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

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

DOCKET NO.: 203
DECIDED BY: Warren Court (1958-1962)
LOWER COURT:

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

Facts of the case

Question

  • Oral Argument – March 21, 1961
  • 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.

    Charles E. Whittaker:

    May I ask you, sir?

    Is it conceded here, as it was there, that there is no local commerce involved, that this is exclusively interstate commerce that’s been done by Eli Lilly?

    Everett I. Willis:

    The appellees have raised on this appeal for the first time, a new argument that the — that Eli Lilly is partly engaged in intrastate commerce.

    Now, they based on the Cheney case that came to this Court many years ago from Massachusetts, which nobody even mentioned below because the whole argument below was on the assumption and the premise that it was entirely interstate commerce and the question was whether it was constitutional.

    Now, we — we contend — that that question comes too late, is not before the Court.

    The appellees do not deny that it’s a new argument on this appeal.

    They seek to excuse it by arguing that when seeking affirmance, rather than reversal, you may raise new arguments.

    But we’ve cited the cases that there is no such rule on appeals from state courts and — but — but furthermore, there is no support in — in the record for their — for their contention in any event, as we have shown in our brief.

    Felix Frankfurter:

    You — I don’t quite follow.

    You mean to say that counsel obtained a judgment for those who can’t pick up new arguments when they get here?

    Everett I. Willis:

    Well, I say that the —

    Felix Frankfurter:

    They can’t pick up new facts, so they can’t pick up big stuff out of the record contrary to either the findings or assumptions of judgment below that I understand, but they could make new arguments can they?

    Everett I. Willis:

    Well, my position is that — that they cannot try the case below on the theory that it were all an interstate commerce and —

    Felix Frankfurter:

    Added something, I quite understand it.

    That’s not a new argument.

    That’s a new case.

    Everett I. Willis:

    Well —

    Felix Frankfurter:

    One thing to say, the — what if — how are these case tried as they say it were?

    Everett I. Willis:

    Well there was a — a —

    Felix Frankfurter:

    Leading, what comes (Voice Overlap) —

    Everett I. Willis:

    Yes, sir.

    Summary judgment was granted, dismissing the complaint.

    Felix Frankfurter:

    Yes.

    Now, did they — did the — the State move or you move?

    Everett I. Willis:

    Well it’s the (Voice Overlap) no, the — the appellee Sav-On-Drugs, yes.

    Felix Frankfurter:

    Well.

    Did they — did they set forth facts from which only one deduction can be made with — with namely Lillys are engaged entirely in interstate commerce?

    Well did you try?

    How are we — how am I to find out whether as a matter of fact, Justice Whittaker’s question is to be answered one way or the other?

    Everett I. Willis:

    Well, there were — there were affidavits submitted as is the usual practice on — in — in support of it, in our position to the summary judgment which spell out exactly what — what we do in New Jersey.

    Felix Frankfurter:

    Did you — did you explicitly in term say, your entirely engagement interstate commerce?

    And — and —

    Everett I. Willis:

    Yes, sir.

    Felix Frankfurter:

    — disavowed being engaging over commerce?

    I mean is the record dubious than on that subject?

    In the Cement case as Justice Whittaker indicated, they are findings, they’re specific findings as my recollection was, I think of —

    Charles E. Whittaker:

    Well, that’s right.

    In — in the Cement case, Minnesota Supreme Court had expressedly found that the commerce involved was exclusively interstate in character and so it was true in stock and vows, the same —

    Everett I. Willis:

    Yes.

    Charles E. Whittaker:

    — it is.

    Earl Warren:

    What does the record show — what does the record show in the activities of — of these promotional men with relation, let us say, to the consumers in the — in the community?

    Everett I. Willis:

    None, none.

    These men, they’re trained pharmacists and they go around to the physicians and hospitals and pharmacists and can —

    Earl Warren:

    And those are consumers, aren’t they —

    Everett I. Willis:

    No.

    Earl Warren:

    — that’s — that’s what I would call consumers —

    Everett I. Willis:

    Well, they’re — they’re —

    Earl Warren:

    Have your — have your (Voice Overlap) —

    Everett I. Willis:

    Well that — the doctors — the doctors prescribed them and the hospitals use them, the pharmacists sell them.

    Earl Warren:

    Yes.

    Well, there, the ultimate consumers are your products, aren’t they?

    Whether — whether they are not —

    Everett I. Willis:

    No, sick people are — sick people are, yes.

    Earl Warren:

    — let’s — let’s say what are your relations — what are the relations of these promotional men to such people, doctors, hospitals, and pharmacists?

    Everett I. Willis:

    Well, they call on them and — and explain the products to them, what they will do, what their ingredients, what disease they’re indicated for, what the — that — directions for use and — and of course, how wonderful Lilly products are, what they will do for disease.

    Earl Warren:

    They go beyond that?

    Everett I. Willis:

    Well as I mentioned, they — they do distribute some advertising literature, promotional literature.

    Earl Warren:

    So they go beyond that?

    Everett I. Willis:

    And then the other thing I mentioned was that occasionally, as a service to a retailer, they will transmit an order to a wholesaler which he may fill or not as he chooses.

    Now, the — that’s where the appellees on this appeal bring in the Cheney case.

    Everett I. Willis:

    Now, the — the Cheney case of course, was a tax case, but its — its facts also were vastly different.

    Now, the state court in Massachusetts, this came from Massachusetts and that court found that the Company involved there happened to be the Northwestern Consolidated Milling Company, had actually qualified to do a local business in Massachusetts.

    It had an office where orders were received and accepted.

    It had a stock of goods from which some sales were made.

    And then it was found that a major part of its business consisted of furnishing salesmen to actually and regularly act as agents for local wholesalers in the aggressive solicitation of business for the wholesalers who would then fill it and get it paid.

    Now, the appellees cease on the circumstance here to try to assimilate that to the Cheney case, which was never mentioned below, namely, the occasional courtesy transmissions of an order for a retailer which is not part of the mainstream or their regular job.

    Now, on Portland — Northwest Portland Cement, it had been found and it’s recited in this Court’s opinion, that the company involved there furnished salesmen — had salesmen in the State taking orders from retailers and turning them over to retailers, actually soliciting.

    It’s not like ours, it’s not just the occasional transmission service to a retailer, but an act — regular active solicitation and the Court found that was entirely interstate commerce and this Court so found and it had this so find because it held that that corporation was subject to a net income tax which by his terms, didn’t apply unless the corporation was solely an interstate commerce.

    So I don’t — I don’t see how — you have Cheney up here with an awful lot of intrastate activity.

    Portland Cement with a little less, but still far more than this occasional thing we did and so I don’t see, first, how the point can be raised here, not having been raised below and — and secondly, how — how it can apply.

    William J. Brennan, Jr.:

    Mr. Willis —

    Charles E. Whittaker:

    (Voice Overlap) will find — go ahead.

    William J. Brennan, Jr.:

    I’m just wondering.

    Is this the affidavit of 28, 29 of Mr. Audino.

    This is all there is in the record regarding the activities of Mr. Audino’s district manager and makes him detail?

    Everett I. Willis:

    Well, then there is a — Mr. Justice Brennan, a — an affidavit on 27 of Mr. Clutter.

    William J. Brennan, Jr.:

    I see it, yes.

    This is also written constantly —

    Everett I. Willis:

    Yes, sir.

    William J. Brennan, Jr.:

    In this — are those — is that all there is in the record regarding Lilly’s activities in New Jersey?

    Everett I. Willis:

    Yes.

    The — the motion was granted on — on the complaint and on —

    William J. Brennan, Jr.:

    — and on those affidavits.

    Everett I. Willis:

    — on those affidavits and some affidavits, two affidavits were submitted in support of the motion which are on 23 and 24.

    William J. Brennan, Jr.:

    Well, I don’t find anything in the complaint, but just scanning it faithfully in your complaint, that says any — any of the — as any of the facts which appear on those two affidavits, which 27 —

    Everett I. Willis:

    No, I think the affidavits state the case.

    William J. Brennan, Jr.:

    So that Judge Scherer decided — granted the summary promotion — summary judgment —

    Everett I. Willis:

    Yes.

    William J. Brennan, Jr.:

    — on those affidavits including the affidavits of the defendants.

    Everett I. Willis:

    Yes, sir.

    Everett I. Willis:

    Now —

    Potter Stewart:

    You read just — before we leave this point, you read Judge Scherer’s —

    Everett I. Willis:

    Scherer —

    Potter Stewart:

    — opinion, part two of his opinion, appearing on pages 38 to 41 of the record as — as an implicit holding that this — this petitioner was engaged explicitly in interstate commerce?

    Everett I. Willis:

    Yes, sir.

    I think you use — you see that throughout the whole — whole assumption as —

    Felix Frankfurter:

    It isn’t — I have Justice Stewart’s (Inaudible) because look at the first paragraph.

    They did contend that it’s accepted from any requirement that apply in foreign corporation provisions of our corporation, because it is engaged entirely in interstate commerce.

    Everett I. Willis:

    Yes.

    Felix Frankfurter:

    Now, if he gone on and said despite that, but he doesn’t go on and say that, what does he say?

    Not all State regulations affecting foreign corporations constitute a burden upon interstate commerce, which is a very different sentence for the opening paragraph, isn’t it?

    Potter Stewart:

    I was troubled it.

    I didn’t know.

    Everett I. Willis:

    Well I think he’s — I think he’s saying that the fact that we’re engaged solely in interstate commerce doesn’t — doesn’t eliminate the State’s power.

    Felix Frankfurter:

    My difficulty is he’s saying that in the first paragraph, but not in the first sentence in the second paragraph.

    Just forget it.

    And then — then again what he refers to the recent trend and over on page 39, the trend and philosophy of the more recent cases has been in favor of upholding rather than striking down reasonable state regulations of foreign corporations, then he refers to Cement and that company (Inaudible).

    Everett I. Willis:

    Yes.

    But now, if I may say, he — of course, there’s been more bad analysis in the interstate commerce field in any place and I — I think we had a contribution toward here, because the — the Court confused two lines of cases.

    Now, these qualification statutes that never been one upheld going to interstate commerce.

    And they have been regarded as falling in an entirely different category from a statute which basically regulates a local matter even though it affects interstate commerce and of course nearly all state regulations have some effect on interstate commerce, but the first question is, what is it you’re regulating?

    And if you’re regulating health or safety or highways or keeping out disease cattle or adulterated food or something like that, then it is a local matter and if the effect on interstate commerce isn’t too burdensome or discriminatory, it’s alright.

    But where the State lays its heavy hand right on the — right to do interstate commerce which is the — which is the case here, there’s simply a basic lack of power.

    And in the Portland Cement case, which upheld in that income tax, they pointed out — the Court — this Court pointed out that the reason that tax was valid and the Connecticut tax involved in the earlier Spector case was invalid, was because the Spector case was on the right to do interstate commerce.

    And that being the incidence of the tax, you reach no question of — of burden or — or balancing of interests, it’s simply a departure from the State’s constitutional sphere.

    Now, the appellees argued here that the test of constitutionality is a balancing of the interest, the need of the State for the statute against the burden on interstate commerce.

    Now, we meet that because we think the need does not exist and that there is a definite burden, but our primary point is that there’s simply no power and you don’t reach that point.

    Now, taking it, however, because taking the appellees’ approach to it, the State really has no need to apply this statute to interstate commerce.

    This is a statute which dates from 1894 and what was its purpose?

    We don’t have to guess at it because the New Jersey courts have ruled on it.

    Everett I. Willis:

    The purpose of the statute was to obtain, require the agent for service in the State and obtain jurisdiction in suits against foreign corporations.

    Now, that wasn’t as easy in those days as it is now.

    There were still vestiges of theories about a corporation not existing outside its home state and not being able to be sued without its consent.

    But now, we live in the days of the International Shoe decision and the McGee decision and it’s perfectly simple to get jurisdiction over foreign corporations without any such statute.

    All it takes is minimum contacts within the bounds of fair play.

    Now, the appellees don’t — don’t assert that this statute is needed to get jurisdiction.

    They realized under New Jersey law, you can serve whoever you can find.

    If you can’t find anybody, you send a registered letter to the home office and you’re in.

    They’ve devised a new theory that this statute is nevertheless quite useful for the State in supplying information as to the company’s charter powers and possible tax liability and — and the lawfulness of its activities and so on.

    But now, there are basic difficulties of that argument.

    In the first place, it’s simply is not the purpose for which the statute was enacted.

    It’s just a — a usefulness that counsel have found in court and secondly, it is an argument that would’ve been just as applicable in the Pigg case and all the other cases that have stricken down these qualification statutes to supply the interstate commerce, because they all follow the same path.

    And so, there — there simply isn’t any need for the statute for the sole purpose for which it was enacted.

    Burden?

    Yes, there is a — a definite deterrent to interstate commerce in it, in several ways.

    Charles E. Whittaker:

    Well, wouldn’t it be for New Jersey to say whether or not, they ought to have it that is whether there’s a reason for it, is that for us here?

    Everett I. Willis:

    Well, Mr. Justice Whittaker, my — my primary position of course, is that you do not reach that, that this — this statute as applied to a company only in interstate commerce since it says, you cannot do your interstate commerce here, unless you do A, B and C and get a certificate from us telling you, you can’t.

    That ends it.

    Now, I —

    Charles E. Whittaker:

    If it’s — if it’s interstate commerce.

    Everett I. Willis:

    Yes, sir.

    Charles E. Whittaker:

    Sure.

    Everett I. Willis:

    Yes, sir.

    And I — I’m arguing the constitutional question that the court below decided at the moment.

    Now, so that if you take, however, I — I’m taking my opponent’s opposite theory that — that they — they elide the lack of power and say it’s balanced the interest as you do on a — in a statute limiting the weight and with trucks or the length of trains and so on.

    And I’m — I’m taking it that way and I’m saying that — that even in those, even in the statutes which regulate local matters and then the test is — is burdens on this and you do balance the interest, then what do you do?

    Then you got to find there’s a need of the State, because if other means are available, the Dean Milk case tells us they must be used.

    Now, so on — that’s the reason I’m developing then, even on their approach, there is no need and there is a burden as I started to say for these reasons, at least.

    Take litigation, broad is the minimum contacts rule is, it still is — is limited to the balance of fair play and there still are some suits that could not necessarily be brought against foreign corporations, if they do not consent.

    As for example, suits by nonresidents on — on causes of action arising outside the State.

    Everett I. Willis:

    Now, if we consent, if we appoint an agent to receive service from all commerce, we’ll be subject to those two, fair play or no fair play.

    This Court ruled that, Mr. Justice Holmes in the Mitchell Furniture case and New Jersey has — has so held.

    Now, take taxation.

    These qualification statutes can be made to pretext for taxation and New Jersey does it in a loud voice, because the tax regulation in New Jersey is cited by the appellees in their brief and the tax regulation says in black and white, “That holding a certificate of authority from New Jersey without more, without anything else, gives rise to taxable status.”

    Now, the appellees say, well that doesn’t make any difference on the facts here.

    We could tax this company anyway.

    Well, that’s another lawsuit and I won’t try — to try it here.

    I might say that the tax statute of New Jersey is clearly a tax on the privilege of doing business, so I don’t know how they get around the — the Spector case.

    But —

    Earl Warren:

    Mr. Willis, do you happen to know if there are other States that have this — these similar laws, I don’t —

    Everett I. Willis:

    A qualification statute, sir?

    Earl Warren:

    Such as this, yes.

    Everett I. Willis:

    Yes sir.

    They’re very — they’re very common.

    Earl Warren:

    Yes, yes.

    Everett I. Willis:

    They’re very common, but as I — I said at the outset, most of the statutes make it very clear that they only apply to an intrastate business and by an intrastate business, I mean something that constitutes commercial transactions that are economically distinct from the interstate sale.

    It’s not all state activity that constitutes a local business.

    Most of them — most of the statutes on their face make it clear they can find the intrastate and — when they don’t do it by statute, the — the courts have so held in 47 states, every state that is ruled on it and New Jersey until this case, so held.

    So there is — there is a — there is a deterrent effect on interstate commerce.

    A businessman deciding whether to go in and do business in New Jersey, he’s asked to stick his head in the news that says he sees staring him additional litigation, he wouldn’t otherwise be subject to, he sees a tax regulations, says he puts his head in that news.

    He bears the tax and that has a deterrent effect on interstate commerce and it’s not just New Jersey and it’s not just this appellant.

    If New Jersey succeeds in this effort, the green light is on and it’s not going unnoticed very long and it won’t be very long before every foreign corporation doing an interstate business will have 50 different and recurring sets of requirements to deal with.

    William J. Brennan, Jr.:

    Excuse me Mr. Willis, I — I don’t think I caught your answer before.

    I know there are — I guess every State has a qualification statute, does it not?

    Everett I. Willis:

    Yes, I think, sir.

    William J. Brennan, Jr.:

    But does every State have a provision of this New Jersey statute namely that you cannot maintain an action in its courts unless you qualified?

    Everett I. Willis:

    Well, I’m not — I don’t know that everyone but it — it’s not an uncommon provision —

    William J. Brennan, Jr.:

    That’s common to, was it?

    Everett I. Willis:

    — and — and of course that it’s come to this Court, that was Furst against Brewster, it was the Pigg case.

    It was Sioux Remedy against Cope, it was Dahnke-Walker against Bondurant and — and the state courts dismissed these suits for failure to qualify and this Court has always said, you cannot do it.

    Charles E. Whittaker:

    Well on Pigg case it say just what you’ve said as to why the actions to recover on a debt, to prevent windfall.

    Everett I. Willis:

    Well, some of them — some of the cases have involved a suit to recover the purchase price, Buck Stove against Vickers was a suit set aside, a — a fraudulent complaint — advance.

    Now this — this suit is a suit to protect the goodwill so this Court ruled in the (Inaudible) case, “Protect the goodwill incident to its interstate commerce.”

    Hugo L. Black:

    More than that, isn’t it?

    Everett I. Willis:

    Sir.

    Hugo L. Black:

    It’s far more than that, isn’t it?

    It’s a suit to fix the price at which retail goods will be sold in the State of New Jersey.

    Everett I. Willis:

    Well, the suit doesn’t — doesn’t set the price.

    They’re — they’re —

    Hugo L. Black:

    Yes, but that’s what it’s for, isn’t it?

    Everett I. Willis:

    Yes, sir.

    It’s to enforce the rights —

    Hugo L. Black:

    To reach the price of retail sales in the State of New Jersey.

    Everett I. Willis:

    Yes, sir.

    The — the suit is to — to enjoin sales below the prices that the appellant —

    Hugo L. Black:

    Retail sales —

    Everett I. Willis:

    Yes, sir.

    Hugo L. Black:

    — in the State of New Jersey, after your goods have been bought by —

    Everett I. Willis:

    Yes, sir.

    Hugo L. Black:

    — somebody else.

    Everett I. Willis:

    Yes, sir.

    And — and that now I might say that I think eight States have the same question.

    And it has been argued that because — that because the nature of the suit, it was different, everyone except New Jersey has held that that’s a part of — of the interstate commerce and it’s designed to protect the goodwill in interstate commerce.

    Hugo L. Black:

    Not much part of interstate commerce is it when a druggist is to sell a dime and brought the goods to a citizen who lives in the next block.

    Everett I. Willis:

    Well the Fair Trade, it was recognized — the Fair — the Fair — State Fair Trade Laws couldn’t become effective without a federal law and that’s why the United States Congress passed the McGuire Act.

    Felix Frankfurter:

    But if it’s — the New Jersey decision from which you are appealing here, doesn’t rest on the nature of the suit, does it?

    Everett I. Willis:

    No, sir.

    Felix Frankfurter:

    It doesn’t say that in is much that sales are made in this State, we would enforce this or they couldn’t in view of the McGuire Act, could they?

    That the case —

    Everett I. Willis:

    No, that’s right.

    Felix Frankfurter:

    — that would turn.

    Everett I. Willis:

    That’s right.

    Felix Frankfurter:

    — the case that would turn on the subject —

    Everett I. Willis:

    No, no.

    No, that’s alright.

    Felix Frankfurter:

    Unless you have the litigation.

    Everett I. Willis:

    No, sir.

    William J. Brennan, Jr.:

    Actually I suppose, if a wholesaler that failed to pay a bill and you tried to sue, under this decision, you couldn’t sue (Voice Overlap) —

    Everett I. Willis:

    That’s right.

    We can’t — we’re barred.

    We’re out, according to this decision.

    Charles E. Whittaker:

    But how did that square with Sioux Remedy and Bondurant, Dahnke-Walker, cases like that.

    Everett I. Willis:

    Well, it’s — it’s completely contrary to them.

    Those are — those follow the Pigg case.

    Charles E. Whittaker:

    And they’re on the basis as I understand it, that this action is one to recover upon debt and those there might be and — and (Inaudible) prevent opening reports to business unlawfully done in the State, this is not such a case.

    This is to recover on a debt.

    It’s all that we used in commerce, is not — is not that the basis of it?

    Everett I. Willis:

    Well, I don’t — I don’t think that the particular thing the suit was brought for was —

    Felix Frankfurter:

    Nothing to do with it.

    Everett I. Willis:

    No, it didn’t have anything to do with it.

    Hugo L. Black:

    Why doesn’t it?

    Everett I. Willis:

    Sir?

    Hugo L. Black:

    You’re talking about a State not having power, suppose — suppose this company did business in New Jersey and they made it against the law to sell goods that way.

    Wouldn’t the State of New Jersey have a right to say, you can’t and nobody else can file a suit to recover on such a judgment or on such claim?

    Everett I. Willis:

    I — I’m sorry.

    I just don’t — I don’t follow your question.

    Hugo L. Black:

    Suppose New Jersey made it against the law and report such a grievance in — in its — within its county or state, would it be barred by any constitutional provision from saying that Lilly or anyone else couldn’t — couldn’t sue to enforce a claim which was illegal?

    Everett I. Willis:

    You — you’re sending out that New Jersey has no fair trade law.

    Is that — yes —

    Hugo L. Black:

    Yes, but I’m —

    Everett I. Willis:

    Yes, they don’t have to have the law but once they have it, they can’t discriminate between their — let their local businesses sue and not let an interstate — a foreign corporation interstate commerce suit.

    Hugo L. Black:

    Well, that’s — that’s a different question, of course.

    But why do you say that this suit is only about interstate business?

    Everett I. Willis:

    Well, I — I say that —

    Hugo L. Black:

    I think it goes right into the heart of the state — states business.

    Everett I. Willis:

    Well, in the —

    Hugo L. Black:

    Maybe that doesn’t affect your — your constitutional question.

    Everett I. Willis:

    Well, I don’t think it does, but I — but in the — in Calvert Brothers against Schwegmann, when the Miller-Tydings Act had — had not specifically said that a fair trade suit could be brought against the so-called non-signer, this Court held that such an action would violate the antitrust laws and of course, it was said, “Oh, this is just retail sales.

    This is just intrastate commerce.”

    And the Court said, “No, this is a nationwide pattern, this is a part of the interstate commerce.

    This is part of a whole fabric.”

    And that — and that’s what all the fair trade cases in the state courts have said.

    Hugo L. Black:

    You have — as I understand it, you have to read two questions.

    Your — your — the first one is whether in fact, your Supreme Court adopting Judge Scherer’s opinion, properly found or whether that judgment of the Supreme Court for which this appeal has taken, rested on the proposition that you’re a foreign corporation, therefore, you must get a license from the State to go into its court and it is a matter of irrelevance that you’re a foreign corporation that does exclusively interstate business, whether that’s what the judgment rests on.

    Because that’s the decision of the Court and secondly, which is a very different question, whether the particular requirement relating to particular transactions allows the State to make the requirement, to submit — have you submit to its regulations with reference to the particular subject matter although you’re engaged exclusively in interstate commerce, namely, whether your situation calls within the Jensen case, which — the Union Brokerage case —

    Everett I. Willis:

    Oh, yes.

    Felix Frankfurter:

    — which concededly, the business was entirely foreign commerce, but this Court sustained that particular regulation because although exclusively engaged in foreign commerce, it had local incidences.

    And as to those local incidences, the particular regulations were relevant.

    And you have to establish —

    Everett I. Willis:

    Yes.

    Felix Frankfurter:

    — both though.

    Everett I. Willis:

    Well —

    Felix Frankfurter:

    Namely, that’s all — that the Court decided what you think it decided and secondly, assuming that it is an exclusively foreign commerce doing business corporation, nevertheless, it’s the kind of protection of local interest that it’s consonant with the Commerce Clause

    Everett I. Willis:

    Yes, sir.

    Now may I — may I comment on — on that and particularly on Union Brokerage against Jensen which you mentioned.

    In Union Brokerage against Jensen, the Brokerage Company did not itself, as this Court pointed out, have anything whatsoever to do with the importation or exportation of articles of commerce.

    It was rendering a personal service business, it had its office in Minnesota, 100% of its business, commercial transactions were carried out there.

    It was nothing new, California and Thompson had upheld —

    Felix Frankfurter:

    It was an adjunct to exclusively foreign business.

    Everett I. Willis:

    Well it had a — it had a relation but — but the company’s business was localized.

    Everett I. Willis:

    It was intrastate.

    Now, the Eli Lilly Company’s business, the only thing we do, our detailmen promote the product, promote our name, basically that’s advertising.

    Now, if an interstate business became intrastate, because the interstate seller advertised to the retail trade or — or to the consuming public, what would be left of interstate commerce?

    That’s not a local business.

    That — that’s not a — the — the sole purpose and significance of the promotion relates to the interstate sales.

    We’re not in the advertising business or the promotion business in New Jersey, just the drug business and it’s — it’s an interstate business, quite different from Union Brokerage.

    Felix Frankfurter:

    If they — if they’re required you — if New Jersey had to be a statute, say, you must disclose the name of your resident agent.

    You wouldn’t — you wouldn’t find it difficult — you wouldn’t oppose that, would you?

    Everett I. Willis:

    Well of course that —

    Felix Frankfurter:

    (Inaudible) that’s raised a different (Voice Overlap) —

    Everett I. Willis:

    That’s raised a different question —

    Felix Frankfurter:

    That’s related to a specific thing.

    Everett I. Willis:

    Yes.

    Because — because and the — and this statute says you shall not transact any business without first doing A, B, C and D.

    Hugo L. Black:

    As Justice Brennan says, you can’t sue in Jersey, a fellow who owes you a bill of goods which you delivered in New York.

    Everett I. Willis:

    We can’t — we couldn’t sue the fellow who — according to this decision, we couldn’t sue the fellow who has truck run over us and grant — destroyed the million dollars worth of trucks.

    We just — we’re out, but how — how do we carry on an interstate business that way?

    I — I think the — the courts never deviated from this principle and the business community has relied on it for half a century and it certainly ought not to be changed now without a showing of the most compelling need and — and none at all has been shown.

    Earl Warren:

    Mr. Lane.

    Samuel M. Lane:

    May it please the Court.

    May I inquire whether the Court is going to sit up to the half hour?

    Earl Warren:

    No.

    I think we’ll sit until — until 4:30.

    Samuel M. Lane:

    4:30?

    Earl Warren:

    Yes.

    Samuel M. Lane:

    Well then, without really undertaking my argument because it’s obviously difficult with only four minutes to go.

    Earl Warren:

    If I will —

    Samuel M. Lane:

    May I call your attention specifically to one or two places in the record just to leave a part with you over the evening.

    If the Court would please look at the transcript of record, first, I would suggest the top of page 36, the first sentence in the first full paragraph at the top of page 36, this comes in the first section of Judge Scherer’s opinion and he says there, despite the above recited facts, plaintiff insist that it is not doing business in New Jersey.

    Now, the plaintiff never insisted that it was not doing an intrastate business in New Jersey.

    Samuel M. Lane:

    And so when the judge says this, “He must imply to the finding that the plaintiff, the appellant here, was doing an intrastate business in New Jersey.”

    Then —

    Felix Frankfurter:

    It doesn’t say doing intrastate business —

    Samuel M. Lane:

    No, sir.

    But he —

    Felix Frankfurter:

    — it doesn’t say intrastate, it says every interstate commerce business does business in the State.

    Samuel M. Lane:

    I understand you, Mr. Justice Frankfurter, but what does he mean when he says, “The plaintiff insists that it is not doing business in New Jersey.”

    What he’s thinking about is the plaintiff insists that it is not doing intrastate business.

    It confesses it’s doing interstate business.

    Now, would you please look at the sentence that you —

    Felix Frankfurter:

    Well, I’ve read it and — and —

    Samuel M. Lane:

    Now, go on —

    Felix Frankfurter:

    — more reading doesn’t clarify the obscurity.

    Samuel M. Lane:

    Let me call your attention to the sentence that Your Honor read at the beginning of the .second paragraph, second section of page 38, the first sentence.

    Your Honor, I suggested that that was a holding by the lower court that the plaintiff was doing an exclusively interstate business.

    That’s not what he said.

    He says plaintiff contends that it is accepted from any requirements to comport with foreign corporation provisions of our corporation because it is engaged entirely in interstate business.

    It’s a contention —

    Felix Frankfurter:

    I understand that.

    Samuel M. Lane:

    — nor a finding —

    Felix Frankfurter:

    But the next sentence doesn’t — next sentence looks isn’t the same sentence.

    Samuel M. Lane:

    I just want to leave this thought in your mind.

    I think the way Judge Scherer looked at this was, he said to himself, “I will examine this now that my Section I from the proposition that it’s doing an intrastate business despite their denial that they are.”

    Now, having done that and having found that there’s enough intrastate activity so that they should comply with the qualification statute, he then goes on and says, “Let’s look at this business about they’re doing only interstate commerce, which they contend they’re doing and as to that, I find that the burden is not an unreasonable burden.”

    Felix Frankfurter:

    But do yourself, slip from doing an intrastate business to intrastate activity, which are different things —

    Samuel M. Lane:

    But let me come to that.

    Felix Frankfurter:

    — for constitutional purposes.

    Samuel M. Lane:

    But let me come back to what Mr. Justice Brennan said at the outset.

    What if we try this on?

    Two affidavits, that’s all.

    Samuel M. Lane:

    And those affidavits don’t say, “We are doing an exclusively interstate business”, they say, “This is what we do.”

    They don’t say whether it’s a fish or a fowl.

    And what Judge Scherer is saying is, “Thus, we don’t have to chop it into intrastate and interstate.”

    We’ve done that in this appeal here and I will try to tell you tomorrow why I think we have a perfect right to do it.

    We’ve done it for the purpose of emphasis and it’s not new.

    It comes right out of the facts that are in there.

    But those facts, that the question holds the New Jersey Judge are they engaged in such activities, hold it what you will, local activities that they should follow these qualification statutes and that the case should become — we cite by Union Brokerage against Jensen.

    Felix Frankfurter:

    But if you let me say so, you — you can’t call it what you will for purposes of an argument of constitutional law.

    Exclusively engaged in interstate commerce is one thing.

    And a business that is exclusively engaged in interstate commerce must necessarily be engaged in local activities.

    But a business that is also engaged in local commerce is another thing and if this business is a local commerce concern, then there’s no problem.

    Samuel M. Lane:

    No problem.

    And of course, it — it is and I’ll try to point that out here tomorrow that in addition to the interstate, there’s such a clear packing of local business promoting local sales from local wholesalers to local retailers to local consumers that, of course, they can be required to qualify.

    Felix Frankfurter:

    Then you don’t need a new trend if it (Voice Overlap) —

    Samuel M. Lane:

    No.

    Felix Frankfurter:

    — of that, you —

    Samuel M. Lane:

    No.

    Felix Frankfurter:

    — don’t need a new trend.

    Samuel M. Lane:

    That’s right.