Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

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

filed: February 17, 1993.

COCA-COLA BOTTLING COMPANY OF SHREVEPORT, INC.; COCA-COLA BOTTLING COMPANY OF ELIZABETHTOWN, INC.; OWENSBORO COCA-COLA BOTTLING COMPANY, INC.; TEXARKANA COCA-COLA BOTTLING COMPANY; COCA-COLA BOTTLING COMPANY (SAN ANGELO); LAS CRUCES COCA-COLA BOTTLING COMPANY; THE COCA-COLA BOTTLING COMPANY OF TUCSON, INC.; JACKSON COCA-COLA BOTTLING COMPANY; WICHITA COCA-COLA BOTTLING COMPANY; PERMIAN COCA-COLA BOTTLING COMPANY; MARSHALL COCA-COLA BOTTLING CO. LIQUIDATING TRUST COMPANY; COCA-COLA BOTTLING COMPANY OF TULSA, INC.; DIXIE COCA-COLA BOTTLING COMPANY, INCORPORATED; NEW BERN COCA-COLA BOTTLING WORKS, INC.; MAGNOLIA COCA-COLA BOTTLING COMPANY, INC.; THE COCA-COLA BOTTLING COMPANY (FORT SMITH); COCA-COLA BOTTLING CO. OF JAMESTOWN; HATTIESBURG COCA-COLA BOTTLING CO.; PLYMOUTH COCA-COLA BOTTLING COMPANY, INC.; SACRAMENTO COCA-COLA BOTTLING CO., INC.; NATCHEZ COCA-COLA BOTTLING CO., INC.; CENTRAL COCA-COLA BOTTLING CO.; DECATUR COCA-COLA BOTTLING CO.; COCA-COLA BOTTLING COMPANY OF WILLISTON ; RICHMOND COCA-COLA BOTTLING CO., INC.; COCA-COLA BOTTLING COMPANY OF MT. PLEASANT; COCA-COLA BOTTLING CO. OF MUSKEGEON; MARY LOUISE GOODRICH; MARY LOUISE KAY ROBINSON, INDIVIDUALLY AND AS TRUSTEE OF THE KENDALL FAMILY INTER VIVOS TRUST; ANN KAY HOBSON HAACK, INDIVIDUALLY AND AS TRUSTEE OF THE KENDALL FAMILY INTER VIVOS TRUST; JOHN K. HOBSON; MARGARET DODGE HOBSON, INDIVIDUALLY AND AS TRUSTEE OF THE KENDALL FAMILY INTER VIVOS TRUST (SUBST. FOR NATCHEZ COCA-COLA BOTTLING CO., INC.); OLIVER C. HUTAFF, JR., AS TRUSTEE UNDER SHAREHOLDERS' LAWSUIT TRUST AGREEMENT (SUBST. FOR WILMINGTON COCA-COLA BOTTLING WORKS, INC. AND KELFORD COCA-COLA BOTTLING WORKS, INC.)
v.
THE COCA-COLA COMPANY ARKANSAS-GEORGIA COMPANY, INC.; CENTRAL COCA-COLA BOTTLING COMPANY, INC.; COCA-COLA BOTTLING COMPANY OF DICKINSON; COCA-COLA BOTTLING COMPANY OF ELIZABETHTOWN, INC.; COCA-COLA BOTTLING COMPANY OF JAMESTOWN; COCA-COLA BOTTLING COMPANY OF LACROSSE, INC.; LAS CRUCES COCA-COLA BOTTLING COMPANY; LOVE COCA-COLA BOTTLING COMPANY; MAGNOLIA COCA-COLA BOTTLING COMPANY; MARSHALL COCA-COLA BOTTLING COMPANY; NATCHEZ COCA-COLA BOTTLING CO., INC.; PLYMOUTH COCA-COLA BOTTLING CO., INC.; SACRAMENTO COCA-COLA BOTTLING CO., INC.; COCA-COLA BOTTLING COMPANY (SAN ANGELO); COCA-COLA BOTTLING COMPANY OF SHELBYVILLE, INC.; THE COCA-COLA BOTTLING COMPANY OF TUSCON, INC.; COCA-COLA BOTTLING COMPANY OF TULSA, INC.; COCA-COLA BOTTLING COMPANY OF WILLISTON; OLIVER C. HUTAFF, JR., AS TRUSTEE UNDER SHAREHOLDERS' LAWSUIT TRUST AGREEMENT (SUBST. FOR WILMINGTON COCA-COLA BOTTLING WORKS, INC. AND KELFORD COCA-COLA BOTTLING WORKS, INC.), APPELLANTS



Appeal from the United States District Court for the District of Delaware. (D.C. Civil Action No. 83-00095).

Present: Hutchinson, Alito and Higginbotham, Circuit Judges.

Author: Hutchinson

Opinion OF THE COURT

HUTCHINSON, Circuit Judge.

This is a companion to the case that is the subject of our opinion of even date disposing of the two consolidated appeals at our Docket Nos. 91-3496 and 91-3498. We will refer to that case as the "Coke case" and our opinion disposing of it as Coke VIII. We will refer to this case as the "diet Coke case" and to this opinion as diet Coke VIII. In diet Coke VIII, twenty bottlers appeal from the district court's final judgment denying them relief on all of their claims.*fn1

We have appellate jurisdiction over the district court's final order in this case. See 28 U.S.C.A. § 1291 (West Supp. 1992). The district court had diversity jurisdiction over the bottlers' action in the diet Coke case. See 28 U.S.C.A. § 1332(a)(1) (West Supp. 1992).

The diet Coke case, like the Coke case that is the subject of Coke VIII, arises out of a dispute between The Coca-Cola Company (the "Company") and some of its bottlers over the scope of the bottlers' pre-existing contracts with the Company. The twenty bottlers who are parties appellant here in the diet Coke case, like the thirty who are parties appellant in the Coke case, refused to amend their contracts with the Company. The amendment proposed to them would have given them the right to bottle diet Coke in exchange for certain concessions. Thus, the question to be resolved is whether the bottlers' original contracts and the 1921 Consent Decrees (Consent Decrees) entered into between the Company and the parent bottlers in settlement of the same 1920 lawsuit we considered in Coke VIII include the right to bottle diet Coke. The district court ultimately held that diet Coke was not within the scope of these agreements.*fn2 In Coke VIII, we addressed the claims of a somewhat overlapping set of bottlers*fn3 concerning the Company's use of alternative natural sweeteners, namely high-fructose corn syrup (HFCS), to produce Coca-Cola Bottlers' Syrup. In Coke VIII, we affirmed the district court's holding that the contracts of that set of bottlers entitled them only to Coca-Cola bottling syrup sweetened with sucrose refined from cane or beet sugar and not HFCS. The district court interpreted the bottlers' contracts on the basis of findings concerning what the parties intended the ambiguous terms "sugar" and "syrup" to mean in the Consent Decrees settling the 1920 dispute over the price and quality of syrup. The 1920 litigation involved the Company and their so-called parent bottlers. See Coca-Cola Bottling Co. v. Coca-Cola Co., 269 F. 796 (D. Del. 1920) (Coke 1920). The bottlers who are parties to this case, like those who are parties to Coke VIII, rely on the rights of their parent bottlers in bringing suit. In Coke VIII, we held that the district court's findings on the meaning of "sugar" and Coca-Cola bottling "syrup" were not clearly erroneous. We further affirmed the district court's determination that the syrup the bottlers are entitled to under the Consent Decrees contains 5.32 pounds of cane or beet sugar per gallon of syrup. The same analysis applies to this case, and we are similarly unable to hold that the district court's findings in diet Coke VII were clearly erroneous. Consequently, we will affirm the judgment of the district court denying relief to the bottlers seeking a supply of diet Coke syrup.

Nevertheless, differences in the parties' arguments, the facts and the evidence, including the inferences that can be drawn from a preclusion order entered in diet Coke IV against the Company for failure to obey a discovery order and the effect of certain specific admissions the Company made that apply to the diet Coke litigation, require some separate exposition and analysis. Those differences and their effect on our legal analysis are the subject of this opinion. Otherwise, the evolution of the relationship between the Company and its bottlers is as set forth more fully in our opinion in Coke VIII, typescript at 10-23. We will not repeat those facts in any detail but will recite here only the undisputed facts specifically and additionally relevant to diet Coke.*fn4

I.

During the 1980's, the Company's product line proliferated. The Company intended one innovation, diet Coke, to counter the "narrow market appeal" of its existing diet product, Tab. diet Coke I, 563 F. Supp. at 1127. Because the diet soft drink market promised to expand by nearly one-hundred percent within the decade, and a ten percent gain in market share was estimated to translate into additional retail revenues of five billion dollars, "on July 8, 1982, diet Coke was introduced with great fanfare." Id. With this introduction of diet Coke came a dispute over whether it was covered by the current bottling contracts.

The bottlers felt that the Company was obligated to provide diet Coke under the terms of their existing contracts. The Company, however, asserted that diet Coke was not within the scope of the existing contracts and proposed developing a new flexible pricing contract to cover it. diet Coke V, 696 F. Supp. at 103.

On October 7, 1982, the Company proposed a Temporary Amendment to the bottlers' contracts which would govern the price of diet Coke pending final agreement on a permanent contract. Id. The Temporary Amendment was intended to be an interim measure. Most of the bottlers have accepted it. About 191 have signed the Temporary Amendment and another 181 bottlers, who have not actually signed, have agreed to its terms. Id. These 372 bottlers are receiving diet Coke syrup and are marketing diet Coke within their territories. The bottlers in this case have refused either to sign or accept the terms of the Temporary Amendment. They object to its Paragraph Nine which states that "it is further agreed, however, that during the period this Temporary Amendment is in effect, the price of Coca-Cola syrup and beverage base for diet Coca-Cola as between the parties hereto shall be determined solely under this Temporary Amendment." Id. (quoting diet Coke I, 563 F. Supp. at 1127-29 (footnotes and quotations omitted)). Consequently, the Company has refused to provide diet Coke syrup or beverage base to these bottlers. Id.

Shortly after its introduction of diet Coke, the Company embarked on a new project:

In April, 1985, the Company announced that it would stop producing Coca-Cola under the existing formula ("old Coke") and immediately start producing "new" Coke, which, the Company proclaims, tastes even better than old Coke. . . . The secret ingredient in new Coke, called "7X-100," is different than the secret ingredient in old Coke, but it is still only known to a handful of individuals and is kept locked in a bank vault in Georgia.

Id. at 103-04 (quoting diet Coke III, 107 F.R.D. at 291).

Within the same general time frame of its introduction of diet Coke and new Coke, the Company also introduced four other types of syrup. In April of 1983, the Company introduced caffeine-free Coca-Cola and caffeine-free diet Coke. In 1985, the Company introduced Cherry Coca-Cola and diet Cherry Coke. These four new products supplemented the existing versions of Coca-Cola and diet Coke and were offered as additional syrups. Each of these syrups have always contained less than the 5.32 pounds of sugar refined from cane or beets per gallon of syrup that the Consent Decrees required. diet Coke VII, 769 F. Supp. at 687-88. In Coke VIII, we held that the syrup the bottlers were entitled to under the Consent Decrees contains 5.32 pounds of cane or beet sugar per gallon of syrup. As explained in our opinion in Coke VIII, the district court found in Coke VII that this type and quantity of sugar defined the term "Coca-Cola bottling syrup" as it was used in the bottling contracts based on the Consent Decrees.

Though the parties entered into separate letter agreements governing the bottling of caffeine-free Coca-Cola and Cherry Coke, no separate agreements were made with respect to caffeine-free diet Coke or diet Cherry Coke. See diet Coke VII, 769 F. Supp. at 687-88. The letter agreements for caffeine-free Coca-Cola and Cherry Coke provided that the new syrups would be supplied pursuant to either the bottlers' pre-existing unamended contracts or the 1978 Amendment,*fn5 depending on which governed the particular bottler's operations. Id. at 687. The letter agreements all contained the same reservation of rights paragraph, which read:

It being the intent and purpose of the Bottler and the Company that this letter and the agreement set out herein shall in no way prejudice or otherwise affect their respective rights and obligations under the Bottler's Contract . . . or from any other source, or the respective legal or equitable claims, the Bottler and the Company expressly stipulate that this letter and the agreement contained herein shall have no such effect.

Id. at 687.

II.

The bottlers who claim that they are entitled to diet Coca-Cola syrup all rely on unamended bottling contracts*fn6 that license them, within their territories, to bottle and sell Coca-Cola under terms initially dictated by an 1899 national franchise the Company had originally granted a predecessor of the parent bottlers' licensors. That franchise was later amended and finally modified by the agreement between the Company and the bottlers' licensors, or "parent bottlers," that was incorporated into the Consent Decrees which settled Coke 1920. The bottlers who are parties to this appeal still operate under these pre-existing contracts. The Company takes the position that the only syrup the bottlers' unamended contracts entitle them to is syrup sweetened with sugar made from cane or beets at a price dependent on the cost of that kind of sugar. Consequently, it says the bottlers have no entitlement to diet Coke syrup.

The bottlers, claiming their contracts are not so limited, filed a five count complaint seeking relief from the Company's refusal to supply diet Coke syrup. They based their claims on their individual contracts (Count One) as well as violation of the Consent Decrees (Count Two), trademark infringement and trademark dilution (Counts Three and Four) and antitrust violations (Count Five). See diet Coke VII, 769 F. Supp. at 679. Like the bottlers in Coke VIII, the bottlers in diet Coke VIII claim that the Company is their fiduciary, and that the manner in which it proposed to market diet Coke was a breach of its fiduciary duty. See id. at 712-14.

The bottlers who are parties to this diet Coke case asked the district court "to issue a preliminary injunction which would allow them to purchase diet Coke syrup without waiving their interim rights." diet Coke I, 563 F. Supp. at 1130. Basically, the bottlers sought to enjoin the Company from offering diet Coke to bottlers willing to temporarily waive whatever rights to diet Coke syrup they might have under their existing bottling contracts by executing the so-called "Temporary Amendment." Id. at 1129-30. In diet Coke I, the district court denied the bottlers' motion for a preliminary injunction. Id. at 1124. The district court concluded:

While the phrase "standard Bottlers Coca-Cola Syrup" is also undefined in the corpus of the 1921 Consent Decrees, it seems clear that the syrup must contain 5.32 pounds of sugar [per gallon]. Since diet Coke syrup contains absolutely no sugar, a fortiori, it is not likely to be encompassed by the contractual phrase Bottler's Coca-Cola Syrup as employed by the 1921 Consent Decree.

Id. at 1135 (footnote omitted). Accordingly, the district court held that the bottlers had not shown a reasonable probability of success on the merits under the bottlers' contracts, the Consent Decrees or trademark rights. Id. at 1135-36, 1139.

Nevertheless, after noting the chemical and taste differences between Coke and diet Coke, the district court concluded that:

Given the Company's acknowledged goal of line extension of the Coke family of products, the blatant identification of diet Coke with Coke, and the commonality of the coveted Merchandise 7X [the secret Coke flavoring] to both products, the Court concludes that for at least some purposes diet Coke may be Coke and now turns to the question of the contractual definitions relevant to the claims of the amended and unamended bottlers.

Id. at 1134.

The district court went on to examine the bottlers' trademark rights. It concluded that the bottlers had the "exclusive right to use the trademark, tradename, and bottle in their exclusive territories." Id. at 1138. It also decided, however, that the Company had not abrogated this right. Id. at 1138. It held that the dissident bottlers had not demonstrated a likelihood of success on the merits of their claim that the law of trademarks compelled the Company to give them diet Coke syrup and precluded it from giving diet Coke syrup to the bottlers who agreed to the Company's temporary amendment. Id. at 1138-39.

diet Coke III concerned the unamended bottlers' motion to compel disclosure of several of the Company's secret formulae. diet Coke III, 107 F.R.D. at 289-90.*fn7 It was a significant victory for the bottlers. The Company took the position that Coke and diet Coke are two separate products, id. at 295, but the district court rejected its supporting argument that Coca-Cola syrup could be defined solely by its sweetener. Id. at 296. The district court also decided that the bottlers could not rebut the Company's "separate products" argument without knowing the precise ingredients of the syrups that the Company used to make the different varieties of Coca-Cola it was selling. Id. at 296. The court, therefore, ordered the Company to disclose several of its formulas.*fn8 Id. at 300. These formulas are "one of the best-kept trade secrets in the world." Id. at 289. They are kept locked away in an Atlanta bank vault which may "only be opened upon a resolution from the Company's Board of Directors." Id. The court reasoned that the bottlers had shown the secret ingredients were relevant and material in determining the nature of the syrup the Company was obligated to provide under the 1921 contracts. A stringent protective order could avoid any potential harm from disclosure, especially since the disclosure would be made not to the Company's competitors but to parties who shared the Company's interest in protecting the secret formula for Coca-Cola. Id. at 296-99.

The Company did not comply with the disclosure order the district court entered in diet Coke III. The bottlers moved for sanctions in the form of an order pursuant to Federal Rule of Civil Procedure 37(b)(2)(C) striking the Company's answer and entering judgment in the bottlers' favor on Counts One and Two of their complaint alleging breach of contract and breach of the Consent Decrees. diet Coke IV, 110 F.R.D. at 366-67. The district court did not grant the sanction the bottlers requested. Instead, it entered a preclusion order that gave the bottlers "the advantage of every possible inference that fairly could be drawn from the formulae evidence sought." Id. at 369. The district court was unwilling to grant a preclusion order, "coextensive with the issues to which the withheld formulae evidence is relevant," id. at 369, because such an order would be the "functional[ ] equivalent [of] a default judgment." Id. at 369 n.16. The district court sought to avoid this result because it concluded "ingredient identity is not necessarily the same as product identity." Id. at 370.

Categories of evidence other than the formulae--such as taste identity, marketing history and strategy, consumer perceptions, and packaging--are urged by the Company as being relevant to the product identity issue. If the Company is correct in whole or in part, it may be able to overcome whatever showing could be made on the basis of the formulae evidence.

Id.

Under this order, the district court also precluded the Company from distinguishing different varieties of Coca-Cola bottling syrup solely on differences in the sweetener used. The preclusion order did permit the Company to rely on differences in the sweetener used in diet Coke and other Coke products that were concededly covered by the bottlers' contracts if the difference in those sweeteners was material to the fact questions set forth in the Company's preliminary statement of issues. Id. at 371-72. The order thus reduced the Company's arguments to three: the course of conduct of the parties, the effect of the Consent Decrees' requirement that the syrup contain at least 5.32 pounds of sugar per gallon, and the bottlers' own ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.