Chapiewsky v. G. HEILEMAN BREWING COMPANY

• Decision Date: 23 October 1968
• Docket Number: No. 68-C-116.,68-C-116.
• Citation: 297 F. Supp. 33
• Parties: Levi CHAPIEWSKY, a sole proprietor d/b/a Chapiewsky Distributing Company; Leonard F. Killian, a sole proprietor d/b/a Old Style Lager Distributing Co.; and Milnor Homstad, a sole proprietor d/b/a Homstad Distributing Company, Plaintiffs, v. G. HEILEMAN BREWING COMPANY, a Wisconsin corporation, Defendant.
• Court: U.S. District Court — Western District of Wisconsin

297 F. Supp. 33

Levi CHAPIEWSKY, a sole proprietor d/b/a Chapiewsky Distributing Company; Leonard F. Killian, a sole proprietor d/b/a Old Style Lager Distributing Co.; and Milnor Homstad, a sole proprietor d/b/a Homstad Distributing Company, Plaintiffs, v. G. HEILEMAN BREWING COMPANY, a Wisconsin corporation, Defendant.

No. 68-C-116.

United States District Court W. D. Wisconsin.

October 23, 1968.

COPYRIGHT MATERIAL OMITTED

Elliot S. Kaplan, Mark Rodman, Minneapolis, Minn., for plaintiffs.

T. H. Skemp, William P. Skemp, La Crosse, Wis., David E. Beckwith, Maurice J. McSweeney, Milwaukee, Wis., for defendants.

JAMES E. DOYLE, District Judge.

This is an action brought under the antitrust laws of the United States and under the laws of the State of Wisconsin. Plaintiffs' complaint alleges that certain alleged actions and practices of defendant constitute violations of Sections 1 and 2 of the Sherman Act (15 U.S.C. §§ 1, 2) and Sections 133.01(1), 133.17, and 133.185, Wis. Stats. Defendant has asserted that plaintiffs' claims for relief must be dismissed because they fail to state a claim upon which relief can be granted and because this court lacks jurisdiction over the subject matter.

From the face of plaintiffs' complaint it appears that plaintiffs are independent wholesale beer distributors; that each of the plaintiffs is a resident of Wisconsin; that defendant G. Heileman Brewing Company (hereinafter Heileman) is a brewer of beer and malt products, with breweries in Wisconsin and Kentucky, and with its principal office in La Crosse, Wisconsin; that there is a continuous flow in interstate commerce of substantial quantities of the beer and malt products manufactured by Heileman; that the brands of beer and malt products produced by Heileman compete, wherever they are sold, with beer and malt products produced by other interstate breweries; that in an area approximately bounded by the corporate limits of the city of La Crosse, Heileman is the exclusive seller of its products to retail accounts; that elsewhere the beer and malt products manufactured by Heileman are not distributed by Heileman directly to retailers but rather are sold by Heileman to independent distributors pursuant to wholesaler appointment agreements; that by the terms of these agreements the distributors assume all title, risk and dominion over Heileman's products at the time the distributors gain physical possession; that each of the plaintiffs is, and has been for some years, engaged in the distribution and sale at wholesale of Heileman's beer and malt products; and that plaintiffs sell Heileman's beer and malt products primarily to persons and firms engaged in the tavern business or the retail sales of packaged beer products in portions of the State of Wisconsin which are directly abutting and adjacent to the territory in which Heileman is the only source of supply of its product to retailers.

The complaint sets forth three claims for relief.

Under the first claim it is alleged that the wholesaler appointment agreements between Heileman and each of the plaintiffs and between Heileman and its other independent distributors include restrictions as to the areas in which and the customers to whom plaintiffs and the other independent distributors may resell Heileman beer and malt products; that by the terms of these wholesaler appointment agreements the wholesale prices at which plaintiffs and other independent distributors may resell Heileman beer and malt products are fixed, adhered to, stabilized, and maintained; that Heileman has utilized various methods to enforce said territorial restrictions and resale price restrictions; that Heileman has sold at unreasonably low prices to retailers within the area in which Heileman alone sells to retail accounts; and that other parties have conspired and combined with Heileman and have participated in this scheme. Among the effects alleged to have resulted from Heileman's practices are (1) the maintenance of wholesale prices for all beers and malt products at unreasonably and artificially low levels in the "Greater La Crosse Area Market" (defined as an area extending 65 miles in all directions from La Cross and including portions of eastern Minnesota — hereinafter the GLAM), thereby restricting and discouraging competition by and between Heileman and other interstate breweries; and (2) the unreasonable restraint of competition in the production, distribution and sale of all beer and malt products in the GLAM, thereby restraining a substantial portion of interstate and intrastate commerce. These alleged practices of Heileman are said to violate Sections 1 and 2 of the Sherman Act (15 U.S.C. §§ 1, 2) and § 133.01(1), Wis. Stats. The relief prayed for under this claim for relief includes treble damages and an order enjoining the continuation of Heileman's distribution plan.

Under the second claim for relief it is alleged that Heileman has charged plaintiffs unreasonably and discriminatorily higher prices for Heileman beer and malt products then it has charged its wholesale distributors in parts of the State of Wisconsin outside of the GLAM in violation of § 133.17, Wis. Stats.; and that Heileman has engaged in secret payment or allowance of rebates, refunds or unearned discounts to certain favored wholesale distributors located in portions of the State of Wisconsin outside the GLAM, in violation of § 133.185, Wis. Stats. The relief prayed for under this claim for relief includes damages and an order requiring Heileman to sell and deliver its products to plaintiffs upon the same terms and conditions as Heileman sells and delivers its products to all other wholesale distributors located in the State of Wisconsin.

Under the third claim for relief plaintiff Chapiewsky alleges that Heileman terminated the wholesaler appointment agreement between Heileman and Chapiewsky without reasonable prior notification. This conduct is alleged to be unconscionable and in bad faith contrary to §§ 402.309(3), 401.203, Wis. Stats. Chapiewsky seeks damages and an order enjoining Heileman from terminating the agreement between Heileman and Chapiewsky except for good cause shown to this court and upon reasonable prior notification to Chapiewsky.

Heileman has filed four motions. The first requests dismissal of plaintiffs' claim for relief under Sections 1 and 2 of the Sherman Act (15 U.S.C. §§ 1, 2) on the ground that it does not state a claim upon which relief can be granted (The motion is silent with respect to the allegation that the same alleged conduct violates § 133.01(1), Wis. Stats., but if the motion were granted as to the Sherman Act, this court would lose jurisdiction of this entire action, as explained later in this opinion). The second motion requests dismissal of plaintiffs' second and third claims for relief on the ground that the court lacks jurisdiction over the subject matter. The third motion requests that the complaint be dismissed or in the alternative that certain paragraphs of the complaint be stricken because they are verbose and redundant of certain other paragraphs. The fourth motion requests that plaintiffs be required to state definitely the names of the alleged co-conspirators and to state separately and specifically each count and the specific section of the Sherman Act and the Clayton Act to which it pertains.

Defendant's first motion is directed at plaintiffs' Sherman Act allegations. These allegations are asserted to be defective on two grounds: (1) that the 21st Amendment operates to limit federal regulation of an industry engaged in the production of malt beverages; and (2) that the alleged practices of Heileman do not restrain interstate commerce.

It is true that by virtue of the provisions of the 21st Amendment the states are totally unconfined by traditional Commerce Clause limitations when they restrict the importation of intoxicants destined for use, distribution, or consumption within their borders. See State Board of Equalization v. Young's Market Co., 299 U.S. 59, 57 S. Ct. 77, 81 L.Ed. 38 (1936); cf. Mahoney v. Joseph Triner Corp., 304 U.S. 401, 58 S.Ct. 952, 82 L.Ed. 1424 (1938). But the 21st Amendment did not repeal pro tanto the Commerce Clause with respect to the power of Congress to regulate interstate commerce in intoxicating liquor, Hostetter v. Idlewild Bon Voyage Liquor Corp., 377 U.S. 324, 331-332, 84 S.Ct. 1293, 12 L.Ed.2d 350 (1964). Defendant does not claim that enforcement of the Sherman Act in this case conflicts in any way with the policy of the State of Wisconsin. In the absence of such a conflict, the 21st Amendment presents no barrier to the enforcement of the Sherman Act. See Frankfurter, J., concurring in United States v. Frankfort Distilleries, Inc., 324 U.S. 293, 301, 65 S.Ct. 661, 89 L.Ed. 951 (1945).

Heileman also contends that the Sherman Act is inapplicable here since the transactions complained of were wholly intrastate. It is well established, however, that the Sherman Act is not limited to transactions in interstate commerce, but extends to intrastate transactions which affect interstate commerce. See e. g., Mandeville Island Farms, Inc. v. American Crystal Sugar Co., 334 U.S. 219, 68 S.Ct. 996, 92 L.Ed. 1328 (1948); United States v. Yellow Cab Co., 332 U. S. 218, 67 S.Ct. 1560, 91 L.Ed. 2010 (1947); Jewel Tea Co. v. Local Unions, Etc., 274 F.2d 217 (7th Cir.), cert. denied 362 U.S. 936, 80 S.Ct. 757, 4 L.Ed. 2d 747 (1960).

United States v. Yellow Cab Co., supra; Gordon v. Illinois Bell Telephone Co., 330 F.2d 103 (7th Cir.), cert. denied 379 U.S. 909, 85 S.Ct. 197, 13 L.Ed.2d 182 (1964); Ace Beer Distributors, Inc. v. Kohn, Inc., 318 F.2d 283 (6th Cir.), cert. denied 375 U.S. 922, 84 S.Ct. 267, 11 L.Ed.2d 166 (1963); and Central Ice Cream Co. v. Golden Rod Ice Cream Co., 287 F.2d 265 (7th Cir.), cert. denied 368 U.S. 829, 82 S.Ct. 50, 7 L.Ed.2d 32 (1961), relied upon by defendant, are not applicable. In United States v. Yellow Cab Co., s...