Harris v. Capitol Records Distributing Corp.

• Decision Date: 25 April 1966
• Citation: 64 Cal.2d 454,413 P.2d 139,50 Cal.Rptr. 539
• Court: California Supreme Court
• Parties: , 413 P.2d 139 Milton E. HARRIS, Plaintiff and Appellant, v. CAPITOL RECORDS DISTRIBUTING CORP. et al., Defendants and Respondents. L.A. 27965.

Page 539

50 Cal.Rptr. 539

64 Cal.2d 454, 413 P.2d 139

Milton E. HARRIS, Plaintiff and Appellant, v. CAPITOL RECORDS DISTRIBUTING CORP. et al., Defendants and Respondents.

L.A. 27965.

Supreme Court of California,

In Bank.

April 25, 1966.

Naiditch & Gould, Louis Naiditch, Los Angeles, Morton H. Gould, Robert L. Brock, Hollywood, and Irwin Chasalow, Los Angeles, for plaintiff and appellant.

Moses Lasky, Richard Haas, Robert S. Daggett, Brobeck, Phleger & Harrison, San Francisco, Robert E. Carp, Elliot Chaum, Hollywood, Gibson, Dunn & Crutcher, Frederic H. Sturdy, Irwin F. Woodland, O'Melveny & Myers, Homer I. Mitchell Allyn O. Kreps and James V. Delong, Los Angeles, for defendants and respondents.

MOSK, Justice.

Plaintiff appeals from a summary judgment entered in favor of defendants Capitol Records Distributing Corporation, Columbia Records Distribution Corporation, and RCA Victor Distributing Corporation, in an action for damages and injunctive and declaratory relief under the California Unfair Practices Act (hereinafter called the Act). (Bus. & Prof.Code, §§ 17000--17101.)

We need not undertake the usual task of analyzing the conflicting declarations filed in support of and in opposition to the motion for summary judgment to determine whether there is a triable issue of fact (see, e.g., Stationers Corp. v. Dun & Bradstreet, Inc. (1965) 62 Cal.2d 412, 417, 42 Cal.Rptr. 449, 398 P.2d 785), for there is no legal theory upon which these defendants can be held liable to plaintiff. As will appear, the Unfair Practices Act does not apply to the situation here presented.

Plaintiff owns and operates a retail phonograph records store on Hollywood Boulevard in Los Angeles. He buys his inventory from Capitol, Columbia, RCA, and similar distributors, at the standard dealer discount of 38 percent off list price. Harry Dale, doing business under the name of Guaranteed Record Sales, is known as a rack-jobber. In this commercial field a rack-jobber is a subdistributor who purchases records from distributors and places them in self-service racks in supermarkets, drugstores and similar retail outlets in which the sale of records is only an incidental item. He is given the standard 38 percent dealer discount, plus an additional 10 percent off the remaining cost (i.e., a total discount of 44.2 percent off list) because of his extra expenses in supplying and servicing the racks.

In May 1963 Dale opened a retail record store of his own, called Master Music Mart, across the street from plaintiff's store, and proceeded to advertise and sell Capitol, Columbia, and RCA records at 50 percent off list price. Plaintiff brought this suit against Dale, Master Music Mart, Capitol, Columbia, and RCA, alleging that Dale was allowed to buy his stock at a rack-jobber's discount and to sell it as a retailer through Master Music Mart, thus enabling him to undersell plaintiff and damage his business.

Motions for summary judgment by Dale and Master Music Mart were denied, and a temporary injunction was issued against each. Perhaps victims of their own pricing practices, however, Dale and Master Music Mart subsequently became insolvent and the action was dismissed as to them. Motions for summary judgment by Capitol, Columbia, and RCA (hereinafter called defendants) were granted, and plaintiff appeals. Since there are no factual conflicts of consequence, we shall refer at some length to the parties' conflicting interpretations of the law.

Plaintiff first contends that by selling to him at one price and to Dale at another, defendants created an unlawful 'locality discrimination' in violation of Business and Professions Code sections 17040 ¹ and 17031. ² A difficult question of statutory interpretation is presented by plaintiff's argument that in spite of the 'geographical' overtones of the language of section 17031, in its present form it in effect prohibits discriminations between sales to different individual Purchasers in the same location, as well as discrimination between sales in different geographical Locations.

Defendants dispute this conclusion, and begin with a historical analysis of the legislation in question. Relying on decisions of our sister jurisdictions construing similar statutes (e.g., State v. Drayton, 1908, 117 N.W. 768, 23 L.R.A.,N.S., 1287; State v. Central Lumber Co., 1909, 24 S.D. 136, 123 N.W. 504, 42 L.R.A.,N.S., 804, 82 Neb. 254, affd. (1912) 226 U.S. 157, 33 S.Ct. 66, 57 L.Ed. 164), defendants assert that the intent of the Legislature in enacting the Unfair Practices Act in its original form (Stats.1913, p. 508) was to prevent a monopolistic practice by which a large retail chain would lower its prices at a store in one area, constituting a severable market, until the competition from smaller, local businesses in that community had been eliminated, concurrently offsetting the losses is thus suffered by charging higher prices in its other areas of operation. After the demise of competitors, the chain outlet would then realize monopoly profits, and the procedure of attrition would be repeated elsewhere. Defendants urge that in its present form the Act is still designed to serve similar purposes, relying in this connection on the statutory declaration of legislative intent. ³

Plaintiff responds by stressing an assertedly significant addition to the original language of the Act. The 1913 statute spoke only of discrimination 'between different sections, communities or cities or portions thereof of this state,' making no use of the present word, 'locations.' The latter was added when the statute was rewritten in 1931 (Stats.1931, p. 1333), and it now forbids discrimination 'between different sections, communities or cities or portion thereof, Or between different locations in such sections, communities, cities or portions thereof in this state.' (Italics added.) 'Locations,' plaintiff concludes, must refer to the site of individual stores or outlets within any such geographical area. Defendants are hard put to provide a different definition of the word 'locations,' but suggest that it means separate business districts within the same city. Plaintiff replies, however, that the latter category was already adequately covered by the word 'portion' in the original language, 'sections, communities or cities Or portions thereof,' and argues that the Legislature will not be presumed to have committed the idle act of adding redundancy to the statute. ⁴

It is difficult to leap, however, from discrimination between individual stores or outlets, to discrimination between individual purchasers. Plaintiff has not demonstrated how the gap can logically be bridged, and to this extent the word 'location' must be deemed to retain a geographic connotation. Defendants point up the distinction by a comparative analysis of the California Unfair Practices Act and the federal Robinson-Patman Act (15 U.S.C. §§ 13, 13a, 13b, 13c, 21a). In two separate sections the federal statute prohibits price discriminations either 'between different purchasers' (15 U.S.C. § 13, subd. (a)) or between different 'parts of the United States' (15 U.S.C. § 13a). Defendants argue that if the California Legislature had intended our statute to cover the former kind of discrimination, it could have said so in very few words. An opportunity was presented in 1941, for example, when the Unfair Practices Act was codified into the Business and Professions Code (Stats.1941, pp. 1839--1846). At that time the single section 1 of the former Act was divided, the prohibition against 'locality discriminations' being codified in section 17040, and the definition of that term being codified in section 17031. Defendants reason that if the Legislature had simply intended to prohibit discrimination between purchasers it would have been absurd for it to reemphasize the heavy baggage of language by which 'locality discrimination' is first prohibited and then defined in such a manner as to assertedly eliminate the element of locality. ⁵

There are no published judicial opinions on the matter, but defendants cite us to two trial court decisions which had held that 'locality discrimination' means discrimination between sales in different geographical locations rather than between sales to different purchasers in the same location. (Hardware Centers, Inc. v. Blue Chip Stamp Co. (1963) Los Angeles Superior Court No. 804308; Millage v. Interstate Bakeries Corp. (1957) San Bernardino Superior Court Nos. 84573 and 85262.) What little secondary authority there is, is sharply divided. Some writers have found that the 1931 addition of the term 'locality' to the Act had no effect on its scope (e.g., Cupp, The Unfair Practices Act (1936) 10 So.Cal.L.Rev. 18, 23--24), while others have concluded to the contrary (e.g., Legal Aspects of Competitive Business Practices (Cont.Ed.Bar 1961) p. 278).

If anything emerges from the foregoing contentions volleying, it is that there remains ample room for legislative clarification. As section 17031 is presently worded, we conclude that the smallest geographic unit it envisages is the individual store or outlet, not the individual purchaser regardless of location. But even when the section is thus construed, it is of no relevance to plaintiff's cause of action. Sections 17040 and 17031 prohibit selling 'at a lower price * * * In one location * * * than In another.' (Italics added.) The clear import of this language is that to fall within its prohibition a seller must have at least two different places of business and must sell at a lower price In one than In the other. The two outlets involved in the present case are owned not by the defendant wholesale record distributors but by their retail customers, plaintiff and Dale.

This distinction leads us to defendants' related contention that section 17040 is intended to apply only to competition on the same 'level' as the person allegedly creating the locality discrimination (i.e., 'primary' comp...