Royal Crown Cola Co. v. Coca-Cola Co.

• Decision Date: 13 November 1989
• Docket Number: No. 88-8014,COCA-COLA,88-8014
• Parties: , 1989-2 Trade Cases 68,843 ROYAL CROWN COLA CO., Plaintiff-Appellee, Cross-Appellant, v. TheCOMPANY, PepsiCo, Inc., and Dr. Pepper Co., Defendants-Appellants, Cross-Appellees.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1480

887 F.2d 1480

58 USLW 2317, 1989-2 Trade Cases 68,843

ROYAL CROWN COLA CO., Plaintiff-Appellee, Cross-Appellant, v. The COCA-COLA COMPANY, PepsiCo, Inc., and Dr. Pepper Co. Defendants-Appellants, Cross-Appellees.

No. 88-8014.

United States Court of Appeals Eleventh Circuit.

Nov. 13, 1989.

Richard T. Coleman, Howrey & Simon, Washington, D.C., Jerrold J. Ganzfried, Richard A. Marchetti, Page, Scrantom, Harris & Chapman, Columbus, Ga., for defendants-appellants, cross-appellees.

Trammell E. Vickery, Hansel & Post, Atlanta, Ga., Jonathan Band, Wm. F. Squadron, Washington, D.C., for D. Pepper.

Albert W. Stubbs, Hatcher, Stubbs, land, Hollis & Rothschild, Columbus, Ga., David Lee Foster, Willkie Farr & Gallagher, New York City, James H. Wallace, Jr., Wiley, Rein & Fielding, Washington, D.C., for plaintiff-appellee, cross-appellant.

Gordon B. Spivack, Coudert Brothers, New York City, Frank C. Jones, King & Spalding, Atlanta, Ga., for COCA-COLA CO.

Appeals from the United States District Court for the Middle District of Georgia.

Before JOHNSON and CLARK, Circuit Judges, and ZLOCH ^*, District Judge.

CLARK, Circuit Judge:

In this appeal, the appellants challenge the propriety of an award of almost 1.4 million dollars in attorney's fees in favor of the Royal Crown Company (Royal Crown) for its efforts to prevent PepsiCo Inc. (PepsiCo) and the Coca-Cola Company (Coca-Cola) from acquiring certain carbonated soft drink companies. 678 F.Supp. 875. Because we find that Royal Crown is not a "prevailing party" within the meaning of the Clayton Act, 15 U.S.C. Sec. 26, we reverse.

I. BACKGROUND

In the year 1986, two carbonated soft drink company giants each attempted mergers with other well known carbonated soft drink companies. These mergers were ultimately aborted. Today, we attempt to resolve the remaining repercussions of actions taken during that year.

On January 24, 1986, PepsiCo announced its plans to acquire the Seven-Up Company (Seven-Up) through Seven-Up's parent company, Philip Morris, Inc. Shortly thereafter, Coca-Cola announced on February 25, 1986, that it planned to acquire the Dr. Pepper Company (Dr. Pepper) through Dr. Pepper's sole stockholder, DP Holdings, Inc. The parties to these merger agreements filed their respective notification and report forms with the FTC and with the Department of Justice as required by the Hart-Scott-Rodino Antitrust Improvements Act of 1976, 15 U.S.C. Sec. 18a (Hart-Scott-Rodino Act). At the same time, Royal Crown retained legal counsel in order to mount a challenge to these acquisitions.

The Hart-Scott-Rodino Act establishes a 30-day waiting period following the submission of certain forms during which time any applicable acquisition cannot be consummated. 15 U.S.C. Sec. 18a(b)(1). In the present case, the FTC requested additional information from the parties thereby extending the waiting period for 20 days following the parties' response to the request. 15 U.S.C. Sec. 18a(e)(2). In early June, it was apparent that the FTC's investigation of PepsiCo's acquisition of Seven-Up and Coca-Cola's acquisition of Dr. Pepper was not proceeding at optimal speed. Upon this realization and at the FTC's request, the involved parties agreed not to complete the proposed acquisitions prior to 11:59 p.m. on June 24, 1986. The FTC later scheduled a closed meeting for June 20, 1986 to consider both proposed acquisitions.

On June 19, 1986, Royal Crown filed a complaint together with a motion for a temporary restraining order, (TRO), in the Middle District of Georgia. In its motion for a TRO, Royal Crown asked the district court to enjoin the proposed acquisitions pending a hearing on the merits of Royal Crown's complaint. On June 20, 1986, the same day that the FTC was scheduled to vote on whether to challenge the acquisitions and four days before the extended waiting period was to expire, the district court for the Middle District of Georgia held a hearing on Royal Crown's application for a TRO. Following argument by all of the parties, the district court granted the TRO and, at the request of Seven-Up, the court scheduled a hearing for June 30, 1986 in order to determine whether to issue a preliminary injunction. The district court also ordered expedited discovery. Later that same afternoon, the FTC voted to challenge both the PepsiCo and the Coca-Cola transactions.

On June 23, 1986, the FTC filed a motion in the district court for the District of Columbia to enjoin Coca-Cola from consummating the acquisition of Dr. Pepper. The FTC did not challenge the Seven-Up acquisition because, on that same day, PepsiCo and Philip Morris abandoned their efforts to complete their transaction. On June 24, the FTC and Coca-Cola appeared before the D.C. district court and, rather than present arguments for and against the implementation of a TRO, the parties represented to the court that Coca-Cola would not consummate the acquisition until the D.C. district court ruled on the FTC's application for a preliminary injunction.

The next day, June 25, 1986, the remaining parties to the Georgia litigation, Royal Crown, Coca-Cola and Dr. Pepper, met in the Georgia district court to discuss a problem with the scheduled date of the preliminary injunction hearing to take place in that court on the 30th of June. Coca-Cola and Dr. Pepper requested the district court to postpone the hearing in order to allow the FTC action to proceed to hearing in the District of Columbia in mid-July. Although the Georgia district court vacated the June 30th hearing and stayed discovery until July 28, 1986, it ordered, without a hearing on the merits, that the existing TRO be continued as a preliminary injunction against Coca-Cola and Dr. Pepper and that a trial on the merits be accelerated to August 25, 1986.

On July 16, 1986, the D.C. district court held a hearing on the FTC's application for a preliminary injunction and on July 31, 1986, the injunction was granted until such time as the FTC completed its administrative proceeding with respect to the Dr. Pepper acquisition. Coca-Cola challenged this decision by requesting an expedited appeal which the FTC opposed. The Coca-Cola/Dr. Pepper agreement of February 1986 provided that if, for any reason, the transaction did not close by August 29, 1986, either party could terminate the agreement. On August 5, 1986, five days after the D.C. district court issued a preliminary injunction in favor of the FTC, Coca-Cola and Dr. Pepper announced that they too had abandoned their proposed acquisition.

Royal Crown subsequently filed a motion requesting an award of attorney's fees. At the request of some of the defendants, the district court heard oral argument on Royal Crown's motion, but did not hold an evidentiary hearing. On August 25, 1986, a stipulation and order was entered in the Georgia district court vacating the preliminary injunction and dismissing the complaint but reserving to any party the right to seek attorney's fees.

In a memorandum dated January 16, 1987, the district court found that Royal Crown was entitled to a fee award pursuant to section 16 of the Clayton Act. In determining that Royal Crown's action was a "substantial factor" and a "catalyst" in causing the abandonment of the proposed acquisition, the district court set out the following:

The Court has given consideration to the briefs submitted and oral arguments made by counsel and has concluded that in this case the situation which existed before Royal Crown filed suit, the situation as it now exists, and the intervening course of events clearly show that Royal Crown was both a "substantial factor" and a "catalyst" in motivating the Defendants to terminate their planned acquisitions. Royal Crown filed this action on June 19, 1986. Prior to that time both the Coca-Cola acquisition of Dr. Pepper and the Pepsico acquisition of Seven-Up were to be consummated at the end of the Hart-Scott-Rodino waiting period which is required for all large mergers. In conjunction with its complaint, Royal Crown, at the same time, filed a motion for a temporary restraining order and at that time no action had been taken by any government agency to challenge these transactions, and prospects for any such action were uncertain. The Court conducted a hearing on June 20 and issued the requested temporary restraining order that prevented immediate consummation of the proposed acquisitions after the waiting period, and at the same time, at the request of counsel for Philip Morris and Seven-Up, set a hearing on the application for preliminary injunction to begin just ten days later on June 30. Later the same day (June 20), after this Court had issued the temporary restraining order, the Federal Trade Commission (FTC) decided that it would institute its own proceeding to challenge the acquisitions.

After obtaining the temporary restraining order Royal Crown immediately launched full-scale discovery to prepare for the preliminary injunction hearing, dispatching teams of lawyers to a number of locations to review the Defendants' documents and simultaneously scheduled and commenced depositions of the Defendants' key officials and experts. After some of the depositions had already begun, Philip Morris, Seven-Up, and Pepsico announced on June 23 that their proposed transaction had been cancelled. In light of this development the temporary restraining order which had been entered by this Court on June 20, insofar as it applied to those Defendants, was vacated on June 26 and therefore did not continue in effect as a preliminary injunction against them. After the announcement on June 23 above mentioned the Royal Crown lawyers who had been assigned to review the documents of Pepsico, Philip Morris, and Seven-Up were redeployed to continue Royal Crown's discovery efforts against Coca-Cola and Dr. Pepper.

Because this Court had already issued a temporary restraining order it was not necessary for the FTC to seek immediate...