Royal Crown Bottling Co. v. Royal Crown Cola Co., Civ. A. No. C-4288.
| Decision Date | 22 September 1972 |
| Docket Number | Civ. A. No. C-4288. |
| Citation | 358 F. Supp. 290 |
| Parties | ROYAL CROWN BOTTLING CO., a Colorado corporation, Plaintiff, v. ROYAL CROWN COLA CO., a corporation, Defendant. |
| Court | U.S. District Court — District of Colorado |
Charles F. Brega, Hindry & Meyer, Denver, Colo., for plaintiff.
Donald C. McKinlay, Holme Roberts & Owen, Denver, Colo., James H. Wallace, Jr., Thomas B. Carr, Kirkland, Ellis & Rowe, Washington, D. C., for defendant; Nolan Murrah, Jr., Columbus, Ga., of counsel.
The Court has considered the pleadings, citations of authorities of counsel, testimony elicited at the hearing held on September 8, 1972 on Plaintiff's Motion for Preliminary Injunction, exhibits, and deposition of Mr. John M. Alden, principal officer of Plaintiff, and the Court has pursued independent legal research.
The Court being advised in the premises finds that the Motion for Preliminary Injunction is not well taken and is DENIED.
On September 1, 1972, Royal Crown Bottling Co. (Plaintiff-Licensee) filed its complaint and motions seeking a Temporary Restraining Order, a Preliminary and Permanent Injunction requiring Royal Crown Cola Co. (Defendant-Licensor) to supply Plaintiff "with all of the filled cans of defendant's brand of soft drinks . . . . the plaintiff requires" and seeking damages "in an amount not to exceed $1,000,000.00 plus interest and attorney's fees."
Plaintiff bases its claims for relief on alleged violations of the anti-trust laws of the United States and on an alleged breach of contract; the action arises under Title 15, U.S.C. secs. 1, 2, 15, 26 and 45; the amount in controversy exceeds the sum of $10,000.00 exclusive of interest and costs and the Court has jurisdiction over the parties and subject matter by virtue of diversity of citizenship between the parties and because the case arises under the statutes of the United States.
Plaintiff, a Colorado corporation since 1968, is in the business of canning, bottling and distributing soft drinks pursuant to franchise agreements with defendant, a Georgia corporation.
The franchise agreements with defendant contained restrictions prohibiting plaintiff from selling soft drinks produced under the agreements outside or "without" the licensed territory (ten Colorado counties, including Denver) and from selling the soft drinks to any person who will sell them outside the described territory.
Defendant is engaged in the business of selling concentrates or syrups for the manufacturing and mixing of bottled and canned soft drinks under one or more of its trademarks, i. e. "Royal Crown", "Diet Rite", "Nehi", and is also in the business of selling such canned soft drinks to distributors or franchisees located throughout the United States. Defendant also is engaged in the business of bottling soft drinks in several company-owned plants located elsewhere in the United States.
Plaintiff contends that in August 1972, defendant, arbitrarily and without prior notice to plaintiff, set quota limits on the number of cans of soft drinks that plaintiff could purchase through the defendant and its agent, Seven-Up Bottling Co.1
The setting of the quota gave rise to this action and claim of plaintiff for immediate relief.
Plaintiff contends that it is suffering immediate and irreparable harm as a result of the acts of the defendant in establishing an arbitrary quota and in enforcing the territorial and customer restrictions in the franchise agreements in that (1) plaintiff is losing sales of the products involved; (2) plaintiff is prevented from filling orders that have been placed with it; (3) plaintiff is prevented from supplying customers with the products involved; (4) plaintiff is losing a competitive advantage in the marketplace; (5) plaintiff is not able to stock shelf space in supermarkets because of a lack of supply of the franchised canned beverages, and it is losing such shelf space in supermarkets; (6) plaintiff had acquired such shelf space at great cost and expense; (7) plaintiff is losing valuable employees with a consequential deterioration of its route sales; (8) plaintiff has been forced to remove vending machines from certain locations because of its inability to keep them filled with franchised beverages; (9) plaintiff has had to keep much of its truck fleet idle; (10) plaintiff is unable to use certain of its office space because of the reduction in its business; (11) plaintiff is in danger of losing a substantial investment in its business.
Plaintiff further contends that unless the defendant and its agents, servants and employees are enjoined from maintaining the arbitrary quotas it has established and from enforcing the territorial and customer restrictions in the franchise agreements, the plaintiff will continue to suffer irreparable and immediate harm and damage; further that plaintiff has no plain, speedy and adequate remedy at law.
Defendant contends that plaintiff is not entitled to the extraordinary relief requested, i. e. preliminary injunction.
1. A major part of the requested soft drink supply will be distributed for sale outside the ten county Colorado restricted area and generally will be used to service California customers of plaintiff.
2. In situations where plaintiff does not sell the product directly outside the ten county area, the product is sold by plaintiff to other local inter-twined companies operated by Mr. John M. Alden, president of plaintiff company, and in turn said companies sell outside the ten county area.
3. Plaintiff's current sales and profits in relation to defendant's products are at levels in excess of prior years.
4. Sales by plaintiff of Royal Crown trademarked products (cans only as distinguished from cases of bottles) reflect that each year defendant supplied plaintiff with a substantial increase of canned beverages over previous years.
1968 - 44,049 cases of cans
1969 - 35,151 cases of cans
1970 - 41,711 cases of cans
1971 - 81,479 cases of cans
1972 - 117,000 (first seven months)
cases of cans
5. Mr. Alden, at his deposition, indicated that plaintiff's projected future needs for canned products is as follows:
Licensee's Estimate of Can Requirements to Supply Exclusive 10 County Licensed Denver Area, "California Customers," and Miscellaneous other Areas.
Sept. 1972 35,000 to 40,000 cases
Oct. 1972 35,000 to 40,000 cases
Nov. 1972 35,000 to 40,000 cases
Dec. 1972 35,000 to 40,000 cases
Licensee's Estimate of Can Requirements to Supply Exclusive 10 County Licensed Denver Area plus Miscellaneous other Areas.
Sept. 1972 8,000 to 10,000 cases
Oct. 1972 8,000 to 10,000 cases
Nov. 1972 8,000 to 10,000 cases
Dec. 1972 8,000 to 10,000 cases
6. Plaintiff has sufficient inventory of defendant's canned beverages and other products to meet its needs, and to fulfill its contract obligations to defendant, within its ten county Denver exclusive license, having received in excess of 6,500 cases of filled cans in August, 1972, and having received 5,700 cases of filled cans during the first weeks of September, 1972, measured against plaintiff's estimate of average monthly sales demand within its area of 6,000 to 8,000 cases.
7. Defendant is agreeable to continue to perform its obligations to supply plaintiff with defendant's product for sale and is agreeable to continue to provide plaintiff with a sufficient supply of its products, canned beverages and others to permit plaintiff to fulfill contracts in the Denver ten county area.
8. Defendant's exclusive license agreement with plaintiff and its policies pursuant thereto are substantially identical with its exclusive licenses and policies with respect to some 300 other licensees of defendant throughout the United States. Plaintiff does not claim discriminatory treatment.
9. Mr. John Norton, a licensee of defendant in the Chico, California area (an exclusive licensee within a restricted California area) testified that Royal Crown canned beverages—not prepared or canned in the Chico, California area —are surfacing in that locality and Chico area distributors are confronted with several sources in which to purchase said product.
10. Mr. Norton testified that he has invested over half a million dollars in acquiring and developing the tradename of defendant in his exclusive licensed area and he would be seriously injured if another licensee or distributor were permitted to ship defendant's trademarked products to Chico, California.
11. Further Mr. Norton testified that if plaintiff were permitted by order of this Court, or otherwise, to ship defendant's trademarked products to Chico, California, plaintiff would unconsciously benefit from Norton's extensive advertising and promotional activities of the Royal Crown tradename in Chico.
12. To grant relief requested by plaintiff, would (a) enable plaintiff to operate in territories properly licensed to other licensees of defendant without restrictions; (b) plaintiff would at this juncture of the case potentially impair the organization of defendant's entire licensing system; (c) the order would potentially cause a ripple effect extending beyond plaintiff's ten county restricted area and beyond Colorado's borders into other areas thus affecting license privileges of other licensees in their contractual relationships with defendant.
13. Defendant is in a stable financial posture to pay any money judgment entered against it.
14. Plaintiff's damages are calculable and plaintiff has an adequate remedy at law.
15. To grant plaintiff's requested relief at this juncture of the case would have the effect of the Court nullifying and altering the plain terms of the licensing agreement between plaintiff and defendant and implementing a new contractual relationship on terms at variance to the parties written contract.
16. While plaintiff has introduced testimony of impairment to...
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