Package Shop, Inc. v. Anheuser-Busch, Inc.

• Decision Date: 19 October 1987
• Docket Number: Civ. A. No. 83-0513.
• Citation: 675 F. Supp. 894
• Parties: The PACKAGE SHOP, INC., and Shalbor, Inc., t/a Butler's Liquor Store, on behalf of themselves and all others similarly situated, Plaintiffs, v. ANHEUSER-BUSCH, INC., Crown Beer Distributors, Inc., Garden State Beverage Co., Harrison Beverage Co., High Grade Beverage t/a Mine Hill Distributing Company or High Grade Mine Hill, Hub Beer Distributors, Hub City Distributors, Inc., Konrad Beer Distributors, Inc., The Kristen Distributing Co., MS & W Distributors, Inc., Point Pleasant Distributors, Inc., Ritchie & Page Distributing Co., Inc., South Jersey Distributors Corp., Trip Distributors, Inc., and Warren Distributing Co., Defendants.
• Court: U.S. District Court — District of New Jersey

675 F. Supp. 894

The PACKAGE SHOP, INC., and Shalbor, Inc., t/a Butler's Liquor Store, on behalf of themselves and all others similarly situated, Plaintiffs, v. ANHEUSER-BUSCH, INC., Crown Beer Distributors, Inc., Garden State Beverage Co., Harrison Beverage Co., High Grade Beverage t/a Mine Hill Distributing Company or High Grade Mine Hill, Hub Beer Distributors, Hub City Distributors, Inc., Konrad Beer Distributors, Inc., The Kristen Distributing Co., MS & W Distributors, Inc., Point Pleasant Distributors, Inc., Ritchie & Page Distributing Co., Inc., South Jersey Distributors Corp., Trip Distributors, Inc., and Warren Distributing Co., Defendants.

Civ. A. No. 83-0513.

United States District Court, D. New Jersey.

October 19, 1987.

COPYRIGHT MATERIAL OMITTED

Hellring, Lindeman, Goldstein, Siegal & Stern by Jonathan L. Goldstein, Charles A. Oransky, Irwin P. Burzynski, Bruce S. Etterman, Newark, N.J., for plaintiffs.

Howrey & Simon by Peter E. Moll, Terrence C. Sheehy, Edwin H. Wheeler, Carmine R. Zarlenga, Washington, D.C. and Connell, Foley & Geiser by Richard D. Catenacci, Roseland, N.J., for Anheuser-Busch, Inc.

Robinson, Wayne, Levin, Riccio & La Sala by Thomas D. Ruane, Joseph F. Lagrotteria, Paul J. Linker, Newark, N.J., for Crown Beer Distributors, Inc.

Mattson, Madden & Polito by Andrew S. Polito, Newark, N.J., for Harrison Beverage Co.

Soriano & Gross by Daniel C. Soriano, Jr., Somerville, N.J., for High Grade Beverage.

Clapp & Eisenberg by William J. O'Shaughnessy, Frederick S. Kessler, Kathy

M. Hooke, Newark, N.J., for Konrad Beer Distributor, Inc.

Cummins, Dunn & Pashman by Robert E. Rochford, Hackensack, N.J., for Ritchie & Page Distributing Co., Inc.

Ellenport, Holsinger & Lehn, P.A. by John R. Holsinger, Roseland, N.J., for Hub Beer Distributors, Inc. and Hub City Distributors, Inc.

Paul Van Embden, Vineland, N.J., for Garden State Beverage Co.

Mackenzie, Welt, Duane & Maher by John D. North, Felice Londa, Woodbridge, N.J., for The Kristen Distributing Co.

Mc Glynn, Reed, Hense & Pecora by William E. McGlynn, Point Pleasant, N.J., for Point Pleasant Distributors.

Perskie, Nehmad & Grossman by John L. Grossman, Atlantic City, N.J., for South Jersey Distributors Corp.

Jeffer, Hartman, Hopkinson, Vogel, Coomber & Pfeiffer by Jerome A. Vogel, Richard J. Allen, Jr., Hawthorne, N.J., for Trip Distributors, Inc.

Flynn & Goracy by Edward R. Goracy, Westfield, N.J., for Warren Distributing Co.

OPINION

DEBEVOISE, District Judge.

I. INTRODUCTION

The second amended complaint in this action, brought under Section 1 of the Sherman Act, 15 U.S.C. § 1, et seq., and the New Jersey Antitrust Act, N.J.S.A. 56:9-1, et seq., alleges a horizontal conspiracy to allocate exclusive distributor territories among the wholesalers of Anheuser-Busch ("A-B") and Miller Brewing Company ("Miller") malt beverage products in the State of New Jersey. Plaintiffs represent a certified class of New Jersey beer retailers. Defendants are distributors engaged in the business of selling A-B or Miller beer at wholesale to the plaintiff class of New Jersey retailers. The defendants which sold A-B beer are A-B/Newark; Crown Beer Distributors, Inc. ("Crown Beer"); Harrison Beverage Co. ("Harrison"); High Grade Beverage ("High Grade"); Konrad Beer Distributor, Inc. ("Konrad"); and Ritchie & Page Distributing Co., Inc. ("Ritchie & Page") (collectively referred to as "the A-B defendants"). Other than A-B/Newark, which is part of and operated by the Wholesale Operations Division of Anheuser-Busch, Inc., a Missouri corporation ("A-B/St. Louis"), the A-B defendants are all incorporated in New Jersey. The defendants which sold Miller beer are Garden State Beverage Co. ("Garden State"); Hub Beer Distributors, Inc. ("Hub Beer"); Hub City Distributors, Inc. ("Hub City"); The Kristen Distributing Co. ("Kristen"); MS & W Distributors, Inc. ("MS & W"); Point Pleasant Distributors, Inc. ("Point Pleasant"); South Jersey Distributors Corp. ("South Jersey"); Trip Distributors, Inc. ("Trip"); and Warren Distributing Co. ("Warren") (collectively referred to as "the Miller defendants").

The A-B defendants and the Miller defendants each jointly move for summary judgment.

II. PROCEDURAL BACKGROUND

Plaintiffs commenced this action in February 1983 by verified complaint against 70 malt beverage brewers and wholesale distributors alleging three separate categories of conspiracies to allocate territories and customers for the sale of beer at wholesale in New Jersey: 1) a horizontal conspiracy among the brewers; 2) a horizontal conspiracy among the distributors; and 3) vertical conspiracies among the brewers and their respective distributors.

After extensive class action discovery plaintiffs amended their complaint, dismissing more than half of the original defendants (26 distributors and 13 brewers) and adding A-B/Newark as a distributor defendant. On September 25, 1984, I denied plaintiffs' motion for class certification, concluding that the necessity for individualized rule-of-reason analyses as to the vertical territorial restraints and the lack of common proof of antitrust impact precluded class treatment. Plaintiffs subsequently filed a second motion for certification of the same retailer class on purely horizontal claims against only the A-B and Miller distributors. On March 12, 1985, I granted plaintiffs' second motion for class certification and dismissed all brewer defendants and the remaining distributor defendants which did not sell A-B or Miller beer.

On March 25, 1985, plaintiffs filed their Second Amended Verified Class Action Complaint and Demand for Jury Trial, in which plaintiffs allege:

The defendants have combined, conspired and agreed among themselves to allocate territories for the distribution of beer in the relevant geographic market, i.e., the State of New Jersey. Defendants' conduct is manifested in a system of "areas of responsibility" or "exclusive territories" by which defendants allocate the distribution of beer in New Jersey. The purpose and effect of said system is that no distributor sells beer outside of that distributor's exclusive territory; no member of the plaintiff class can buy any brand of beer from a distributor other than the exclusive distributor for that brand of beer in the area in which the class member is located.

Plaintiffs' theory encompasses three distinct alleged horizontal conspiracies: 1) a conspiracy among the A-B distributor defendants to allocate territories for the sale of A-B beer; 2) a conspiracy among the Miller distributor defendants to allocate territories for the sale of Miller beer; and 3) a joint conspiracy between the A-B and Miller defendants to allocate A-B and Miller territories.

The complaint alleges that the defendants' conspiracies had the purpose and effect of eliminating intrabrand and interbrand competition among the defendant distributors in the State of New Jersey. The complaint further asserts that defendants' conduct was intended to and has indeed directly and proximately caused the wholesale prices of beer in New Jersey to rise to artificially high levels, and, as a result, members of the plaintiff retailer class have been required to pay higher prices for the beer they have purchased and continue to purchase from the defendant distributors. Plaintiffs seek judgment for, inter alia: 1) treble damages, interest, costs of suit and attorneys' fees, and 2) a permanent injunction ordering the termination of any and all geographic market allocation and exclusive territory agreements among the defendants.

III. LEGAL AND FACTUAL FRAMEWORK

For at least 20 years prior to 1967 A-B/St. Louis assigned specified territories within which each of its New Jersey distributors were authorized to sell A-B malt beverage products. However, in 1967 the Supreme Court held that the vertical imposition of exclusive territories was per se illegal. United States v. Arnold, Schwinn & Co., 388 U.S. 365, 87 S.Ct. 1856, 18 L.Ed.2d 1249 (1967). Under cases interpreting the scope of the per se rule enunciated in Schwinn, producers could not insist upon observance of territorial or customer restrictions on resale, but could assign territories within which distributors or retailers were expected to concentrate their primary marketing efforts. See, Janel Sales Corp. v. Lanvin Parfums, Inc., 396 F.2d 398, 406 (2d Cir.), cert. denied, 393 U.S. 938, 89 S.Ct. 303, 21 L.Ed.2d 275 (1968); Colorado Pump & Supply Co. v. Febco, Inc., 472 F.2d 637, 639-40 (10th Cir.), cert. denied, 411 U.S. 987, 93 S.Ct. 2274, 36 L.Ed.2d 965 (1973); but cf. Hobart Brothers Co. v. Malcolm T. Gilliland, Inc., 471 F.2d 894 (5th Cir.1973).

In 1974, A-B/St. Louis and each of the A-B defendants (and all 950 A-B distributors nationwide) entered into Anheuser-Busch Wholesaler Equity Agreements ("the 1974 A-B Equity Agreements"). The 1974 A-B Equity Agreements assigned each distributor a primary marketing area in which it was responsible for sales, service and merchandizing of A-B products. The first paragraph of the agreements provided:

AREA OF PRIMARY RESPONSIBILITY:

Wholesaler agrees to exercise its best efforts to promote, sell and service Anheuser-Busch's Products in the geographic area designated on Exhibit 1 as Wholesaler's primary market area. Wholesaler shall be primarily responsible for servicing retail accounts in its primary market area with Anheuser-Busch Products and will be expected to concentrate its efforts in that area. It is understood, however, that, unless required by state law, Anheuser-Busch does not assign exclusive areas and does not grant exclusivity to Wholesaler in its primary market area.

The agreements specified that each wholesaler was to direct its efforts "to achieve maximum market representation of Anheuser-Busch products in Wholesaler's primary market area." The agreements also required distributors to satisfy certain sales and merchandizing standards. Failure to satisfy these standards...