Hoffmann-LaRoche, Inc. v. Weissbard

• Decision Date: 31 March 1952
• Docket Number: HOFFMANN-LA,Nos. C--1928,C--2217,s. C--1928
• Parties: ROCHE, Inc. v. WEISSBARD et al. JOHNSON & JOHNSON et al. v. CHARMLEY DRUG CO.
• Court: New Jersey Superior Court

Page 210

19 N.J.Super. 210

88 A.2d 238

HOFFMANN-LA ROCHE, Inc. v. WEISSBARD et al.

JOHNSON & JOHNSON et al. v. CHARMLEY DRUG CO.

Nos. C--1928, C--2217.

Superior Court of New Jersey Chancery Division.

March 31, 1952.

Joseph H. Stamler, Newark, for the plaintiffs Hoffman-LaRoche, Inc. and Johnson & Johnson (Lorentz & Stamler, Newark, attorneys).

Walter F. Waldau, Newark, for the plaintiff McKesson & Robbins (Stryker, Tams & Horner, Newark, attorneys).

Sanford Freedman, Newark, for the defendants Max Weissbard and others (Bilder, Bilder & Kaufman, Newark, attorneys; John M. Kaufman, Newark, on the brief).

Joseph Kraemer, Newark, for the defendant Charmley Drug Co.

FREUND, J.S.C.

These two cases involve a common question of law. They have a common object and the issues save in one respect are identical. They were instituted to test the enforceability against non-signers of the Fair Trade Act, R.S. 56:4--3 et seq., N.J.S.A., by reason of the decision of the United States Supreme Court in Schwegmann Bros. v. Calvert Distillers Corp., 341 U.S. 384, 71 S.Ct. 745, 95 L.Ed. 1035 (1951).

Hoffmann-La Roche v. Weissbard

The question here is whether the plaintiff, a New Jersey corporation, may enjoin the defendants, owners of local drugstores, from selling plaintiff's products under the prices stipulated in a contract made in this State between the plaintiff and another retailer. The defendants are not parties to the contract, but had notice thereof.

The plaintiff manufactures pharmaceuticals in Nutley, New Jersey; maintains business offices in seven states; and employs over 200 persons outside New Jersey. It has executed 'fair trade' contracts in 45 states, and uses the same price list for its products throughout the United States. Its advertising which is on a national scale cost over $1,000,000 in 1951.

Prior to the Schwegmann decision, the defendants purchased plaintiff's products directly from the plaintiff in New Jersey; but since then the products have been purchased outside the State and delivered to the defendants' stores in New Jersey. The specific violation alleged is that the defendants advertised and sold Vi-Penta Drops at $3.49, whereas the price stipulated by the plaintiff in the 'fair trade' contract was $3.95. The merchandise had been purchased from jobbers in New York City. The defendants contend that having purchased the plaintiff's products in interstate commerce and not having signed a 'fair trade' agreement they are not bound by the prices established in the plaintiff's 'fair trade' contract executed in New Jersey.

Johnson & Johnson v. Charmley

Johnson & Johnson, a New Jersey corporation, is a manufacturer of pharmaceuticals, with plants in Illinois, New Jersey and New York. Its trademarked products are sold throughout the United States, and it stipulates the minimum prices at which they should be sold, of which the trade is advised through its own pamphlet entitled 'Net Selling Prices' and other drug publications.

The co-plaintiff, McKesson & Robbins, a Maryland corporation, is a wholesale distributor of the products of various manufacturers, including Johnson & Johnson, maintaining warehouses and offices in 35 states, including New Jersey.

The defendant, a New Jersey corporation, operates a retail drugstore in the City of Newark, where it sells Johnson & Johnson products. It had signed no 'fair trade' agreement with either plaintiff.

In an endeavor to overcome the effect of the Schwegmann decision, the plaintiffs devised a plan to bind non-signers to resale price maintenance. By letter they notified their customers, including the defendant, that the following legend would be endorsed on invoices:

'Fair Trade Agreement. Purchaser, by accepting delivery from Seller of any fair traded commodity, agrees not to resell such commodity, by direct or indirect means, at less than the prescribed net retail minimum price published by the Producer or Distributor whose trademark, brand or name appears on the commodity. This agreement not applicable to sales in nonfair trade states or District of Columbia.'

Thereafter, the defendant by telephone ordered Johnson & Johnson products, some from McKesson & Robbins' Newark Division and some from its New York Division. The orders were accepted without the imposition of any restriction or condition respecting resale price maintenance. However, the invoices, when received, bore the legend above set forth. Thereupon, the defendant by letter advised McKesson & Robbin's Newark and New York Divisions and Johnson & Johnson 'that your Fair Trade agreement as set forth on the invoices and in your notices does not bind us and is illegal. Therefore, we are at liberty to sell the merchandise below Fair Trade prices.' Later, the defendant purchased additional Johnson & Johnson products from a Philadelphia jobber without any restrictions.

The plaintiffs seek a declaratory judgment respecting the validity of the alleged contract and an injunction to restrain the defendant from reselling the products of Johnson & Johnson under the minimum resale prices. The defendant urges that being a non-signer and not having otherwise agreed to resale price maintenance, it is not bound.

Thus, the issue specific to this case is whether the inscription on the invoice and the retention of the goods by the purchaser constitutes a contract for resale price maintenance under our New Jersey Fair Trade Act and the Miller-Tydings Amendment. The subordinate question is whether the legend is sufficiently definite and certain to warrant an injunction against price-cutting.

Resale price maintenance contracts were prohibited as restraints of trade by the Sherman Anti-Trust Act, 26 Stat. 209, c. 647; 15 U.S.C.A. § 1 (July 2, 1890); Dr. Miles Medical Co. v. John D. Park & Sons Co., 220 U.S. 373, 31 S.Ct. 376, 55 L.Ed. 502 (1911); and as violative of the Federal Trade Commission Act, 38 Stat. 717, c. 311; 15 U.S.C.A. § 41 (1914); Federal Trade Commission v. Beech-Nut Packing Co., 257 U.S. 441, 42 S.Ct. 150, 66 L.Ed. 307 (1922); Armand v. Federal Trade Commission, 78 F.2d 707 (C.C.A.2d 1935), certiorari denied 296 U.S. 650, 56 S.Ct. 309, 80 L.Ed. 463 (1935). At common law in this State, price-fixing agreements were illegal as against public policy. Ingersoll v. Goldstein, 84 N.J.Eq. 445, 93 A. 193 (Ch.1915).

In 1931 California enacted the first state fair trade act, St.1931, p. 583. In 1935 Illinois enacted a statute, Smith-Hurd.Rev.Stat.1935, c. 121 1/2 sec. 188 et seq., and in the same year New Jersey enacted its counterpart, R.S. 56:4--3 et seq., c. 58, L. 1935, page 140, N.J.S.A. The constitutionality of these fair trade laws was upheld by the United States Supreme Court; Old Dearborn Distributing Co. v. Seagram-Distillers Corp. (McNeil v. Joseph Triner Corp.), 299 U.S. 183, 57 S.Ct. 139, 81 L.Ed. 109 (1936); Pep Boys v. Pyroil Sales Co. and Kunsman v. Max Factor & Co., 299 U.S. 198, 57 S.Ct. 147, 81 L.Ed. 122 (1936). As a consequence, all of the states, with the exception of Missouri, Texas and Vermont, and the District of Columbia, enacted fair trade statutes. See 2 C.C.H. Trade Reg.Rep. trade statutes. See 2 C.C.H. Trade Reg. Rep. (9th ed.) sec. 7011 et seq.

Heretofore, injunctive relief against price-cutting by non-signers with notice was afforded under the state fair trade acts. A single valid contract entered into between a producer and a retailer pursuant to R.S. 56:4--5, N.J.S.A. was held to be sufficient to bind all other retailers having notice, to respect the price stipulated in the contract, R.S. 56:4--6, N.J.S.A. Johnson & Johnson v. Weissbard, 121 N.J.Eq. 585, 191 A. 873 (E. & A. 1937); Bristol-Myers Co. v. L. Bamberger & Co., 122 N.J.Eq. 559, 95 A. 625 (Ch.1937), affirmed 124 N.J.Eq. 235, 1 A.2d 332 (E. & A.1938); Lentheric, Inc., v. Weissbard, 122 N.J.Eq. 573, 195 A. 818 (Ch.1937); Houbigant Sales Corp. v. Woods Cut Rate Store, 123 N.J.Eq. 40, 196 A. 683 (Ch.1937); Revlon Nail Enamel Corp. v. Charmley Drug Shop, 123 N.J.Eq. 301, 197 A. 661 (Ch.1938); Burstein v. Charline's Cut Rate, 126 N.J.Eq. 560, 10 A.2d 646 (Ch.1940); Frank Fischer Merchandising Corp. v. Ritz Drug Co., 129 N.J.Eq. 105, 19 A.2d 454 (Ch.1941); California Oil Co. v. Reingold, 5 N.J.Super. 525, 68 A.2d 572 (Ch.Div.1949); Max Factor & Co. v. Kunsman, 5 Cal.2d 446, 55 P.2d 177 (1936), affirmed 299 U.S. 198, 57 S.Ct. 147, 81 L.Ed. 122 (1936); Bourjois Sales Corp. v. Dorfman, 273 N.Y. 167, 7 N.E.2d 30, 110 A.L.R. 1411 (Ct.App.1937).

To implement the state fair trade acts, Congress in 1937 passed the Miller-Tydings amendment to the Sherman Act, Title VIII, 50 Stat. 673, 693, c. 690; 15 U.S.C.A. § 1, and thereby expressly exempted contracts or agreements prescribing minimum prices for the resale in interstate commerce of trade-marked commodities, provided such contracts were valid under state statute. However, the federal act differs from most of the state statutes in that it does not contain a 'nonsigner' clause. The Schwegmann case provided the United States Supreme Court with the first opportunity to consider the effect of this variance. The plaintiffs doing an interstate business had obtained an injunction against price-cutting by an operator of a retail supermarket, a non-signer with notice of a 'fair trade' contract made by the plaintiffs under the Louisiana Fair Trade Act, La.Gen.Stat., sec. 9809.1 et seq. (1936) LSA--R.S. 51:391 et seq. This statute, like the New Jersey Act, contained the non-signer provision and prohibited the resale of commodities, except at prices 'stipulated' by the vendor. The Supreme Court reversed, ruling that a retailer who does not sign a contract for price maintenance is not to be bound by the schedule of a price maintenance plan although he has notice thereof. Mr. Justice Douglas, speaking for the majority of the court said:

'The omission of the nonsigner provision from the federal law is fatal to respondents' position unless we are to perform a distinct legislative...