Adolph Coors Co. v. A & S Wholesalers, Inc.

Decision Date29 July 1977
Docket Number76-1228,Nos. 76-1227,s. 76-1227
Citation561 F.2d 807
Parties1977-2 Trade Cases 61,565 ADOLPH COORS COMPANY, Plaintiff-Appellee, Cross-Appellant, v. A & S WHOLESALERS, INC., Defendant-Appellant, Cross-Appellee.
CourtU.S. Court of Appeals — Tenth Circuit

Leo N. Bradley of Bradley, Campbell & Carney, Golden, Colo., for plaintiff-appellee, cross-appellant Coors.

Richard E. Thigpen of Thigpen & Hines, Charlotte, N. C., and Irvin M. Kent, Denver, Colo., for defendant-appellant, cross-appellee A & S.

Before SETH and BARRETT, Circuit Judges, and KERR, * District Judge.

BARRETT, Circuit Judge.

This suit was initiated by Adolph Coors Company (Coors), a Colorado corporation, on January 19, 1973, to enjoin A & S Wholesalers, Inc. (A & S), a North Carolina corporation, from purchasing Coors beer in Colorado from Colorado retailers and transporting it to North Carolina for resale to retail outlets.

Following a February 16, 1973, hearing, a Preliminary Injunction was entered enjoining A & S from obtaining Coors beer from Colorado retail outlets and transporting it to North Carolina for resale to wholesalers or retailers there. On June 5, 1973, A & S filed an Amended Answer and Counterclaim alleging that Coors, Coors Distributing Company and other persons unknown had combined and conspired to impose customer and territorial restrictions upon independent distributors, wholesalers and retailers in the sale of Coors beer. A & S prayed for damages and injunctive relief, alleging that Coors had violated §§ 1 and 2 of the Sherman Act, 15 U.S.C.A. §§ 1 and 2. The case was tried to the court following extensive and voluminous discovery consisting of depositions, affidavits and various and sundry documents. The evidence was essentially uncontroverted. On February 28, 1975, the court entered its Amended Memorandum Opinion and Order which (a) dismissed the Coors complaint and dissolved the preliminary injunction, (b) dismissed the A & S counterclaim insofar as it sought damages based on Coors' prosecution of the instant lawsuit, and (c) decreed that the A & S counterclaim based on Coors' alleged territorial and customer restrictions states a claim upon which relief may be granted. The aforesaid counterclaim was thereafter tried to a jury of six which found in favor of Coors on January 16, 1976. Judgment was subsequently entered on the verdict dismissing the A & S counterclaim. Both parties appeal.

We withheld and/or postponed any decision in this appeal until the United States Supreme Court had rendered a decision in the case of Continental T.V., Inc., v. GTE Sylvania, Incorporated, No. 76-15, on Writ of Certiorari to the United States Court of Appeals for the Ninth Circuit, 537 F.2d 980. That decision was handed down on June 23, 1977, reported in --- U.S. ----, 97 S.Ct. 2549, 53 L.Ed.2d 568. The Supreme Court there expressly overruled the so-called Schwinn per se rule announced in United States v. Arnold, Schwinn & Co., 388 U.S. 365, 87 S.Ct. 1856, 18 L.Ed.2d 1249 (1967), which this court applied in Adolph Coors Co. v. F.T.C., 497 F.2d 1178 (10th Cir. 1974), cert. denied, 419 U.S. 1105, 95 S.Ct. 775, 42 L.Ed.2d 801 (1975). In a footnote, the Supreme Court observed that in our 1974 decision we had urged the Supreme Court ". . . to consider the need in this area for greater flexibility." --- U.S. ----, 97 S.Ct. 2557. In that respect we said: "Although we are compelled to follow the Schwinn per se rule rendering Coors' territorial restrictions on resale illegal per se, we believe that the per se rule should yield to situations where a unique product requires territorial restrictions to remain in business . . . Perhaps the Supreme Court may see the wisdom of grafting an exception to the per se rule when a product is unique and the manufacturer can justify its territorial restraints under the rule of reason. White Motors Co. v. United States, 372 U.S. 253, 83 S.Ct. 696, 9 L.Ed.2d 738 . . ." 497 F.2d at 1187. We hasten to observe that we did not there hold that the Coors territorial restraints were in fact justified under the rule of reason. That issue was not before us. In any event, denial of certiorari by the United States Supreme Court imports no expression of opinion on the merits. Sunal v. Large, 332 U.S. 174, 67 S.Ct. 1588, 91 L.Ed. 1982 (1947).

We are required to test the contentions on appeal to the extent directly applicable measured by the law ". . . in effect at the time it (the appellate court) renders its decision, unless doing so would result in manifest injustice or there is statutory direction or legislative history to the contrary." Bradley v. Richmond School Board, 416 U.S. 696, 711, 94 S.Ct. 2006, 2016, 40 L.Ed.2d 476 (1974); United States v. Alabama, 362 U.S. 602, 80 S.Ct. 924, 4 L.Ed.2d 982 (1960); Mustang Fuel Corp. v. Youngstown Sheet & Tube Company, 516 F.2d 33 (10th Cir. 1975); Chicago, Rock Island & Pacific Railroad Company v. Hugh Breeding, Inc., 247 F.2d 217 (10th Cir. 1957), dismissed, 355 U.S. 880, 78 S.Ct. 138, 2 L.Ed.2d 107 (1957); Lytle v. Commissioners of Election of Union County, 541 F.2d 421 (4th Cir. 1976), U. S. appeal pendg.; Parrish v. Board of Commissioners of Alabama State Bar, 524 F.2d 98 (5th Cir. 1975), cert. denied, 425 U.S. 944, 96 S.Ct. 1685, 48 L.Ed.2d 188; Ybarra v. City of San Jose, 503 F.2d 1041 (9th Cir. 1974); 21 C.J.S. Courts § 194. Applying this rule, we are guided on appeal by the law announced in Continental T.V., Inc., supra.

The Supreme Court in Continental T.V., Inc., v. GTE Sylvania, Incorporated, supra, held in pertinent part:

We conclude that the distinction drawn in Schwinn between sale and nonsale transactions is not sufficient to justify the application of a per se rule in one situation and a rule of reason in the other. The question remains whether the per se rule stated in Schwinn should be expanded to include nonsale transactions or abandoned in favor of a return to the rule of reason. We have found no persuasive support for expanding the rule. . . .

We revert to the standard articulated in Northern Pac. R. Co. (Northern Pac. R. Co. v. United States, 356 U.S. 1, (78 S.Ct. 514, 2 L.Ed.2d 545) (1958)) and reiterated in White Motor (White Motor Co. v. United States, 372 U.S. 253 (, 83 S.Ct. 696, 9 L.Ed.2d 738) (1963)), for determining whether vertical restrictions must be "conclusively presumed to be unreasonable and therefore illegal without elaborate inquiry as to the precise harm they have caused or the business excuse for their use." 356 U.S., at 5, 78 S.Ct., at 518. . . . Certainly, there has been no showing in this case, either generally or with respect to Sylvania's agreements, that vertical restrictions have or are likely to have a "pernicious effect on competition" or that they "lack . . . any redeeming virtue." Ibid. Accordingly, we conclude that the per se rule stated in Schwinn must be overruled. In so holding we do not foreclose the possibility that particular applications of vertical restrictions might justify per se prohibition under Northern Pac. R. Co. But we do make clear that departure from the rule of reason standard must be based upon demonstrable economic effect rather than as in Schwinn upon formalistic line drawing.

--- U.S. ----, at pp. ----, ----, 97 S.Ct. at pp. 2561-2562.

To the extent, then, that the law announced in Continental T.V., Inc., supra, applies to the facts and circumstances contained in the record on appeal, we will dispose of those issues; otherwise the case must be remanded for further proceeding.

A & S appeals from the judgment dismissing that portion of its counterclaim based upon Coors' prosecution of the instant lawsuit and from the verdict and judgment relating to that portion of the counterclaim tried to the jury. A & S alleges that the trial court erred, especially in its failure to instruct the jury that the acts of Coors complained of constituted a per se violation of the Sherman Antitrust Act.

Coors cross-appeals from the trial court's denial of its Motion for Directed Verdict and from the award to A & S of $7,500.00, representing costs and damages pursuant to Coors' bonds posted upon its application for injunctive relief in that identical amount.

A recitation of the factual background, largely undisputed, should aid in our disposition of the legal issues presented.

Coors owns and operates a single brewery at Golden, Colorado, from which it produces and markets a beer product which is in great national demand. Coors is presently the fourth largest brewery in terms of national consumption even though it has historically limited its territorial marketing area to ten and one-half of the western states. Its brewery has produced at full capacity for years but, even so, there have been many occasions when the demand has outstripped production.

Coors markets its beer products through some 167 independent wholesale distributors in the established marketing area, where it enjoys an average market penetration of about 36.40 percent, notwithstanding that its beer products retail for substantially higher prices than its major competitors. Coors has steadfastly maintained that the quality of its beer is the result of its unique brewing and distributing process, which requires refrigeration. Coors is the only "shipping" brewery, in that it ships all of the beer brewed at its plant in Golden to the various distributors in refrigerated units. The beer is made by the aseptic brewing process which requires refrigeration. In order to maintain the quality of its product, Coors requires that its distributors adhere to a program which requires refrigeration controls and proper and regular rotation. Coors representatives regularly monitor the program in order to "protect the integrity" of the Coors product. These standards are spelled out in the Coors Distributorship Contract and Policy Manual. Coors has established and maintained "vertical" restrictions on its marketing territory...

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