Standard Fashion Co. v. Magrane Houston Co.

• Decision Date: 28 June 1919
• Docket Number: 1343.
• Citation: 259 F. 793
• Parties: STANDARD FASHION CO. v. MAGRANE HOUSTON CO. [1]
• Court: U.S. Court of Appeals — First Circuit

259 F. 793

STANDARD FASHION CO. v. MAGRANE HOUSTON CO. ^[1]

No. 1343.

United States Court of Appeals, First Circuit.

June 28, 1919

Robert G. Dodge, of Boston, Mass. (Herbert Noble and James B Sheehan, both of New York, on the brief), for appellant.

James W. Sullivan, of Lynn, Mass., for appellee.

Before BINGHAM and ANDERSON, Circuit Judges, and BROWN, District judge.

ANDERSON Circuit Judge.

After the per curiam opinion of June 28, 1918, the plaintiff petitioned for a rehearing. The petition was granted. The plaintiff has orally and on brief elaborately reargued the case. On careful reconsideration we are constrained to adopt the construction of the contract urged by the plaintiff and made by the court below.

Construing the contract as a whole, we do not think it can fairly be held so ambiguous as, if valid in all its provisions, to warrant the court in refusing the injunction prayed for.

The contract runs for a term of two years from date, and 'from term to term thereafter, until this agreement is terminated as hereinafter provided. ' The provision for termination is:

'Either party desirous of terminating this agreement must give the other party three months' notice in writing within thirty days after the expiration of any contract period as above specified, the agency to continue regularly during such three months.'

The contract is dated November 25, 1914. Its first two-year term ran to November 25, 1916; failing the three months' notice within thirty days thereafter, the contract then ran until November 25, 1918. Then for 30 days there was another opportunity to give the three months' written notice of termination. And so on from term to term.

We think the negative covenant (assuming for the moment it and the rest of the contract to be valid) is applicable to the entire life of the contract construed as to duration as we have indicated; that the contract shows a clear intention of the defendant to be bound for successive terms of two years and for three months after notice of termination. We adopt, therefore, the construction put upon the contract by the court below.

We also agree with the District Court that the contract does not establish an agency 'properly so termed,' but that it is a contract for sale. The case is easily distinguishable in this regard from Willcox & Gibbs Co. v. Ewing, 141 U.S. 627, 12 Sup.Ct. 94, 35 L.Ed. 882. Full title passed from the plaintiff to the defendant. The defendant was selling its own goods to its own customers; it was not, under delegated authority, selling plaintiff's goods to the plaintiff's customers.

See the cases collected and to some degree discussed in Ford Motor Company v. Union Motor Sales Co., 244 F. 156, 156 C.C.A. 584; and Ford Motor Company v. Benjamin E. Boone, Inc., 244 F. 335, 156 C.C.A. 621; cf. Mechem on Agency, Secs. 44-48, and cases cited; Mechem on Sales, Sec. 41 et seq.; 2 Corpus Juris, pp. 422, 423; John H. Pray & Sons Co. v. Appledore L. & Bldg. Co., 76 N.H. 167, 80 A. 337; Bendix v. Staveo Carridge Co., 174 Ill.App. 589, 595.

An agency is not created simply by calling a contract for sales an agency contract.

We may test the question whether the defendant was the plaintiff's agent engaged in selling the plaintiff's goods, or a vendee selling its own goods, by querying whether the plaintiff could be held liable in tort for the defendant's material and false misrepresentations made to a customer-- such misrepresentations, for instance, as that patterns sold embodied the latest Paris fashion when in fact they were obsolete. Obviously, if the defendant was the plaintiff's agent, its misrepresentations, made in the course of the business of the agency, would bind the plaintiff. We think the plaintiff would be surprised to find this or any other court holding it responsible for such tortious conduct of the defendant with relation to the sale of these patterns.

The plaintiff admits that the notice of termination given by the defendant on April 7, 1917, followed by this suit brought on July 25, 1917, must be deemed applicable to the term of the contract expiring on November 25, 1918, as though given within 30 days after November 25, 1918. The plaintiff consequently admits that its right to an injunction expired on February 25, 1919.

But the plaintiff insists that the fact that relief by injunction has now become inappropriate by reason of lapse of time does not warrant the court in refusing to retain jurisdiction in equity for the purpose of granting any appropriate relief, though it be only for the assessment of damages. Clark v. Wooster, 119 U.S. 322, 7 Sup.Ct. 217, 30 L.Ed. 392; Busch v. Jones, 184 U.S. 598, 22 Sup.Ct. 511, 46 L.Ed. 707; Cartwright v. So. Pacific (D.C.) 206 F. 234; Beedle v. Bennett, 122 U.S. 71, 7 Sup.Ct. 1090, 30 L.Ed. 1074; County of Mobile v. Kimball, 102 U.S. 691, 26 L.Ed. 238.

Assuming for the moment that the contract and all the stipulations thereof are valid, the great weight of authority is in favor of the plaintiff's proposition that it was entitled to an injunction against a breach of the negative covenant. Butterick Publishing Co. v. Fisher, 203 Mass. 122, 89 N.E. 189, 133 Am.St.Rep. 283; Standard Fashion Co. v. Siegel-Cooper Co., 30 A.D. 564, 52 N.Y.Supp. 466; Id., 157 N.Y. 60, 51 N.E. 408, 43 L.R.A. 854, 68 Am.St.Rep. 749; Butterick Publishing Co. v. Chabot, N.Y. Law Journal, July 21, 1908, affirmed 128 A.D. 900, 112 N.Y.Supp. 1123; Butterick Publishing Co. v. Rose, 141 Wis. 533, 124 N.W. 647; Peerless Pattern Co. v. Gauntlett Dry Goods Co., 171 Mich. 158, 136 N.W. 1113, 42 L.R.A. (N.S.) 843.

We think, therefore, that the plaintiff's contention that it is now entitled to a decision from this court either affirming or reversing the decision of the District Court must prevail. The plaintiff insists, and rightly, that the gist of the case is whether the Clayton Act Oct. 15, 1914, c. 323, 38 Stat. 730, invalidates its contract, in whole or any part, and that the fact that its right to an injunction has expired pendente lite does not relieve the court from the duty of determining the issues admittedly alive and involving substantial rights at the time of the argument of the appeal in this court.

Does section 3 of the Clayton Act (Comp. St. Sec. 8835c) invalidate the negative covenant in this contract? We think it does, and that the decision of the District Court in that regard must be affirmed.

The mere fact that Congress enacted the Clayton Act after numerous courts had held similar or analogous restrictions not obnoxious to the Sherman Act July 2, 1890, c. 647, 26 Stat. 209 (Comp. St. Secs. 8820-8823, 8827-8830), or invalid at common law, or under state anti-trust statutes, grounds an inference that the Legislature intended in the light of actual experience, to change the law. Butterick Pub. Co. v. Fisher, 203 Mass. 122, 89 N.E. 189, 133 Am.St.Rep. 283; Brown v. Rounsavell, 78 Ill. 589; Southern Fire Brick & Clay Co. v. Garden City Sand Co., 223 Ill. 616, 79 N.E. 313, 7 Ann.Cas. 50; Heimbuecher v. Goff, Horner & Co., 119 Ill.App. 373; Ferris v. American Brewing Co., 155 Ind. 539, 58 N.E. 701, 52 L.R.A. 305; J. W. Ripy & Son v. Art Wall Paper Mills, 41 Okl. 20, 136 P. 1080, 51 L.R.A. (N.S.) 33; In re Greene (C.C.) 52 F. 104; Mogul Steamship Co. v. McGregor, 1892 A.C. 25; Whitwell v. Continental Tobacco Co., 125 F. 454, 60 C.C.A. 290, 64 L.R.A. 689; Peerless Pattern Co. v. Gauntlett Dry Goods Co., 171 Mich. 158, 136 N.W. 1113, 42 L.R.A. (N.S.) 843; Sullivan v. Rime, 35 S.D. 75, 150 N.W. 556; Standard Fashion Co. v. Siegel-Cooper Co., 30 A.D. 564, 52 N.Y.Supp. 433; Id., 157 N.Y. 60, 51 N.E. 408, 43 L.R.A. 854, 68 Am.St.Rep. 749; Butterick Publishing Co. v. Chabot, N.Y. Law Journal, July 21, 1908, affirmed 128 A.D. 900, 112 N.Y.Supp. 1123; Butterick Publishing Co. v. Rose, 141 Wis. 533, 124 N.W. 647.

There is no answer to the suggestion of Judge Trieber in U.S. v. United Shoe Machinery Co. (D.C.) 234 F. 127, 150, that the 'presumption is, not that Congress intended that the construction of the Sherman Act should control, but, on the contrary, that it should not control. ' And again quoting from Judge Trieber: 'Evidently Congress was not satisfied to only prohibit actual lessening of competition, or monopolizing, but to make it unlawful for any person to do these acts, which may put it in his power to do so.'

The very title of this act is significant-- 'An act to supplement existing laws against unlawful restraints and monopolies, and for other purposes.'

In the report of the Senate Committee on Judiciary upon this bill is the following statement of the legislative purpose:

'Broadly stated, the bill, in its treatment of unlawful restraints and monopolies, seeks to prohibit and make unlawful certain trade practices which, as a rule, singly and in themselves, are not covered by the act of July 2, 1890, or other existing anti-trust acts, and thus, by making these practices illegal, to arrest the creation of trusts, conspiracies, and monopolies in their incipiency and before consummation. Among other of these trade practices which are denounced and made unlawful may be mentioned discrimination in prices for the purpose of wrongfully injuring or destroying the business of competitors; exclusive and tying contracts; holding companies; and interlocking directorates.'

In the report of the House Committee there is also instructive language concerning section 3:

'Let us therefore consider what this section really accomplishes. It prohibits the exclusive or 'tying' contract made between the manufacturer and the dealer by purchase or lease, whereby the latter agrees, as a condition of his contract, not to use or deal in the commodities of the competitor or rival of the seller or lessor. It is designed

...