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JOHNSON & JOHNSON v. JANEL SALES CORP.

February 16, 1961

JOHNSON & JOHNSON, Plaintiff,
v.
JANEL SALES CORP., Defendant



The opinion of the court was delivered by: DIMOCK

This is a motion for a preliminary injunction against the sale of plaintiff's products at lower than 'fair trade' prices. Plaintiff is a producer of surgical dressings, baby products, elastic products, ointments and other related articles.

It is alleged that plaintiff is a New Jersey corporation with its principal place of business in New Jersey and that defendant is a New York corporation with its principal place of business in New York.

 Plaintiff's claim is based upon section 369-b of the New York General Business Law (Chapter 20 of the Consolidated Laws) which reads as follows:

 ' § 369-b. Unfair competition defined and made actionable

 'Wilfully and knowingly advertising, offering for sale or selling any commodity at less than the price stipulated in any contract entered into pursuant to the provision of section three hundred sixty-nine-a, whether the person so advertising, offering for sale or selling is or is not a party to such contract, is unfair competition and is actionable at the suit of any person damaged thereby.'

 Section 369-a, referred to in section 369-b quoted above, reads, in subdivision 1, as follows:

 ' § 369-a. Price fixing of certain commodities permitted

 '1. No contract relating to the sale or resale of a commodity which bears, or the label or content of which bears, the trade mark, brand, or name of the producer or owner of such commodity and which is in fair and open competition with commodities of the same general class produced by others shall be deemed in violation of any law of the state of New York by reason of any of the following provisions which may be contained in such contracts:

 '(a) That the buyer will not resell such commodity except at the price stipulated by the vendor;

 '(b) That the vendee or producer require any dealer to whom he may resell such commodity to agree that he will not, in turn, resell except at the price stipulated by such vendor or by such vendee.'

 On October 28, 1957, plaintiff entered into a contract with William Cohen, of Levittown, New York, in which plaintiff was referred to as the manufacturer and Cohen the retailer and which recited that the manufacturer's products, the subject of the agreement, would be distributed under the manufacturer's trade mark, brand or name, in free, fair and open competition with commodities of the same general class produced by others and that the retailer was engaged in the sale of such products. The contract contained an agreement that the retailer would not offer for sale the products specified in a price list attached, or in said price list as it might be amended or revised by the issuance of a later one, at less than the minimum retail selling price stipulated for such a sale therein. The manufacturer on its part agreed to employ all reasonable means to obtain and enforce observance by competitors of the retailer of the minimum retail selling prices established by the contract.

 The contract with Cohen was thus a contract entered into pursuant to the provisions of section 369-a of the General Business Law. Accordingly, pursuant to the terms of section 369-b, any sale of any commodity at less than the price stipulated in the contract constitutes actionable unfair competition whether the person so selling 'is or is not a party to such contract'. Therefore, under the letter of the New York statute, defendant would be guilty of actionable unfair competition if it sold any commodity at less than the price stipulated, even though defendant was not a party to such a contract as that made with Cohen.

 Defendant does not deny that it has been selling plaintiff's fair traded products at less than the stipulated prices but raises the defense that the provisions of the New York General Business Law are invalid as in violation of the federal antitrust laws. Plaintiff, however, relies upon the McGuire Act, 66 Stat. 632, 15 U.S.C. § 45, *fn1" which reads as follows:

 ' § 45. Unfair methods of competition unlawful; prevention by Commission -- Declaration of unlawfulness; power ...


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