Com. v. Mass. CRINC

• Court: Supreme Judicial Court of Massachusetts
• Writing for the Court: Before HENNESSEY; LIACOS
• Citation: Com. v. Mass. CRINC, 466 N.E.2d 792, 392 Mass. 79 (Mass. 1983)
• Decision Date: 09 November 1983
• Parties: , 1984-1 Trade Cases P 66,057

Page 792

466 N.E.2d 792

392 Mass. 79, 1984-1 Trade Cases P 66,057

COMMONWEALTH v. MASS. CRINC et al. ¹

Supreme Judicial Court of Massachusetts,

Suffolk.

Nov. 9, 1983.

May 24, 1984.

Donald B. Gould, Boston, for J.J. Taylor Distributing Co. (H. Glenn Alberich, Boston, for Mass. CRINC & others; Joseph B. Pritti, of New York, for Merrimack Valley Distributing Co. with him); Leonard F. Clarkin, Boston, for Mooney & Co., Inc.; Francis D. Dibble, Jr., Springfield, for Burke Beverage, Inc., & others.

Peter E. Moll, Washington, D.C., for August A. Busch & Co. of Massachusetts, Inc.

Alan L. Kovacs, Asst. Atty. Gen. (Dennis M. Ryan, Asst. Atty. Gen., with him), for the Commonwealth.

Before HENNESSEY, C.J., and WILKINS, LIACOS, ABRAMS and O'CONNOR, JJ.

LIACOS, Justice.

The defendants, Mass. CRINC (Mass. Container Recovery, Inc.) and thirteen Massachusetts beer distributors, appeal pursuant to G.L. c. 231, § 118, from an order of a judge in the Superior Court, dated April 29, 1983, issuing a preliminary injunction. See Mass.R.Civ.P. 65(b), 365 Mass. 832 (1974). ² The injunction, sought by the Attorney General as part of the relief requested in his civil action against the defendants, restrained several of the defendants' business activities and required them to engage in other particular activities. Although the defendants do not dispute any of the factual findings made by the judge, they claim that he failed to apply the correct legal standards to the facts, and thus improperly issued the injunction. The defendants also contend that portions of the order are overly broad and vague, and alter the status quo by their mandatory terms.

We state first the procedural and substantive facts necessary to the consideration of this appeal. In 1981, the Legislature enacted St.1981, c. 571 (bottle bill), effective January 17, 1983, requiring that each beverage container sold must carry a refund value or deposit of at least five cents. See G.L. c. 94, § 322. ³ Distributors must refund deposits to any dealer or redemption center who returns to them empty containers of the type, size, and brand that those distributors have sold within the past sixty days. See G.L. c. 94, §§ 323(c ), (e ). The bottle bill and regulations issued pursuant to it provide that the distributor must pay the dealer a handling fee of at least two cents a container, provided the containers are presented at the time and place of delivery of filled containers. See G.L. c. 94, § 323(c ); 301 Code Mass.Regs. § 4.05(2), (4) (1983). ⁴ Cf. G.L. c. 94, § 323(e ) (redemption center refunds). The regulations promulgated by the Secretary of Environmental Affairs to effectuate the objectives of the bottle bill further provide that "[a]cceptance of beverage containers from dealers shall be the responsibility and expense of distributors, and shall not be made less convenient ... for dealers than acceptance at the time of delivery of filled containers" (emphasis supplied). 301 Code Mass.Regs. § 4.05(2) (1983).

The defendants, except Mass. CRINC, are distributors (i.e., wholesalers) in the malt beverage distribution market in Massachusetts. Several defendants do not have adequate facilities to handle the large amount of returnable containers that they are obligated to accept under the bottle bill. Based on a feasibility study and on legal advice, some of the defendants concluded that the formation of a single corporate entity to perform all collection and recycling functions for Massachusetts beer distributors would be the most cost efficient and profitable means for individual distributors to fulfil their bottle bill obligations. The defendant distributors formed Mass. CRINC (CRINC), a corporation wholly owned and controlled by the thirteen defendants who were, and are, competitors in the Massachusetts wholesale beer market.

The defendant distributors control approximately two-thirds of the Massachusetts malt beverage distribution market. They and other distributors contracted for CRINC's services. The defendants claim that their contract with CRINC constitutes the only practical and economic manner in which they could adhere to the mandate of the bottle bill, given their inadequate facilities and the substantial capital expenditures required to enable them to collect and process containers. The CRINC service contract provided that effectively CRINC would be given the exclusive right to pick up and to process returnable beer containers from all off-premise dealers in Massachusetts who purchased these products from a CRINC affiliated distributor. CRINC would pick up empty beer containers from each designated dealer, process the containers at one of its recycling plants, and sell the scrap produced at the highest price available on a continuing basis. In return for CRINC's services, the contract provided that the distributors pay to CRINC fees calculated by the can or by the bottle. ⁵ Although such fees were computed with the goal of attracting investors by providing a sufficient return, CRINC agreed that any fee increase during the contract term would be based only on the corporation's operating costs and would not include any additional profit margin. To date, the defendants have not realized a monetary return on their investments in CRINC. In fact, CRINC has sustained a net loss in its first year of operation of $1,902,943.

The chairman of CRINC stated that the costs incurred in providing the company's services would be reflected in beer prices. He anticipated, however, that the efficiency resulting from a combined distributor collection service would maintain beer prices at as competitive a level as the requirements of the bottle bill would allow. Following the implementation of the bottle bill in January, 1983, the defendants raised their beer prices an average of $1.00 a case. ⁶ The contract for services between CRINC and a distributor provided that CRINC would pick up returnable containers at each retail dealer's place of business no less than once a week. If the dealer decided that this schedule did not satisfy the distributor's obligations under the bottle bill, CRINC would arrange pickups contemporaneously with the distributor's deliveries of beer to the dealer. The contract further provided that each unscheduled container collection would cost the retail dealer $20.

CRINC would only pick up returnable cans which were stored in recycling bags furnished by CRINC, at cost, to the dealers. CRINC sought to promote the return of bottles in their original, or mother, carton by charging dealers twenty-five cents for using cardboard shells for storing empty beer bottles obtained from one of their processing centers. Furthermore, CRINC would deduct three-quarters of a cent a can from the mandated two-cent handling fee whenever the dealer neglected to sort cans by brand or supplier. On the fifteenth of each month, dealers would be remitted the refunds and handling fees due them from collection completed the previous month.

In March, 1983, the Attorney General filed a complaint against the defendants in Superior Court in Suffolk County, alleging that CRINC's activities violated several provisions of the Massachusetts Antitrust Act and the bottle bill. The Commonwealth simultaneously sought a preliminary injunction, seeking to enjoin CRINC's allegedly unlawful practices. Following a hearing and the submission of voluminous affidavits and other documentary evidence, a judge of the Superior Court granted the Commonwealth's motion on April 29, 1983.

Since the defendants do not dispute the judge's factual findings, we need not review them here. Based on his findings, the judge concluded that there existed a substantial likelihood that the defendants violated the Massachusetts Antitrust Act and the bottle bill by thwarting the entry of competitors in the newly formed container recovery market.

The judge enjoined and restrained the defendant distributors from (1) requiring that any dealer return containers only to CRINC, at times scheduled by CRINC, and from refusing to do business with a third person or redemption center offering services on the same or better terms than CRINC; (2) refusing to accept empty beverage containers when they deliver products to a dealer except where the dealer has entered into a voluntary agreement regarding collection with some third person or where the defendant distributor has made arrangement with CRINC or others to pick up empty returnables from the dealer at times as convenient to the latter as the times of delivery; (3) accepting back any mother carton for any fee, credit, or benefit to CRINC unless the defendants offer the same benefit to dealers doing business directly with third persons or other redemption centers; (4) paying CRINC any fees unless defendants make available to dealers doing business directly, and to third persons or redemption centers, the same uniform schedule of fees. CRINC was enjoined from (1) failing to pay anyone from whom CRINC has accepted returnables, the appropriate deposit and handling fees within fifteen days of accepting containers; (2) failing, upon acceptance of containers, to pay the two cents a container handling fee with no deduction for commingling; (3) charging dealers with the cost of receptacles for storing empty beverage containers; (4) increasing the current service fees required to be paid to CRINC by its distributor clients.

The same Superior Court judge granted a motion by the defendants to stay the preliminary injunction on May 10, 1983. ⁷ On June 1, 1983, a single justice of the Appeals Court extended the stay until that court issued a further order and also directed the parties to seek reconsideration in the Superior Court.

The Superior Court judge who granted the injunction and the stay denied the defendants' request for reconsideration on June 30, 1983, and continued the stay of the injunction. In this final order the judge explained that he did not prohibit CRINC's...