United States District Court, Northern District of New York
April 6, 1999
ANHEUSER-BUSCH, INC., PLAINTIFF,
G.T. BRITTS DISTRIBUTING, INC. AND RICHARD WORDON, DEFENDANTS.
The opinion of the court was delivered by: McAVOY, Chief Judge.
MEMORANDUM — DECISION & ORDER
Plaintiff Anheuser-Busch, Inc. ("plaintiff") commenced an
action against Defendants G.T. Britts Distributing, Inc.
("Britts") and Richard Wordon (the "defendants") arising out of
an alleged breach
of a distribution agreement. Defendants asserted counterclaims
for breach of contract and violation of the antitrust laws.
Presently before the Court is plaintiff's motion pursuant to
FED.R.CIV.P. 12(b)(6) seeking dismissal of the counterclaims.
In November 1982, plaintiff entered into an distribution
agreement with Britts. In July 1996, Defendant Richard Wordon
acquired Britts and became its sole shareholder. In July 1987,
plaintiff entered into an amended wholesaler distribution
agreement (the "agreement") with Britts wherein Britts was
designated as the exclusive authorized wholesaler representative
for plaintiff in the Athens, New York region. In January 1997,
Defendant Wordon entered into an "Unlimited Guaranty Contract"
with plaintiff whereby he personally guaranteed "payment to
[plaintiff] of all indebtedness of Debtor [Britts] to [plaintiff]
now existing or hereafter created."
Britts was required to pay plaintiff for its beer products in
accordance with approved terms. Under the approved credit terms,
Britts was to pay for plaintiff's products within ten days of
shipment and typically made payments via electronic fund
transfer. On many occasions, plaintiff allowed Britts an
additional ten to twenty days within which to tender payment. At
numerous times in 1997 and 1998, Anheuser-Busch unsuccessfully
attempted to electronically acquire funds from Britts' bank
account for payment for products (which they apparently were
authorized to do), even after the additional twenty day grace
period. The attempted electronic payments failed because of
Thus, on December 15, 1997, plaintiff wrote Britts stating that
there had been an unacceptable number of returned payments and
warned that plaintiff expected timely payment. Plaintiff again
wrote Britts on May 27, 1998 stating that seventeen more payments
had "bounced" and again warning that "[t]his situation is not
On June 24, 1998, plaintiff again wrote to Britts stating that:
[P]ursuant to Paragraph 6(a) of the [agreement], this
letter constitutes written notice of termination of
G.T. Britts as an authorized Anheuser-Busch
wholesaler based on G.T. Britt's failure to pay for
Anheuser-Busch products in accordance with approved
terms and insolvency. As you know, G.T. Britts has
failed to pay for Anheuser-Busch products ordered and
accepted, despite repeated warnings and extensions of
payment due dates. Over sixty separate electronic
funds transfers that G.T. Britts has attempted to
make as payments for Anheuser-Busch products have
been rejected by your bank due to insufficient funds
in G.T. Britts's account. Many of these payments
"bounced" despite the fact that Anheuser-Busch has
already extended you additional time to pay for the
The termination of the . . . agreement . . . is
effective immediately. . . . . In accordance with . . .
[the] Agreement, Anheuser-Busch is prepared to
purchase and G.T. Britts is required to sell G.T.
Britts's current inventory of Anheuser-Busch products
at G.T. Britts's laid-in cost.*fn1
On that same day, June 24, 1998, plaintiff commenced the
instant lawsuit against defendants asserting causes of action for
money due and owing, breach of the agreement, and breach of the
Unlimited Guaranty Contract. In their answer, defendants asserted
two counterclaims alleging breach of the agreement and violations
of the antitrust laws. Plaintiff now moves pursuant to
FED.R.CIV.P. 12(b)(6) seeking dismissal of the counterclaims in
A. Rule 12(b)(6) Standard
"A [counterclaim] may not be dismissed under Rule 12(b)(6)
unless it appears beyond doubt that the [counter-claimant] can
prove no set of facts in support of his claim which would entitle
him to relief. In reviewing a Rule 12(b)(6) motion, this Court
must accept the factual allegations of the [counterclaim] as true
and must draw all reasonable inferences in favor of the
[counter-claimant]. The review of such a motion is limited, and
the issue is not whether a [counter-claimant] will ultimately
prevail but whether the claimant is entitled to offer evidence to
support the claims." Bernheim v. Litt, 79 F.3d 318, 321 (1996)
(internal quotations and citations omitted). "In order to survive
dismissal, a [counter-claimant] must assert a cognizable claim
and allege facts that, if true, would support such a claim."
Boddie v. Schnieder, 105 F.3d 857, 860 (2d Cir. 1997). With
this standard in mind, the Court will now address plaintiff's
motion to dismiss.
B. Defendants' Antitrust Claim
Plaintiff moves to dismiss the antitrust claim on the ground
that defendants have failed to plead the requisite antitrust
injury. Defendants respond that they have brought their
counterclaim pursuant to section 3 of the Clayton Act,
15 U.S.C. § 14, and that plaintiff has adopted a program called "Share of
Mind" designed to lessen competition and encourage wholesalers
not to carry competing brands.
To establish antitrust injury, defendants "must show more than
that [plaintiff's] conduct caused [them] an injury. [Defendants]
must prove antitrust injury, which is to say injury of the type
the antitrust laws were intended to prevent and that flows from
that which makes [plaintiff's] acts unlawful. The injury should
reflect the anticompetitive effect either of the violation or of
anticompetitive acts made possible by the violation. This
antitrust injury requirement underscores the fundamental tenet
that the antitrust laws were enacted for the protection of
competition, not competitors." Balaklaw v. Lovell,
14 F.3d 793, 797 (2d Cir. 1994) (internal citations and quotations
omitted) (emphasis in original). Thus, "[t]he antitrust injury
requirement obligates [defendants] to demonstrate, as a threshold
matter, `that the challenged action has had an actual adverse
effect on competition as a whole in the relevant market; to prove
it has been harmed as an individual competitor will not
suffice.'" George Haug Co. v. Rolls Royce Motor Cars, Inc.,
148 F.3d 136, 139 (2d Cir. 1998) (quoting Capital Imaging v. Mohawk
Valley Med. Assocs., 996 F.2d 537, 543 (2d Cir.), cert.
denied, 510 U.S. 947, 114 S.Ct. 388, 126 L.Ed.2d 337 (1993)).
Defendants have clearly alleged injury to their own business
interests. The fundamental flaw in the counterclaim, however, is
that it alleges no detrimental impact upon market-wide
competition. The relevant portions of the counterclaim are that:
[T]he true motivation for g.t. BRITT's termination
[was] . . . to force wholesaler consolidation and/or
to work a forfeiture of valuable rights of these
Defendants. Ans., ¶ 19.
Anheuser-Busch exercises its market power . . . to
force the consolidation of smaller distributors . . .
and discourage its wholesalers from dealing in the
products of other brewers all with the intention and
effect of lessening competition. Id., at ¶ 32.
Anheuser-Busch, Inc's termination of the rights of
g.t. BRITT's, Inc. is part of a policy . . . to force
the consolidation of its wholesaler distributors
and/or a policy to discourage its wholesale
distributors from dealing in the products of its
competitors. Id., at ¶ 33; and
g.t. BRITT's has been injured in its business and
Richard W. Wordon has been injured in his property by
reason of violations on the part of Anheuser-Busch,
Inc. of the Anti-Trust Laws . . . [and][t]he injuries
suffered by g.t. BRITT's and Richard W. Wordon are
direct injuries incurred within a sector of the
economy, mainly the wholesale distribution of malt
beverage, in which the violations of the Anti-Trust
Laws by Anheuser-Busch, Inc. and its larger
wholesalers threatens a breakdown of competitive
economic conditions. Id., at ¶ 35.
The first problem with the counterclaim is that it fails to
define the relevant market area or to address plaintiff's market
share in the relevant market area. Assuming, for purposes of this
motion, that the relevant market area is narrowly defined to
include Greene and Columbia Counties, see Ans., at ¶ 5, and
accepting all the allegations in the counterclaim as true, the
counterclaim, nonetheless, fails to allege any facts from which
injury to market-wide competition can be inferred. See e.g.
Textiles Co., Inc. v. A & E Prods. Group, 18 F. Supp.2d 232, 243
(E.D.N.Y. 1998). Rather, defendants merely allege injury to
themselves, which is insufficient to confer standing to assert
antitrust violations. Rolls Royce, 148 F.3d at 139.
Here, plaintiff terminated its distributor agreement with
Britts. However, it is not a "violation of the antitrust laws,
without a showing of an actual adverse effect on competition
market-wide, for a manufacturer to terminate a distributor . . .
and to appoint an exclusive distributor." Electronics Comm.
Corp. v. Toshiba Am. Consumer Prods., Inc., 129 F.3d 240, 244
(2d Cir. 1997); see also Burdett Sound, Inc. v. Altec Corp.,
515 F.2d 1245, 1248 (5th Cir. 1975) ("A mere unilateral change of
distributors is not an unusual business practice, nor is it a
violation of the antitrust laws.") (and cases cited); Bushie v.
Stenocord Corp., 460 F.2d 116, 119 (9th Cir. 1972). Thus, in
order to survive the motion to dismiss, the counterclaim must
allege sufficient facts to support an allegation of an adverse
effect on market-wide competition.
While defendants attempt to demonstrate reduced market choice,
their attempts are insufficient. Defendants contend that because
they served as representatives of Anheuser-Busch and other beer
producers, but have now been removed as an Anheuser-Busch
representative, retailers can no longer purchase different brands
of beer from them, thereby reducing competition. Instead,
retailers wishing to purchase beer products from different
manufacturers presumably are now obligated to contact two
distributors rather than one. However, defendants do not assert
that, as a result of plaintiff's conduct, retailers are precluded
from purchasing competing brands of beer. Furthermore, there is
no allegation that another wholesaler to whom plaintiff might
award an exclusive dealership in Greene and/or Columbia Counties
could not also represent a competitor. Accordingly, accepting the
factual assertions in the counterclaim as true, there are
insufficient allegations of a reduction in market-wide
competition and, thus, no antitrust injury.
Assuming, arguendo, that defendants can demonstrate the
requisite antitrust standing and that the Share of Mind program
encourages exclusive distribution agreements, the counterclaim,
nonetheless, fails to state a claim for a violation of section 3
of the Clayton Act.*fn2 "[A]greements
with manufacturers that limit distributors' sales to products
made by the manufacturer are not per se violations of antitrust
laws. Such an agreement is barred by section 3 of the Clayton Act
only if its effect `may be to substantially lessen competition or
tend to create a monopoly in a line of commerce.'" Lupia v.
Stella D'Oro Biscuit Co., Inc., 586 F.2d 1163, 1172 (7th Cir.
1978), cert. denied, 440 U.S. 982, 99 S.Ct. 1791, 60 L.Ed.2d
242 (1979). "[E]xclusive dealing arrangements imposed on
distributors rather than endusers are generally less cause for
anticompetitive concern" because there may be other avenues
available to competing manufacturers to distribute their product.
Omega Environmental, Inc. v. Gilbarco, Inc., 127 F.3d 1157,
1162 (9th Cir. 1997) (citing Ryko Mfg. Co. v. Eden Services,
823 F.2d 1215, 1235 (8th Cir. 1987), cert. denied, ___ U.S.
___, 119 S.Ct. 46, 142 L.Ed.2d 36 (1998)). Indeed, "[i]f
competitors can reach the ultimate consumers of the product by
employing existing or potential alternative channels of
distribution, it is unclear whether such restrictions foreclose
from competition any part of the relevant market." Id. Here,
defendants have failed to allege facts demonstrating that
plaintiff's marketing practices foreclosed plaintiff's
competitors from a substantial market. See Lupia, 586 F.2d at
1172; Omega, 127 F.3d at 1162. The Complaint does not allege
that Anheuser-Busch's competitors are precluded from reaching
retailers because of the Share of Mind program. Accordingly, the
counterclaim fails to state a claim under section 3 of the
Finally, in their memorandum of law, defendants assert that
"the incentives offered by [plaintiff] to exclusive wholesalers
under the Share of Mind program constitute themselves violation
of the Robinson Patman amendments to the Clayton Act [see
15 U.S.C. § 13] in that they constitute discriminatory pricing."
Mem. of Law, at 19-20. There are no factual allegations of
discriminatory pricing in the counterclaim; rather, the
counterclaim merely refers to plaintiff's alleged efforts to
"force the consolidation of its wholesaler distributors and/or
[institute] a policy to discourage its wholesale distributors
from dealing in the products if its competitors." Ans., at ¶ 33.
Because the counterclaim makes no reference to discriminatory
pricing it fails to satisfy the pleading requirements in
FED.R.CIV.P. 8. Assuming that defendant properly pleaded a
counterclaim for discriminatory pricing, defendant offers no
factual support for a claim under 15 U.S.C. § 13 and, therefore,
it must be dismissed under Rule 12(b)(6).*fn3
C. Breach of Contract
Plaintiff also moves to dismiss the breach of contract claiming
that Britts breached the agreement by failing to make timely
payments and, therefore, plaintiff lawfully exercised its right
to terminate the agreement. Defendants respond that plaintiff
waived its right to timely payment under the agreement and, thus,
plaintiff improperly terminated it.
Assuming the facts alleged in the counterclaim to be true, as
the Court must on a Rule 12(b)(6) motion, the Court finds that
this claim must stand. Two elements give rise to a breach of
contract claim: (1) a contract between the parties; and (2) an
act allegedly in violation of that agreement. See Agency Rent A
Car v. Grand Rent A Car, Corp., 98 F.3d 25, 31 (2d Cir. 1996).
The counterclaim properly alleges a contract entered into between
the parties, see Ans., at ¶ 23; that defendants "performed each
and every covenant and condition on its part to be performed
as the performance of same were waived and/or prevented by
[plaintiff]," Ans. at ¶ 24; and that plaintiff breached the
agreement by "terminating unilaterally g.t. BRITT's rights
thereunder without good cause and/or in bad faith, with resultant
damages to g.t. BRITT's, inc. of at least $1,500.00." Ans., at ¶¶
25. These facts, if true, would properly support a breach of
contract claim and, thus, are sufficient for purposes of
plaintiff's Rule 12(b)(6) motion.
For the foregoing reasons, plaintiff's motion pursuant to
FED.R.CIV.P. 12(b)(6) is GRANTED IN PART and defendants'
counterclaim alleging violations of the antitrust laws is
DISMISSED. In all other respects, plaintiff's motion is
IT IS SO ORDERED