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.

Caldwell Wholesale Co. LLC v. R.J. Reynolds Tobacco Co.

United States District Court, W.D. Louisiana, Shreveport Division

May 11, 2018

CALDWELL WHOLESALE COMPANY, L.L.C.
v.
R.J. REYNOLDS TOBACCO COMPANY

          HORNSBY MAGISTRATE JUDGE.

          MEMORANDUM RULING

          S. MAURICE HICKS, JR., CHIEF JUDGE.

         Before 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 GRANTED.

         I. BACKGROUND

         Caldwell 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.

         In 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 ¶ 8.

         Caldwell 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.

         Once 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.

         From 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 ¶ 21.

         In 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.

         Approximately 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. See id.

         Further, 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.

         In the 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.

         II. ...


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.