Coca-Cola Bottling of Elizabethtown v. Coca-Cola Co.

• Decision Date: 01 September 1987
• Docket Number: Civ. A. No. 81-48 MMS.
• Citation: 668 F. Supp. 906
• Parties: COCA-COLA BOTTLING COMPANY OF ELIZABETHTOWN, INC., et al., Plaintiffs, v. The COCA-COLA COMPANY, Defendant.
• Court: U.S. District Court — District of Delaware

668 F. Supp. 906

COCA-COLA BOTTLING COMPANY OF ELIZABETHTOWN, INC., et al., Plaintiffs, v. The COCA-COLA COMPANY, Defendant.

Civ. A. No. 81-48 MMS.

United States District Court, D. Delaware.

September 1, 1987.

COPYRIGHT MATERIAL OMITTED

Edmund N. Carpenter II, Charles F. Richards, Jr., Jesse A. Finkelstein, of Richards, Layton & Finger, Wilmington, Del. (Emmet J. Bondurant, Jane V. Vehko, and Jeffrey D. Horst, of Bondurant, Mixson & Elmore, Atlanta, Ga., J. Barry Epperson, of Epperson, Goodpaster & Johnston, Tulsa, Okl., M.B. Jackson, of MacDonald, Halsted & Laybourne, Los Angeles, Cal., of counsel), for plaintiffs and intervenors.

Andrew B. Kirkpatrick, Jr., Richard D. Allen, and Michael Houghton, of Morris, Nichols, Arsht & Tunnell, Wilmington, Del. OF COUNSEL: (Griffin B. Bell, Frank C. Jones, Chilton Davis Varner, and Dwight J. Davis, of King & Spalding, Atlanta, Ga., of counsel), for defendant.

OPINION

MURRAY M. SCHWARTZ, Chief Judge.

The battle between the Coca-Cola Company ("Company") and a shrinking band of bottlers has escalated with the Company's proposal to supply the plaintiffs with sucrose-sweetened Coca-Cola syrup ("sucrose syrup"). Plaintiffs filed motions for a preliminary injunction to enjoin the Company from supplying sucrose syrup and to amend their complaint to more accurately reflect their claims in light of developments since this action was instituted in 1981. A two-day hearing was conducted on July 8 and 9, 1987. The Court will briefly review the events leading up to the present circumstances of the parties' relationship before considering the motions. Plaintiffs' motion for a preliminary injunction will be denied because they cannot prove either that the Company's threatened action will irreparably harm them or that there is a reasonable likelihood of success on the merits. The Court will grant the motion to amend the complaint.

I. BACKGROUND

In January, 1980, the Company began using high fructose corn syrup ("HFCS-55") instead of sucrose to sweeten the Coca-Cola syrup supplied to bottlers. See Coca-Cola Bottling Co. of Elizabethtown, Inc. v. Coca-Cola Co., 654 F.Supp. 1388, 1390-91 (D.Del.1986) ("Coke III") (describing HFCS-55). A group of approximately 120 bottlers, called "unamended" bottlers, brought suit over the use of the HFCS-55 in 1981. The Bottler's Contract contains a pricing provision for Coca-Cola bottler's syrup based on the market price of sugar as quoted by the ten largest sugar refineries in the United States. Coca-Cola Bottling Co. v. The Coca-Cola Co., 654 F.Supp. 1419, 1424 n. 2 (D.Del.1987) ("Coke IV"). The heart of the dispute concerns the Company's continued uses of the price formula for sugar while using the lower cost HFCS-55 without passing those savings along to the unamended bottlers.

After a 16-day trial in 1986 concerning the meaning of the terms "sugar" and "market price" in the 1921 Consent Decrees, the court held that "'sugar' for the purposes of paragraph 10 means refined granulated sugar from cane or beet, and therefore HFCS-55 is not sugar as that term is used in paragraph 10 of the 1921 Consent Decrees...." Coke III, 654 F.Supp. at 1391. The Company filed a motion to amend the Coke III findings, which was denied. Coke IV, 654 F.Supp. at 1429. The Court also determined which unamended bottlers have standing to sue for breach of the Consent Decrees, and which are limited to breach of contract claims. Id. at 1433-37.

Prior to the denial of the motion to amend the Coke III findings, the Company informed the unamended bottlers on January 6, 1987, that as of May 1 the opportunity to sign the 1978 and 1983 Bottler's Contract Amendments would be withdrawn. Upward of 97% of the distribution volume is now covered by these Amendments, with the 1978 Amendment containing a pricing provision different from the plaintiffs' unamended contracts. The 1978 amendment permits the Company to supply HFCS-55 sweetened syrup, and the 1983 Amendment covers supplies and pricing of diet Coca-Cola.

On March 16, 1987, the Company sent the plaintiffs a letter informing them "that effective as of September 1, 1987, the Company will supply you or your authorized processor Coca-Cola Bottler Syrup that is sweetened 100% with sucrose."¹ Plaintiff's Motion for Preliminary Injunction, Docket ("Dkt.") 563, Exhibit A ("Sucrose Letter"). The Company imposed a July 1 deadline for accepting an offer to receive HFCS-55-sweetened bottler syrup ("HFCS-55 syrup") on condition the plaintiffs waive any future claim for breach of the Bottler's Contract and Consent Decrees, and any damages related to the Company's pricing practices for the syrup. Upon filing the motion for preliminary injunction, the Company agreed to postpone implementing the Sucrose Letter policy until the Court could consider the questions involved, and the unamended bottlers agreed to waive damages pending disposition of the motion.

II. PRELIMINARY INJUNCTION

The four-part standard for reviewing a preliminary injunction motion is familiar:

1) threat of irreparable harm to the moving party if the injunction is not granted 2) likelihood of success on the merits;

3) the possibility of harm to other interested persons from the grant or denial of the injunction;

4) the public interest.

Sullivan v. City of Pittsburgh, 811 F.2d 171, 181 (3d Cir.1987); Continental Group, Inc. v. Amoco Chemical Corp., 614 F.2d 351, 356-57 (3d Cir.1980). The first two factors are the primary focus of the Court's review, and the moving party must demonstrate both are present to succeed. Morton v. Beyer, 822 F.2d 364, 367 (3d Cir.1987); In Re Arthur Treacher's Franchisee Litigation, 689 F.2d 1137, 1143 (3d Cir.1982).

A. Irreparable Injury

The initial question concerning the Sucrose Letter policy is what degree of injury plaintiffs must show in order to secure equitable relief. In A.O. Smith Corp. v. F.T.C., 530 F.2d 515 (3d Cir.1976), the Court of Appeals for the Third Circuit stated that "courts ought to harken to the basic principle of equity that the threatened injury must be, in some way, `peculiar.'" Id. at 527 (footnote omitted). That the potential harm is solely monetary does not necessarily foreclose a determination of irreparable injury. See United Steelworkers of America v. Fort Pitt Steel Casting, 598 F.2d 1273, 1280 (3d Cir.1979); Northern Natural Gas Co. v. United States Department of Energy, 464 F.Supp. 1145, 1158 (D.Del.1979). The threshold of "peculiarity" that the proposed action threatens must be high, because purely economic injuries are generally compensable and do not require injunctive relief. See Morton, 822 F.2d at 372 (loss of income alone not irreparable injury); Coca-Cola Bottling Co. of Shreveport v. The Coca-Cola Co. ("diet Coke"), 563 F.Supp. 1122, 1141 (D.C. Del.1983) (loss of additional profits not irreparable harm).

In order to demonstrate the threatened injury is sufficiently peculiar, the plaintiffs must submit particularized proof of the direct harm to their operations caused by the Sucrose Letter policy. Cf. A.O. Smith, 530 F.2d at 529 (Adams, J., concurring) (record must show specifically the burden imposed on individual plaintiffs). Of the seventeen unamended bottler plaintiffs seeking the preliminary injunction, only twelve have submitted affidavits or have been deposed on the question of how their business will be harmed by the Company's proposed action.² Plaintiffs argue the proof submitted by the other bottlers is sufficient to show the type of injury sustained by all unamended bottlers, and therefore the generalized harm each will suffer is adequate proof of irreparable harm.

Plaintiffs' argument fails for two reasons. First, the alleged harm is purely economic, as the fundamental loss any bottler will sustain is the added cost of processing and shipping sucrose-sweetened Coca-Cola products. In order to show this monetary injury is peculiar, individual plaintiffs must demonstrate how each is particularly affected by the switch to sucrose syrup. Second, the plaintiffs are not similarly situated, and the harm sustained by one, e.g., having to seek out new processors, will not necessarily affect another in the same manner or to a similar degree. Plaintiffs' reliance on Ft. Pitt Steel Casting is misplaced because the potential injury there would affect each union member in a virtually identical way. The unamended bottlers affected by the Sucrose Letter represent the range of Coca-Cola bottler operations, from large packaging operations to small plants to bottlers who do none of their own bottling. Individualized proof of harm is the necessary prerequisite to the Court's considering a motion for a preliminary injunction where diverse plaintiffs allege an injury that is primarily economic in nature. Cf. diet Coke, 563 F.Supp. at 1141. Those plaintiffs failing to submit such proof cannot prove irreparable injury, and therefore the motion will be denied as to them.

Before analyzing the evidence of harm submitted by the twelve plaintiffs, a brief description of the bottling system is necessary to determine the effect of supplying syrup with different sweeteners to individual bottlers. Coca-Cola comes in a number of different packages, e.g., 10-, 12-ounce and 16-ounce bottles, 12-ounce cans, and one-, two-, and three-liter plastic containers. The development of these varied packages dates back to the 1950's, and has accelerated greatly in the past decade. Moreover, since 1980, the Company has expanded the number of non-diet, sweetened products offered in the market from one, Coca-Cola, to four: new Coke, Coke Classic (the "original" formula), cherry Coke, and caffeinefree Coke. The unamended Bottler's Contracts require each bottler to invest in the necessary plant and equipment "sufficient to meet satisfactorily the demands of the business...." See PX 44, ¶ FOURTH(e) (standard unamended Bottler's Contract).

The proliferation of packages and products can create economic problems for bottlers,...