Eastman Kodak Co. v. Siegel

• Decision Date: 23 February 1956
• Citation: 150 N.Y.S.2d 99,2 Misc.2d 966
• Parties: EASTMAN KODAK COMPANY, Plaintiff, v. Morton SIEGEL, doing business as Tower Photo Shop, Defendant.
• Court: New York Supreme Court

Page 99

150 N.Y.S.2d 99

2 Misc.2d 966

EASTMAN KODAK COMPANY, Plaintiff, v. Morton SIEGEL, doing business as Tower Photo Shop, Defendant.

Supreme Court, Special Term, New York County, Part IX.

Feb. 23, 1956.

Judgment Modified May 22, 1956. See 151 N.Y.S.2d 859.

White & Case, New York City, for plaintiff.

Sugarman, Kuttner & Fuss, New York City, for defendant.

SAYPOL, Justice.

Plaintiff, a manufacturer of photographic equipment and supplies, brought this action for a permanent injunction pursuant to the so-called Feld-Crawford 'Fair Trade Law', General Business Law, §§ 369a-369-e, L.1935, ch. 976, re-enacted L.1940, ch. 195. Applications for a preliminary injunction were previously denied, 207 Misc. 283, 136 N.Y.S.2d 800, Matthew M. Levy, J.; 207 Misc. 986, 140 N.Y.S.2d 260, Steuer, J.

The complaint alleges the existence, known to the defendant, of a fair trade agreement with respect to the minimum retail resale prices of certain of the plaintiff's products and the defendant's sales thereof below such prices. The defendant, a non-signer retailer of the agreement, in his amended answer denied the allegation of the complaint that 'said commodities bear the plaintiff's trademarks, brands and names, and are in fair and open competition in this State with commodities of the same general class produced by others' and also denied (although not pressed too vigorously) that he knowingly sold the plaintiff's fair traded products below the fair-trade prices. In addition, the amended answer set up the following affirmative defenses: (1) The plaintiff combined in one package or outfit its own trademarked and fair traded products with its own trademarked but not individually fair traded products and also with products trademarked by other manufacturers but not fair traded; such practice it is claimed constitutes an abandonment of the plaintiff's fair trade agreement. (2) The plaintiff has not equitably enforced its fair trade agreement and has unfairly discriminated between its franchised dealers and independent retailers such as the defendant to the detriment of the latter. (3) The plaintiff has franchised as an authorized retail dealer the Ritz Camera Centers which maintains stores not only in New York City but also in Washington, D. C., where there are no fair trade laws; that the Ritz Washington store accepts mail orders and ships the plaintiff's products to New York City at less than the fair trade prices maintained in New York; that by permitting the Ritz Camera Stores to engage in such mail order practices the plaintiff has abandoned its alleged fair trade enforcement system. (4) Combining the plaintiff's products with trademarked products of other manufacturers in one outfit and designating 'the entire content of said package as a product of the plaintiff' violate the Penal Law of New York.

The defendant did not testify at the trial nor did he call any witnesses. What was litigated was the broad and overall question of whether or not the plaintiff's conduct or rather misconduct precludes equitable aid.

The issues litigated at the trial mainly resolved themselves into the following: (1) whether the plaintiff's program of enforcing its fair trade agreement was adequate, fair and equitable; (2) whether the plaintiff's dealings with the Ritz Camera Stores constituted an abandonment of its fair trade enforcement policy; and (3) whether the sale of the outfits likewise constituted either (a) an abandonment of the plaintiff's entire fair trade agreement or (b) at least and activity not covered by the Fair Trade Act.

Before I dispose of the issues as I have stated them, I will consider briefly two incidental questions raised by the defendant. He urges firstly that the qualifying language of the statute purporting to limit applicability to a commodity '* * * in fair and open competition with commodities of the same general class', General Business Law, § 369-a(1), is fatally vague and indefinite and, therefore, a denial of due process under the New York State Constitution, Art. 1, § 6. A similar objection under the Due Process clause of the Fourteenth Amendment of the Federal Constitution was overruled in Old Dearborn Distributing Co. v. Seagram-Distillers Corp., 299 U.S. 183, 196-197, 57 S.Ct. 139, 81 L.Ed. 109, see Adams, Fair Trade and the Art of Prestidigitation, 65 Yale L.J. 196, 200, 207, note 48. The defendant urges, however, that our Court of Appeals has not expressly passed upon this claim under the State Constitution. Even were this so, this court would follow the reasoning of the Old Dearborn case and apply it to the analogous provision of the State Constitution. As it is, when the constitutionality of the Fair Trade Act was recently reupheld by the Court of Appeals, General Electric Co. v. Masters, Inc., 307 N.Y. 229, 120 N.E.2d 802, appeal dismissed for want of substantial Federal question, 348 U.S. 892, 75 S.Ct. 215, 99 L.Ed. 701, that court appeared to give its blanket approval to every facet of the Old Dearborn opinion. In referring to Bourjois Sales Corp. v. Dorfman, 273 N.Y. 167, 7 N.E.2d 30, 110 A.L.R. 1411, which overruled Doubleday, Doran & Co. v. R. H. Macy & Co., 269 N.Y. 272, 199 N.E. 409, 103 A.L.R. 1325, on the basis of the Old Dearborn decision, Judge Froessel stated, at page 237 of 307 N.Y., at page 803 of 120 N.E.2d: 'This time, relying on the Old Dearborn decision, we upheld the statute against claims that it violated the New York State Constitution.' (Italics in original.) While of late several state courts have held nonsigner clauses invalid under their respective state constitutions, see, e. g., Union Carbide & Carbon Corp. v. White River Distributors, Inc., 224 Ark. 558, 275 S.W.2d 455; Cox v. General Electric Co., 211 Ga. 286, 85 S.E.2d 514; McGraw Electric Co. v. Lewis & Smith Drug Co., 159 Neb. 703, 68 N.W.2d 608 (entire law unconstitutional), this State's highest tribunal since the Bourjois Sales decision has consistently rejected any suggestion of disharmony in this field in the interpretation of analogous provisions of the Federal and State Constitutions. The constitutional objection is, therefore, overruled.

Secondly, the defendant urges that the plaintiff has failed to prove that its fair traded products are in 'fair and open competition' with commodities of the same general class produced by others. The court finds that the evidence satisfies the statutory requirement, especially in view of the defendant's failure to controvert the plaintiff's evidence in this regard. The phrase 'fair and open competition' has received a liberal interpretation in this State, Columbia Records v. Goody, 278 App.Div. 401, 105 N.Y.S.2d 659; General Electric Co. v. S. Klein-on-the Square, Sup., 121 N.Y.S.2d 37, 49-50; and elsewhere it has been held that the fact that a commodity is copyrighted or patented does not preclude the establishment of a fair trade price. Glen Raven Knitting Mills v. Sanson Hosiery Mills, 4 Cir., 189 F.2d 845, 854; Schill v. Remington Putnam Book Co., 179 Md. 83, 17 A.2d 175, 22 A.2d 128; Ely Lilly & Co. v. Saunders, 216 N.C. 163, 4 S.E.2d 528, 125 A.L.R. 1308; 1 Callman, Unfair Competition and Trade Marks (2d ed.) 456-60. The only reported contrary result involved 'color' film manufactured exclusively by this plaintiff, the court declaring that such film was not in fair and open competition with the ordinary 'black and white' film. Eastman Kodak Co. v. Federal Trade Commission, 2 Cir., 158 F.2d 592, certiorari denied, 330 U.S. 828, 67 S.Ct. 869, 91 L.Ed. 1277; cf. Eastman Kodak Co. v. Schwartz, Sup., 133 N.Y.S.2d 908, 914. ¹ In the light of these authorities and on the evidence, the court overrules the objection that the plaintiff's products are not in fair and open competition within the meaning of the Fair Trade Law.

Much of the evidence adduced at the trial related to the plaintiff's enforcement activities with respect to its fair trade agreement. Upon the basis of such evidence the defendant strongly urges that the plaintiff's program and efforts of enforcement were inadequate, ineffective and discriminatory and the defendant does not hesitate to characterize such efforts as 'easy-chair' enforcement.

The evidence concerning the plaintiff's enforcement procedure and activities in Manhattan and the Bronx may be summarized as follows: The responsibility for enforcing the plaintiff's fair trade program rested primarily with an official of its Sales Department in Rochester, N. Y., who devoted but part of his time to such work. He was assisted by two stenographers. The plaintiff's sales manager for the Northeastern Sales Division in New York City chose a shopping service whose employees, engaging in surveillance, would visit various retail stores to find out if there were any violations of the plaintiff's fair trade agreement. If a violation were found, a form letter would be sent to the violating retailer advising him to desist. Such a retailer would again be shopped and if on the second visit, another violation were discovered, the plaintiff would send a registered letter. Other shoppings would be made and only if three successive violations were found would legal action be undertaken.

It appears that in the fifteen months before trial the plaintiff caused 4,750 shoppings to be made in 640 stores located in Manhattan and the Bronx. Of these, 3,908 shoppings in 340 stores showed no violations. Of the 300 stores showing some violations, 259 seemingly desisted as a result of correspondence. Of the remaining 41 stores, the plaintiff had obtained injunctions against 24 and had actions pending against 8 others. Further shoppings of the remaining 9 stores were being made. Both franchised dealers and independent retailers were included in these shopping activities.

Since the Legislature in enacting the Fair Trade Law has set no standards for guidance of an enforcement policy in this field and has made no express provision suggesting defenses to an enforcement...