Olin Mathieson Chemical Corp. v. Francis

• Decision Date: 27 August 1956
• Docket Number: No. 17666,17666
• Parties: OLIN MATHIESON CHEMICAL CORPORATION, a corporation, Plaintiff in Error, v. Phil I. FRANCIS, doing business as Associated Consumers, Defendant in Error.
• Court: Colorado Supreme Court

Page 139

301 P.2d 139

134 Colo. 160

OLIN MATHIESON CHEMICAL CORPORATION, a corporation, Plaintiff in Error, v. Phil I. FRANCIS, doing business as Associated Consumers,

Defendant in Error.

No. 17666.

Supreme Court of Colorado, En Banc.

Aug. 27, 1956.

Grant, Shafroth & Toll, Morrison Shafroth, Henry W. Toll, Frank H. Shafroth, Denver, for plaintiff in error.

Creamer & Creamer, Denver, for defendant in error.

Henry & Keating, Hubert D. Henry, Robert B. Keating, Denver, Rinn & Connell, Boulder, amici curiae.

KNAUSS, Justice.

This is a suit for an injunction and for damages brought by plaintiff in error, herein referred to as plaintiff, or by name; against defendant in error, referred to by name, or as defendant. The action is predicated on the Colorado Fair Trade Act, C.R.S. '53, 55-1-4. A temporary injunction was denied, and plaintiff's action was, on motion of counsel for defendant, dismissed. Plaintiff is here on writ of error.

The question presented is whether the 'non-signer' clause of the Fair Trade Act is constitutional.

The complaint recites that plaintiff manufactures and sells firearms and ammunition under two trade-marks, viz. 'Winchester' and 'Western'. It was alleged that these products were 'fair-traded' in Colorado, by written agreements with retailers in this state. The record discloses that one such agreement, exhibit 'B' was executed between plaintiff and Fisher Denver Co., a hardware dealer in Denver, who sold plaintiff's products. This contract consisted of two closely printed pages and was dated August 2, 1952. It provided that 'The Purchaser (Fisher) will not (except as specifically permitted by statute) directly or indirectly advertise, offer for sale or sell at wholesale or at retail any of the Commodities to any buyer in any state in which at the time of such sale a Fair Trade Act shall be in effect, at less than the minimum wholesale and/or retail selling price at that time stipulated therefor in such state by the Manufacturer. This provision shall be construed to apply to any Commodities which the Purchaser may already have on hand or on order or in transit to the Purchaser from the Manufacturer.' It is further provided: 'The minimum wholesale and/or retail selling prices stipulated by Manufacturer for such Commodities in various states (2) are those now or hereafter designated and set forth in attached Price Lists, exclusive of all sales or excise taxes applicable to such wholesale and/or retail trade. Manufacturer may, at any time and from time to time, upon notice given to Purchaser in writing, amend or supplement this Agreement; change any of said stipulated minimum resale prices, or eliminate any of the commodities now listed, or add other commodities and stipulate minimum wholesale and/or retail prices therefor as the case may be. Any such amendment and supplement or any such change in any stipulated minimum wholesale and/or retail price, or any such elimination from or addition to the lists of commodities, shall become effective forthwith upon receipt of such notice by Purchaser.' The contract further provided: 'This Agreement is not agreement of sale and purchase, and Purchaser by executing this Agreement does not in any way change or affect Manufacturer's right to select its own customers. Purchaser is bound by this Agreement only in respect to the Commodities set out and described in the annexed Price Lists which it may have to offer for sale or sell.'

The printed contract also contained the following: 'It is the agreement and intention of the Parties, hereto, that if any provision or part of this Agreement shall be held invalid, the remainder shall nevertheless be valid and binding upon the Parties; and no provision or part of this Agreement which may be held to be invalid shall be deemed to be an inducement to any other provision or part of this Agreement or to the execution by either Party to this Contract or any part thereof.'

While the contract might be terminated by either party by giving ten days notice, it was also provided that the Agreement 'shall remain in full force and effect with respect to all of such Commodities in the hands of the Purchaser or on order by the Purchaser or in transit to the Purchaser at the time of such termination.'

The Fisher contract was the only one, according to this record, which was executed between plaintiff and any dealer in the State of Colorado. Under date of December 2, 1953 plaintiff by letter advised defendant of its claims, enclosing two copies of 'Our Fair Trade contracts', and stated: 'These prices are now in effect on our products. Under the Colorado Fair Trade Law, the Fair Trade price is binding upon persons who have not actually signed the Fair Trade Agreement, as well as signers of it. * * * We believe that Fair Trade will redound to the benefit of all handlers and users of our products and are hopeful that we may have your cooperation. May we hear from you favorably advising that you will conform to our Fair Trade policy.' (Emphasis supplied.) Defendant did not 'conform'.

The Colorado Fair Trade Act, C.R.S. '53, 55-1-1 et seq. was enacted in 1937 and is found in Chapter 146 of the session laws of that year. The title to the act reads: 'An Act to protect trade-mark owners, distributors and the public against injurious and uneconomic practices in the distribution of articls of standard quality under a distinguished trade-mark, brand or name.' (Emphasis supplied.)

Section 1 of the statute provides: 'No contract relating to the sale or resale of a commodity which bears, or the label or container of which bears, the trademark, brand or name of the producer * * * of such commodity, and which commodity is in free and open competition with commodities of the same general class produced or distributed by others shall be deemed in violation of any law of the state of Colorado by reason of any of the following provisions which may be contained in such contract: (a) That the buyer will not resell such commodity at less than the minimum price stipulated by the seller. * * *'

Section 4 of the Act provides: 'Willfully 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 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.'

It will be noted that the statute authorizes contracts in respect to a commodity which is 'in free and open competition with commodities of the same general class produced or distributed by others'. The contention of plaintiff is to the effect that the exclusive manufacturer of a product may fix the retail price thereof upon the theory that when sold by one retailer, that article is in competition with the same product sold by another retailer. It is plain that this contention does not fall within the intent or purpose of the statute.

The distinguished and learned trial judge in announcing his ruling in this case, among other things, said: 'Plaintiff herein seeks a preliminary or temporary injunction to enjoin the Defendant from selling below a fixed minimum price certain trade-marked products manufactured by the Plaintiff but thereafter lawfully acquired by the Defendant. There exists no contract whatsoever between the Plaintiff and this Defendant, and the Plaintiff accordingly is proceeding under the so-called 'non-signer' clause of the Colorado Fair Trade Act, that being Section 4. * * * the Colorado Fair Trade Act stripped of its formalities and viewed in the light of actual practice, seems to this Court to be a legally unjustifiable attempt by the state legislature beyond the proper bounds of its police power to delegate to one class of persons, namely the manufacturer in the instant case, the right to set minimum prices for which its product must be sold by every retailer of said product within the state, solely, so far as the law is concerned by virtue of the fact that this Plaintiff may have a written contract fixing minimum prices with only one retailer located in the state; and that in fixing the minimum price the manufacturer is not restricted to or bound by any legislative standards, and his action, once made, is not thereafter subject to any review whatsoever.

'The argument is made that even though this Plaintiff has divested itself fully and completely of its ownership of the tradenamed product that it nonetheless still has an interest in its product. * * * Such interest can never in this Court's opinion be paramount and superior to the rights of every person to the unfettered use of that which he legally owns. Of course the right to the free use of one's own property is subject to some restrictions, but it seems to this Court that most certainly a lawful incident of ownership is the right to fix for oneself the price for which he will sell that which he owns.'

Considering what plaintiff charterized as 'our Fair Trade policy', it strains the mental processes to discover anything therein not amounting to a right reserved to the plaintiff corporation to exercise in its uncontrolled and unrestricted discretion to do as it pleases with reference to the fixing of prices for its commodities and its reserved right to refuse to sell its products to any purchaser.

The contract sought to be enforced in the instant case is a much more elaborate if not dangerous method of price-fixing than that which has heretofore received the approval of some courts. It embraces terms which if enforced would constitute a strait-jacket control of prices of plaintiff's products, ever moving in the direction of monopoly.

The Colorado Unfair Practices Act, C.R.S. '53, 55-2-1, et seq. declares in section 16 thereof: 'The general assembly declares that the purpose of this article is to safeguard the public against the creation or perpetuation of monopolies...