Vanco Beverages, Inc. v. Falls City Industries, Inc.

• Decision Date: 29 September 1981
• Docket Number: No. 80-1709,80-1709
• Citation: 654 F.2d 1224
• Parties: 1981-2 Trade Cases 64,177 VANCO BEVERAGES, INC., Plaintiff-Appellee, v. FALLS CITY INDUSTRIES, INC., Defendant-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 1224

654 F.2d 1224

1981-2 Trade Cases 64,177

VANCO BEVERAGES, INC., Plaintiff-Appellee, v. FALLS CITY INDUSTRIES, INC., Defendant-Appellant.

No. 80-1709.

United States Court of Appeals,

Seventh Circuit.

Argued Dec. 10, 1980.

Decided July 15, 1981.

Rehearing and Rehearing En Banc Denied Sept. 29, 1981.

Howard Adler, Jr., Bergson, Borkland, Margolis & Alder, Washington, D. C., for defendant-appellant.

Gordon B. Nash, Jr., and John T. Cusack, Gardner, Carton & Douglas, Chicago, Ill., for plaintiff-appellee.

Before CUMMINGS, Chief Judge, SWYGERT, Senior Circuit Judge, and BROWN, Senior District Judge. ^*

CUMMINGS, Chief Judge.

Defendant Falls City Industries, Inc. (Falls City) appeals from a judgment awarding plaintiff Vanco Beverages, Inc. (Vanco) $1,725,881.37 in treble damages for injury resulting from Falls City's discriminatory pricing of beer in violation of Section 2(a) of the Robinson-Patman Act (15 U.S.C. § 13(a)) and $17,251.27 for monies had and received by Falls City as a result of overcharging Vanco for state excise taxes. We affirm except as to the amount of damages awarded under Section 2(a).

I. Introduction

Falls City formerly operated a brewery in Louisville, Kentucky, that marketed beer under the names "Falls City Beer" and "Drummond Bros. Preferred Beer." Vanco, located in Evansville, Indiana, was formerly the sole wholesale distributor of Falls City beer in Vanderburgh County, Indiana, which includes the city of Evansville. Vanderburgh County is located just north of Henderson County, Kentucky, with their common border running mostly along the Ohio River. Beer retailers in both states are required by state law to purchase beer for resale only from authorized distributors in their respective states. ¹ Indiana law also requires that each brewer sell at a uniform price to all its Indiana wholesale distributors. ²

In November 1977, Vanco filed its first amended complaint in this lawsuit. ³ That complaint, as subsequently amended and supplemented, alleged that Falls City sold a substantial quantity of beer brewed in Kentucky to wholesale distributors, including Vanco, located in Indiana; that beer retailers in Henderson County, Kentucky, were in competition with beer retailers in Vanco's distribution area; that from July 1, 1972, to November 30, 1978, Falls City sold its beer to Kentucky wholesalers at prices lower than those granted to Vanco; that this discriminatory pricing policy resulted in higher retail prices in Indiana than in Kentucky; and that as a consequence many Indiana consumers purchased Falls City beer from Kentucky retailers instead of Indiana retailers, thereby causing Indiana retailers to purchase less Falls City beer from Vanco.

Count I alleged that from July 1, 1972, to November 30, 1978, ⁴ Falls City and various unnamed beer wholesalers in Kentucky conspired to restrain trade in violation of Section 1 of the Sherman Act (15 U.S.C. § 1) and conspired to monopolize the sale of Falls City beer in the relevant market area in violation of Section 2 of the Sherman Act (15 U.S.C. § 2), thereby damaging Vanco in an indeterminate amount. ⁵ Count II alleged that Falls City had engaged in discriminatory pricing in violation of Section 2(a) of the Robinson-Patman Act, thereby causing Vanco to pay in excess of $500,000 more for Falls City beer than defendant's Kentucky wholesalers over the relevant six-year period for the same quantity and quality of beer. Count III, a pendent state law claim for money had and received, alleged that Falls City overcharged Vanco for Indiana excise taxes by an amount in excess of $17,000 and that Falls City did not pay these overcharges to the State of Indiana but retained them for its own use. Vanco sought treble damages under Counts I and II, return of the Indiana tax overcharges alleged in Count III, and injunctive relief to prevent Falls City from selling its products to Kentucky wholesalers at a lower price than it granted Vanco and from overcharging Vanco for state excise taxes. ⁶

After a five-day bench trial in May 1979, the district court dismissed the Sherman Act claims in Count I for want of proof, but found in favor of Vanco on Counts II and III in the respective amounts of $575,293.79, before trebling under Section 4 of the Clayton Act (15 U.S.C. § 15), and $17,251.27 plus interest. No equitable relief was granted. ⁷ At the close of the trial, the district court called for briefs and for proposed findings of fact and conclusions of law. The last of these documents was filed in January 1980. The court's amended findings of fact, conclusions of law and judgment, drawn from the parties' proposals and the court's own additions, were released on April 14, 1980, and are reported in CCH 1980-2 Trade Cases P 63,357. This appeal followed.

II. Elements of the Robinson-Patman Violation

Section 2(a) of the Robinson-Patman Act provides in pertinent part:

"That it shall be unlawful for any person engaged in commerce, in the course of such commerce, either directly or indirectly, to discriminate in price between different purchasers of commodities of like grade and quality, where either or any of the purchases involved in such discrimination are in commerce, where such commodities are sold for use, consumption or resale within the United States * * * and where the effect of such discrimination may be substantially to lessen competition or tend to create a monopoly in any line of commerce, or to injure, destroy, or prevent competition with any person who either grants or knowingly receives the benefit of such discrimination, or with customers of either of them * * *." (15 U.S.C. § 13(a)).

In concluding that Falls City violated this provision, the district court relied on the following ultimate findings of fact: that from July 1, 1972, to November 30, 1978, Falls City sold beer to Vanco at f.o.b. prices approximately 10% to 30% higher than prices charged Dawson Springs Beverage Company, the Falls City distributor for Henderson County, Kentucky, and other Kentucky distributors; that the Evansville, Indiana, and Henderson, Kentucky, areas constitute a unified retail beer market; that Falls City's discriminatory pricing policy substantially lessened competition in the Evansville-Henderson market; and that Falls City could have sold to Vanco and Dawson Springs at the same price, but chose "to get a higher price in Indiana than in Kentucky."

Falls City concedes that it sold beer to Vanco and Dawson Springs at different prices, but challenges as "legally and factually erroneous" the district court's findings with respect to other elements necessary to establish a Section 2(a) violation. However, Vanco has carefully annotated those findings to 165 portions of the transcript of trial testimony and depositions as well as to exhibits of both parties (Supp.App. A-16 A-23). An examination of the annotated materials and the record generally has convinced us that the court's findings are not clearly erroneous and that the record supports its conclusion that Falls City violated Section 2(a).

A. Interstate Commerce

Falls City argues in a footnote in its principal brief that the interstate features of Section 2(a) were not satisfied. This argument is frivolous. Even Falls City's president, James F. Tate, admitted both in his deposition (at p. 16) and at trial (Supp.App. A-81) that his company sold beer in Indiana. Moreover, Falls City allocated Vanderburgh County, Indiana, to Vanco as its exclusive territory for the wholesale distribution of Falls City beer, paid Indiana excise taxes on the beer sold to Vanco and participated in Vanco's Indiana sales by the soliciting and servicing of Vanco's retail accounts there. Thus the sale of Falls City beer to Vanco was clearly "in commerce" within the meaning of Section 2(a). Gulf Oil Corp. v. Copp Paving Co., 419 U.S. 186, 95 S.Ct. 392, 42 L.Ed.2d 378; Standard Oil Co. v. Federal Trade Commission, 340 U.S. 231, 71 S.Ct. 240, 95 L.Ed. 239. The facts that Falls City priced its beer f.o.b. Louisville and that all its distributors, including Vanco, picked up their beer at the brewery in Louisville do not, as Falls City suggests, make the sales to Vanco wholly intrastate. ⁸

B. Relevant Market

Falls City next argues that there is no unified Evansville-Henderson retail beer market and that the district court therefore erred in finding that Vanco and Dawson Springs, Falls City's Henderson County distributor, competed in the same market. However, the record is to the contrary insofar as their retail customers were concerned and that is sufficient under the Act.

As noted, Vanderburgh County, Indiana, and Henderson County, Kentucky, are separated for most of their common border only by the Ohio River. In addition, a portion of Henderson County lies on the Indiana side of the river contiguous to Evansville. The cities of Evansville and Henderson are diagonally across from each other on the river ten or fewer miles apart and are connected by a four-lane interstate highway. There is a massive flow of residents of Vanderburgh County to work in Henderson County and vice versa, and shopping centers and entertainment facilities in the area are patronized by residents of both counties. Consequently, the federal Department of Labor counts the two counties together for the purpose of labor statistics, and both areas are designated as one by the federal Department of Commerce. Moreover, many retail purveyors of beer and liquor are located along a Kentucky portion of the highway connecting Evansville and Henderson only a few miles from Evansville. This area, known as "The Strip," is frequented by both Indiana and Kentucky consumers. Finally, various witnesses testified that consumers in the area go to whichever county has the cheaper beer and liquor prices and that advertising is directed at residents of both areas as if they constituted one market. Thus the district court's finding that beer retailers in Vanderburgh County were in...