA BOTTLING COMPANY OF SHREVEPORT, INC., et al., Plaintiffs, v. The COCA-COLA COMPANY, A Delaware Corporation, Defendant.

ALEXANDRIA COCA-COLA BOTTLING COMPANY, LTD., et al., Plaintiffs, v. The COCA-COLA COMPANY, A Delaware Corporation, Defendant.

Civ. A. Nos. 83-95, 83-120.

United States District Court, D. Delaware.

April 29, 1983.

Edmund N. Carpenter, II, Charles F. Richards, Jr., Jesse A. Finkelstein, and Thomas A. Beck, Richards, Layton & Finger, Wilmington, Del., for plaintiffs and intervenors; Emmet J. Bondurant, H. Lammar Mixson, Thomas B. Metzloff, and Deborah J. Merritt, Bondurant, Miller, Hishon & Stephenson, Atlanta, Ga., Roger N. Nanovic, Bondurant, Miller, Hishon & Stephenson, Jim Thorpe, Pa., Epperson, Good-paster & Johnsen, Tulsa, Okl., Miles J. Alexander, Kilpatrick & Cody, Atlanta, Ga., of counsel.

Andrew B. Kirkpatrick, Jr., William O. LaMotte, III, and Richard D. Allen, Morris, Nichols, Arsht & Tunnell, Wilmington, Del., for defendant; Frank C. Jones, Michael C. Russ, and George S. Branch, King & Spalding, Atlanta, Ga., Jerome Gilson, Hume, Clement, Brinks, Willian & Olds, Ltd., Chicago, Ill., of counsel.

MURRAY M. SCHWARTZ, District Judge.

Multimedia advertising proclaims "Coke is it," but what is "it"? Is diet Coke "it"? These are some of the questions currently before the Court. The plaintiffs¹ in these two unconsolidated lawsuits seek declaratory, injunctive and monetary relief against the Coca-Cola Company (the "Company") based upon allegations of breach of contract, violation of two 1921 Consent Decrees,² trademark infringement, dilution of trademark value, and federal antitrust violations, all of which concern the Company's introduction of diet Coke. Jurisdiction is based upon 28 U.S.C. §§ 1332, 1338, 2201; 15 U.S.C. §§ 1114, 1121, 1125; and 15 U.S.C. §§ 15, 16. Pending before the Court is plaintiffs' motion for a preliminary injunction pursuant to Fed.R.Civ.P. 65. Upon consideration of the voluminous briefs and affidavits submitted by the parties and the argument heard on April 7, 1983, the Court, for the reasons that follow, will deny the motion for a preliminary injunction.

I. Background

While the genealogy of the Coca-Cola family has been examined judicially many times, including this Court's recent opinion in Coca-Cola Bottling Co. of Elizabethtown, Inc. v. The Coca-Cola Co., 98 F.R.D. 254, (D.Del.1983), it is virtually impossible to consider the substance of the lawsuit without a basic understanding of the family tree.

A. The Coca-Cola Family

In 1886, an Atlanta pharmacist, Dr. J.S. Pemberton, created the syrup for a soda fountain beverage and named it Coca-Cola.³ In 1887, the name was registered as a trademark in the United States Patent Office. In exchange for $2,300, Asa Chandler acquired the Coca-Cola trademark and formula in 1888 and in 1892 formed The Coca-Cola Company as a Georgia corporation.

Prior to 1899, Coca-Cola was sold primarily as a fountain drink but in that year the Company entered into a contract with two Chattanooga, Tennessee, lawyers, B.F. Thomas and J.B. Whitehead, granting them the exclusive right to purchase Coca-Cola syrup ("Bottler's Syrup") at a fixed price, use the Coca-Cola trademarks, and sell Coca-Cola throughout the United States in bottles or other receptacles.⁴ The Company retained the right to manufacture and sell syrup, and to market fountain Coca-Cola.⁵ In December 1899, Whitehead and Thomas formed a Tennessee corporation known as Coca-Cola Bottling Company. Bottling plants were established in Chattanooga and Atlanta.

In 1900, due to a disagreement over the best method to develop the bottling business, Coca-Cola Bottling Company divided its territory into two parts. Thomas retained ownership of Coca-Cola Bottling Company which conveyed to Whitehead and his new business associate, J.T. Lupton, all of the rights that Coca-Cola Bottling Company had under the 1899 contract to certain states in the newly divided territory. Whitehead and Lupton formed a Tennessee corporation originally named Dixie Coca-Cola Bottling Company, which later changed its name to The Coca-Cola Bottling Company.⁶

In 1902, the Company granted the right to bottle Coca-Cola in Texas to Whitehead-Lupton, who in turn granted one-third of its interest in Texas and Oklahoma to E.D. Twinam. This right to Texas and Oklahoma held by Whitehead-Lupton and Twinam was then transferred to a new corporation which became known as The Coca-Cola Bottling Company (1903) ("1903 Company"). In 1916, the Company granted the exclusive right to bottle Coca-Cola in the six New England states to Monroe Bickart who formed the New England Coca-Cola Bottling Company ("New England").

These four companies — Thomas, Whitehead-Lupton, 1903 Company, and New England — became known as "parent bottlers."⁷ The parent bottlers did not actually bottle Coca-Cola themselves; rather, they contracted with other individuals and entities to bottle and sell Coca-Cola in exclusive specifically designated geographic territories. These bottlers became known as "actual" or "first-line" bottlers. The first-line bottlers often further divided their exclusive geographic territories amongst "sub-bottlers." The system that developed functioned as follows: The Company manufactured Bottler's Syrup which in turn was sold to the parent bottlers. The parents or sub-parents then resold the syrup to the actual bottlers at a higher price.⁸

Between 1899 and 1915 the contracts between the parent bottlers and the Company, which gave the parents the right to purchase Bottler's Syrup at a fixed price per gallon, may have been amended to adjust the price of Bottler's Syrup. In 1915, the contracts were amended to conform with changes of the Clayton Act. Dkt. 63, ¶ 26 Exh. F-1, F-2 (Second Affidavit of Emmet J. Bondurant). The parent bottlers modified their contracts with their first-line bottlers to reflect these changes. Id. at ¶ 28. These modifications were carried out through the use of standardized printed contracts. ("Bottler's Contracts").⁹

In 1918, the Company was purchased by a banking syndicate and became a Delaware corporation, assuming the obligations to the parent bottlers. The new corporation entered into an agreement with the principal parent bottlers in December of 1919 to permit the Company to pass on cost increases of sugar in excess of nine cents per pound to the parent bottlers. Due to the high cost of sugar after World War I, the Company sought to enter into new contracts with the parents which would allow the Company to raise Bottler's Syrup prices at will. The parent bottlers rejected this proposal and the Company informed the parents that their contracts were terminable at will and gave notice of termination. In response, Whitehead-Lupton and Thomas instituted suits against the Company in this Court.¹⁰

In Coca-Cola Bottling Co. v. The Coca-Cola Co., the Court granted the parents' motion for a preliminary injunction holding that their contracts were perpetual. 269 F. at 816. While an appeal was pending, the parties executed settlement agreements which were incorporated by the Court as final judgments on October 4, 1921. These constituted the 1921 Consent Decrees.

The Consent Decrees also amended the 1899 contracts, as amended in 1915, between the Company and the parents. The Consent Decrees provided, inter alia: first, that the parents' contracts with the Company were perpetual; second, that Coca-Cola Bottler's Syrup contain no less than 5.32 pounds of sugar per gallon; third, that the cost of Bottler's Syrup to the parents would be no less than $1.17½ per gallon and that the first-line bottlers would pay a maximum of $1.30 per gallon; fourth, that the price of Bottler's Syrup could increase based upon the increase in the market price of sugar as quoted quarterly by the ten largest refineries in the United States; and fifth, that the parents would have the exclusive right to use the trade name and trademark Coca-Cola in their exclusive territories.

The settlement with Whitehead-Lupton was temporarily conditioned on Whitehead-Lupton's attempt to obtain acceptance of the modification of its first-line Bottler's Contracts to conform with the Consent Decrees.¹¹ Dkt. 1, Exh. 5, ¶¶ 15, 16. The Thomas bottlers had two-year term contracts, most of which had expired during the litigation. Thomas executed perpetual new form Bottler's Contracts which conformed to the Consent Decrees.

Between 1923 and 1975, the Company acquired and dissolved all of the parent and sub-parent bottlers. Dkt. 55, Exh. 7, ¶ 17 (Affidavit of Charles L. Wallace). The Company, therefore, has succeeded to the rights and obligations of all the parent bottlers, and today sales of Bottler's Syrup are made directly from the Company to the actual bottlers.¹² The price of Bottler's Syrup during this period was governed by the price formula established by the 1921 Consent Decrees.

Beginning in 1978, the Company sought amendments to its contracts with all first-line bottlers to permit a new formula for pricing Bottler's Syrup which would utilize a "sugar element," a "base element," and the Consumer Price Index. The sugar element expands the period for adjustments from the prior quarterly system and provides for adjustments based on the quoted market price of any sweetening ingredient used in Bottler's Syrup. As of this date, approximately 339 first-line bottlers, representing approximately 90 percent of the domestic volume of Coca-Cola sales, have signed the 1978 Amendment. These bottlers are generally known as "amended bottlers." Approximately 83 first-line bottlers are "unamended bottlers" who continue to operate under Bottler's Contracts which basically conform to the 1921 Bottler's Contracts entered after the 1921 Consent Decrees.¹³

Beginning in 1980, the Company began substituting high fructose corn syrup ("HFCS-55") for approximately 50 percent of the granulated sugar in the Bottler's Syrup sold to amended...