Corning Glass Works v. Ann & Hope, Inc. of Danvers

CourtUnited States State Supreme Judicial Court of Massachusetts
Citation294 N.E.2d 354,363 Mass. 409
Parties, 1973-1 Trade Cases P 74,432 CORNING GLASS WORKS v. ANN & HOPE, INC. OF DANVERS. (and a companion case 1 ).
Decision Date02 April 1973

Page 354

294 N.E.2d 354
363 Mass. 409, 1973-1 Trade Cases P 74,432

ANN & HOPE, INC. OF DANVERS. (and a companion case
Supreme Judicial Court of Massachusetts, Suffolk.
Argued Jan. 3, 1973.
Decided April 2, 1973.

Erik Lund, Boston (Robert T. Harrington, Lowell, with him), for Corning Glass Works.

Manuel Katz, Boston, for LCA Corporation, S. W. Farber Division.

[363 Mass. 410] Barry Ravech, Boston (George S. Abrams, Boston, with him), for Ann & Hope, Inc. of Danvers.

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Gordon T. Roberts, Boston, for New England Hardware Dealers Assn., amicus curiae, submitted a brief.

Donald B. Gould and Paul D. Weaver, Boston, for A. T. Cross Co., amicus curiae, submitted a brief.

Before [363 Mass. 409] TAURO, C.J., and QUIRICO, BRAUCHER, HENNESSEY and WILKINS, JJ.

[363 Mass. 410] BRAUCHER, Justice.

The plaintiff (Corning) brought suit under the so called Fair Trade Law, G.L. c. 93, §§ 14A--14D, to enjoin the defendant (Ann & Hope) from advertising, offering for sale or selling Corning products at prices less than the 'fair trade' prices stipulated by Corning in its 'fair trade' contracts with Massachusetts retailers. Ann & Hope, which had never made such a contract, filed a plea in bar asserting that the so called nonsigner provision of the statute, G.L. c. 93, § 14B, is unconstitutional.

The statute was held constitutional in 1956 in General Elec. Co. v. Kimball Jewelers, Inc., 333 Mass. 665, 677, 132 N.E.2d 652, 658, where we observed, citing numerous cases: 'Where the question has been presented it has been decided in the great majority of cases that State fair trade statutes are valid and not contrary to the State or Federal Constitution.' In 1972, however, in BLACK & DECKER MFG. CO. V. ANN & HOPE, INC. OF DANVERS, MASS., 277 N.E.2D 687A we observed that 'one source reports that out of the forty States which presently have such legislation, twenty-three have declared their acts unconstitutional as applied to noncontracting third parties, fifteen have declared theirs to be constitutional in this respect and two have not ruled on the question.'

The trial judge was of the opinion that the question of law presented by the defendant's plea in bar so affected the merits of the controversy that it ought to be determined by this court before further proceedings. Accordingly, he reserved and reported the case upon the bill, the plea in bar and a statement of agreed facts. Briefs have been filed by A. T. Cross Company and by the New [363 Mass. 411] England Hardware Dealers Association as friends of the court.

We reconsider the General Electric case and overrule it in part as indicated later in this opinion.

We summarize the statement of agreed facts. Corning, a New York corporation, produces and sells specialty glassware under various trade marks, brands and names. These products are of standard quality and are in free, fair and open competition with products of the same general class produced and sold by others. Corning has a valuable good will in its products, trade marks, brands and names, and has expended great sums in advertising and promoting them. It has entered into contracts, pursuant to G.L. c. 93, §§ 14A--14D, all in the same form, whereby Massachusetts retailers of its products have agreed that they will not, except as specifically permitted by statute, advertise, offer or sell certain Corning products at prices other than the 'fair trade' prices set by Corning.

Ann & Hope sells merchandise at retail in Danvers, including Corning products. Ann & Hope has never made a 'fair trade' contract with Corning, but has been aware of Corning's system of distribution and Corning's fixing of retail prices. Despite written notice from Corning of Corning's contracts and prices, Ann & Hope offered and sold Corning products at prices below the 'fair trade' retail prices fixed by Corning.

There is no claim that Ann & Hope incurred any liability under the so called Unfair Sales Act G.L. c. 93, §§ 14E--14K. Ann & Hope's conduct was not justified

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under any of the exceptions in G.L. c. 93, § 14A, covering closeout sales, damaged or deteriorated goods, and sales under court order. Ann & Hope owned all of the products sold by it, and has had no direct contractual relations with Corning with respect to those products. Ann & Hope's acts violated G.L. c. 93, § 14B. After those acts other retailers in the Commonwealth acted similarly, and retail dealers seeking to continue to abide by [363 Mass. 412] the Corning contracts complain that they cannot compete in price with Ann & Hope. Corning is a 'person damaged' under G.L. c. 93, § 14B. If waives its claim for damages and asks only for injunctive relief. If the plea in bar is overruled, the parties agree that a permanent injunction may be entered against Ann & Hope.

1. The history of 'fair trade.' Apart from statute, this court in 1900 upheld and enforced a contract between the seller of a proprietary medicine and a buyer-retailer by which the retailer agreed not to resell below a stipulated price. Garst v. Harris, 177 Mass. 72, 58 N.E. 174. In 1901 this court refused to enforce such a contract against a retailer who was not a party to it, even though he bought the product with full knowledge of the proprietor's system of distribution. Grast v. Hall & Lyon Co., 179 Mass. 588, 61 N.E. 219. In 1905, however, such a contract was enforced by injunction against a third-party retailer who had conspired with a contracting retailer to deprive the proprietor of the benefit of the contract. Grast v. Charles, 187 Mass. 144, 72 N.E. 839.

In 1911 a manufacturer of proprietary medicines sought to enforce by injunction against a nonsigner a similar scheme, relying on the doctrine that 'an actionable wrong is committed by one who maliciously interferes with a contract between two parties, and induces one of them to break that contract, to the injury of the other.' Dr. Miles Medical Co. v. John D. Park & Sons Co., 220 U.S. 373, 394, 31 S.Ct. 376, 379, 55 L.Ed. 502. The Supreme Court of the United States, with Mr. Justice Holmes dissenting, held that the restrictions sought to be enforced were invalid both at common law and under the Sherman Antitrust Act of 1890, 26 Stat. 209 (now as amended, 15 U.S.C. § 1 (1970)), declaring illegal every 'contract, combination . . . or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations.' Compare Butterick Publishing Co. v. Fisher, 203 Mass. 122, 89 N.E. 189; Associated Perfumers, Inc. v. Andelman, 316 Mass. 176, 184, 55 N.E.2d 209.

The next major development came in the 1930s. See Report of Federal Trade Commn. on Resale Price Maintenance[363 Mass. 413] pp. XXVI--XXVIII (1945). Beginning with California in 1931, a number of States adopted statutes authorizing resale price maintenance by contracts enforceable against nonsigners with knowledge. In 1936 the Supreme Court of the United States upheld the Illinois and California statutes against constitutional attack made on the grounds that they denied due process of law and equal protection of the laws in violation of the Fourteenth Amendment to the Constitution of the United States. Old Dearborn Distrib. Co. v. Seagram-Distil. Corp., 299 U.S. 183, 57 S.Ct. 139, 81 L.Ed. 109; Pep Boys, Manny, Moe & Jack of Cal. Inc. v. Pyroil Sales Co. Inc., 299 U.S. 198, 57 S.Ct. 147, 81 L.Ed. 122. In 1937 the Miller-Tydings Act amended the Sherman Act to permit contracts for resale price maintenance with respect to commodities to be resold in a State where such contracts are lawful for intrastate sales. 50 Stat. 693 (as amended, 15 U.S.C. § 1 (1970)). In the same year, the Massachusetts statute was enacted. St.1937, c. 398, inserting §§ 14A--14D in G.L. c. 93. Eventually forty-six States enacted such laws. 2

In 1951 the Supreme Court held that the Miller-Tydings amendment validated resale price maintenance only with respect to parties to the contracts and did not permit relief

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against nonsigners. Schwegmann Bros. v. Calvert Distil. Corp., 341 U.S. 384, 71 S.Ct. 745, 95 L.Ed. 1035. In 1952 the McGuire Act extended the immunity from the antitrust laws granted by the Miller-Tydings amendment so as to permit enforcement of resale price maintenance against nonsigners. 66 Stat. 631. 15 U.S.C. § 45(a)(3) (1970). Hudson Distrib. Inc. v. Eli Lilly & Co., 377 U.S. 386, 395, 84 S.Ct. 1273, 12 L.Ed.2d 394.

When the McGuire Act was enacted in 1952, only one State, Florida, had held a 'fair trade' law unconstitutional. Liquor Store, Inc. v. Continental Distil. Corp., 40 So.2d 371 (Fla.). Such laws had been enacted in every State except Missouri, Texas, and Vermont. When we upheld the constitutionality of the Massachusetts statute in 1956, we cited cases from sixteen States upholding [363 Mass. 414] such statutes and contrary decisions in four States. General Elec. Co. v. Kimball Jewelers, Inc., 333 Mass. 665, 677, 132 N.E.2d 652. Our subsequent decisions have followed the General Electric case. E.I. du Pont de Nemours & Co. Inc. v. Kaufman & Chernick, Inc., 337 Mass. 216, 219, 148 N.E.2d 634; Colgate-Palmolive Co. v. Elm Farm Foods Co., 337 Mass. 221, 225, 148 N.E.2d 861; Shulton, Inc. v. Consumer Value Stores, Inc., 352 Mass. 605, 607, 227 N.E.2d 482. See Clairol, Inc. v. Cody's Cosmetics, Inc., 353 Mass. 385, 394, 231 N.E.2d 912; BLACK & DECKER MFG. CO. V. ANN & HOPE, INC. OF DANVERS, MASS., 277 N.E.2D 687B.

Since 1956 the picture has changed. We are told that seventeen States now have effective 'fair trade' laws including nonsigner provisions. In the remaining thirty-three States and in the District of Columbia, either there is no such statute or nonsigner provisions are not enforceable. It is argued that the 'fair trade' States with effective nonsigner provisions, including Massachusetts, account for more than half of the total dollar volume of retail sales. But the force of that argument is weakened by the fact that at least...

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