Apani Southwest, Inc. v. Coca-Cola Enterprises

• Court: U.S. Court of Appeals — Fifth Circuit
• Writing for the Court: Carl E. Stewart
• Citation: Apani Southwest, Inc. v. Coca-Cola Enterprises, 300 F.3d 620 (5th Cir. 2002)
• Decision Date: 12 August 2002
• Docket Number: No. 01-11026.,01-11026.
• Parties: APANI SOUTHWEST, INC., Plaintiff-Appellant, v. COCA-COLA ENTERPRISES, INC., Defendant-Appellee.

300 F.3d 620

APANI SOUTHWEST, INC., Plaintiff-Appellant, v. COCA-COLA ENTERPRISES, INC., Defendant-Appellee.

No. 01-11026.

United States Court of Appeals, Fifth Circuit.

August 12, 2002.

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Harold Houston Pigg (argued), Clifford, Field, Krier, Manning, Stone & Wilkerson, Lubbock, TX, for Plaintiff-Appellant.

Jerry L. Beane, Kay Lynn Brumbaugh (argued), Strasburger & Price, Dallas, TX, for Defendant-Appellee.

Appeal from the United States District Court for the Northern District of Texas.

Before STEWART and CLEMENT, Circuit Judges.¹

CARL E. STEWART, Circuit Judge:

Plaintiff-Appellant, Apani Southwest, Inc. ("Apani"), appeals from the district court's dismissal of its antitrust claims against Coca-Cola Enterprises, Inc. ("CCE") arising out of a contract between CCE and the city of Lubbock, Texas (the "City"), which granted CCE the exclusive right to sell bottled water on property owned by the City. For the reasons stated herein, we affirm.

FACTUAL AND PROCEDURAL BACKGROUND

Apani is a manufacturer of purified bottled water operating in and around the Lubbock, Texas area. Prior to the events in question, Apani had developed a business relationship with the City, which permitted Apani to sell its product in facilities owned and operated by the City. On August 26, 1999, however, the City entered into an exclusive contractual agreement with CCE allowing CCE to supply non-alcoholic beverages to all facilities "owned and operated" by the City and precluding the City from purchasing beverages from other parties.² The agreement, therefore, effectively eliminated the City's business relationship with Apani.³ The contract between the City and CCE arose from a proposal by the City that CCE donate approximately one million dollars for the construction of two new scoreboards at the Lubbock Municipal Coliseum. CCE agreed to provide the funds for the scoreboards as long as it would be permitted to recoup some of its investment. Accordingly, a contract was drafted giving CCE "the exclusive right to advertise and promote Exclusive Beverages in and with respect to the Territory(s), the Locations and Sites, and with respect to the CITY of LUBBOCK, events at the Locations...." The agreement, however, provided for several exceptions, including the following:

(1) the right of the city to make available fresh-squeezed juice, tea, coffee products, water drawn from the public water supply, and milk products as long as CCE does not distribute a similar product;

(2) permit trade show exhibitors who have an exclusive agreement for competitive products to advertise, display, serve, or sample products during trade show events;

(3) allow customers with a single beverage serving for immediate consumption to drink but not refill them;

(4) permit local water bottling (Apani) company, that is the official sponsor of the Cotton Kings, to sell bottled water at professional hockey games. This water will not be chilled or iced down; and

(5) allow amateur sports leagues in city parks the option to sell concessions using competing products.

Apani filed suit against CCE seeking damages for violations of § 3 of the Clayton Act, 15 U.S.C. § 14, and the Texas Free Enterprise and Antitrust Act ("TFEAA"), TEX. BUS. & COM. CODE ANN. § 15.01 et seq. It also alleged claims of tortious interference with existing and prospective business relations. CCE filed a motion to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. The district court granted CCE's motion as to the state and federal antitrust claims, but denied the motion with regard to the tortious interference claims. Subsequent to the partial dismissal, the court allowed Apani to file a Second Amended Complaint adding causes of action under the Sherman Act, 15 U.S.C. §§ 1 and 15, and a civil conspiracy claim. The district court again dismissed all of the antitrust claims pursuant to Rule 12(b)(6). CCE then filed a Motion for Summary Judgment as to the tortious interference and civil conspiracy claims. The district court granted the motion as to both claims. Thereafter, Apani filed a motion to Alter or Amend Summary Judgment, which the district court denied.

STANDARD OF REVIEW

We review a district court's ruling on a Federal Rule of Civil Procedure 12(b)(6) motion de novo. Jackson v. City of Beaumont Police Dep't, 958 F.2d 616, 618 (5th Cir.1992). In reviewing the dismissal of a claim pursuant to 12(b)(6), this court must accept all of the plaintiff's factual allegations as true. Blackburn v. City of Marshall, 42 F.3d 925, 931 (5th Cir. 1995). "The motion may be granted only if it appears that no relief could be granted under any set of facts that could be proven consistent with the allegations." Jackson, 958 F.2d at 618 (quotation marks and citations omitted). "[D]ismissal is proper if the complaint lacks an allegation regarding a required element necessary to obtain relief." Blackburn, 42 F.3d at 931 (citation omitted).

A district court's grant of summary judgment is also reviewed de novo. Melton v. Teachers Ins. & Annuity Ass'n of Am., 114 F.3d 557, 559 (5th Cir.1997). Summary judgment is proper where the pleadings and summary judgment evidence present no genuine issue of material fact and the moving party is entitled to a judgment as a matter of law. FED. R. CIV. P. 56(c); Celotex Corp. v. Catrett, 477 U.S 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). A factual dispute will preclude an award of summary judgment if the evidence is such that a reasonable jury could return a verdict for the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

DISCUSSION

Apani asserts antitrust violations against CCE under the Clayton Act, the Sherman Act, and the TFEAA. Specifically, in its Second Amended Complaint, Apani asserted that "[t]he Agreement, having a duration of ten (10) years, represents a contractual agreement resulting from an illegal combination or conspiracy by the City of Lubbock and Coca-Cola, and which constitutes a restraint of trade in violation of the Sherman Antitrust Act, the Clayton Antitrust Act, and the Texas Free Enterprise and Antitrust Act of 1983."

I. Clayton Act

Section 3 of the Clayton Act makes it unlawful to sell goods on the "condition, agreement, or understanding" that the purchaser refrain from dealing with competitors of the seller if the effect "may be to substantially lessen competition or tend to create a monopoly in any line of commerce." 15 U.S.C. § 14 (1997). Two types of restrictions on competition may be challenged under § 3: tying restraints and exclusive-dealing arrangements. Gulf Oil Corp. v. Copp Paving Co., Inc., 419 U.S. 186, 194, 95 S.Ct. 392, 42 L.Ed.2d 378 (1974). Tying restraints occur when a seller agrees to sell one product on the condition that the buyer also agree to purchases a different, or tied product, or the buyer agrees that he will not purchase the same product from another supplier. Kaiser Aluminum & Chem. Sales, Inc. v. Avondale Shipyards, Inc., 677 F.2d 1045, 1048 n. 5 (5th Cir. 1982). Exclusive dealing, in contrast, occurs when a seller agrees to sell its output of a commodity to a particular buyer, or when a buyer agrees to purchase its requirements of a commodity exclusively from a particular seller. WILLIAM C. HOLMES, ANTITRUST LAW HANDBOOK § 4.02[3] (1999). Here, Apani's claim under § 3 arises from the exclusive arrangement between the City and CCE in which the City agreed to permit CCE to sell its products exclusively on property owned and operated by the City. This court has recognized that an exclusive-dealing arrangement does not violate § 3 of the Clayton Act unless the probable effect of the agreement "will foreclose competition in a substantial share of the line of commerce affected." Bob Maxfield, Inc. v. Am. Motors Corp., 637 F.2d 1033, 1036 (5th Cir.1981) (citing Tampa Elec. Co. v. Nashville Coal Co., 365 U.S. 320, 327, 81 S.Ct. 623, 5 L.Ed.2d 580 (1961)).

When assessing whether an exclusive-dealing arrangement has the probable effect of substantially lessening competition, the Supreme Court has identified a three-part inquiry. Tampa Elec. Co., 365 U.S. at 327-28, 81 S.Ct. 623. First, the relevant product market must be identified by considering interchangeability and cross-elasticity of demand. Second, the relevant geographic market must be identified, "by careful selection of the market area in which the seller operates and to which the purchaser can practicably turn for supplies." Id. Finally, a plaintiff must show that the "competition foreclosed by the arrangement constitutes a `substantial share of the relevant market.'" Id. That is, "the opportunities for other traders to enter into or remain in that market must be significantly limited." Id.

In applying this three-step analysis, it is clear that in order to determine whether a substantial portion of the competition has been foreclosed, Apani must first identify the relevant product and geographic markets.

A. Product Market

In ascertaining the relevant product market, courts consider the extent to which the seller's product is "interchangeable in use" and the degree of "cross-elasticity of demand between the product itself and substitutes for it." C.E. Servs., Inc. v. Control Data Corp., 759 F.2d 1241, 1245 (5th Cir.1985) (citing Brown Shoe Co. v. United States, 370 U.S. 294, 325, 82 S.Ct. 1502, 8 L.Ed.2d 510 (1962)). Within the product market, there may exist submarkets which, in themselves, represent product markets for antitrust purposes. Heatransfer Corp. v. Volkswagenwerk, A. G., 553 F.2d 964, 980 (5th Cir.1977) (citing United States v. E.I. duPont de Nemours & Co., 353 U.S. 586, 593-595, 77 S.Ct. 872, 1 L.Ed.2d 1057 (1957)). "The boundaries of such a submarket may be determined by examining such practical indicia as industry or public recognition of the submarket as a separate economic entity, the product's...