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Hoffmann-Laroche Inc. v. Weissbard

Decided: March 31, 1952.

HOFFMANN-LAROCHE, INC., A CORPORATION OF THE STATE OF NEW JERSEY, PLAINTIFF,
v.
MAX WEISSBARD AND HARRY WEISSBARD, INDIVIDUALLY AND TRADING AS WEISSBARD BROS., DEFENDANTS. JOHNSON & JOHNSON, A CORPORATION OF THE STATE OF NEW JERSEY, AND MCKESSON & ROBBINS, INCORPORATED, A CORPORATION OF THE STATE OF MARYLAND, PLAINTIFFS, V. CHARMLEY DRUG CO., A CORPORATION OF THE STATE OF NEW JERSEY, DEFENDANT



Freund, J.s.c.

Freund

These two cases involve a common question of law. They have a common object and the issues save in one respect are identical. They were instituted to test the enforceability against non-signers of the Fair Trade Act, R.S. 56:4-3 et seq. , by reason of the decision of the United States Supreme Court in Schwegmann Bros. v. Calvert Distillers Corp. , 341 U.S. 384, 71 S. Ct. 745, 95 L. Ed. 1035 (1951).

HOFFMANN-LA ROCHE v. WEISSBARD

The question here is whether the plaintiff, a New Jersey corporation, may enjoin the defendants, owners of local drugstores, from selling plaintiff's products under the prices stipulated in a contract made in this State between the plaintiff and another retailer. The defendants are not parties to the contract, but had notice thereof.

The plaintiff manufactures pharmaceuticals in Nutley, New Jersey; maintains business offices in seven states; and employs over 200 persons outside New Jersey. It has executed

"fair trade" contracts in 45 states, and uses the same price list for its products throughout the United States. Its advertising which is on a national scale cost over $1,000,000 in 1951.

Prior to the Schwegmann decision, the defendants purchased plaintiff's products directly from the plaintiff in New Jersey; but since then the products have been purchased outside the State and delivered to the defendants' stores in New Jersey. The specific violation alleged is that the defendants advertised and sold Vi-Penta Drops at $3.49, whereas the price stipulated by the plaintiff in the "fair trade" contract was $3.95. The merchandise had been purchased from jobbers in New York City. The defendants contend that having purchased the plaintiff's products in interstate commerce and not having signed a "fair trade" agreement they are not bound by the prices established in the plaintiff's "fair trade" contract executed in New Jersey.

JOHNSON & JOHNSON v. CHARMLEY

Johnson & Johnson, a New Jersey corporation, is a manufacturer of pharmaceuticals, with plants in Illinois, New Jersey and New York. Its trademarked products are sold throughout the United States, and it stipulates the minimum prices at which they should be sold, of which the trade is advised through its own pamphlet entitled "Net Selling Prices" and other drug publications.

The co-plaintiff, McKesson & Robbins, a Maryland corporation, is a wholesale distributor of the products of various manufacturers, including Johnson & Johnson, maintaining warehouses and offices in 35 states, including New Jersey.

The defendant, a New Jersey corporation, operates a retail drugstore in the City of Newark, where it sells Johnson & Johnson products. It had signed no "fair trade" agreement with either plaintiff.

In an endeavor to overcome the effect of the Schwegmann decision, the plaintiffs devised a plan to bind non-signers

to resale price maintenance. By letter they notified their customers, including the defendant, that the following legend would be endorsed on invoices:

"FAIR TRADE AGREEMENT. Purchaser, by accepting delivery from Seller of any fair traded commodity, agrees not to resell such commodity, by direct or indirect means, at less than the prescribed net retail minimum price published by the Producer or Distributor whose trademark, brand or name appears on the commodity. This agreement not applicable to sales in non-fair trade states or District of Columbia."

Thereafter, the defendant by telephone ordered Johnson & Johnson products, some from McKesson & Robbins' Newark Division and some from its New York Division. The orders were accepted without the imposition of any restriction or condition respecting resale price maintenance. However, the invoices, when received, bore the legend above set forth. Thereupon, the defendant by letter advised McKesson & Robbins' Newark and New York Divisions and Johnson & Johnson "that your Fair Trade agreement as set forth on the invoices and in your notices does not bind us and is illegal. Therefore, we are at liberty to sell the merchandise below Fair Trade prices." Later, the defendant purchased additional Johnson & Johnson products from a Philadelphia jobber without any restrictions.

The plaintiffs seek a declaratory judgment respecting the validity of the alleged contract and an injunction to restrain the defendant from reselling the products of Johnson & Johnson under the minimum resale prices. The defendant urges that being a non-signer and not having otherwise agreed to resale price maintenance, it is not bound.

Thus, the issue specific to this case is whether the inscription on the invoice and the retention of the goods by the purchaser constitutes a contract for resale price maintenance under our New Jersey Fair Trade Act and the Miller-Tydings Amendment. The subordinate question is whether the legend is sufficiently definite and certain to warrant an injunction against price-cutting.

Resale price maintenance contracts were prohibited as restraints of trade by the Sherman Anti-Trust Act, 26 Stat. 209, c. 647; 15 U.S.C.A. § 1 (July 2, 1890); Dr. Miles Medical Co. v. John D. Park & Sons Co. , 220 U.S. 373, 31 S. Ct. 376, 55 L. Ed. 502 (1911); and as violative of the Federal Trade Commission Act, 38 Stat. 717, c. 311; 15 U.S.C.A. § 41 (1914); Federal Trade Commission v. Beech-Nut Packing Co. , 257 U.S. 441, 42 S. Ct. 150, 66 L. Ed. 307 (1922); Armand v. Federal Trade Commission , 78 Fed. 2 d 707 (C.C.A. 2 1935), certiorari denied 296 U.S. 650, 56 S. Ct. 309, 80 L. Ed. 463 (1935). At common law in this State, price-fixing agreements were illegal as against public policy. Ingersoll v. Goldstein , 84 N.J. Eq. 445 (Ch. 1915).

In 1931 California enacted the first state fair trade act. In 1935 Illinois enacted a statute, Smith-Hurd. Rev. Stat. 1935, c. 121 1/2, § 188 et seq. , and in the same year New Jersey enacted its counterpart, R.S. 56:4-3 et seq., c. 58, L. 1935, page 140. The constitutionality of these fair trade laws was upheld by the United States Supreme Court; Old Dearborn Distributing Co. v. Seagram-Distillers Corp. (McNeil v. Joseph Triner Corp.), 299 U.S. 183, 57 S. Ct. 139, 81 L. Ed. 109 (1936); Pep Boys v. Pyroil Sales Co. and Kunsman v. Max Factor & Co. , 299 U.S. 198, 57 S. Ct. 147, 81 L. Ed. 122 (1936). As a consequence, all of the states, with ...


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