Elizabeth Arden Sales Corporation v. Gus Blass Co.

• Decision Date: 02 September 1945
• Docket Number: No. 12897.,12897.
• Citation: 150 F.2d 988
• Parties: ELIZABETH ARDEN SALES CORPORATION v. GUS BLASS CO.
• Court: U.S. Court of Appeals — Eighth Circuit

150 F.2d 988 (1945)

ELIZABETH ARDEN SALES CORPORATION v. GUS BLASS CO.

No. 12897.

Circuit Court of Appeals, Eighth Circuit.

July 31, 1945.

Rehearing denied September 2, 1945.

J. W. Barron, of Little Rock, Ark. (J. Howard Carter, of New York City, on the brief), for appellant.

S. Lasker Ehrman, of Little Rock, Ark. (Grover T. Owens, of Little Rock, Ark., on the brief), for appellee.

Before SANBORN, JOHNSEN and RIDDICK, Circuit Judges.

JOHNSEN, Circuit Judge.

The action is one under the Clayton Act, as amended by the Robinson-Patman Act, for threefold the damages claimed to have been sustained from a violation of section 2(d) and (e), 49 Stat. 1527, 15 U.S.C.A. § 13(d) and (e). On a trial without a jury, the court entered a judgment against appellant for $3,030 and an attorney's fee, from which it has appealed.

The statutory subsections referred to provide:¹

"(d) It shall be unlawful for any person engaged in commerce to pay or contract for the payment of anything of value to or for the benefit of a customer of such person in the course of such commerce as compensation or in consideration for any services or facilities furnished by or through such customer in connection with the processing, handling, sale, or offering for sale of any products or commodities manufactured, sold, or offered for sale by such person, unless such payment or consideration is available on proportionally equal terms to all other customers competing in the distribution of such products or commodities.

"(e) It shall be unlawful for any person to discriminate in favor of one purchaser against another purchaser or purchasers of a commodity bought for resale, with or without processing, by contracting to furnish or furnishing, or by contributing to the furnishing of, any services or facilities connected with the processing, handling, sale, or offering for sale of such commodity so purchased upon terms not accorded to all purchasers on proportionally equal terms."

Appellant, a Delaware corporation, was the distributing and sales corporation of Elizabeth Arden, Inc., a manufacturer of cosmetic and toilet preparations. Appellee, an Arkansas corporation, was the owner and operator of a department store in Little Rock, Arkansas, which had a toilet-goods department. In August, 1938, appellee took on the Elizabeth Arden line of products in its store, under an oral agreement with appellant as part of which appellant was to designate one of the clerks in appellee's toilet-goods department as an Elizabeth Arden "demonstrator" and was to pay or reimburse appellee for one-half of her regular $20-a-week salary. This demonstrator was supposed to push the sale of Elizabeth Arden products, when it was fairly possible to do so, but, like every other clerk in the department, it was her duty to wait on the trade generally and to sell any toilet item or article that the store carried. The arrangement for partial payment or reimbursement of a clerk's salary, or for partial furnishing of a demonstrator-clerk's services, whichever one might choose to call it, remained in effect for approximately two years, at the end of which time appellant decided to discontinue selling further Elizabeth Arden products to appellee and to give M. M. Cohn Co., another department store in Little Rock, the right of exclusive local representation.

Cohn Co. had for some years previously been handling the Elizabeth Arden line and continued to do so during the time that appellee also was selling the products. This fact appellee knew and had understood at the time. Appellant did not inform it, however, that the arrangement which existed between Cohn Co. and appellant all during this time was that appellant, instead of paying or reimbursing Cohn Co. for half of a clerk's salary or furnishing half of a clerk's services, was making an allowance to Cohn Co. of $20 a week, or in other words was providing the entire salary or services of a clerk as a so-called demonstrator.

The purpose of the present action was to recover threefold the difference between the amount of the allowances made or the value of the services furnished to Cohn Co. and those made or furnished to appellee during the period that it purchased and sold appellant's products, on the theory that appellant had failed to pay clerk's salary or furnish clerk's services to it on proportionally equal terms with Cohn Co., and that it had been pecuniarily damaged by such discriminatory treatment to the extent of the difference in these amounts or values.

The trial court found that "the defendant appellant discriminated in favor of M. M. Cohn Company against the plaintiff appellee, both of whom bought commodities from the defendant for resale, by contracting to furnish or by contributing to the furnishing of services and facilities connected with the sale and offering for sale of such commodities so purchased from the defendant, such discrimination consisting of the payment of the entire salary of defendant's representative in the M. M. Cohn Company store and one-half salary to the defendant's representative in the plaintiff's store"; that "had the defendant paid the plaintiff or allowed the plaintiff credit for the entire salary of its demonstrator or representative in the plaintiff's store during the period of 101 weeks * * * the cost of the operation of the plaintiff's cosmetic department during that period of time would have been reduced at the rate of $10.00 per week, or an aggregate of $1,010.00"; and that "the plaintiff has accordingly been damaged to the extent of $1,010.00 on account of the increased cost of the operation of its cosmetic department as a result of the discrimination."

The trial court thus appears to have treated the comparative arrangements with Cohn Co. and with appellee as constituting an unlawful discrimination by appellant against appellee under section 2(e) of the Clayton Act, as amended by the Robinson-Patman Act, 15 U.S.C.A. § 13(e), "by contributing to the furnishing of, any services or facilities connected with the * * * handling, sale, or offering for sale of such commodity so purchased upon terms not accorded to all purchasers on proportionally equal terms." The situation probably might alternatively have been regarded as a discriminatory payment of compensation by appellant for special clerk's services or facilities furnished by Cohn Co. and by appellee in demonstrating or pushing the sale of appellant's products, instead of as a furnishing of clerk's services or facilities by appellant to Cohn Co. and to appellee, and so to constitute a violation of section 2(d) of the Clayton Act, as amended by the Robinson-Patman Act, 15 U.S.C.A. § 13(d), as "the payment * * * as compensation or in consideration for any services or facilities furnished by or through such customer in connection with the * * * handling, sale, or offering for sale of any products * * * unless such payment or consideration is available on proportionally equal terms to all other customers competing in the distribution of such products or commodities."

But whether the situation were construed as a discrimination under subsection (e) or as one under subsection (d) of section 2 would not seem to be of any importance here, except as there might be merit in appellant's contention that subsection (e) is unconstitutional — an attack which has not been made on subsection (d). Before proceeding to examine that question, it may be remarked generally that it was for the trial court, of course, to determine from the facts the nature of the discrimination under the statute, and that the interpretation which it has made of the present situation was a sound and proper one on the evidence. It may further be observed in passing that the Federal Trade Commission has, in a cease and desist order issued against appellant's sales-practices, involving arrangements such as those existing in the present case and some variations thereof, similarly branded appellant's general scheme as a violation of section 2(e) of the Clayton Act, as amended by the Robinson-Patman Act. In the Matter of Elizabeth Arden, Inc., Elizabeth Arden Sales Corporation, and Florence N. Lewis, F.T.C. Doc. No. 3133, 3 C.C.H. Trade Reg. Serv. No. 12,962.

Appellant contends, as we have indicated, that section 2(e) is unconstitutional. The basis of its argument is that subsection (e) imposes a prohibition on "any person", without the limitation "engaged in commerce",² such as is specifically incorporated in subsections (a), (c), (d) and (f) of section 2 and in other portions of the Act, and that, unlike the rest of the Act, it therefore must be held to have been intended to cover persons engaged in either intrastate or interstate commerce and hence is void. Reliance is placed on the Trade-Mark Cases, United States v. Steffens, etc., 100 U.S. 82, 96, 97, 25 L.Ed. 550, where, in some criminal prosecutions under a statute which made the fraudulent use, sale and counterfeiting of trademarks registered pursuant to the laws of the United States a punishable offense, without limiting the application of the statute to trademarks used in interstate or foreign commerce, the court said: "When, therefore, Congress undertakes to enact a law, which can only be valid as a regulation of commerce, it is reasonable to expect to find on the face of the law, or from its essential nature, that it is a regulation of commerce with foreign nations, or among the several States, or with the Indian tribes. If not so limited, it is in excess of the power of Congress. If its main purpose be to establish a regulation applicable to all trade, to commerce at all points, especially if it be apparent that it is designed to govern commerce wholly between citizens of the same State, it is obviously the exercise of a power not confided to Congress."

The opinion in the Trade-Mark Cases cites United States v. Reese, 92 U.S. 214, 23 L.Ed. 563, where it was analogously held that a statute which made it a...