Pepsi-Cola Bottling Co. of Pittsburg, Inc. v. Pepsico, Inc.

Decision Date20 December 2005
Docket NumberNo. 03-3134.,03-3134.
Citation431 F.3d 1241
PartiesPEPSI-COLA BOTTLING COMPANY OF PITTSBURG, INC., Plaintiff-Appellant, v. PEPSICO, INC.; Bottling Group, LLC, Defendants-Appellees. A.D. Huesing Bottling Works, Inc.; Harco Distributors, Inc.; Interactions, Inc.; Lakeside Bottling Co.; Lime Rock Springs Co.; M.B.C. Inc.; Newberry Bottling Company, Inc.; North Star Beverage Company, Inc.; Northern Bottling Co., Inc.; Pepsi-Cola Bottling Co. of Alliance, Inc.; Pepsi-Cola Bottling Company of N.E. Wisconsin, Inc.; Pepsi-Cola Bottling Company Of New Haven, Missouri, Inc.; Pepsi-Cola Bottling Company of Brookfield, Inc.; Pepsi-Cola Bottling Company of Marysville, Inc.; Pepsi-Cola Memphis Bottling Co., Inc.; Pepsi-Cola of the Hudson Valley; Refreshment Services, Inc.; Southeastern Bottling Company of Arizona; Stueber's Beverages, Inc.; The Gillette Group, Inc.; Central Investment Corporation; Pepsi-Cola Bottling Company of Ft. Lauderdale-Palm Beach, Inc., Amici Curiae.
CourtU.S. Court of Appeals — Tenth Circuit

David W. Hauber, Baty, Holm & Numrich, P.C., Kansas City, MO, (Todd M. Johnson, Baty, Holm & Numrich, P.C., Kansas City, MO; and William L. Kallal, William L. Kallal, P.C., Cheyenne, WY, with him on the briefs) for the plaintiff-appellant.

Matthew J. Verschelden (David E. Everson, Jr., W. Dennis Cross, and Ann M. Scarlett, with him on the brief), Stinson, Morrison, Hecker LLP, Kansas City, MO, for the defendant-appellee PepsiCo, Inc.

Andrew H. Schapiro (Richard M. Steuer and Matthew D. Ingber with him on the brief), Mayer, Brown, Rowe & Maw LLP, New York, NY, for the defendant-appellee Bottling Group, LLC.

Scott M. Mendel (John W. Rotunno, Erik F. Dyhrkopp, and Kara A. Elgersma, with him on the brief), Bell, Boyd & Lloyd LLC, Chicago, IL, for amici curiae A.D. Huesing Bottling Works, Inc.; Harco Distributors, Inc.; Interactions, Inc.; Lakeside Bottling Co.; Lime Rock Springs Co.; M.B.C. Inc.; Newberry Bottling Company, Inc.; North Star Beverage Company, Inc.; Northern Bottling Co., Inc.; Pepsi-Cola Bottling Co. of Alliance, Inc.; Pepsi-Cola Bottling Company of N.E. Wisconsin, Inc.; Pepsi-Cola Bottling Company of New Haven, Missouri, Inc.; Pepsi-Cola Bottling Company of Brookfield, Inc.; Pepsi-Cola Bottling Company of Marysville, Inc.; Pepsi-Cola Memphis Bottling Co., Inc.; Pepsi-Cola of the Hudson Valley; Refreshment Services, Inc.; Southeastern Bottling Company of Arizona; Stueber's Beverages, Inc.; the Gillette Group, Inc.

G. Jack Donson, Jr., Marcia V. Andrew, Jeanne M. Bruns, Taft, Stettinius & Hollister LLP, Cincinnati, OH; James B. Helmer, Jr., Frederick M. Morgan, Julie W. Popham, Helmer, Martins & Morgan Co., L.P.A., Cincinnati, OH, on the brief for amici curiae Central Investment Corporation and Pepsi-Cola Bottling Company of Ft. Lauderdale-Palm Beach, Inc.

Before HENRY, BRISCOE, and HARTZ, Circuit Judges.

BRISCOE, Circuit Judge.

Plaintiff Pepsi-Cola Bottling Company of Pittsburg, Kansas (Pittsburg Pepsi) appeals the district court's order granting summary judgment in favor of defendants PepsiCo, Inc. (PepsiCo) and its wholly owned subsidiary, Bottling Group, LLC (Bottling Group). While Pittsburg Pepsi asserts claims sounding both in tort and in contract, its overriding contention is that defendants have interfered with its contractual right to sell a full line of Pepsi products in its exclusive territory. We affirm in part, reverse in part, and remand.

I.

As this is a summary judgment case, we review the evidence in the light most favorable to the non-moving party, which in this case is Pittsburg Pepsi. PepsiCo is a leading seller of soft drink concentrate and it controls the trademarks associated with its products. Under an Exclusive Bottling Appointment (EBA), PepsiCo enters into an individual agreement with a bottler for the bottling and distribution of its soft drink products within a designated geographic territory. Under a syrup appointment, PepsiCo enters into an individual agreement with a bottler to manufacture, sell, and distribute fountain syrup within designated geographic territories.

Pittsburg Pepsi is an independent bottler of PepsiCo products.1 In addition to PepsiCo products, Pittsburg Pepsi distributes products manufactured by other concentrate companies that do not compete with its PepsiCo products. Pittsburg Pepsi sells, on average, 500,000 cases of beverage products each year. PepsiCo issued an EBA to Pittsburg Pepsi on September 28, 1959, for Pepsi-Cola for the designated territory encompassing the Kansas counties of Bourbon, Crawford, Cherokee, and part of Labette, and part of the Missouri counties of Jasper and Barton. The EBA provided in relevant part:

Pepsi-Cola Company ..., herein called the Company, hereby appoints:

Name Pepsi-Cola Bottling Company of Pittsburg, Inc.

Address Pittsburg, Kansas herein called Bottler, as its exclusive bottler, to bottle and distribute the carbonated beverage known as "Pepsi-Cola" in the following described territory ... and nowhere else....

....

2. That the Bottler will not bottle, distribute or sell, directly or indirectly, any other cola beverage or any other beverage with the name Cola and/or any beverage which could be confused with Pepsi-Cola.

....

4. That the Company will sell to the Bottler, and the Bottler will purchase, at the Company's then price or prices ... at the time of each sale, the Bottler's requirements of Pepsi-Cola concentrate or syrup for the bottling of Pepsi-Cola hereunder, payment for same to be made by the Bottler in advance of shipment; and all Pepsi-Cola concentrate or syrup so purchased will be used by the Bottler for the bottling of Pepsi-Cola in the Territory and for no other purpose.

....

7. That the Bottler will sell the bottled Pepsi-Cola in the Territory at the Bottler's price per case plus the deposit charge for bottles and case. The Company may from time to time suggest to the Bottler the price per case to be charged by him and the deposit charge.

8. That the Bottler will push vigorously the sale of bottled Pepsi-Cola throughout the entire territory in the 12-oz. size bottle and in any other size bottle prescribed by the Company for the Territory. Without in any way limiting the Bottler's obligation under this Paragraph 8, the Bottler must fully meet and increase the demand for Pepsi-Cola throughout the Territory and secure full distribution up to the maximum sales potential therein through all distribution channels or outlets available to soft drinks, using any and all equipment reasonably necessary to secure such distribution; must service all accounts with frequency adequate to keep them at all times fully supplied with Pepsi-Cola must use his own salesmen and trucks ... in quantity adequate for all seasons; and must fully cooperate in and vigorously push the Company's cooperative advertising and sales promotion programs and campaigns for the Territory. In addition the Bottler will actively advertise, in all reasonable media including adequate point-of-purchase advertising, and vigorously engage in sales promotion of, bottled Pepsi-Cola throughout the Territory at his own cost and expense....

....

19. That this Appointment expresses fully the understanding, and that all prior understandings are hereby cancelled, and no future changes in the terms of this Appointment shall be valid, except when and if reduced to writing and signed by both the Bottler and the Company, by legally authorized officials.

20. The failure by the Company to enforce at any time or for any period of time any one or more of the terms or conditions of this Appointment, shall not be a waiver of such terms or conditions or of the Company's right thereafter to enforce each and every term and condition of this Appointment.

21. That this Appointment and all its terms and conditions shall be governed by and interpreted under the laws of the State of New York.

App. II at 586-89. After issuing Pittsburg Pepsi the Pepsi-Cola EBA, PepsiCo offered and Pittsburg Pepsi accepted EBAs for the following products: Teem (1960); Diet Pepsi/Diet Pepsi-Cola (1964); Mountain Dew (1965); Sugar Free Teem (1965); Pepsi Light.Pepsi-Cola Light (1976); Diet Pepsi Free/Diet Pepsi-Cola Free (1982); Slice and Diet Slice (1985); Mug/Mug Old Fashioned Root Beer and Diet Mug/Diet Mug Old Fashioned Root Beer (1998); and Pepsi One (1998).2 In each successive EBA, Pittsburg Pepsi agreed not to sell another beverage in the same flavor category as the beverage specified in the EBA. In most instances, Pittsburg Pepsi has also received a syrup appointment for the same product.

PepsiCo's move toward alignment

PepsiCo has historically viewed the EBA, and specifically its grants of exclusive territories to its independent bottlers, as the core of its overall business structure. In his August 14, 1975, testimony before the Federal Trade Commission, then-PepsiCo President Walter S. Mack discussed how PepsiCo used the promise of exclusivity to persuade independent businessmen to become PepsiCo bottlers:

[W]e had to give them confidence in the early days that we were going to win our trademark suits and that they were taking on a beverage which they would have the exclusive right to from then on for the rest of their lives.... [We told the bottlers] that the parent company would protect their franchise, the terms and conditions of the franchise, and do everything we could to protect both the trademark and the name and their territory for them on an exclusive basis.

App. III at 1019-21. Mack testified that PepsiCo told the bottlers they would have an exclusive franchise for the rest of their lives or in perpetuity. On March 19, 1980, PepsiCo's then vice president for corporate affairs, Cartha D. Deloach, testified before the House Subcommittee on Monopolies and Commercial Law on the Soft Drink Interbrand...

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