Acquaire v. Canada Dry Bottling

• Decision Date: 06 November 1995
• Docket Number: No. 90-CV-4005 (JG).,90-CV-4005 (JG).
• Citation: 906 F. Supp. 819
• Parties: Frank ACQUAIRE, et al., Plaintiffs, v. CANADA DRY BOTTLING, et al., Defendants.
• Court: U.S. District Court — Eastern District of New York

906 F. Supp. 819

Frank ACQUAIRE, et al., Plaintiffs, v. CANADA DRY BOTTLING, et al., Defendants.

No. 90-CV-4005 (JG).

United States District Court, E.D. New York.

November 6, 1995.

COPYRIGHT MATERIAL OMITTED

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Kenneth F. McCallion, Goodkind, Labaton, Rudoff & Sucharow, New York City, for New York Plaintiffs.

Gerald J. McMahon, New York City, for New Jersey Plaintiffs.

Peter E. Greene, Jonathan Lerner, Skadden, Arps, Slate, Meagher & Flom, New York City, for Defendants Canada Dry Bottling Company of New York, Harold Honickman, Dennis E. Berberich and Concord Beverage.

William Escobar, Kelley, Drye & Warren, New York City, Attorneys for Defendant Transervice Lease Corp.

Richard S. Atwater, Lustig & Brown, Buffalo, New York, for Defendants Ronald J. Srein and Evans, Conger, Broussard & McCrea.

Dennis P. Orr, Kenneth S. Prince, Shearman & Sterling, New York City, for Defendants Cadbury Beverages, Inc., Canada Dry U.S.A., James Smith, Schweppes U.S.A. and Cadbury Schweppes PLC.

Sidney Fox, Barry Levy, Shapiro, Shiff, Beilly, Rosenberg & Fox, New York City, for Defendants Soft Drink and Brewery Workers, Union Local 812 International Brotherhood of Teamsters and Anthony Rumore.

George B. Yankwitt, Steven Stimell, Robinson Silverman Pearce Aronsohn & Berman, New York City, Attorneys for Defendant Soft Drink and Brewery Workers, Union Local 812 Retirement Fund.

Irving Anolik, New York City, for Defendant Louis Rumore.

Laura A. Sanom, Vincent E. Reilley, McElroy, Deutsch & Mulvaney, Morristown, NJ, for Northbrook Property and Casualty Insurance Co.

MEMORANDUM AND ORDER

GLEESON, District Judge:

Plaintiffs brought this action against approximately 40 defendants, claiming violations of the Sherman, Clayton, Robinson-Patman, Lanham, and Taft-Hartley Acts, the Racketeer Influenced and Corrupt Organizations Act ("RICO"), the Employee Retirement Income Security Act ("ERISA") and various state laws of New York and New Jersey. Plaintiffs, of whom there are more than 130, are wholesale distributors of soft drink products that have been manufactured or bottled by defendants Canada Dry Bottling Company of New York ("Canada Dry"), Coors Distributing Company of New York, Inc. ("Coors"), Cadbury Beverages, Inc. ("Cadbury"), and their affiliates.¹ Some of the plaintiffs are sole proprietors and others are small corporations.

The 260-page complaint has been amended twice and now sets forth 36 counts. It alleges generally that Canada Dry, Coors, Cadbury, Coke and others conspired to restrain trade in soft drink products by: fraudulently inducing plaintiffs to buy distribution franchises for products produced by the manufacturing and bottling defendants; using their alleged control of the soft drink and mixer market to force plaintiffs to lease their delivery trucks and obtain liability insurance through designated companies; using this alleged market control to force the corporate plaintiffs to enter into collective bargaining agreements with the defendant Soft Drink and Brewery Workers Union Local 812 ("Local 812"), and to force the individual plaintiffs to become members of the union; allowing plaintiffs to increase the value of the franchises by expanding distribution of Canada Dry and Coors products, and then employing price discrimination, price-fixing, breach of the franchise agreements, and tortious interference with plaintiffs' businesses to drive plaintiffs out of business and take their franchises without compensation; laundering the proceeds of the defendants' allegedly unlawful conduct; and "otherwise running their business empire as a racketeering enterprise through threats of intimidation in furtherance of a scheme to extort, to defraud and to monopolize the market for soft drinks and mixers in the New York area." (Second Amended Complaint ("2d Am.Compl.") ¶ 2.)

Joined as defendants are the insurance companies, truck leasing companies, insurance brokers, and labor organizations that plaintiffs claim stood to benefit from the alleged conspiracy. Separate claims have also been alleged against these additional defendants.

Defendants Canada Dry, Coors and others have moved to compel arbitration pursuant to an arbitration clause contained in all of the distribution agreements. They have also moved to stay the remainder of the action while arbitration is proceeding. In the alternative, they move to dismiss the complaint under Federal Rule of Civil Procedure 12(b)(6). The following defendants have also moved to dismiss the claims against them: Cadbury and its affiliates; Northbrook Property and Casualty Insurance Company ("Northbrook"); Evans, Conger, Broussard & McCrea ("ECBM") and Ronald Srein, an ECBM partner; Transervice Lease Corporation ("Transervice"); Local 812; the Soft Drink and Brewery Workers Union Local 812 Retirement Fund ("the Retirement Fund"); and Anthony and Louis Rumore, who are alleged to be officials of Local 812 and trustees of the Retirement Fund.

In addition, on May 3, 1995, plaintiffs obtained an order to show cause, directed to Canada Dry, why it should not be held in contempt of a preliminary injunction issued in this case on April 12, 1993.

For the reasons stated herein, the motion to compel arbitration is granted, the application for a contempt citation is denied, and all remaining claims and motions are stayed pending the outcome of the arbitration.

I. The Motion to Compel Arbitration

Background

In 1977, Canada Dry began offering "equity routes" to its employee distributors for $15,000. Those who accepted became independent "equity distributors," exclusively entitled to sell Canada Dry products to customers in designated geographic territories throughout New York and New Jersey. The terms of the arrangement were set forth in a standard distribution contract, executed by the distributor and an authorized representative of Canada Dry. In 1982, Canada Dry offered its distributors a modified version of the prior distribution contract, entitled "Distributor's Agreement." The ways in which this contract differed from the earlier one are not important to disposition of the instant motion. (2d Am.Compl. ¶¶ 94-101.)

Paragraph 22 of the "Distributor's Agreement" contained an arbitration clause, which reads as follows:

Except as otherwise provided in this Agreement, any and all disputes or disagreements between the Company and the Distributor concerning the interpretation or application of the provisions of this Agreement shall be determined in arbitration before Harry Silverman, Esq. (or the person then acting as the replacement arbitrator for Harry Silverman, Esq. in the majority of Distributor Agreements which previously named Harry Silverman, Esq. as arbitrator, between soft drink bottling companies in New York City and Distributors) in accordance with the rules of the Civil Practice Law and Rules ... The award of the arbitrator shall be final and binding upon the parties. A request for arbitration must be made in writing with a copy to the other party within thirty (30) days after the facts arose which form the basis of the dispute.

The Distributor's Agreement provided that its terms would expire on September 30, 1990.

Plaintiffs allege that at all pertinent times, defendant Harold Honickman had a controlling interest in Canada Dry and several of the other defendant soft drink manufacturers. In 1986, pursuant to an agreement with Adolph Coors Company, Honickman formed Coors Distributing Company of New York, Inc. ("Coors") to distribute products bearing the Coors label. He then began recruiting Canada Dry distributors to perform the distribution tasks. The following year, the Coors distributors were offered a standard distribution contract which incorporated all the terms of the Canada Dry Distributor's Agreement, including the arbitration clause. (2d Am.Compl. ¶¶ 14, 104-05.)²

During the summer of 1990, Canada Dry and Coors expressed an intention not to renew the distribution contracts that were due to expire on September 30, 1990. As it turned out, none of the contracts were renewed after that date. Two months later, on November 20, 1990, plaintiffs filed the instant action. (Id. ¶¶ 188-90.) On the same day, they filed a motion for a temporary restraining order and preliminary injunction, which was apparently abandoned pending settlement discussions that took place before the Honorable Zachary W. Carter, United States Magistrate Judge.

On January 3, 1992 plaintiffs filed an amended complaint with the consent of the defendants. Early in 1993, plaintiffs again moved for a temporary restraining order and preliminary injunction; the requested relief was granted in part and denied in part by order dated April 15, 1993.³ The Second Amended Complaint was filed on March 1, 1993, and the instant motions followed in accordance with a scheduling order issued April 14, 1993, by Magistrate Judge Carter.

In May 1995, the case and all pending motions were transferred to this Court. After considering the issues raised in the parties' briefs, the Court heard oral argument on September 22, 1995.

Discussion

Congressional policy, as it is embodied in the Federal Arbitration Act, 9 U.S.C. §§ 1-15 (1988) ("the Act"), favors enforcement of arbitration clauses in commercial contracts.⁴Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 625, 105 S.Ct. 3346, 3353, 87 L.Ed.2d 444 (1985); Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1, 24, 103 S.Ct. 927, 941, 74 L.Ed.2d 765 (1983). This preference is expressed in a provision of the Act which states that written agreements to arbitrate in such contracts "shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2. A further provision requires judicial proceedings to be stayed pending arbitration if the court is satisfied that the issues presented are arbitrable — i.e., contemplated by an...