319 U.S. 703 (1943), 593, Direct Sales Co. v. United States

Docket Nº:No. 593
Citation:319 U.S. 703, 63 S.Ct. 1265, 87 L.Ed. 1674
Party Name:Direct Sales Co. v. United States
Case Date:June 14, 1943
Court:United States Supreme Court

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319 U.S. 703 (1943)

63 S.Ct. 1265, 87 L.Ed. 1674

Direct Sales Co.


United States

No. 593

United States Supreme Court

June 14, 1943

Argued April 12, 1943




A mail order wholesale drug corporation made sales of morphine sulphate to a physician in unusually large quantities, frequently, and over an extended period.

Held, that the evidence, from which it could be inferred that the seller not only knew the physician was selling the drug illegally but intended to cooperate with him therein, was sufficient to sustain the seller's conviction of conspiracy to violate the Harrison Narcotic Act. United States v. Falcone, 311 U.S. 205, distinguished. P. 714.

131 F.2d 835 affirmed.

Certiorari, 318 U.S. 749, to review the affirmance of a conviction for conspiracy to violate the Harrison Narcotic Act. See also 44 F.Supp. 623.

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RUTLEDGE, J., lead opinion

MR. JUSTICE RUTLEDGE delivered the opinion of the Court.

Petitioner, a corporation, was convicted of conspiracy to violate the Harrison Narcotic Act.1 It challenges the sufficiency of the evidence to sustain the conviction. Because of asserted conflict with United States v. Falcone, 311 U.S. 205, certiorari was granted.

Petitioner is a registered drug manufacturer and wholesaler.2 It conducts a nationwide mail order business from Buffalo, New York. The evidence relates chiefly to its transactions with one Dr. John V. Tate and his dealings with others. He was a registered physician, practicing in Calhoun Falls, South Carolina, a community of about 2,000 persons. He dispensed illegally vast quantities of morphine sulphate purchased by mail from petitioner. The indictment charged petitioner, Dr. Tate, and three others, Black, Johnson, and Foster, to and through whom Tate illegally distributed the drugs, with conspiring to violate

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Sections 1 and 2 of the Act3 over a period extending from 1933 to 1940. Foster was granted a severance, Black and Johnson pleaded guilty, and petitioner and Dr. Tate were convicted. Direct Sales alone appealed. The Circuit Court of Appeals affirmed. 131 F.2d 835.

The parties here are at odds concerning the effect of the Falcone decision as applied to the facts proved in this case. The salient facts are that Direct Sales [63 S.Ct. 1267] sold morphine sulphate to Dr. Tate in such quantities, so frequently, and over so long a period it must have known he could not dispense the amounts received in lawful practice, and was therefore distributing the drug illegally. Not only so, but it actively stimulated Tate's purchases.

He was a small-town physician practicing in a rural section. All of his business with Direct Sales was done by mail. Through its catalogues, petitioner first made

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contact with him prior to 1933. Originally, he purchased a variety of pharmaceuticals. But, gradually, the character of his purchases narrowed, so that, during the last two years of the period alleged for the conspiracy, he ordered almost nothing but morphine sulphate. At all times during the period, he purchased the major portion of his morphine sulphate from petitioner. The orders were made regularly on his official order forms. The testimony shows the average physician in the United States does not require more than 400 one-quarter grain tablets annually for legitimate use. Although Tate's initial purchases in 1933 were smaller, they gradually increased until, from November, 1937, to January, 1940, they amounted to 79,000 one-half grain tablets. In the last six months of 1939, petitioner's shipments to him averaged 5,000 to 6,000 half-grain tablets a month, enough, as the Government points out, to enable him to give 400 average doses every day.

These quantity sales were in line with the general mail order character of petitioner's business. By printed catalogues circulated about three times a month, it solicits orders from retail druggists and physicians located for the most part in small towns throughout the country. Of annual sales of from $300,000 to $350,000 in the period 1936 to 1940, about fifteen percent by revenue and two-and-a-half percent by volume were in narcotics. The mail order plan enabled petitioner to sell at prices considerably lower than were charged by its larger competitors, who maintained sales forces and traveling representatives. By offering fifty percent discounts on narcotics, it "pushed" quantity sales. Instead of listing narcotics like morphine sulphate in quantities not exceeding 100 tablets, as did many competitors, Direct Sales for some time listed them in 500, 1,000, and 5,000 tablet units. By this policy, it attracted customers, including a disproportionately

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large group of physicians who had been convicted of violating the Harrison Act.

All this was not without warning, purpose, or design. In 1936, the Bureau of Narcotics informed petitioner it was being used as a source of supply by convicted physicians.4 The same agent also warned that the average physician would order no more than 200 to 400 quarter-grain tablets annually,5 and requested it to eliminate the listing of 5,000 lots. It did so, but continued the 1,000 and 500 lot listings at attractive discounts. It filled no more orders from Tate for more than 1,000 tablets, but continued to supply him for that amount at half-grain strength. On one occasion in 1939, he ordered on one form 1,000 half and 100 quarter grains. Petitioner sent him the 1,000, and advised him to reorder the 100 on a separate order form. It attached to this letter a sticker printed in red suggesting anticipation of future needs and taking advantage of discounts offered. Three days later, Tate ordered 1,000 more tablets, which petitioner sent out. In 1940, at the Bureau's suggestion, Direct Sales eliminated its fifty and ten percent discounts. But, on doing so, it translated its discount into its net price.

Tate distributed the drugs to and through addicts and purveyors, including Johnson, [63 S.Ct. 1268] Black, and Foster. Although he purchased from petitioner at less than two dollars,

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he sold at prices...

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