Sun Dun, Inc. of Washington v. Coca-Cola Co., Civ. A. No. S 88-2540.

Citation740 F. Supp. 381
Decision Date25 June 1990
Docket NumberCiv. A. No. S 88-2540.
PartiesSUN DUN, INC. OF WASHINGTON, Plaintiff, v. The COCA-COLA COMPANY, General Cinema Beverages of Washington, D.C., Inc., d/b/a Pepsi-Cola Bottlers of Washington, D.C., Mid-Atlantic Coca-Cola Bottling Company, Inc. and Pepsi-Co, Inc., Defendants.
CourtU.S. District Court — District of Maryland



Wilbur D. Preston, Jr., Fenton L. Martin, Nevett Steele, Jr., and Whiteford, Taylor & Preston, Baltimore, Md., for plaintiff.

Francis B. Burch, Jr. and Jeffrey D. Herschman, Piper & Marbury, Baltimore, Md., and William M. Dreyer, Atlanta, Ga., for defendant Coca-Cola Co.

Thomas M. Wilson, III, Tydings & Rosenberg, Baltimore, Md., and C. Benjamin Crisman, Jr., William J. Guzick, and Henry L. Huser, Skadden, Arps, Slate, Meagher & Flom, Washington, D.C., for defendant General Cinema Beverages.

Gerald A. Connell, Lee H. Simowitz, Peter B. Kenney, Jr., and Jenifer M. Brown, Baker & Hostetler, Washington, D.C., and Lee T. Ellis, Jr., Baker & Hostetler, Beltsville, Md., for defendant Mid-Atlantic Coca-Cola Bottling Co.

Theodore Sherbow and Henry R. Abrams, Weinberg & Green, Baltimore, Md., and Fred A. Freund, Richard M. Steuer, and John K. Crossman, Kaye, Scholer, Fierman, Hays & Handler, New York City, and Gerard W. Casey, Sommers, N.Y., for defendant PepsiCo, Inc.


SMALKIN, District Judge.

This antitrust case is before the Court on motions of all defendants to dismiss the Amended Complaint pursuant to Federal Civil Procedure Rule 12(b)(6). There has been thorough briefing by all parties, and the motion will be decided without oral argument, as permitted by Local Rule 105(6), D.Md.


Plaintiff, Sun Dun, Inc., is in the business of marketing and servicing vending machines as a "full service vendor."1 Defendants Coca-Cola and PepsiCo manufacture trademarked, secret formula soft drink syrup and sell it to licensed, franchised distributors, who in turn mix, package, and distribute the final products. Defendant Mid-Atlantic Coke is a licensed distributor for Coca-Cola in the Washington, D.C. metropolitan area, which includes portions of Maryland and Virginia. Defendant General Cinema, Inc., is a distributor for PepsiCo in the same region. Both General Cinema and Mid-Atlantic are also engaged in the full service vending machine business.

Sun Dun seeks in this action to redress alleged harm arising from its inability to obtain Coca-Cola and Pepsi-Cola products "at competitive prices" in the Washington, D.C. metropolitan area from Mid-Atlantic and General Cinema ("the bottler defendants") or from any other source. Plaintiff claims that the imposition of, and adherence to, territorial and marketing restrictions by various combinations of the defendants have prevented it from competing effectively in the market, by essentially cutting off supply of two of its major product lines. Sun Dun argues that the conduct of the defendants in creating these unfavorable conditions violates Sections 1, 2, and 3 of the Sherman Act, 15 U.S.C. §§ 1-3 (1982), as well as the District of Columbia's antitrust laws, D.C.Code Ann. §§ 28-4502 and -4503 (1981). Plaintiff seeks the monetary and injunctive relief available under Sections 4 and 16 of the Clayton Act, 15 U.S.C. §§ 15, 26 (1982), and D.C.Code Ann. §§ 28-4508, -4509 (1981). Sun Dun has also set forth claims in tort for unfair competition and tortious interference with business relationships.

Standard of Review of Motions to Dismiss

In deciding a motion to dismiss, all inferences must be drawn in favor of the plaintiff, and "the facts must be viewed as the plaintiff most strongly can plead them." Coakley & Williams, Inc. v. Shatterproof Glass Corp., 706 F.2d 456, 457 (4th Cir. 1983), cert. denied, 475 U.S. 1121, 106 S.Ct. 1640, 90 L.Ed.2d 185 (1986). The district court may not, then, grant a motion to dismiss for failure to state a claim "unless it appears beyond doubt that the plaintiff can prove no set of facts which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 102, 2 L.Ed.2d 80 (1957). The Supreme Court has applied this standard rigorously in antitrust cases, holding that in such cases "dismissals prior to giving the plaintiff ample opportunity for discovery should be granted very sparingly." Hospital Building Co. v. Trustees of Rex Hospital, 425 U.S. 738, 746, 96 S.Ct. 1848, 1853, 48 L.Ed.2d 338 (1976).

The Federal Claims

As a threshold issue, defendants challenge Sun Dun's standing to assert Sherman Act claims, arguing that Sun Dun has made only indirect, not direct, purchases from the defendants. Under the holding of Illinois Brick Co. v. Illinois, 431 U.S. 720, 97 S.Ct. 2061, 52 L.Ed.2d 707 (1977), federal antitrust law provides no remedy for treble damages under Section 4 of the Clayton Act, 15 U.S.C. § 15 (1982), for those who have made merely indirect purchases from defendants. The Supreme Court recently reaffirmed this interpretation of Section 4 in Kansas v. Utilicorp United, Inc., ___ U.S. ___, 110 S.Ct. 2807, 111 L.Ed.2d 169 (1990). See also California v. ARC America Corp., 490 U.S. 93, 109 S.Ct. 1661, 104 L.Ed.2d 86 (1989). Sun Dun, however, has asserted that, in addition to its indirect purchases, it made some direct purchases from one or more of the defendants. Amended Complaint, at ¶¶ 22, 24, 31, 55. Although the Amended Complaint provides few details about the direct purchases, the allegations are sufficient to confer standing upon Sun Dun to assert claims for damages arising from those purchases.

Sun Dun also seeks injunctive relief under Section 16 of the Clayton Act, 15 U.S.C. § 26 (1982). Here, Sun Dun's status as an indirect purchaser is not a bar to standing. Following the lead of the Third and Fifth Circuits, other judges of this Court have held that a plaintiff who cannot seek damages for indirect purchases under Section 4 of the Clayton Act may nevertheless seek injunctive relief under Section 16. National Constructors Association v. National Electrical Contractors Association, 498 F.Supp. 510, 524 (D.Md.1980) (Murray, J.), aff'd as modified, 678 F.2d 492 (4th Cir.1982), cert. dismissed, 463 U.S. 1234, 104 S.Ct. 26, 77 L.Ed.2d 1449 (1983); Dart Drug Corp. v. Corning Glass Works, 480 F.Supp. 1091, 1105 (D.Md.1979) (Watkins, J.). See also In re Beef Industry Antitrust Litigation, 600 F.2d 1148, 1167 (5th Cir.1979), cert. denied sub nom. Safeway Stores, Inc. v. Meat Price Investigators Association, 449 U.S. 905, 101 S.Ct. 280, 66 L.Ed.2d 137 (1980); Mid-West Paper Products Co. v. Continental Group, Inc., 596 F.2d 573, 590-94 (3d Cir.1979). Cf. Associated General Contractors, Inc. v. California State Council of Carpenters, 459 U.S. 519, 524 n. 5, 103 S.Ct. 897, 901 n. 5, 74 L.Ed.2d 723 (1983) (declining to address issue of standing under Section 16); Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U.S. 100, 130, 89 S.Ct. 1562, 1580, 23 L.Ed.2d 129 (1969) (determining that equitable relief under Section 16 requires proof of only "a significant threat of injury" from antitrust violations, not an "actual injury"). Of course, "plaintiff here must still establish, as Section 16 requires, that principles of equity entitle it to such injunctive relief." Dart Drug, 480 F.Supp. at 1105. See also National Constructors, 498 F.Supp. at 524. For the purposes of ruling on defendants' motions to dismiss, however, it is not necessary to consider the merits of plaintiff's claims. Dart Drug, 480 F.Supp. at 1105. It is sufficient to note that at this stage of the proceedings, Sun Dun has standing to seek injunctive relief under federal antitrust laws as both a direct and indirect purchaser.

Restraint of Trade

In Counts I, II, and III of its Amended Complaint, Sun Dun alleges unreasonable restraint of trade in violation of Sections 1 and 3 of the Sherman Act. Because the substantive elements of a claim under Section 3 are identical to those under Section 1, see Association for Intercollegiate Athletics for Women v. National Collegiate Athletic Association, 735 F.2d 577, 580 n. 1 (D.C.Cir.1984), the Court will deal with these claims simultaneously.2

To state a claim under Section 1, a plaintiff normally must allege facts supporting (1) an agreement, conspiracy, or combination among the defendants in restraint of trade; (2) injury to the plaintiff's business and property as a direct result; and (3) damages capable of reasonable ascertainment. Wilder Enterprises, Inc. v. Allied Artists Pictures Corp., 632 F.2d 1135, 1139 n. 1 (4th Cir.1980).

Count I is based on an alleged horizontal price-fixing conspiracy between General Cinema and Mid-Atlantic. In support of this Count, plaintiff has alleged facts relating to Sun Dun's own experiences in attempting to buy at competitive prices from General Cinema and Mid-Atlantic which could support an inference that the two were engaged in price-fixing. In addition, the complaint alleges that both bottler defendants pleaded guilty to informations charging price-fixing during the time period at issue in this case. It is well settled that price-fixing constitutes restraint of trade in violation of Section 1. United States v. Socony-Vacuum Oil Co., 310 U.S. 150, 60 S.Ct. 811, 84 L.Ed. 1129 (1940). Sun Dun has also sufficiently alleged a direct injury to its business which, if proved, could support an award of damages. Defendants' motions to dismiss with respect to Count I are therefore denied.

Count II alleges combination and conspiracy among all four defendants3 to prevent "transshipment"4 of Coca-Cola and Pepsi-Cola products in violation of Sections 1 and 3. Count III asserts, on the same underlying facts, that the territorial restraints imposed by the manufacturer defendants and adhered to by the bottler defendants violated Sections 1, 2, and 3. Taking the facts alleged in the complaint as true, the basis for these claims is essentially as follows....

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