Burroughs Wellcome & Co. (U.S.A.), Inc. v. Johnson Wholesale Perfume Co., Inc.

• Decision Date: 17 February 1942
• Court: Connecticut Supreme Court
• Parties: BURROUGHS WELLCOME & CO. (U.S.A.), Inc. v. JOHNSON WHOLESALE PERFUME CO., Inc.

24 A.2d 841

BURROUGHS WELLCOME & CO. (U.S.A.), Inc.

v. JOHNSON WHOLESALE PERFUME CO., Inc.

Supreme Court of Errors of Connecticut.

Feb. 17, 1942.

Appeal from Superior Court, Hartford County; Simpson, Judge.

Action by Burroughs Wellcome & Co. (U.S.A.), Inc., against the Johnson Wholesale Perfume Company, Inc., under the Fair Trade Act for an injunction forbidding the defendant from selling plaintiff's products at cut-rate prices. From a judgment in favor of plaintiff, defendant appeals.

No error.

Before MALTBIE, C. J., and AVERY, BROWN, JENNINGS, and ELLS, JJ.

Herman M. Levy and Burton N. Levey, both of New Haven, for appellant.

William F. Weber, of New York City, and Cornelius D. Shea, of Hartford, for appellee.

AVERY, Judge.

This action was brought by the plaintiff under the Fair Trade Act of this state, Cum. Supp. 1939, § 921e, seeking an injunction and damages. It bases its cause of action on subsection (f) of the act, which reads as follows: "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 this chapter, 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." The trial court rendered judgment for the plaintiff.

The facts as stated in the finding, with such corrections as we make, are as follows: The plaintiff is engaged in the production, distribution and sale of various drugs, medicinal and toilet products bearing its registered trade-marks, brands and name, "Burroughs-Wellcome & Co. (U.S. A.) Inc.," and is the sole owner of the right to use the trade-marks identifying its products and preparations, which are articles of standard quality, sold throughout the state in fair and open competition with products of the same general class produced and sold by others. The defendant carries on a wholesale business in which it manufactures and sells cosmetics and sundry articles to retail stores, and it also operates a chain of retail stores in Connecticut where such articles are sold. One store operated by the defendant has a prescription department. Other stores of the defendant are in competition with stores selling similar goods except as regards compounding prescriptions and the sale of narcotics and the like for which a special license is required. The defendant in its wholesale department does not possess proper federal and state licenses, particularly narcotic licenses, necessary to handle and distribute many of the plaintiff's products, but in other respects it is in competition with the wholesale dealers handling the plaintiff's goods in the state. The plaintiff sells only to certain designated wholesalers in this state. It does not make sales in this state directly to any retail distributors. It does sell directly to certain national chain drug organizations having retail outlets in this state, but all sales to such organizations are wholly consummated without the state. The defendant could and did purchase from the plaintiff's wholesalers in Connecticut on the same basis and at the same prices as other retailers similarly situated, and has at all times been able to obtain its adequate requirements from recognized wholesale distributors of the plaintiff located in this state within a reasonable time. The plaintiff declines to sell to the defendant either as a wholesaler or retailer and does not sell directly in Connecticut to any stores of the type maintained by the defendant. The plaintiff's refusal to sell its products to the defendant is in accordance with its general selling policy and has not been actuated by bad faith. The price at which the plaintiff sells to all wholesalers, including those which sell at retail in connection with their wholesale business, is the list price less 33 1/3, 15 and 5 per cent; the price charged retailers purchasing from wholesalers is the list price less 33 1/3 and 5 per cent; hospitals and charitable and governmental institutions are given the same rate as wholesalers; the sales by the plaintiff to chain store operators are at the same rate as those by wholesalers to retailers. The defendant's retail chain stores buy at the same prices and under the same conditions as other retail distributors in this state with whom they are in direct competition. The sale of the plaintiff's products is not charged with a public use and benefit. The plaintiff has entered into numerous contracts with many retailers throughout the state providing that the latter will not sell or advertise to sell the plaintiff's trade-marked products at prices less than the minimum prices specified in the contracts. These retail dealers buy the plaintiff's products through its recognized wholesalers and distributors in Connecticut. The defendant received notice from the plaintiff that it was operating, and had executed such contracts, under the Fair Trade Act, but the plaintiff refused to sell directly to the defendant. The defendant, with knowledge of the existence of these contracts, purchased, for the purpose of reselling, various of the plaintiff's products bearing its descriptive trademarks and brands, and advertised and sold at retail these products below the prices set forth in the contracts entered into by the plaintiff with its retail distributors in this state. Such sales did and will adversely affect the plaintiff's business and caused the plaintiff to lose sales. Upon these facts, the trial court rendered judgment enjoining the defendant from selling any of the plaintiff's trade-marked products bearing its registered trade-marks, brands and names at less than the prices stipulated in the plaintiff's Fair Trade contracts, from which the defendant has appealed.

The Connecticut statute is not essentially different from that of Illinois, the constitutionality of which was sustained in Old Dearborn Distributing Co. v. Seagram-Distillers Corporation, 299 U.S. 183, 194, 57 S.Ct. 139, 81 L.Ed. 109, 106 A.L.R. 1476. See Carroll v. Schwartz, 127 Conn. 126, 130, 14 A.2d 754. This the defendant concedes. It contends, however, that if a producer who takes advantage of the statute sells to certain customers but refuses to sell to others doing a like business, it is enabled to discriminate between them in a way which violates constitutional guarantees, and that, therefore, the statute in so far as it permits this to be done is unconstitutional. Related to this contention and subject to the same answer is the claim of the defendant that because the plaintiff refused to sell directly to the defendant, the plaintiff comes into court with unclean hands and is, therefore, not entitled to injunctive relief. A "trader or manufacturer, * * * carries on an entirely private business, and can sell to whom he pleases." United States v. Trans-Missouri Freight Ass'n, 166 U.S. 290, 320, 17 S. Ct. 540, 551, 41 L.Ed. 1007; United States v. Colgate & Co., 250 U.S. 300, 307, 39 S. Ct. 465, 63 L.Ed. 992, 7 A.L.R. 443; Great Atlantic & Pacific Tea Co. v. Cream of Wheat Co., 2 Cir, 227 F. 46, 48, 141 C.C.A. 594; McCune v. Norwich City Gas Co., 30 Conn. 521, 524, 79 Am.Dec. 278. All that the plaintiff refuses to do in this case is to sell directly to the defendant. It asks that the defendant, if it uses the plaintiff's good will to make sales, be...