Associated Perfumers, Inc. v. Andelman

• Decision Date: 02 May 1944
• Citation: 55 N.E.2d 209,316 Mass. 176
• Parties: ASSOCIATED PERFUMERS, Inc., v. ANDELMAN et al.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

316 Mass. 176

55 N.E.2d 209

ASSOCIATED PERFUMERS, Inc.,

v.ANDELMAN et al.

Supreme Judicial Court of Massachusetts, Suffolk.

May 2, 1944.

Bill in equity by Associated Perfumers, Inc., against Abe Andelman and Max Miller to enjoin the defendant Abe Andelman from engaging in business in violation of a written agreement between him and the plaintiff and to recover damages from him and from the other defendant, Max Miller, under a contract of guaranty. From adverse decrees, the defendants appeal.

Order in accordance with opinion.Appeal from Superior Court, Suffolk County; Fosdick, Judge.

Before FIELD, C. J., and LUMMUS, QUA, DOLAN, RONAN, and WILKINS, JJ.

S. C. Rand and C. Lee, both of Boston, for plaintiff.

J. L. Yesley and S. Andelman, both of Boston, for defendants.

DOLAN, Justice.

This is a bill in equity to enjoin the defendant Abe Andelman from engaging in business in violation of a written agreement between him and the plaintiff, and to recover damages from him and also from the other defendant, Max Miller, under a contract of guaranty. The defendants demurred to the bill of complaint and appealed from the overruling of the demurrers. The grounds of the demurrers are that the defendants were improperly joined in the suit; that the bill sets forth no ground for equitable relief, sets forth no claim with sufficient definiteness and is verbose and argumentative; and that the plaintiff has an adequate remedy at law.

The case was referred to a master who incorporated the pleadings in his report. The relevant facts found by him are these: The plaintiff is a Connecticut corporation having a usual place of business in New Haven, Connecticut. It is engaged in the manufacturer and wholesale distribution of branded drugs, medicines, cosmetics, and other articles usually offered for sale in drug stores, which articles it distributes in Massachusetts and in not less than thirteen other Atlantic seaboard States, and in the District of Columbia. In 1933 the plaintiff entered into a written contract with the Carroll Company, a Connecticut corporation, which operates a chain of retail cut-rate stores in the area above mentioned and sells therein at retail the wares manufactured and distributed by the plaintiff. The Carroll Company was the originator of the cut-rate chain store method of distribution of the products in question; it developed a distinctive store front and methods of display and merchandising which have been effective and have given the Carroll Company and its name a place of distinction in the retail patent medicine and cosmetic business. By the contract between the Carroll Company and the plaintiff, the Carroll Company licensed the plaintiff itself to operate or to grant to others sublicenses to operate ‘Carroll Delaer’ retail stores employing the name ‘Carroll’ in conjunction with the word ‘Dealer,’ and to employ the Carroll Company's distinctive store front, display and merchandising methods. The contract bound the plaintiff to exact of sublicensees an agreement that, when the Carroll Company should be required by any manufacturer whose products it sold in its own stores to maintain a minimum retail price on any items, the sublicensees should maintain the same retail price.

On May 27, 1938, the plaintiff entered into a written contract with the defendant Andelman granting him an exclusive license to operate a retail store in Winchester, Massachusetts, as a ‘Carroll Dealer,’ using the name ‘Carroll’ with the word ‘Dealer,’ and the aforementioned distinctive store front, methods of display and merchandising. The contract bound the defendant Andelman to purchase from the plaintiff $1,800 worth of its products or an amount equal to seven and one half per cent of his total retail sales per year; to carry only the plaintiff's products and those competing brands listed in a ‘Grey Book’ issued by the plaintiff, and no others; and to maintain the same prices on any items that the Carroll Company might be required to maintain in its stores by other manufacturers. The contract authorized the plaintiff to terminate the arrangement upon two weeks' notice in writing if the defendant Andelman should fail to purchase his stipulated quota of the plaintiff's products, and to terminate it forthwith upon written notice in the event of any other breach. In the event of termination of the contract for any reason, the defendant Andelman covenanted not to engage directly or indirectly in the manufacture, sale, or distribution of drugs, cosmetics, patent medicines, or the like, for two years after the termination of the agreement, in Maine, New Hampshire, Vermont, Massachusetts, Rhode Island, Connecticut, New York, New Jersey, Delaware, Maryland, Pennsylvania, Virginia, West Virginia, Kentucky, Indiana, the District of Columbia, and Florida, or in any town in any State in which the Carroll Company or a ‘Carroll Dealer’ might at such time be conducting a general retail cosmetic or patent medicine business. The contract was identical with contracts entered into between the plaintiff and about two hundred thirty-three other individuals and firms or corporations in the eastern portion of the United States.

The bill alleges that the defendant Andelman failed to purchase his agreed quota of merchandise; that he bought and sold products not contained in the ‘Grey Book’ despite complaints by the plaintiff and repeated promises by Andelman; and that he violated the price maintenance agreements despite complaints by the plaintiff and promises by Andelman. The bill further alleges, and the master found, that on August 4, 1941, the plaintiff sent Andelman a written notice of its intention to terminate the contract effective August 20, 1941, but that the defendant had continued after the latter date and was continuing to hold himself out to the public as a ‘Carroll Dealer,’ using the Carroll colors, store front, signs and displays and the Carroll name in the operation of his Winchester retail store.

The master also made the following findings: During the calendar years of 1939 and 1940 Andelman failed to purchase his agreed quota of merchandise from the plaintiff. On several occasions he sold certain items at prices less than the Carroll Company was required to maintain under the ‘Fair Trade’ law, despite complaints by the plaintiff and promises by Andelman. Between February, 1939, and August 1, 1941, Andelman purchased some $500 worth of merchandise not contained in the ‘Grey Book,’ some of which he sold. On complaint by the plaintiff in November, 1939, he promised to refrain from such practice in the future, which promise was not made in good faith and was not kept. The ‘Grey Book’ contained a list of substantially all articles of merchandise of wide sale and distribution in the drug and cosmetic business. Its purpose was to confine Carroll dealers to known articles and thus prevent them from dealing in unknown and inferior goods to the detriment of the Carroll system and Carroll dealers. There were sixty-eight Carroll franchise dealers in Massachusetts, thirty-three of whom were in the Greater Boston area. In addition, there were eleven stores owned and operated by the Carroll Company in the Commonwealth. The plaintiff did about four tenths of one per cent of the total annual dollar value of the cosmetic business done in Massachusetts. Andelman's violations of his contract were known generally to other Carroll dealers in Massachusetts who complained to the plaintiff and threatened to do likewise if he was not stopped. To permit him to carry on as a ‘Carroll Dealer’ would tend to promote unrest among authorized dealers in the area and tend to break down the entire system as well as to injure the good will of the plaintiff and of the Carroll Company.

Prior to entering into the contract in issue Andelman had been employed in other cut-rate stores, including a ‘Carroll Dealer’ store operated by his sister, and had been manager of two of the stores in the Allen chain, a firm whose methods of operation are similar to those of the Carroll system, so that the Carroll methods were well known to him as well as to many others.

Based on figures of other dealers similarly located, Andelman for the remainder of the year 1941 should have purchased from the plaintiff about $1,116.67 worth of goods, on which the plaintiff's profit, approximately forty-five per cent, would have amounted to $502.50. From August 20, 1941, to January 10, 1942, the last business day before the hearings, Andelman ‘either made a profit, or, without regard as to whether it was profit, extracted from said business' for his own use $2,475.88. Andelman owes the plaintiff the sum of $22.16 for merchandise bought of the plaintiff before August 20, 1941. The plaintiff claims no damages on account of injury to its good will or that of the Carroll Company, and consequently none was assessed.

The plaintiff prays for an injunction restraining Andelman from using the Carroll Company's type of store front, store interior, and merchandise display; from holding himself out to the public as a ‘Carroll Dealer’; from passing off the merchandise of other manufacturers as products of the plaintiff and as products generally found in Carroll stores; from engaging directly or indirectly in the manufacture, sale, or distribution of drugs, cosmetics, and the like, anywhere in the Commonwealth, or in such portions as the court deems equitable; and for damages from Andelman and from the guarantor Miller. An amended answer of the defendants alleges that the agreement and its restrictive covenant are against public policy and unreasonably in restraint of trade and are void; that there is lacking mutuality of obligations; and that there has been a failure of consideration on the part of the plaintiff and the Carroll Company. The master found these allegations untrue in so far as they be questions of fact.

The defendant filed three objections to the master's report and, at their request,...