Jetro Cash & Carry Enter. v. Food Distribution Ctr.

• Decision Date: 15 August 1983
• Docket Number: Civ. A. No. 81-3922.
• Citation: 569 F. Supp. 1404
• Parties: JETRO CASH AND CARRY ENTERPRISES, INC. v. FOOD DISTRIBUTION CENTER and Philadelphia Fresh Food Terminal Corp.
• Court: U.S. District Court — Eastern District of Pennsylvania

569 F. Supp. 1404

JETRO CASH AND CARRY ENTERPRISES, INC. v. FOOD DISTRIBUTION CENTER and Philadelphia Fresh Food Terminal Corp.

Civ. A. No. 81-3922.

United States District Court, E.D. Pennsylvania.

August 15, 1983.

COPYRIGHT MATERIAL OMITTED

Judah I. Labovitz and Benjamin A. Levin, Cohen, Shapiro, Polisher, Shiekman & Cohen, Philadelphia, Pa., for plaintiff.

Louis J. DiGiacomo, Philips, Curtin & DiGiacomo, Philadelphia, Pa., for Philadelphia Fresh Food Terminal Corp.

MEMORANDUM

GILES, District Judge.

The parties dispute whether a restrictive covenant in plaintiff's deed legally precludes the conduct of certain business within the Philadelphia Food Distribution Center. Specifically, can plaintiff be restrained from selling fresh fruit and produce in the original container within the confines of the Food Distribution Center but outside of the Produce Market, which is a part thereof? Philadelphia Fresh Food Terminal Corporation ("PFFTC") answers in the negative, arguing that the restrictive covenant runs with the land. Plaintiff answers affirmatively, arguing that the covenant and actions of PFFTC violate the antitrust laws.

Jetro Cash and Carry Enterprises, Inc. ("Jetro") arrived at the courthouse first, instituting suit based upon sections 1 and 2 of the Sherman Antitrust Act, 15 U.S.C. §§ 1, 2 (1976). PFFTC counterclaimed, asserting that Jetro was violating the restrictive covenant. Preliminary injunctive relief was granted in favor of Jetro, giving the parties time to engage in discovery and brief the various issues. A bench trial was held in December of 1982. The following constitute my findings of fact and conclusions of law pursuant to Rule 52(a) of the Federal Rules of Civil Procedure.

I. FINDINGS OF FACT

1. Jetro, a wholly owned subsidiary of Jetro Holding, Inc., is a corporation organized under the laws of New York. The Jetro concept is "one stop" wholesale shopping, offering a complete line of grocery products to restaurants, grocery and convenience stores and vendors.

2. The Food Distribution Corporation ("FDC"), a nonprofit Pennsylvania corporation, was and remains the Redeveloper of the Philadelphia Food Distribution Center ("the Center"), pursuant to a contract with the Philadelphia Redevelopment Authority ("RDA"). The Center stretches approximately four hundred (400) acres in South Philadelphia and houses a large variety of wholesale food merchants.

3. PFFTC is a corporation organized under the laws of Pennsylvania. Its shareholders consist of wholesale merchants of fresh fruit and produce in the original containers. That is, the product is resold in the same packaging used for shipping.

4. PFFTC now leases eighteen (18) acres of the Center from FDC. This area is known as the Produce Market. PFFTC subleases the 70 individual store units located therein to its shareholders.

5. Before the Center's redevelopment, the wholesale merchants of fresh fruit and produce in the original container were located at the Old Dock Street Market. Conditions there were extremely crowded and unsanitary.

6. In December of 1955, a redevelopment contract was authorized by City Council and approved by the Mayor. Under this contract, dated January 3, 1956, FDC acted as the redeveloper of the Center, submitting all plans to the RDA for approval. The contract was duly recorded.

7. PFFTC was formed to represent the merchants of the Old Dock Street Market in negotiating their possible relocation to the Center.

8. Between early 1956 and July, 1959, members of PFFTC negotiated with representatives of FDC. On many occasions, authorized representatives of FDC told officers, directors and stockholders of PFFTC that the sale of fresh fruit and produce in the original container would not be permitted in the Center outside the confines of the Produce Market.

9. The first lease between FDC and PFFTC for rental of the Produce Market was executed on November 7, 1957.

10. Paragraph 11(d) of the original Redevelopment Contract required FDC, its successors and assigns:

to devote each Parcel or any portion thereof in the Project Area, after it shall have been conveyed to the redeveloper, substantially to the uses specified therefor in the Redevelopment Proposal and this Contract and not to devote any of the land to any other use or purpose.

This restriction was to be in force for a forty year period. In 1959, this paragraph was amended and the following provision added:

1. The foregoing shall be deemed to be complied with, in the case of any parcel or portion of the Project Area, if such parcel or portion and the buildings and improvements thereon shall be used by each occupant thereof principally and primarily for the manufacture, processing, marketing, distributing and warehousing of food, beverages, agricultural and horticultural products, and such other products as are customarily sold in any type of food store, and the furnishings of services advantageous in connection with such manufacture, processing, marketing, distributing and warehousing.

11. Paragraph 11(e) of the Redevelopment Contract provides:

The foregoing covenants in this paragraph 11 shall be covenants running with the land; and covenants to the same effect, which shall be covenants running with the land, shall be included in any deed or deeds from the Authority or from its successors or assigns to the Redeveloper and to its successors or assigns, conveying, or purporting to convey the land in the Project Area or any part thereof or interest therein; and shall also be included in any deed, deeds, lease, leases, agreements or encumbrances executed by the Redeveloper; provided, that the covenants in subparagraph (d) of this paragraph 11 shall cease and determine at the expiration of forty (40) years from the date of this Contract.

12. The disputed covenant set out in the preceding paragraphs is facially ambiguous. However, it was interpreted by the Pennsylvania Superior Court in Philadelphia Fresh Food Terminal Corporation v. M. Levin & Co., et al., 239 Pa.Super. 287, 361 A.2d 886 (1976), petition for allowance of appeal denied per curiam, (May 4, 1977). After admitting extrinsic evidence on the issue of the covenant's meaning, the Levin Court interpreted it to mandate segregated markets. 239 Pa.Super. at 297, 361 A.2d at 891-92. In other words, the covenant prohibited the sale of fresh fruit and produce in the original container within the Center but outside of the Produce Market.

13. The Levin decision was never recorded with the original or amended redevelopment contract. Jetro was not a party to the Levin action, although FDC was a party defendant.

14. The members of PFFTC sell fresh fruit and produce in the original containers in sixty-seven of the seventy units within the Produce Market. The remaining three units are sublet to restaurants or other support services. Many produce merchants lease more than one unit. There are only thirty-six different entities occupying the sixty-seven available units.

15. All of the tenants except the three restaurants are stockholders of PFFTC. There are two stockholders who are not tenants within the Produce Market.

16. All units within the Produce Market are currently occupied. On several occasions in the past, FDC has refused to sell or lease space within the Center but outside the Produce Market to those who sell fresh fruit and produce in the original container.

17. The Produce Market spans Galloway Street, with thirty stores on one side of the street and forty units on the other side. Gates have been erected across Galloway Street which are locked when the Market is closed. Thus, the Market is well insulated from the remainder of the Center.

18. The hours during which the Produce Market is open for business are established by rules and regulations of Terminal Corporation. Market selling hours for wholesalers within the Produce Market are from 4:00 a.m. until noon and from 6:00 p.m. to 10:00 p.m., Monday through Thursday; from 4:00 a.m. until noon on Friday, and from 1:00 p.m. until 9:00 p.m. on Sundays. The Produce Market is closed on Saturdays.

19. The limitation on hours is strictly enforced by PFFTC. A paid employee stands guard at the north gate to control who has access to the Market when it is closed. According to the by-laws of PFFTC, failure to observe these hours may result in the imposition of fines.

20. A merchant seeking entry into the Produce Market must purchase stock from a departing merchant or PFFTC itself. The Board of Directors of PFFTC has the power to veto a stock transfer, essentially denying a merchant entrance to the Market. The decision is based upon criteria such as good moral character, financial stability and experience in the business.

21. Members of PFFTC have, on a few occasions, taken or solicited orders or quoted prices over the telephone when the Produce Market was closed. In addition, these telephone orders were taken from warehouses which were located within the Center but outside the Market. The telephones located in the warehouses bear the same numbers as those in the stalls within the Market.

22. The Merchant's Warehouse Company purchased twelve point seven (12.7) acres of land from the RDA and FDC in 1964. This property, known as the Merchant's Warehouse, is located at 10th Street and Pattison Avenue, within the Center, but outside of the Produce Market. In 1981, it was sold to the Philadelphia Authority for Industrial Development ("PAID"), which, in turn, entered into an installment sale agreement with Jetro.

23. The restrictive covenant is contained in the deeds transferring the property to the Merchant's Warehouse Company and to PAID, as well as in the agreement of sale between PAID and Jetro. Thus, Jetro had actual knowledge of the covenant's existence.

24. In 1980, while Jetro was still choosing a site for their operation, its attorney and real estate agent met with Dougherty, a representative of both FDC and PAID. At that time, Dougherty related...