Coca-Cola Bottling Co. of Elizabethtown, Inc. v. Coca-Cola Co.

95 F.R.D. 168, 1982 U.S. Dist. LEXIS 14196
CourtDistrict Court, D. Delaware
DecidedAugust 17, 1982
DocketCiv. A. No. 81-48
StatusPublished
Cited by34 cases

This text of 95 F.R.D. 168 (Coca-Cola Bottling Co. of Elizabethtown, Inc. v. Coca-Cola Co.) is published on Counsel Stack Legal Research, covering District Court, D. Delaware primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Coca-Cola Bottling Co. of Elizabethtown, Inc. v. Coca-Cola Co., 95 F.R.D. 168, 1982 U.S. Dist. LEXIS 14196 (D. Del. 1982).

Opinion

OPINION

MURRAY M. SCHWARTZ, District Judge.

This is an action for declaratory, injunctive, and monetary relief brought by Coca-Cola Bottling Co. of Elizabethtown (“Elizabethtown”) against the Coca-Cola Company (“Coca-Cola” or “Company”). Plaintiff seeks to resolve several issues involving the composition and pricing of Bottlers’ Coca-Cola Syrup (“Bottlers’ Syrup” or “syrup”) which it purchases from Coca-Cola. Before the court at the present time are Elizabeth-town’s motions for class certification under Rule 23 of the Federal Rules of Civil Procedure and for bifurcation of the trial on the declaratory judgment claims from the trial ón the damage claims. The Court will first address the motion for class certification and then the bifurcation motion.

I. The Motion for Class Certification

Plaintiff seeks to represent a class of so-called “unamended” bottlers — bottlers who have not amended their contracts with Coca-Cola to permit certain modifications in the composition and pricing of syrup. In a motion for class certification, the plaintiff must make a prima facie showing in its pleading that it satisfies Rule 23. The burden of proving that an action is appropriate for class certification is on the party seeking to represent the class. See Davis v. Romney, 490 F.2d 1360, 1366 (3d Cir. 1974). The class representative need not establish its case on the merits. Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 177-78, 94 S.Ct. 2140, 2152-2153, 40 L.Ed.2d 732 (1974). Nevertheless, some preliminary inquiry into the merits may be necessary for an intelligent determination of whether to certify the class. See Shelton v. Pargo, Inc., 582 F.2d 1298, 1312-13 (4th Cir. 1978).

At issue in this lawsuit are questions arising under consent decrees entered as final judgments of this Court in settlement of . Coca-Cola Bottling Co. v. The Coca-Cola Co., 269 F. 796 (D.Del.1920), and contracts between bottlers and the Company which incorporate some of the provisions of those judgments. Plaintiff’s complaint essentially challenges two practices of the Company — the substitution of high fructose corn sugar (HFCS-55) for granulated sugar in Bottlers’ Syrup, and the pricing of the syrup.

Some recital of the facts is necessary to set the controversy in context.1 An Atlanta pharmacist, Dr. J. S. Pemberton, originally developed the formula for Coca-Cola in 1886. In 1888, Asa G. Chandler, a pharma[171]*171cist and owner of a wholesale drug company, acquired an interest in the Coca-Cola trademark and formula. In 1892, he formed The Coca-Cola Company to market Coca-Cola syrup to drugstores as a fountain drink.

The genesis of the Coca-Cola bottling system occurred in 1899. Two Chattanooga lawyers, B. F. Thomas and J. B. Whitehead, obtained the exclusive right to purchase syrup at a fixed price and use Coca-Cola 'trademarks to sell Coca-Cola in “bottles or other receptacles” throughout the United States.2 The Coca-Cola Company reserved only the right to manufacture the syrup and to sell the syrup to Thomas and Whitehead and their assignees and to soda fountains.3 The lawyers established bottling plants in Chattanooga and Atlanta and formed the Coca-Cola Bottling Company as a Tennessee corporation in December, 1899.

In 1900, the Bottling Company divided into two parts, apparently in a business dispute over the nature of the contracts to be granted to the actual bottlers. Whitehead wanted to grant them perpetual contracts, but Thomas sought to grant them only term contracts of two-year duration. Thomas retained ownership of the Coca-Cola Bottling Company, and conveyed to Whitehead and his new business partner, J. T. Lupton, all rights acquired under the 1899 contract except for distribution in fifteen states, the District of Columbia, and small parts of Georgia and Alabama. Whitehead and Lupton ultimately named their company The Coca-Cola Bottling Company. For simplicity’s sake, the two companies will be identified as the Thomas and Whitehead-Lupton Compianies.

These two “parent” bottlers4 did not bottle or sell Coca-Cola themselves. Rather, from 1900 on, they contracted with so-called “actual” or “first-line” bottlers who built, owned, and operated the plants and bottled, promoted, and sold Coca-Cola in the exclusive territories assigned to them. The parent bottlers assigned to the actual bottlers all rights to purchase Coca-Cola syrup and to bottle and sell Coca-Cola in a given territory.

The first agreement at issue in this lawsuit is a 1907 agreement between the parent bottlers and the Company. In 1907, following passage of the Pure Food and Drug Act of 1906, the Company abandoned its practice of using saccharine in its syrup, and began using a standard granulated sugar.5 The reformulation of the syrup increased Coca-Cola’s costs. After negotiations with the Company, the parent bottlers agreed in 1907 to accept a price increase in the syrup from ninety cents to ninety-two cents per gallon because of the additional expense to the Company in using granulated sugar.6 Plaintiff alleges that the formula for Coca-Cola syrup — 5.32 pounds of sugar per gallon — was part of this unwritten agreement.

The precipitating force behind the litigation which led to the consent judgments at issue here was the effect of World War I on the world economy, particularly the sugar market. Even before the United States entered the war, prices had risen, and during the war rigid price controls were maintained and rationing imposed. In April, 1917, the parent bottlers accepted a temporary price increase of five cents per gallon, bringing the total price per gallon to ninety-seven cents. The ending of the war, the [172]*172removal of price controls in September, 1919 and an acute sugar shortage led to a dramatic rise in the price of sugar from nine cents a pound in September 1919 to over twenty-seven cents a pound in June, 1920.

In 1919, the Coca-Cola Company was purchased by a banking syndicate and became a Delaware corporation, assuming the obligations to the parent bottlers. The new corporation entered into an agreement with the principal parent bottlers in December of 1919 to permit the Company to pass on cost increases of sugar in excess of nine cents per pound to the actual bottlers. The Company then sought to enter into new contracts with the parent bottlers which would permit the Company to raise its syrup prices at will. When the parent bottlers strongly rejected this proposal in January 1920, the Coca-Cola Company informed them that their contracts were contracts at will and could be terminated for cause. Efforts to avoid a confrontation proved unsuccessful, and when the parent bottlers threatened to withdraw their consent to temporary price changes unless the Company acknowledged the perpetual nature of their contracts, the Company notified them that their contracts were terminated as of May 1, 1920.

The two principal parent bottlers brought suit in the U. S.

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Bluebook (online)
95 F.R.D. 168, 1982 U.S. Dist. LEXIS 14196, Counsel Stack Legal Research, https://law.counselstack.com/opinion/coca-cola-bottling-co-of-elizabethtown-inc-v-coca-cola-co-ded-1982.