Sunbeam Corp. v. Payless Drug Stores

• Decision Date: 15 May 1953
• Docket Number: No. 31068.,31068.
• Citation: 113 F. Supp. 31
• Parties: SUNBEAM CORP. v. PAYLESS DRUG STORES et al.
• Court: U.S. District Court — Northern District of California

113 F. Supp. 31

SUNBEAM CORP. v. PAYLESS DRUG STORES et al.

No. 31068.

United States District Court N. D. California, S. D.

May 15, 1953.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Herman T. Van Mell, Chicago, Ill., Landels & Weigel, Stanley A. Weigel, San Francisco, Cal., for plaintiff.

Fitzgerald, Abbott & Beardsley, M. W. Dobrzensky, Edward B. Kelly and Robert S. Rutledge, Oakland, Cal., for defendants, Skaggs Payless Drug Stores; L. H. Vierk and Glynn E. Tucker, L. J. Skaggs, Mary Skaggs, his wife, and Payless Drug Stores.

Gallagher & Ruffo and Albert J. Ruffo, San Jose, Cal., and Gagliardi & Ursich, Tacoma, Wash., for defendant Theodore H. Zimmerman.

OLIVER T. CARTER, District Judge.

Plaintiff, Sunbeam Corporation, is an Illinois corporation which manufactures and sells electrical household appliances. Defendants are corporations, a partnership and persons engaged in the retail drug and variety store business in a number of cities in the States of California and Washington.

The complaint seeks to enjoin and to recover damages for the alleged tortious interference with plaintiff's contractual relationships, alleged restraint of trade and alleged unfair competition in the use of trademarks. Certain of defendants¹ have moved to dismiss or to strike the complaint and the causes of action alleged therein for failure to state a claim upon which relief can be granted, and on the further ground that the complaint fails to comply with subdivisions (a)(2) and (e)(1) of Rule 8 of the Federal Rules of Civil Procedure, 28 U.S.C.A. Defendant Theodore H. Zimmerman has moved the court to quash the service upon himself of the order to show cause, summons, complaint and notice to take deposition, and to dismiss him from this action.

The material facts, as alleged, are as follows:

Plaintiff's products, which are hereafter referred to as Sunbeam products, are identified by trademarks, brands and names owned by plaintiff. Plaintiff sells its products to wholesale distributors, who in turn resell such products to retail stores. Plaintiff has undertaken to fix the prices at which Sunbeam products may be resold—first by wholesalers to retail stores, and second by retail stores to consumers. To accomplish this result plaintiff has entered into a series of contracts with the wholesalers and retailers who handle Sunbeam products. Through the medium of such contracts plaintiff has exacted from each wholesaler to whom it sells a promise that the latter will resell Sunbeam products at prices not less than the minimum wholesale prices specified by plaintiff, and a further promise that the wholesaler will require any retailer to whom Sunbeam products are resold to agree to resell such products at prices not less than the minimum retail prices specified by plaintiff. Those retailers who contract with plaintiff promise to maintain, in the selling of Sunbeam products, minimum retail prices specified by plaintiff. None of the defendants have entered into any such contracts with plaintiff. They have, nevertheless, been able to secure Sunbeam products for resale in their stores by inducing those who have contracted with plaintiff to breach such contracts and by inducing others to enter into such contracts with plaintiff for the sole purpose of obtaining Sunbeam products for resale by defendants. Defendants have advertised for sale, and sold Sunbeam products at prices less than the minimum prices specified by plaintiff.

This case has been productive of voluminous pleadings, arguments and briefs, attempting to raise complicating collateral issues. Therefore it is appropriate to reduce the controversy to the simplest possible terms.

The complaint alleges three "causes of action." None of these is an action in contract, but rather two are in tort and the other is a right of action created by federal statute.² Nor is any of these an action for unfair competition against non-signers of price maintenance contracts, as was the case in Schwegmann Brothers v. Calvert Distillers Corp., 341 U.S. 384, 71 S.Ct. 745, 95 L. Ed. 1035.³

The theory upon which the first claim for relief is based is the allegation that defendants have tortiously interfered with plaintiff's contractual relations. It is alleged that defendants have knowingly, wilfully and without justification induced breaches of plaintiff's contracts. That such conduct is actionable has long been well settled in law and equity in a long line of cases stemming from Lumley v. Gye, 2 E. & B. 216, and including, to cite but a few of the modern cases, Angle v. Chicago, St. Paul, Minneapolis & Omaha R. Co., 151 U.S. 1, 14 S.Ct. 240, 38 L.Ed. 55; Bitterman v. Louisville & Nashville R. Co., 207 U.S. 205, 28 S.Ct. 91, 52 L.Ed. 171; Truax v. Raich, 239 U.S. 33, 36 S.Ct. 7, 60 L.Ed 131; American Malting Co. v. Keitel, 2 Cir., 209 F. 351; Falstaff Brewing Corp. v. Iowa Fruit & Produce Co., 8 Cir., 112 F.2d 101; Keene Lumber Co. v. Leventhal, 1 Cir., 165 F.2d 815; Baruch v. Beech Aircraft Corp., 10 Cir., 175 F.2d 1; Hope Basket Co. v. Product Advancement Corp., 6 Cir., 187 F.2d 1008; Gruen Watch Co. v. Artists Alliance, 9 Cir., 191 F.2d 700; Philadelphia Record Co. v. Leopold, D.C.S.D.N.Y., 40 F.Supp. 346; Imperial Ice Co. v. Rossier, 18 Cal.2d 33, 112 P.2d 631; California Grape Control Board, Ltd. v. California Produce Corp., 4 Cal.App.2d 242, 40 P.2d 846; cases collected in 84 A.L.R. 55; in Prosser on Torts (West Pub. Co., 1941) 976-1013; note in 24 Calif. L.Rev. 208. See also Sayre, "Inducing Breach of Contract," 36 Harv.L.Rev. 663; Carpenter, "Interference with Contractual Relations," 41 Harv.L.Rev. 728; Restatement of Torts, Section 766.

A complaint is required to state "a short and plain statement of the claim showing that the pleader is entitled to relief." If the complaint states any claim on which the plaintiff might possibly recover, the complaint should not be dismissed without a trial or motion for summary judgment. Dioguardi v. Durning, 2 Cir., 139 F.2d 774, 775. Only if it is certain that plaintiff would be entitled to no relief under any state of facts which could be proved in support of the claim should the complaint be dismissed for failure to state a cause for which relief can be granted. Dennis v. Village of Tonka Bay, 8 Cir., 151 F.2d 411.

The allegations of the complaint do not describe specific acts on the part of defendants which induced breaches of contract. Also, there is only one specific contractual relationship referred to by name as being a contract, the breach of which was induced by defendants.⁴

Defendants have not filed a motion for a more definite statement under Rule 12(e) of the Federal Rules of Civil Procedure.⁵ Moreover, all that Rule 8(a) requires of a complaint is that it indicate generally the type of litigation that is involved; and a generalized summary of the case that affords fair notice is sufficient. Securities and Exchange Comm. v. Timetrust, Inc., D.C.N.D.Cal., 28 F.Supp. 34, 41. The complaint, in charging defendants with having induced the breach of contracts between plaintiff and third persons, alleges that defendants had knowledge of such contracts. The rule is that a complaint does not require amplification by a bill of particulars where the information sought to be obtained by such device is peculiarly within the knowledge of the defendant. Kraft Corrugated Containers, Inc., v. Trumbull Asphalt Co., D.C.N.J., 31 F.Supp. 314, 316; William F. Luebke Co. v. Manhardt, D.C. E.D.Wis., 37 F.Supp. 13, 15; Porter v. Shoemaker, D.C.M.D.Pa., 6 F.R.D. 438, 441. From what sources defendants obtained the Sunbeam products which they offered for sale and sold is information peculiarly within the knowledge of defendants. Under the circumstances the complaint is sufficient to afford them adequate notice as to what claim for relief plaintiff asserts against them.

Defendants contend that if their actions have induced breaches of plaintiff's contracts, such interference was justified, and therefore not tortious. This conclusion rests upon the assertion that plaintiff's contracts were illegal under the antitrust laws of the United States—more particularly under Section 1 of the Sherman Act, 26 Stat. 209, 15 U.S.C.A. § 1.

Congress at its last session enacted the McGuire Act,⁶ which amended the Federal Trade Commission Act, 38 Stat. 719, 15 U.S. C.A. § 45. The McGuire Act specifically exempts from the prohibitions of the Federal Antitrust Acts contracts containing provisions such as those in plaintiff's instant contracts.⁷ This amendment was approved on July 14, 1952 and settles the present law, but does not answer the question of whether or not plaintiff's contracts were legal before its enactment.

Since the passage of the Miller-Tydings Act, 50 Stat. 693, 15 U.S.C.A. § 1 in 1937 there have been exempted from the operation of the Sherman Act contracts or agreements prescribing minimum prices for the resale of specified commodities when contracts or agreements of that description are lawful as applied to intrastate transactions under local law.⁸ Schwegmann Brothers v. Calvert Distillers Corp., supra. Resale price maintenance contracts are legalized by statute in every state in the United States except Missouri, Texas and Vermont. Plaintiff's contracts, in express terms, are limited to sales within states where agreements prescribing minimum resale prices are lawful. Therefore, no illegality exists as to the provisions of plaintiff's contracts wherein the party contracting with plaintiff, whether wholesaler or retailer, binds himself to resell Sunbeam products at minimum prices prescribed by plaintiff.

Defendants argue that it is illegal for plaintiff to include in its contracts with wholesalers that provision wherein the wholesaler promises that he will secure from all buyers of Sunbeam products a promise that such buyer will not resell such Sunbeam products for prices less than the minimum retail prices prescribed by...