Central Shade Roller Co. v. Cushman

• Decision Date: 11 January 1887
• Citation: 143 Mass. 353,9 N.E. 629
• Parties: CENTRAL SHADE-ROLLER CO. v. CUSHMAN.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

143 Mass. 353

9 N.E. 629

CENTRAL SHADE-ROLLER CO. v. CUSHMAN.

Supreme Judicial Court of Massachusetts, Suffolk.

January 11, 1887

COUNSEL

J.B. Warner, for plaintiff.

The attempt to apply to this subject the rules which forbid a restraint of trade is without precedent. Morse Twist-drill Co. v. Morse, 103 Mass. 73; Taylor v Blanchard, 13 Allen, 370, 373; Vickery v Welch, 19 Pick. 523; Leather Cloth Co. v. Lorsont L.R. 9 Eq. 345; Printing, etc., Co. v. Sampson, L.R. 19 Eq. 462; Peabody v. Norfolk, 98 Mass. 452. The burden is upon the defendant to make it "plainly and obviously clear that the contract is against public policy; such being the burden upon a party who seeks to put a restraint upon the freedom of contract." Rousillon v. Rousillon, 14 Ch.Div. 351, 365; Phippen v. Stickney, 3 Metc. 384; Marsh v. Russell, 66 N.Y. 288; Stearns v. Barrett, 1 Pick. 443, 450; Morris v. Colman, 18 Ves. 437; Marsh v. Russell, 66 N.Y. 288; Wallis v. Day, 2 Mees. & W. 273. See Mitchel v. Reynolds, 1 P.Wms. 181; S.C. 1 Smith, Lead.Cas. 756; Gale v. Reed, 8 East, 80. An agreement to sell the entire product of the business to one party, who agrees to buy it, cannot possibly be a restraint. Schwalm v. Holmes, 49 Cal. 665; Long v. Towl, 42 Mo. 545; Wiggins Ferry Co. v. Chicago & A.R. Co., 73 Mo. 389; Ainsworth v. Bentley, 14 Wkly.Rep. 630; Perkins v. Lyman, 9 Mass. 521; Barfield v. Nicholson, 2 Sim. & S. 1; Stiff v. Cassell, 2 Jur. (N.S.) 348; Ingram v. Stiff, 5 Jur. (N.S.) 947.

The cases in which agreements to prevent competition have been adjudged illegal are usually those where the end is accomplished by a wholesale restraint of trade, as in contracts not to manufacture, or not to sell at all, or except by permission of an association. Hilton v. Eckersley, 6 El. & Bl. 47; Hornby v. Close, L.R. 2 Q.B. 153; Central Ohio Salt Co. v. Guthrie, 35 Ohio St. 666; India Bagging Ass'n v. Kock, 14 La.Ann. 168; Morris Run Coal Co. v. Barclay Coal Co., 68 Pa.St. 173; Arnot v. Pittston & Elmira Coal Co., 68 N.Y. 558; Raymond v. Leavitt, 46 Mich. 447; S.C. 9 N.W. 525; Craft v. McConoughy, 79 Ill. 346; Stanton v. Allen, 5 Denio, 434. See Phippen v. Stickney, 3 Metc. 384; Gibbs v. Smith, 115 Mass. 592. It is not a principle of law that competition is to be guarded to the extent of prohibiting an honest combination of persons having similar interests. Collins v. Locke, 4 App.Cas. 674; Wickens v. Evans, 3 Younge & J. 318; Skrainka v. Scharringhausen, 8 Mo.App. 522; 1 Wood, Ry.Law, 600; Central Trust Co. v. Ohio Cent. Ry., 23 F. 306; Hare v. London & N.W. Ry. Co., 2 Johns. & H. 80; Mallan v. May, 11 Mees. & W. 653, 665; Griffiths v. Earl of Dudley, 9 Q.B.Div. 357, 364; Perkins v. Lyman, 9 Mass. 521; Palmer v. Stebbins, 3 Pick. 188; Com. v. Hunt, 4 Metc. 111, 130; Carew v. Rutherford, 106 Mass. 1; Bowen v. Matheson, 14 Allen, 499; Snow v. Wheeler, 113 Mass. 179; Long v. Towl, 42 Mo. 545, 549. If any danger is apprehended from the possible abuse of powers of combination, we submit that the court should wait until it has a clear case of illegal action within the limits already recognized by the law. It cannot be well to meet the possible evil, which may never arise, by selecting an inoffensive case as the occasion for an interference which may be itself the greater evil. Master Stevedores' Ass'n v. Walsh, 2 Daly, 1.

Moorfield Storey, for respondent.

The contract is clearly in restraint of trade, and therefore void. Certainly a court of equity will not enforce it. Craft v. McConoughy, 79 Ill. 346; Raymond v. Leavitt, 46 Mich. 447; S.C. 9 N.E. 525; India Bagging Ass'n v. Kock, 14 La.Ann. 168; Central Ohio Salt Co. v. Guthrie, 35 Ohio St. 666; Morris Run Coal Co. v. Barclay Coal Co., 68 Pa.St. 173; Stanton v. Allen, 5 Denio, 434; Arnot v. Pittston & Elmira Coal Co., 68 N.Y. 558; Keeler v. Taylor, 53 Pa.St. 467; Story, Eq. § 292 et seq; California & Hecla Min. Co. v. Quincy Min. Co., (N.Y.Sup. Court,) ---; Saratoga Co. Bank v. King, 44 N.Y. 87; Hartford & N.H.R.R. v. New York & N.H.R. Co., 3 Rob. (N.Y.) 411.

The court will look through the form to the substance. Craft v. McConoughy, ubi supra; Central Ohio Salt Co. v. Guthrie, ubi supra.

The fact that in this case the combination relates to articles protected by patents is immaterial.

The general rule is modified where an article is patented only so far as is necessary to secure the patentee the fruits of his patent. Mitchel v. Reynolds, 1 P.Wms. 181; S.C. 1 Smith, Lead.Cas. 756; Oregon Steam Nav. Co. v. Winsor, 20 Wall. 64.

OPINION

W. ALLEN, J.

The contract which is sought to be enforced by this bill (and the validity of which is the only question presented by the demurrer and argued by the parties) was made between the plaintiff, of the first part, and three manufacturers, under several patents of certain curtain fixtures known as "Wood Balance Shade-rollers," of the second part, in pursuance of an arrangement between the persons forming the party of the second part that the plaintiff corporation should be created for the purpose of becoming a party to the combination, was to prevent, or rather to regulate, competition between the parties to it in the sale of the particular commodity which they made. This is a lawful purpose, but it is argued that the means employed to carry it out--the creation of the plaintiff corporation and the terms of the contract with it--are against public policy and invalid. The fact that the parties to the combination formed themselves into a corporation of which they were the stockholders, that they might contract with it, instead of with each other, and carry out their scheme through its agency, instead of that of a pre-existing person, is obviously immaterial, and the only ground upon which it can be argued that the contract is invalid is the restraint it puts upon the parties to it.

Does the contract impose a restraint as to the manufacture on the sale of balance and shade-rollers which is void as against public policy? The contract certainly puts no restraint upon the production of the commodity to which it relates. It puts no obligation upon and offers no inducement to any person to produce less than to the full extent of his capacity. On the contrary, its apparent purpose is, by making prices more uniform and regular, to stimulate and increase production. The contract does not restrict the sale of the commodity. It does not look towards withholding a supply from the market in order to enhance the price, as in Craft v McConoughy, 79 Ill. 346, and other cases cited by the defendant. On the contrary, the contract intends that the parties shall make sales, and gives them full power to do so; the only restrictions being that sales not at retail or for export shall be in the name of the plaintiff, and reported to it, and the accounts of them kept by it; and the provision that, when any party shall establish an agency in any city or town for the sale of a roller made exclusively for that purpose, no other party shall take orders for the same roller in the same place. To these restrictions, clearly valid, there is added the one which affords an argument for the invalidity of the contract,--the restriction as to price. That restriction is, in substance, that the prices for rollers of the same grade, made by different parties, shall be the same, and shall be, according to a schedule contained in the contract, subject to changes which may be made by the plaintiff upon recommendation of three-fourths of its stockholders. In effect, it is an agreement between three makers of a commodity that for three years they will sell it at a uniform price fixed at the outset, and to be changed only by consent of...