United States District Court, W.D. Louisiana, Shreveport Division
CALDWELL WHOLESALE COMPANY, L.L.C.
R.J. REYNOLDS TOBACCO COMPANY
HORNSBY MAGISTRATE JUDGE.
MAURICE HICKS, JR., CHIEF JUDGE.
this Court is a Motion to Dismiss (Record Document 17) filed
by Defendant, R.J. Reynolds Tobacco Company
(“RJR”). RJR seeks dismissal of the state law
Louisiana Unfair Trade Practices Act (“LUTPA”)
and tortious interference with business claims lodged against
it by Caldwell Wholesale Company, L.L.C.
(“Caldwell”). RJR seeks dismissal on the grounds
that Caldwell lacks standing to bring a LUTPA claim, both the
LUTPA and the tortious interference with business claims are
perempted/prescribed, and Caldwell has failed to allege facts
that would entitle it to relief as to both claims. Caldwell
opposes the Motion to Dismiss, rebutting each of RJR's
defenses. See Record Document 21. For the reasons
set forth below, the Motion to Dismiss is
is a wholesale distributor servicing retail customers in the
States of Louisiana, Texas, and Arkansas that has been in
business since 1953. See Record Document 5 at ¶
5, Amended Complaint. Caldwell purchased cigarettes and other
tobacco products directly from RJR, for resale to
Caldwell's retail customers, from 1959 until December
2004. Id. at ¶ 6. Like other tobacco
manufacturers, RJR offers reimbursement payments known as
“buydowns” to retailers selling RJR products.
Id. at ¶ 13. All “reporting”
wholesalers, including Caldwell, report all of their sales of
tobacco products to Management Science Associations, Inc.
(“MSA”). Id. at ¶ 14. The sales
data of wholesalers who are “on direct” with RJR
is reported by MSA to RJR. Based on that sales information,
RJR then issues buydown reimbursement payments to retailers
that have purchased RJR products. Id. at ¶ 15.
The eligibility of a wholesaler's invoices to retailers
for these buydown payments is critical to a wholesaler's
ability to price its products at a competitive level in the
market, as the amount of the buydown typically exceeds the
profit margin that a wholesaler makes on the sale of tobacco
products on a per unit basis. Id. at ¶16.
January 2003, Smith Wholesale Company, Inc., a Tennessee
wholesale distributor, filed suit against RJR in the United
States District Court for the Eastern District of Tennessee
seeking injunctive relief and asserting violations of
antitrust law based on RJR's allegedly discriminatory
pricing policies (the “Smith Litigation”).
Id. at ¶ 7. Ten months later, in November 2003,
Caldwell joined the Smith Litigation as one of the twenty
wholesaler plaintiffs asserting price discrimination and
other antitrust claims against RJR. See id. at
alleges that RJR terminated Caldwell's status as a direct
purchaser in December 2004 in retaliation for Caldwell's
participation in the Smith Litigation. See id. at
¶ 10. To support its theory, Caldwell contends that
RJR's decision to terminate Caldwell was based on the
misperception that Caldwell's President, Ken Caldwell,
played a role in organizing the Smith Litigation and
encouraging the participation of other wholesalers. See
id. at ¶ 11. This allegation is based on Ken
Caldwell serving as President of the American Wholesale
Marketers Association (“AWMA”), just prior to the
commencement of the Smith Litigation. See id. at
¶ 9. However, Caldwell asserts that Ken Caldwell's
tenure as President of the AWMA concluded before the Smith
Litigation was instituted, by other wholesalers, and more
than a year before Caldwell joined the suit. See id.
at ¶ 12.
Caldwell lost its direct purchaser status with RJR, RJR
refused to sell its products directly to Caldwell. See
id. at ¶ 10. Therefore, Caldwell was forced to
purchase RJR products from an intermediary to resell them to
Caldwell's retailer-customers, who must stock RJR
products to satisfy consumer demand. See id.
Furthermore, when RJR terminated Caldwell's direct status
in December 2004, it also stopped honoring Caldwell invoices
for buydown purposes. See id. at ¶ 17. In other
words, since December 2004 RJR has declined to pay buydowns
to retailers for any RJR products purchased from Caldwell.
See id. However, Caldwell contends that a wholesale
distributor does not have to be on direct-buying status with
RJR to have its invoices honored for buydown purposes.
See id. at ¶ 18. Caldwell alleges that although
RJR refuses to reimburse anyone for products purchased from
Caldwell, RJR issues buydown reimbursements for RJR products
sold by many other wholesalers who, like Caldwell, are not on
direct-buying status. See id.
the time RJR terminated its direct buying contract with
Caldwell in 2004 until now, several events have taken place
in the tobacco industry that have adversely impacted
Caldwell's business. In May 2006, RJR's parent
company, Reynolds American, Inc., acquired Conwood, the maker
of Grizzly brand moist snuff. Id. at ¶ 19. At
that time, Grizzly was Caldwell's best-selling brand of
moist snuff. Id. at ¶ 20. As a result of the
Conwood acquisition, purchases of Grizzly moist snuff, and
all other Conwood products, from Caldwell were no longer
eligible for buydowns as of May 2006. Id. at ¶
order to remedy this negative impact, in February 2011,
Caldwell approached RJR to ask whether RJR would consider
again honoring Caldwell invoices for buydown purposes, since
the loss of business resulting from RJR's refusal to
honor Caldwell's invoices for buydowns was beginning to
threaten the viability of Caldwell's business. See
id. at 22. Caldwell did not ask RJR to restore its
direct purchasing status. Id. at ¶ 23.
Caldwell's request was only that RJR accept Caldwell
invoices for purposes of buydown payments to retailers, as
RJR does with respect to other, similarly-situated non-direct
wholesalers. See id. Caldwell representatives met
with RJR representative, Stan Rogers (“Rogers”),
to discuss Caldwell's request. Id. at ¶ 24.
After that meeting, in conjunction with RJR's evaluation
of the request, Caldwell provided customer sales information
requested by RJR. Id. at ¶ 25. Caldwell also
authorized MSA to release Caldwell's proprietary sales
information to RJR. Id. at ¶ 26. RJR
subsequently denied Caldwell's request to honor Caldwell
invoices for buydown purposes by letter dated June 7, 2011.
Id. at ¶ 27. The only stated reason for
RJR's decision was that “distribution of R. J.
Reynolds tobacco products would not be improved by putting
[Caldwell] on the Data Reporting Program.” Id.
three and a half years later, Caldwell made another
essentially identical request, again asking RJR to consider
honoring Caldwell invoices for buydown purposes, as it had
done for forty-five years until 2004. Id. at 28. On
June 18, 2014, Caldwell representatives met with RJR
representatives, Kecalf Bailey (“Bailey”), to
discuss this second request. Id. at 29. After the
meeting, Caldwell again provided RJR with customer sales
information requested by RJR and authorized MSA to release
Caldwell's sales information to RJR. Id. at
¶ 30. RJR subsequently denied Caldwell's second
request to buydown RJR products sold by Caldwell by letter
dated October 3, 2014. Id. at ¶ 31. That letter
was substantively identical to the 2011 denial letter,
stating only that “distribution of R. J. Reynolds
tobacco products would not be improved by putting [Caldwell]
on the Data Reporting Program.” Id. At that
time, Caldwell alleges that nothing was different about
Caldwell's ability to distribute RJR products with
benefit of the buydown as compared to the forty-five years in
which RJR did honor Caldwell's invoices for buydowns.
Caldwell contends that part of the motivation for its second
request to RJR was the pending acquisition of Lorillard, Inc.
by RJR's parent company, Reynolds American, Inc. See
id. at ¶ 32. Reynolds American, Inc.'s
acquisition of Lorillard, Inc. was completed in June 2015.
Id. at ¶ 33. Lorillard, Inc. was the
manufacturer of Newport brand cigarettes and Newport is
Caldwell's second best-selling brand of cigarettes,
accounting for approximately fifteen percent (15%) of
Caldwell's cigarette sales as of June 2015. See
id. at ¶ 34. As a result of the Lorillard
acquisition, Newport cigarettes, and all other Lorillard
products, purchased from Caldwell were no longer eligible for
buydowns as of June 2015. See id. at ¶ 35.
tobacco industry, for the sake of efficiency and convenience,
retailer-customers prefer to purchase the products they sell
to consumers from a single wholesaler or as few wholesalers
as possible. See id. at ¶ 37. Therefore,
RJR's refusal to buydown products sold by Caldwell forces
many Caldwell customers to obtain RJR products from another
wholesaler since they cannot feasibly forego buydowns at the
expense of their profit margins. See id. at ¶
38. By forcing Caldwell customers to use multiple wholesalers
or suffer diminished profit margins, RJR has raised a
substantial impediment to Caldwell's ability to retain
customers. See id. at ¶ 39. As a result of
RJR's conduct, Caldwell alleges that it has lost the
entire business of certain customers who have switched to
another full-service wholesaler for all of their purchases.
See id. at ¶ 40. But for the conduct of RJR,
these customers would have remained with Caldwell. See
Id. at ¶ 41. Furthermore, Caldwell alleges that as
a result of RJR's conduct, Caldwell has also lost a
portion of the business of certain customers, who now
purchase RJR products from other wholesalers. See
id. at ¶ 42. But for the conduct of RJR, these
customers would purchase RJR products from Caldwell. See
id. at ¶ 43. Lastly, Caldwell contends that
RJR's conduct has substantially impeded Caldwell's
efforts to acquire new customers. See id. at ¶
44. Customers that would have purchased some or all of their
products from Caldwell but for the conduct of RJR have taken
their business elsewhere to the substantial detriment of
Caldwell. See id. at ¶ 45. These lost sales and
business opportunities have continued to occur, on an ongoing
basis, since December 2004, when RJR initially took Caldwell
off direct and stopped buying down RJR products purchased
from Caldwell, to the present, but have reached a point since
the Lorillard acquisition that has caused Caldwell to
conclude it cannot indefinitely sustain its business as the
lost customers and lost business continue to increase.
See id. at ¶ 46.