Lionel Corp. v. Grayson-Robinson Stores, Inc.

• Decision Date: 26 June 1953
• Docket Number: No. C--877,GRAYSON-ROBINSON,C--877
• Parties: LIONEL CORP. v.STORES, Inc.
• Court: New Jersey Superior Court

Page 54

27 N.J.Super. 54

98 A.2d 623

LIONEL CORP. v. GRAYSON-ROBINSON STORES, Inc.

No. C--877.

Superior Court of New Jersey Chancery Division.

June 26, 1953.

Samuel Voltaggio, Newark, for the plaintiff.

Meyer E. Ruback, Newark, for the defendant (Ruback, Albach & Weisman, Newark, attorneys; Sidney A. Diamond and Roosevelt, Freidin & Littauer, of the New York Bar, New York City, of counsel).

FREUND, J.S.C.

This proceeding brought by The Lionel Corporation seeks to enjoin the defendant, Grayson-Robinson Stores, Inc., from selling or offering for sale 'Lionel Trains' or 'Lionel Products,' manufactured by the plaintiff at less than the list prices established by the plaintiff. The action is brought under the New Jersey Fair Trade Act, R.S. 56:4--3 et seq., N.J.S.A., and under the McGuire Act, 66 Stat. 632, 15 U.S.C.A. § 45. The defendant has moved for summary judgment as a matter of law.

The complaint and affidavits submitted on the motion palpably show that there is no genuine issue as to any material fact. The following facts are gleaned from the pleadings: The plaintiff, a corporation of the State of New York, authorized to do business in this State, is engaged in interstate commerce, manufacturing toy electric trains under the trade name of 'Lionel,' and has a price-fixing policy which it endeavors to maintain by means of retail price maintenance agreements and by prices listed in its catalogs. The defendant, a corporation of the State of California, authorized to do business in this State, owns a nation-wide chain of retail stores--one in the City of Newark. The policy of the defendant is to operate its stores on a self-service, cash-and-carry basis, and to sell its merchandise at minimum prices. The defendant asserts that it has never entered into any 'fair trade' contract and it has been stipulated that it has no contract with the plaintiff.

The plaintiff has entered into price maintenance agreements with retailers in this State, of which fact it alleges the defendant had notice. The defendant denies having notice but admits it did offer for sale and sold the plaintiff's products at less than the stated list prices, and insists on its right to do so.

The plaintiff contends that the McGuire Act, supra, has encompassed nonsigners and that the defendant's practice of price-cutting, with notice of the plaintiff's price maintenance contracts, constitutes violation of the New Jersey Fair Trade Act, entitling it to an injunction. R.S. 56:4--3 et seq., N.J.S.A.

In opposition, the defendant presents many points, among them that the New Jersey Fair Trade Act and the federal McGuire Act, insofar as they attempt to bind nonsigners, are unconstitutional: (1) being in violation of the due process clauses of the Fifth and Fourteenth Amendments to the Federal Constitution and of Article I, Section I, of the State Constitution, because they deprive the defendant of its property right to sell merchandise at the price it sees fit; and (2) because they unlawfully delegate to private persons, manufacturers and producers, the power to fix prices of commodities not affected with a public interest, without any standards or regulations governing the exercise of the delegated power.

The plaintiff urges that state fair trade statutes were declared to be valid by the United States Supreme Court in Old Dearborn Distributing Co. v. Seagram-Distillers Corp., 299 U.S. 183, 57 S.Ct. 139, 81 L.Ed. 109 (1936), and that thereupon the courts of this State upheld the constitutionality of our Fair Trade Act and enjoined nonsigners from selling below fixed prices. Johnson & Johnson v. Weissbard, 121 N.J.Eq. 585, 191 A. 873 (E. & A.1937). Further, that the defendant is asking this court to overrule these decisions. The defendant concedes that the Court of Errors and Appeals held that our statute did not violate the due process clause, but argues that the court did not pass upon its constitutionality on the issue of unlawful delegation of legislative power. The defendant urges that, to the extent that the United States Supreme Court has not overruled the Old Dearborn case by its decision in Schwegmann Bros. v. Calvert Distillers Corporation, 341 U.S. 384, 71 S.Ct. 745, 95 L.Ed. 1035, 19 A.L.R.2d 1119 (1951), this court is free to disregard it; and that the validity of the McGuire Act has not been passed upon by the Supreme Courts of either the United States or of this State.

The historical background of fair trade legislation and decisions pertaining thereto, including the Schwegmann case, are set forth in the opinions of this court and of the Supreme Court of New Jersey in Hoffmann-LaRoche, Inc., v. Weissbard and Johnson & Johnson v. Charmley Drug Co., 19 N.J.Super. 210, 88 A.2d 238 (Ch.Div.1952), affirmed 11 N.J. 541, 95 A.2d 398, and 11 N.J. 526, 95 A.2d 391 (1953). Here, it will suffice to say that price-fixing agreements were illegal as against public policy. Ingersoll v. Goldstein, 84 N.J.Eq. 445, 93 A. 193 (Ch.1915); prohibited as restraints of trade under the Sherman Anti-Trust Act, 26 Stat. 209, c. 647; 15 U.S.C.A., § 1 (1890), and held violative of the Federal Trade Commission Act, 38 Stat. 717, c. 311, 15 U.S.C.A., § 41 (1914). Dr. Miles Medical Co. v. John D. Park & Sons Co., 220 U.S. 373, 31 S.Ct. 376, 55 L.Ed. 502 (1911); Federal Trade Commission v. Beech-Nut Packing Co., 257 U.S. 441, 42 S.Ct. 150, 66 L.Ed. 307 (1922). However, in 1936, the United States Supreme Court in the Old Dearborn case, supra, upheld the validity of state fair trade statutes sanctioning agreements for retail price-fixing with reference to trade-marked or branded commodities sold in fair and open competition with other commodities of the same general class, binding also upon retailers not parties to the contract who had notice of the price agreement. The purported purpose of fair trade statutes is to protect owners of trade-marked goods, or distributors, who have built up a good-will for the product, from injurious practices.

In 1937, in order to implement state fair trade acts and to alleviate the proscriptions of the Sherman Anti-Trust Act upon price maintenance agreements valid under local law, Congress enacted the Miller-Tydings Amendment to the Sherman Act, Title VIII, 50 Stat. 673, 693, c. 690, 15 U.S.C.A. § 1. That amendment provides immunity from the ban of the Sherman Act for 'contracts or agreements prescribing minimum prices for the resale' of specified trade-marked or branded commodities 'when contracts or agreements of that description are lawful as applied to intrastate transactions' under local law. However, the immunity is limited to 'vertical' and not to 'horizontal' price-fixing by those in competition with each other at the same functional level. The latter continue to be prohibited by the Sherman Act. The New Jersey Fair Trade Act has a nonsigner clause, which was lacking in the Miller-Tydings Amendment. Following the Old Dearborn case, our courts in numerous cases enjoined nonsigners from failing to adhere to price stipulations of the manufacturer. See cases cited in Hoffmann-LaRoche, Inc. v. Weissbard, 19 N.J.Super. 210, at page 215, 88 A.2d 238.

In Schwegmann Bros. v. Calvert Distillers Corp., supra, the United States Supreme Court held that the Miller-Tydings Amendment immunized only contracts or agreements prescribing minimum resale prices of trade-marked commodities in interstate commerce, and that a retailer who had not signed a contract for price maintenance could not be subjected to price observance since the amendment did not encompass noncontracting retailers. On the authority of this case, injunctions against nonsigners were denied in Hoffmann-LaRoche, Inc. v. Weissbard, supra, and Johnson & Johnson v. Charmley Drug Stores, supra, and injunctions which had previously been issued were vacated. Johnson & Johnson v. Weissbard, and Burroughs Welcome & Co. (U.S.A.), Inc., v. Weissbard, 11 N.J. 552, 95 A.2d 403 (1953).

To overcome the effect of the decision in the Schwegmann case, Congress, on July 14, 1952, adopted the McGuire Act as an amendment to the Federal Trade Commission Act, 15 U.S.C.A. § 45. It purports to include nonsigners within the immunity granted by the Miller-Tydings Act. The pertinent section reads as follows:

'(3) Nothing contained in this section or in any of the Antitrust Acts shall render unlawful the exercise or the enforcement of any right or right of action created by any statute, law, or public policy now or hereafter in effect in any State, Territory, or the District of Columbia, which in substance provides that willfully and knowingly advertising, offering for sale, or selling any commodity at less than the price or prices prescribed in such contracts or agreements whether the person so advertising, offering for sale, or selling is or is not a party to such contract or agreement, is unfair competition and is actionable at the suit of any person damaged thereby.' 15 U.S.C.A. § 45, (a).

Paragraph (4) of the same subsection of the McGuire Act provides that the exercise or enforcement of any right of action under the state statute or public policy...