Kinsey Distilling Sales Co. v. Foremost Liquor Stores, Inc.

• Decision Date: 26 November 1958
• Docket Number: No. 34902,34902
• Parties: KINSEY DISTILLING SALES COMPANY, Appellee, v. FOREMOST LIQUOR STORES, Inc., et al., Appellants.
• Court: Illinois Supreme Court

Page 290

154 N.E.2d 290

15 Ill.2d 182

KINSEY DISTILLING SALES COMPANY, Appellee, v. FOREMOST LIQUOR STORES, Inc., et al., Appellants.

No. 34902.

Supreme Court of Illinois.

Nov. 26, 1958.

Schultz, Biro & Karmel, Chicago, for appellants.

Lee A. Freeman and David J. Krupp, Chicago, for appellee.

BRISTOW, Justice.

The plaintiff, Kinsey Distilling Sales Company, brought an action in the circuit court of Cook County to permanently enjoin Foremost Liquor Stores, Inc., its president, and others from wilfully and knowingly advertising, offering for sale or selling three named brands of whisky at less than the prices stipulated from time to time under, and conformably to, the Fair Trade Act, and in accordance with contracts executed under it, and to recover damages of $150,000. All but one defendant joined in a motion to dismiss, the motion was denied, defendants elected to abide by their motion, and a decree was entered granting the injunctive relief sought. Defendants prosecute this direct appeal, constitutional questions being involved within the contemplation of section 75 of the Civil Practice Act. Ill.Rev.Stat.1957, chap. 110, par. 75.

Plaintiff, the sole sales and distributing agent in Illinois of three brands of whisky produced by Continental Distilling Corporation, sells to various wholesale distributors. The trademarks, brands or names are: Old Hickory Straight Bourbon Whisky, 100 proof Bottled-in-Bond for Old Hickory Distilling Corporation; Old Hickory Straight Bourbon Whisky, 86 proof bottled by Old Hickory Distillers Company; Kinsey Silver Blended Whisky, 70% GNS, 86 proof, bottled by Kinsey Distillers Company. Each of the three beverages, the complaint alleged, is in free, fair and open competition with like commodities, produced by others, and sold and distributed throughout Illinois. Plaintiff has expended substantial sums of money in advertising and promoting these products; their trademarks, brands or names have become widely and favorably known to the trade and public generally in Illinois, thereby enabling plaintiff to sell large quantities of the products in Chicago and throughout the State. Plaintiff has executed fair trade contracts with a number of retailers in Illinois and its products, distributed in the State, are sold subject to the terms of the contracts. These contracts provide that the products shall not be sold, advertised or offered for sale in Illinois below the prices stipulated by plaintiff in written schedules.

Illustrative is a contract between plaintiff and an individual retailer which provides: (1) that the retailer shall not sell any of plaintiff's products to consumers in Illinois at other than the resale price therefor; (2) that it shall have the right to revise or change any such resale prices, the resale prices to be in accordance with written schedules furnished from time to time to the retailer by plaintiff; that plaintiff may list additional goods and brands in any such schedules, with designated retail prices to consumers, and that the provisions of the agreements shall apply to the additions; (3) that plaintiff shall not give any article of value or make any concession, rebate or refund which may change the retail prices designed by it; (4) that, in the event of the sale of the retailer's business, he shall require, as a condition of the sale, that the successor transferee be bound by the provisions of the agreement upon the retailer's part to be performed; (5) that plaintiff shall be entitled to injunctive relief against both actual or threatened breaches of the agreement by the retailer; (6) that the retailer agrees to pay plaintiff as liquidated damages $50 for each sale within Illinois at other than the resale prices to consumers then in effect under the contract.

All defendants, excepting two corporations which advertise and promote the sales of the other defendants and the president of the two companies, are engaged in selling alcoholic beverages at retail in the Chicago area. Plaintiff's complaint alleged that, prior to the acts complained of, it caused to be announced and made known generally to the trade in Illinois the stipulated retail prices of the three products previously described and that defendants, on November 19, 1957, received copies of the schedules of the stipulated prices; that, nevertheless, they wilfully and knowingly offered for sale and advertised the products at less than those stipulated. Plaintiff alleged, further, that on January 8, 1958, Irving Garmisa entered into a fair trade agreement with it, providing for the maintenance of stipulated minimum fair trade prices for its products; that, subsequent to the execution of this contract, various named defendants induced Garmisa to breach his fair trade agreement with plaintiff.

Defendants' motion to dismiss was based upon the grounds, among others, that the Fair Trade Act is unconstitutional. Their principal attack upon appeal, as in the trial court, is directed against section 2, commonly referred to as the 'non-signer' provision. Ill.Rev.Stat. 1957, chap. 121 1/2, par. 189. Defendants contend that section 2 violates the due process clause of our constitution and, also, constitutes an unlawful delegation of legislative powers to private persons to fix prices in contravention of section 1 of article IV, S.H.A. Section 2 of the Fair Trade Act declares: 'Wilfully and knowingly advertising, offering for sale or selling any commodity at less than the price stipulated in any contract entered into pursuant to the provisions of section 1 of this Act, whether the person so advertising, offering for sale or selling is or is not a party to such contract, is unfair competition and is actionable at the suit of any person damaged thereby.'

The constitutional validity of the Fair Trade Act was sustained in 1936 in Joseph Triner Corp. v. McNeil, 363 Ill. 559, 2 N.E.2d 929, 104 A.L.R. 1435, and Seagram-Distillers Corp v. Old Dearborn Distributing Co., 363 Ill. 610, 2 N.E.2d 940. Upon appeal, the United States Supreme Court held that the Illinois statute did not violate Federal constitutional guaranties. Old Dearborn Distributing Co. v. Seagram-Distillers Corp., 299 U.S. 183, 57 S.Ct. 139, 81 L.Ed. 109. Although we pointed out in the Triner case that this court was not concerned with the economic wisdom of the statute, defendants' assault upon the constitutionality of section 2 rests largely upon its asserted economic undesirability. The need for fair trade legislation was debatable when the first Fair Trade acts were passed in California in 1931, West's Ann.Bus. & Prof.Code, § 16900 et seq., and in New York, General Business Law, § 369-a et seq., and Illinois in 1935. The debate continues unresolved to this day. Where such questions of fact are fairly debatable, this court does not substitute its judgment for that of the General Assembly but accepts and carries into effect its declared policy. As in the earlier case, we are concerned with whether the Fair Trade Act squares with constitutional safe-guards-not whether the members of this court agree with the economic and social philosophy reflected by the statute. Defendants urge that we re-examine and overrule the Triner case. That decision has been the established law of Illinois for 22 years and, in the orderly administration of justice, should be deemed controlling until and unless the General Assembly provides otherwise. Accordingly, to the extent that defendants make the same contentions decided adversely to them in the Triner and Seagram cases, we adhere to and reaffirm the disposition made of the contentions in those cases.

In the Triner case, we said: 'It is argued that section 2 delegates to such individuals as choose to avail themselves of the benefits of the statute the power to regulate the prices of commodities sold by others. The contention, and the argument supporting it, rest upon the unwarranted assumption that the Fair Trade Act is primarily, and not incidentally, a price-fixing statute.' 363 Ill. 559, at page 581, 2 N.E.2d at page 939. The primary purpose of the statute, it was pointed out, was the 'preservation and protection of the property interest of the producer and his distributors in the good will represented by brands, trade-marks, and trade-names.' 363 Ill. 559, at page 579, 2 N.E.2d at page 938.

In Old Dearborn Distributing Co. v. Seagram-Distillers Corp., 299 U.S. 183, 57 S.Ct. 139, 81 L.Ed. 109, the United States Supreme Court held that a non-signer was subject to section 2 of the Fair Trade Act for the reason that he purchased the trade-marked merchandise with knowledge of the fair trade contract, impliedly assented to the contract and, by his implied assent, ratified, became a party to, and was bound by, the contract.

In the Triner case we stated that the Fair Trade Act would remain ineffective until and unless the conditions which it prescribes are satisfied, observing: 'The plaintiff, for example, is not commanded to operate under it. Only in the event that manufacturers or distributors elect to avail themselves of its provisions does the statute come into actual operation. This does not mean that the act took effect upon the approval of any authority other than the legislative branch of our state government.' 363 Ill. 559, at page 582, 2 N.E.2d at page 939.

Similarly, in Old Dearborn Distributing Co. v. Seagram-Distillers Corp., 299 U.S. 183, 192, 57 S.Ct. 139, 144, the United States Supreme Court, in rejecting the contention that the Fair Trade Act unlawfully delegated power to private persons to control the disposition of the property of others, observed: 'It is clear that this section (1) does not attempt to fix prices, nor does it delegate such power to private persons. It permits the designated private persons to contract with respect thereto. It contains no element of compulsion but simply legalizes their acts, leaving them free to enter into the authorized contract or not as they may see...