Skaggs Drug Center, Inc. v. U.S. Time Corp.

• Decision Date: 17 November 1966
• Docket Number: No. 7959,7959
• Citation: 420 P.2d 177,101 Ariz. 392
• Parties: SKAGGS DRUG CENTER, INC., a corporation, Appellant, v. UNITED STATES TIME CORPORATION, a corporation, Appellee.
• Court: Arizona Supreme Court

Page 177

420 P.2d 177

101 Ariz. 392

SKAGGS DRUG CENTER, INC., a corporation, Appellant, v. UNITED STATES TIME CORPORATION, a corporation, Appellee.

No. 7959.

Supreme Court of Arizona, In Banc.

Nov. 17, 1966.

Ryley, Carlock & Ralston, Phoenix, for appellant.

Burns, Ferrin & Ehrenreich, Phoenix, for appellee.

JACK G. MARKS, Superior Court Judge.

This is an appeal by Skaggs Drug Center, Inc., hereinafter called the defendant or retailer, from an order of the Superior Court of Maricopa County entered on February 28, 1963, granting to United States Time Corporation, hereinafter called the plaintiff or manufacturer, a preliminary injunction restraining the defendant Pendente lite from offering to sell plaintiff's products (TIMEX watches) at a price less than the minimum fair trade price set and established by the plaintiff, with certain exceptions not material to the issues now before the court. The complaint sought a permanent injunction (Count One) and actual damages in the sum of $10,000.00 and punitive damages in the sum of $10,000.00 (Count Two). There had been no agreement between the parties as to minimum retail sale prices of TIMEX watches manufactured by the plaintiff. The plaintiff based its claim for relief on the 'non-signer' provision of A.R.S. §§ 44--1423.

The plaintiff alleged that it was in the business of manufacturing, selling and distributing watches which bore the trademark 'TIMEX', a trade-mark exclusively owned by the plaintiff; that all of said watches and the labels affixed to the cartons or containers in which said watches were packaged bore the trade-mark of the plaintiff; that the watches were sold by the plaintiff to retailers such as the defendant and were in continuous free, fair and open competition in Arizona and in the United States of America with watches of the same general class produced and sold by other manufacturers; that as a result thereof its trade-mark TIMEX had been widely and favorably known to the trade and to the public generally as goods and merchandise of high quality; and that it had established and maintained a valuable reputation and good will for its watches which constituted an extremely valuable business asset.

The plaintiff further alleged that it had entered into agreements with distributors and retail dealers in Arizona which provided that TIMEX watches shall not be directly or indirectly advertised, offered for sale or sold by retailers at less than the minimum retail sale prices stipulated by the plaintiff, which agreements were in effect at all times material to this case.

The defendant admitted that it was engaged in selling merchandise, including TIMEX watches, at retail in Phoenix, Arizona. It admitted having notice both of the fact that, during and subsequent to the month of June 1961, the plaintiff had entered into fair trade agreements (also referred to herein as manufacturer-retailer contracts) with wholesalers and ratailers in Arizona in connection with the sale of TIMEX watches and of the minimum retail prices stipulated in said agreements. It further admitted that, notwithstanding such knowledge, it sold TIMEX watches to the public at less than such stipulated minimum retail prices, contending that in so doing it had not been guilty of an illegal or unlawful act.

The evidence before the Superior Court consisted of copies of six manufacturer-retailer contracts, dated April 1, 1961 by and between the plaintiff and six other retailers located at Phoenix and Scottsdale, Arizona.

The preliminary injunction was granted solely upon the authority of General Electric Company v. Telco Supply, Inc., 84 Ariz. 132, 325 P.2d 394 (1958), and Everybody's Drug Company v. Duckworth, 84 Ariz. 141, 325 P.2d 400 (1958), which sustained the constitutionality of A.R.S. §§ 44--1421 to 44--1424, originally known as the Fair Trade Act of 1936 (Laws of 1936, Ch. 11, § 1), hereinafter sometimes called the 'Act'. The court found that the six fair trade contracts in evidence were valid agreements pursuant to the provisions of the Act which read as follows:

' § 44--1421. Definitions

'In this article, unless the context otherwise requires:

'1. 'Commodity' means any subject of commerce.

'2. 'Producer' means grower, baker, maker, manufacturer or publisher.

' § 44--1422. Provisions permitted in contracts relating to sale or resale of fair trade commodities; fair trade commodities defined; implied exceptions to contract provisions

'A. No contract relating to the sale or resale of a commodity which bears the trade-mark, brand or name of the producer or owner of the commodity, or the label or container of which bears such trade-mark, brand or name, and which is in fair and open competition with commodities of the same general class produced by others shall be deemed to violate any law of the state by reason of any of the following provisions which may be contained in the contract:

'1. That the buyer will not resell such commodity except at the price stipulated by the vendor.

'2. That the vendee or producer require in delivery to whom he may resell such commodity to agree that he will not, in turn, resell except at the price stipulated by such vendor or by such vendee.

'B. The provisions set forth in paragraphs 1 and 2 of subsection A, when used in an agreement, shall be deemed to contain or imply conditions that the commodity may be resold without reference to the agreement in the following cases:

'1. In closing out the owner's stock for the purpose of discontinuing the delivery of any such commodity.

'2. When the goods are damaged or deteriorated in quality, and notice is given to the public thereof.

'3. By an officer acting under the orders of a court.

' § 44--1423. Advertising or sale of commodity at less than agreed price as unfair competition; right of person damaged to maintain action

'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 § 44--1422, whether the person so advertising, offering for sale or selling is or is not a party to such contract, is unfair competition upon which an action may be brought by any person damaged thereby.

' § 44--1424. Inapplicability of article to contracts between producers, wholesalers or retailers

'This article shall not apply to any contract or agreement between producers or between wholesalers or between retailers as to sale or resale prices.'

The single question presented in this appeal is whether the Fair Trade Act of 1936, as reenacted in 1956 (A.R.S. §§ 44--1421 to 44--1424), is constitutional as applied to persons not parties to fair trade agreements authorized by A.R.S. § 44--1422. No questions of fact are involved in this appeal.

The defendant contends that A.R.S. §§ 44--1421 to 44--1424 are unconstitutional for the following reasons:

(1) That the Fair Trade Act of 1936 is void because it violates § 15 of Article 14 of the Arizona Constitution; and

(2) That the 'non-signer' provision of A.R.S. § 44--1423 is void because it constitutes an attempt at an unlawful delegation of a legislative power and a deprivation of property without due process of law and is in excess of the police powers of the state exercisable by statute.

The plaintiff counters this attack on the constitutionality of the Act, and, in particular, the 'non-signer' provision of A.R.S. § 44--1423, by invoking the rule of Stare decisis urging that General Electric Company v. Telco Supply Inc., supra, hereinafter referred to as the G-E decision or case, is conclusive.

If, when the G-E case was argued before this court, the contentions were identical with the defendant's contentions herein, the doctrine of Stare decisis might be applied by us. However, the defendant has raised an issue which was not considered by this court in the G-E case and, therefore, the constitutionality of the Act may properly be reconsidered by us at this time. State ex rel. De Concini v. Sullivan, 66 Ariz. 348, 188 P.2d 592 (1948). Furthermore, if the G-E decision were erroneous as to the issues actually litigated we are not precluded from a re-examination of our decision in that case if cogent reasons are advanced by the defendant. Garvey v. Trew, 64 Ariz. 342, 170 P.2d 845 (1946), cert. denied 329 U.S. 784, 67 S.Ct. 297, 91 L.Ed. 673 (1946); State v. Allred, 67 Ariz. 320, 195 P.2d 163, 4 A.L.R.2d 735 (1948); Crane Co. v. Arizona State Tax Commission, 63 Ariz. 426, 163 P.2d 656, 163 A.L.R. 261 (1945); State ex rel. La Prade v. Cox, 43 Ariz. 174, 30 P.2d 825 (1934).

Scrutiny of our decision in the G-E case discloses that General Electric Company, as does the plaintiff herein, asserted, Inter alia, in support of its contention that the Fair Trade Act of 1936 is constitutional (1) that the act did not create a monopoly in violation of § 15 of Article 14 of the Arizona Constitution, A.R.S., (2) that it was not in violation of § 1 of the Fourteenth Amendment to the Federal Constitution and (3) that it was not in violation of § 4 of Article 2 of the Arizona Constitution guaranteeing due process of law.

As to the first issue we held that the Act is not a price fixing act and, therefore, is not in violation of the monopoly provisions of § 15 of Article 14 of the Arizona Constitution. We are not persuaded by the contentions of the defendant that the G-E decision was in error with respect to § 15 of Article 14 of the state constitution and, therefore, affirm our holding that the Act does not contravene the said section.

As to our holding in the G-E decision that the Act is not in violation of the provisions of the Federal Constitution, we recognize that the United States Supreme Court is the final arbiter when such questions are raised. Pennekamp v. State of Florida, 328 U.S. 331, 66 S.Ct. 1029, 90 L.Ed. 1295 (1946). Therefore, unless the United States Supreme Court has overruled or modified its decision in Old Dearborn Distributing Co. v. Seagram-Distillers...