Smoky Mountains Beverage Co. v. Anheuser-Busch, Inc.

• Decision Date: 29 March 1960
• Docket Number: Civ. A. No. 3861.
• Citation: 182 F. Supp. 326
• Parties: SMOKY MOUNTAINS BEVERAGE COMPANY, Plaintiff, v. ANHEUSER-BUSCH, INCORPORATED, Defendant.
• Court: U.S. District Court — Eastern District of Tennessee

182 F. Supp. 326

SMOKY MOUNTAINS BEVERAGE COMPANY, Plaintiff, v. ANHEUSER-BUSCH, INCORPORATED, Defendant.

Civ. A. No. 3861.

United States District Court E. D. Tennessee, N. D.

March 29, 1960.

J. H. Hodges, Knoxville, Tenn., Williams, Harwell, Howser & Thomas, Nashville, Tenn., James Henry, Tullahoma, Tenn., for plaintiff.

John Hayward, St. Louis, Mo., Frantz, McConnell & Seymour, Knoxville, Tenn., for defendant.

TAYLOR, District Judge.

This is a suit by Smoky Mountains Beverage Company, plaintiff, against Anheuser-Busch, Incorporated, defendant —and for brevity purposes the plaintiff will hereafter at times be referred to as Smoky Mountains and the defendant as Anheuser-Busch, and whenever and wherever Royal Crown Bottling Company is used it will be referred to as Royal Crown—to recover damages for breach of contract relating to a beer distributorship operation in the Knoxville area and for tortious actions of Anheuser-Busch that resulted in injury to Smoky Mountains.

Plaintiff is a corporation organized under the laws of Tennessee with its principal office in Knoxville, and the defendant is a corporation organized under the laws of Missouri with principal offices in St. Louis.

The Court has heard numerous witnesses testify in the case, all of whom appeared in person except Mr. August A. Busch, thus enabling the Court to see and hear at first hand the testimony of these witnesses who disagree in some respects with regard to the course of dealings between Smoky Mountains, represented by Mr. Charles M. Brown, and Anheuser-Busch, represented by Messrs. Wm. Bien, Lou Fogassey, S. I. Lewis, M. L. Belote, Robert H. Beasley, Glenn Niebur, and T. C. Burrows. Some 165 exhibits have been filed in the suit and, as indicated, the trial has lasted seven days.

The complaint consists of four distinct and separate counts. The first count charges an implied contract between the parties which arose in the course of dealings and conduct of the parties over a period of years and which Smoky Mountains asserts was breached.

The second count charges an express contract that was made in November 1957 at which time Anheuser-Busch required Smoky Mountains to undertake the sale and distribution of Budweiser and Michelob draught beers in the Knoxville territory, and expressly agreed that if Smoky Mountains would take on draught beer it would continue as Anheuser-Busch's exclusive agent in the Knoxville territory, and Smoky Mountains in reliance on that express promise expended large sums of money in advertising and promoting the sale of draught beer; that instead of carrying out its promise the defendant abruptly and in bad faith terminated Smoky Mountains' entire distributorship of beer as of November 1, 1958.

The third count charges a conspiracy between the representatives of Anheuser-Busch, particularly Messrs. Beasley, Lewis, Belote, Bien and Burrows and the present distributor of Anheuser-Busch products in the Knoxville territory, who is a Mr. E. L. Tipton and is the chief owner and operator of the Tipton Distributing Company in Knoxville. Smoky Mountains asserts that these conspirators committed overt acts in pursuance of the conspiracy which greatly injured it and ultimately resulted in the loss of its distributorship in Knoxville.

The fourth and last count charges that Anheuser-Busch representatives in the furtherance of Anheuser-Busch's business intentionally and by deceit perpetrated a fraud upon Smoky Mountains by deceiving its president and representative, Mr. Brown, into believing that if Smoky Mountains installed the draught beer in its territory and put on additional trucks and increased its routes and increased its personnel and advertising expenditures, that Smoky Mountains would be continued as Anheuser-Busch's wholesale distributor and representative in Knoxville and the other fourteen adjacent counties for a least one year from the time the misrepresentations were made and an unnamed number of years that were to follow.

Anheuser-Busch denies that it had either an implied or express contract with Smoky Mountains. It says, in substance, that it sold its beer to Smoky Mountains upon an order-to-order basis, and that since it did not have any contract with Smoky Mountains it could not or did not either in law or in fact breach such alleged contract.

Anheuser-Busch denies that its representatives conspired with Tipton or anyone else to commit a legal wrong against Smoky Mountains. In that connection Anheuser-Busch says that its representatives, Mr. Beasley and the other individuals named, acted at all times in good faith and what they conceived to be the best interests of their company in dealing with Smoky Mountains' representative or representatives.

Anheuser-Busch denies that its representative Mr. Fogassey made a misrepresentation of fact to either Mr. Brown or Mr. Richard L. Carson in the November 1957 conference in St. Louis.

Anheuser-Busch denies that Smoky Mountains suffered any damages by reason of any alleged breach of contractual duty owed to Smoky Mountains or by reason of any tortious breach of duty owed to plaintiff.

A pre-trial conference was held in this case in which the attorneys for the respective parties participated, and on February 12, 1960 the pre-trial order was filed in which the issues for the determination of this Court were set forth as follows:

(1) Did a contractual relationship, express or implied, exist between plaintiff and defendant prior to November 1, 1958?

(2) If so, was such contract repudiated and breached by defendant?

(3) If such contract existed and was breached by defendant, was such breach brought about through the mala fides of defendant?

(4) Did the defendant conspire with others to cancel and repudiate its contract with plaintiff for the purpose of transferring plaintiff's wholesale distributorship to one or more of its conspirators with the intent of crippling and destroying plaintiff's said business and eliminating plaintiff as a business competitor?

(5) Did the defendant fraudulently mislead and deceive the plaintiff into making expenditures for the installation of draught beer in its territory, entice it to put on additional trucks and increase its routes, increase its supervisory and office personnel, and increase its advertising and promotional expenditures, and to make other extraordinary expenditures, all in the belief that plaintiff would be continued as defendant's representative, to the injury and damage of the plaintiff, or to the unjust enrichment and benefit of the defendant?

(6) If plaintiff had a contract either express or implied, is it unenforceable by reason of the Tennessee statute of frauds?

(7) If the contract, whether implied or whether express, was breached, what is the amount of damages that resulted to plaintiff as a proximate result of such breach?

(8) If defendant breached a duty owed to the plaintiff and thereby committed a tort against the plaintiff, what is the amount of damage to which plaintiff is entitled under the tort phase of the complaint? (Plaintiff will not be permitted to recover both under the contract and under the tort phase of the litigation but will only be entitled to recover, if at all, under either the contract theory or the tort theory.)

(9) Is the plaintiff entitled to punitive damages, if so, how much?

In order to better understand the issues, a brief recitation of the dealings between the parties to the suit and a short review of some of the pertinent testimony is proper.

At this point the observation should be made that it is difficult to give a brief review of the history of the dealings of the parties and the testimony in the record because, as previously indicated, the testimony is long and the exhibits numerous.

In 1936 Smoky Mountains' predecessor was the distributor for Anheuser-Busch in fifteen East Tennessee counties for the sale at wholesale of Anheuser-Busch's Budweiser beer. In 1938 Smoky Mountains' predecessor, Chero Cola Bottling Company, was organized into a company which has been referred to so many times in this record as Royal Crown Bottling Company and the distributorship of this beer was thereafter continued in the same territory theretofore covered by its predecessor.

In 1939 Royal Crown was handling other beers for other breweries than Anheuser-Busch, and at that time was not only a wholesale distributor for Budweiser beer, a premium beer, but was also wholesaler for another premium beer known as Kruger's Ale. It was also distributor for other brands of beer known as popular priced beers.

In 1939 Anheuser-Busch, through its representative, either demanded or suggested that Smoky Mountains' predecessor give up and discontinue its wholesale distributorship of the premium beer Kruger's Ale, a competitive brand of Anheuser-Busch's premium brand, Budweiser beer.

Mr. Charles M. Brown and his family own 425 shares out of a total of 500 shares of Smoky Mountains stock, and Smoky Mountains and Mr. Brown and his family own 4,500 shares out of a total of 5,000 shares of Royal Crown stock.

Smoky Mountains has sold Budweiser beer exclusively since 1949 and increased its facilities to handle this beer at the termination of World War II. Sales of the beer increased materially in 1948 due to increased facilities, according to Mr. Brown.

1953 was Smoky Mountains' biggest year in sales, which was due to a beer strike in Milwaukee where the beer of Smoky Mountains' chief competitor was made. In the year 1953 Smoky Mountains sold over 500,133 cases of beer. The sales dropped back from the peak sales of 1953 in the years 1954, 1955, 1956, 1957 and 1958, but in July 1958 they began to increase again.

Three thousand square feet of additional warehouse space was added to the facilities of Smoky Mountains in 1953. On January 1, 1954, a five-year lease from Royal Crown to Smoky Mountains for additional space was made.

In 1956 Smoky Mountains sold 27.27 per cent of all beer sold in Smoky...