Bulova Watch Co. v. Robinson Wholesale Co., 50263

• Decision Date: 04 April 1961
• Docket Number: No. 50263,50263
• Citation: 252 Iowa 740,108 N.W.2d 365
• Parties: BULOVA WATCH COMPANY, Inc., Appellant, v. ROBINSON WHOLESALE CO. and Robinson Wholesale, Inc., of Davenport, Appellees.
• Court: Iowa Supreme Court

Page 365

108 N.W.2d 365

252 Iowa 740

BULOVA WATCH COMPANY, Inc., Appellant, v. ROBINSON WHOLESALE CO. and Robinson Wholesale, Inc., of Davenport, Appellees.

No. 50263.

Supreme Court of Iowa.

April 4, 1961.

Holliday, Miller & Stewart, by William Wimer and Joseph B. Joyce, Des Moines, for appellant.

Lappen & Kramer, Des Moines, for appellees.

SNELL, Justice.

This is an appeal from a decision by Polk District Court holding unconstitutional the nonsigner provisions of the Iowa Fair Trade Act, Chapter 550, Code, 1958, I.C.A.

We have before us the record, duly settled in the trial court, and appellant's brief and argument. We have not been favored by any brief or argument, written or oral, by appellees. We mention this only in explanation of our difficulty and intend no reflection upon counsel for appellees as we are advised they have refrained from further defense of the case on instructions from their clients.

Without knowing the reasons for this lack of interest, it would be improper for us to assume it is solely because of loss of confidence in their position as sustained by the trial court.

Plaintiff, Bulova Watch Company, Incorporated, a New York corporation not qualified or authorized to transact business in Iowa, brought this action under the provisions of Chapter 550, Code, 1958, I.C.A., commonly called the Iowa Fair Trade Act, to restrain defendants from advertising for sale or selling plaintiff's products at prices less than those stipulated in contracts entered into under the Act.

The commodities involved bear the label, trade-mark, brand and name of plaintiff. It is producer and owner of such commodities and products and all are in fair and open competition with products and commodities of the same general class produced by others. In the main, they are men's and ladies' watches.

Subsequent to enactment of the Iowa Fair Trade Act, but prior to the acts complained of herein, plaintiff had entered into agreements with other retailers in Iowa providing that said retailers would not, within the State, advertise, offer for sale, sell or resell any such commodities of plaintiff at less than the prices set forth in its retail price list.

There are no fair trade contracts between plaintiff and defendants or between plaintiff and defendants' suppliers.

Bulova watches have been sold by defendants for less than the fair trade price established plaintiff. Defendants admit the volume of such sales totaled $35,000 to $40,000. These watches were obtained from distributors and not by direct purchase from plaintiff.

Frequent violation of the fair trade price schedule of plaintiff by retailers other than defendants was shown by the purchase of 16 Bolova watches at less than the established price between the commencement of this action and final submission in district court.

The trial court dismissed the action against one of the original defendants and in this appeal plaintiff-appellant objects thereto, but we do not deem this very important as to the ultimate issue.

The trial court held the provisions of the Iowa statute unconstitutional as to nonsigners of fair trade agreements and dismissed the action.

We agree with the trial court.

The pertinent parts of the statutes with which we are concerned are as follows:

'550.1 Contracts as to selling price. No contract relating to the sale or resale of a commodity which bears, or the label or content of which bears, the trade-mark, brand, or name of the producer or owner of such commodity and which is in fair and open competition with commodities of the same general class produced by others shall be deemed in violation of any law of the state of Iowa by reason of any of the following provisions which may be contained in such contract:

'1. That the buyer will not resell such commodity except at the price stipulated by the vendor.

'2. That the vendee or producer require in delivery to whom he may resell such commodity to agree that he will not, in turn, resell except at the price stipulated by such vendor or by such vendee.

'550.3 Actions for damages. Willfully 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 sections 550.1 and 550.2, 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.' (Emphasis supplied.)

Our Fair Trade Act, in essence, in section 1, legalizes as to both vendees and subvendees, resale price maintenance contracts for any commondity which bears the trademark, brand or name of the producer or owner of the commodity and which is in fair and open competition with commodities of the same general class produced by others; and in section 3 creates a statutory tort of unfair competition in knowingly and willingly 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 1, whether the person advertising or selling is or is not a party to such contract. With respect to resale price maintenance by contract, the Fair Trade Act not only affirms the Iowa judicial tolerance of binding immediate vendees but also goes beyond all common law development in this state to extend enforceability to contracts binding subvendees as well.

The validity of nonsigner provisions under Fair Trade Acts has been upheld by the Supreme Court of the United States. Probably the leading case is 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. It was held the acquisition of a trade-marked article with full knowledge of contractual price restruction imposed by the producer constitutes the buyer's assent to the protective price restriction even though the buyer was not a party to the contract containing the restriction.

An annotation in 60 A.L.R.2d on page 423 says: 'Summarization of the law regarding the validity, as a matter of state constitutional law, of 'nonsigner' provisions, must be prefaced with the caveat that decisions in various jurisdictions are not merely opposed in result, but are complately irreconcilable. On virtually every conceivable state constitutional question, there is strong authority on both sides. It may be of value to note that with the disappearance of the depressed economic conditions out of which the fair trade statutes arose, there has been a growing tendency to find state constitutional defects in the nonsigner provisions.'

In a great number of jurisdictions in which nonsigner provisions have been tested against state constitutional guarantees, the nonsigner provisions have been upheld. What some writers call the minority view holds the nonsigner provisions are in fatal conflict with state constitutional guarantees. In some instances the attack was sustained on a basis not involved in the case at bar.

Some courts point out the restriction as to the resale price of commondities within the scope of the statute is not, under the terms of the statute, imposed after the acquisition of the commodity, and thus is not in derogation of an existing or established right. These courts hold that the restriction is a condition that is attached to property prior to its purchase, is known to the prospective purchaser and so is binding on the purchaser.

Among the cases holding fair trade statutes unconstitutional it is argued that for such a law to be upheld it is indispensable there be some semblance of a public necessity for it, and it must have some relation to public health, morals, safety or welfare.

The Indiana court said it was beyond the power of the legislature to make it possible for private parties, by contract, to make a law binding upon everyone who retailed the goods manufactured by one of the private parties. As to the contention that the Fair Trade Act did no more than give an additional property right in a trade-mark, the court said if this is to be done it must be accomplished pursuant to the constitution, and the state legislature had no right to delegate its legislative power to private persons, and could not even delegate to a governmental...