Hudson Distributors, Inc. v. Eli Lilly & Company – Oral Argument – April 29, 1964

Media for Hudson Distributors, Inc. v. Eli Lilly & Company

Audio Transcription for Oral Argument – April 30, 1964 in Hudson Distributors, Inc. v. Eli Lilly & Company

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Earl Warren:

Number 489, Hudson Distributors, Inc., versus the Upjohn Company.

Mr. Krotinger.

Myron N. Krotinger:

If the Court please?

This case arises out of the declaration of unconstitutionality by the Ohio Supreme Court of the nonsigner clause of the 1936 Ohio Fair Trade Law.

In January of 1958, the Supreme Court of the United — rather, of the State of Ohio, in the Bargain Fair case, declared the nonsigner clause as null and void on the ground that it was a deprivation of due process of law, it was an unlawful delegation of legislative authority, it was unrelated to the police power of the State.

The Court, however, left unprepared the doctrine that a contract, a resale price maintenance contract, directly between a manufacturer or other authorized person and a vendor, would continue to be lawful.

Hudson established its business in the City of Cleveland, downtown Cleveland in the summer of 1958.

Hudson is on the business of buying and selling trademark and other commodities at a price which renders it a profit, however, below the fair traded prices.

Hudson acquires all of its merchandise from a wholesaler in the State of Michigan, on the other side of Lake Erie, so that, for example, Upjohn products would first be bought by the wholesaler, then resold to Hudson, then resold to the consuming public.

In the summer of 1959, the State of Ohio passed a new fair trade law, June 29th, 1959, to take effect on October 22nd, 1959 and on July 31st, 1959, Hudson got a letter from Upjohn calling attention to the new law and stating that Upjohn was in light of its passage, calling attention of contracts that had been made under it and Hudson came to our firm and asked what was the situation and so we checked this new statute.

In this new statute, Your Honors, defines a contract as a contract arising either by agreement or by the act of the parties.

And the act of the parties which brings this contract into effect is the acquisition of a trademarked item with notice.

Well, if the Court please, the — we’ve never seen anything quite like that in any other fair trade law.

We subsequently found something like it in the Virginia statute but prior to that time, there was nothing like it.

And then we looked at that statute a little further and we found it did other odd things.

It, for example, provided that a proprietor might also fair trade at the wholesale level, although it competed with its wholesalers, provided that the proprietor did not sell at a price different or other than the wholesaler.

We also found that there are various provisions that a buyer could be required to sell only to persons with whom it made a resale price agreement and demand to the buyer that it too get a comparable contract from its sub-vendee.

We found another provision that the seller could agree to bind itself on making a sale to — that it would demand of the next buyer that it, too, observed the resale price maintenance agreement and make a contract of a sub-vendee.

We also found a provision for the first time in any State fair trade law that it was a full defense to the action, that on the removal of a trademark, this would be a defense to the resale price maintenance contract.

John M. Harlan II:

Is the full scope of this statute been authoritatively construed by the Ohio courts?

Myron N. Krotinger:

Mr. Justice Harlan, we raised these constitutional questions.

The questions must have been passed upon in accordance with the Ohio statute which requires the appellate courts to pass upon all questions raised either by assignments of their — or by brief.

What — what the Supreme Court of Ohio did was to apply the premise in a minority — in a minority ruling, in a 3-to-4 ruling —

John M. Harlan II:

I beg your pardon, excuse me.

Myron N. Krotinger:

Sorry, Mr. Justice.

What the Supreme Court of Ohio did in its minority ruling, a 3-to-4 decision, was to apply the premise that such a statute achieved validity and authenticity solely as a matter of state law that the — the Court also noted the completely novel nature of the statute, that for the first time, the conception of proprietary interest was established.

In other words, that a trademark holder or trade name owner must, as the statute says, retain a proprietary interest in his product and that upon giving notice, a contract eventually, the doctrine of implied contract, therefore, once the Supreme Court of Ohio started with the premise that this was wholly a matter of state law, it must necessarily, by the statute of Ohio, have overruled our contentions and I respectfully submit, Your Honor, that the judgment which was put on the books by the minority of the Court could not have been arrived at unless the very clear arguments as to conflict with the Supremacy Clause of the United States Constitution have been overruled by the minority.

So, not to leave your question, Your Honor, as to whether there had been a construction, my answer is that there was an overruling of the contentions that we’ve made concerning the statute.

So, Your Honor, then we looked a little further and we found that the only comparable statute, length and breadth that we could find was the Harris Bill, the first Harris Bill of 1958 which had been proposed in the Congress of the United States and where the Ohio statute followed most of the provisions of the Harris Act in the conception of proprietary interest, in the conception of notice, in the conception of the abnegation of the McKesson & Robbins Doctrine, in the conception that a good merchandizing practice at all levels of commerce required the overruling of Section 5 (a) (5) of the McGuire Act and in the conception that a cooperative enforcement to avoid intra-brand competition was most desirable because I think that some of the literature has shown that following the decision of this Court in McKesson & Robbins in 1956, wholesalers were discounting goods in commerce, particularly to change which thereby achieved a competitive advantage over the individual retailer.

And so, with these propositions, we advised the client that we should obtain a declaratory judgment action in accordance with a time-honored practice that in a situation of this kind where injunctions might be obtained pursuant to the words of the statute, the client might well be put out of business before it constitutionality could be determined, this action was so filed.

Myron N. Krotinger:

The action specified both state grounds of unconstitutionality, federal grounds of unconstitutionality and Your Honors, in the Spring in 1958, on the second amended petition, followed by an answer in cross-petition by Upjohn in which enforcement was sought and where the Upjohn answer admitted and the policy and the practice of establishing and enforcing fair trade, the matter came on by motion for immediate trial into a courtroom with Upjohn having filed a motion for summary judgment, accompanied by 18 affidavits and Judge McNeil in that courtroom said, “Now, gentlemen, we have had one declaration of unconstitutionality by Judge Gusweiler in Cincinnati, we’ve had the Bargain Fair case.

My suggestion is that you’ll sever this litigation so that you determine constitutionality on the petition and the responsive pleadings and leave the cross-petition for one side” and, may it please the Court, we also have another peculiar quirk in Ohio practice whereby we have no mandatory counterclaim procedure whatsoever.

There is nothing like Federal Rule 13 of the FRCP.

In fact, the Ohio statute say that at any time prior to trial, a defendant may move to either discontinue his cross-petition or cross-claim when there is no difference under the Ohio practice, he may, thereby, achieve a separate docketing if the trial court so directs.

He may, upon direction of the trial court, thereby avoid special supplementary service or he may even start the case later on as a separate proceeding altogether.

Perhaps, a very old-fashioned sort of practice rule, but one firmly embedded in the practice of the State of Ohio.

And so, Your Honors, the parties in this proceeding proceeded accordingly.

We did just that and we proceeded to go to trial upon a stipulation of evidence, and this stipulation of evidence included affidavits filed by the appellant, a deposition filed by the local manager of Upjohn, counter-affidavits as to whether or not the Upjohn method of wholesaling disclosed actual competition between the wholesalers and Upjohn and in fact, Your Honors, the evidence disclosed the del credere agency pursuant to which many wholesalers in the State of Ohio and Northern Ohio did actually go after the business of retailers with whom Upjohn sold.

And we took the position back in 1958 and continuously down to the present time that within the teaching of Masonite and the more recent pronouncements of this Honorable Court, the del credere agency clearly can establish a competitive relationship between a manufacturer and an agent.

Now, within the clear intent of the parties, Your Honors, every constitutional issue was thrown wide open.

Therefore, the briefs — the briefs in — from the Court of Common Pleas on raised the issue of whether, within the meaning of 5 (a) (2) of the McGuire Act, this kind of contract could be a “contract or agreement” within the sense which the history of the McGuire Act taught us, in other words, that 0it had to be in the nature of something consensual, something consensual.

As this Court held in Schwegmann, contracts and agreements follow a congressional intendment, not to be decided by the States.

We checked very carefully the history of that statute and we found that there isn’t a word in the legislative history whereby the term “contract and agreement” might be given a different meaning.

In fact, in the section-by-section analysis of the statute, Section 5 (a) (2) is described as referring solely to contracts.

The amendment of 5 (a) (2) describes a permissible vertical contract manufacturer to wholesaler to retailer, they’re not in so many words, but whereby the fair trade contract might require the contractee to enter into another contract.

The section-by-section analysis further made perfectly plain and clear that the reversal of Schwegmann by the Congress took place in terms of Section 5 (a) (3), dealing with nonsigner clauses, nonsigners.

In other words, that where a policy of the State provided that a remedy of unfair competition might be given equally against both signers and nonsigners who are not parties to the agreement.

Such policy might be enforced.

Well, now, in the State of Ohio, we no longer have signers and nonsigners.

Signers and — we didn’t have those at all.

We only had contractors and we wondered about that, and so we got the reading about the Harris Bill and we found that as the State Supreme Courts continued to knock out the nonsigner clauses.

On the suggestion of Professor MacLachlan in the December 1957 Vanderbilt Law Review on a new method of fair trade, Representative Harris had introduced this bill whereby a mechanism would be established, whereby, upon giving notice of a proprietary interest, everyone would now be bound.

There wouldn’t be — there just wouldn’t be anymore nonsigner problem.

And this proprietary interest, by shifting the basis of fair trading throughout the United States would create a method, the rationale and a new basis of interstate commerce for being better able to have an orderly marketing of goods within the fair trade laws free of rulings like Vessel, like the — like the Master of Discount House of Washington D.C. cases which held that goods might be shipped from a nonsigner state into — rather, into an non fair trade area into a fair trade area, but if the contract were closed outside the fair trade area, then the discounting by means of catalogue shipments was perfectly good.

It would also give a rationale basis for overcoming the ruling of this Court in McKesson & Robbins.

It would also give a basis for the cooperative enforcement of fair trade where, if this Court please, any cooperative enforcement of price maintenance in commerce would be suspect and interdicted as a boycott, none of which the McGuire Act permits, but which was sought by the proponents of fair trade.

All this was in the Ohio statute.

This was argued, Your Honors, in the Court of Common Pleas.

These issues were raised.

These issues were carried up to the Court of Appeals.

Myron N. Krotinger:

The judge in the Court of Common Pleas agreed with us.

He thought there was an unlawful delegation of the Ohio Constitution.

The Court of Appeals of Cuyahoga County reversed.

And in its extended ruling, specifically mentioned that there were no federal issues with which it found difficulty.

Then, we went to the Supreme Court of the State of Ohio and I might add, Your Honors, that we filed a — an application for rehearing with the Court of Appeals of Cuyahoga County in which we raised federal issues.

And the Upjohn brief, a certified copy of which has been filed with this Court, in opposition to our petition for rehearing in the Court of Appeals of Cuyahoga County on the ground, perhaps, that Court had really now encompassed the federal issues.

We were told by Upjohn that our position was ludicrous and in fact, the Court of Appeals had considered such issues.

Then, we filed our motion to certify to the Supreme Court of Ohio on the grounds of great and general public interest —

(Inaudible)

Myron N. Krotinger:

Upjohn, Your Honor.

(Inaudible)

Myron N. Krotinger:

No, Upjohn’s brief to the Court of Appeals.

We then filed our motion to certify.

Our motion to certify included a broad-gauged statement of federal issues as well as some detail of the federal issues now before the Court and Upjohn joined in our motion to certify on the ground that all these issues should be disposed of by the Supreme Court of the State of Ohio and Your Honors, our briefs in the Supreme Court raised these issues.

Raised the issues which have appeared in our jurisdictional statement and which have appeared in our briefs before this Honorable Court.

Now, under the law of Ohio, where as stated the law requires the appellate court to pass on all errors and briefs, the minority of the Supreme Court of — of our State sustained the statute in a 4-to-3 decision.

In other words, we won the battle and lost the war in the Supreme Court of Ohio and upon our notice to certify, rather our motion, our notice of appeal to this Court, we asked the Clerk, please, to send to the Clerk of the Supreme Court of the United States all documents upon which the Supreme Court of Ohio had passed, all briefs before the Supreme Court of Ohio were lodged in this Court by the Clerk of the Supreme Court of Ohio and these briefs show all of these contentions.

In other words, we first contend, Your Honors, that there is no contract within the meaning of Section 5 (a) (2) created by the State of Ohio.

In other words, the congressional history of the McGuire Act must show some sort of consensual agreement.

It is not enough that on the facts of this case, Upjohn gave Hudson notice of a third party’s contract.

(Inaudible)

Myron N. Krotinger:

Paragraph 2.

(Inaudible)

Myron N. Krotinger:

5 (a) (3)?

Well, 5 (a) (3), Your Honor, is the nonsigner clause.

Yes, that’s right.

Myron N. Krotinger:

Right.

Now, the nonsigner clause was meant to accommodate the nonsigner provisions of state statutes.

(Inaudible)

Myron N. Krotinger:

No, Your Honor.

Myron N. Krotinger:

It does so but on the theory that this was a direct contract and there is no state policy which makes other than contractual obligations effective, direct — direct contract.

(Inaudible)

Myron N. Krotinger:

Yes.

(Inaudible)

Myron N. Krotinger:

Yes, Your Honor.

(Inaudible)

Myron N. Krotinger:

It does not apply it.

In other words, the basic policy of the statute and may I read from the legislative history, in a colloquy, it’s the record at page 226, where Mr. Sweeny is talking to Mr. James Gorrell, the legislative exponent.

“Apparently, from your House Bill 318, you have attempted to get around the provision or to write in the law a corrective feature whereby notice to anyone by mail or otherwise or perhaps markings on the package would be sufficient to bind a nonsigner and the very acceptance of his product for sale by him would be deemed to be a contract with the manufacturer.

Am I correct on that?

” Mr. Gorrell: “That’s our theory.

” Mr. Sweeny: “One or two observations, then there’s no need for a formal written contract with any distributor now.

” Mr. Gorrell: “Not under this law, true.

” Mr. Sweeny: “And one further thought arising from my ignorance, under what theory of law would you bind the third party to a contract where he had no communication whatsoever with the manufacturer?

Perhaps, some of your implied warranty features are along that theory?

” Mr. Gorrell: “That is correct, sir.

For example, a recent Supreme Court decisions in our State which have, in effect, knocked out the old idea of privity of contract, we are suing on a breach of warranty where it is said you had no direct contractual dealings.

” The Court has said that is a pretty adequate, the doctrine has refused to apply it.

I think the same thing would apply here.

This Court knows the implied warranty theory is a theory of tort recovery.

It’s tort recovery, a means of facilitating recovery by an injured party.

In fact, Mr. Gorrell also recognized that if this weren’t recognized in contract theory, there would be a constitutional amendment required in the State of Ohio.

And at page 269 of legislative record, and Mr. Robinson, one of the sponsors, said to Mr. Gorrell, “If the Supreme Court would deny fair trade, as you set it forth here, you have the feeling or is it your opinion, we’re dealing with opinions this afternoon, in your opinion, there is only one other answer and that would be to have a fair trade amendment of the Constitution.

” Mr. Gorrell, “That’s our feeling.

I say, it’s not only my feeling but it is the canvassed opinion of lawyers far better than I am across the country.

” In other words, Your Honors, this is the new problem of fair trade arising out of the — the declaration of unconstitutionality by now 23 or 24 state courts around the United States of their respective nonsigner clauses.

Now —

Potter Stewart:

(Voice Overlap) their — under their State Constitution?

Myron N. Krotinger:

Yes, Your Honor.

Now, the basic problem that now comes to all of us is here, we now have a fundamental shift in the basis and policy of fair trade law around the United States, fundamental shift.

Myron N. Krotinger:

The Miller-Tydings Act proceeded on the theory of contract or agreement.

In the ruling by this Court in Schwegmann, the Court discussed the requirements of contract or agreement.

In the 1952 McGuire Act, the Congress of the United States discussed contract or agreement, it never — never discussed proprietary interest or another.

Not until the Harris Bill and the new and novel theory of 1958 and Professor MacLachlan’s suggestion was this new basic notion of a new method of handling a fair trade broached before the Congress and the American public.

I’m reserving 10 minutes of my time.

May I answer your question, Mr. Justice Harlan?

John M. Harlan II:

(Inaudible)

Ralph M. Carson:

Mr. Chief —

Earl Warren:

Mr. Carson.

Ralph M. Carson:

Mr. Chief Justice, may it please the Court.

In presenting this case on behalf of the appellee, Upjohn Company, I beg to call the Court’s attention to the parallel and, yet, slightly different position of these two appellees in 489 and 490 where Mr. Krotinger will argue for appellant in each and Mr. Willis will follow me in speaking for the appellee, Lilly.

These cases are essentially similar and yet, there are differences in details which may be important on the two appeals.

I refer for a definition of what I’ve just said and a definition of the jurisdictional point, Mr. Krotinger has just talked about, to the record and may I say in passing that what I’ve heard in the appellant’s presentation is not very familiar to me from the record.

At page 380 of the large brown record in the Upjohn case, we have the statement of the Court of Appeals of Cuyahoga County.

In the two cases, Lilly and Upjohn, in the fifth line of Justice Skeel’s opinion, both cases involved some of the facts and with the questions to be determined by this Court the same in each case, the appeals will be considered together.

The assignment of error is identical in both cases.

Now, what is that assignment?

You’ve heard Mr. Krotinger paint at large the numerous constitutional points he raised.

The quotation by the Ohio court is “For its assignment of error, defendant-appellant asserts that the Court of Common Pleas, the trial court, of Cuyahoga County erred in declaring, I interpolate the statute, to be in violation of the Constitution of the State of Ohio.

Now, I, therefore, deem it our duty as appellees to present to Your Honors the facts of the record bearing on the settled doctrine of this Court, that the Court will not act under Section — of the section of the code where the judgment of the state court to be reviewed lacks the requisite finality and that this Court has jurisdiction or takes jurisdiction only of federal questions passed on by the highest court of the State being reviewed.

I will spend relatively little of my short time on the substance dealing and passing only with the so-called McKesson & Robins point which affects Upjohn peculiarly.

John M. Harlan II:

Mr. Carson.

Ralph M. Carson:

Yes, Your Honor?

John M. Harlan II:

At page (Inaudible) this case and —

Ralph M. Carson:

Yes.

John M. Harlan II:

(Inaudible)

Ralph M. Carson:

I’d be glad to do so.

It’s been remanded by the Supreme Court of Ohio to the trial court for trial of the remaining issues which were issues severed on May 2, 1960 in the trial court.

I intended to come to that later and, on which, the so-called McKesson & Robbins point, previously reserved by stipulation, will be tried on which other defenses of Mr. Krotinger’s client will be tried and any defenses he adds by amendment, our right to an injunction and damages will be tried.

Therefore, we say, and I’m sketching it very rapidly, that we lack finality here, not that we, as he implies, lack of confidence in the merits, Mr. Willis will deal with them, but it’s fair to say that the degree of finality which Your Honors have sketched in the Republic National Gas case and others, and they’re all in our brief, is not here at all.

Ralph M. Carson:

The answer to your question, sir, is back on the trial court on the severed questions.

John M. Harlan II:

(Inaudible)

Ralph M. Carson:

Yes, Your Honor.

John M. Harlan II:

(Inaudible)

Ralph M. Carson:

That’s an exact statement with two possible additions that, in Mr. Krotinger’s favor, I should add to be entirely candid.

There is a possible inferential decision by the Supreme Court of Ohio to the effect that the so-called notice point in Mr. Krotinger’s appeal is consistent with the Federal Constitution.

That’s a matter of construction of the Ohio statute within the framework of the congressional exemptions in the McGuire Act and the Miller-Tydings Act.

He says that’s been construed in our favor against him by the Ohio Supreme Court.

It’s not to be found in the language but that’s an inferential construction, as they are told.

Nothing else, I think, comes out of the Ohio Supreme Court except the final determination as to the Ohio Constitution and its impact on this new statute of 1959.

Your Honors will appreciate how that is so.

If you gather from Mr. Krotinger’s history that in Ohio, the prior nonsigner statute and the Bargain Fair case so-called of the decision of the Ohio Supreme Court, declaring the prior statute unconstitutional as an undue delegation of legislative power, how those preempted the entire foreground of the — of the litigation.

Therefore, it became important to the parties, as I gather from the record, and I was not in the Ohio litigation but I’m confined by the record as I take it the Court is, as I gather, it was important to the parties to have a determination of the Ohio constitutional point.

Now, since that part is raised by the question, may I at once go to that and refer Your Honors to the place in this comprehensive record where the Supreme Court dealt with it.

It’s at page 413, and I skip any further references to the prior decisions below.

Your Honors will find, beginning at 414, the long opinion of the Supreme Court starting with the case I mentioned, the Bargain Fair case, where they declared that the prior statute in Ohio was unconstitutional.

It goes on to discuss the Ohio Constitution.

He goes on to quote on page 416, from the new 1959 statute, the definition of the proprietor’s proprietary interest in the trademarked commodity which is to be fair traded and then he goes on, on page 417, to say this brings us to a consideration of the second — of the new concepts incorporated in the new Act.

He quotes the definition of contract in the new Act.

Then, he says, at page 417, “This provision is the core of the Act, the definition of contract.

” Now, at that point, Mr. Krotinger has said and he’s appealed the legislative history somewhere else, that is, in Congress of another bill which he says is the progenitor of this Ohio statute.

Mr. Krotinger has said that those words mean a consensual contract.

“Contract means any agreement, written or verbal or arising from the acts of the parties,” says the Ohio statute and Mr. Krotinger says that the — the permissive federal legislation contract or agreement is limited to something consensual.

The Ohio court has not had an opportunity to pass on that with respect to the federal problem, although it has construed the Ohio statute.

Arthur J. Goldberg:

Mr. Carson.

Ralph M. Carson:

Yes, sir?

Yes, Your Honor?

Arthur J. Goldberg:

(Inaudible)

Ralph M. Carson:

Yes.

Arthur J. Goldberg:

(Inaudible)

Ralph M. Carson:

Yes.

Arthur J. Goldberg:

(Inaudible)

Ralph M. Carson:

Yes.

Arthur J. Goldberg:

(Inaudible)

Ralph M. Carson:

Yes.

Arthur J. Goldberg:

(Inaudible)

Ralph M. Carson:

Yes.

Arthur J. Goldberg:

(Inaudible)

Ralph M. Carson:

Yes.

Arthur J. Goldberg:

(Inaudible)

Ralph M. Carson:

Well, I can only say that it was raised.

You will find no discussion of it in the Court of Appeals and in the Supreme Court, where Mr. Krotinger says and has filed the briefs that it was also raised, you would find the only reference on page 424, Your Honor, after discussing the Ohio constitutional attack on the Ohio statute, in the third line of 424, the presiding — the prevailing group and the Court says, “None of the constitutional attacks on this new Act have merit.”

Arthur J. Goldberg:

(Inaudible)

Ralph M. Carson:

I assume that.

Arthur J. Goldberg:

(Inaudible)

Ralph M. Carson:

Yes.

Arthur J. Goldberg:

(Inaudible)

Ralph M. Carson:

You could say.

Arthur J. Goldberg:

(Inaudible)

Ralph M. Carson:

You — you —

Arthur J. Goldberg:

(Inaudible) about the state law and federal law?

Ralph M. Carson:

I think he could, Your Honor, on two grounds.

I think this Court ought to hear the Ohio Supreme Court’s ruling on the federal statutory point and above all, in relation to that, this — this Court, I think, would consider itself bound by what the Ohio court said its statute meant.

Now, we must bear in mind that on this record, in the — both cases, I think, certainly in my case, there are written contracts.

The record is replete with the fact that Upjohn entered into written fair trade price maintenance contract as permitted by the statute with numerous pharmacists.

It has 70,000 retail outlets.

This appellant did not sign a contract but he admits that he had notice, and the notice is in the record at page 4, of the existence of the contracts and of the price maintenance requirement.

Now, what is the effect of those facts on the construction of the Ohio statute?

I think Your Honors would want to hear from the Ohio Supreme Court as to what they thought, in regard to Mr. Krotinger’s contention, applied to the Ohio statute because they will construe that statute.

Byron R. White:

Well, let’s assume for the moment — let’s assume for the moment that the Ohio court — that these points had been raised —

Ralph M. Carson:

Yes, sir.

Byron R. White:

— before the Ohio court and they just ignored them.

Ralph M. Carson:

Yes, sir.

Byron R. White:

You would still —

Ralph M. Carson:

I would, sir.

I think I would.

Byron R. White:

— think that we ought to send it back to the Ohio court.

Ralph M. Carson:

I think — I think, Your Honors, that — that case, we want to send it back.

Byron R. White:

But the real question is, this — if they were raised in the — in the Ohio Supreme Court and urged there in briefs or otherwise or it — or it consists with the rule and then the Court said none of the constitutional attack have merit, what about that?

Ralph M. Carson:

I believe that refers to the statement on the preceding page, 423, which begins with at the top of the page, “Two other matters are urged as to the constitutionality of this legislation,” and he goes on “First, delegation of power —

Byron R. White:

I see.

Ralph M. Carson:

— Second is final contention is sale of his own property.”

Byron R. White:

But the — were — were the other federal points raised? Do you designate the points on appeal or — or just brief them (Voice Overlap)?

Ralph M. Carson:

You — you certify questions and you brief them both.

Byron R. White:

And were the federal questions in that?

Ralph M. Carson:

I — yes, I believe they were, Your Honor, but I believe also, and I have not had the time and opportunity since receiving the reply brief to check the Ohio practice but I am told the Ohio rules quoted by my adversary, with dots or asterisks at that point, leave it in the discretion of the Ohio court whether to rule on these points that have been raised.

Now —

Byron R. White:

Because they were not raised in the lower court —

Ralph M. Carson:

Yes.

Byron R. White:

— is that it?

Ralph M. Carson:

Or because that might be so.

I can’t conceive what would move their discretion.

They may have something to tribute.

Byron R. White:

You — you agree that they were presented to the —

Ralph M. Carson:

They where in the briefs.

Byron R. White:

— Supreme Court of Ohio.

Ralph M. Carson:

They were in the briefs.

Byron R. White:

They were presented.

Ralph M. Carson:

Yes.

Tom C. Clark:

They were presented in the Court of Appeals, also in the complaint of (Voice Overlap) —

Ralph M. Carson:

Well, I’ve read, Your Honor, what the Court of Appeals said as to the certification —

Tom C. Clark:

It may now —

Ralph M. Carson:

Limited —

Tom C. Clark:

(Voice Overlap) —

Ralph M. Carson:

Sir?

Tom C. Clark:

— the rehearing petition of the (Voice Overlap) —

Ralph M. Carson:

Yes, the rehearing petition did — did mention.

Now —

Potter Stewart:

The Court of Appeals opinion at page 394 talks about the McGuire Act.

Ralph M. Carson:

394?

Potter Stewart:

In the record, unless I’m reading another thing here.

Ralph M. Carson:

Yes, the Court of Appeals opinion discusses the McGuire Act.

This is a part of legislative history.

I don’t know whether it purports to rule on Mr. Krotinger’s contention.

I do want to make, since I’m confusing my argument to answer the Court’s questions, I do want to make a clear exception to what I’ve been saying.

What Mr. Krotinger calls to the McKesson & Robbins point that is the contention that we sold to wholesalers, with whom we were in competition at the resale level, was expressly carved out of the case by a stipulation which I can best state to the Court by reading it from Mr. Krotinger’s brief at page 23 of the appellants brief and this is referred to in our brief.

(Inaudible)

Ralph M. Carson:

10?

(Inaudible)

Ralph M. Carson:

Well, I’ll refer to page 10 of our brief which gives the substance of the stipulation as quoted by him from the jurisdictional statement.

“Both Upjohn and Lilly filed answers and so on in order to narrow and thereby, to expedite the determination of the issues before the Court.

The parties agreed the cases should be heard by the Court of Common Pleas on the issues raised by plaintiff-appellants’ petitions for declaratory judgments and defendant-appellees entered thereto.

The litigation was, therefore, narrowed to the basic issue of the constitutionality of the new fair trade law.

” And we say that means the Ohio constitutionality.

“The parties reserved for future determination,” and thus relates to the McKesson & Robbins point, the parties reserved for future determination.

The issue is raised by defendant-appellees’ cross-petitions and plaintiff-appellants replies.

Now, the essential thing, Your Honors, in the chronology here is that this McKesson & Robbins point came later in the litigation and was, therefore, carved out in the reserved and to refer to the chronology, Your Honors might want to look at the record.

I refer to the docket entries at page — at record, page 367 and — to 370.

Now, these show that, as shown at page — the docket entries are into 367 to 370 and the amended answer of Hudson in which it, for the first time, raised what I call the McKesson & Robbins issue, was filed April 25, 1960, as shown at page 368 of the docket and the substance containing the McKesson & Robbins defense is at pages 27 and 29 or rather 29 of this record, so that when we talk about what went to the Ohio appellate courts, we must carve that out.

And when you come to analyze out what went to those courts, I think you will find that they survived only for determination inferentially this so-called notice point in the analysis of the McGuire Act.

Ralph M. Carson:

Now, Your Honors might want to look in that connection, page 23 of Mr. Krotinger’s brief and I apologize for the confusion of the record, but that’s what we have brought here.

Page 23, at the middle of the page, the opinion of the Supreme Court did not discuss the permissible scope of either state fair trade legislation or fair trade contract under the federal enabling legislation.

At page 27, the controlling of the minority opinion of the Supreme Court never adverted to any issues concerning federal state relationships in price fixing by private persons in interstate commerce.

William O. Douglas:

(Inaudible) were present?

Ralph M. Carson:

I believe that they were adverted to in a vague way in appellant’s briefs, yes, sir.

Tom C. Clark:

Would —

Ralph M. Carson:

But not the McKesson & Robbins point that I’ve just mentioned as an exception.

Excuse me, Justice Clark?

Tom C. Clark:

Would that be in paragraph on 424 wherein they say the — the same passed on any constitutional questions because they don’t have enough votes to — in the opinion.

I think (Inaudible)

Ralph M. Carson:

Because they don’t have enough votes, so this refers to a limitation in the Ohio Constitution that — which has been accepted by a ruling in this Court cited in one of the amicus briefs that it requires six members of the Court —

Tom C. Clark:

As I understand it —

Ralph M. Carson:

— to declare.

Tom C. Clark:

— I don’t think that’s the reason why they did not win.

Ralph M. Carson:

It could well be, sir.

Tom C. Clark:

Otherwise, it wouldn’t — why would they put that in here?

Ralph M. Carson:

Well, perhaps, just to explain how the 4-to-3 vote operates for the purposes of the public reading of this decision.

John M. Harlan II:

That has nothing to do with the Federal Constitution.

Ralph M. Carson:

No, sir.

It has nothing to do with the Federal Constitution but it — it might well be, sir.

John M. Harlan II:

(Voice Overlap) Ohio Constitution.

Ralph M. Carson:

An Ohio Constitution.

William O. Douglas:

Well, it might be unconstitutional because it didn’t comply with the McGuire Act.

Ralph M. Carson:

The Supreme Court didn’t think so and didn’t say so.

William O. Douglas:

Well, I —

Ralph M. Carson:

The Supreme Court denied the appeal in which Mr. Krotinger says this point was raised and all I say, Your Honor, is the Supreme Court did not discuss the points that the Court’s questions have been raising.

And I refer to the matter of certificate from the Court would — which this Court frequently, at requests, as to what was actually decided below but we don’t have that here.

We have only the jurisdictional statement which is excessively (Inaudible)

Hugo L. Black:

Is it your argument that the case did not pass on the question of (Inaudible)

Ralph M. Carson:

Yes, sir, I believe so.

Hugo L. Black:

Why isn’t that —

Ralph M. Carson:

Because —

Hugo L. Black:

— objection —

Ralph M. Carson:

Sir?

Hugo L. Black:

— if it’s raised?

Ralph M. Carson:

If it’s raised?

I believe this Court, according to its practice, has required an expression of the — of the opinion of the highest court on all questions raised before it will review them.

Certainly, I would say that was so as to the meaning of the Ohio statute.

Now, I’m less positive as to federal constitutional questions.

But I do make it clear, Your Honor, again, I trust that the so-called McKesson & Robbins question, the competition with the wholesaler at the retail level was reserved like other matters in the case by express stipulation —

Byron R. White:

That was never —

Ralph M. Carson:

— for trial in the cases remanded.

Byron R. White:

— that was never raised in the Supreme Court.

Ralph M. Carson:

Never raised in the Supreme Court.

Tom C. Clark:

But the —

Ralph M. Carson:

Now —

Tom C. Clark:

— the notice was, isn’t it?

Ralph M. Carson:

The notice was.

Now, I’m sorry this is so laborious, Your Honors, but Mr. Krotinger has favored us all by filing with the Court copies of all the briefs below and he has said that we accepted or implied that we accepted the argument that he made that the McKesson & Robbins case was up on appeal.

Now, I have here the — two of the briefs of the appellee, Upjohn.

One in the Court of Common Pleas at page 28, where we say the McKesson & Robbins argument is completely out of place and irrelevant to the case at bar, so we ask the Court not to discuss it.

The same — the same argument is a statement that’s made by us in the briefs in the Supreme Court and in the trial court.

Now —

Byron R. White:

Why would he even have to say that in the Supreme Court when he hasn’t urged the point on the — upon (Inaudible)?

Ralph M. Carson:

Because Mr. Krotinger urged it.

Byron R. White:

So he did raise it.

Ralph M. Carson:

He did raise it, yes.

Byron R. White:

He raised it in the Supreme Court.

Ralph M. Carson:

Yes, exactly.

Byron R. White:

He presented it to the Court.

Ralph M. Carson:

And we call attention, again, the fact, as admitted by his own briefs, that there was a stipulation taking out and reserving for future trial this issue with others, pleading damages and injunction on the remand which the courts have now ordered.

Now, I had hoped to leave the Court in a more orderly way through what I apologize for as a very confused record but I trust, I’ve said enough with the references in the brief to show that there is — here, no finality of the kind requisite for this Court’s jurisdiction under the statute and that almost none of the constitutional questions asserted here, except perhaps one, the no – so called notice question has been passed on even inferentially by the Ohio court.

Now, Mr. Krotinger said orally that there was something about a del credere agency in this case and he claimed that there — thus, involved, I think he said, horizontal price fixing.

The del credere agency, which existed in a very few cases, in the case of Upjohn, contained no provisions which authorized the distributor or required it to make a similar agreement with other distributors.

Section 6 of the del credere agency agreement, which is in this record, excuse me, Section 6, which is at page 107 specifically says, “The agent shall not control or attempt to control prices.

” The difficulty one has in presenting this cause in a partial record is emphasized by the fact that I’m informed, but is not in the record, that the del credere agencies have all been terminated as of the date after the first proceedings below, that is, as of December 1961 but you won’t find that in this record because this point, with other points, is going back on the remand from the Supreme Court.

Now, may I then pass to the allegation, which is also in Mr. Krotinger’s brief, that due process of law, federal due process of law — could I have their — their reply brief?

Federal —

John M. Harlan II:

(Inaudible)

Ralph M. Carson:

— federal —

John M. Harlan II:

(Inaudible)

Ralph M. Carson:

Yes, sir?

John M. Harlan II:

(Inaudible) jurisdiction had — excuse me.

If the Supreme Court of Ohio (Inaudible) comes to the question that’s been raised, what was the purpose of the remand?

Ralph M. Carson:

The purpose of the remand was for trial on the remaining issues including the reserved, the severed cross-petition of the defendant, Upjohn and the amended reply of Hudson thereto, also for injunctive relief and damages.

The case is still on trial.

Nothing has been done, as stated in our brief, pending the hearing by this Court but it’s now in the lower courts of Ohio.

Do I answer Your Honor’s question?

John M. Harlan II:

Well, I think so (Voice Overlap) —

Ralph M. Carson:

You asked what was the purpose of the remand?

John M. Harlan II:

What I’m trying to get at is, if this case is ripe for decision up here, I don’t see what the remand is for if the Supreme Court (Inaudible)

Ralph M. Carson:

Well, I — my —

John M. Harlan II:

— purpose of the remand.

Ralph M. Carson:

My submission had been that this is not ripe for decision here.

My submission had been that we are now in the middle of an Ohio litigation in which the constitutionality of the statute had been decided and the remaining issues, including any new ones that Mr. Krotinger asserts, are to go back to trial.

John M. Harlan II:

Right, but this is all part of your briefs and this appeared very clearly (Inaudible) the State made.

Ralph M. Carson:

Well, I — I must admit that the record is not clear and the allegations concerning the record are not clear.

Now, as to remand, may I refer Your Honor — Your Honors to the action of the Court of Appeals which did remand the cause at page — at page 412.

It remanded to the Court of Common Pleas of the Cuyahoga County to carry this judgment into effect and for execution and for further proceedings.

At the end of the Court of — in the Supreme Court’s opinion, you’ll find simply an affirmance.

Ralph M. Carson:

Now, as to the due process point, I’m going to find their brief, as to the possibility of federal due process having been passed on by the Supreme Court, I find that in their reply brief — in their brief in the Supreme Court at page 30, they say only State of Ohio due process is involved and they discuss only that form of due process.

And the reason they do show, they’re showing it elsewhere in their briefs because in Ohio, they were confronted with this Court’s decision in the Old Dearborn case that upheld the enforcement of a state non — nonsigner law.

Therefore, they discussed, in Ohio, only state due process.

Going to the notice point, which approaches the substance and which I feel will be further developed by Mr. — Mr. Willis.

I merely mentioned that we have in this case, as I’ve said before, series of express contracts by the appellee, Upjohn, which as to the appellant is conveyed to him by notice.

Now, the Court in — the Supreme Court of Ohio says that this is a valid application or protection of trademarked property, which is all that’s involved here, where the producers are in competition as they are here.

And it construes the Ohio statute, we say, authoritatively in that regard.

We’re not confined to notice.

We have the concept of implied contract discussed in the Supreme Court and as to Mr. Krotinger’s suggestion that this is a mere fecal mask, I happened to have taken with me Jenks’ Old History of English Law from which it’s clear that implied contract is one of the oldest hits of the common law jurisdiction in Anglo-American law.

I think that we should say, therefore, that on the implied contract construction which this Ohio legislature and Supreme Court have (Inaudible), we are here as regard to the McGuire Act with full authority of Congress which enacted that Act to deal with this special situation.

I apologize, Mr. Chief Justice, for the hasty manner which I’ve been obliged to present a complicated record.

Earl Warren:

No problem.

Mr. Krotinger, I think you have very few moments to —

Myron N. Krotinger:

Your Honor —

Earl Warren:

— pose.

Myron N. Krotinger:

— if the Court please, I would like to lay to rest this ghost that the issues were not raised.

I am reading from the brief of defendant-appellant in opposition to petition for rehearing in the Court of Appeals and on page 2, a certified copy of this brief is in this Court.

None of the plans raised by the applicant for reconsideration in the instant case are moot.

All were treated far more extensively in the original briefs submitted to the Court.

All were argued orally by counsel for the applicant at the hearing before this Court.

Applicant’s first contention was at the Court, does not appear to have considered the Supremacy Clause of the Constitution, which applicant asserts, requires the observance by this Court of the McGuire Act.

Applicant’s argument does not include a single authority not brought to the Court’s attention initially.

Starting on page 1 and continuing on page 22 of applicant’s initial answer brief in the Upjohn Company case, counsel for the applicant opened up the very same attack he is now asserting.

More importantly, the majority, in its opinion, clearly considered the question raised by federal statutes, so that applicant’s assertion that this Court missed the “impact of the Supremacy Clause of the Federal Constitution” boarders on a ludicrous.

This Court in its majority opinion discussed the evolution of federal statutory law and the significant federal decisions regarding fair trade and paying state in detail.

The Court properly concluded that the implied contract provision of the new Act did not offend constitutional provisions.

I might add, I omitted one sentence in which the Court’s attention was also pointed out, that in the initial answer brief in the Eli Lilly case in the Court of Appeals, 12 pages are devoted to development of the same point, namely, the Supremacy Clause.

We then go to our brief in support of motion to certify where the broad gauge second issue is stated in accordance with sound Ohio practice to “Is the Ohio fair trade law inclusive violative of the Constitution of the United States or of any law of the United States?”

The Court of Appeals for Cuyahoga County answered, “No.”

Plaintiff-appellant contends the answer should be yes.

Myron N. Krotinger:

Page 18 of our brief, brave questions exists as to whether the new Ohio Fair Trade Act violates the Supremacy Clause of the United States Constitution by exceeding the bounds set for fair trade legislation by the McGuire Act.

Federal enabling legislation requires there be an actual contract under state fair trade laws not mere contracts by notice and so we go on.

Upjohn joined in this motion to certify upon these grounds.

We have, as an appendix to our reply brief in this Court, Your Honor, we have added the table of contents of each of our briefs in each of the courts.

We also, again, respectfully direct the Court’s attention to Section 2505.21 of the Ohio Code which commands appeals taken on questions of law shall be heard upon assignments of (Inaudible) in the clause or set out in the briefs of the appellant before hearing.

The suggestion of Mr. Carson that we have omitted part of the statute, which would leave such passage discretionary with the Court, is I don’t think well-taken.

I have 2505.21 with sentence which was left out and as to which, afterwards, were out.

In its decision, the reviewing court shall specify such reassigned errors as it finds or shown by the record and the reasons for the decision, this has been construed as referring to reversal, was settled Ohio appellate law, these were contrary.