Zale-Las Vegas, Inc. v. Bulova Watch Co.

• Decision Date: 16 November 1964
• Docket Number: No. 4753,ZALE-LAS,4753
• Parties: VEGAS, INC., a Nevada corporation, Zale or Zales Jewelry Store, in Las Vegas, Nevada, Appellants, v. BULOVA WATCH COMPANY, Inc., Respondent.
• Court: Nevada Supreme Court

Page 683

396 P.2d 683

80 Nev. 483

ZALE-LAS VEGAS, INC., a Nevada corporation, Zale or Zales

Jewelry Store, in Las Vegas, Nevada, Appellants, v. BULOVA WATCH COMPANY, Inc., Respondent.

No. 4753.

Supreme Court of Nevada.

Nov. 16, 1964.

Foley Brothers, Las Vegas, for appellants.

Sundean, Christensen, Bell, Morris & Albright, Las Vegas, for respondent.

BADT, Chief Justice.

This is an appeal from the judgment of the court below upholding the validity of the Fair Trade Act, being Chapter 48, Stats. of Nevada, 1937, and comprising NRS 599.010-599.050, and granting a preliminary injunction enjoining appellants from advertising, offering for sale, or selling Bulova products at prices below those established by the fair-trade agreement between Bulova and Ginsburg Jewelry Company. We reverse.

The title to the act in question reads as follows: 'An Act to protect trade-mark owners, their agents, producers, distributors, and the general public against injurious and uneconomic practices in the distribution of competitive commodities bearing a distinguishing trade mark, brand or name, through the use of voluntary contracts establishing minimum resale prices, and other matters properly relating thereto.'

Section 2 of the act reads: 'Willfully and knowingly advertising, offering for sale or selling any commodity at less than the minimum price stipulated in any contract entered into pursuant to the provisions of this act, whether the person so advertising, offering for sale or selling is or is not a party to such contract, is unfair competition and is actionable at the suit of any person damaged thereby.' (Emphasis supplied.)

An annotation in 60 A.L.R.2d 420, entitled 'Validity, under state constitutions, of nonsigner provisions of Fair Trade Laws' (1958), discusses under appropriate headings all the jurisdictions to the date of the annotation which showed, at that time, if our count is correct, 15 jurisdictions including the United States Supreme Court, holding in favor of constitutionality, and 13 holding against constitutionality. Subsequent to that annotation, 12 states have decided the issue--10 against constitutionality and 2 in favor, so that at present 23 jurisdictions have held such acts unconstitutional as against 17 upholding the acts. The issue has not been decided in this jurisdiction and we are therefore free to adopt either theory.

To discuss all the cases, or even to cite or list the same, is beyond the requirements of this appeal. We restrict ourselves, then, to reciting the rationale of the leading cases upholding the Fair Trade Acts and the rationale of the cases striking them down, and to our choice of the latter.

The writer of the annotation, at 60 A.L.R.2d 422, describes the issue in the following words:

'Fair trade laws, although of comparatively recent origin, are unquestionably the most familiar of legislative methods to control resale prices. Such statutes validate contractual provisions by which the buyer of a trademarked or 'brand name' commodity agrees that he will not resell the commodity except at the price stipulated * * *. Included in such statutes are socalled 'nonsigner provisions'--often described as the backbone of fair trade legislation--under the terms of which one not a party to such a contract, who, with notice, offers for sale or sells a commodity at less than the resale price stipulated in a contract between the vendor and a buyer of a trademarked commodity, is made subject to liability for unfair competition; * * *. The validity of these provisions as a matter of federal constitutional law having been established by a decision of the United States Supreme Court, the question to be dealt with herein is whether non-signer provisions are defective from a state constitutional point of view.'

The provisions of the Nevada constitution involved are the following sections quoted in pertinent part:

Art. 1, § 1: 'All men * * * have certain inalienable rights among which are those of * * * Acquiring, Possessing and Protecting property * * *.'

Art. 1, § 8: '* * * No person shall * * * be deprived of life, liberty, or property, without due process of law; * * *.'

Art. 1, § 20: 'This enumeration of rights shall not be construed to impair or deny others retained by the people.'

Art. 1, § 1: 'The Legislative authority of this State shall be vested in a Senate and Assembly which shall be designated 'The Legislature of the State of Nevada' * * *.'

Appellants contend that under these provisions and under Article 4, § 17, the act violates the constitution, because (1) it is in violation of the requirement: 'Each law enacted by the Legislature shall embrace but one subject, and matter, properly connected therewith, which subject shall be briefly expressed in the title * * *;' in that the title to the act recities that it is 'An Act to protect trade-mark owners, their agents, producers, distributors, and the general public against injurious and uneconomic practices in the distribution of competitive commodities bearing a distinguishing trade mark, brand or name, through the use of voluntary contracts establishing minimum resale prices * * *,' thus referring only to voluntary contracts, while effective against contracts not signed by the vendees of the trade-mark commodities. Although this issue is argued at great length in the briefs, we find it unnecessary to dispose of it by reason of our other reasons for holding the act in violation of the constitution.

Appellants attack the legislation upon the further grounds as follows:

'2. It is unlawful exercise by the Legislature of the police power granted to the state.

'3. The Act constitutes an unlawful deprivation of property rights of Appellant contrary to the due process clause of the Nevada Constitution.

'4. The Act is an unlawful delegation of Legislative authority contrary to the Nevada Constitution.'

So heavily does the respondent rely on Max Factor & Co. v. Kunsman, 5 Cal.2d 446, 55 P.2d 177, that its quotations from the opinion consume 15 pages of its type-written brief. Many pages of the quoted matter are devoted to the proposition that the advisability of the legislation, or whether it is good or bad, is no concern of the court. This point has been so often determined by this court that no great citation of authorities or quotation of page after page of the decisions is or was necessary. The California court did definitely hold, however, as concisely noted in headnote 9: 'Power of state to regulate right of free bargaining in exercise of police power includes power to regulate price'; and, so concisely stated in headnote 10: 'Price fixing in statute effecting entire class of articles which is reasonably subject of classification is valid, notwithstanding that articles involved may not be affected with public interest'; and further, as concisely, stated in headnote 11: 'Purchase and sale of article or entire class of articles is affected with public interest where subject to regulation under police power.' (Emphasis supplied.)

This statement (headnote 11) holds itself up by its own bootstraps. The main question as will hereafter appear is whether the regulation was a proper exercise of the police power. The mere fact that an article was subject to regulation under the police power cannot, of itself, indicate that it is affected with a public interest.

Having then seen that 'price fixing' and 'regulating price' are recognized as being the purpose of the act, it then appears, as indicated briefly in headnote 12, that the provisions in question of the Fair Trade Act were 'intended to protect property and contract rights of manufacturer or producer of commodities by prevention of price cutting, and not primarily as price-fixing statute * * *.' (Emphasis added.)

The court then proceeded to hold that such acts were not arbitrary or discriminatory and were not an unconstitutional denial of the equal protection of the laws. The court held further that, in approving injunctions issued under such statutes with reference to the sale of trade-marked commodities at prices less than those fixed by the producer in contracts with other distributers or other retailers (although the particular defendant was not a party thereto), the relief was limited to the factual situation presented to the court.

In the case under discussion, Factor was engaged in the manufacture of cosmetics and toilet articles manufactured by it under registered trade-marks, and had transferred to Sales Builders, Inc., the exclusive right and privileges of selling such commodities in the United States, 'including the state of California' with the good will pertaining thereto and with the right to use the trade-marks; that Kunsman offered such commodities 'at prices conspicuously lower than the marked or established prices of said commodities as so-called 'leaders,' * * *'; that persons or traders such as Kunsman have become known as 'cut-rate drugstores.' The 'evils' of such system were recited in the opinion. Other dealers were forced to meet the cut prices, trademarks and brand items were offered at prices cut to a point yielding no profit and in many cases representing a loss. Other distributers in general observe and conform with the terms of the contracts. Sales Builders, Inc., enjoys a good profitable business under the California Fair Trade Act, but the practices of the defendant have caused other distributers to sell such products at conspicuously lower prices, so that other dealers are forced to meet defendant's price competition. The defendant 'has procured, and continues to procure, commodities manufactured by Max Factor & Co. bearing the trade-marks, brands, and names of Max Factor & Co., and has sold, and is now selling, the commodities at prices less than the retail sales prices which are being sustained by substantially all of the retail dealers in cosmetics and toilet articles in the state of California.' Such practices 'are unduly...