Cohen v. Board of Registration in Pharmacy

Decision Date09 February 1966
Citation214 N.E.2d 63,350 Mass. 246
CourtUnited States State Supreme Judicial Court of Massachusetts Supreme Court

David Berman, Asst. Atty. Gen., for respondent Board of Registration in Pharmacy (John F. Zamparelli, Medford, for intervener, Massachusetts State Pharmaceutical Ass'n, with him).

Harold Rosenwald, Boston (George W. Cashman, Boston, with him), for petitioners.


SPALDING, Justice.

This case has been here twice for the determination of procedural issues. Cohen v. Board of Registration in Pharmacy, 347 Mass. 96, 196 N.E.2d 838; Milligan v. Board of Registration in Pharmacy, 348 Mass. 491, 204 N.E.2d 504 (and a companion case). It now comes here on the merits.

In February of 1962 the petitioners, Hingham Pharmacy, Inc. (Hingham) and Martin Cohen (Cohen), applied to the Board of Registration in Pharmacy (board) for the registration of a store in Hingham for the transaction of the retail drug business, and for the issuance of a permit to Cohen, a registered pharmacist, to operate the store. See G.L. c. 112, §§ 38, 39.

The hearing was held in May, 1962, and in July the board gave notice of their denial of the application. After prolonged litigation of various points of procedure, the chronology of which need not detain us (see Milligan v. Board of Registration in Pharmacy, supra, at p. 494, 204 N.E.2d 504) the case was heard on the merits of the board's decision in the Superior Court. The judge made findings upholding the board's decision. Before the entry of a final decree, however, he made a supplementary finding to the effect that the board's decision was 'unsupported by substantial evidence to warrant the conclusions upon which it was based,' and that the board drew 'inferences unfavorable to the [p]etitioner which are not based upon sufficient or established facts.' 1 A final decree was entered ordering the board to register the drug store owned by Hingham Pharmacy, Inc. (Hingham) and to issue a permit to Cohen to operate the store. From this decree, the board appeals. The Massachusetts State Pharmaceutical Association was permitted to intervene as a party in the proceedings beofre the board (G.L. c. 30A, § 10), and it filed notice of intervention in the review proceeding (c. 30A, § 14 ). It has also filed a brief in this court in support of the board's decision.

The evidence received by the board, which was virtually uncontradicted, may be summarized as follows: Cohen is a registered pharmacist in this Commonwealth. Hingham is a Massachusetts corporation which was organized in February of 1962 for the retail sale of drugs, chemicals, physicians' supplies, and so forth. Of Hingham's 230 outstanding shares, 222 are held by Parkview Drugs, Inc. (Parkview), a Missouri corporation which operates 'drug and prescription departments' in numerous States, three by the incorporators, and five by Cohen. The 'prime movers' behind Parkview and Hingham, who are also the president and vice-president, respectively, of Hingham, are John and Phillip Small. Both are pharmacists registered in Missouri.

The proposed store is to be located on premises leased by Hingham from G.E.M. of Hingham, Inc. (Gem), a so called closed-door membership department store, with a branch in Hingham, Massachusetts, and in various other States. 2 The lease describes the premises as a 'certain well defined space walled off from the rest of the said Lessor's premises * * * and inaccessible from the 'inside' [thereof].' The term of the lease is one year, with options to extend the term for four additional one year periods. The provisions of the lease emphasize that the various aspects of the business to be conducted, such as advertising, displays, the hiring of employees, business hours, taxes, and compliance with local, State, and Federal laws, are to be under the exclusive control and responsibility of Hingham. Rental for the premises, and for other facilities such as parking, is 'a sum equal to Six Percent (6%) of the Total Gross Sales * * * of the * * * Lessee's premises.' The lessor has reserved the right to check the lessee's register tapes.

The memorandum submitted by Hingham to the board states that 'while the G.E.M. Store is a closed-door membership store * * * [Hingham] is open to all and requires no fee for service * * *.' Also, a deposition of Phillip Small, Hingham's vice-president and chairman of the board of Parkview, states that Hingham is 'completely * * * and irrevocably independent from G.E.M. of Hingham, Inc.'

Under a written contract with Cohen, Hingham has employed him 'To act as a Registered Pharmacist on the said premises and as the Store Manager under the direction of the Company's officers, directors, or General Manager.' The contract runs for two years, but either party has a right to terminate upon thirty days notice. Cohen has purchased five shares of Hingham at par and has options to purchase up to seventy additional shares. Upon termination of Cohen's employment for any reason, Hingham has the right to repurchase all of his shares at book value. Cohen testified that he would have complete control over the pharmaceutical aspects of the business and would enforce compliance in the store with both the board's code governing pharmacy and the applicable laws. Phillip Small supported this testimony in his deposition, adding that the 'only control that Hingham * * * will exercise over its * * * pharmacists will lie in those areas wherein such control is not inconsistent with the duties and the obligations * * * [of] a registered pharmacist.'

The board also received numerous letters from drug manufacturing firms, pharmaceutical associations, and banks testifying to the high reputation of both Parkview and the Small brothers in the retail drug industry.

Evidence, in addition to the above, from which the board sought to draw inferences adverse to Hingham includes the following: The by-laws of Hingham, reciting that 'The Board of Directors shall have general direction, management and control of the business * * *' and that the president shall 'exercise general supervision * * * of the corporation's affairs'; a resolution adopted by Hingham's board of directors authorizing its president, John Small, to negotiate the agreement with Gem, 'on the same approximate terms and conditions as other license agreements now in existence between [Parkview] subsidiaries * * * and GEM'; a prospectus filed by Parkview with the Securities and Exchange Commission (S.E.C.) in 1962, outlining a plan to operate 'licensed departments in nine new closed-door membership department stores located in Memphis, etc., including Massachusetts, * * * [t]he company * * * [being] required to sell in the name of the particular store in which the department may be located * * *, the store operator (GEM) * * * [to provide] advertising * * *'; and the proposed schedule of Hingham's business hours, which coincide with the hours during which the Gem departments are in operation.

The board drew from this evidence two inferences, on the basis of which it seeks to justify its rejection of the petitioners' applications. The first is that Cohen's position in Hingham is such that he will not be able to exercise the kind of control over the professional aspects and standards of the pharmacy contemplated by § 39. For this conclusion the board relies primarily on the termination clause in his contract, his meager stock holdings, and the by-laws which purport to vest the management of the store in Hingham's board of directors and corporate officers. The board further concludes that the close relationship between the operations of Gem and Parkview subsidiaries in other parts of the country as revealed by the S.E.C. prospectus,...

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