Shulton, Inc. v. Consumer Value Stores, Inc.

• Citation: 352 Mass. 605,227 N.E.2d 482
• Parties: SHULTON, INC. v. CONSUMER VALUE STORES, INC.
• Decision Date: 06 June 1967
• Court: United States State Supreme Judicial Court of Massachusetts

Page 482

227 N.E.2d 482

352 Mass. 605

SHULTON, INC. v. CONSUMER VALUE STORES, INC.

Supreme Judicial Court of Massachusetts, Middlesex.

Argued April 4, 1967.

Decided June 6, 1967.

Paul R. Sugarman, Boston, for defendant.

Edward L. Schwartz, Boston (Benjamin Nesson, Boston, with him), for plaintiff.

Before WILKINS, C.J., and SPALDING, WHITTEMORE, CUTTER and REARDON, JJ.

WILKINS, Chief Justice.

This bill in equity by a New Jersey corporation, which is engaged in the manufacture, distribution, and sale of cosmetics, toilet articles, and similar commodities bearing the trademark, 'Shulton,' is brought to enjoin the defendant, a Massachusetts corporation, from offering to sell or selling the plaintiff's products at prices lower than the minimum sale or resale prices set by the plaintiff in its fair trade contracts with other retailers in the Commonwealth. The defendant, also a retailer, is not a party to such a contract, but having received notice of the 'fair trade' prices set by the plaintiff, it could not thereafter sell Shulton products below the retail price stipulated in Shulton's contracts (G.L. c. 93, § 14B) ¹ unless the plaintiff failed to meet certain conditions required of a seller who seeks to invoke the Fair Trade Law. The defendant contends that the plaintiff has not met three of these conditions: (1) The plaintiff's commodities are not 'in fair and open competition with commodities of the same general class produced by others' (S 14A). (2)² The plaintiff's enforcement policy is inadequate. General Elec. Co. v. Kimball Jewelers, Inc., 333 Mass. 665, 674--675, 132 N.E.2d 652. (3) The plaintiff is doing business in the Commonwealth within the meaning of G.L. c. 181, §§ 3, 5, and 12, and is, therefore, barred from seeking relief in our courts.

The basis contention is that the defendant has engaged in unfair competition in violation of G.L. c. 93, §§ 14A--14D, the Fair Trade Law. The case was referred to a master, who filed a report which was confirmed. From a final decree of injunction the defendant appealed.

Massachusetts is one of the minority jurisdictions which hold the Fair Trade Law to be valid. General Elec. Co. v. Kimball Jewelers, Inc., 333 Mass. 665, 675--678, 132 N.E.2d 652; E.I. Du Pont De Nemours & Co., Inc. v. Kaufman & Chernick, Inc., 337 Mass. 216, 219, 148 N.E.2d 634; Colgate-Palmolive Co. v. Elm Farm Foods Co., 337 Mass. 221, 225, 148 N.E.2d 861. We are not asked to reconsider this holding, and we are not so disposed now to make a retroactive reinterpretation of legislative intent on a matter which is largely one of policy. See Remington Arms Co. Inc. v. Lechmere Tire & Sales Co., 339 Mass. 131, 137. 158 N.E.2d 134.

1. The bill prayed for an injunction as to 'any commodities bearing, or the containers or labels of which bear, the plaintiff's trademarks, brands, or name at prices less than the minimum sale or resale price now or at any time hereafter' established by the plaintiff. The final decree contained an injunction relating to 'any commodities bearing, or the containers or labels of which bear, the plaintiff's name 'Shulton' or any variation thereof, or bearing the trademark or brand of the plaintiff Shulton.'

The master made general findings, based on his subsidiary findings, that the plaintiff had 'established minimum fair trade prices on certain toilet articles manufactured and distributed by it which bore its trademark, brand, or name. These articles are in 'Fair and open competition with commodities of the same general classes' produced by others.'

The subsidiary findings do not sustain these general findings. With respect to only one Shulton product, after shave lotion, were there adequately detailed findings about the name and extent of the plaintiff's competition. He found that the plaintiff's most expensive lotion retails for $3.50 for about six fluid ounces, and that its best selling lotion ratails for $1.25 for four and three-fourths ounces. Several other lotions made by various producers retail at approximately the same price as the less expensive lotion. The only lotion which retails for about the same price as the more expensive lotion is sold by Jade East at $3 to $3.50 for four ounces.

Specific findings are lacking as to the competition faced by the plaintiff's other products. The master found that the plaintiff manufactures and sells after shave lotion, talcum powder, hair cream, toilet soaps, hair shampoos, deodorants, and other cosmetics and colognes; and the '(p)roducts similar in nature' are manufactured and distributed by ten other manufacturers listed by name. These other manufacturers sell and distribute their products throughout the Commonwealth, in many cases to the same stores as the plaintiff. '(S)ome of these products of different manufacturers do compete with the plaintiff's products, and the plaintiff's products are in fair and open competition with commodities of the same general class produced by others.'

The findings, in and of themselves, do not support the final decree which covers all brand name products of the plaintiff. Annexed to the bill of complaint, as exhibit B, is a copy of the price schedule for Shulton products containing the minimum sale or resale prices. This lists approximately 200 items.

The plaintiff, however, relies upon a notice to admit facts, so called, which it filed and which the defendant did not deny. G.L. c. 231, § 69 (as amended through St.1946, c. 450). Krinsky v. Pilgrim Trust Co., 337 Mass. 401, 408, 149 N.E.2d 665. The purported facts thus filed and now brought to our attention are: '1. Plaintiff has for years manufactured, distributed and sold cosmetics, toilet articles, perfumery, powder and other commodities of a similar nature.' '10. Exhibit B attached to the bill of complaint is a copy of plaintiff's minimum price schedule for * * * products of the plaintiff.' These clearly are facts, and are facts whose accuracy is not open to doubt. Their present materiality is to give fuller meaning to another alleged fact: '4. Said commodities or products have been in competition with commodities or products of the same general class produced by others.' It will be noted that the words 'fair and open' in § 14A of the Fair Trade Law are not included. ³ This omission could raise a very different issue. The question for the master and for us on appeal must cover the full extent prescribed by § 14A. Whether competition is 'fair and open' presents a question of law, which cannot be admitted under the guise of a question of fact as contemplated under c. 231, § 69.

There is a further difficulty. 'Fair and open competition' means competition sufficiently vigorous 'so that if the resale price of the branded article were set too high the manufacturer would lose his trade by the competition of other similar articles.' Eastman Kodak Co. v. Federal Trade Commn., 158 F.2d 592, 593--594 (2d Cir.), cert. den. 330 U.S. 828, 67 S.Ct. 869, 91 L.Ed. 1277. General Elec. Co. v. S. Kleinon-the-Square, Inc., 121 N.Y.S.2d 37. But in the case at bar the defendant might have felt unable to deny that 'other products' were in the broad sense 'in competition' with the plaintiff's products. In these circumstances a dilemma confronting the defendant stands out. Had it admitted that the plaintiff's products were 'in competition' with those of others, as it in effect did, this would, perhaps unsoundly, concede much of the case. Had the defendant filed a denial and 'competition' should then be given a broad interpretation it would have run the risk of the sanction imposed by § 69 of having to pay 'the reasonable expense of proving such fact.' Facts which would fully support the master's finding as to the nature of the plaintiff's competition cannot be supplied by the notice to admit.

2. The master made the general finding that 'the plaintiff's enforcement program and activities are adequate, diligent, consistent and made in good faith.' The subsidiary findings are in support. These cover eight pages of the printed record on this point. The plaintiff's attorney in charge of enforcement, Mr. Durkin, had no knowledge of other violations that he was not 'doing something about' at the time of the suit. Between 1960 and the time of the hearing, nine other enforcement suits were brought in the Commonwealth. Of forty violations in Massachusetts brought to the plaintiff's attention since 1963, five led to litigation and in the others voluntary compliance was obtained.

Following commencement of this suit in June, 1963, the defendant sent out a shopper to find...