Fragale & Sons Beverage Co. v. Dill

760 F.2d 469
Court of Appeals for the Third Circuit·Decided April 15, 1985·No. Nos. 84-5615, 84-5616·Published·Cited by 73 cases

Opinion

OPINION OF THE COURT

JAMES HUNTER, III, Circuit Judge:

Plaintiff-appellant Fragale & Sons Beverage Company (“Fragale”) appeals from an order granting summary judgment in favor of defendant-appellees Dills Beverage, Inc. (“Dills”), Bonini Tobacco Co., Inc. (“Bonini”), and Emporium Beverage Co., Inc. (“Emporium”). Fragale filed this consolidated action in the United States District Court for the Middle District of Pennsylvania, alleging in two separate complaints that Dills and Emporium, and Bonini and Emporium, respectively, conspired in violation of section 1 of the Sherman Antitrust Act (“the Sherman Act”), 15 U.S.C. § 1 (1982), to drive Fragale out of the beer retailing business in the Cameron County, Pennsylvania area. Both complaints also alleged that all defendants violated section 2 of the Sherman Act, 15 U.S.C. § 2 (1982), by monopolizing or attempting to monopolize the beer retail business in Cameron County. Because we find that genuine issues of material fact exist as to the allegations under both sections 1 and 2 of the Sherman Act, we reverse and remand for further proceedings on both complaints.

I.

As part of a broad regulatory scheme, the Commonwealth of Pennsylvania licenses all distributors of malt and brewed bev[471] erages. 47 Pa.Cons.Stat.Ann. § 4-431 (Purdon 1969). The holder of what is commonly known as an “ID” license generally buys directly from a beer wholesaler, and may resell to individual purchasers, retail accounts, or other distributors. The holder of what is commonly known as a “D” license, on the other hand, may not buy directly from beer wholesalers or sell to other distributors, but may sell to individual purchasers and retail accounts. Although all defendants in this case hold “ID” licenses, Bonini and Dills sell exclusively to other distributors, while Emporium sells almost exclusively to individual and retail accounts. Fragale, as a “D” license holder, sells only to individual and retail accounts.

The dispute in this case centers on the beer retail business in Cameron County, Pennsylvania.1 Bonini and Dills are the exclusive distributors of Anheuser-Busch and Stroh’s products, and Miller’s and Genessee products, respectively, in a territory that includes Cameron County. Emporium buys from both distributors, and then resells all four brands of beer to individual and retail accounts in Cameron County. This action arises from the refusal of Bonini and Dills to enter into a similar relationship with Fragale in late 1981 and early 1982.

Prior to late 1981, Emporium competed with a distributorship named Jones, and later its successor Snell’s, for retail accounts and individual sales in the Cameron County market. In November of 1981, Snell’s went out of business, leaving Emporium as the only retail distributor in Cameron County. Fragale then bought the defunct Snell’s and reopened the distributorship in February, 1982.

Prior to opening its new business, Fragale contacted all of Jones’ and Snell’s suppliers, including Dills and Bonini, and asked whether the suppliers would be willing to provide Fragale with various brands of beer for resale. According to Fragale, Bonini agreed in late 1981 to sell Fragale Anheuser-Busch and Stroh’s products. Dills responded to Fragale’s request by telling Michael Fragale that he would not decide until Fragale received its “D” license from the Commonwealth.

According to Fragale, the attitude of both Dills and Bonini changed dramatically by February of 1982. Bonini repudiated its agreement to sell beer to Fragale, allegedly because Bonini believed that the Cameron County market would not support both Emporium and Fragale.2 Dills informed Fragale that it would only sell to Emporium in the Cameron County area, and has continued to refuse to sell any beer to Fragale.

Fragale alleges that between November of 1981, when Michael Fragale first approached Dills and Bonini, and February of 1982, when both Dills and Bonini refused to sell to Fragale, Carmen Pastella of Emporium visited both Dills and Bonini for the purpose of encouraging them not to sell to Fragale. Although accounts of the meetings differ, representatives of both Dills and Bonini testified at depositions that they told Pastella that they would not sell beer to Fragale.

In early 1982, Dills and Bonini offered reasons for their decisions not to sell to Fragale. Dills told Fragale that two distributors in the Cameron County market presented problems for Dills, and that Fragale was too inexperienced in the beer retail business. Bonini told Fragale that there was not enough business in Cameron County to justify two distributorships. During the pendency of this action, however, both Dills and Bonini supplemented their reasons for refusing to deal with Fragale. Representatives of Dills testified in depositions that Fragale’s small size did not warrant the extra paperwork that sales to Fragale would necessitate, that selling exclusively to Emporium would encourage Emporium to promote Dills’ products, and [472] that it is easier to trace stale beer if only one distributor is involved. Representatives of Bonini similarly testified at depositions that selling exclusively to Emporium would encourage more active marketing of Bonini’s products, and that Fragale was too inexperienced to succeed in the beer retail business.

During discovery and in response to defendants’ Motion for Summary Judgment, Fragale challenged each of defendants’ articulated reasons for refusing to deal with Fragale. First, Fragale demonstrated that both Dills and Bonini sell to more than one distributor in markets comparable in size to Cameron County, and that Dills sells to every other distributor in its territory except for Fragale. Second, to rebut defendants’ contention that Cameron County could only support one distributor, Fragale noted that, except for a brief time period between Snell’s and Fragale, Cameron County had supported two distributors and that one of those distributors, Jones, engaged in price competition with Emporium. Third, Fragale alleged that Emporium did not and in fact could not actively promote Dills’ and Bonini’s products in exchange for an exclusive dealing arrangement, because advertising in the beer market originates with the manufacturer, and not the retailers. Finally, Fragale contested whether experience was necessary in the beer retail business, and alleged that both Dills and Bonini sell to smaller distributors than Fragale.

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Fragale & Sons Beverage Co. v. Dill, 760 F.2d 469 (3d Cir. 1985).

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