Goldmann, Kilkenny and Collester. The opinion of the court was delivered by Goldmann, S.j.a.d.
These three consolidated actions involve an order of the Director of the Office of Milk Industry (Director) ordering Cumberland Farms of New Jersey, Inc. (Cumberland) and Burlington Food Stores, Inc. (Burlington) to cease and desist from distributing coupons, hereinafter described, in connection with the sale of gallon and half-gallon containers of milk and redeemable in cash on certain conditions.
Cumberland is licensed as a milk dealer under the Milk Control Act, N.J.S.A. 4:12A-1 et seq. Burlington is licensed under that act and operates stores throughout the State. The two corporations have interlocking identity or management and ownership. Under N.J.S.A. 4:12A-7 and 20 the Director is empowered to adopt, promulgate and enforce all rules, regulations and orders necessary to carry out the objects and provisions of the act. Further, under the Emergency Milk Control Law of 1962, as amended, N.J.S.A. 4:12A-59 et seq. , the Director is authorized to fix the minimum prices that may be charged consumers of milk. Pursuant to such authority he promulgated Regulation H-17 on December 11, 1963, establishing minimum prices on the sale by stores to consumers of milk in gallon containers at 87 cents and in half-gallon containers at 44 cents. About seven years ago, on March 15, 1957, and pursuant to statutory authority, the Director promulgated Regulation H-5 which prohibits any licensee from giving or lending "anything of value" to any customer in the sale or solicitation for sale of milk products, with the single exception that a licensee was permitted to lend any customer a doorstep milk box distinctly marked as the property of the lender.
On January 20, 1964, and continuing thereafter, Burlington and Cumberland, individually or in concert, began to distribute with the sale of milk in gallon containers a coupon purporting to have a face value of 18 cents, and with the sale of
milk in half-gallon containers a coupon purporting to have a face value of 9 cents. The 18 cents coupon reads as follows:
This coupon redeemable in cash to the holder when the New Jersey consumer milk price fix now in effect is adjudicated retrospectively unconstitutional so as to nullify the minimum milk price fixed for this date.
Coupons must be redeemed within 3 months of the date of adjudication with cash register receipt attached.
* Operated by Burlington Food Stores, Inc."
The coupon issued to purchasers of half-gallon containers is identical except that it bears a face value of 9 cents and is printed on paper of another color.
The Director learned of the coupon practice through newspaper stories and advertisements. He at once had his employees conduct an investigation and ascertained that the Burlington stores were issuing the coupons in question. He thereupon on January 24, 1964 wrote Cumberland and Burlington that the coupon practice constituted a violation of existing law and regulations, and more particularly L. 1941, c. 274 (the Milk Control Act, N.J.S.A. 4:12A-1 et seq.) and L. 1962, c. 182 (the Emergency Milk Control Law of 1962, N.J.S.A. 4:12A-59 et seq.), as amended, as well as Regulations H-5 and H-17 of the Office of Milk Industry. Further, the Director stated:
"* * * the circumstances under which you offer the coupons to the public would tend either to cause confusion or to deceive and mislead the public. Although you impose what would appear to be a restriction upon the basis of which the coupons are redeemable, the general import to the public is that they will receive the redemption in any circumstances in which it might be considered lawful. However, the coupons seemingly would not be redeemable, although the public might not understand this, should the Office of Milk Industry by its own action remove the restriction of minimum pricing or reduce the minimum price presently in effect to any degree whether or not it be to the fullest extent indicated by you in the coupon. There would appear to be other circumstances under which you would not redeem these coupons but which would not be understandable to the public."
Accordingly, the Director ordered Cumberland and Burlington immediately "to cease and desist from distributing these coupons or this office will be compelled to take necessary and appropriate action as may be permitted by law and under the aforementioned or any other applicable statutes."
The Director received no reply from either company. However, on January 30, 1964 counsel for the companies advised him by telephone that notwithstanding his order, Burlington and Cumberland would continue to issue the coupons. They did so.
N.J.S.A. 4:12A-30 (section 30 of the 1941 Milk Control Act) declares it to be unlawful and contrary to the public interest for any licensee or other person, association or corporation "to operate under any mutual or secret agreement, arrangement, combination, contract or common understanding," whereby the price of milk to be paid by stores or consumers is decreased. N.J.S.A. 4:12A-59 et seq. (the Emergency Milk Control Law of 1962, as amended) and Regulation H-17 prohibit the sale of milk by a store to consumers below the established minimum price. As already stated, Regulation H-5, adopted in 1957 pursuant to the 1941 Milk Control Act, as amended, prohibits a licensee from giving or lending anything of value to any customer served or solicited to be served by the licensee. And Regulation F-33, promulgated April 16, 1953 and still operative, embodies the language of N.J.S.A. 4:12A-30, just referred to, and in addition provides that both the buyer and the seller will be held equally responsible where, by agreement or any other arrangement, the price to be paid by stores or consumers for milk is decreased.
On January 31, 1964 Burlington and Cumberland, pursuant to N.J.S.A. 4:1-34, filed a notice of appeal (A-496-63) from the Director's order of January 24, 1964. And see R.R. 4:88-8. They also filed a petition for a declaratory judgment (A-518-63) on February 6, allegedly pursuant to R.R. 4:88-10, praying that this court adjudge the order illegal and void and that we order the Director to cease and desist immediately
from further publication or announcement of that order or from interfering in any way with the lawful and proper maintenance of petitioners' business.
Meanwhile, on February 3, 1964 the Attorney General, on behalf of the Director, filed a Chancery Division complaint (C-1498-63) in two counts, reciting the facts set out above. In the first count he alleged that the conduct of Cumberland and Burlington constituted an intentional violation of the law, and unless they were restrained, they could continue to violate the law. The second count was specifically based on the provisions of N.J.S.A. 4:12A-35(7) which prohibits a course of dealing of such nature as to satisfy the Director of an intent on the part of the licensee to deceive or defraud consumers. In that count the Director alleged that the coupons in question were not worth their purported face value of 18 cents and 9 cents respectively, because they represented a promise or agreement to pay money in the future under certain contingencies which might never occur, or which might not occur within the time limits fixed by the coupons. There might be other circumstances under which the coupons were not redeemable, and if such were the case, this would not be understandable to the public. The Director charged that defendants' use of the coupons amounted to a deceptive course of dealing, scheme and practice, intended to deceive or defraud consumers in matters regulated by the provisions of the Milk Control Act.
The Director therefore demanded judgment on either or both counts of the complaint, restraining Cumberland and Burlington from (1) giving or offering to give coupons of rebate or refund, or any other consideration or thing of value which results in or purports to result in the sale or offer of sale of milk below the lawful selling price; (2) engaging in any scheme, practice, or course of dealing, or using any device which results or purports to result in the sale of milk at prices below the lawfully established minimums; (3) engaging in any deceptive course of dealing or practice in connection with the sale of milk and, in particular, from the practice
of issuing the coupons in question; and (4) giving or offering to give coupons of rebate or refund, or any other consideration or thing of value.
On the same day the Director's complaint was filed, the Chancery Division judge entered an order to show cause, returnable February 14, why an injunctive order should not be issued enjoining Cumberland and Burlington according to the demands of the complaint. The matter was continued until February 21.
In the meantime, the companies filed a notice of motion in A-496-63 (the appeal) that they would on February 17 apply to this Part of the Appellate Division for an order staying the provisions of the Director's order of January 24 and restraining him from interfering in any manner with their distribution of the coupons or from taking any action to prohibit their operations until the appeal was determined. ...