Sunbeam Corporation v. Masters of Miami

Decision Date22 July 1955
Docket NumberNo. 15414.,15414.
Citation225 F.2d 191
PartiesSUNBEAM CORPORATION, Appellant, v. MASTERS OF MIAMI, Inc., Appellee.
CourtU.S. Court of Appeals — Fifth Circuit

Douglas D. Batchelor, Miami, Fla., Herman T. Van Mell, Chicago, Ill., for appellant.

Louis M. Jepeway, John G. Dauber, Jepeway & Dauber, Miami, Fla., for appellee.

Before HUTCHESON, Chief Judge, and RIVES and TUTTLE, Circuit Judges.

TUTTLE, Circuit Judge.

The sole question here is whether the complaint states a claim for which relief can be granted. Jurisdiction is properly based on diversity of citizenship, and the applicable substantive law is that of the State of Florida. Sunbeam Corporation commenced this action, seeking an injunction and damages on the ground that Masters of Miami, the defendant below, wrongfully interfered with Fair Trade contracts between Sunbeam and the distributors and retailers of its products in states where such contracts are valid, by inducing them to sell to Masters of Miami the trademarked products of Sunbeam in violation of the Fair Trade contracts. For a second cause of action it was alleged that Masters of Miami, by buying and selling Sunbeam products without having entered a Fair Trade contract with Sunbeam, had unlawfully appropriated Sunbeam's trademarks; but since Sunbeam's brief on appeal does not make any argument relative to the dismissal of the second cause of action, under our Rules that matter may be disregarded. Rule 24.2(b). The court below having dismissed the complaint for failure to state a claim for which relief can be granted, Sunbeam appealed and asks that we determine whether "it appears to a certainty that the plaintiff cannot possibly be entitled to relief under any set of facts which could be proved in support of" the allegations under the first claim in the complaint. This being the test of sufficiency of a complaint, we must reverse the judgment if the complaint satisfies this test. John Walker & Sons v. Tampa Cigar Co., 5 Cir., 197 F.2d 72; Byrd v. Bates, 5 Cir., 220 F.2d 480.

The complaint alleges that Sunbeam Corporation has for more than thirty years been engaged in manufacturing and selling electrical and other appliances under the trade name "Sunbeam" and other trade names. At present its gross sales exceed $70 million a year and its annual advertising and promotional expenses exceed $3 million. Sunbeam's products are distributed through some 1,200 wholesalers throughout the United States, who supply over 175,000 retail dealers, several thousand of whom are in the State of Florida. In order to take advantage of the so-called Fair Trade Laws existing in 45 states, including Florida, Sunbeam has adopted and followed since 1951 a policy of selling its products in these 45 states only to distributors who contract (1) not to advertise or sell Sunbeam products at less than the minimum wholesale price established by Sunbeam, and (2) to require all persons to whom it sells Sunbeam products to enter into contracts whereby such persons will not, in turn, advertise or sell such products for less than the retail price established by Sunbeam. Through this policy of resale price maintenance, combined with the high quality of its merchandise and national advertising, it is alleged that Sunbeam's trade marks and brand name have acquired great value. Defendant Masters of Miami, Inc., has the same officers and stockholders as Masters, Inc., a New York corporation, which is engaged in Fair Trade litigation with Sunbeam in the State of New York, and by virtue of this fact and of specific notice given by Sunbeam, Masters of Miami, Inc., is well aware of Sunbeam's Fair Trade distribution policy. However, although it has not signed a retail contract with Sunbeam, it is engaged in advertising and selling at retail the products manufactured by Sunbeam at less than the prices specified in the Fair Trade contracts. Furthermore, it is alleged that Masters of Miami, Inc., has interfered with the contracts between Sunbeam and its wholesalers and retailers by purchasing Sunbeam products through channels and means unknown to Sunbeam, knowing that these wholesalers and retailers were not permitted to sell such products to a nonsigner. It is further alleged that in order to conceal their source, Masters of Miami, Inc., destroyed and defaced all shipping labels on Sunbeam products it had acquired in this manner.

The court below was of the opinion that no recovery could be had on this complaint because to allow any relief would be against the public policy of Florida, and furthermore because the complaint fails to set forth specific acts of interference.

We are of the opinion that the complaint was sufficiently specific under the test announced by us in the John Walker case, supra. Assuming that liability could be predicated on a specific state of facts falling within the general allegations of the complaint, Sunbeam should not be denied the opportunity to ascertain the specific facts through discovery proceedings and examining witnesses who know the facts, nor should a discount house be allowed to defeat a just claim by the simple expedient of defacing the shipping labels on its goods. The facts are peculiarly within the defendant's knowledge, and we do not think it is aggrieved by the failure of the plaintiff to allege them; the plaintiff would be entitled to employ discovery proceedings and to narrow down the issues by an appropriate means provided in the Federal Rules. In short, assuming Sunbeam might be able to prove a right to relief under these general allegations, the lack of a specific allegation of the source and means employed by Masters of Miami is no ground to dismiss the complaint.

Thus, the only real question is whether the public policy of Florida permits such an action.

It is appropriate briefly to review the history of resale-price maintenance or "Fair Trade," as its supporters style it. The tide of battle over this controversial subject has ebbed and flowed. Condemned in the early cases1 as a restraint of trade violating the Sherman Act,2 the system received approbation in numerous state statutes during the depression of the 1930's, and in the case of Old Dearborn Distributing Co. v. Seagram-Distillers Corp., 1936, 299 U.S. 183, 57 S.Ct. 139, 81 L.Ed. 109, the Supreme Court held the Illinois Fair Trade law a valid exercise of state police power, not transgressing the due process and equal protection clauses of the Fourteenth Amendment. Congress one year later passed the Miller-Tydings amendment3 in order to except Fair Trade contracts valid under state law from the ban of the Sherman Act. But the triumph of the Fair Trade faction was only apparent, for in 1951, in Schwegmann Bros. v. Calvert Distillers Corp., 341 U.S. 384, 71 S.Ct. 745, 95 L.Ed. 1035, 19 A.L.R.2d 1119, the Supreme Court held that the Miller-Tydings Act validated state legislation only to the extent that it made Fair Trade contracts enforceable inter partes, and that the Sherman Act still precluded state legislation making the price-maintenance arrangement enforceable against nonsigners. But the tide shifted again when Congress saw fit to remove this and other federal statutory difficulties standing in the way of Fair Trade legislation by the states, in the McGuire Act4 of 1952; and we held that statute constitutional in Schwegmann Bros. Giant Super Markets v. Eli Lilly & Co., 5 Cir., 205 F.2d 788, certiorari denied 346 U.S. 856, 74 S.Ct. 71, 98 L.Ed. 369. At the present time there seem no longer to be any federal constitutional or statutory barriers to Fair Trade legislation.

However, the state Fair Trade Acts — now numbering 45 — have continued to suffer vicissitudes in the state courts, and in none have they fared worse than in Florida. In Bristol-Myers Co. v. Webb's Cut-Rate Drug Co., 137 Fla. 508, 188 So. 91, the nonsigner clause of the first Florida Fair Trade Act, Ch. 18395, Acts of 1937, was held unconstitutional as not within the scope of the Act's title. The legislature responded with another Fair Trade Act in 1939. This Act was held unconstitutional in Liquor Store, Inc., v. Continental Distilling Corporation, Fla., 40 So.2d 371, 388, on the ground that it exceeded the bounds of the legislature's police power; that is, the power to protect public health, welfare, and morals, because it served the private interest of one economic group to the detriment of the general public.5 Later, the legislature passed a third Fair Trade Act, Ch. 25204, Acts of 1949. This Act was in all material respects like that of 1939 except that the legislature affixed a lengthy preamble styled "Findings of Fact" which declared that the Act would serve the public interest and was a lawful exercise of the police power. In Seagram-Distillers Corp. v. Ben Greene, Inc., Fla., 54 So.2d 235, the Supreme Court unanimously held that the nonsigner clause of this act was invalid, applying the rule of the first Schwegmann case, 341 U.S. 384, 71 S.Ct. 745, 95 L.Ed. 1035, 19 A.L.R.2d 1119. After the McGuire Act removed that barrier, the question of constitutionality of the nonsigner clause of the 1949 Act came squarely before the court. In Miles Laboratories, Inc., v. Eckerd, Fla., 73 So.2d 680, 681,6 the court held that the so-called "Findings of Fact" had not cured the defects in the earlier act, and held this act unconstitutional as applied to a nonsigner. The court's language is notably strong:

"This Court has expressed its views on fair trade and similar acts and has consistently and unequivocally rejected, on constitutional grounds, both the underlying theory and the economic facts on which they are sought to be predicated citing eight cases. * * *
"As we have stated before, the real effect of the non-signer clause is anti-competitive price fixing; not the protecting of the good will of trade marked products as other courts have held. Good will, it has been said, should be determined by the price which the goods can command in a competitive

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