Purity Products, Inc. v. Tropicana Products, Inc.

• Decision Date: 13 December 1988
• Docket Number: Civ. No. H-86-2319.
• Citation: 702 F. Supp. 564
• Parties: PURITY PRODUCTS, INC., Plaintiff, v. TROPICANA PRODUCTS, INC., et al., Defendants.
• Court: U.S. District Court — District of Maryland

702 F. Supp. 564

PURITY PRODUCTS, INC., Plaintiff, v. TROPICANA PRODUCTS, INC., et al., Defendants.

Civ. No. H-86-2319.

United States District Court, D. Maryland.

December 13, 1988.

Lewis A. Noonberg and Eric Miller, Piper & Marbury, and Jeffrey C. Hines, Baltimore, Md., for plaintiff.

David S. Acker and R. Mark McCareins, Winston & Strawn, Chicago, Ill., and Thomas M. Wilson, III and Fred A. Cohen, Tydings & Rosenberg, Baltimore, Md., for defendants.

ALEXANDER HARVEY, II, Chief Judge.

This civil action was instituted when defendants discontinued sales of orange juice products to a distributor located in Baltimore County. Plaintiff, Purity Products, Inc. (hereinafter "Purity"), is here seeking injunctive relief and damages from various defendants for alleged violations of federal and state laws arising out of defendants' refusal to deal with plaintiff as a distributor of Tropicana brand products. Named as defendants in the complaint are Kohlberg, Kravis, Roberts & Co. (hereinafter "KKR"), Beatrice Companies, Inc. (hereinafter "Beatrice"), Tropicana Products, Inc. (hereinafter "Tropicana Products"), and Tropicana Products Sales, Inc. (hereinafter "Tropicana Sales").

The complaint contains eight counts.¹ Plaintiff has asserted claims under §§ 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1 and 2; under § 7 of the Clayton Act, 15 U.S.C. § 18; under state law; and under the Racketeering Influenced and Corrupt Organizations Act (hereinafter "RICO"), 28 U.S.C. § 1961 et seq. In a Memorandum and Order entered on July 28, 1987, this Court granted defendants' motion to dismiss with respect to plaintiff's RICO claim but denied it with respect to all other claims asserted here by plaintiff. Subsequently, by stipulation of the parties, KKR and Beatrice were dismissed as defendants in the case.

The remaining defendants, Tropicana Products and Tropicana Sales, have now moved for summary judgment as to all claims asserted against them. Plaintiff Purity has indicated that it is not opposing defendants' motion as to Count 1 (alleging unlawful monopolization under § 2 of the Sherman Act) and as to Count 7 (alleging breach by defendants of an oral distribution agreement). However, Purity has opposed the granting of summary judgment as to the five remaining counts of the complaint, namely Counts 2, 3, 4, 5 and 8.²

Exhaustive memoranda in support of and in opposition to the pending motion have been filed and reviewed by the Court. Attached to these memoranda are numerous and lengthy exhibits. Oral argument has been heard in open court. For the reasons to be stated herein, defendants' motion for summary judgment will be granted as to all remaining claims asserted against them by plaintiff in this case.

I Facts

Defendant Tropicana Products is a Delaware corporation with its principal place of business in Bradenton, Florida. Defendant Tropicana Sales is a wholly owned subsidiary of Tropicana Products. Tropicana Products is a nationwide seller of numerous citrus and other juice products. These products are sold in different types of containers and in a multitude of sizes. They are sold in a frozen concentrate, refrigerated (or chilled), or shelf-stable form. The latter two groupings are called "ready-to-serve."

Plaintiff Purity is a Maryland corporation with its principal place of business in Baltimore County. It was formed in 1973 by its owner and sole shareholder, Ivan Goldstein. Purity has since its formation been a distributor of various food products in the Baltimore/Washington market, as well as in other East Coast cities. Purity first began doing business with Tropicana Products in 1976 when it purchased orange juice in glass bottles from defendants' local food broker for sales to small grocery stores and restaurants in the Baltimore/Washington area. Purity's purchases of products through RMI Brokerage Co., the Baltimore broker of Tropicana products, in time increased to include ultimately all of defendants' juice and beverage products.

Purity remained an authorized reseller of defendants' products until December of 1985 when it was informed that commencing in 1986 Tropicana Products would no longer sell products directly to it. Plaintiff contends that as a result of defendants' decision to "terminate" it as a distributor,³ plaintiff's business relations with its wholesaler and retailer juice customers were destroyed, that plaintiff has been unable to regularly supply Tropicana products to its wholesale customers at competitive prices, and that plaintiff's route distribution network in the Baltimore/Washington trade area has been severely disrupted.⁴ In this civil action, plaintiff seeks injunctive relief and substantial damages for the wrongs allegedly committed by defendants.

Purity's dispute with defendants primarily challenges the territorial and customer allocation scheme of Tropicana Products in effect in the United States. Typically, Tropicana Sales utilizes a food broker specific to a particular sales territory. That broker assists defendants in the selling and distribution of Tropicana products to authorized independent wholesale distributors. Purity was just such an authorized wholesale distributor before defendants stopped selling to it. These wholesale distributors in turn resell Tropicana products to retailers, other wholesalers and other distributors. Retailers may also purchase products directly from Tropicana Sales.

However, in the New York metropolitan area, Tropicana Sales does not utilize food brokers in connection with sales of its nonfrozen, ready-to-serve juice products.⁵ Instead, Tropicana Sales uses its own direct sales force under its division called "Citrus Bowl." Citrus Bowl sells these products directly to large retailers and to certain authorized wholesale distributors, including dairies and routemen, who service smaller retail establishments. These routemen are independent businessmen who operate routes within the New York metropolitan area, delivering Tropicana products to smaller grocery stores and restaurants.

Tropicana Products has long had a policy of selling only to wholesalers who will agree to restrict their sales to retailers who are located in and who sell products in the same Nielsen territory⁶ as that to which Tropicana Products has shipped the products. Defendants assert that this policy is imperative so that they may maintain quality control of their products. Defendants contend that only by controlling the shipping, handling and storage of their juice products throughout the distribution chain can Tropicana Products ensure the high quality of these extremely perishable items. Additionally, defendants assert that this territorial restriction policy ensures that they will properly be advised of the promotional performance of their resellers required in order for them to receive certain promotional allowances.

Plaintiff asserts that the sole reason for its termination as an authorized distributor was plaintiff's violation of defendants' policy prohibiting extraterritorial sales of Tropicana products to customers in the Citrus Bowl area.⁷ Plaintiff contends that this policy imposes an unlawful restraint on interstate commerce and trade in violation of § 1 of the Sherman Act and of provisions of the Maryland Antitrust Act, Md. Comm.Law Code Ann. § 11-204(a)(1). Plaintiff also asserts that defendants thereby tortiously interfered with plaintiff's business relations, in violation of Maryland common law.

II The Claims

Since the Court previously dismissed plaintiff's RICO claim (Count 6), and since plaintiff has not opposed the entry of summary judgment as to its claim of unlawful monopolization under § 2 of the Sherman Act (Count 1) and also as to its claim of breach of an oral contract (Count 7), there can be no more than five claims remaining in this case. In Count 2, plaintiff seeks a recovery under § 1 of the Sherman Act because of allegedly unlawful territorial restrictions. Count 3 is also brought under § 1 of the Sherman Act and charges that defendants entered into an unlawful agreement, combination and conspiracy in restraint of trade. Count 4 charges a violation of § 7 of the Clayton Act, 15 U.S.C. § 18, and Count 5 seeks a recovery under the Maryland Antitrust Act. Count 8 is brought under Maryland common law and charges defendants with tortious interference with plaintiff's business.

From the record here, it is apparent that there are in fact only three remaining claims. Since defendants KKR and Beatrice have been dismissed, plaintiff cannot in this case assert a claim under § 7 of the Clayton Act for unlawful acquisition to lessen competition or to create a monopoly. Moreover, it is apparent that Counts 2 and 3 overlap. Both of them are brought under § 1 of the Sherman Act, and both seek a recovery pursuant to allegations that defendants engaged in a conspiracy to impose territorial restrictions on plaintiff in unlawful restraint of trade.

III Summary Judgment Principles

In their motion for summary judgment, defendants contend that there is a complete failure of proof as to essential elements of plaintiff's federal antitrust claims and that since these claims form the basis for the claims asserted by plaintiff under Maryland law, summary judgment should be entered in favor of defendants as to all counts of the complaint.

It is well settled that a defendant moving for summary judgment has the burden of showing that no genuine issue of material fact exists and that it is entitled to judgment as a matter of law. Rule 56(c), F.R. Civ.P.; see also Barwick v. Celotex Corp., 736 F.2d 946, 958 (4th Cir.1984). This burden may be met by consideration of affidavits, exhibits, depositions and other discovery materials. Id.

One of the purposes of Rule 56 is to require a plaintiff, in advance of trial and after a motion for summary judgment has been filed and supported, to come forward with some minimal facts to show that a defendant may be liable under the claims...