Lafayette Beverage Distributors v. Anheuser-Busch

• Decision Date: 25 August 1982
• Docket Number: No. L 82-52.,L 82-52.
• Parties: LAFAYETTE BEVERAGE DISTRIBUTORS, INC., Plaintiff, v. ANHEUSER-BUSCH, INC., Defendant.
• Court: U.S. District Court — Northern District of Indiana

545 F. Supp. 1137

LAFAYETTE BEVERAGE DISTRIBUTORS, INC., Plaintiff, v. ANHEUSER-BUSCH, INC., Defendant.

No. L 82-52.

United States District Court, N. D. Indiana, Hammond Division at Lafayette.

August 25, 1982.

COPYRIGHT MATERIAL OMITTED

Daniel P. Byron, Phillip A. Terry, Indianapolis, Ind., Carl J. Sandy, Lafayette, Ind., for plaintiff.

Paul J. DeVault, Malcolm C. Mallette, Indianapolis, Ind., Paul D. Ewan, Lafayette, Ind., Terrence C. Sheehy, Peter E. Moll, Washington, D. C., Thomas H. Singer, South Bend, Ind., for defendant.

SHARP, Chief Judge.

This is a civil action seeking damages and injunctive relief for alleged violations of the Sherman Anti-Trust Act, 15 U.S.C. § 1, Indiana franchise statutes, Indiana alcoholic beverage statutes and for breach of contract. This case is presently before the Court on plaintiff's, Lafayette Beverage Distributors, Inc., Motion for Preliminary Injunction. The parties presented testimony and oral argument before this Court on July 6, 1982 and have submitted briefs on the motion. The Court now finds the facts and states its conclusions of law thereon in accordance with Rules 52 and 65 of the Federal Rules of Civil Procedure.

FINDINGS OF FACT

1. Plaintiff, Lafayette Beverage Distributors, Inc. ("Lafayette Beverage"), is an Indiana corporation with its principal place of business in Lafayette, Indiana. Lafayette Beverage is a large, diversified wholesale of alcoholic beverages, licensed by the Indiana Alcoholic Beverage Commission and the Bureau of Alcohol, Tobacco and Firearms. In 1981, Lafayette Beverage had net sales of $8,088,249 and assets of $1,373,277. Lafayette Beverage distributes the products of Anheuser-Busch, Inc., Miller Brewing Co., Schlitz Brewing Co., Stroh Brewing Co., Heileman, Falstaff Brewing Co., Heineken, St. Pauli Girl and Grolsch. Lafayette Beverage also distributes wines such as Almaden, Gallo, Taylor's, Manischewitz, Blue Nun, Riunite and various imports from France and Italy.

2. Defendant, Anheuser-Busch, Inc. ("Anheuser Busch"), is a Missouri corporation with its principal place of business in St. Louis, Missouri. Anheuser-Busch is a brewer of various brands of Malt beverages, including Budweiser, Budweiser Light, Michelob, Michelob Light, Natural Light and Busch.

3. The matters in controversy in this cause of action exceed, exclusive of interests and costs, the sum of $10,000. Anheuser-Busch and Lafayette Beverage are found and transact business within this district.

4. Lafayette Beverage is a company which merged with another Lafayette beer wholesaler, Quality Beer, Inc., in late 1980. Prior to the time of this merger, and since approximately 1965, Quality Beers had been a wholesale distributor of products manufactured by Anheuser-Busch. Following the merger, in January 1981, Lafayette Beverage assumed the distribution of these products manufactured by Anheuser-Busch. At the time Anheuser-Busch approved the merger with Quality Beers, Lafayette Beverage was distributing products of the Miller Brewing Co. and other competitors of Anheuser-Busch, such as Schlitz and Stroh's.

5. On January 15, 1981, Lafayette Beverage and Anheuser-Busch entered into a Wholesaler Equity Agreement ("Equity Agreement") governing all relations and dealings between the parties and setting forth their respective rights and obligations. The Equity Agreement entered into by Lafayette Beverage is identical to the agreement which Anheuser-Busch has offered to each of its other wholesalers.

6. The Equity Agreement designates Lafayette Beverage as a wholesale distributor of the products manufactured by Anheuser-Busch within Lafayette Beverage's primary area of responsibility, which area encompasses the Indiana counties of Tippecanoe and Clinton. By its terms, the Equity Agreement does not restrict the areas within which Lafayette Beverage may sell its products, nor does it restrict Lafayette Beverage's right to distribute products manufactured by other brewers.

7. Anheuser-Busch has no policy of restricting the sales of its wholesalers to their respective areas of primary responsibility. All Anheuser-Busch wholesalers, including Lafayette Beverage, are independent businessmen and are free to sell Anheuser-Busch products wherever they choose. Anheuser-Busch has never told Lafayette Beverage that it could not sell outside its area of primary responsibility.

8. A "transshipper" is a wholesale distributor who sells beer in Indiana counties other than its county or counties of primary responsibility.

9. Indiana ABC Rule 28 permits wholesalers to sell anywhere in the state and transshipping is prevalent throughout the state. Many Anheuser-Busch Indiana wholesalers sell outside their areas of primary responsibility. Approximately 25% of Anheuser-Busch products distributed in Indiana are sold by wholesalers outside of their respective areas of primary responsibility.

10. Three or four Anheuser-Busch wholesalers, other than Lafayette Beverage, sell in Lafayette Beverage's area of primary responsibility. Lafayette Beverage has frequently complained about sales by these other wholesalers. Anheuser-Busch has taken no action in response to complaints about transshipping from Lafayette Beverage or any other Indiana wholesaler, beyond informing the complaining wholesaler that there is nothing Anheuser-Busch can do about transshipping.

11. Lafayette Beverage has been selling Anheuser-Busch products outside of its area of primary responsibility since September 1981.

12. Anheuser-Busch has not terminated or threatened to terminate any Indiana wholesaler as a consequence of sales outside of that wholesaler's area of primary responsibility. Lafayette Beverage was not terminated for selling outside its area of primary responsibility.

13. It is the policy of Anheuser-Busch that all Anheuser-Busch wholesalers, as independent businessmen, determine their own resale prices and are free to sell Anheuser-Busch products at any price they choose.

14. Anheuser-Busch has at times suggested resale prices to Lafayette Beverage and other wholesalers. Anheuser-Busch advised the wholesalers that all decisions on resale prices were theirs alone to make.

15. Mr. Rogers executes and submits Form B-19 to the division office as required by Anheuser-Busch company policy whenever he presents a price promotion to Lafayette Beverage or any other wholesaler. Form B-19 reads in part:

I advised the above-named wholesaler that he will receive this promotional allowance whether or not he elects to pass all or any part of the allowance on to retailers and regardless of whether or the extent to which he may elect to participate on his own. I further advised the wholesaler that whatever action he may take is his own decision.

16. Mr. Rogers never made Anheuser-Busch promotional allowances to Lafayette Beverage conditional on Lafayette Beverage's pricing. Lafayette Beverage frequently participated in Anheuser-Busch price promotions because it was a good way to move more merchandise and increase sales.

17. The sale of Budweiser Light to Lafayette Beverage was not conditioned by Anheuser-Busch on Lafayette Beverage's agreement to sell Budweiser Light at, below or above any price.

18. Lafayette Beverage did not always follow the prices suggested by Mr. Rogers and other Anheuser-Busch representatives. Lafayette Beverage set its own prices at levels necessary to be competitive with other wholesaler's prices.

19. Wholesaler prices on Anheuser-Busch products in Indiana vary to a large degree, despite Anheuser-Busch's uniform F.O.B. price to all of its Indiana wholesalers.

20. Anheuser-Busch did not take any action to discipline Lafayette Beverage for any variance from Anheuser-Busch's suggested resale price.

21. Anheuser-Busch's decision to terminate Lafayette Beverage was a unilateral one, made solely by Anheuser-Busch without consultation or collusion with any other party.

22. Paragraph 6 of the Equity Agreement provides that Anheuser-Busch has the right to immediately terminate the brewer-wholesaler relationship if certain enumerated events occur. One of those events is: "Fraudulent conduct of wholesaler in any of its dealings with Anheuser-Busch or its Products."

23. Lafayette Beverage was sent a notice of termination by certified mail, return receipt requested, on May 20, 1982. The termination notice stated that the ground for termination was that Lafayette Beverage engaged in fraudulent conduct in their dealings with Anheuser-Busch or its product. The termination notice further provided that Lafayette Beverage would have 30 days to windup its business with regard to Anheuser-Busch products.

24. On December 9, 1981, Randolph Rogers, Anheuser-Busch's District Manager, received a report from the Anheuser-Busch Division Office in South Bend, Indiana, that Lafayette Beverage had picked up some overage draught beer from retail accounts and was offering it for sale.

25. On December 10, 1981, Randolph Rogers drove to Lafayette Beverage to ascertain whether the report was true. At Lafayette Beverage, Rogers inspected Lafayette Beverage's inventory and discovered 82 half-barrels of overage Busch draught beer, and 12 quarter-barrels of overage Michelob Light draught beer. The overage half-barrels of Busch draft beer were code dated 286, which indicates that the beer was brewed on October 13, 1981 and was therefore 58 days old.

26. Beer is perishable and draught beer which is not pasteurized deteriorates quickly. Anheuser-Busch's overage beer policy is that draught beer is not to be sold by a wholesaler to a retailer after 35 days and in no event can draught beer be sold to a consumer after 45 days.

27. It is vital to Anheuser-Busch to maintain the quality and integrity of its products and it is imperative that overage product not reach retailers or consumers. The sale of overage product injures the reputation and good will of Anheuser-Busch, its wholesalers and its products.

28. It is a generally...