Eli Lilly & Company v. Sav-on-Drugs, Inc.

PETITIONER: Eli Lilly & Company
RESPONDENT: Sav-on-Drugs, Inc.
LOCATION: Eagle Coffee Shoppe

DECIDED BY: Warren Court (1958-1962)

CITATION: 366 US 276 (1961)
ARGUED: Mar 20, 1961 / Mar 21, 1961
DECIDED: May 22, 1961

Facts of the case


Media for Eli Lilly & Company v. Sav-on-Drugs, Inc.

Audio Transcription for Oral Argument - March 21, 1961 in Eli Lilly & Company v. Sav-on-Drugs, Inc.

Audio Transcription for Oral Argument - March 20, 1961 in Eli Lilly & Company v. Sav-on-Drugs, Inc.

Earl Warren:

Number 203, Eli Lilly and Company, Appellant, versus Sav-On-Drugs, Incorporated, et al.

Mr. Willis.

Everett I. Willis:

Mr. Chief Justice, if the Court please.

This appeal presents a clear cut question of constitutional law, whether a State may constitutionally require a foreign corporation engaged only in interstate commerce to comply with its qualification statute and obtain a certificate of authority from the State in order to transact its interstate business in the State and may bar the corporation from access to its courts if it does not do so.

Now, the case arose in this way.

The appellant, which is one of the country's largest manufacturers of ethical drugs, is an Indiana corporation.

It sued the appellee in a New Jersey court to enjoin it from selling the appellant's trademark products at prices less than the minimum prices established pursuant to the New Jersey Fair Trade Law and the Federal McGuire Act.

The trial court, which was affirmed by the New Jersey Supreme Court without opinion, granted summary judgment dismissing the complaint on the ground that the appellant was barred from the courts of New Jersey for not having obtained a certificate of authority to transact business in the State.

Now, the business the appellant transacts in New Jersey is entirely an interstate commerce.

And the proceedings below, nobody disputed it.

The appellant's factories are in Indiana.

All its products are manufactured there.

All its sales were made under contracts entered into outside New Jersey.

The appellant makes no sales to retailers, only to wholesalers.

The appellant owns no property, leases no property in New Jersey, has no warehouse, no stock of goods in New Jersey.

Indeed, the only activities of any kind, in New Jersey consist of promotional and informational activities by employees who neither solicit nor accept any orders from anyone.

There's a district manager who leases an office for the expense of which he is reimbursed by the appellant.

He supervises 18 highly trained detailmen who call on physicians, hospitals and pharmacists to acquaint them with these drugs, their ingredients, their therapeutic properties and promote the Lilly name and the use of its products.

They distribute some free advertising and promotional literature.

Occasionally, as a service to a retailer, they may transmit an order for him to a wholesaler who may fill it or not, as he pleases.

Basically, these detailmen are missionaries whose function it is, to promote the Lilly name and products, try to increase the demand for them by physicians, hospitals and pharmacists so that more orders will flow from the wholesalers to the factories in Indiana.

Now, until this case, New Jersey recognized that it could not constitutionally apply its qualification statute to interstate commerce.

The right to do interstate commerce being a federal right, not one to be granted, denied or conditioned by the State.

Every other State in the union, which has addressed itself to the problem, either through its legislature or its courts, and there are 47 of them, has recognized the constitutional limitation.

The classic decision of this Court on the subject is, of course, International Textbook Company against Pigg, which has been followed again and again.

Now, the court below did not seriously suggest that if the Pigg case and the other qualification statutes cases that have followed it are still law, New Jersey would be able to apply its qualification statute to this appellant.

It didn't suggest that the Pigg line of cases has ever been overruled or assert that this Court has ever upheld a qualification statute as applied to interstate commerce for it never has in its history.

What the Court said was that it thought it saw in some recent decisions of this Court a new trend, a new philosophy about interstate commerce.

But the only case it cited as an illustration of a new philosophy was the recent tax decision in Northwest Portland Cement.

Now, Northwest Portland Cement recognized the continued vitality of the basic principle of the Pigg line of cases which is that a State cannot impose conditions upon the right to engage in interstate commerce because that is outside the constitutional fit stair of the State.