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Lionel Corp. v. Grayson-Robinson Stores Inc.

Decided: June 26, 1953.

THE LIONEL CORP., ETC., PLAINTIFF,
v.
GRAYSON-ROBINSON STORES, INC., ETC., DEFENDANT



Freund, J.s.c.

Freund

This proceeding brought by The Lionel Corporation, seeks to enjoin the defendant, Grayson-Robinson Stores, Inc., from selling or offering for sale "Lionel Trains" or "Lionel Products," manufactured by the plaintiff at less than the list prices established by the plaintiff. The action is brought under the New Jersey Fair Trade Act, R.S. 56:4-3 et seq. , and under the McGuire Act, 66 Stat. 632, 15 U.S.C.A., sec. 45. The defendant has moved for summary judgment as a matter of law.

The complaint and affidavits submitted on the motion palpably show that there is no genuine issue as to any material fact. The following facts are gleaned from the pleadings: The plaintiff, a corporation of the State of New York, authorized to do business in this State, is engaged in interstate commerce, manufacturing toy electric trains under the trade name of "Lionel," and has a price-fixing policy which it endeavors to maintain by means of retail price maintenance agreements and by prices listed in its catalogs. The defendant, a corporation of the State of California, authorized to do business in this State, owns a nation-wide chain of retail stores -- one in the City of Newark. The policy of the defendant is to operate its stores on a self-service, cash-and-carry basis, and to sell its merchandise at minimum prices. The defendant asserts that it has never entered into any "fair trade" contract and it has been stipulated that it has no contract with the plaintiff.

The plaintiff has entered into price maintenance agreements with retailers in this State, of which fact it alleges the defendant had notice. The defendant denies having notice but admits it did offer for sale and sold the plaintiff's products at less than the stated list prices, and insists on its right to do so.

The plaintiff contends that the McGuire Act, supra , has encompassed nonsigners and that the defendant's practice of price-cutting, with notice of the plaintiff's price maintenance contracts, constitutes violation of the New Jersey Fair Trade Act, entitling it to an injunction. R.S. 56:4-3 et seq.

In opposition, the defendant presents many points, among them that the New Jersey Fair Trade Act and the federal McGuire Act, insofar as they attempt to bind nonsigners, are unconstitutional: (1) being in violation of the due process clauses of the Fifth and Fourteenth Amendments to the Federal Constitution and of Article I, Section I, of the State Constitution, because they deprive the defendant of its property right to sell merchandise at the price it sees fit; and (2) because they unlawfully delegate to private persons, manufacturers and producers, the power to fix prices of commodities not affected with a public interest, without any standards or regulations governing the exercise of the delegated power.

The plaintiff urges that state fair trade statutes were declared to be valid by the United States Supreme Court in Old Dearborn Distributing Co. v. Seagram-Distillers Corp. , 299 U.S. 183, 57 S. Ct. 139, 81 L. Ed. 109 (1936), and that thereupon the courts of this State upheld the constitutionality of our Fair Trade Act and enjoined nonsigners from selling below fixed prices. Johnson & Johnson v. Weissbard , 121 N.J. Eq. 585 (E. & A. 1937). Further, that the defendant is asking this court to overrule these decisions. The defendant concedes that the Court of Errors and Appeals held that our statute did not violate the due process clause, but argues that the court did not pass upon its constitutionality on the issue of unlawful delegation of legislative power. The defendant urges that, to the extent that the United States Supreme Court has not overruled the Old Dearborn case by its decision 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 (1951), this court is free to disregard it; and that the validity of the McGuire Act has not been

passed upon by the Supreme Courts of either the United States or of this State.

The historical background of fair trade legislation and decisions pertaining thereto, including the Schwegmann case, are set forth in the opinions of this court and of the Supreme Court of New Jersey in Hoffmann-LaRoche, Inc., v. Weissbard and Johnson & Johnson v. Charmley Drug Co. , 19 N.J. Super. 210 (Ch. Div. 1952), affirmed 11 N.J. 541 and 526 (1953). Here, it will suffice to say that price-fixing agreements were illegal as against public policy. Ingersoll v. Goldstein , 84 N.J. Eq. 445 (Ch. 1915); prohibited as restraints of trade under the Sherman Anti-Trust Act, 26 Stat. 209, c. 647; 15 U.S.C.A., sec. 1 (1890), and held violative of the Federal Trade Commission Act, 38 Stat. 717, c. 311, 15 U.S.C.A., sec. 41 (1914). Dr. Miles Medical Co. v. John D. Park & Sons Co. , 220 U.S. 373, 31 S. Ct. 376, 55 L. Ed. 502 (1911); Federal Trade Commission v. BeechNut Packing Co. , 257 U.S. 441, 42 S. Ct. 150, 66 L. Ed. 307 (1922). However, in 1936, the United States Supreme Court in the Old Dearborn case, supra , upheld the validity of state fair trade statutes sanctioning agreements for retail price-fixing with reference to trademarked or branded commodities sold in fair and open competition with other commodities of the same general class, binding also upon retailers not parties to the contract who had notice of the price agreement. The purported purpose of fair trade statutes is to protect owners of trademarked goods, or distributors, who have built up a good-will for the product, from injurious practices.

In 1937, in order to implement state fair trade acts and to alleviate the proscriptions of the Sherman Anti-Trust Act upon price-maintenance agreements valid under local law, Congress enacted the Miller-Tydings Amendment to the Sherman Act, Title VIII, 50 Stat. 673, 693, c. 690, 15 U.S.C.A., sec. 1. That amendment provides immunity from the ban of the Sherman Act for "contracts or agreements ...


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