Oak Distributing Co. v. Miller Brewing Company

• Decision Date: 30 November 1973
• Docket Number: Civ. A. No. 39717.
• Citation: 370 F. Supp. 889
• Parties: OAK DISTRIBUTING CO. et al., Plaintiffs, v. MILLER BREWING COMPANY, Defendant.
• Court: U.S. District Court — Western District of Michigan

370 F. Supp. 889

OAK DISTRIBUTING CO. et al., Plaintiffs, v. MILLER BREWING COMPANY, Defendant.

Civ. A. No. 39717.

United States District Court, E. D. Michigan, S. D.

November 30, 1973.

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John L. Cote, Willingham, Coté, Hanslovsky, Griffith & Foresman, P. C., East Lansing, Mich., for plaintiffs.

John A. Krsul, Jr., Dickinson, Wright, McKean & Cudlip, Detroit, Mich., for defendant

ORDER GRANTING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT

KAESS, Chief Judge.

This civil action has been brought pursuant to Section 4 of the Clayton Act (15 U.S.C. § 15) to recover treble damages for alleged violations of Sections 1 and 2 of the Sherman Act (15 U.S.C. §§ 1, 2), and the Clayton Act (15 U.S.C. § 12 et seq.). Plaintiffs have also included a count in their complaint, as amended, for breach of contract, and have also alleged violations of the Federal Alcohol Administration Act and unspecified laws of the State of Michigan.

Defendant Miller Brewing Company ("Miller") has brought this motion to dismiss pursuant to Rule 12, Federal Rules of Civil Procedure. However, the Court now considers this a motion for summary judgment pursuant to Rule 56, Federal Rules of Civil Procedure.

Miller is a corporation organized and existing under the laws of the State of Wisconsin, and has its principal place of business in Milwaukee, Wisconsin.

The Plaintiffs, Oak Distributing Company, Greater Macomb Beer and Wine Distributors, Ecko Beer Distributing and Supply, Inc., and Kolb Sales Co., are corporations organized pursuant to the laws of the State of Michigan, with their principal offices located, respectively, in the Counties of Oakland, Macomb, and Wayne, State of Michigan.

On June 29, 1972, Miller entered into an agreement with Meister Brau, Inc., a Delaware corporation. Under the said agreement, Miller purchased certain of the assets of Meister Brau, Inc. The relevant portions of that agreement provide:

"D. From the date of closing through December 31, 1973, Buyer shall market beer under the Meister Brau, Buckeye and Lite brands. Except as provided in the previous sentence of this subparagraph, nothing in this Agreement shall require Buyer actually to brew or package any of the brands of beer subject to this Agreement, nor to package any such beer in any particular packages, nor to sell the same in any particular markets or to any particular persons, firms, or corporations. Pricing shall be in the sole discretion of the Buyer. All advertising, merchandising, promotion, and marketing themes and programs, as well as the extent thereof in respect of such brands, shall be in the sole discretion of Buyer subject only to the dollar limitations set forth in subparagraph C.

E. Except as provided in subparagraphs C and D above, nothing in this Agreement shall require Buyer to market any of the brands subject to this Agreement; or, to do so through particular wholesalers, distributors or retailers; or, to maintain any branches (including those heretofore operated by Seller) for that purpose. Buyer does not and under no circumstances shall Buyer become obligated to assume any of the obligations of Seller under any of the distributorship agreements Seller may have had with any of Seller's distributors. Sales by Buyer to such distributors shall not be regarded as an assumption of any such obligations. It is contemplated that Buyer is to be free to distribute the brands of beer subject to this Agreement through distributors of Buyer's selection."

Miller thereafter sent a letter dated June 30, 1972, to each of the 36 distributors of Meister Brau, Inc., including the plaintiffs, informing them of the non-assumption of Meister Brau, Inc.'s obligations by Miller. This letter also offered each distributor an opportunity to sell Miller beer, under an arrangement which could be terminated by either party at any time.

Of the thirty-six (36) distributors who were sent such a letter, eighteen (18) of those who accepted Miller's offer by returning the letter continue to this day to sell Miller beer. Eight (8) did not return the letter and, therefore, had no relationship with Miller. The remaining ten (10) who accepted Miller's offer by returning the letter were subsequently terminated by Miller as distributors, including the plaintiffs here, who were each terminated by notice dated September 22, 1972. Miller replaced the terminated distributors with other distributors who were properly licensed to distribute beer in Michigan (Dunn affidavit). As stated before, plaintiffs accepted Miller's offer, and continued to distribute the brands of beer previously supplied by Meister Brau until they were terminated by Miller on September 22, 1972.

Miller's share of the beer market in Michigan was 2.05% in 1971 and 2.51% in 1972. Based upon such percentages, Miller was the 11th ranking beer company in Michigan in terms of beer shipments in 1971 and the 9th ranking company in Michigan in terms of beer shipments in 1972 (Dunn affidavit).

In Count III of their amended complaint, plaintiffs allege that Miller has violated Section 1 of the Sherman Act. The alleged violations appear at III(2) as follows:

"(2) That commencing in the year 1972, and continuing up to and including the date of this Complaint, Miller has failed and refused to lawfully perform its obligations incumbent upon said corporation pursuant to Miller's acquisition from Meister Brau, Inc., of the trademarks Meister Brau, Lite and Buckeye, and has breached said contractual obligations in material respects including, but not limited to, those recited herebelow:

(A) combined, conspired and attempted to destroy the business of the said Distributors in interstate commerce (B) entered into and performed contracts, agreements and understandings in unreasonable restraint of interstate trade and commerce;

(C) combined, conspired and attempted to interfere, upset and destroy contractual and other advantageous relationships between said Distributors and others;

(D) combined, conspired and attempted maliciously to disparage said Distributors, and has so disparaged said Distributors in their trade and commerce;

(E) combined, conspired and attempted and has prevented said Distributors from selling and distributing beer products bearing Meister Brau, Lite and Buckeye trademarks with the intentions to substantially lessen competition and to create a monopoly in interstate commerce, and to wrongfully advance the competitive position of newly assigned distributors."

The law is clear that the allegations put forth by plaintiffs in no way constitute a violation of the antitrust laws, particularly Section 1 of the Sherman Act.

In essence, plaintiffs allege that Miller terminated its contractual relationships with them in favor of contractual relationships with other distributors. This is readily admitted by Miller. Plaintiffs further allege a refusal to deal by Miller. This is also admitted. Nevertheless, it is clear that such conduct by Miller is not forbidden by the antitrust laws.

In United States v. Colgate Co., 250 U.S. 300 at p. 307, 39 S.Ct. 465 at p. 468, 63 L.Ed. 992 (1919), the United States Supreme Court held:

"In the absence of any purpose to create or maintain a monopoly, the Sherman act does not restrict the long recognized right of trader or manufacturer engaged in an entirely private business, freely to exercise his own independent discretion as to parties with whom he will deal."

In Ace Beer Distributors, Inc. v. Kohn, Inc., 318 F.2d 283 (6th Cir. 1963), cert. den. 375 U.S. 922, 84 S.Ct. 267, 11 L.Ed.2d 166 (1963), the complainant alleged that the defendants conspired to destroy plaintiff's business and to eliminate it as a beer distributor in interstate commerce, and "that this result was accomplished by the termination by Stroh of plaintiff's franchise as its beer distributor and thereafter conducting its business through another distributor" (318 F.2d at 286). In affirming the dismissal of plaintiff's complaint in which violations of Section 1 of the Sherman Act were alleged, the court held, at p. 286, as follows:

"That, without the results proscribed by the Sherman Act, is not a violation of the Act. A manufacturer has a right to select its customers and to refuse to sell its goods to anyone, for reasons sufficient to itself. United States v. Colgate Co., 250 U.S. 300, 39 S.Ct. 465, 63 L.Ed. 992. . . . A refusal to deal becomes illegal under the Act only when it produces an unreasonable restraint of trade, such as price fixing, elimination of competition or the creation of a monopoly. (Cases omitted). The fact that a refusal to deal with a particular buyer without more, may have an adverse effect upon the buyer's business does not make the refusal to deal a violation of the Sherman Act. Damage alone does not constitute liability under the Act.

* * * * * *

It is well settled that the `restraint of trade' referred to in Section 1 of the Act, means only unreasonable restraint of trade, in that, as the cases point out, every commercial contract has some restraining effect upon trade. (Citing cases). The substitution of one distributor for another in a competitive market of the kind herein involved does not eliminate or materially diminish the existing competition of distributors of other beers, is not an unusual business procedure, and, in our opinion, is not an unreasonable restraint of trade. (Citing cases)." (Emphasis added).

The Court notes that each of the plaintiffs have spiced their affidavits with a short and vary vague allegation of price fixing. However, nothing specific has been submitted which would support these naked allegations.

In Ricchetti v. Meister Brau, Inc., 431 F.2d 1211 (9th Cir. 1970), cert. den. 401 U.S. 939, 91 S.Ct. 934, 28 L.Ed.2d 219 (1971), Meister Brau, Inc. had purchased the assets of the Burgermeister Brewing Company, and thereafter determined not to appoint as distributors of Burgermeister Beer the three...