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

696 F. Supp. 97, 1988 U.S. Dist. LEXIS 10197, 1988 WL 93094
CourtDistrict Court, D. Delaware
DecidedAugust 2, 1988
DocketCiv. A. 83-95 MMS, 83-120 MMS
StatusPublished
Cited by7 cases

This text of 696 F. Supp. 97 (Coca-Cola Bottling Co. of Shreveport, 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 Shreveport, Inc. v. Coca-Cola Co., 696 F. Supp. 97, 1988 U.S. Dist. LEXIS 10197, 1988 WL 93094 (D. Del. 1988).

Opinion

OPINION

MURRAY M. SCHWARTZ, Chief Judge.

There are three related cases now before the Court: Coca-Cola Bottling Company of Elizabethtown, Inc. v. The Coca-Cola *98 Company, No. 81-48 MMS; Coca-Cola Bottling Company of Shreveport, Inc. v. The Coca-Cola Company, No. 83-95 MMS; and Alexandria Coca-Cola Bottling Company, Ltd. v. The Coca-Cola Company, No. 83-120. This opinion disposes of motions filed in the latter two cases (the “diet Coke cases”); an opinion released concurrently with this one (“Coke VI”) addresses motions filed in the first case (the “Coke case,” or “Elizabethtown”). Specifically, this opinion treats the partial summary judgment motions filed by the Coca-Cola Company (the “Company”) and the cross-motions for partial summary judgment filed by the plaintiffs.

The Elizabethtown litigation began in 1981 and stemmed from the Company’s decision to begin substituting high-fructose corn syrup (“HFCS” or “HFCS-55”) for granulated sugar in the syrup for Coca-Cola sold by the Company to the plaintiff bottlers. The Coke case centers primarily around the type of syrup to which the bottlers are entitled (sucrose-sweetened or HFCS-sweetened) and the price of that syrup. In 1983, when the Company introduced its new diet product, diet Coke, many Coca-Cola bottlers believed that the Company was obligated to supply the syrup for the new product under the terms of the existing contracts. The Company disagreed and these suits ensued.

The plaintiffs in 83-95 (the “unamended bottlers”) are bottlers whose contracts derive from agreements entered as consent decrees (the “Consent Decrees”) primarily between the ancestors of the present bottlers (the “parent bottlers”) and the Company in 1921. 1 The plaintiffs in 83-120 (the “amended bottlers”) are bottlers who have amended their contracts with the Company in response to a Company proposal and negotiations begun in 1978 (the “1978 amendment”). The differences in status of the unamended and amended bottlers will be discussed more fully below.

Trial of the three cases is scheduled to begin in late September of this year and continue for five months.

This Court has jurisdiction over the diet Coke cases pursuant to 28 U.S.C. §§ 1332, 1338, 2201 (1982 & Supp. IV 1986); and 15 U.S.C. §§ 15, 26, 1121 (1982).

I. FACTUAL BACKGROUND

Many of those familiar with this litigation know the following litany by heart. 2 *99 For the sake of those less steeped in the history of the parties, the Court will repeat it yet again. 3

A. The Growth of the Bottling System

In an amusing sketch of the history of Coca-Cola, Pat Watters notes that by the late 1970’s, the world’s population consumed approximately 12.5 million gallons of Coca-Cola drinks daily. P. Watters, Coca-Cola: An Illustrated History 3 (1978). There is every reason to believe that this figure is considerably greater today. The nativity of this phenomenally successful soft drink is due to the efforts of an Atlanta pharmacist, John Styth Pem-berton, who developed the original formula for the drink in 1886. Shortly afterward, Asa G. Candler, also an Atlanta pharmacist and owner of a wholesale drug company, purchased the trademark rights and the formula from Pemberton. Candler formed The Coca-Cola Company to market the product as a soda fountain beverage.

In 1899, two Chattanooga lawyers, B.F. Thomas and J.B. Whitehead, purchased the rights to sell Coca-Cola in “bottles or other receptacles.” Docket Item (“Dkt.”) 1, exh. B-l at 39 (83-120). Their agreement with the Company provided that the Company would supply the syrup at a fixed price and that Whitehead and Thomas would in turn produce sufficient quantities of the drink to meet “the demand in all territory embraced in this agreement.” Id. 4

The 1899 contract obligated Whitehead and Thomas to “establish in the city of Atlanta, as soon as the necessary machinery and buildings can be obtained, a bottling plant for the purpose of bottling a mixture of Coca-Cola syrup preparation with carbonic acid and water.” Coke 1920, 269 F. at 800 (quoting 1899 contract). Initially, two plants were built and operated by Whitehead and Thomas. Demand soon outpaced the capacity of the two plants, however, and Whitehead and Thomas determined that new plants were necessary to fulfill their contractual duties. Id. at 801.

At about the same time, there was a falling out between Whitehead and Thomas as to the best method of developing the bottling business. In particular, they disagreed over the length of the contracts to be granted to “first-line,” or “actual” bottlers — local plant owners with whom Whitehead and Thomas would contract in fulfillment of the obligation imposed by the 1899 contract to supply sufficient quantities of the drink to meet demand. Whitehead favored perpetual contracts, whereas Thomas viewed term contracts as wiser. Unable to compromise, the two split the bottling business. The company they initially had formed, Coca-Cola Bottling Company, remained under the control of Thomas (the “Thomas Co.”), who retained bottling rights in approximately fifteen states while conveying rights in the remainder of the states to Whitehead. Whitehead and a new partner, J.T. Lupton, named their bottling company “The Coca-Cola Bottling Company” (the “Whitehead-Lupton Co.”). The Company, Thomas Co., and Whitehead-Lupton Co. joined in amending the 1899 agreement to reflect the division.

With the consent of the Company, the two bottling companies (the “parent bottlers”) 5 proceeded to sub-contract with in *100 dividual first-line bottlers for actual bottling. The first-line bottlers invested in bottling plants and equipment, and bought their syrup from the parent bottler with rights to bottle Coca-Cola in their locality. By 1920, the actual bottlers’ capital investment exceeded that of the Company by a factor of five.

For the first years of the contracts, the Company sold the bottlers the same syrup sold to soda fountains. Because there was some disparity in taste between the bottled and the fountain drink, some saccharin was added to the bottled product. 6 After the passage of the Pure Food and Drug Act in 1906, outlawing the use of saccharin in food, the Company formulated a separate bottle syrup. The new syrup contained more granulated sugar to maintain the sweetness, and accordingly was more expensive. The parent bottlers allowed the Company to increase the syrup price to reflect the higher cost of the sweetener.

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696 F. Supp. 97, 1988 U.S. Dist. LEXIS 10197, 1988 WL 93094, Counsel Stack Legal Research, https://law.counselstack.com/opinion/coca-cola-bottling-co-of-shreveport-inc-v-coca-cola-co-ded-1988.