Union Carbide & Carbon Corp. v. Skaggs Drug Center, Inc.
| Decision Date | 10 February 1961 |
| Docket Number | No. 10067,10067 |
| Citation | 359 P.2d 644,139 Mont. 15 |
| Parties | UNION CARBIDE AND CARBON CORPORATION, a corporation, Plaintiff and Respondent, v. SKAGGS DRUG CENTER, INC., a corporation, Defendant and Appellant. |
| Court | Montana Supreme Court |
Paul F. Potter, Salt Lake City, Utah, Howard A. Johnson and Keith P. Johnson, Butte, for appellant. Howard A. Johnson and Keith P. Johnson argued orally.
Luedke & Packwood, Billings, amicus curiae.
John W. Bonner, Helena, amicus curiae. John W. Bonner argued orally.
Jardine, Stephenson, Blewett & Weaver, Great Falls, amicus curiae.
Hall, Alexander & Kuenning, John H. Kuenning, Great Falls, Landels, Weigel & Ripley, Stanley Weigel, San Francisco, Cal., for respondent.
John H. Kuenning and Stanley Weigel argued orally.
This is an appeal from a judgment of the district court of the eighth judicial district, in and for the county of Cascade, which adjudged and decreed that the defendant, Skaggs Drug Center, Inc., be permanently enjoined from advertising, offering for sale or selling, at prices below the minimum retail resale prices then fixed by fair trade agreements, the antifreeze product bearing the trademark of 'Prestone', which is manufactured by the Union Carbide and Carbon Corporation.
Hereinafter the respondent, Union Carbide and Carbon Corporation, whose name has since been changed to Union Carbide Corporation, will be referred to as the plaintiff, and the appellant, Skaggs Drug Center, Inc., will be referred to as the defendant.
The facts of this case were stipulated at the trial and are not in dispute. The plaintiff is a corporation duly organized and existing under the laws of the State of Utah. The defendant owns and operates a chain of retail stores including three stores in the State of Montana, one of which is located in the City of Great Falls in Cascade County. The plaintiff is engaged in the manufacture, sale and distribution throughout the United States and the State of Montana of an antifreeze commodity which bears the distinctive, registered trademark of 'Prestone'. The plaintiff is the sole owner of the 'Prestone' trademark. This Prestone brand antifreeze is in fair and open competition throughout the United States and the State of Montana with commodities of the same general class which are produced and distributed by other companies at a wide range of competing prices; the range of such retail prices being from $1.95 per gallon to $3.25 per gallon. The trademark of some twenty-one other competing products are listed in the agreed statement of facts which is incorporated in the bill of exceptions.
The plaintiff has expended large sums of money in advertising and promoting its Prestone brand and through these efforts it has established a valuable reputation and good will for the product and for the trademark 'Prestone' which the product bears. The plaintiff has elected to distribute its Prestone brand antifreeze under its own distinguishing trademark, its reputation for producing high quality products and its good will, relying principally for its retail distribution on national mass-market distribution, with numerous retail outlets throughout the United States, including the State of Montana which regularly handle, stock and display its antifreeze. Each retail outlet has a substantial number of potential customers for Prestone who have been developed by the plaintiff's national advertising, by the good will of the plaintiff of which the 'Prestone' trademark is a symbol, by the intrinsic quality of the product and by satisfied users.
The function of each retailer, under mass-market distribution, is to close the sale with these potential customers and this function is impaired or destroyed unless large numbers of retailers throughout the nation carry adequate stocks of Prestone, give it reasonable display, make it readily available on call and provide reasonable selling support for it. Under national mass-market distribution, the consumer does not rely upon the retailer but does rely upon the manufacturer and his reputation to test, research, package, and select ingredients and materials for his product. The consumer also relies on the manufacturer's guarantees of suitability for intended use and for general warranty, although some consumers do ask the retailer to repair or replace products received by such consumer from the retailer in damaged or defective condition.
In order to avail itself of the protection afforded by statutes of the various states legalizing price maintenance contracts, misleadingly named Fair Trade Acts, the plaintiff has elected to enter into Fair Trade contracts with retailers throughout the United States and in states having Fair Trade statutes which include the State of Montana. See R.C.M.1947, Secs. 85-201 to 85-208. The minimum retail resale prices established by the plaintiff for its Prestone, pursuant to all of its Montana Fair Trade contracts, and pursuant to notices issued in accordance with such contracts, since April 1, 1955, have been $3.25 per gallon in gallon cans, $3.40 per gallon in quart cans and $.85 per quart in quart cans. The plaintiff has exercised due diligence in enforcing its claimed rights under the Montana Fair Trade Act and the accommodating federal statutes, and Montana retailers are generally respecting the plaintiff's claimed rights under these statutes. The plaintiff's product is accordingly being sold throughout the State of Montana, including Cascade County, in a volume which is satisfactory to the plaintiff.
On or about the date of July 11, 1955, and at various times after that date, the plaintiff duly notified the defendant of the existence of its Montana Fair Trade contracts and of the minimum retail resale prices which were stipulated thereunder. With full knowledge of the existence of the Fair Trade contracts of the plaintiff and the prices stipulated thereunder, the defendant acquired and sold plaintiff's Prestone brand antifreeze at prices below the stipulated prices. All of the advertising, offering for sale and selling by the defendant of the plaintiff's Prestone in the defendant's store in Great Falls, was at the price of $2.49 per gallon can which was $.76 less than the minimum retail resale price per gallon can which had been set by the plaintiff in its Fair Trade contracts with other dealers. The defendant's net invoice cost for each gallon can of Prestone, after all deductions and discounts, was $2.13 per gallon and the sales were not made below cost. The defendant was never itself a party to a Fair Trade contract or agreement with the plaintiff but these contracts and agreements were made with other retailers in the state.
These sales by the defendant were not made in closing out its stock for the purpose of discontinuing dealing therein, or with the trademark wholly removed or obliterated, or because the product sold was altered, secondhand, damaged or deteriorated, or by an officer acting under an order of a court.
It was stipulated that such advertising, offering for sale and selling by the defendant caused serious, continuous and irreparable damage to the plaintiff, the plaintiff's good will, its trademark 'Prestone' and to the plaintiff's business in many other vital respects.
After consideration of the agreed statement of facts, the district court entered its conclusions of law in which it found that the Montana Fair Trade Act does not violate any of the state or federal constitutional provisions which are urged against it in the instant case and that it does not violate the Federal Sherman Act, 15 U.S.C.A. Sec. 1 et seq. The district court then issued its final judgment and decree of permanent injunction and its order directing the clerk to issue a perpetual restraining order. Pursuant to this order, a perpetual restraining order was issued by the clerk. The defendant has appealed from such judgment and decree of the district court.
The plaintiff concedes that if the Montana Fair Trade Act or any part thereof be held unconstitutional in this proceeding as applied to these facts, the judgment should be for the defendant. The defendant likewise concedes that if this same Act be held constitutional in this proceeding as applied to these facts the plaintiff shall be entitled to the relief sought and the judgment should be accorded the plaintiff. Therefore, the only issues raised on this appeal are all issues concerning the constitutionality of the Montana Fair Trade Act or its validity in conjunction with the Federal Sherman Act.
The Montana Fair Trade Act was originally enacted by the State Legislature in 1937 as Chapter 42 of the Montana Session Laws of 1937. The Act is now embodied in R.C.M.1947, Secs. 85-201 to 85-208, as follows:
'85-201. Definitions. The following terms, as used in this act, are hereby defined as follows:
'(a) 'Commodity' means any subject of commerce.
'(b) 'Producer' means any grower, baker, maker, manufacturer, bottler, packer, converter, processor or publisher.
'(c) 'Wholesaler' means any person selling a commodity other than a producer or retailer.
'(d) 'Retailer' means any person selling a commodity to consumers for use.
'(e) 'Person' means an individual, a corporation, a partnership, an association, a joint-stock company, a business trust or any unincorporated organization.'
'85-202. Permissible agreements in contracts for sale of labeled commodities. No contract relating to the sale or resale of a commodity which bears, or the label or container of which bears, the trademark, brand, or name of the producer or distributor of such commodity and which commodity is in free and open competition with commodities of the same general class produced or distributed by others shall be deemed in violation of any law of the state of Montana by reason of any of the following provisions which may be contained in such contract:
'(a) That the buyer will not resell such commodity at...
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