Beer & Pop Warehouse v. Jones

• Decision Date: 14 January 1999
• Docket Number: No. Civ.A.1:97-CV-0753.,Civ.A.1:97-CV-0753.
• Citation: 41 F.Supp.2d 552
• Parties: BEER & POP WAREHOUSE, et. al., Plaintiffs, v. John E. JONES, III, et. al., Defendants.
• Court: U.S. District Court — Middle District of Pennsylvania

41 F.Supp.2d 552

BEER & POP WAREHOUSE, et. al., Plaintiffs, v. John E. JONES, III, et. al., Defendants.

No. Civ.A.1:97-CV-0753.

United States District Court, M.D. Pennsylvania.

January 14, 1999.

Roslyn M. Litman, Litman, Litman, Harris, Brown & Watzman, P.C., Pittsburgh, PA, Martha S. Helmreich, Pittsburgh, PA, W. Thomas McGough, Jr., Reed Smith Shaw & McClay, Pittsburgh, PA, Robert B. Hoffman, Reed, Smith, Shaw & McClay, Harrisburg, PA, Pamela Ewing, Pittsburgh, PA, for plaintiffs.

Joel M. Ressler, Harrisburg, PA, Susan J. Forney, Office of Attorney General, Harrisburg, PA, for defendants.

MEMORANDUM

CAPUTO, District Judge.

On May 12, 1997, plaintiffs Beer & Pop Warehouse, Inc; Case Beer & Soda Outlet, Inc.; Jet Distributors, Inc.; and Q.F.A., Inc. t/b/a "Beer World" filed a complaint alleging that subsections 447(a)(2), (a)(3), (b), and (c) of the Pennsylvania Liquor Code violate section 1 of the Sherman Act, 15 U.S.C. § 1. Plaintiffs seek an injunction against the enforcement of the above provisions of the Code. On June 24, 1997, defendants John E. Jones, III, the Chairman of the Pennsylvania Liquor Control Board ("LCB"); Robert Fohl, a member of the LCB; Robert P. Kaskiel, the Director of the LCB's investigative unit; and Paul J. Evanko, the Commissioner of the Pennsylvania State Police filed a motion to dismiss. On October 17, 1997, the Honorable William W. Caldwell denied defendants' motion to dismiss. (See Doc. # 22.)

On May 15, 1998, plaintiffs filed a motion for summary judgment. On June 29, 1998, defendants filed a motion for summary judgment. Because I find that the plaintiffs have produced evidence of a "threatened" anti-trust injury, the defendants' motion for summary judgment will be denied. In addition, because I find that subsections 447(a)(2), (a)(3), (b), and (c) of the Pennsylvania Liquor Code violate section 1 of the Sherman Act, 15 U.S.C. § 1, plaintiffs' motion for summary judgment will be granted. Defendants will be permanently enjoined from enforcing subsections 447(a)(2), (a)(3), (b), and (c) of the Pennsylvania Liquor Code.

I. BACKGROUND

The plaintiffs are "retailers," "distributors," and "importing distributors" under the Pennsylvania Liquor Code, 47 Pa.Stat. §§ 1-101 to 8-803 the statutory scheme dealing with the distribution in the Commonwealth of beer and liquor. (Answer ¶ 13).

Pennsylvania's scheme of the sale and distribution of malt liquor is a three tiered structure which consists of the manufacturers, distributors and importing distributors, and retailers. Manufacturers are licensed by the LCB to manufacture, sell, and transport malt or brewed beverages. See 47 Pa.Stat. § 1-102.¹ Distributors are licensed by the LCB to purchase only from Pennsylvania manufacturers and importing distributors, and to resell the malt or brewed beverages in quantities of not less than one-hundred twenty-eight (128) ounces. See id.² Importing distributors are similar to distributors, but they may purchase from manufacturers outside the Commonwealth. See id.³ Retailers are licensed by the LCB to sell the malt or brewed beverages. See id.⁴ The manufacturers must sell to the distributors and the distributors must buy from the manufacturers. See id. The distributors sell to the retailers who must buy from the distributors. See id.

The Commonwealth's regulation of liquor and alcohol is very different as compared with the regulation of malt and brewed beverages. Compare 47 Pa.Stat. § 2-207, with § 4-431. The purchase of liquor and alcohol is made by the LCB "at the lowest price and in the greatest variety reasonably determined." See 47 Pa.Stat. § 2-207(a). Prices of liquor and alcohol are fixed at the wholesale and retail level. See id. § 2-207(b). In contrast, malt and brewed beverage prices are set by the wholesaler (distributor), but the LCB regulates the ability of the distributor to raise and lower the prices of malt and brewed beverages. See 47 Pa.Stat. § 4-477.

This is the third attempt by the Commonwealth of Pennsylvania within the last ten years to regulate the price of malt and brewed beverages, this court having struck down the two previous attempts of the Commonwealth to do so. See Stroh Brewery Co. v. Walp, No. 1:Cv-93-937 (M.D.Pa. April 4, 1994); Anheuser-Busch, Inc. v. Goodman, 745 F.Supp. 1048 (M.D.Pa. 1990). The Commonwealth's stated purpose in regulating malt and brewed beverages is "to discourage increased consumption and irresponsible conduct resulting from impulse buying, price promotion or the natural elasticity of demand relative to price." 47 Pa.Stat. § 4-447(a).

The Commonwealth has attempted to meet that objective by enacting the following pricing scheme. Subsection 447(a)(2) provides that if a manufacturer, importing distributor, or distributor reduces the price of any brand of malt or brewed beverages, it may subsequently reduce the price a second time, but that price must be maintained for at least one-hundred twenty (120) days. See 47 Pa.Stat. § 4-447(a)(2).⁵ If the price is lowered "within the geographic area for which [an importing distributor or distributor] possesses distribution rights for that product," that price must be lowered to all other importing distributors, distributors, or retail licensees in that geographic area. See id. § 4-447(a)(3).⁶

There are several exceptions to subsection 447(a)(2). Prices may be reduced to reflect a tax increase. See id. § 4-447(a)(2)(ii). In addition, if a competitor lowers its price on a brand of malt or brewed beverage, a manufacturer, importing distributor, or distributor may reduce its price on the same or similar brand of malt or brewed beverage. See id. § 4-447(b).⁷ The price reduction, however, cannot be greater than the competitor's price reduction and the price must be maintained for at least 120 days after the competitor's price became effective or after the competitor's price is lawfully rescinded. See id.

Moreover, under subsection 447(c), a manufacturer, importing distributor, or distributor "may change the price ... if market conditions or other good cause support the change." See id. § 4-447(c).⁸ If a price is changed under subsection 447(c), the LCB must be notified within forty-eight (48) hours of the change so that the LCB can schedule a hearing to determine if the price was changed for good cause. See id. If, after a hearing, the LCB determines that the price was not changed for good cause, a manufacturer, importing distributor, or distributor must refund the difference to all importing distributors, distributors, or retail licensees who purchased from them. See id.

III DISCUSSION

A. Summary Judgment Standard

Federal Rule of Civil Procedure 56(c) provides that the moving party is entitled to summary judgment if "the pleadings, depositions, answers to interrogatories, and admissions on file together with the affidavits, if any, show there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56. A fact is "material" if proof of its existence or non-existence might affect the outcome of the suit under the applicable law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). "Facts that could alter the outcome are material facts." Charlton v. Paramus Bd. of Educ., 25 F.3d 194, 197 (3d Cir.), cert. denied, 513 U.S. 1022, 115 S.Ct. 590, 130 L.Ed.2d 503 (1994). "Summary judgment will not lie if the dispute about a material fact is `genuine,' that is, if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson, 477 U.S. at 248, 106 S.Ct. 2505.

Initially, the moving party must show the absence of a genuine issue concerning any material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 329, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). All doubts as to the existence of a genuine issue of material fact must be resolved against the moving party, and the entire record must be examined in the light most favorable to the nonmoving party. White v. Westinghouse Elec. Co., 862 F.2d 56, 59 (3d Cir.1988); Continental Ins. Co. v. Bodie, 682 F.2d 436 (3d Cir.1982). Once the moving party has satisfied its burden, the nonmoving party "must present affirmative evidence to defeat a properly supported motion for summary judgment." Anderson, 477 U.S. at 256-57, 106 S.Ct. 2505. Mere conclusory allegations or denials taken from the pleadings are insufficient to withstand a motion for summary judgment once the moving party has presented evidentiary materials. Schoch v. First Fidelity Bancorporation, 912 F.2d 654, 657 (3d Cir. 1990). Rule 56 requires the entry of summary judgment, after adequate time for discovery, where a party "fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex, 477 U.S. at 322, 106 S.Ct. 2548. "The moving party is `entitled to a judgment as a matter of law' because the nonmoving party has failed to make a sufficient showing on an essential element of her case with respect to which she has the burden of proof." Id. at 323, 106 S.Ct. 2548.

B. Hybrid Restraint

Of relevance to both the defendants and plaintiffs' motions for summary judgment is the determination that this case involves a hybrid restraint of trade. In denying the defendants' motion to dismiss, Judge Caldwell found that the defendants are not exempt under the state action doctrine because the statutory scheme here at issue constituted "a hybrid restraint that allows private entities to set prices." See Beer & Pop Warehouse, Inc. v. Jones, No. 97 Civ. 753, slip op. at 11 (M.D.Pa. Oct. 17, 1997) (citing Parker v. Brown, 317 U.S. 341, 63 S.Ct. 307, 87 L.Ed. 315 (1943)). Therefore, the doctrine exempting state action from the application of the Sherman Act is not available to the defendants. See id.

C. Defendants' Motion for Summary Judgment

Plaintiffs seek to enjoin ...