Ash v. Hack Branch Distributing Co.

• Decision Date: 01 August 2001
• Docket Number: No. 10-99-322-CV,10-99-322-CV
• Parties: (Tex.App.-Waco 2001) JOHN T. ASH, BILL SNIDER, GEORGE L. BETROS AND STACY JOE ASH, Appellants v. HACK BRANCH DISTRIBUTING COMPANY, INC. AND DUDLEY HAAS DISTRIBUTING COMPANY, INC., Appellees
• Court: Texas Court of Appeals

Page 401

54 S.W.3d 401 (Tex.App.-Waco 2001)

JOHN T. ASH, BILL SNIDER, GEORGE L. BETROS AND STACY JOE ASH, Appellants v. HACK BRANCH DISTRIBUTING COMPANY, INC. AND DUDLEY HAAS DISTRIBUTING COMPANY, INC., Appellees

No. 10-99-322-CV

Court of Appeals of Texas, Waco

August 1, 2001

From the 74th District Court McLennan County, Texas Trial Court # 99-3133-3

[Copyrighted Material Omitted]

[Copyrighted Material Omitted]

[Copyrighted Material Omitted]

Before Chief Justice Davis, Justice Vance, and Justice Gray

OPINION

REX D. DAVIS, Chief Justice

The owners of several McLennan County restaurants and taverns filed suit against four beer distributors alleging violations of the Texas Free Enterprise and Antitrust Act of 1983 and tortious interference with existing and prospective business relationships. The court granted motions for summary judgment filed by Hack Branch Distributing Company, Inc. and Dudley Haas Distributing Company, Inc. and severed the plaintiffs' claims against the other two defendants. The plaintiffs claim on appeal that the court abused its discretion by overruling their objections to portions of the defendants' summary judgment evidence and that the court erred in granting the summary judgments because genuine issues of material fact exist on their claims.

BACKGROUND

The plaintiffs/appellants include John and Stacy Ash (the Ashes), George Betros and Bill Snider. The defendants in the underlying suit consist of Hack Branch Distributing Company, Inc. ("Branch"), Dudley Haas Distributing Company, Inc. ("Haas"), Jack Hilliard Distributing Company, Inc. ("Hilliard"), and Brazos Beverages, Inc. ("Brazos"). Branch and Hilliard are the Anheuser-Busch distributors for McLennan and Brazos Counties respectively. Haas and Brazos are the Miller distributors for those counties respectively.

According to the record, major national breweries sell beer in Texas through the use of exclusive territorial distributors. Each brewery contracts with one distributor in each territory, giving that distributor the exclusive right to sell that brewery's product on the wholesale market in that territory. The territorial limits are strict, and the breweries prohibit each distributor from selling directly to retailers in other territories. Texas law, however, strictly honors the right of retailers to purchase beer from any distribution territory in the state. See Tex. Alco. Bev. Code Ann. § 102.53 (Vernon 1995). As a result, while a distribution agreement may validly prevent a distributor from delivering beer directly to retailers in another territory, it may not prevent a retailer from purchasing directly from a distributor in another territory and transporting the beer back into the retailer's home territory. Id.

Appellants' antitrust claims center around allegations that the owners of Branch and Haas have conspired to raise the wholesale price of beer in McLennan County and maintain the price at inflated levels. Appellants allege that the conspiracy is facilitated through the owners' membership in the McLennan County Wholesale Beer Distributors Association (the "Association"), which is composed entirely of McLennan County beer distributors. Appellants allege that the Association routinely holds closed meetings at which the members discuss and agree upon wholesale beer prices to be charged within McLennan County in violation of Texas antitrust law.

The Ashes further allege that Branch and Haas impermissibly exerted pressure on Hilliard and Brazos to prevent the Ashes from purchasing beer on the wholesale market in Brazos County. The Ashes contend that this conduct amounts to a tortious interference with prospective business relations between the Brazos County distributors and themselves.

Facts Pertinent to the Tortious Interference Claim

In December 1994, Branch and Haas each announced a $2.00-per-keg price increase, scheduled to take effect on the same day. The Ashes claim that, during that time period, the wholesale price of beer kegs in Brazos County was approximately twenty dollars cheaper than in McLennan County. As a result, the Ashes traveled to Brazos County to purchase keg beer from J.J.'s, a wholesale store in Bryan. They testified by deposition that, prior to making the sale, the owner of the store verified the propriety of the sale with Brazos's vice-president and general manager Jim Pillans, who indicated that a sale to an extra-territorial retailer was permissible.

Pillans testified that Haas's general manager Mark SoRelle later contacted him and expressed concern about Bryan wholesalers selling beer to Waco retailers. Pillans told SoRelle that he would investigate the matter. He then contacted J.J.'s and verified his suspicion that the buyers about whom J.J. had previously inquired were the same buyers about whom SoRelle was concerned. Pillans testified that, after reviewing his contract with Miller, he concluded that he could not permit J.J.'s to sell keg beer to the Ashes. He then called J.J.'s to inform its operators that he would stop selling to J.J.'s if it continued to sell beer to the Ashes.

When the Ashes were told that they could no longer purchase beer from J.J.'s, John Ash contacted the Texas Alcoholic Beverage Commission and confirmed that his attempt to purchase beer from a wholesaler outside the McLennan County territory was lawful. He then decided to attempt to purchase keg beer directly from Hilliard and Brazos. Due to his suspicions that these Brazos County distributors were engaging in illegal conduct, Ash secretly taped his conversations with the representatives of the distributors.

Ash initially attempted to purchase keg beer from Brazos. He testified that Pillans refused to sell him any beer. Pillans's deposition testimony confirms Ash's account and reflects that he refused to sell beer to Ash because he believed that Brazos's distributorship agreement with Miller prevented him from selling to anyone who would take the product out of Brazos's designated territory.

Ash then proceeded to Hilliard's where he presented his valid licenses and permits and sought to purchase keg beer. The receptionist referred Ash to the Sales Manager, Dave Smith. Smith acknowledged in his deposition that he was aware at this time that Ash was from McLennan County. While Ash was waiting to meet with Smith, Smith accepted a call from Hilliard president, Jack Hilliard, Jr. Ash also presented the affidavit of Larry Salter who stated that a Branch employee told him that someone from Hilliard called Branch while Ash was there regarding the fact that Ash was in Bryan attempting to purchase keg beer. In his deposition, Smith confirmed that he spoke with Jack Hilliard but denied speaking with anyone at Branch.

After speaking with Jack Hilliard, Smith told Ash that he would not sell him any beer. Ash testified that Smith, like Pillans, justified this refusal by indicating his belief that the distributorship agreement with Anheuser-Busch prevented him from selling to retailers outside the Brazos County territory. Smith further explained the decision as an "unwritten rule" between Anheuser-Busch distributors to honor each other's territory, and indicated that Jack Hilliard had prevented the sale because "he just didn't want to get into it with [Haskell]."

Facts Pertinent to the Antitrust Claims

Appellants allege that Appellees' attempts to illegally enforce their distribution districts is related to their participation in a conspiracy to fix the wholesale price of beer in McLennan County. In support of these contentions, Appellants allege several operative facts. Initially, Appellants note that the price of different brands of keg beer in McLennan County has been uniform throughout the relevant time periods. Appellants further contend that the uniform price is approximately twenty dollars higher than the price in other markets, such as Brazos County, and that there is significantly greater price competition in those areas.

Appellants attribute the pricing disparity to the existence of formal associations of beer distributors in those areas, such as McLennan County, in which the price of different brands is uniform. Although the stated purpose of these associations is charitable in nature, Appellants assert that the beer distributors use the monthly association meetings to illegally discuss pricing policies and enter price-fixing agreements. Appellants emphasize the fact that only the owners of the distributors are allowed to attend an association's meetings, and allege that at least one meeting has preceded each price increase that has gone into effect during the relevant time period. Appellants further note that without exception Branch has been the first in McLennan County to announce each price increase. In every instance, the other McLennan County distributors have issued announcements of identical increases which took effect on the same date as Branch's. Appellants contend that such uniform pricing is inconsistent with independent action and supports an inference of an agreement to fix prices.

THE SUMMARY JUDGMENT MOTIONS

Haas contends in its summary judgment motion that it is entitled to judgment as a matter of law on Appellants' antitrust claim because they can produce no evidence to support the claim, because uniformity of prices standing alone is insufficient as a matter of law to establish an antitrust violation, and because, as Dudley Haas stated in his summary judgment affidavit, the sole basis for Haas's decision to increase prices has been, "in every single instance," the manufacturer's recommendation.¹

Haas contends that it is entitled to judgment as a matter of law on the Ashes' tortious interference claim because this claim is derivative of their antitrust claim (on which Haas contends it is entitled to judgment as a matter of law as set out above) and because SoRelle properly advised Pillans to check Brazos's distributorship contract about the propriety of doing business with the...