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Johnson & Johnson v. Charmley Drug Co.

Decided: March 2, 1953.

JOHNSON & JOHNSON, A BODY CORPORATE, AND MCKESSON & ROBBINS, INCORPORATED, PLAINTIFFS-APPELLANTS,
v.
CHARMLEY DRUG CO., A BODY CORPORATE, DEFENDANT-RESPONDENT



On appeal from the Chancery Division of the Superior Court, whose opinion is reported in 19 N.J. Super. 210, certified by this court on its own motion.

For affirmance -- Chief Justice Vanderbilt, and Justices Heher, Oliphant, Wachenfeld, Burling and Brennan. For reversal -- None. The opinion of the court was delivered by Heher, J.

Heher

The question for decision is whether the defendant retailer of pharmaceutical supplies in interstate commerce is in the particular circumstances a "signer" of a minimum price-fixing agreement made between the appellant corporations, Johnson & Johnson, a manufacturer of medical and surgical supplies and dressings, and McKesson & Robbins, Incorporated, a wholesale distributor of products of this class, within the intendment of the Miller-Tydings Amendment of the Sherman Anti-trust Act adopted August 17, 1937 (26 Stat. 209, c. 647; 50 Stat. 673, 693, c. 690; 15 U.S.C.A., sec. 1), as expounded by the United States Supreme Court in Schwegmann Bros. v. Calvert Distillers Corporation, 341 U.S. 384, 71 S. Ct. 745, 95 L. Ed. 1035, 19 A.L.R. 2 d 1119 (1952).

Plaintiffs seek a judicial declaration under the New Jersey Declaratory Judgments Act (R.S. 2:26-66 et seq.) of the subsistence and legal enforceability of the stated minimum-price arrangement made pursuant to the Fair Trade Act of

New Jersey (R.S. 56:4-3 et seq.) between the plaintiff manufacturer and the plaintiff wholesaler and an asserted implementing agreement binding the defendant retailer not to resell the products of Johnson & Johnson purchased by defendant from McKesson & Robbins, by direct or indirect means, at less than the minimum resale price established by Johnson & Johnson, and for an injunction to that end.

The Superior Court, Judge Freund sitting, concluded that defendant was a "nonsigner" within the interpretive principle of the Schwegmann case, and therefore not bound by the price arrangement made by the plaintiff corporations between themselves; and the complaint was accordingly dismissed. Plaintiffs' joint appeal from the subsequent judgment to the Appellate Division of the Superior Court was certified here for decision.

The basic point made is that the plaintiff wholesaler and the defendant retailer "voluntarily entered into a binding contract under principles of contract law" which is "a valid and enforceable fair trade contract under the statutes." Interstate commerce is conceded. The postulate is that the Miller-Tydings Amendment "does not prohibit all fair trade contracts except those in writing and actually signed by the parties to be bound."

This is the situation of fact:

Johnson & Johnson is a New Jersey corporation; and McKesson & Robbins, a Maryland corporation. The former operates manufacturing plants in New Jersey, New York and Illinois; the latter is a wholesale distributor of the products of various manufacturers, including Johnson & Johnson's, and maintains warehouses and offices in most of the states of the Union, including New Jersey. Johnson & Johnson's trademarked commodities are sold throughout the Union subject to a minimum price schedule of which notice is given to the trade from time to time through its own price pamphlets and by means of other drug publications. Their products are traded in free and open competition with commodities of the same class produced or distributed by

others. Defendant, a New Jersey corporation, operates a retail drug store in Newark, New Jersey. The crucial evidence is largely documentary.

On July 2, 1951 the Newark, New Jersey, Division of McKesson & Robbins forwarded a letter to all its retail customers, defendant among them, stating that "by virtue of fair trade contracts entered into" by named manufacturers, the writer had been "authorized and obligated to get retail fair trade agreements from all" of its customers binding them "to sell commodities of these manufacturers at not less than the net minimum retail prices prescribed by the manufacturer in accordance with the applicable fair trade laws of the states where the sales are made." The letter then advised the addressee that the "method of your entering into the contract will be through the inclusion of a fair trade agreement in our regular terms of sale so that whenever you buy from us you will know that the purchase includes an obligation on your part as follows:

"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!"

The letter continued:

"To confirm and reiterate this agreement on your part, the terms thereof will be placed on every invoice which we will hereafter send to you."

The letter listed three manufacturers whose products were then covered by McKesson's fair trade agreement. Johnson & Johnson was not among them; but the letter said:

"At the present time the legend agreement will not apply to products of other manufacturers. However, whenever additional manufacturers may obligate us ...


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