R. E. Spriggs Co. v. Adolph Coors Co.

94 Cal. App. 3d 419, 156 Cal. Rptr. 738, 94 Cal. App. 2d 419, 1979 Cal. App. LEXIS 1871
CourtCalifornia Court of Appeal
DecidedJune 26, 1979
DocketCiv. 52115
StatusPublished
Cited by12 cases

This text of 94 Cal. App. 3d 419 (R. E. Spriggs Co. v. Adolph Coors Co.) is published on Counsel Stack Legal Research, covering California Court of Appeal primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
R. E. Spriggs Co. v. Adolph Coors Co., 94 Cal. App. 3d 419, 156 Cal. Rptr. 738, 94 Cal. App. 2d 419, 1979 Cal. App. LEXIS 1871 (Cal. Ct. App. 1979).

Opinion

Opinion

KAUS, P. J.

R. E. Spriggs Company, Inc., appeals from a judgment on its cross-complaint in favor of cross-defendant Adolph Coors Company.

Adolph Coors Company (Coors) is a Colorado corporation. It manufactures, brews, and bottles beer .only in Golden, Colorado, and sells it, f.o.b. Golden, to wholesale distributors in 11 western states, including California.

Appellant R. E. Spriggs Company, Inc. (Spriggs) owned and operated a wholesale distributorship in Los Angeles, California. Spriggs distributed Coors’ products from 1937 until its termination in 1964. The written distribution agreements between Coors and its distributors, including Spriggs, designated the territory within which each could distribute Coors beer.

On Spriggs’ termination, Coors sought injunctive relief against Spriggs’ continued sales. Spriggs cross-complained in October 1965, alleging a combination in restraint of trade, and seeking damages under the Cartwright Act. (Bus. & Prof. Code, § 16700 et seq.) In the parties’ joint pretrial statement—the controlling document before the court—Spriggs contended that during the relevant years preceding October 1965 the Coors-Spriggs written agreements violated the act “by reason of the territorial limitations therein, and because the control afforded to Coors by such agreements in combination with other agreements between Coors and Spriggs resulted in illegal price fixing,” and, further, that such agreements “resulted in territorial limitations, price fixing and conspiracy to exclude Spriggs from selling beer in Los Angeles County, all in violation of the Cartwright Act.” (Our italics.)

Initially, the trial court dismissed for lack of jurisdiction, reasoning that since all relevant activities involved interstate commerce the supremacy clause of the United States Constitution and the Sherman Antitrust Act precluded application of the Cartwright Act to the factual situation. This *423 court reversed and remanded, finding no preemption. (R. E. Spriggs Co. v. Adolph Coors Co. (1974) 37 Cal.App.3d 653 [112 Cal.Rptr. 585].)

Later, the trial court, pursuant to stipulation by the parties, ordered the cause bifurcated and proceeded initially only on the question whether Coors had violated the act.

Facts

During the trial Spriggs established the economic dominance of Coors in its relationship with its distributors. A Coors’ distributorship was a valuable, but fragile asset, terminable without cause on 30 days’ notice. Coors had a waiting list of about 7,000 applicants for a total of 167 distributorships. Clearly the situation was tailored for Coors’ wishes to become the distributors’ commands.

As noted, each distributorship contract contained strict territorial restrictions which Coors defended in the name of efficiency in distribution, quality control and so forth. Admittedly, however, the territorial restrictions totally eliminated intrabrand competition at the wholesale level. Further, it is quite clear from the record that they made it easier for Coors to monitor both wholesale and retail prices. Coors maintained a staff of field representatives whose business it was to keep check on the distributors: one of their specific duties was to report distributors’ price changes—up or down—to Coors.

The matter of prices charged at the wholesale and retail levels was admittedly vital to Coors. A policy memorandum distributed after the period in question, but admitted to be relevant at all times, contained the following instructions to its distributors: “In order to maintain a successful wholesale or retail business, pricing integrity is essential. Pricing integrity will result in adequate and equitable profit to both Distributor and retailer and is fair to the ultimate consumer.

“It is the policy of the Adolph Coors Company to suggest, if it so chooses, to either the wholesaler or retailer level, suggested minimum pricing. We reserve the right to further that policy by simply refusing to deal with anyone who doesn’t adhere to said policy.

“The Adolph Coors Company and its agents must only state the policy. They cannot make agreements, threaten, coerce or intimidate wholesalers or retailers in any manner. They can enforce the policy only by reserving *424 the right to refuse to deal with those who don’t adhere to the suggested prices.” 1

While this pricing policy memorandum speaks only of minimum pricing, the record indicates that Coors was not just interested in minimum pricing, but in price fixing, period. Thus, its president and chairman of the board testified that if wholesale prices could not be kept down, the company would not survive. Both wholesale and retail profit margins were “suggested” at such levels that both the distributor and the retailer got a “fair return” if they ran a “tight ship.” Coors’ philosophy was that it was in partnership with the distributors and retailers and if any one of the three partners got out of step “the castle [would] come tumbling down.” According to this witness Coors’ pricing policy was enforced by its representatives who went around to the distributors to discuss wholesale prices with them. They made suggestions as to such prices and attempted to persuade the distributors to follow them. When a distributor had too high a markup Coors “strongly” suggested that he do something about it. Low markups were, however, equally frowned on. According to one Bamhardt, Coors’ vice president of sales, Coors did not permit any rebates or discounts. “Everything is on a one-price basis. We do not appreciate our distributors rebating or discounting in any fashion. We think that that is an undesirable part of marketing.”

Earnhardt left little doubt that Coors’ efforts at persuasion were successful, at least with those distributors who wanted to stay in the “partnership.” Asked whether it was his experience that the distributors normally complied with Coors’ policies, he replied: “It is our experience that all of those that are still representing us do comply with our policies. We feel that way or they wouldn’t be representing us. ” (Italics added.)

Earnhardt also testified that Coors’ California distributors complied with the beer price posting provisions of section 25000 of the Business and Professions Code by having Coors post the prices at which distributors would sell. 2

*425 Eventually the trial court signed findings and conclusions. We summarize the highlights: 1. Compliance with various state laws could “be accomplished in an effective way only by absolute designation of responsibility under territorial guidelines.” 2. Territorial limitations on distributorships were the only practicable way for insuring quality control. 3. Further, such territorial limitations and certain regulations which Coors enforced prevented distributors from servicing only the large, profitable accounts. Thus the system vindicated the public’s “right to the widest availability of Coors beer.” 4. The territorial limitations had no restraining effect on interbrand competition. 5.

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Bluebook (online)
94 Cal. App. 3d 419, 156 Cal. Rptr. 738, 94 Cal. App. 2d 419, 1979 Cal. App. LEXIS 1871, Counsel Stack Legal Research, https://law.counselstack.com/opinion/r-e-spriggs-co-v-adolph-coors-co-calctapp-1979.