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Major Mart, Inc. v. Mitchell Distrib. Co., Inc.

United States District Court, S.D. Mississippi, Northern Division

August 14, 2014

MAJOR MART, INC., PLAINTIFF
v.
MITCHELL DISTRIBUTING COMPANY, INC. AND MITCHELL BEVERAGE, LLC, DEFENDANTS

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For Major Mart, Inc., Plaintiff: April Reeves Freeman, Kaytie M. Pickett, Neville H. Boschert, JONES WALKER, LLP - Jackson, Jackson, MS.

For Mitchell Distributing Company, Inc., Mitchell Beverage, LLC, Defendants: Clarence Webster, III, FORMAN, PERRY, WATKINS, KRUTZ & TARDY, LLP - Jackson, Jackson, MS; Erin D. Saltaformaggio, Michael J. Bentley, Stephen Lee Thomas, W. Wayne Drinkwater, Jr., BRADLEY ARANT BOULT CUMMINGS LLP - Jackson, Jackson, MS; Richard Benjamin McMurtray, William C. Hammack, GLOVER, YOUNG, HAMMACK, WALTON, & SIMMONS, PLLC, Meridian, MS.

For Mitchell Distributing Company, Inc., Mitchell Beverage, LLC, Counter Claimants: Clarence Webster, III, FORMAN, PERRY, WATKINS, KRUTZ & TARDY, LLP - Jackson, Jackson, MS; Stephen Lee Thomas, W. Wayne Drinkwater, Jr., BRADLEY ARANT BOULT CUMMINGS LLP - Jackson, Jackson, MS.

For Gregory Sharp, Counter Defendant: Erin D. Saltaformaggio, BRADLEY ARANT BOULT CUMMINGS LLP - Jackson, Jackson, MS.

For Major Mart, Inc., Counter Defendant: Kaytie M. Pickett, Neville H. Boschert, JONES WALKER, LLP - Jackson, Jackson, MS.

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ORDER

HENRY T. WINGATE, UNITED STATES DISTRICT JUDGE.

This case features a dispute between plaintiff Major Mart, Inc. (" Major Mart" ), and defendants Mitchell Distributing Company, Inc. (" Mitchell Distributing" ), and Mitchell Beverage, LLC (" Mitchell Beverage" ) (collectively " Mitchell" ). Major Mart owns and operates eleven convenience stores in northern Mississippi. Mitchell is an Anheuser-Busch distributor. The core dispute here is whether Mitchell engaged in conduct violative of federal and state antitrust laws, aimed at Major Mart, an accusation that Mitchell denies.

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Before this court are nine motions: a Motion to Dismiss [docket no. 12], filed by Mitchell under the auspices of Rule 12(b)(6)[1] of the Federal Rules of Civil Procedure; a Motion for Summary Judgment [docket no. 86], filed by Mitchell pursuant to the authority of Rule 56 [2] of the Federal Rules of Civil Procedure; a Motion in Limine [docket no. 106], filed by Major Mart, to strike certain expert opinions of Greg Ellis and limit his expert testimony; a Motion in Limine [docket no. 107], filed by Major Mart, to strike certain expert opinions of William C. Myslinski and limit his expert testimony; a Motion in Limine [docket no. 108], filed by Major Mart, to strike certain expert opinions of Ralph J. Stephens and limit his expert testimony; a Motion for Summary Judgment [docket no. 113], filed by Mitchell Distributing as allowed by Rule 56 of the Federal Rules of Civil Procedure; a Motion to Strike Supplemental Trial Report of David C. Sharp [docket no. 118], filed by Mitchell; a Motion to Strike Jimmy Brown as a Potential Trial Witness [docket no. 119], filed by Mitchell; and a Motion in Limine to Exclude All Documents and Testimony Relating to Settlement Discussions [docket no. 121], filed by Mitchell.

Having reviewed the motions and their supporting documents, the court grants in part and denies in part the Motion to Dismiss [docket no. 12]. The court grants the Motion to Dismiss only as to Counts V and VI of the complaint.

The court grants in part and denies in part the Motion for Summary Judgment [docket no. 86]. The court grants the motion only as to the Robinson-Patman Act claim. The court denies the motion as to the Sherman Act claim, the Mississippi antitrust claim, and the tortious interference claim. The court also denies the Motion for Summary Judgment [docket no. 113].

The court grants the Motion in Limine [docket no. 106] to exclude the expert opinion of Greg Ellis; denies the Motion in Limine [docket no. 107] to exclude the expert opinions of William C. Myslinski; denies the Motion in Limine [docket no. 108] to exclude the expert opinion of Ralph J. Stephens; denies the Motion to Strike the Supplemental Trial Report of David C. Sharp [docket no. 118]; grants the Motion to Strike Jimmy Brown as a Potential Trial Witness [docket no. 119], and grants the Motion in Limine to Exclude All Documents and Testimony Relating to Settlement Discussions [docket no. 121].

I. BACKGROUND

Major Mart, is a Mississippi corporation with its principal place of business in Starkville, Mississippi. Its president is Gregory Sharp (" Sharp" ). Major Mart owns eleven " B-Quik" convenience stores in the following northeast Mississippi

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towns: West Point, Clay County; Columbus, Lowndes County; Starkville, Oktibbeha County; Saltillo, Lee County; Baldwyn, Lee County; and New Albany, Union County. Major Mart's B-Quik stores sell, inter alia, tobacco products, gasoline, and light wine and beer.

Mississippi has created a special format for distribution of light wine and beer. Each manufacturer must create sales territories within the state and name one licensed wholesaler to service that territory with the manufacturer's brand. Miss. Code Ann. § 27-71-349(1)[3]. The licensed wholesaler must sell the light wine or beer to retailers within the territory " without discrimination in service." Miss. Code Ann. § 27-71-349(2).[4]

Mitchell Distributing is a Mississippi corporation with its principal place of business in Meridian, Mississippi. Mitchell Distributing is a beer distributor licensed by the State of Mississippi to sell Anheuser-Busch beer in the following Mississippi counties: Winston County, Neshoba County, Kemper County, Scott County, Newton County, Lauderdale County, and Clarke County.

Mitchell Beverage is a Mississippi limited liability company that has its principal place of business in Meridian, Mississippi. Mitchell Beverage is licensed by the State of Mississippi to sell Anheuser-Busch beer in Prentiss County, the southern part of Tishomingo County, Union County, Lee County, Itawamba County, Chickasaw County, Monroe County, Clay County, Lowndes County, Oktibbeha County, and Noxubee County.

Manny Mitchell (" Manny" ) owns 30% of Mitchell Beverage. Manny Depo. at 15, docket no. 104, exh. 2. The remaining 70% is divided equally between two trusts held for the benefit of his son and daughter, Adam Mitchell (" Adam" )[5] and Emily Mitchell Athanas. Id. Adam serves as the President of Mitchell Beverage and Mitchell Distributing.

Major Mart claims to have sold Anheuser-Busch products in its retail stores for over thirty-two years. Prior to November 2008, the Anheuser-Busch wholesaler for the territory in which Major Mart did business was Cash Distributing Company. Major Mart claims it had a good working

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relationship with Cash Distributing Company. In November 2008, Mitchell became the Anheuser-Busch wholesaler in Major Mart's territory.

In September 2010, Major Mart claims that about 70-75% of its light wine and beer sales were Anheuser-Busch products. Customers, says Major Mart, would come to the B-Quik stores to purchase beer and subsequently would purchase other products such as gasoline, tobacco, and grocery items. Major Mart says that customers often have preferred beer brands, and they will not stay to buy other items if their preferred beer brand is not in stock.

In September 2010, the relationship between Major Mart and Mitchell began to deteriorate. Major Mart says Mitchell sent five different " Every Day Low Price" (" EDLP" ) sheets to Major Mart with differing prices. As a result of the confusing price sheets, Major Mart was unable to correctly price the Anheuser-Busch products and lost profit on its beer sales. Major Mart also asserts that Mitchell began overstocking the store with items that Major Mart did not request and charging prices different from prices charged at other stores. Mitchell, in contrast, claims that it gave accurate pricing information to Major Mart, but Major Mart ignored the updated pricing sheet and chose not to redo its pricing. Mitchell refused to compensate Major Mart for the alleged lost profits during this period.

As a result of the dispute with Mitchell, in late 2010 and early 2011, Major Mart made a business decision to provide additional display space to Mitchell's competitors, remove Anheuser-Busch displays and signs, and lower the prices on Mitchell's competitors' products. Although the cooler space allocation in five Major Mart stores remained the same, in the other stores Major Mart reduced the cooler space allocated to Anheuser-Busch products from approximately 55 percent to approximately 48 percent. As a result, Major Mart's sales of Coors and Miller beers increased.

In late September 2010, one of Major Mart's competitors sent an email to Mitchell, complaining that it was losing Coors and Miller business to Major Mart because of the pricing in the B-Quick stores. The competitor wanted to see if Mitchell could do anything about the situation. Mitchell claims that its members met to discuss the situation, but they ultimately chose to do nothing. Tony Carley Depo. at 65-69, docket no. 104, exh. 4. Major Mart's President, Sharp, however, claims he discovered that Mitchell's salesmen were entering the coolers and storeroom to inventory competitors' products. Sharp Depo. at 176-77,183-84, docket no. 104, exh. 1. As a consequence, in early November 2010, Major Mart informed Mitchell that Major Mart would conduct its own ordering and Mitchell's employees were not permitted in the storeroom. Id. 182-84.

Major Mart contends that Mitchell began retaliating against Major Mart. Major Mart claims that Mitchell was dissatisfied with the Anheuser-Busch shelf space in the B-Quik stores (approximately 50 percent) and wanted the shelving allocation to represent Anheuser-Busch products' market share (approximately 70 percent). Mitchell also wanted price parity with its competitors' products. Manny Depo. at 120, docket no. 104, exh. 2.

On April 11, 2011, Mitchell contacted Major Mart to inform it that Mitchell was changing its delivery days and cutting deliveries to most Major Mart stores to once per week. Major Mart asserts that Mitchell continued to provide multiple delivery days to Major Mart's competitors. Mitchell asserts that it made this change because of its twice annual evaluation of delivery routes. After evaluating the volume

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on the trucks, the number of stops the truck made, and the drive time, Mitchell determined that Major Mart was selling less Anheuser-Busch beer, and once-a-week deliveries would make more business sense for Mitchell.

On April 12, 2011, Major Mart's President, Sharp, emailed Mitchell complaining that once a week deliveries would fill up Major Mart's coolers and storerooms, leaving no room for competitor products. Friday deliveries, continued Major Mart, would leave the store without cold beer on the " best selling day of the week; " delivery personnel would have to take longer reviewing the accounts, thus hindering other venders from doing the same; and delivering so much beer at once would obstruct customers. Sharp also filed a discrimination complaint with Anheuser-Busch regarding the situation and threatened to file a complaint with the Mississippi Department of Revenue.

Sharp repeatedly contacted Mitchell regarding any new procedures for special orders and minimum case orders. On orders from Adam, no one responded to Sharp's emails. Tony Carley Depo. at 77, docket no. 104, exh. 4. On April 15, 2011, after Sharp received no answers to his questions, Sharp informed Mitchell that Major Mart was instituting special vendor procedures for Mitchell Beverage. Vendor hours were restricted to between 6:30 a.m. and 11:30 a.m.; the vendor truck had to be parked in a specific area; Mitchell could use only two carts in the store at a time; other vendors would have priority in servicing the account; Mitchell could not enter the store if another vendor was already servicing the account; and Mitchell had to remove all boxes or trash if the store had no recycling bin.

Manny, part owner of Mitchell, sent the following message to his son Adam after reading Major Mart's new vendor rules:

He is very close to getting on my last nerve.
We don't have to even service him if we choose not to.
Let me think on this.
We could conference in some of the guys if you want to get some creative thinking on it.
Or we could tell him to go screw himself.
He is spending lots of energy on this. Our non-answers are probably totally driving him crazy! He probably expects us to bow and serve him.
The more of this shit we can give him to write, the better, I think. What a nice guy he is . . .

Email, docket no. 101, exh. 33.

On April 18, 2011, Mitchell stopped delivering to Major Mart stores. Manny Depo. at 252-53, docket no. 104, exh. 2. Because Mitchell is the only wholesaler licensed to sell Anheuser-Busch products in the counties where Major Mart does business, Major Mart was without access to some of the market's best-selling beers (i.e. Budweiser and Bud Light). Major Mart asserts that Mitchell knew that its actions would result in sales losses and damage to customer loyalty.

On April 20, 2011, Major Mart filed for and obtained a Temporary Restraining Order to require Mitchell to resume its deliveries. Temporary Restraining Order, docket no. 121, exh. 2.

During the pendency of the Temporary Restraining Order, counsel for both Major Mart and Mitchell discussed a resolution to the delivery dispute. The parties seemingly reached a resolution to the dispute. Major Mart believed that Mitchell would provide two or more deliveries per week if Major Mart: (1) increased its prices on competing brands of beer to the same price as Anheuser-Busch products; (2) retracted

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the vendor procedures; and (3) reconsidered shelf space allocation for Anheuser-Busch. Brown Affidavit, docket no. 101, exh. 53.

On June 2, 2011, after Major Mart raised its prices on other beers and dismissed its action for preliminary and permanent injunction, Mitchell demanded that Anheuser-Busch's shelf allocations be increased to the pre-September 2010 levels by June 7, 2011. Sharp Depo. at 270-71, docket no. 104, exh. 1; Letter, docket no. 121, exh. 10. Mitchell claimed that an " immediate return of September 2010 shelving was required" in their agreement. Letter, docket no. 121, exh. 10. When Major Mart declined to reallocate its shelf space by June 7, 2011, Mitchell cut deliveries to one day a week for most of Major Mart's stores. Sharp Depo. at 275, docket no. 104, exh. 1; Email, docket no. 101, exh. 34. Because of limited storage space in the stores, Major Mart says it could not order as much Anheuser-Busch beer in one order unless it chose to cut back on competing brands of beer.

On June 13, 2011, after the agreement between Major Mart and Mitchell fell apart, Major Mart instituted a new set of vendor rules, including new delivery hours. Id. at 276-77; Email, docket no. 101, exh. 35. Adam advised his salesmen to go to the Major Mart stores at the regularly scheduled time and " if That [sic] doesn't fit in the time window then [Sharp] can either FAX in the order by 4pm or not get beer." Email, docket no. 101, exh. 35.

Mitchell also stopped providing sales velocity reports and business reviews, which Major Mart claims Mitchell still provided to Major Mart's competitors. When Major Mart asked about the reports, it received no reply. Tony Carley Depo. at 96-97, docket no. 104, exh. 4. Major Mart says it would use these reports when ordering beer from Mitchell, and without the reports it was more difficult for Major Mart to determine the amount to order.

Also, between June and September 2011, Major Mart began documenting sales coupons and promotional giveaways that Mitchell was providing to Major Mart's competitors. For example, some stores had text-to-win [6] and in-store drawings for Anheuser-Busch coolers, grills, golf bags, and foldable beach chairs. Some stores had coupons and mail-in rebates to give away with Anheuser-Busch beer purchases. Further, some stores received large Anheuser-Busch promotional displays and " freebies" (golf balls, beer koozies, and hats) to attract customers. Mitchell asserts that these promotional materials and coupons were provided only to stores where promotional displays were used. Major Mart, however, decided to remove the Anheuser-Busch promotional displays in in 2010.

In 2011, July 4th fell on a Monday, the usual day that Mitchell made its deliveries. Email, docket no. 101, exh. 38. Mitchell decided not to make deliveries during the holiday, which would require retailers, like Major Mart, that only receive once a week deliveries to order extra for the holiday and for the longer wait between deliveries. Id. Mitchell, however, did not tell Major Mart about the changed schedule until after Major Mart had ordered for the week. Id. As a result, Major Mart ran low on beer, and Mitchell failed to make deliveries on July 5, 2011 or July 6, 2011. Email, docket no. 101, exh. 39. When Sharp complained about the missed deliveries, Adam told his employees to ignore the email. Email, docket no. 101, exh. 40.

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Major Mart also began experiencing problems with " short-dated beer [7]." On July 7, 2011, after Mitchell finally delivered beer, Major Mart allegedly discovered several packages of beer that were forty to forty-six days old. Email, docket no. 101, exh. 41. Concerned about selling expired beer, Sharp contacted Mitchell, saying that he would prefer not to receive beer older than thirty days. Id. Sharp also claimed that he caught Mitchell's employees trying to " swap" short dated beer on their truck for " good product" in Major Mart stores. Id. Mitchell denied that it was intentionally sending short dated beer, claiming that it moves beer out of its warehouse on a " first in first out basis." [8] Email, docket no. 101, exh. 43. Mitchell also informed Major Mart that it would not allow Major Mart to pick specific code dates on beer.

Major Mart requested that Mitchell take away boxes and other trash after restocking the store. Mitchell claims that it does not provide that service. Major Mart, however, provided pictures of boxes stacked in Mitchell's trucks, along with packaging labels that contain the names of Major Mart's competitors. Sharp Affidavit, docket no. 101, exh. 54.

On July 25, 2011, Mitchell again stopped delivering to Major Mart stores due to conflicts with Major Mart and Sharp. Major Mart claims this resulted in a significant loss because its B-Quik stores were without popular brands of beer just as students were returning to college. Mitchell, however, resumed deliveries on August 2, 2011, after Major Mart's attorney sent Mitchell a demand.

When disputes continued, Major Mart filed suit in this federal court on September 16, 2011. On the part of Mitchell, Major Mart alleges monopolization, price discrimination, violation of state statutes, and tortious interference with business relations.

The parties' disputes have not stopped with the filing of this lawsuit. Major Mart claims that Mitchell has continued its attempt to disrupt Major Mart's business and punish Major Mart for refusing to allow Mitchell to control beer sales at its stores. On October 31, 2011, Mitchell quit putting price stickers on beer as it had done for years. Manny Depo. at 200-01, docket no. 104, exh. 2. Mitchell refused to allow Major Mart to price the beer during the check-in process, which required Major Mart to stock its own coolers and rotate the beer in its coolers. Sharp Depo. at 340-52, docket no. 104, exh. 1.

Major Mart states that Mitchell also would arbitrarily skip deliveries and take entire orders back to its warehouse. Id. 448. Mitchell also began delivering damaged products and out-of-date products to Major Mart stores in April 2012, says Major Mart. Manny Depo. at 205-06, docket no. 104, exh. 2. When Sharp complained, Adam ignored him. In an April 3, 2012 email, Manny wrote to Adam as follows:

I don't think it is right for us to continue to jump through his hoops.
We should maybe create some more of our own. Aren't we still working some stores twice? Let's cut him to once.
...
His volume continues to decline. I didn't think it could slide for this long.
He is such a small part of our business...for us to play these games with him is ridiculous.

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might be time to skip some deliveries...be late, just skip a day, etc.
or, quit selling him again and get dragged back into court.
...
What is his end game??
Does he ever think he will be a big deal to us?
He has to have hurt himself beyond repair with the sales losses and with the extra crap he puts us and his employees through.
His hate is costing him a lot.
It is a pain in the ass to us, but at least it is a minor irritant.
To him it is with him every waking moment.

Email, docket no. 101, exh. 50.

On April 26, 2012, Manny emailed Adam and suggested that he consider not emailing directly with Sharp and, instead, run all correspondence through the attorneys to increase Major Mart's legal fees. Email, docket no. 101, exh. 52. Manny also suggested that its lawyers might include in a letter the following: " It also seems clear that since your client represents around 1% of my clients business that he is not ever going to consider paying any money to settle this." Id.

Eventually, Major Mart felt the need to litigate in court these matters. After instructing its attorneys to draw up a twenty-eight page complaint, and later an amended complaint of thirty-one pages, Major Mart filed this lawsuit. The defendants answered with their thirty-nine page answer and counterclaim.

In brief, Mitchell's counterclaim alleged that Major Mart and Sharp had defamed Mitchell when they accused Mitchell of selling short-dated beer and accused Mitchell's employees of stealing beer from Major Mart's coolers. Mitchell also accused Major Mart and Sharp of tortious interference with business relations when they disparaged Mitchell's product. Mitchell further accused Major Mart and Sharp of conversion when they took down the Anheuser-Busch signs and displays, but failed to return them to Mitchell. Against Major Mart, Mitchell also claimed a breach of the covenant of good faith and fair dealing due to Major Mart's refusal to cooperate in Mitchell's attempts to provide beer. Against Sharp, Mitchell claimed tortious interference with a contract due to Sharp's alleged interference with the beer servicing contract between Mitchell and Major Mart.

On June 23, 2014, this court entered an agreed order of dismissal [docket no. 96] as to Mitchell's counterclaim. The parties asked for this dismissal after they reached a confidential agreement.

II. JURISDICTION

This court has subject-matter jurisdiction over this lawsuit pursuant to Title 28 U.S.C. § 1331 [9], commonly referred to as federal question jurisdiction. " To bring a case within the statute, a right or immunity created by the Constitution or laws of the United States must be an element, and an essential one, of the plaintiff's cause of action." Gully v. First Nat'l Bank, 299 U.S. 109, 112, 57 S.Ct. 96, 81 L.Ed. 70 (1936).

Plaintiff's complaint alleges claims arising under the Sherman Antitrust Act, Title 15 U.S.C. § § 1-7, and the Robinson-Patman Act, Title 15 U.S.C. § 13. Therefore, this court has subject-matter jurisdiction to hear those claims.

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Furthermore, pursuant to Title 28 U.S.C. § 1367(a)[10], this court has subject-matter jurisdiction to hear any state law claims that may be supplemental to the federal claims already alleged. This court considers plaintiff's state law claims sub judice to be supplemental to its federal law claims. Therefore, ...


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