Untitled

• Decision Date: 29 October 1975
• Docket Number: Civ. A. No. 73-1804.
• Citation: 403 F. Supp. 643
• Parties: V. & L. CICIONE, INC., et al. v. C. SCHMIDT & SONS, INC. and Wm. H. Pflaumer & Sons, Inc.
• Court: U.S. District Court — Eastern District of Pennsylvania

403 F. Supp. 643

V. & L. CICIONE, INC., et al. v. C. SCHMIDT & SONS, INC. and Wm. H. Pflaumer & Sons, Inc.

Civ. A. No. 73-1804.

United States District Court, E. D. Pennsylvania.

October 29, 1975.

COPYRIGHT MATERIAL OMITTED

John T. Clary, Philadelphia, Pa., for plaintiffs.

Charles I. Thompson, Jr., Ballard, Spahr, Andrews & Ingersoll, Philadelphia, Pa., for defendants.

MEMORANDUM AND ORDER

BRODERICK, District Judge.

This is an antitrust action alleging violations of the Sherman Act brought by the plaintiff, a beer distributor, whose dealership was terminated by the defendant brewery. It comes before the Court on the motion of defendant C. Schmidt & Sons, Inc. for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure. This motion for summary judgment is submitted upon the pleadings, depositions, affidavits, exhibits and answers to interrogatories. For the reasons expressed hereinafter, this Court has concluded that even when all the issues of fact are resolved in favor of plaintiff Cicione, defendant Schmidt is entitled to judgment; accordingly, its motion for summary judgment is granted.

The following facts have been stipulated by the parties.¹ Plaintiff V. & L. Cicione, Inc. ("Cicione"), defendant C. Schmidt & Sons, Inc. ("Schmidt") and Wm. H. Pflaumer & Sons, Inc. ("Pflaumer)² are all Pennsylvania corporations with their principal places of business in Philadelphia, Pennsylvania. During the period in question in this case, both Cicione and Plfaumer were distributors of beer for Schmidt, a regional brewer.

The sale of beer in Pennsylvania is extensively regulated by law. All those who participate, whether as brewers, distributors, or retailers, must be licensed by the State. There are two classes of licensed distributors: "D" and "ID" distributors. Both classes of distributors can resell to taverns and the public. However, under the law a "D" distributor cannot resell to another distributor, whereas an "ID" distributor can do so. Consequently, if a brewer wishes to have a distributor who can "wholesale" to other distributors, he must appoint an "ID" distributor. For this reason, "ID" distributors are usually larger distributors who resell to other distributors, taverns and the public, while "D" distributors are usually smaller and resell only to taverns and the public.

Under the Pennsylvania Liquor Code, when a brewer designates a distributor as a "primary or original supplier" of the brewer's beer (as Schmidt did with its distributors in 1969), the brewer is required by law to also designate a territory within which the distributor can resell the beer; the distributor is prohibited by law from reselling outside that territory. In 1969, and until 1971, Schmidt's distributors operated under "territorial letters" giving them the right to resell throughout the entire City of Philadelphia. Beginning in 1971, the distributors operated under limited "territorial letters" which gave each distributor a specific limited territory within the City. Since 1971, Cicione's area, in general, has been South Philadelphia and Pflaumer's, Northeast Philadelphia. However, In August, 1973, Cicione's franchise was terminated³ by Schmidt.

There appear to be several genuine issues of material fact which must be decided if this case goes to trial. In its pre-trial order, Cicione has set out the contested facts that it intends to prove at trial with some specificity. It is Schmidt's position as to its motion that even if Cicione were able to prove all of the contested facts, Schmidt would nevertheless be entitled to summary judgment. For the purpose of this discussion, we shall proceed on the assumption that Cicione will be able to produce evidence supporting all of its allegations. Therefore, in the recitation of facts as hereinafter set forth, whenever the parties are in disagreement the facts have been resolved and all inferences drawn in Cicione's favor. It is on this basis that we summarize the facts in this case as follows:

During the period of time in which Cicione was a Schmidt "ID" distributor, 1959-1973, Cicione alleges that Schmidt continually made certain demands upon Cicione. They included demands that Cicione increase inventory, hire additional personnel, make substantial investments in plant and equipment, and take on bookkeeping systems which were not suited to Cicione's business. In addition to these requirements, Schmidt allegedly fixed both the price that it charged Cicione, as well as the resale price at which Cicione could sell to distributor and tavern accounts. Schmidt constantly threatened to terminate Cicione if its dictates were not followed. In March of 1971 Schmidt allocated territories among the Philadelphia distributors and in July of 1972 cut 15% of Cicione's territory for its alleged failure to comply with Schmidt's dictates.

Pflaumer, who was also a Schmidt "ID" distributor, made several attempts to purchase Cicione's business and the businesses of other "ID" distributors in Philadelphia. Cicione avers that Schmidt fostered Pflaumer's acquisitions and aided and abetted its growth in order to implement Schmidt's marketing plan of establishing and maintaining Pflaumer as its largest distributor. Even though Cicione's sales performance allegedly was as good as, if not better than, other "ID" distributors, as evidenced by an award that it received from Schmidt for good performance, Schmidt terminated Cicione's franchise in 1973. Contemporaneously with the termination, Schmidt arranged for Pflaumer to purchase Cicione's business allegedly as part of Schmidt's overall plan to make Pflaumer its sole distributor in Philadelphia. Cicione claims that Schmidt intended to eliminate not only the "ID" distributors but also the smaller "Mom and Pop" type of distributors; and planned to charge Pflaumer a higher price than it had been charging other distributors, while keeping distribution costs to a minimum. Cicione alleges that this was possible because Pflaumer was able to operate on a small margin of profit.

Schmidt never treated Cicione as an independent business, avers Cicione. Cicione claims it was an economic captive of Schmidt's scheme to establish and maintain prices, and to monopolize distribution of Schmidt's beer in the City of Philadelphia in one distributor. Subsequent to its termination, Cicione instituted this suit in August, 1973. The first amended complaint⁴ alleges the following violations in two counts:⁵

(a) Count I alleges violations of Section I of the Sherman Act, charging that, with respect to Cicione, Schmidt illegally dictated business practices, maintained territorial restrictions and imposed resale prices;

(b) Count III charges violations of Sections I and II of the Sherman Act, alleging that Schmidt's termination of Cicione's dealership constituted a concerted refusal to deal with plaintiff; that Schmidt and Pflaumer conspired to force Cicione to surrender his distributorship; and that their conduct was an unlawful attempt to monopolize, or a conspiracy to monopolize, the distribution of Schmidt's beer and the distribution of all beer in Philadelphia.

In response to Schmidt's motion for summary judgment, Cicione argues that even though pre-trial discovery has been substantially completed, material issues of fact remain. In a motion for summary judgment, all doubt as to the existence of a genuine issue of material fact must be resolved against the moving party. First Pa. B. & T. Co. v. United States Life Ins. Co., 421 F.2d 959, 962 (3d Cir. 1969), reh. denied December 10, 1969. As stated in Moore's Federal Practice, ¶ 56.153 at 2335-36:

The courts are in entire agreement that the moving party for summary judgment has the burden of showing the absence of any genuine issue as to all the material facts, which, under applicable principles of substantive law, entitle him to judgment as a matter of law.

The courts hold the movant to a strict standard. To satisfy his burden the movant must make a showing that is quite clear what the truth is, and that excludes any real doubt as to the existence of any genuine issue of material fact. (Footnotes omitted).

Although a summary judgment procedure should be used sparingly in complex antitrust cases where motive and intent play leading roles, Poller v. Columbia Broadcasting System, Inc., 368 U.S. 464, 82 S.Ct. 486, 7 L.Ed.2d 458 (1962), under Rule 56, once a properly supported summary judgment motion is made, an adverse party may not rest upon the mere allegations of his pleading. His response, by affidavits or otherwise, must set forth specific facts showing that there is a genuine issue for trial. If he does not so respond, summary judgment, if otherwise appropriate, shall be entered against him. First National Bank of Arizona v. Cities Service Co., 391 U.S. 253, 288-290, 88 S.Ct. 1575, 20 L.Ed.2d 569 (1966); Chapman v. Rudd Paint & Varnish Company, 409 F.2d 635, 643-4 (9th Cir. 1969). It is not necessary, however, for the Court to consider whether genuine issues of fact exist for trial because, as we have heretofore pointed out, the Court has accepted Cicione's version of all the factual issues for the purpose of this summary judgment motion.

I. TERMINATION OF DISTRIBUTORSHIP.

A. The Section I Claim — Restraint of Trade.

In its complaint, Cicione makes sweeping allegations which boil down to the contention that the termination of its distributorship violates both Section I and Section II of the Sherman Act. Cicione appears to predicate its Section I claim on the theory enunciated by the Supreme Court in United States v. Parke, Davis & Co., 362 U.S. 29, 80 S.Ct. 503, 4 L.Ed.2d 505 (1960), that under certain circumstances, refusal of a manufacturer to deal with a distributor can constitute a "combination" in restraint of trade within the purview of the Sherman Act,⁶,⁷ see also, United States v. Bausch & Lomb Optical Co., 321 U.S. 707, 722, 64 S.Ct. 805, 88 L.Ed. 1024 (1944); Federal Trade Commission v....