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MARTIN ICE CREAM CO. v. CHIPWICH

January 7, 1983

MARTIN ICE CREAM CO., Plaintiff,
v.
CHIPWICH, INC., and PREMIUM PRODUCTS SALES CORPORATION, Defendants


Goettel, D.J.


The opinion of the court was delivered by: GOETTEL

GOETTEL, D.J.:

Plaintiff Martin Ice Cream Co. ("Martin"), a distributor of ice cream products, brings suit against defendant Chipwich, Inc. ("Chipwich"), the primary manufacturer of the chocolate-chip-cookie-ice-cream-sandwich known as the Chipwich (hereinafter designated the "C-wich" to distinguish it from its manufacturer), and defendant Premium Products Sales Corporation ("Premium"), Chipwich's former exclusive sales agent, for allegedly illegally preventing Martin from continuing as the exclusive distributor of C-wiches to all Pathmark and Shoprite supermarkets located in the New York Metropolitan area. In this action, Martin raises eight claims: five under the federal antitrust provisions of the Sherman and Robinson-Patman Acts, 15 U.S.C. §§ 1, 2, & 13 (1976), one for breach of contract, and two for tortious interference with contractual relations. *fn1"

 At this juncture in this relatively young suit, defendant Premium has moved to dismiss for failure to state a claim upon which relief can be granted, pursuant to Fed. R. Civ. P. 12(b) (6), and defendant Chipwich has moved to dismiss on the pleadings, pursuant to Fed. R. Civ. P. 12(c). In considering these motions, however, the Court has, except with respect to the claim of tortious interference with contractual relations, relied upon not only the pleadings but also affidavits and exhibits submitted by all of the parties. Accordingly, the Court has treated both motions, pursuant to Rules 12(b) (6) and 12(c), respectively, as motions for summary judgment.

 Consequently, the movants must meet the difficult burdens imposed under Fed. R. Civ. P. 56. They must "show that there is no genuine issue as to any material fact" and that they are "entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c). The Court may determine only whether issues of fact exist; it may not pass any judgment on the quality of the proof by trying such factual issues. See, e.g., Wilson-Rich v. Don Aux Associates, Inc., 524 F. Supp. 1226, 1229 (S.D.N.Y. 1981). Moreover, it must draw all reasonable inferences in favor of the party opposing the motion, Quinn v. Syracuse Model Neighborhood Corp., 613 F.2d 438, 445 (2d Cir. 1980), which in this case is Martin. In addition, summary disposition of antitrust claims is generally considered to be undesirable. See, e.g., Poller v. Columbia Broadcasting System, Inc., 368 U.S. 464, 473, 7 L. Ed. 2d 458, 82 S. Ct. 486 (1961) ("Summary procedures should be used sparingly in complex antitrust litigation where motive and intent play leading roles, the proof is largely in the hands of the alleged conspirators, and hostile witnesses thicken the plot"). Finally, where there has been almost no discovery, as is the case here, courts have held that, even if summary judgment might be granted, the better course is to deny the motion without prejudice to renewing it after further discovery is completed. 10 C. Wright & A. Miller, Federal Practice and Procedure: Civil § 2728, at 558 (1973). *fn2"

 Considering the defendants' motions under these stringent standards, the Court has concluded that, for reasons given below, the motions must be denied with respect to all but the claim of tortious interference with Martin's contractual relations, which is dismissed with leave to amend the complaint. However, in the interests of fairness to the defendants and expeditious litigation of the case, the denial of these motions with respect to the other seven claims is made without prejudice to the defendants' right to renew the motions upon the completion of further discovery. *fn3"

 I. BACKGROUND

 The raison d'etre of this case is the C-wich. Created by Richard La Motta, a primary founder of Chipwich, the C-wich has become a trademarked, mass-produced, commercial success of the first order. The primary corporations behind the development of this commercial success have been Chipwich and Premium. The former is the manufacturer of the C-wich, while the latter is a small, supposedly expert sales and marketing firm, which contracted to provide Chipwich with the marketing and sales mechanism that it needed to reach a large market. While the complete interrelationship of Chipwich and Premium and their officers and shareholders has not been fully detailed in the affidavits, the submissions to date do reveal at least the broad outlines of what appears to be a somewhat complex interlocking of organizations. At the minimum, the following contractual relations appear to have been created:

 1. On January 16, 1981, Chipwich signed a consulting agreement with Bruce Nevins, one of the principals of Premium and an original, major stockholder in Chipwich, by which Nevins was to receive $2,000 per month for two years for performing at least one day per month of consulting services;

 2. A few weeks later, Chipwich signed a similar consulting agreement with Jim Stevens, the other principal of Premium and another original, major stockholder in Chipwich;

 3. On March 27, 1981, *fn4" Chipwich signed a contract with Premium, by which Premium agreed to be the exclusive sales and marketing agent for the C-wich and Chipwich agreed to pay 14% of the gross sales orders taken by Premium;

 4. On May 12, 1981, Chipwich and Premium entered an agreement under which Mr. Stevens became the acting president and chief operating officer of Chipwich.

 All of these relationships existed during the period relevant to this action but were terminated at the insistence of Chipwich on March 5, 1982.

 When the C-wich was first introduced to the public in May of 1981, it was sold only from ice cream carts. However, it took little time for Chipwich and Premium to realize that the public demand for the C-wich would be almost insatiable. Ever since, Chipwich has been trying, at first with the help of Premium and later with the assistance of other firms, to create a marketing and sales mechanism to meet the extraordinary demand for C-wiches.

 To that end, Chipwich and Premium began negotiations with Haagen Dazs Ice Cream, Inc. ("Haagen Dazs"), *fn5" to obtain the benefit of its distribution network. An agreement seems to have been reached by early November 1981, under which Haagen Dazs became, with certain exceptions, the exclusive distributor of C-wiches in the New York Metropolitan area. For purposes of this action, the key exception to this exclusive arrangement was that retail outlets, primarily supermarkets, that were not directly serviced by Haagen Dazs would be serviced by Haagen Dazs's three surrogate ice cream distributors, namely: Priscilla Ice Cream Company ("Priscilla"), LaSalle Ice Cream Company ("LaSalle"), and Martin. *fn6" Thus, the plaintiff alleges that Haagen Dazs, Martin, Priscilla, and LaSalle, who together are referred to as "the Haagen Dazs distribution network," were to be the exclusive distributors of C-wiches to all shopping markets in the New York Metropolitan area.

 More specifically, Martin claims that early in November of 1981 principals of Chipwich met with representatives of Martin, Priscilla, and LaSalle and struck an oral agreement with regard to the new distribution system. By that agreement, *fn7" Martin alleges, the three distributors were made the exclusive distributors to all institutions not covered by Haagen Dazs, and Martin, in particular, was designated the authorized distributor to four supermarket chains: Pathmark, Shoprite, Foodtown, and Acme. The agreement called for Martin and the other two distributors to buy C-wich "multipacks" from Chipwich at $8.52 per "shipping unit" and to sell them to retailers at the suggested wholesale price of $11.15 per "shipping unit." *fn8"

 Chipwich disputes the nature of whatever agreement, if any, that it may have made with Martin at the early November meeting. *fn9" Most critically, Chipwich denies that it merely "desired" Martin to make "store-door" deliveries; rather, Chipwich contends that it "demanded" such deliveries and prohibited the delivery of C-wiches to any chain's warehouse distribution center. *fn10" In effect, Chipwich is claiming that a material term of the agreement was that only store-door deliveries be made, while Martin denies that such was a term of the agreement.

 Pursuant to the alleged agreement, Martin began within two or three weeks to contact its "designated" supermarket chains and to make sales to them. It made only warehouse deliveries, however, to Pathmark because that company refused to take deliveries at its individual stores. Martin alleges that it made these deliveries, knowing that Chipwich preferred store-door deliveries only because Martin hoped thereby to persuade Pathmark to accept at a later time what Chipwich wanted. To the other three supermarket chains, Martin apparently did make store-door deliveries. While it sold to the latter three chains at Chipwich's suggested wholesale price of $11.15 per unit, it sold to Pathmark at a discount price of $10.00 per unit.

 According to Martin, when the defendants learned of its successful discount sales to Pathmark's warehouse, they chose to punish Martin, increase their own profit margins, and discourage the other distributors from discounting by taking the sudden and unannounced step of making direct sales to Pathmark. In addition, once they learned that such sales could also be made to Shoprite, the defendants began selling directly to Shoprite's new warehouse distribution system. This latter step was allegedly taken despite the fact that Martin had been making store-door deliveries to Shoprite, as Chipwich had requested. *fn11"

 Since the beginning of 1982, Martin has made sales only to Foodtown and Acme. Pathmark and Shoprite apparently have had an economic incentive to buy directly from Chipwich because the manufacturer sold to those two chains at a price of $9.27 per unit. This price, which was $.73 less than Martin's discount price, was considerably lower than what Martin could afford to offer the chains.

 On the basis of these facts and others, which are described when necessary later in the opinion, Martin has alleged the following causes of action: *fn12"

 1. that by making direct sales to the two chains Chipwich breached its exclusive distribution agreement with Martin;

 2. that Chipwich and Premium conspired to unreasonably restrain trade by, inter alia, establishing a resale price maintenance scheme and thereby violated section 1 of the Sherman Act; ...


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