157 F. Supp. 689 | S.D.N.Y. | 1957
Reference is made to the Court’s earlier opinion on an application by the plaintiff to punish the defendant for contempt of court for violation of the injunctive provisions of a final decree, entered by consent, which enjoined the defendant from selling or offering for sale plaintiff’s products in violation of New York State’s Fair Trade Law.
As the opinion indicates a factual conflict existed as to the circumstances of the organization by the defendant of a wholly owned subsidiary in the District of Columbia, a non-fair trade jurisdiction, and also the circumstances under which sales were made by it to New York residents and participated in by the defendant. Accordingly, final decision was withheld pending an inquiry into these matters and in particular into the circumstances of sales to New York residents by the subsidiary, Masters Mail Order Co. of Washington, D. C.
The parties in a desire to avoid hearings before a special master on the factual issues, agreed to stipulate the facts; it took almost two years before they reached an accord.
In the meantime, our Court of Appeals had under consideration, and has since decided, an action brought against the subsidiary. General Electric Co. v. Masters Mail Order Co. of Washington, D. C., 2 Cir., 244 F.2d 681, certiorari
The General Electric case is thus an authoritative determination that the activities of the mail order house as revealed in the record now before the Court, do not violate the New York Fair Trade Law. The plaintiff insists, however, that notwithstanding the lawful character of these activities, nevertheless the defendant in so far as it furthered them, violated the injunction herein. It is true that the defendant, the parent corporation, Masters, Inc., was not a party to the General Electric suit. However, the close relationship with its subsidiary, the mail order house, was fully established, and, as already mentioned, heavily relied on by General Electric in support of its position. The absence of the parent corporation, the defendant herein, as a formal party in the General Electric suit cannot obliterate the plain fact that this defendant’s part in the mail order house operation was taken into account and was held not to alter the legal effect of that operation.
The injunctive provisions of the final decree are to be read in context. It must not be forgotten that the original action was brought to enforce the plaintiff’s rights under the New York Fair Trade Law. The relief sought and given within the framework of that law was the suppression of acts forbidden, not of those permitted, by it. So construed, the injunction must be held limited to those activities which violated the New York Fair Trade Law. It having been determined that the conduct here charged as a contempt does not violate that law, it follows that it is not within the prohibition of the injunction. An injunction framed in terms of the statute upon which it is based adds nothing to the command of the statute.
The scope of the holding in the General Electric case is such that I am of the view there is no basis upon which to bottom a contempt of this Court’s decree by reason of the organization of the subsidiary and the sales made by it and participated in by the defendant upon which the plaintiff’s present motion was founded — activities found not
The plaintiff has urged the case of Eastman Kodak Co. v. Masters, Inc., 7 Misc.2d 185, 153 N.Y.S.2d 433, wherein under substantially the same facts as here presented, it was held that mere advertising and offering for sale was a violation of an identical decree of the New York State Supreme Court. However, the authority of the case is undermined by the holding in the General Electric case that the New York statute is necessarily limited by the McGuire Act with respect to interstate transactions where the sale is consummated in a free trade jurisdiction. Plaintiff urges the continuing authority of the Eastman Kodak case on the ground that jurisdiction in the instant cáse rests upon diverse citizenship and accordingly, the federal court is bound by the state court interpretation of a state statute, However, the state statute derives its authority from the federal statute, the McGuire Act, and in any conflict between the two the federal law prevails. The limitation the McGuire Act places on state fair trade laws is not determined by the state courts; on the contrary on this issue federal law is supreme.
Whatever loopholes now exist in so far as enforcement of state trade fair laws are concerned is a subject for the legislature and not for the courts. Indeed, the McGuire Act was enacted in an effort to close the gap in the MillerTydings Law, which followed the ruling in Schwegmann Bros. v. Calvert Distillers Corp., 341 U.S. 384, 71 S.Ct. 745, 95 L.Ed. 1035.
The application to adjudge the defendant in contempt is denied.
. N. Y. General Business Law, McKinney’s- Consol.Laws, c. 20, § 369-a et seq.
. Douds v. I. L. A., 2 Cir., 224 F.2d 455, 460, certiorari denied 350 U.S. 873, 76 S.Ct. 117, 100 L.Ed. 772.
. Terminal R.R. Ass’n of St. Louis v. United States, 266 U.S. 17, 45 S.Ct. 5, 69 L.Ed. 150; Douds v. Local 1250, 2 Cir., 173 F.2d 764, 768, 9 A.L.R.2d 685; Star Bedding Co. v. Englander Co., 8 Cir., 239 F.2d 537.
. Terminal R.R. Ass’n of St. Louis v. United States, 266 U.S. 17, 29, 45 S.Ct. 5, 8, 69 L.Ed. 150.
. Gibbons v. Ogden, 9 Wheat. 1, 6 L.Ed. 23; Testa v. Katt, 330 U.S. 386, 67 S.Ct. 810, 91 L.Ed. 967; Sola Electric Co. v. Jefferson Electric Co., 317 U.S. 173, 63 S.Ct. 172, 87 L.Ed. 165.
. 244 P.2d at 686.