BBCI, INC. v. Canada Dry Delaware Val. Bottling Co.

• Decision Date: 28 April 1975
• Docket Number: Civ. A. No. 70-1510.
• Citation: 393 F. Supp. 299
• Parties: BBCI, INC., Successor in Interest to Booth Bottling Co., Inc. v. CANADA DRY DELAWARE VALLEY BOTTLING CO., and Pepsi Cola Bottling Company of Pennsauken.
• Court: U.S. District Court — Eastern District of Pennsylvania

393 F. Supp. 299

BBCI, INC., Successor in Interest to Booth Bottling Co., Inc. v. CANADA DRY DELAWARE VALLEY BOTTLING CO., and Pepsi Cola Bottling Company of Pennsauken.

Civ. A. No. 70-1510.

United States District Court, E. D. Pennsylvania.

April 28, 1975.

Theodore W. Flowers, White & Williams, Philadelphia, Pa., for plaintiff.

Theodore R. Mann, Mann & Ungar, P. C., David Berger, David Berger, P. A., Philadelphia, Pa., for defendant.

OPINION AND ORDER

JOHN MORGAN DAVIS, Senior District Judge.

Defendant Pepsi Cola Bottling Company of Pennsauken ("Pepsi") seeks posttrial relief from a jury verdict against it based on both a contract claim and an antitrust claim. Canada Dry Delaware Valley Bottling Co. ("Canada Dry") was absolved of all liability by the jury, and is not involved in these post trial motions. Both claims against Pepsi relate to a sub-franchise agreement between Pepsi and Booth Bottling Co., Inc. ("Booth"). The breach of contract claim is based on the allegedly premature termination of this sub-franchise agreement. The antitrust claim is that the attempted repurchase and ultimate termination of the sub-franchise were among the "unfair means of competition" alleged by plaintiff, and that these were acts of unfair competition, and evidenced an anticompetitive intent. More specifically, it is the attempted repurchase from which plaintiff claims a jury may infer that defendant, at the time it granted Booth the sub-franchise, harbored a secret intent to repurchase shortly thereafter, in order to destroy Booth's employee morale, its financial stability and its root beer as a competitive product.

In November, 1968, Pepsi was offered the Hires Root Beer franchise for Southern New Jersey, Southeastern Pennsylvania and Northern Delaware, provided it could find a means of distributing the product in Southeastern Pennsylvania and Northern Delaware, where it did not operate. Pepsi therefore offered a sub-franchise to Booth, to cover the Southeastern Pennsylvania and Northern Delaware territory.

Pepsi had previously made unsuccessful attempts to acquire the Metropolitan Philadelphia Pepsi-Cola bottling plant and franchise. Booth knew this; and in its negotiations with Pepsi over the terms of the sub-franchise, the question of what would happen if Pepsi did acquire such a Philadelphia facility of its own, was the subject of intense discussion both between the parties and internally at Booth. The end result was that the parties entered into a sub-franchise agreement which included not only the usual termination provisions, but also a contractual provision whereby Pepsi could repurchase the sub-franchise if it paid a stipulated price, even if none of the termination provisions applied. That provision stated the following:

5.

* * * * * *

(d) If circumstances shall be such that at a particular time PENNSAUKEN is not entitled to terminate under subsections (b) and (c) of this section, PENNSAUKEN shall nevertheless have the right to repurchase (terminate) this subfranchise agreement by paying to BOOTH for BOOTH'S good will and for the subfranchise a price computed by multiplying the number of standard cases of HIRES sold by BOOTH at its usual and regularly established prices during the twelve (12) month period immediately preceding the date of purchase by twenty-five cents ($.25) per case. * * *

The present point of contention is that Pepsi claimed that this allowed it to repurchase the sub-franchise at will, and Booth claimed that its permission was necessary.

The sub-franchise was entered into as of February 17, 1969. Booth began bottling and distributing Hires in March, 1969. In May or June of 1969 Canada Dry Corporation decided to sell its company owned Philadelphia plant to a franchisee and began negotiations with Harold Honickman, President of Pepsi. On September 30, 1969 that transaction was finalized and Canada Dry Delaware Valley was created by Harold Honickman. On November 17, 1969, Honickman offered to repurchase the Hires sub-franchise from Booth for the contractually stipulated sum. Booth refused, was terminated and this litigation followed.

I. Breach of Contract Claim.

Under the breach of contract claim, the question we must decide is whether or not the Court was correct in submitting the interpretation of this subfranchise to the jury, and admitting parole evidence in this regard. If its provisions are ambiguous or obscure, then its interpretation becomes a question of fact for the jury, and parole evidence is admissible to aid in this interpretation. If its provisions are unambiguous and clear, then its interpretation becomes a question of law for the Judge, and parole evidence is not admissible. The question of whether its provisions are ambiguous or obscure on the one hand, or unambiguous and clear on the other hand, is a question of law for the Judge. Haskins v. Point Towing Co., 421 F.2d 532, 536 (3rd Cir. 1970); Ludwig Honold Mfg. Co. v. Fletcher, 405 F.2d 1123 (3rd Cir. 1969); Jamison v. A. M. Byers Co., 330 F.2d 657, 660 (3d Cir. 1964); Globe Motors, Inc. v. Studebaker-Packard Corp., 328 F.2d 645, 649 (3d Cir. 1964); Magill v. Westinghouse Electric Corp., 327 F.Supp. 1097, 1107 (E.D.Pa.1971), aff'd in part, rev'd in part (on other grounds), 464 F.2d 294 (3d Cir. 1972); A. L. K. Corp. v. Columbia Picture Industries, Inc., 320 F.Supp. 816, 818 (E.D.Pa.1970), rev'd on other grounds, 440 F.2d 761 (3rd Cir. 1971); Sirianni v. General Motors Corp., 313 F.Supp. 1176, 1178 (W.D.Pa.1970); Hall Motor Sales, Inc. v. Studebaker-Packard Corp., 145 F.Supp. 430 (W.D.Pa.1956); Shipley v. Pittsburgh & L. E. R. Co., 83 F.Supp. 722, 741 (W.D.Pa.1949); Consolidated Title & Slate Co. v. Fox, 410 Pa. 336, 189 A.2d 228 (1963); Easton v. Washington County Ins. Co., 391 Pa. 28, 137 A.2d 332 (1957) ; Foulke v. Miller, 381 Pa. 587, 112 A.2d 124 (1955); Waldman v. Shoemaker, 367 Pa. 587, 80 A.2d 776 (1951); 12A. P.S. § 2-202 (U.C.C. § 2-202); Corbin on Contracts § 535; Notes of Testimony 3/59-60.

At trial, this Court decided that the terms of the subfranchise were ambiguous or unclear, and submitted the contract to the jury, and admitted parole evidence to aid in its interpretation. Now that the heat of trial has subsided, we must re-examine the terms of the subfranchise in the more dispassionate, reflective circumstances afforded us by defendant's post trial motions.

The contract between Pepsi and Booth contains the following provisions:

3. Master Franchise Provisions Applicable.

(a) * * * this subfranchise agreement is subject to the terms and conditions provided for by the printed provisions of each of the MASTER FRANCHISE AGREEMENTS attached hereto as Exhibits "C" and "D" in like manner as if such provisions were an integral part hereof and the names of the parties hereto were substituted for those of the parties to said MASTER FRANCHISE AGREEMENTS. Under no circumstances shall BOOTH'S rights hereunder within its subterritories exceed those of PENNSAUKEN under each of the MASTER FRANCHISE AGREEMENTS as they now exist or from time to time may hereafter be amended.

5. Sales Quota.

* * * * * *

(d) If circumstances shall be such that at a particular time PENNSAUKEN is not entitled to terminate under subsections (b) and (c) of this section, PENNSAUKEN shall nevertheless have the right to repurchase (terminate) this subfranchise agreement by paying to BOOTH for BOOTH'S good will and for the subfranchise a price computed by multiplying the number of standard cases of HIRES sold by BOOTH at its usual and regularly established prices during the twelve (12) month period immediately preceding the date of purchase by twenty-five cents ($.25) per case. * * * The relevant section of the Crush master franchise is:

ARTICLE VI

TERMINATION OF FRANCHISE

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2. Termination With Notice. In the event of any of the following:

a. The failure of BOTTLER to manufacture, bottle and sell CRUSH for any reason whatsoever for a period of 15 consecutive days except as provided in Paragraph 1 of Article IV hereof;

b. The failure of BOTTLER to manufacture, bottle and sell CRUSH within 30 days after the date hereof; then in either such event COMPANY may terminate FRANCHISE by giving written notice to BOTTLER that FRANCHISE is terminated upon date of such notice.

Pepsi argues that it had two independent justifications for terminating the contract with Booth (1) failure of Booth to sell Orange Crush, and (2) the repurchase provision in paragraph 5(d).

The Pepsi-Booth contract was dated February 17, 1969. From the date of the contract through the date of termination—a period of more than 300 days — Booth had never sold Crush. Defendant argues that this would be grounds for termination under paragraph 2 above of the master franchise agreement, which was incorporated by reference into the subfranchise agreement by paragraph 3(a) above. The plaintiff counters this argument with three contentions of his own: (a) this argument was specifically repudiated by defense counsel himself, in his closing argument (N.T. 19/107-108); (b) Pepsi itself was not distributing Crush either, and Booth was not expected to begin distribution until after Pepsi had done so; and (c) no damages were awarded for the termination of the Orange Crush franchise, only the Hires franchise, which defendant admitted was terminated despite Booth's satisfactory performance.

However, we need not decide whether or not Pepsi was justified in terminating the contract for failure to sell Crush, since we find that Pepsi was justified in terminating the contract under paragraph 5(d).

During the ten month period of its bottling, Booth had sold 216,000 cases of Hires. At the rate of 25 cents per case, Pepsi would have owed Booth $54,000 under this contract provision. When Honickman offered to terminate Booth, he did so on the basis that he would pay $75,000, which was 25 cents times the 300,000 cases contemplated in other sections of the agreement. Booth refused...