DOVER, Del. -- A Delaware judge has dismissed a shareholder lawsuit alleging that Coca-Cola Co. used its control over its largest bottler, Coca-Cola Enterprises (CCE), to maximize its profits at the expense of the bottler's shareholders, reported the Associated Press.
In an opinion handed down last week, Chancellor William Chandler III ruled that actions challenged by the International Brotherhood of Teamsters are expressly allowed under a 1986 master agreement between Coke and CCE, and are thus barred by a three-year statute of limitations.
Among other things, the plaintiffs alleged that Coca-Cola engaged in channel stuffing, pushing large volumes of concentrate to CCE to meet sales targets. They also claimed that Coca-Cola forced the bottler to revise a plan for its Rocky Mountain division that emphasized sales volume and resulted in a reduction in the bottler's projected profits.
It also claimed that Coca-Cola pushed for warehouse delivery, instead of direct delivery, of Powerade to Wal-Mart stores, apparently drawing the ire of the Teamsters and prompting a lawsuit that was dismissed.
Chandler noted that under Delaware law, the clock starts ticking for a plaintiff's cause of action at the moment of the alleged wrongful act, not when the actual harm is felt, even if the plaintiff is unaware of the wrong.
The plaintiffs have railed against particular actions that have occurred in the last three years, but those actions were the foreseeable results of a contract formed in 1986, the judge wrote.
Lawyers for Coca-Cola and the bottler argued that the Delaware lawsuit boiled down to disagreements over the business operations of CCE, which has about 80% of Coca-Cola's North American sales and about 20% of worldwide sales.
In his decision, Chandler said Coca-Cola, which owns about 35% of the bottler's shares, had every right under the 1986 contract to revise prices, terms of payment and other conditions in supplying the bottler with syrup and concentrate, and that those changes could take effect immediately upon notice to the bottler.
Plaintiffs have alleged only that Coke exercised its rights under the contract, wrote Chandler, noting that the 1986 agreement requires CCE to submit annual plans to Coca-Cola for its approval.
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