FULTON - A lawsuit filed by a rival soft-drink company challenging Coca-Cola's exclusive "pouring rights" contract with Fulton City School District could have a dramatic impact on similar school-district contracts statewide.
State Education Commissioner Richard Mills' decision that Coca-Cola's contract with the Fulton district was valid has been challenged by American Quality Beverages and is now on appeal in the New York State Supreme Court in Albany.
Fulton City School District attorney Norman Gross and Assistant State Attorney General Stephen Kerwin both said the case is on hold until AQB files for a rescheduling, at which time a judge will be assigned to the case.
AQB attorney Ross E. Getman said he will soon file the appropriate papers with Supreme Court and arrange a trial date.
Getman maintains exclusivity provisions soft-drink manufacturers often require in "pouring rights" contracts with school districts are illegal and unenforceable.
If the court rules agrees with him, it could invalidate every "pouring rights" contract in New York state, Getman said.
According to Getman, if the Fulton City School District opts to sell other beverages, or stop selling soda on its property, it would not be reneging on its contract with Coca-Cola and would not have to pay back any of the $495,000 the district received from the company.
"Coca-Cola is trying to get 10 years of soda selling locked up," said Getman, who acknowledged his primary interest in challenging "pouring rights" contracts is to open school markets to his client's beverages.
The Fulton-Coca-Cola contract submitted to the court states no company other than Coca-Cola can sell in the school, even after school hours.
Getman said under stipulations now included in the Fulton-Coca-Cola contract, future school board members may be reluctant to cancel the contract because it is "front-loaded," meaning the district received money upfront - in this case, $495,000 - in exchange for agreeing to sell only Coca-Cola products.
If the district varies from these contractual obligations by selling other beverages or removing soft drinks in the next 10 years, the school board is required to return the $495,000 to Coca-Cola.
Fulton is one of the area's last districts to have a front-loaded contract, which is exactly why Getman and AQB chose the district for their challenge.
"Politically, any board would be reluctant to vote to stop selling the soda if they had to pay the money back," said Getman.
According to Auburn School District Business Manager Marianne O'Connor, Auburn has not signed pouring rights contracts with any beverage companies.
"We do have vending machines in the schools," O'Connor said, "but they are turned on after school and the proceeds benefit student organizations."
The Auburn School District has no plans to sign pouring rights contracts with any company, said O'Connor.
The Fulton City School District will not receive any additional money from Coca-Cola until it sells over 1.7 million units. Once it reaches that quota, the district will receive a 35-percent commission on bottled carbonated drinks, 30-percent for sports drinks, fruit drinks, and bottled waters, and 25-percent on sales of Minute Maid juices.
The district will receive the highest commission on the least healthful products, said Getman.
Getman argues a larger variety of drinks, including sports drinks like Z'lektra that AQB produces, results in better sales for all brands.
He also pointed out how unhealthy soda is and worries about schools pushing "sugar water" over beverages enriched with vitamins, like the kind his client produces.
Profits schools earn from selling soda do not outweigh costs of diseases, like diabetes and obesity in young people, linked to soda consumption, said Getman.
Getman argued the New York State Constitution and Education Law embody the principle that a school district may close the door to all outside organizations. But, he maintains, if it opens its doors, it must treat alike all organizations in the same category.
Thus, Getman believes, Fulton's contract with Coca-Cola is unconstitutional.
"Requiring booster clubs, parents, and members of the community using school property to purchase a product from a particular supplier violates the New York state Constitution," he said.
Fulton City School District attorney Norman Gross and Assistant State Attorney General Stephen Kerwin both said the case is on hold until AQB files for a rescheduling, at which time a judge will be assigned to the case.
AQB attorney Ross E. Getman said he will soon file the appropriate papers with Supreme Court and arrange a trial date.
Getman maintains exclusivity provisions soft-drink manufacturers often require in "pouring rights" contracts with school districts are illegal and unenforceable.
If the court rules agrees with him, it could invalidate every "pouring rights" contract in New York state, Getman said.
According to Getman, if the Fulton City School District opts to sell other beverages, or stop selling soda on its property, it would not be reneging on its contract with Coca-Cola and would not have to pay back any of the $495,000 the district received from the company.
"Coca-Cola is trying to get 10 years of soda selling locked up," said Getman, who acknowledged his primary interest in challenging "pouring rights" contracts is to open school markets to his client's beverages.
The Fulton-Coca-Cola contract submitted to the court states no company other than Coca-Cola can sell in the school, even after school hours.
Getman said under stipulations now included in the Fulton-Coca-Cola contract, future school board members may be reluctant to cancel the contract because it is "front-loaded," meaning the district received money upfront - in this case, $495,000 - in exchange for agreeing to sell only Coca-Cola products.
If the district varies from these contractual obligations by selling other beverages or removing soft drinks in the next 10 years, the school board is required to return the $495,000 to Coca-Cola.
Fulton is one of the area's last districts to have a front-loaded contract, which is exactly why Getman and AQB chose the district for their challenge.
"Politically, any board would be reluctant to vote to stop selling the soda if they had to pay the money back," said Getman.
According to Auburn School District Business Manager Marianne O'Connor, Auburn has not signed pouring rights contracts with any beverage companies.
"We do have vending machines in the schools," O'Connor said, "but they are turned on after school and the proceeds benefit student organizations."
The Auburn School District has no plans to sign pouring rights contracts with any company, said O'Connor.
The Fulton City School District will not receive any additional money from Coca-Cola until it sells over 1.7 million units. Once it reaches that quota, the district will receive a 35-percent commission on bottled carbonated drinks, 30-percent for sports drinks, fruit drinks, and bottled waters, and 25-percent on sales of Minute Maid juices.
The district will receive the highest commission on the least healthful products, said Getman.
Getman argues a larger variety of drinks, including sports drinks like Z'lektra that AQB produces, results in better sales for all brands.
He also pointed out how unhealthy soda is and worries about schools pushing "sugar water" over beverages enriched with vitamins, like the kind his client produces.
Profits schools earn from selling soda do not outweigh costs of diseases, like diabetes and obesity in young people, linked to soda consumption, said Getman.
Getman argued the New York State Constitution and Education Law embody the principle that a school district may close the door to all outside organizations. But, he maintains, if it opens its doors, it must treat alike all organizations in the same category.
Thus, Getman believes, Fulton's contract with Coca-Cola is unconstitutional.
"Requiring booster clubs, parents, and members of the community using school property to purchase a product from a particular supplier violates the New York state Constitution," he said.
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