Cal-Dak Co. v. Sav-On Drugs, Inc.

• Decision Date: 17 March 1953
• Docket Number: CAL-DAK,SAV-ON
• Citation: 254 P.2d 497,40 Cal.2d 492
• Court: California Supreme Court
• Parties: CO. v.DRUGS, Inc. L. A. 22168.

Page 497

254 P.2d 497

40 Cal.2d 492

CAL-DAK CO. v. SAV-ON DRUGS, Inc.

L. A. 22168.

Supreme Court of California, in Bank.

March 17, 1953.

Landels & Weigel, O'Connor & O'Connor, Los Angeles, and Stanley A. Weigel San Francisco, for appellant.

Wright, Wright, Green & Wright, Loyd Wright and Herschel B. Green, Los Angeles, for respondent.

CARTER, Justice.

Plaintiff appeals from an order denying its application for a preliminary injunction in an action seeking injunctive relief and damages.

Plaintiff is a California corporation engaged in the manufacture and sale of clothes baskets under the trade name 'Sav-Ur-Bak Clothes Basket.' Defendant is a California corporation engaged in this state in the operation of retail drug stores. Defendant bought some of the clothes baskets from plaintiff's jobber in this state and has offered them for sale at retail in its stores at prices below the retail price fixed by plaintiff in agreements with its jobbers. Plaintiff commenced this action asking for an injunction and alleged that it had suffered damages because of defendant's conduct. Its application for a preliminary injunction was denied.

It is clear according to plaintiff's complaint that defendant's acts in offering the baskets for sale below the price fixed is a violation of the Fair Trade Act, Bus. & Prof. Code, § 16900 et seq., for thereunder a contract relating to the resale of a commodity which bears a trade mark may provide that the buyer will not resell except at the price stipulated by the vendor. ¹ And the violation of the contract is unfair competition and actionable even though the violator is not a party to the contract did not sign it. ² Defendant is not a party to the contract between plaintiff and its jobber.

Defendant, however, invokes the Sherman Anti-Trust Act, 15 U.S.C.A. § 1, as invalidating such contracts and urges that the Miller-Tydings amendment to that act ³ purporting to exempt such contracts from the Sherman Act does not extend to nonsigners as interpreted by the United States Supreme Court in Schwegmann Bros. v. Calvert Distillers Corp., 341 U.S. 384, 71 S.Ct. 745, 95 L.Ed. 1035. It was held in that case that where interstate commerce is involved such contracts violate the Sherman Act and that the Miller-Tydings amendment thereto, while exempting the parties to the contract from the Sherman Act, does not extend to non-signers of the contract. Hence the state Fair Trade Act embracing nonsigners can have no application where interstate commerce is involved. The sole issue presented on the application for a preliminary injunction was, therefore, whether interstate commerce was involved, thus making the federal statutes applicable.

On this question, as above shown, the baskets were manufactured in California by plaintiff, a California corporation, and were sold by plaintiff to its jobber in this state and its jobber sold and delivered them to defendant, who offers them for retail sale, all in this state. There are additional factors, however, as appears from defendant's answer where it is alleged: '* * * plaintiff's said clothes baskets are sold by jobbers throughout the United States. That said jobbers own and operate their establishments within and without the State of California. That a great majority of plaintiff's said clothes baskets are sold to Jewel Tea Company in Chicago, Illinois. That the said Jewel Tea Company sells plaintiff's said clothes baskets throughout the United States. That plaintiff maintains an office and is conducting business in the City of Chicago, State of Illinois. That in the purchase of materials used by plaintiff in the manufacture of its clothes baskets outside the State of California, the shipment by plaintiff of its said clothes baskets to its office and place of business in Chicago, Illinois, the shipment by plaintiff of said clothes baskets to jobbers in Illinois and in other states and in the transaction of business in its Chicago office, plaintiff has been since 1937 and is now continuously engaged in interstate commerce.'

The application for a preliminary injunction was denied on August 10, 1951. This appeal was taken from the order of denial. Thereafter Congress amended, approved July 19, 1952, the Miller-Tydings amendment to the Sherman Act to exempt from the latter, state laws such as ours giving validity to price fixing contracts and making them binding on nonsigners; it in effect nullifies the Schwegmann case. ⁴ It is not disputed that under the 1952 law non-signers are bound by our state Fair Trade Act, supra, and thus thereunder a preliminary injunction could have been properly granted regardless of whether or not interstate commerce is involved. This is true because a preliminary injunction (here we have an order denying such an injunction) is aimed at preventing future conduct conduct after the issuance of the injunction and likely to occur during the pendency of the action. 'Relief by injunction operates in futuro, and the right to it must be determined as of the date of decision by an appellate court.' American Fruit Growers v. Parker, 22 Cal.2d 513, 515, 140 P.2d 23, 24; also Bautista v. Jones, 25 Cal.2d 746, 754, 155 P.2d 343; Thompson v. City of Los Angeles, 82 Cal.App.2d 45; Tulare Irr. Dist. v. Lindsay-Strathmore Irr. Dist., 3 Cal.2d 489, 45 P.2d 972; Brophy v. Employers Retirement System, 71 Cal.App.2d 455, 162 P.2d 939; Diederichsen v. Sutch, 47 Cal.App.2d 646, 118 P.2d 863.

Defendant asserts, however, that it does not intend to do the acts charged during the pendency of the action and there is nothing to show it does; hence a preliminary injunction is not proper. The application for the injunction was made and decided upon the verified pleadings of the parties and while plaintiff alleged that defendant threatened to and would continue his improper conduct, that was denied by defendant and the parties rested their cases and the trial court based its denial of the injunction solely on the ground that, as interstate commerce was involved, no injunction would lie in any event under the Sherman Act, the Miller-Tydings amendment and the Schwegmann case, which as we have seen is no longer the crucial issue. The trial court has never passed on the question of whether defendant threatened to continue its acts during the pendency of the action. Hence the appropriate procedure is to reverse the order denying the preliminary injunction and remand the case to the trial court for such proceedings as are proper in the light of the 1952 change in the law.

There still remains in the case the question of the damages claimed by plaintiff by reason of defendant's alleged improper conduct prior to the 1952 change in the law, which, as above noted, requires the determination as to whether or not interstate commerce was involved, because if it was, defendant's conduct would not have been improper. Those questions are not...