Dr. Pepper Bottling Co. of Paragould v. Frantz

• Decision Date: 23 November 1992
• Docket Number: No. 92-133,92-133
• Citation: 311 Ark. 136,842 S.W.2d 37
• Parties: DR. PEPPER BOTTLING CO. OF PARAGOULD, Appellant, v. Don FRANTZ d/b/a Frantz Distributing, Appellee.
• Court: Arkansas Supreme Court

Page 37

842 S.W.2d 37

311 Ark. 136

DR. PEPPER BOTTLING CO. OF PARAGOULD, Appellant, v.Don FRANTZ d/b/a Frantz Distributing, Appellee.

No. 92-133.

Supreme Court of Arkansas.

Nov. 23, 1992.

Wright, Lindsey & Jennings, Little Rock, for appellant.

Casey Jones, Robert McHenry, Conway, Little Rock, for appellee.

HAYS, Justice.

Three points are raised by this appeal: whether a distributorship agreement between appellantDr. Pepper Co. of Paragould, Inc.(Dr. Pepper) and appelleeDon Frantz(Frantz) is subject to the Arkansas Franchise Practices Act; whether Dr. Pepper's termination of the distributorship was without good cause and in violation of statutory provisions; and whether the evidence supports damages of $100,000 awarded to Frantz.Answering those questions in the affirmative, we affirm.

On November 17, 1986, Frantz and Dr. Pepper entered into a contract entitled "Distributorship Agreement," appointing Frantz to distribute exclusively throughout some eleven Arkansas counties the beverage products franchised by Dr. Pepper.Frantz agreed to carry Dr. Pepper's entire line of products on its trucks, to refrain from selling any beverages similar to the products of Dr. Pepper, to comply with all policies of Dr. Pepper, including dress code, standards of merchandizing and the like.Frantz was to distribute beverage to retail outlets throughout the territory assigned to him at prices set by Frantz and to distribute at retail through coin-operated vending machines.No provision in the agreement obligated Frantz to maintain a particular place of business, a focal point of this dispute.

Frantz operated four trucks and two vans and rented warehouse space in Little Rock.Later, in 1989, Frantz constructed a warehouse, investing about $100,000 in the property.A representative of Dr. Pepper looked at the site and thought it "a good idea and a good investment."Frantz maintained regular hours, keeping the doors open until six or seven p.m. Frantz distributed approximately one thousand five hundred cases of beverage each week, primarily to retail outlets but some sales were made to customers at the warehouse where products were on display.

In December 1988 Dr. Pepper wrote to Frantz stating that its products were being distributed in less than a third of the outlets of his territory, whereas he was obligated to secure and maintain regular distribution in a minimum of 65% of the outlets.Frantz was given until March 31, 1989, to correct the deficiency.

In September 1989 Frantz received a letter from Dr. Pepper informing him that because Dr. Pepper had recently acquired the 7-Up Bottling Company of Little Rock and Mountain Valley Water of Central Arkansas, "we must exercise our option to terminate your distributor agreement, effective immediately" upon thirty days notice.

Frantz brought this action against Dr. Pepper alleging the termination of the distributorship was in violation of the Arkansas Franchise Practices Act.The case was tried, Dr. Pepper moved for a directed verdict at the end of the plaintiff's proof and again at the close.Both motions were denied and the jury returned a verdict for Frantz for $100,000.Dr. Pepper then moved for a judgment notwithstanding the verdict.That, too, was denied and this appeal followed.

IThe Circuit Court Erred In Finding That There Was A Legally Sufficient Evidentiary Basis For The Jury's Finding That Frantz Was A Franchisee As That Term Is Defined By The Arkansas Franchise Act

A trial court may enter judgment notwithstanding the verdict only if there is no substantial evidence to support the verdict of the jury, and the moving party is entitled to judgment as a matter of law.Dedman v. Porch, 293 Ark. 571, 739 S.W.2d 685(1987).On appeal from the denial of a motion for a judgment notwithstanding the verdictwe review the evidence and all reasonable inferences arising therefrom in the light most favorable to the party on whose behalf the judgment was entered.McCuistion v. City of Siloam Springs, 268 Ark. 148, 594 S.W.2d 233(1980).¹

The Arkansas Franchise Practices Act[Act 355 of 1977, Ark.Code Ann. §§ 4-72-201--210(1987) ] provides remedies for persons whose rights as franchisees have been terminated without good cause.A franchise is defined by the act as

a written or oral agreement for a definite or indefinite period, in which a person grants to another person a license to use a trade name, trademark, service mark, or related characteristic within an exclusive or nonexclusive territory, or to sell or distribute goods or services within an exclusive or nonexclusive territory, at wholesale, retail, by lease agreement, or otherwise.

Ark.Code Ann. § 4-72-202(1).

The act applies only to a franchise

entered into, renewed, or transferred after March 4, 1977, the performance of which contemplates or requires the franchise to establish or maintain a place of business within the State of Arkansas.

Ark.Code Ann. § 4-72-203.

"Place of business" is defined as

a fixed geographical location at which the franchisee displays for sale and sells the franchisor's goods or offers for sale and sells the franchisor's services.

Ark.Code Ann. § 4-72-202(6).

From the foregoing excerpts, Dr. Pepper argues that the act applies only to agreements "the performance of which contemplates or requires the franchise to establish or maintain a place of business in Arkansas," that is to say, "a fixed geographical location at which the franchisee displays for sale and sells the franchisor's goods."See§ 4-72-202(6).

Dr. Pepper relies on Bridgman v. Cornwell Quality Tools Co., 831 F.2d 174(8th Cir.1987), George R. Darche Associates v. Beatrice Foods Co., 538 F.Supp. 429(D.N.J.), affirmed676 F.2d 685(3rd Cir.1981)andCarlo C. Gelardi v. Miller Brewing Co., 421 F.Supp. 233(D.N.J.1976).But those cases are neither controlling nor persuasive, given material differences.Bridgman operated entirely from a van and made no pretense of selling from a fixed location where Cornwell's products were displayed.The trial court found that neither Bridgman's van nor his home constituted a place of business and the appeals court deferred to those factual findings.

The Darche case has marked differences from the case before us.Darche maintained no inventory and had no authority to set prices, whereas Frantz determined the price.Darche was, in effect, simply a soliciting agent and all orders were considered simply "an offer to purchase until accepted by [Beatrice]."Products were delivered directly to the purchaser by the manufacturer and not by the soliciting agent.Darche undertook no duty to promote sales.

The Gelardi case involved a dispute between a New Jersey beer distributor, Gelardi, and Miller Brewing Company.Gelardi sued Miller alleging a breach of its distributorship in violation of New Jersey's Franchise Practices Act.That act, like ours, applies only to franchises the performance of which contemplates or requires the franchisee to establish or maintain a place of business with the State of New Jersey.But, unlike our act, the New Jersey act requires a minimum level of gross sales attributable to the goods of the franchisor.More important, § 56:10-3(f) of that act specifically excludes "a warehouse, a place of storage, a residence or a vehicle" from the definition of "place of business."Miller argued the exclusion of warehouses, etc., was indicative of a legislative intent to exclude alcoholic beverages from the coverage of the franchise act.The court rejected the contention that § 56:10-3(f) was intended to exclude particular industries or substantial operations like Gelardi's from the protection of the act in these terms:

This is especially so when one considers the strong public policy in favor of protection expressed by the act.SeeShell Oil Co. v. Marinello, 63 N.J. 402, 409, 307 A.2d 598, 602(1973), cert. denied, 415 U.S. 920[, 94 S.Ct. 1421, 39 L.Ed.2d 475](1974).

Nor do we read the Gelardi case as the appellant does, to support the view that the issue of what is contemplated in terms of performance is resolved "solely by reference to the contract."Whether that is implicit in the opinion is at best debatable; it is not, however, explicit, and if the opinion seems to focus largely on the provisions of the agreement, that is doubtless influenced by the fact that the question before the court was whether a preliminary injunction should issue anticipatory to a trial.

Thus, Dr. Pepper posits the issue to be decided as not whether Frantz actually established a place of business in Arkansas where products of Dr. Pepper were displayed and sold--a premise not easily sustainable in view of the testimony and the verdict--but whether the agreement required that Frantz would display and sell Dr. Pepper products from a fixed location,...