Continental Distributing Co., Inc. v. Somerset Importers, Ltd.

• Decision Date: 27 April 1976
• Docket Number: No. 76 C 767.,76 C 767.
• Citation: 411 F. Supp. 754
• Parties: CONTINENTAL DISTRIBUTING CO., INC., et al., Plaintiffs, v. SOMERSET IMPORTERS, LTD., Defendant.
• Court: U.S. District Court — Northern District of Illinois

411 F. Supp. 754

CONTINENTAL DISTRIBUTING CO., INC., et al., Plaintiffs, v. SOMERSET IMPORTERS, LTD., Defendant.

No. 76 C 767.

United States District Court, N. D. Illinois, E. D.

April 27, 1976.

James E. Hastings, Chadwell, Kayser, Ruggles, McGee & Hastings, Chicago, Ill., for plaintiffs.

Burditt & Calkins, George M. Burditt, Richard M. Calkins and Tom Scheuneman, Chicago, Ill., for defendant.

MEMORANDUM

LEIGHTON, District Judge.

I.

This is a motion for a preliminary injunction filed pursuant to Rule 65 of the Federal Rules of Civil Procedure by three wholesale liquor distributors who seek to enjoin the termination of a distributorship agreement. In a two-count complaint, the distributors charge defendant with violations of federal and anti-trust laws and breach of a contract. The court has heard the motion, received evidence and has considered the briefs of the parties. The issue to be resolved is whether a showing has been made for grant of preliminary injunctive relief.

II.

Plaintiffs Continental Distributing Co., Inc., Merchants Liquor Distributors, Inc., and Sheridan Wholesale Liquors, Inc., d/b/a Steuben County Wine & Liquor Co. are wholesale distributors of alcoholic beverages. Continental sells liquor at wholesale in the counties of Cook, DuPage, Kane, Kendall, Will and Grundy. Merchants sells in Cook and DuPage Counties. Sheridan sells liquor at wholesale in the counties of Lake and McHenry. The defendant Somerset Importers, Ltd., is a Delaware Corporation that has its principal place of business in the city of New York. It is a subsidiary of Norton Simon, Inc., and is primarily engaged in the business of importing alcoholic beverages and selling them to wholesalers.

For about 35 years prior to February 18, 1976, Continental has been a wholesale distributor of the Johnnie Walker scotch whiskeys for Somerset and its corporate predecessors in the Chicago metropolitan area. The other plaintiffs have maintained a similar relation for some 10 to 15 years. Continental has had one competitor, Capitol Wine & Liquor Company, another distributor that has wholesaled Somerset's lines of alcoholic beverages in Cook and DuPage counties. During the period 1972 to 1975, Capitol, though a smaller company, sold more of Somerset's brands than did Continental or the other plaintiffs. In 1975, Continental's sales of Somerset brands were in excess of 3.5 million dollars, sales that constituted approximately 5 to 7% of its total for that year.

Continental's, and the other plaintiffs' distributorship agreements with Somerset have been in writing, for several years; and each has contained a provision for termination on 30 days notice. Throughout their distributorships for Somerset and its predecessor corporations, plaintiffs have not received any complaint or criticism about their sales performance, their compliance with the agreements, or concerning their credit or general financial condition. In fact, Somerset's evaluations of Continental have always been favorable. These evaluations, and those concerning Capitol, show that by comparison, Continental distributes on a wider geographic area, has a larger warehouse, employs a larger sales organization and has more accounts.

Capitol, however, competed with Continental in the distribution of Somerset's products throughout Cook and DuPage counties. Low retail prices for Somerset's products in the Chicago metropolitan area have resulted from the fierce competition that has characterized the relation of the two companies, and from price cutting by both of them at the wholesale level. The competition between Capitol and Continental, and the price cutting between them, have intensified in the last year. Somerset's Chicago sales supervisor received complaints from retailers about this price cutting. Sidney Friedman, Capitol's executive officer, complained to Somerset about Continental's price-cutting practices, particularly its "Friday Specials."

In the last year before this suit was filed, Friedman of Capitol made comments to representatives of Continental that he could not live with its competition; and that he, through his friendship with Heilmann of Somerset, was going to establish Capitol as the exclusive distributor of Johnnie Walker and Tanqueray alcoholic beverage lines in the Chicago metropolitan area. Friedman had known Heilmann; Heilmann has had business relations with Friedman since 1972.

On September 24, 1975, Heilmann visited Friedman in Capitol's office in Chicago. In late October or early November, 1975, Murray, Somerset's Chicago representative, in a telephone conversation, recommended to a Somerset executive that Continental be terminated as a Somerset distributor. On February 18, 1976, two Somerset employees delivered to Continental a letter giving it notice that in 30 days the distributorship agreement with it, and those with the other plaintiffs, would be terminated. On the same day, Capitol was notified that it was Somerset's sole distributor in the Chicago area. Plaintiffs immediately filed this suit and have moved for a preliminary injunction to restrain termination of their distributorships with Somerset.

III.

Four witnesses have testified at the hearing of this motion. They were Fred and Abe Cooper, for the plaintiffs; John E. Heilmann and James Sherman Barry for the defendant. In addition, the court has admitted exhibits and has been asked to consider excerpts from five depositions which are said to be admissions binding on the parties. From this evidence it must be determined whether plaintiffs have shown they have a reasonable likelihood of success on the merits; that they will be irreparably injured unless the injunction issues; and that the balance of hardships tips in their favor. Pure Food Products, Inc. v. American Bakeries Company, 356 F.Supp. 701 (N.D.Ill.1973); compare McCrerry Angus Farms v. American Angus Association, 379 F.Supp. 1008 (N.D.Ill.1974), affirmed 7 Cir., 506 F.2d 1404.

Turning to the likelihood that plaintiffs will succeed on the merits, a showing has been made that when the case is heard, it may be proved that Somerset's decision to terminate plaintiffs' distributorship agreements was done in concert with representatives of Capitol and for the purpose of fixing and stabilizing the retail prices of Somerset's lines of alcoholic beverages in the Chicago metropolitan area. A showing has been made that at the hearing of this cause on the merits, evidence may prove the objective of Somerset and Capitol in eliminating Continental as a distributor of Somerset's brands had an anti-competitive purpose. It is true, as Somerset argues, that a liquor distributorship can be terminated for compelling business considerations. See Joseph E. Seagram & Sons, Inc. v. Hawaiian Oke & Liquors Ltd., 416 F.2d 71 (9 Cir. 1969), certiorari denied 396 U.S. 1062, 90 S.Ct. 752, 24 L.Ed.2d 755 (1970); Ace Beer Distributors, Inc. v. Kohn, Inc., 318 F.2d 283 (6 Cir. 1963), certiorari denied 375 U.S. 922, 84 S.Ct. 267, 11 L.Ed.2d 166. However, it is equally true that while a supplier may terminate a distributor for business reasons, it cannot do so if the termination results in a violation of federal anti-trust laws. United States v. Parke, Davis & Co., 362 U.S. 29, 80 S.Ct. 503, 4...