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MASTERS, INC. v. SUNBEAM CORP.

December 29, 1952

MASTERS, Inc.
v.
SUNBEAM CORP. et al.



The opinion of the court was delivered by: NOONAN

This action is brought by Masters, Inc. against Sunbeam Corporation and certain of its wholesale distributors alleging that Sunbeam's "universal fair trade contract system" violates the Sherman Anti-Trust Act, 15 U.S.C.A. §§ 1-7, 15 note. The complaint, in brief, alleges that the defendant, through the operation of this fair trade contract system, has engaged in a conspiracy and concerted activity in restraint of trade. Plaintiff, Masters, seeks treble damages and injunctive relief.

Defendants have moved this court for an order (a) dismissing the complaint for failure to state a claim, rule 12(b)(6) F.R.C.P., 28 U.S.C.A.; (b) for summary judgment, rule 56(b) F.R.C.P. on the following grounds:

 (1) the contracts which plaintiff alleges to be illegal are within the express provisions of the New York Fair Trade Act, and the Miller-Tydings Amendment to the Sherman Anti-Trust Act.

 (2) plaintiff has suffered no injury.

 (3) plaintiff, seeking equitable relief, comes into court with unclean hands.

 Items (2) and (3) set forth above involve questions of fact which cannot be resolved here, and will not be further considered by the court. However, the motion to dismiss, and for a summary judgment, may be considered as one for they will rise or fall on the determination of whether Sunbeam's universal fair trade contract system is lawful.

 By way of background, defendant Sunbeam is a manufacturer of electrical appliances, the remaining defendants are wholesale distributors of Sunbeam appliances in the New York area, and its products are distributed under the trademark "Sunbeam". An essential factor in its distribution system has been the maintenance of minimum fair trade prices under various State Fair Trade Laws since 1937.

 Prior to the decision in Schwegmann Bros. v. Calvert Distillers Corp., 341 U.S. 384, 71 S. Ct. 745, 95 L. Ed. 1035, plaintiff endeavored to enforce its fair trade prices against non-signers as well as signers of fair trade contracts. Subsequent to this decision it evolved and put into operation a "universal fair trade contract system;; with its wholesale distributors and retailers. This system was designed to limit sales of Sunbeam products to signatories of fair trade contracts with Sunbeam. In the Distributors Fair Trade Contracts, the wholesalers agree (1) to sell Sunbeam's trade marked products at not less than stipulated minimum prices, and (2) to sell such products only to retailers who have signed fair trade contracts with Sunbeam.

 Plaintiff, Masters, Inc., operates a retail store in New York City, and had entered into fair trade agreements with Sunbeam Corporation in 1938, and again in 1950, but it refused to execute a retailer contract after the decision in the Schwegmann case, supra. Accordingly, Masters, in its complaint, alleges that the wholesalers, who, prior to the institution of the universal fair trade contract system, had supplied Masters with Sunbeam products, have now, under the operation of such system, uniformly refused to sell Sunbeam products to Masters.

 Basically, agreements for price maintenance of articles moving in interstate commerce are unreasonable restraints within the meaning of the Sherman Act, United States v. Trenton Potteries, 273 U.S. 392, 47 S. Ct. 377, 71 L. Ed. 700, United States v. Socony-Vacuum Co., 310 U.S. 150, 60 S. Ct. 811, 84 L. Ed. 1129. Restrictions imposed by the seller upon resale prices of articles moving in interstate commerce were, until the enactment of the Miller-Tydings Act, 50 Stat. 693, 15 U.S.C.A. § 1, consistently held to be violations of the Sherman Act. U. S. v. Univis Lens Co., 316 U.S. 241, 253, 62 S. Ct. 1088, 86 L. Ed. 1408 and cases cited.

 Thus, in the instant case, it would appear that Sunbeam's Universal Fair Trade Contract system falls within the prohibitions of the Sherman Act unless it is immunized by the Miller-Tydings Amendment.

 The Miller-Tydings Amendment excepted from the Sherman Law contracts or agreements prescribing minimum prices for resale of trade marked commodities where such contracts or agreements are valid under the law of the State. It is not contended here that Sunbeam's system, now under attack, is unlawful under the Fair Trade laws of the State of New York, or the Fair Trade law of any other state.

 Plaintiff argues that the provision of Sunbeam's Distributor Fair Trade Contract whereby the distributor is obligated not to sell Sunbeam's products to any retailer who refuses to execute a Sunbeam Retailer Fair Trade Contract, while lawful under the laws of New York *fn1" , finds no sanction in the provisions of the Miller-Tydings Act and constitutes an unlawful price-fixing and boycott scheme in violation of the Sherman Act.

 Sunbeam's position, however, is that as its Fair Trade contract system is lawful under the State Acts, its system is within the exemption of the Miller-Tydings Act. Further, since the Supreme Court has held that the Miller-Tydings Act does not authorize a manufacturer in Interstate Commerce to resort to the Non-signer (tort remedy) clause to protect his fair trade contracts, it is argued that the only statutory method left is for a manufacturer to distribute his goods entirely and uniformly under types of contracts validated by the State Fair Trade Laws. Thus Sunbeam contends that a necessary and integral part of such contracts is a clause in the wholesalers' contract limiting ...


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