Farrier, James

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Louisiana Law ReviewVolume 18 | Number 1The Work of the Louisiana Supreme Court for the1956-1957 TermDecember 1957Constitutional Law - Validity of Louisiana Fair-Trade LawJames FarrierThis Note is brought to you for free and open access by the Law Reviews and Journals at LSU Law Digital Commons. It has been accepted for inclusionin Louisiana Law Review by an authorized editor of LSU Law Digital Commons. For more information, please contact kreed25@lsu.edu.Repository CitationJames Farrier, Constitutional Law - Validity of Louisiana Fair-Trade Law, 18 La. L. Rev. (1957)Available at: https://digitalcommons.law.lsu.edu/lalrev/vol18/iss1/37LOUISIANA LAW REVIEWoutside the jurisdiction of the United States against the laws ofa foreign country.2 3 American citizenship does not give an Amer-ican immunity from prosecution for the commission of crimesin other countries, or entitle him to a trial in any other modethan that allowed to its own people by the country from the lawsof which he has fled.24 The only difference between a case ofextradition and the instant case is that the respondent here is inmilitary service. However, the fact that the respondent did notvoluntarily leave the protection of continental United States lawdoes not create in him a constitutional right which he had neverhad before, nor does it reduce the extent of the treaty-makingpower of the United States. The involuntary nature of a soldier'sstation is simply one more factor affecting the public opinionwhich the United States Government must consider in bargain-ing with another sovereign. It appears that the United States'adherence to comity in international relations is sufficient tojustify a treaty by which American citizens are surrendered toforeign powers in derogation of what respondent would call hisconstitutional right to trial by the United States authorities. Theextradition example of the needs of the sovereign as weighedagainst the rights of the individual would seem adequate prece-dent for a like result in the instant case. Therefore, it is sub-mitted that the decision of the United States Supreme Court islegally sound.William L. McLeod, Jr.CONSTITUTIONAL LAW-VALIDITY OF LOUISIANA FAIR-TRADE LAWPlaintiff sought to enjoin defendant from selling productsbearing the plaintiff's brand at a price below the minimumwhich had been set in accordance with the Louisiana Fair-TradeAct.' Defendant challenged the constitutionality of the act, andparticularly the "non-signer" clause which prohibited non-con-tracting retailers from wilfully selling plaintiff's products under23. Neely v. Henkel, 180 U.S. 109 (1900) ; Argento v. Horn, 241 F.2d 258(6th Cir. 1957), cert. denied, No. 183, U.S. Sup. Ct. Bull. Current Term, p. 8024(October 14, 1957).24. See note 23 supra.1. La. Acts 1936, No. 13, p. 62, incorporated as LA. R.S. 51:394 (1950). Theact consists of a contract clause providing that a contract shall not be invalid byreason of a stipulated minimum price, and the contested non-signer clause whichstates: "Wilfully and knowingly advertising, offering for sale or selling at lessthan the minimum price stipulated in any contract entered into pursuant to theprovision of R.S. 51:392, whether the person so advertising, offering for sale, orselling is or is not a party to the contract, is unfair competition and is actionableby any person damaged."[Vol. XVIIINOTESthe prices established by the plaintiff through contracts withother retailers. Injunction was granted by the trial court. Onappeal the court of appeal affirmed the decision, dismissing de-fendant's contentions as having been settled adversely in a pre-vious decision of the Louisiana Supreme Court.2 On certiorari,held, reversed. By subjecting retailers' property rights to thewill of private individuals, the act violated Article III, Section 1,2of the Louisiana Constitution in that it delegated legislativepower to private persons. Dr. G. H. Tichenor Antiseptic Co. aV.Schwegmann Brothers Giant Super Markets, 231 La. 51, 90 So.2d343 (1956).At the beginning of this century, contracts by which pro-ducers bound retailers to fixed prices were upheld by courts aspermissible measures to protect goodwill created by brand ortrade names. 4 However, in 1911 the United States SupremeCourt held that any contract by which a producer attempted tomaintain a system to control resale prices was unlawful not onlyas a violation of the Sherman Anti-Trust Act 5 but also as anunreasonable restraint of trade at common law.6 Pressure tacticswere used by some producers to continue price maintenance,though such efforts were to some extent curbed by the FederalTrade Commission.7Finally, beginning in 1933, state legislatures opened the doorfor producers to maintain retail prices by passing fair-trade lawscontaining "non-signer" clauses.8 In Old Dearborn DistributingCo. v. Seagram Distiller" the United States Supreme Court heldsuch measures to be valid exercises of the state police powerand not improper delegations of the legislative power violatingthe "due process" clause of the Fourteenth Amendment. The de-cision was based upon "due process" and did not erase the bar-2. Pepsodent Co. v. Krauss Co., 200 La. 959, 9 So.2d 303 (1942).3. "The legislative power of the state shall be vested in a legislature. . .4. Fowle v. Park, 131 U.S. 88 (1889) ; Dr. Miles Medical Co. v. Platt, 142Fed. 606 (N.D. Ill. 1906). See also Note, 60 U. PA. L. REV. 270 (1912).5. Sherman Act of July 2, 1890, c. 647, § 1, 26 STAT. 209.6. Dr. Miles Medical Co. v. Park, 220 U.S. 373 (1911).7. United States v. Colgate, 250 U.S. 300 (1919). Here the producer was boy-cotting those retailers not complying with his desired price. No price fixing con-tract had been entered into. The court held that no unfair trade practice had beencommitted. For a discussion of cases involving fair trade and the Federal TradeCommission, see Note, 75 U. PA. L. REV. 248 (1927).8. California was the first state to adopt a fair trade act. See CALIF. BusI-NESS AND PROFESSIONS CODE ANN. §§ 16900-16905 (Deering 1951). This act andall other statutes referred to as "fair trade acts" are substantially the same, con-taining a contract clause and a non-signer clause. See note 1 supra.9. 299 U.S. 183 (1936).19571,LOUISIANA LAW REVIEW [Vol. XVIIIrier presented by the Sherman Act. However, Congress passedthe Miller-Tydings Act 10 which exempted from condemnation ofthe Sherman Act contracts which prescribed minimum prices,if such contracts were in accordance with state laws. Thus thestates were left to decide whether to allow fair trade; and all butthree states eventually passed fair-trade acts containing the"non-signer" clause." But the Miller-Tydings Act had neglectedto include the "non-signer" clause in authorizing state fair-tradelaws. Because of this omission, the Supreme Court of the UnitedStates in 1951 declared the "non-signer" clause in the LouisianaFair Trade Act a violation of the Sherman Act.12 However, onceagain Congress acted, this time passing the McGuire Act 13 whichamended the Miller-Tydings Act so as to contain the "non-signer" clause. Of the twenty-one fair-trade laws reviewed sincepassage of the McGuire Act, twelve have been declared uncon-stitutional.14The validity of the Louisiana Fair Trade Act was consideredand upheld by the Supreme Court of this state under the anti-10. 50 STAT. 693 (1937), 15 U.S.C. §§ 1-7 (1948).11. Every state but Texas, Vermont, and Missouri passed similar statutes.Until 1952, only two courts of last resort had declared a fair trade act Invalid.See Liquor Store Inc. v. Continental Distilling Corp., 40 So.2d 371 (Fla. 1949) ;Shakespeare Co. v. Lippman's Tool Shop Sporting Goods Co., 334 Mich. 109, 54N.W.2d 268 (1952).12. Schwegmann Bros. v. Calvert Distillers Corp., 341 U.S. 384 (1951).13. 66 STAT. 631, 632 (1952), 15 U.S.C. §45 (1952).14. The following cases held state fair trade acts invalid: Union Carbide &Carbon Corp. v. White River Distributors, 224 Ark. 558, 275 S.W.2d 455 (1955)Olin Mathieson Chemical Corp. v. Francis, 301 P.2d 139 (Colo. 1956); MilesLaboratories v. Eckerd, 73 So.2d 680 (Fla. 1954) Grayson-Robinson Stores v.Oneida, Ltd., 209 Ga. 613, 75 S.E.2d 161 (1952); Bargain Barn, Inc. v. ArvinIndustries Inc., CCH TRADE REG. REP. (1955 Trade Cas.) 68074, at 70463(Super. Ct. Marion County, 1955) (Ind.); General Electric Co. v. AmericanBuyers, C-IH TRADE REG. REP. (1956 Trade Cas.) 68341, at 71514 (JeffersonCounty Cir., 1956) (Ky.) ; McGraw Electric Co. v. Lewis & Smith Drug Co.,159 Neb. 703, 68 N.W.2d 608 (1955); Skaggs Drug Center v. General ElectricCo., CCH TRADE REG. REP. (1957 Trade Cas.) 68823, at 73329 (Sup. Ct. Colo.1957) ; General Electric Co. v. Wahle, 207 Ore. 302, 296 P.2d 635 (1956) ; Rogers-Kent, Inc. v. Westinghouse Electric Corp., CCH TRADE GEo. REP. (1955 TradeCas.) 68084, at 70481 (Richland County, 1955) (S.C.) ; General Electric Co.v. Thrifty Sales Inc., 5 Utah 2d 326, 301 P.2d 741 (1956); Benruss Co. v.Smith-Williams Jewelers, CCH TRADE REQ REP. (1955 Trade Cas.) 67985,at 70197 (Richmond Law & Eq. Ct., 1955) (Va.). Those state courts hold-ing for the validity of fair trade acts since 1952 are the following: ScovillManufacturing Co. v. Skaggs Pay Less Drug Stores, 45 Cal.2d 281, 291 P.2d 936(1955) ; General Electric Co. v. Klein, 106 A.2d 206 (Del. 1954) ; Home UtilitiesCo. v. Revere Copper & Brass, 122 A.2d 109 (Md. 1956) ; General Electric Co. v.Kimball Jewelers, 132 N.E.2d 652 (Mass. 1956) ; Lionel Corp. v. Grayson-Robin-son Stores, 15 N.J. 191, 104 A.2d 304 (1954); General Electric Co. v. MastersInc., 307 N.Y. 229, 120 N.E.2d 255 (1955) ; Union Carbide and Carbon Corp.%v.Bargain Fair, 130 N.E.2d 255 (Ohio Com. P1. 1955) ; Burche Co. v. GeneralElectric Co., 382 Pa. 370, 115 A.2d 361 (1956) ; Bulova Watch Co. v. Anderson,270 Wis. 21, 70 N.W.2d 243 (1955).NOTEStrust provision of the Louisiana Constitution1 5 in Pepsodent Co.v. Krauss.16 The court held in that case that the constitutionalprovision in question did not limit the state in exercising itspolice power; the police power was only limited in that it couldnot be used arbitrarily or unreasonably. Using the rationale ofthe Dearborn decision, 17 the court held that the act was not anabuse of the police power.The fact that the Pepsodent case dealt with the constitution-ality of the Fair Trade Act under the anti-trust provision of theLouisiana Constitution and did not treat the problem of delega-tion of legislative power distinguishes that case from the presentone. The court in the instant case reasoned that an individualpossesses a right to sell his property at whatever price he pleases,and that this right can be taken away and regulated only by theLegislature in the exercise of its police power. Thus, in allowingproducers and distributors to fix minimum prices binding non-contracting parties, the Legislature was delegating its powerand subjecting the retailer's rights to the will of private per-sons, contrary to Article III, Section 1, of the State Constitu-tion.'8 To justify the delegation of the price-fixing function toproducers would be impossible unless the producer could be saidto retain same property right in the commodity after it was soldto the retailer. Such a right, as the court pointed out, wouldamount to burdening ownership of a chattel by imposition ofsome implied covenant, condition, or servitude - devices notrecognized in Louisiana law.19 The main problem facing thecourt was the Dearborn decision, which, though dealing with afederal constitutional question, nevertheless was cited with favorin the Pepsodent case. The court pointed out that the Pepsodentcase did not deal with delegation of power, nor could the UnitedStates Supreme Court in a situation such as that presented in the15. LA. CONST. art. XIX, § 14. This provision condemns all "combinations,trusts, or conspiracies in restraint of trade, commerce, or business."16. 200 La. 959, 9 So.2d 303 (1942).17. 299 U.S. 183 (1936).18. See note 3 eupra.19. Dr. G. H. Tichenor Antiseptic Co. v. Schwegmann Bros. Giant SuperMarkets, 231 La. 51, 71, 90 So.2d 343, 350, n. 10 (1957) : "Equitable servitudesrunning with a movable and restraints on the alienation of movable property aredisfavored under the public policy of this State. Once a movable is sold, the sellerrelinquishes all interest therein and conditional sales, whereby the vendor retainstitle to the property, are not recognized in Louisiana. Barber Asphalt Paving Co.v. St. Louis Cypress Co., 121 La. 152, 46 So. 193 (1908) ; Lee Const. Co. v. L.M.Ray Const. Corp., 219 La. 246, 52 So.2d 841 and cases there cited. And, until1912, chattel mortgages were unknown in this State." The court also cited LA.CIVIL CODE arts. 490-491 (1870).1957]LOUISIANA LAW REVIEWDearborn case resolve conflicts between state legislation and theState Constitution. The court furthermore observed that in 1951the United States Supreme Court had found the Louisiana stat-ute to be a "price-fixing" statute, a finding contrary to that inthe Dearborn case.20The decision in the present case reflects a trend toward re-appraisal of fair trade legislation,2 1 apparently incited by theUnited States Supreme Court decision in 1952,22 and the sub-sequent McGuire Act. That fair trade perhaps protects goodwill of producers and stops "loss leading" tactics is an issue notto be entirely disregarded. But the chief argument for fair tradeis that it affords protection for the "little man" who cannot with-stand competition of large-scale operations. 23 On the other hand,opponents of fair trade point out that the public is hurt by beingdenied the benefits of this competition. 24 Thus, in the contextof public policy, the result of the instant case is to preserve thebenefits of competition by permitting the large-scale operatorsto offer fair-trade goods for sale at lower prices. Also, the legaldetermination by the court in this instance protects the retailers'property rights against an unfettered exercise of the will by pri-vate persons.James FarrierCRIMINAL LAW-MISAPPROPRIATION OF FUNDS OF A COMMERCIALPARTNERSHIP BY ONE OF THE PARTNERSDefendant partner allegedly withdrew funds from the part-nership bank account and converted them to his own use. Thedistrict court sustained a motion to quash the information filedagainst the defendant for theft of partnership funds. On appealby the state, held, affirmed. Since the partner can eventually beheld liable for the entire debt of a commercial partnership of20. Schwegmann Bros. v. Calvert Distillers Corp., 341 U.S. 384 (1951). Theargument that the Supreme Court in this case had overruled the Dearborn deci-sion was quashed in Schwegmann Bros. v. Eli Lily & Co., 205 F.2d 788 (5th Cir.1953). This case considered and upheld the McGuire Act.21. See note 14 supra.22. Schwegmann Bros. v. Calvert Distillers Corp., 341 U.S. 384 (1951).23. Two chief arguments for fair trade are that the manufacturer's trade markhas been "exploited and cheapened" and the small retailers driven out of businessby sales of brands below cost. The chief fear is of "price wars" which will tramplethe little men down. See Fulda, Resale Price Maintenance, 21 U. Cni. L. REV.175 (1954), for a full analysis of arguments for and against fair trade.24. "In addition many newspapers and magazines throughout the country hailedthe Schwegmann decision as a victory for the consumer and the free enterprisesystem . . . Fortune magazine repeatedly attacked the fair-trade laws as economi-cally unsound and harmful to the best interests of consumers." Id. at 186-87.182 [Vol. XVIII

Constitutional Law - Validity of Louisiana Fair-Trade Law

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Constitutional Law - Validity of Louisiana Fair-Trade Law

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