Federal Cartridge Corp. v. Helstrom

• Citation: 202 Or. 557,276 P.2d 720
• Parties: FEDERAL CARTRIDGE CORPORATION, a corporation, Appellant, v. Henning HELSTROM, doing business under the assumed name and style of Foster Sporting Goods, Respondent.
• Decision Date: 24 November 1954
• Court: Supreme Court of Oregon

Page 720

276 P.2d 720

202 Or. 557

FEDERAL CARTRIDGE CORPORATION, a corporation, Appellant, v. Henning HELSTROM, doing business under the assumed name and style of Foster Sporting Goods, Respondent.

Supreme Court of Oregon, En Banc.

Argued before Department 1 on April 22, 1954.

Reargued before court in Banc and submitted Nov. 10, 1954.

Decided Nov. 24, 1954.

Cleveland C. Cory, Portland, argued the cause for appellant. With him on the briefs were Hugh L. Biggs, and Hart, Spencer, McCulloch, Rockwood & Davies, Portland.

Bartlett F. Cole and R. R. Bullivant, Portland, argued the cause and filed briefs for respondent.

Herman T. Van Mell, Chicago, Ill., Stanley A. Weigel, San Francisco, Cal., and Nicholas Jaureguy, Portland, filed a brief for Sunbeam Corp. as amici curiae, urging reversal.

TOOZE, Justice.

This is a suit for an injunction and for damages, brought by plaintiff Federal Cartridge Corporation against Henning Helstrom, dba Foster Sporting Goods, as defendant. Decree was entered in favor of defendant, and plaintiff appeals.

Plaintiff is the manufacturer of certain shotgun shells which are sold in the state of Oregon and elsewhere, and which bear plaintiff's exclusive registered trademarks and brand names of 'Hi-Power' and 'Monark'. Acting pursuant to the provisions of §§ 43-401 to 43-404, incl., O.C.L.A., ORS 646.310 to 646.370, incl., commonly known as the 'Fair Trade Law', plaintiff entered into written agreements with wholesalers and retailers in and about the city of Portland and elsewhere in Oregon. All agreements were in form and substance the same. One of such agreements is that entered into between plaintiff and one Semler, of Portland, Oregon, on February 17, 1950, whereby Semler agreed not to advertise, offer for sale or sell any of plaintiff's products in any state having a Fair Trade Act 'at less than the applicable Minimum Resale Price then in effect for the Product advertised, offered for sale or sold.' Under said contracts, minimum retail prices at which such shotgun shells might be sold were stipulated.

On March 17, 1952, defendant, a merchant of Portland, Oregon, purchased at Tacoma, Washington, a large supply of such shotgun shells for the purposes of resale at retail within the state of Oregon. Defendant never entered into any contract with plaintiff; in other words, he is a nonsigner. During the year 1952, both prior to and following the filing of the complaint in this suit (October 17, 1952), defendant advertised, offered for sale, and sold such shotgun shells at retail for less than the stipulated minimum retail prices established under said contracts. Prior to the commencement of this suit, plaintiff gave notice to defendant of the existence of its Oregon Fair Trade agreements and the stipulated resale prices thereunder.

In its complaint plaintiff prayed for injunctive relief against the actions of defendant, and for damages for sales made by defendant subsequent to July 14, 1952.

July 14, 1952, marks the date of the enactment by Congress of the Federal Fair Trade Act, as amended, McGuire Act: 66 Stat. 632, 15 U.S.C.A. § 45.

The principal question for decision on this appeal is whether a nonsigner of the fair trade agreements entered into by plaintiff, who knowingly advertises and sells a fair-traded commodity may claim an absolute immunity from sanctions of the Oregon Fair Trade Law because the commodity which is sold in interstate commerce was purchased by him for purposes of resale prior to the date of the enactment of the McGuire Act, supra.

Section 43-401, so far as material to the problem before us, reads as follows:

'No contract relating to the sale or resale of a commodity which bears, or the label or container of which bears or the vending equipment through which such commodity is sold bears, the trade-mark, brand or name of the producer or distributor of such commodity and which commodity is in free and open competition with commodities of the same general class produced or distributed by others shall be deemed in violation of any law of the state of Oregon by reason of any of the following provisions which may be contained in such contract:

'(1) That the buyer will not resell such commodity at less than the minimum price stipulated by the seller.

'(2) That the buyer will require of any dealer to whom he may resell such commodity an agreement that he will not, in turn, resell at less than the minimum price stipulated by the seller.

'(3) That the seller will not sell such commodity:

'(a) To any wholesaler, unless such wholesaler will agree not to resell the same to any retailer unless the retailer will in turn agree not to resell the same except to consumers for use and at not less than the stipulated minimum price, and such wholesaler will likewise agree not to resell the same to any other wholesaler unless such other wholesaler will make the same agreement with any wholesaler or retailer to whom he may resell; or

'(b) To any retailer, unless the retailer will agree not to resell the same except to consumers for use and at not less than the stipulated minimum price.'

Section 43-402, O.C.L.A., provides:

'Wilfully and knowingly advertising, offering for sale or selling any commodity at less than the price stipulated in any contract entered into pursuant to the provisions of section 43-401, whether the person so advertising, offering for sale or selling is or is not a party to such contract, is unfair competition and is actionable at the suit of any person damaged thereby.' (Italics ours.)

Oregon's Fair Trade Law was adopted pursuant to the authority attempted to be conferred by Congress in the adoption by it of the Miller-Tydings Amendment to the Sherman Anti-Trust Act of July 2, 1890, 50 Stat. 693, 15 U.S.C.A. 1.

Based upon the decision of the United States Supreme Court in Old Dearborn Distributing Co. v. Seagram-Distillers Corp., 299 U.S. 183, 57 S.Ct. 139, 81 L.Ed. 109, 106 A.L.R. 1476, we held the Fair Trade Law of this state to be constitutional. Borden Co. v. Schreder, 182 Or. 34, 37, 185 P.2d 581.

In 1951 the United States Supreme Court again considered a state fair trade act as it applied to nonsigners of fair trade agreements. Schwegmann Bros. v. Calvert Distillers Corp., 341 U.S. 384, 71 S.Ct. 745, 95 L.Ed. 1035.

In that case Mr. Justice Douglas, speaking for the majority of the court, said, 341 U.S. 389, 71 S.Ct. 748:

'It should be noted in this connection that the Miller-Tydings Act expressly continues the prohibitions of the Sherman Act against 'horizontal' price fixing by those in competition with each other at the same functional level. Therefore, when a state compels retailers to follow a parallel price policy, it demands private conduct which the Sherman Act forbids. See Parker v. Brown, 317 U.S. 341, 350, 63 S.Ct. 307, 313, 87 L.Ed. 315. Elimination of price competition at the retail level may, of course, lawfully result if a distributor successfully negotiates individual 'vertical' agreements with all his retailers. But when retailers are forced to abandon price competition, they are driven into a compact in violation of the spirit of the proviso which forbids 'horizontal' price fixing. A real sanction can be given the prohibitions of the proviso only if the price maintenance power granted a distributor is limited to voluntary engagements.'

As to nonsigners, the Supreme Court held that the provisions of the fair trade law of Louisiana which sought to bind them to the fair trade agreements were invalid.

In 1951 the validity of Oregon's Fair Trade Law, as applied to nonsigners, came before this court for decision. In Lambert Pharmacal Co. v. Roberts Bros., 192 Or. 23, 233 P.2d 258, we held, on the authority of the Schwegmann case, that plaintiff's price resale maintenance activities were illegal per se, as being in violation of the provisions of the Sherman Anti-Trust Act. In discussing the effect of the Schwegmann case. Mr. Justice Lusk, in speaking for the court, said, at page 27 of 192 Or., at page 260 of 233 P.2d:

'On May 21, 1951, * * * the Supreme Court of the United States in Schwegmann Brothers v. Calvert Distillers Corp. and Schwegmann Brothers v. Seagram Distillers Corp. , 71 S.Ct. 745, 95 L.Ed. [1035], held, three judges dissenting, that this was a misconception; that the Miller-Tydings Amendment only removed the taint of illegality from contracts or agreements prescribing minimum resale prices, not from efforts to force nonsigners to observe such prices; and that an attempt of two distributors of whiskey and gin to compel by injunction a New Orleans retailer, a nonsigner, to sell their products at not less than the minimum resale prices must fail because resale price maintenance by notice is a violation of the Sherman Act.'

In the light of these two decisions, it is manifest that at the time of the adoption of Oregon's Fair Trade Law, the provisions thereof respecting nonsigners were in violation of the Sherman Anti-Trust Act and, therefore, were invalid and void.

The purpose of the McGuire Act was to overcome the objections to the fair trade laws as they applied to nonsigners, and as determined in the Schwegmann case. It is stated in the McGuire Act:

'It is the purpose of this Act to protect the rights of States under the United States Constitution to regulate their internal affairs and more particularly to enact statutes and laws and to adopt policies, which authorize contracts and agreements prescribing minimum or stipulated prices for the resale of commodities and to extend the minimum or stipulated prices prescribed by such contracts and agreements to persons who are not parties thereto.' (Italics ours.) 15 U.S.C.A. § 45 note.

We note that in subd. (5) of § 5(a) of the McGuire Act, the prohibitions of the Sherman Act against 'contracts or agreements providing for the establishment of maintenance of minimum or stipulated resale prices on any commodity referred to in paragraph (2) of this subsection,...