Blanton Enterprises, Inc. v. Burger King Corp.

• Decision Date: 26 February 1988
• Docket Number: Civ. A. No. 0:87-50-15.
• Citation: 680 F. Supp. 753
• Court: U.S. District Court — District of South Carolina
• Parties: BLANTON ENTERPRISES, INC., Plaintiff, v. BURGER KING CORPORATION, William Prather, Woodlo, Inc. and Walter Haywood Fox, Jr., Defendants.

680 F. Supp. 753

BLANTON ENTERPRISES, INC., Plaintiff, v. BURGER KING CORPORATION, William Prather, Woodlo, Inc. and Walter Haywood Fox, Jr., Defendants.

Civ. A. No. 0:87-50-15.

United States District Court, D. South Carolina, Rock Hill Division.

February 26, 1988.

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James W. Sheedy, Spencer & Spencer, Rock Hill, S.C., for plaintiff.

John L. Choate, Arthur L. Coleman, Monteith P. Todd, Nelson, Mullins, Riley & Scarborough, Columbia, S.C., and Robert J. Bagdasarien, Kevin F. Kostyn, Breed, Abbott & Morgan, New York City, for Burger King Corp. and William Prather.

M. Craig Garner, Jr., McNair Law Firm, Columbia, S.C., and William L. Rikard, Jr., Parker, Poe, Thompson, Bernstein, Gage & Preston, Charlotte, N.C., for Woodlo, Inc. and Walter Haywood Fox, Jr.

ORDER

HAMILTON, District Judge.

This matter is before the court upon the defendants' motions for summary judgment on all counts of the complaint. Rule 56, Fed.R.Civ.Proc. After an exhaustive review of the record in this case and the briefs of counsel, the court conducted a detailed hearing on the matter on February 4, 1988. Based upon this review, the court finds that there are no genuine issues of material fact and all defendants are entitled to judgment as a matter of law. Rule 56(c), Fed.R.Civ.Proc.

The court has jurisdiction in that the parties are of diverse citizenship, 28 U.S.C. § 1332. In addition, the court has federal question jurisdiction, 28 U.S.C. § 1331, based upon plaintiff's federal antitrust allegations, 15 U.S.C. § 1.

Background Facts

Plaintiff is Blanton Enterprises, Inc. of Rock Hill, South Carolina, whose relevant principals are Wiley Blanton (president and 75% stockholder) and Carl Grimm (executive vice president and 15% stockholder). Defendants are Burger King Corporation of Miami, Florida (hereinafter "BKC"), William Prather (executive vice president of BKC)¹, Woodlo, Inc. of Charlotte, North Carolina, whose relevant principals are Walter Haywood Fox, Jr. (president, owner, and also a defendant in this action), and Richard Elliott (executive vice president).

Since 1978, plaintiff has been a successful franchisee of Burger King restaurants and currently owns six franchises in North and South Carolina. As early as 1982, plaintiff allegedly first considered the possibility of building a Burger King restaurant in the Fort Mill, South Carolina area, near the Carowinds amusement park. In September of 1985, plaintiff filed an application for a proposed franchise in close proximity to Carowinds, which is located just off the Interstate 77 exit in South Carolina. The Carowinds location was less than two miles and just minutes away from Woodlo's Burger King restaurant on Westinghouse Boulevard, which was built in 1982. Fox operates this and a number of other Burger King restaurants in the Charlotte area. The Westinghouse restaurant is positioned near an exit of Interstate 77 outside the City of Charlotte. In constructing the Westinghouse location, Fox had anticipated that some of its customers would include people visiting Carowinds. See BKC exhibit 4.

Upon hearing of plaintiff's intention, Fox complained to Robert Gumm, regional vice president in charge of BKC's Atlanta region (which includes Charlotte), and Tony Whitfield, an area franchise manager of BKC, that the proposed Carowinds site would cannibalize or take business from his Westinghouse location. Fox presented BKC's regional personnel with data supporting his belief that plaintiff's Carowinds site would cannibalize 25% of his business. See BKC exhibit 2. BKC's regional personnel favored plaintiff's new site and believed that its cannibalization of Westinghouse would be no more than 10%. Fox then took his case to Tony Rolland, executive vice president of BKC's southern division. See BKC exhibit 3. Rolland, who had been with BKC for over fifteen years and had extensive experience in conducting cannibalization studies, flew from Miami to Charlotte on February 14, 1986, to resolve the cannibalization dispute.²

In the company of Gumm, Whitfield, and Ken Allgood (a BKC real estate representative), Rolland allegedly spent the better part of February 14 touring the area around the Carowinds and Westinghouse locations, including Interstate 77 and local roads connecting the two sites. Rolland allegedly observed, inter alia, traffic flow, highway access, and residential, commercial, and industrial development in the area of the two sites. In addition, Rolland allegedly had access to BKC's regional file on the Carowinds site, which included maps and demographic data of the area.

When Rolland's tour reached Westinghouse, he met Fox for the first time. Defendants allege that Rolland, Gumm, and Whitfield had a cup of coffee with Fox at a table in the middle of the restaurant, but at no time were Rolland and Fox alone. They contend that the brief conversation was casual and defendants covered, among other things, the cannibalization issue.

Rolland subsequently decided that the regional employees' cannibalization estimate was too low, and that plaintiff's proposed Carowinds site would cannibalize Fox's Westinghouse location by 20% to 25%. In Rolland's view, this percentage of cannibalization would not be in BKC's best interests because it would result in a weakening of both franchise sites. BKC's executive vice president, William Prather, concurred in Rolland's opinion and notified plaintiff of BKC's decision not to locate a franchise at the Carowinds site. This action followed.

In its first and second causes of action, plaintiff seeks, against all defendants, millions of dollars in treble damages for a conspiracy under section 1 of the Sherman Act, 15 U.S.C. § 1, and under the South Carolina Unfair Trade Practices Act, S.C. Code Ann. § 39-5-20(a) (Law.Co-op.1976).³ The thrust of plaintiff's complaint is that BKC and Prather conspired with defendants Woodlo and Fox to deny plaintiff a franchise at the Carowinds site. Plaintiff disputes BKC's decision that a franchise at Carowinds would significantly cannibalize Woodlo's nearby Westinghouse restaurant. Plaintiff claims that the "real reason" for denial of the franchise was "concealed." Plaintiff, however, does not specify what the real reason was, but only offers its "suspicion" that the reason "may have been articulated by Tony Rolland ... and defendant Fox in a closed-door meeting in February 1986." Complaint at ¶¶ 28, 33-34; plaintiff's answer 7 to BKC's interrogatories.

Plaintiff also alleges that this conspiracy between the defendants led BKC to wrongfully terminate a franchise which it had orally granted plaintiff at the Carowinds site. Plaintiff concedes that, with respect to the Carowinds site, it never received the written approvals required by BKC's official franchising procedures. See infra discussion at pp. 769-70. BKC's official franchising procedures also required the parties to execute a preliminary agreement as well as a final franchise agreement, which they never did. Plaintiff contends, however, that certain BKC regional employees granted it oral approvals and orally awarded it the Carowinds site franchise. In its wrongful termination claim against BKC, plaintiff seeks $4,727.00 in incidental damages and lost profits for the term of the franchise, which was for twenty years.

Plaintiff's remaining claim against BKC is based on the doctrine of promissory estoppel. Plaintiff alleges that in reasonable reliance on BKC's oral promises and representations, it suffered the identical injury claimed in its wrongful termination cause of action.

In its last cause of action, directed only to defendants Woodlo and Fox, plaintiff contends that these two defendants tortiously interfered with its franchise agreement for the Carowinds site. Plaintiff seeks the same damages it claims above in its wrongful termination and promissory estoppel causes of action.

Antitrust, 15 U.S.C. § 1

15 U.S.C. § 1 provides in pertinent part that "every contract, combination in the form of a trust or otherwise, or conspiracy in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal." This statute is not to be construed literally, rather, only those practices which unreasonably restrain competition are proscribed. Northern Pacific Railway Co. v. United States, 356 U.S. 1, 78 S.Ct. 514, 2 L.Ed.2d 545 (1958).

A violation of § 1 is not proved by a mere refusal to deal because a manufacturer has the right to deal or refuse to deal with a particular distributor as long as it does so unilaterally. United States v. Colgate, 250 U.S. 300, 39 S.Ct. 465, 63 L.Ed. 992 (1919). Consequently, before a plaintiff can prevail on a § 1 claim he must, as an element of his case, produce evidence of concerted action. Monsanto v. Spray Rite Service Corp., 465 U.S. 752, 104 S.Ct. 1464, 79 L.Ed.2d 775 (1984). Both the Supreme Court and the Fourth Circuit Court of Appeals have recently spoken on the requisite elements of a plaintiff's § 1 case. Matsushita Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986); Monsanto, supra; Garment District, Inc. v. Belk Stores Services, Inc., 799 F.2d 905 (4th Cir.1986), petition for cert. filed, 55 U.S.L.W. 3394 (U.S. Nov. 17, 1986) (No. 86-794); Terry's Floor Fashions v. Burlington Industries, 763 F.2d 604 (4th Cir.1985).

In Terry's, the Fourth Circuit summarized the plaintiff's burden in a § 1 case. The court stated:

In addition to establishing a conspiracy, a successful plaintiff must also show: (1) that the conspiracy produced adverse, anticompetitive effects within the relevant product and geographic market; (2) that the objects of and conduct pursuant to the conspiracy were illegal; and (3) that the plaintiff was injured as a proximate result of the conspiracy.

Terry's, 763 F.2d at 610 n. 10 (emphasis added, citations omitted).

While this burden has not changed markedly in...