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Sony Corp. v. Value House Inc.

Decided: November 30, 1972.

SONY CORPORATION OF AMERICA, PLAINTIFF,
v.
VALUE HOUSE, INC., AND SUPERMARKETS GENERAL CORPORATION, DEFENDANTS



Mehler, J.s.c.

Mehler

This is the continued return day of an order to show cause why defendants Value House, Inc. and Supermarkets General Corporation (Supermarkets) should not be enjoined from selling products of plaintiff Sony Corporation of America (Sony), in violation of Sony's fair trade prices.

The facts as set forth in affidavits and in statements and admissions in the brief of defendants are not in issue. Sony, a New York corporation, sells television sets and other electronic equipment in New Jersey and throughout the United States. Value House is a Maine corporation which for 11 years has sold television sets, appliances and other merchandise at retail at low mark-ups and even at mark-ups lower than many other discount dealers. Until recently its stores were located only in New England, where they sold Sony products among others. Value House is a subsidiary of Supermarkets, a New Jersey corporation, and

is authorized to do business in New Jersey. On August 28, 1972 it opened a store in West Orange and on September 28, 1972 opened one in Wayne.

In 1970 Sony entered into fair trade contracts with retailers in New Jersey and pursuant thereto established minimum retail prices for Sony products. On August 31, 1972 Value House was given notice of Sony's fair trade prices. The notice also stated that plaintiff had learned that Value House was selling Sony products below Sony's minimum retail prices in violation of New Jersey law. Although Value House has not signed a fair trade contract with Sony, it admits that a nonsigner notice of Sony's fair trade prices was sent to it on August 31, 1972, and that it sells products in New Jersey at lower than plaintiff's minimum retail prices.

N.J.S.A. 56:4-3 et seq. , commonly known as the New Jersey Fair Trade Act (the act), permits manufacturers and retailers to enter into contracts that set a retail price below which the manufacturer's products may not be resold. The act also contains a "non-signer" provision, N.J.S.A. 56:4-6, which gives a manufacturer a cause of action against a noncontracting party who wilfully and knowingly advertises, offers to sell or sells a manufacturer's products at less than the minimum resale prices stipulated in a contract between the producer and another. It is under the provisions of this act that Sony seeks an interlocutory injunction against defendants.

On the return day of the order to show cause defendants argued that plaintiff was not entitled to relief because it was not enforcing its fair trade prices in New Jersey. See Menley & James Laboratories Ltd. v. Vornado, Inc. , 90 N.J. Super. 404, 414-415 (Ch. Div. 1966). They have now abandoned this argument, for they admit that plaintiff's affidavits establish that plaintiff has a vigorous policy of enforcing its fair trade prices. The arguments now advanced by defendants will be considered in the order in which they have been presented.

Defendants first contend that the act, especially its nonsigner provision, is an unreasonable exercise of the State's police power and violates the federal due process and commerce clauses and the New Jersey due process clause.

In Old Dearborn Distributing Co. v. Seagram-Distillers Corp. , 299 U.S. 183, 57 S. Ct. 139, 81 L. Ed. 109 (1936), the court declined to accept the contention that the fair trade act of Illinois was unconstitutional as violative of the due process clause of the 14th Amendment. Even though defendants say fair trade laws continue to fall whenever their constitutionality is directly attacked, it is noteworthy that in Lionel Corp. v. Grayson-Robinson Stores , 15 N.J. 191, app. dism. 348 U.S. 859, 75 S. Ct. 87, 99 L. Ed. 677 (1954), defendant's constitutional attack on the act under both the Federal and State Constitutions was rejected in an opinion which expressed the view that the Dearborn case was still dispositive. Lionel Corp. has not been overruled. I am of course bound by it since it is a decision of our highest court.

Without saying in what manner the act is an unreasonable exercise of the State's police power and violates New Jersey's due process clause, defendants merely cite a number of cases. Among them is Remington Arms. Co. Inc. v. G.E.M. of St. Louis, Inc. , 257 Minn. 562, 102 N.W. 2d 528, 531 (Sup. Ct. 1960), which said that the state's fair trade law, by delegating price-making power to private persons, created a new and private government, violated an essential concept of a democratic society and was constitutionally invalid. I do not reach the same conclusion, particularly since in Dearborn the court viewed the legislation solely as a law designed to protect the manufacturer's good will as summarized by its brand or trade mark against unfair price cutting by distributors, ...


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