General Electric Company v. Home Utilities Company

• Decision Date: 06 May 1955
• Docket Number: Civ. No. 7747.
• Citation: 131 F. Supp. 838
• Parties: GENERAL ELECTRIC COMPANY, a body corporate v. HOME UTILITIES COMPANY, Inc., a body corporate.
• Court: U.S. District Court — District of Maryland

131 F. Supp. 838

GENERAL ELECTRIC COMPANY, a body corporate v. HOME UTILITIES COMPANY, Inc., a body corporate.

Civ. No. 7747.

United States District Court D. Maryland.

May 6, 1955.

Semmes, Bowen & Semmes, David R. Owen, George D. Hubbard, Baltimore, Md., for plaintiff.

Harry Silbert and Melvin J. Sykes, Baltimore, Md., for defendant.

WILLIAM C. COLEMAN, Chief Judge.

This is a suit by a manufacturer under the Maryland Fair Trade Act, Annotated Code of Maryland 1951, Art. 83, Secs. 102-110, for injunctive relief on account of alleged violation of the manufacturer's resale price restrictions on its products.

The plaintiff, a New York corporation, manufactures and sells electric housewares, clocks, fans and other electric appliances, and is qualified to fair trade under the Maryland Fair Trade Act. It seeks to enjoin the defendant, a Maryland corporation that sells electrical appliances at retail, within and without the State of Maryland, from cutting prices fixed by the fair trade agreements the plaintiff has with other retailers, of which the particular competing retailer, the defendant here, has had notice, although it has not itself made a fair trade agreement with the plaintiff. The jurisdictional requirements as to diversity of citizenship and amount involved are satisfied. It is admitted that plaintiff's trade-mark "G E" appears on all its appliances. Defendant in its answer asserts the defense to plaintiff's complaint for an injunction that plaintiff has acquiesced in open and notorious violation of its fair trade program in Maryland by numerous retailers and, therefore, is deemed to have abandoned such program.

Plaintiff, contemporaneously with the existence of its fair trade agreements with retailers, sells its goods to a number of wholesale distributors, including the General Electric Supply Company, with which it does not have a fair trade agreement. This company is one of three divisions of General Electric Distributing Corporation, a Delaware corporation, the stock of which is wholly owned by the plaintiff, with interlocking officers and directors. This wholesale distributor, in turn, has sold the plaintiff's products to the defendant at cut prices of which plaintiff admits it is aware and has not so far directly attempted to stop this wholesale distributor from doing so, but has requested it to co-operate in the fair trade program by advising their dealers of it; what the minimum retail prices are from time to time, and to advise the plaintiff of any violations by dealers.

On these facts, the question before the Court is this: is the plaintiff manufacturer entitled to injunction against the defendant requiring it to discontinue its cutting of prices fixed by the fair trade agreements in effect in Maryland?

The underlying purpose of fair trade legislation has been to protect commodities subject to trade which, apart from their physical value, embody a trade-mark, brand or copyright which is, in the law, a valuable property right. In 1911 the United States Supreme Court, Justice Holmes dissenting, held, contrary to numerous State decisions, that agreements by which manufacturers control retail prices of their products are invalid, and more specifically, that the manufacturer of an unpatented article could not, by rule or notice, in the absence of contract or statutory right, even though the restrictions be known to purchasers, fix prices for future sales; and that to the extent that interstate commerce would thereby be affected, such price fixing violated the Sherman Anti-Trust Act, 15 U.S.C.A. §§ 1-7, 15 note. Dr. Miles Medical Co. v. John D. Park & Sons Co., 220 U.S. 373, 31 S.Ct. 376, 55 L.Ed. 502. See also Federal Trade Commission v. Beechnut Packing Co., 257 U.S. 441, 42 S.Ct. 150, 66 L.Ed. 307, and cases therein referred to. However, in 1936, the Supreme Court sustained the validity of Illinois and California fair trade acts similar to the Maryland law as it now stands, holding that these Acts did not infringe the doctrine of the Supreme Court's previous decisions, including those dealing with legislative price fixing, the Court declaring that these decisions constituted no authority for holding that prices in respect of "identified" goods, may not be fixed under legislative leave by contract between the parties. Old Dearborn Distributors Co. v. Seagram Distillers Corp., 299 U.S. 183, 57 S.Ct. 139, 81 L.Ed. 109; Pep Boys v. Pyroil Sales Co., 299 U.S. 198, 57 S.Ct. 147, 81 L.Ed. 122. In 1939, the Maryland Court of Appeals upheld the constitutionality of the Maryland Act. Goldsmith v. Mead Johnson & Co., 176 Md. 682, 7 A.2d 176, 125 A. L.R. 1339. At the present time, except in Missouri, Texas, Vermont and the District of Columbia, there are Fair Trade Acts in effect throughout the country.

The question having arisen as to whether these State laws could protect price maintenance agreements covering products in interstate commerce, in 1937 Congress passed the Miller-Tydings Fair Trade Act, 15 U.S.C.A. § 1, which specifically exempted these agreements from the Sherman Anti-Trust Act. In view of the practical difficulty often of securing signed agreements with all retailers handling a particular line of merchandise, these State laws imposed liability for price cutting not only upon the contracting retailers, but also upon non-contracting retailers who had notice of the existence of such a contract, and the minimum prices fixed thereunder. Until 1951, it was assumed that the exemption of the Miller-Tydings Act was sufficiently broad to permit enforcement of the producers' stipulated retail prices against retailers who had not actually signed price maintenance agreements with the producer in question. However, in that year the Supreme Court held otherwise. Schwegmann Bros. v. Calvert Distillers Corp., 341 U. S. 384, 71 S.Ct. 745, 95 L.Ed. 1035. This decision naturally met with violent opposition by producers in their attempts to enforce fair trade laws. As a result, in 1952, Congress passed the McGuire Act, 15 U.S.C.A. § 45, which provided that re-sale price maintenance policies in accordance with the limitations of the Miller-Tydings Act should be effective and binding on persons "who are not parties thereto", section 1, 15 U.S.C.A. § 45 note, thus changing for the future the effect of the Schwegmann case. The following year this Act was upheld by the Fifth Circuit Court of Appeals and certiorari denied by the Supreme Court, in Schwegmann Bros. Giant Super Markets v. Eli Lilly & Co., 205 F.2d 788, 346 U.S. 856, 905, 74 S.Ct. 71, 98 L.Ed. 369. In enacting the Miller-Tydings and McGuire Acts, as said by Judge Chesnut in Sunbeam Corp. v. MacMillan, D.C., 110 F.Supp. 836, at 843: "Congress had in mind the boundaries between Federal and State power. As to the Anti-trust Acts Congress had full constitutional power under the Interstate Commerce clause; but as to activities within the State the Federal power extended only to such activities as directly and appreciably affected interstate commerce. The plainly expressed purpose and policy of Congress in writing the two Acts was to remove the ban of anti-trust laws from interstate re-sale price maintenance policies conducted within the limitations of the Acts. But Congress had no power to validate such price maintenance if the law of a particular State was to the contrary. And as the fair trade laws of the States were not entirely uniform and as a few of the States did not have any fair trade law, it was necessary in the Acts to recognize that State policy might be opposed to price maintenance."

The Maryland Court of Appeals has had the Maryland Fair Trade Act under consideration in several cases subsequent to Goldsmith v. Mead Johnson & Co., supra. See Schill v. Remington-Putnam Book Co., 1941, 179 Md. 83, 17 A.2d 175, 22 A.2d 128; Id., 182 Md. 153, 31 A.2d 467, 32 A.2d 296; Hutzler Bros. v. Remington-Putnam, 1944, 184 Md. 327, 40 A. 2d 823; Id., 186 Md. 210, 46 A.2d 101, 163 A.L.R. 884; Donner v. Calvert Distillers Corp., 1950, 196 Md. 475, 77 A.2d 305. The Maryland Act was also upheld by Judge Chesnut in 1953, in Sunbeam Corp. v. MacMillan, supra.

I reach the conclusion that the plaintiff is entitled to an injunction, and base this primarily upon the fact that the plaintiff, under all the circumstances as developed by the testimony, has exercised due diligence towards preventing the continued cutting of these fair trade agreement prices. Whether there has been due diligence depends upon each particular set of facts.

The rule set forth in the Hutzler Bros. case, supra, 186 Md. 210, 46 A. 2d 101 is controlling here, since Maryland law governs. Erie Railroad Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188. Summarized, the facts in that case were as follows: suit was brought by a Baltimore retail book seller, Remington-Putnam Book Company, which was a party to a fair trade agreement with a New York publisher, fixing minimum resale prices for that publisher's...