Carlo C. Gelardi Corp. v. Miller Brew. Co.

• Decision Date: 01 October 1976
• Docket Number: Civ. A. No. 76-824.
• Parties: CARLO C. GELARDI CORP., a New Jersey Corporation, Plaintiff, v. MILLER BREWING COMPANY, a Wisconsin Corporation, et al., Defendants.
• Court: U.S. District Court — District of New Jersey

421 F. Supp. 237

CARLO C. GELARDI CORP., a New Jersey Corporation, Plaintiff, v. MILLER BREWING COMPANY, a Wisconsin Corporation, et al., Defendants.

Civ. A. No. 76-824.

United States District Court, D. New Jersey.

October 1, 1976.

COPYRIGHT MATERIAL OMITTED

James R. Heaney, Madison, N. J., for plaintiff.

John E. Keale, Carpenter, Bennett & Morrissey, Newark, N. J., Edward F. Butler, Conboy, Hewitt, O'Brien & Boardman, New York City, for defendants.

OPINION

BARLOW, District Judge.

In a telegram dated May 4th, 1976, the defendant Miller Brewing Company attempted to sever its contractual relationship with the plaintiff, Carlo C. Gelardi Corp. The plaintiff commenced this action on May 5th, 1976, alleging violations of certain provisions of the antitrust laws of the United States by Miller, three employees of Miller, and an unspecified number of unidentified co-conspirators. The complaint also alleged that Miller breached a distributorship agreement with the plaintiff. On May 7th, the plaintiff filed an amended complaint alleging violations of the New Jersey Franchise Practices Act, N.J.Stat.Ann. § 56:10-1, et seq. On that same day, this Court signed an order to show cause and entered an order temporarily restraining Miller from discontinuing the sale of beer products to the plaintiff.

In an opinion dated May 27th, 1976, this Court concluded that the plaintiff had demonstrated a reasonable probability of eventual success on the merits with respect to the question of the applicability of the Franchise Practices Act. As a result, the Court issued a preliminary injunction on May 28th, 1976, directing Miller to comply with the notice provisions of the Act, id. § 56:10-5 (hereinafter "Section 5"). This decision required Miller to wait at least sixty (60) days from May 4th, 1976, before effectuating its intention to terminate the plaintiff's franchise. On June 1st, 1976, the plaintiff filed the instant motion for a preliminary injunction, seeking to prevent Miller from terminating the franchise arrangement upon the expiration of these sixty (60) days.

The narrow question presented in the earlier motion for a preliminary injunction was whether the Franchise Practices Act applied, so as to require sixty (60) days' notice prior to the termination of the plaintiff's franchise. The opinion issued in response to that motion is now the law of the case, and is hereby incorporated into this opinion. The current motion, however, involves a more difficult question — whether Miller, having already given the sixty (60) days' notice, is legally entitled to terminate the plaintiff's franchise. The plaintiff asserts that Miller is not entitled to terminate the franchise, and advances six legal theories in support of this contention. The Court must now consider whether the plaintiff has demonstrated a reasonable probability of eventual success on the merits with respect to any of these theories. See Oburn v. Shapp, 521 F.2d 142, 147 (3d Cir. 1975); Delaware River Port Authority v. Transamerican Trailer Transp., Inc., 501 F.2d 917, 919-20 (3d Cir. 1974); Winkleman v. New York Stock Exch., 445 F.2d 786, 789 (3d Cir. 1971).

The following arguments have been advanced by the plaintiff in support of its motion:

(1) Miller's allocation of beer products is an unreasonable restraint of trade, in violation of the Sherman Act, 15 U.S.C. § 1;

(2) Miller's establishment of a dual distributorship¹ in the plaintiff's area of primary responsibility² manifests a conspiracy to force the plaintiff out of business, in violation of the Sherman Act, id. §§ 1, 2;

(3) Miller's entire course of conduct toward the plaintiff manifests a conspiracy to force the plaintiff out of business, in violation of the Sherman Act, id.;

(4) Miller's terms of sale to the plaintiff constitute price discrimination, in violation of the Clayton Act as amended by the Robinson-Patman Act, id. § 13(a);

(5) Miller is attempting to terminate the plaintiff's franchise without good cause, in violation of § 5 of the New Jersey Franchise Practices Act; and

(6) Miller has imposed unreasonable standards of performance upon the plaintiff, in violation of § 7(e) of the Franchise Practices Act, N.J.Stat. Ann. § 56:10-7(e).³

The plaintiff's first contention must fail on the present record. "Essential to the violation of the antitrust laws is an agreement or combination, the purpose and effect of which is restraint of trade and suppression of competition." See Viking Theatre Corp. v. Paramount Film Distrib. Corp., 320 F.2d 285, 293 (3d Cir. 1963), aff'd, 378 U.S. 123, 84 S.Ct. 1657, 12 L.Ed.2d 743 (1964); Martin B. Glauser Dodge Co. v. Chrysler Corp., 418 F.Supp. 1009, at 1015 (D.N.J.1976); Kaiser v. General Motors Corp. (Pontiac Motor Div.), 396 F.Supp. 33, 38 (E.D.Pa.1975). Whatever the merits of plaintiff's argument that the Miller allocation system⁴ is an unreasonable restraint of trade,⁵ there is no evidence to indicate that the allocation system is the result of a contract, combination, or conspiracy, as required by § 1 of the Sherman Act.⁶ Indeed, the plaintiff's own briefs suggest that Miller alone is responsible for the creation and implementation of the allocation system:

There is no binding contractual requirement that Miller allocate beer in this manner. This has been a procedure adopted in Miller's sole discretion. Miller can determine to provide beer to a distributor even though he had no record in the prior year . . . . Further, Miller, in its sole discretion, can determine to deliver beer to some distributors in amounts which vary from a strict application of the `allocation' formula.

Brief for the Plaintiff at 12.

The plaintiff has not cited, nor has this Court been able to find, anything in the present record to suggest that any of Miller's distributors have participated in or influenced the creation or implementation of the allocation system. The only participants revealed by the record are the various Miller employees necessary to implement the allocation program. However, there must be a plurality of actors to contract, combine, or conspire to restrain trade in violation of § 1 of the Sherman Act, and it is well-settled that the required plurality is not supplied by a combination of a corporation and its employees. See Goldlawr, Inc. v. Shubert, 276 F.2d 614, 617 (3d Cir. 1960). See also Morton Bldgs. of Neb., Inc. v. Morton Bldgs., Inc., 531 F.2d 910, 917 (8th Cir. 1976); Joseph E. Seagram & Sons, Inc. v. Hawaiian Oke & Liquors, Ltd., 416 F.2d 71, 82-84 (9th Cir. 1969), cert. denied, 396 U.S. 1062, 90 S.Ct. 752, 24 L.Ed.2d 755 (1970); Higbie v. Kopy-Kat, Inc., 391 F.Supp. 808, 810 (E.D.Pa.1975); Quigley v. Exxon Co., 376 F.Supp. 342, 350 (M.D.Pa. 1974); Goldinger v. Boron Oil Co., 375 F.Supp. 400, 406 (W.D.Pa.1974), aff'd, 511 F.2d 1393 (3d Cir. 1975).

The plaintiff's second and third contentions allege that the defendants and others conspired to eliminate the plaintiff as a beer distributor in interstate commerce, and that the following steps were taken to consummate said conspiracy:⁷

(a) Miller established a dual distributorship in the plaintiff's area of primary responsibility;

(b) Miller refused to extend to the plaintiff the normal credit extended to other distributors in New Jersey, either for regular shipments of beer or to build up inventory prior to the peak season;

(c) Miller required the plaintiff to pay for beer in advance of delivery;

(d) Miller imposed an arbitrary order and payment schedule on the plaintiff and required strict adherence to the schedule;

(e) Miller rerouted the shipments of beer to the plaintiff, causing delays in receipt; and

(f) Miller interfered with the plaintiff's merger negotiations with Warren Distributing Co.

The plaintiff asserts that this conspiracy is in violation of §§ 1 and 2 of the Sherman Act.

Assuming, arguendo, that the alleged conspiracy existed, it does not appear that the plaintiff will be able to show that its object was one rendered illegal by § 1.⁸ The fact that Miller's actions had an adverse impact upon the plaintiff's business does not, by itself, amount to a violation of the Sherman Act. Damage alone does not constitute liability under the Act. See Ace Beer Distribs., Inc. v. Kohn, Inc., 318 F.2d 283, 287 (6th Cir.), cert. denied, 375 U.S. 922, 84 S.Ct. 267, 11 L.Ed.2d 166 (1963). A conspiracy which results merely in the substitution of one distributor for another does not violate § 1. See Craig v. Sun Oil Co., 515 F.2d 221, 223 (10th Cir. 1975). See also Bowen v. New York News, Inc., 522 F.2d 1242, 1254 (2d Cir. 1975), cert. denied, 425 U.S. 936, 96 S.Ct. 1667, 48 L.Ed.2d 177 (1976); Ark Dental Supply Co. v. Cavitron Corp., 461 F.2d 1093, 1094 (3d Cir. 1972); Joseph E. Seagram & Sons, Inc. v. Hawaiian Oke & Liquors, Ltd., supra, 416 F.2d at 78; V. & L. Cicione, Inc. v. C. Schmidt & Sons, Inc., 403 F.Supp. 643, 648-49 (E.D.Pa. 1975). Nor is an increase in the number of distributors actionable under § 1. See Craig v. Sun Oil Co., supra, 515 F.2d at 223. The elimination of the plaintiff's distributorship would violate § 1 only if, in fact, it constituted a restraint of trade or was motivated by an anti-competitive intent. See V. & L. Cicione, Inc. v. C. Schmidt & Sons, Inc., supra, 403 F.Supp. at 649. See also Continental Distrib. Co. v. Somerset Importers, Ltd., 411 F.Supp. 754, 756 (N.D.Ill. 1976); Beaute Craft Supply Co. v. Revlon, Inc., 402 F.Supp. 385, 387-88 (E.D.Mich. 1975); cf. Fray Chevrolet Sales, Inc. v. General Motors Corp., 536 F.2d 683, 686 (6th Cir. 1976); Morton Bldgs. of Neb., Inc. v. Morton Bldgs., Inc., supra, 531 F.2d at 917; Dreibus v. Wilson, 529 F.2d 170, 172 (9th Cir. 1975); Westinghouse Elec. Corp. v. CX Processing Labs., Inc., 523 F.2d 668, 673 (9th Cir. 1975).

In this case, even if there had been an agreement between Miller and Warren to eliminate the plaintiff's distributorship and to replace it with the Warren distributorship, the plaintiff could not prevail on its ...