Miles Lab., Inc. v. Owl Drug Co.
| Decision Date | 13 December 1940 |
| Docket Number | 8377 |
| Citation | 295 N.W. 292 |
| Parties | MILES LABORATORIES, INC., Respondent, v. OWL DRUG COMPANY, a Corporation, Appellant. |
| Court | South Dakota Supreme Court |
Appeal from Circuit Court, Minnehaha County, SD
#8377—Affirmed
Claude A. Hamilton, Sioux Falls, SD
Attorney for Appellant.
Bailey, Voorhees, Woods & Bottum and Roswell Bottum, all of Sioux Falls, and Verne G. Cawley, of Elkhart, Ind., for Respondent.
Plaintiff is a corporation, who now is and for more than eight years last past has been engaged in the manufacture and sale of proprietary remedies and medicines, among others, a certain analgesic remedy known as “Alka-Seltzer”, which, prior to the commencement of this action has been and now is in free and open competition with commodities of the same general class produced and distributed by other manufacturers, such as Aspirin, Bromo-Seltzer and other proprietary medicines; and long prior to the commencement of this action plaintiff registered the name “Alka-Seltzer” in the United States Patent Office as a trade-mark, and ever since the registration of said trademark and at the present time plaintiff has been and now is the owner thereof.
The Legislature of 1937 enacted Chapter 126, Laws 1937 (now SDC Ch. 54.04), and known as the “Fair Trade Law,” and on or about the 13th day of November, 1937, the plaintiff, pursuant to the provisions of SDC 54.0404, established a minimum price at which its product, “Alka-Seltzer”, should be sold to consumers at retail in this state and that said minimum price ever since said date has been and now is in full force and effect. As a result of extensive advertising and other sales promotion work done by the plaintiff in promoting the sale of “Alka-Seltzer”, and as a result of the wide and general acceptance of said product by the public, plaintiff has built up and established a large and valuable good will in connection therewith, which, at this time, has a value to the plaintiff in the state of South Dakota in excess of $5,000.
Defendant is a corporation engaged in conducting a retail drug store under the name of “Owl Cut-Rate Drug Store” in Sioux Falls, South Dakota, where it deals in proprietary remedies and medicines, including “Alka-Seltzer”.
On or about the 13th day of November, 1937, the plaintiff pursuant to the provisions of the said “Fair Trade Law” entered into certain contracts with distributors of “Alka-Seltzer” wherein plaintiff established minimum resale prices, which said prices are the same as such prices established by the plaintiff in all other states of the United States
having a “Fair Trade Law” other than the State of California, and providing for refusal to sell unless such minimum resale prices are observed, with a large number of retailers of proprietary remedies doing business in this state, all of which agreements are identical in form and language except as to the date and name of the retailer which appears in each of the agreements, all of which agreements were in force and effect at the time of the commencement of this action.
Sometime shortly after November 13, 1937, defendant was informed of the minimum retail prices of “Alka-Seltzer” which plaintiff had on such date established in this state by the delivery to the defendant of a schedule of said minimum prices, and thereafter and until the 6th day of November, 1939, plaintiff sold to defendant such of its products as the defendant ordered from it. That notwithstanding the receipt of said schedule of minimum prices the defendant shortly thereafter violated the provisions of SDC 54.0406 of the said “Fair Trade Law” by wilfully and knowingly offering for sale and selling in its said “Owl Cut-Rate Drug Store” considerable quantities of “Alka-Seltzer” for less than the minimum price established by the plaintiff as aforesaid, and threatened to continue offering for sale and selling said commodity at less than the prices established by the plaintiff as aforesaid.
In its complaint plaintiff alleged that none of such sales come within the exceptions enumerated in SDC 54.0405. Plaintiff also alleged that it was damaged in its business by the said wrongful and unlawful acts of the defendant and prayed judgment that the defendant be perpetually enjoined from unlawfully and knowingly advertising, offering for sale or selling “Alka-Seltzer” at less than the minimum retail prices therefor which plaintiff had previously established and which were in effect at the time of such sales, and from offering or giving any article of value free with or in connection with the sale of “Alka-Seltzer”; or offering or making any concession of any kind whatsoever with or in connection with the sale of “Alka-Seltzer”, or offering or giving any coupon with or in connection with the sale of
“Alka-Seltzer” and selling or offering for sale “Alka-Seltzer” in combination with any other merchandise.
To plaintiff’s complaint, defendant interposed an answer in which it admitted all the allegations contained in plaintiff’s complaint and moved that said complaint be dismissed for the reason and upon the ground that the said “Fair Trade Law”, under which this action is brought is repugnant to and in violation of the Constitution of the State of South Dakota. The Court denied defendant’s motion for judgment and granted plaintiff’s motion for judgment on the pleadings in accordance with plaintiff’s prayer. By this judgment defendant is permanently and perpetually enjoined from: “(a) wilfully and knowingly advertising, offering for sale, or selling the product known as ‘Alka-Seltzer’, which is described in the complaint in this action, at less than the minimum retail prices therefor which the plaintiff may have previously established and which are in effect at the time of said sale; (b) offering or giving any article of value free with or in connection with the sale of “Alka-Seltzer” (c) offering or making any concession of any kind whatsoever with, or in connection with the sale of “Alka-Seltzer” (d) offering or giving any coupon with or in connection with the sale of ‘Alka-Seltzer’; and (e) selling or offering for sale ‘Alka-Seltzer’ in combination with any other commodity.” But further ordered that this injunction “shall not preclude the defendant from reselling said ‘Alka-Seltzer’ at less than the minimum retail prices therefor which the plaintiff may have established in the following cases and under the following circumstances which are set forth in SDC 54.0405, namely: (1) In closing out the defendant’s stock of ‘Alka-Seltzer’ for the bona fide purpose of discontinuing dealing in such commodity when plain notice of the fact is given to the general public; providing that in such case the defendant shall give to the plaintiff prompt and reasonable notice in writing of its intention to close out said stock and an opportunity to purchase such stock at the original invoice price; (2) When the trade-mark, brand or name is removed or wholly obliterated from the said commodity, ‘Alka-Seltzer’, and is not used or directly or in
directly referred to in the advertisement or sale thereof; (3) When said commodity, ‘Alka-Seltzer’ is altered, secondhand, damaged or deteriorated and plain notice of the fact is given to the public in the advertisement and sale thereof, such notice to be conspicuously displayed in all advertisements and to be affixed to said commodity; (4) A sale of said commodity by any officer acting under an order of court.” From this judgment defendant appeals.
It is contended by appellant that the “Fair Trade Law” conflicts with Section 20 of Art. 17, South Dakota Constitution, and therefore is void. This section of the Constitution is what is known as the anti-trust and antimonopoly clause of the Constitution and reads as follows
“Monopolies and trusts shall never be allowed in this state and no...
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