Opinion · Appellate Division of the Supreme Court of the State of New York

Locker v. American Tobacco Co.

Locker v. Am. Tobacco Co., 106 N.Y.S. 115 (Appellate Division of the Supreme Court of the State of New York 1907)

Type
Opinion
Court
Appellate Division of the Supreme Court of the State of New York
Jurisdiction
New York
Date
1907-10-04
Topic
bankruptcy

Rich, J.: ; • This action is brought, as we have seen by the above complaint, to restrain what is alleged to be an unlawful combination between the defendants, in restraint of trade in tobacco, in Greater New York; and the only question before us is, whether the facts alleged in the complaint, as varied by the opening, establish a cause of action. Every allegation of fact contained in the pleading must be taken as admitted, in addition to which plaintiffs are entitled to the benefit of' every fair and reasonable presumption which may be justifiably implied therefrom. We may eliminate from consideration the statutes of the United States, referred to in the complaint, because they have no bearing upon the cause of action here presented. They relate only to matters in restraint of trade or commerce between or among the several States of the Union or with foreign nations, and_ for a violation of their provisions redress must be sought in the Federal courts, which alone have jurisdiction. The common law, and the particular statute claimed to liave been /violated by the defendants, viz., chapter 690 of the Laws' of 1899, commonly known as the Donnelly act,- control the' determination of *450the question whether the acts alleged support the contention that they are illegal and in restraint of trade.

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37 opinions
LOCKERv. AMERICAN TOBACCO CO.,121 App. Div. 443(1907)
106 N.Y.S. 115
JOHN A. LOCKER and ELMA LOCKER, Appellants,v. THE AMERICAN TOBACCO
COMPANY and Others, Respondents.
Appellate Division of the Supreme Court of New York, Second Department.
October 4, 1907.
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Frederick P. Bellamy, for the appellants.Delancey Nicoll[Junius ParkerandJohn D. Lindsaywith him on the brief], for the respondent American Tobacco Company.William N. Cohen[Samuel W. WeissandJonas F. Mannwith him on the brief], for the respondents Metropolitan Tobacco Company and others.
RICH, J.:
This action is brought, as we have seen by the above complaint, to restrain what is alleged to be an unlawful combination between the defendants, in restraint of trade in tobacco, in Greater New York; and the only question before us is, whether the facts alleged in the complaint, as varied by the opening, establish a cause of action. Every allegation of fact contained in the pleading must be taken as admitted, in addition to which plaintiffs are entitled to the benefit of every fair and reasonable presumption which may be justifiably implied therefrom. We may eliminate from consideration the statutes of the United States, referred to in the complaint, because they have no bearing upon the cause of action here presented. They relate only to matters in restraint of trade or commerce between or among the several States of the Union or with foreign nations, and for a violation of their provisions redress must be sought in the Federal courts, which alone have jurisdiction. The common law, and the particular statute claimed to have been violated by the defendants, viz., chapter 690 of the Laws of 1899, commonly known as the Donnelly act, control the determination ofPage 450the question whether the acts alleged support the contention that they are illegal and in restraint of trade. It will be observed that in this pleading there are no allegations that the incorporation of the defendant corporations was unlawful or for an illegal purpose; that their acquisition of or unity with other corporations was unlawful or in pursuance of any agreement to advance or control prices, discriminate between dealers or in any manner restrain or wrongfully control trade, or that it was for such purpose or pursuant to such an agreement that the American Tobacco Company made the Metropolitan Tobacco Company its sole sales agent in Greater New York. It is not alleged that any act of said corporations resulted in discrimination against, or in any manner wrongly or injuriously affected any jobber or dealer in said city other than the plaintiffs. It is not suggested that the relations of the defendant corporations with the other corporations and persons alleged are for any reason illegal or wrongful under the laws of the State of New Jersey, under which they are incorporated, and there being no averment that in its growth and development the American Tobacco Company has at any time entered into an unlawful or forbidden combination or merger, or become a party to an illegal arrangement or agreement, we must assume that its relations with its allied companies are innocent and lawful, and that such is its legal status upon the record before us is abundantly supported by the decisions of our courts. (Vinegar Companyv.Foehrenbach,148 N.Y. 58;Cameronv.N.Y. Mt. Vernon Water Co., 62 Hun, 269; affd.,133 N.Y. 336;Raffertyv.Buffalo City Gas Co.,37 App. Div. 618;Dittmanv.Distilling Co. of America,64 N.J. Eq. 537,544;TrentonPotteries Co. v.Oliphant, 58 id. 507, 524.)

This brings us to the consideration of the alleged agreement between the defendant corporations by which the Metropolitan was given by the American Tobacco Company and the corporations controlled by it the sole right and exclusive privilege of marketing, within Greater New York, all of their products. If by such agreement the American Company and the corporations controlled by it — assuming them to have been competitors — had constituted the Metropolitan Company their exclusive selling agent, with sufficient powers and rights to do away with and prevent competition among them, such arrangement might, within the decisions ofCummingsPage 451v.Union Blue Stone Co. (164 N.Y. 401) andCohenv.BerlinJones Envelope Co. (166 id. 292) have been properly held to have constituted an illegal combination in restraint of trade. No such facts are presented by the record; no such power or right was conferred upon the Metropolitan Company. The agreement alleged did not undertake to regulate, and does not by its terms in any manner relate to competition between the several corporations or persons connected with them, nor does it purport to establish sales prices, output or terms of sale, nor did it give to the Metropolitan Company any powers which the corporations themselves, united or severally, might not lawfully have exercised. The corporate defendants are not, and could not under any circumstances, be competitors; the one is a producer and manufacturer; the other a non-producing and non-manufacturing wholesale and retail dealer. The producer may lawfully sell or refuse to sell to any person; may establish the sales price and terms of sale of its products, and what it may lawfully do itself it may lawfully delegate to another, and the exercise of such delegated power by the other is as lawful as if exercised by the producer itself. If the producer has a monopoly of its products, the selling through a sales agent adds nothing to it. If it has not such monopoly, the fact of selling its products through a sales agent is the mere marketing thereof, and does not create a monopoly. If, therefore, vice existed in this agreement or arrangement, it must be predicated on its results, namely, the refusal by the Metropolitan Company, through the exercise of its power as a sales agent, with the knowledge of its principal, to sell the products of the latter to the plaintiffs to their inconvenience and damage. The complaint evidently proceeds upon the theory that the plaintiffs are vested with the legal right to buy and deal in the merchandise manufactured and controlled by the defendants, and to be supplied at all times, as the demands of their customers require, upon complying with the conditions attached to the sale of such products, and paying therefor, with such amount thereof, as their business demands, and that a refusal to sell to them is a wrongful and actionable invasion of such right; but we are unable to discover in this record anything warranting or sustaining such theory. It is the well-settled law of this State that the refusal to maintain trade relations with any individual is an inherent right which every personPage 452may exercise lawfully, for reasons he deems sufficient or for no reasons whatever, and it is immaterial whether such refusal is based upon reason or is the result of mere caprice, prejudice or malice. It is a part of the liberty of action which the Constitutions, State and Federal, guarantee to the citizen. It is not within the power of the courts to compel an owner of property to sell or part with his title to it, without his consent and against his wishes, to any particular person.

In all the cases to which our attention has been directed by the commendable industry of the learned counsel for plaintiffs, where the plaintiff is an individual, he has been a party to the contract which he attacked and from which his cause of action arose, with one exception; but conceding that without being a party or privy to the sales agreement between the corporation defendants the plaintiffs might maintain this action, and that such agreement was invalid, the power of the courts would yet be limited to the declaration of its invalidity. They could not grant the relief sought and compel such corporations to sell their products to the plaintiffs. Having the legal right to refuse to longer sell their products to the plaintiffs, and having exercised that right in a lawful manner, the motives of the defendants leading to their action are not open to question. (Phelpsv.Nowlen,72 N.Y. 39;Kiffv.Youmans, 86 id. 324;Loughv.Outerbridge, 143 id. 271, 282.) With the exceptions ofPark Sons Co. v.National Druggists' Assn. (175 N.Y. 1) andStrausv.American Pub Assn. (177 id. 473), the principles declared in the large number of authorities cited by the appellants to sustain the propositions they advance are not applicable to the facts presented in the case under consideration. InCummingsv.Union Blue Stone Co. (supra) and similar cases cited, the contracts challenged were, for apparent and sufficient reasons, held illegal and void as being in restraint of trade; but the reasons forming the basis of such decisions do not exist in the case at bar. The contract challenged in this action contains no element rendering it void, either as being in restraint of trade or as creating a monopoly; and being free from the vices condemned by the cases referred to, it is not affected or controlled by their decisions.UnitedStatesv.E.C. Knight Co. (156 U.S. 1) and similar cases were actions brought by the Attorney-General,Page 453under the provisions of the Federal statutes, the provisions of which controlled their disposition.Montaguev.Lowry(115 Fed. Rep. 27) and kindred cases were brought under the provisions of section 7 of the Federal Anti-Trust Act (26 U.S. Stat. at Large, 210) by persons injured in business through acts declared unlawful by such statute, to recover the threefold damages by such section authorized.Curranv.Galen(152 N.Y. 33) and similar cases cited from the Massachusetts and New Jersey reports, were questions involving the rights of company members of labor organizations to agree with others not to employ or to retain in their employ persons refusing to connect themselves with organized labor, which agreement in this State was held to be unlawful. The principles involved in such cases have no application in the case at bar.Peoplev.North River SugarRefining Co. (121 N.Y. 582) andPeoplev.Milk Exchange(145 id. 267) were actions to dissolve corporations for acts committed in violation of law.Matter of Davies(168 N.Y. 89) was a proceeding by the Attorney-General, under the Donnelly Act, to procure the information therein provided for.Peoplev.Sheldon(139 N.Y. 251) andPeoplev.Duke(19 Misc. Rep. 292;44 N.Y. Supp. 336) were criminal cases involving the question of the indictability of the acts on which their prosecution was based. In neither thePark Sons Co. norStrauscase is there any suggestion that a manufacturer or producer does not possess the absolute right of dominion and control over his own products, or that he may not unite with other manufacturers or producers to exercise their legal rights in such manner as may be beneficial to their common interests, and not for an unlawful purpose. In his dissenting opinion in thePark Sons Co. case Judge MARTIN said that the action was not brought to compel the manufacturer against his will or disposition to sell his goods to the plaintiff; and Judge BARTLETT in theStrauscase says: "The refusal to maintain trade relations with a given individual is an inherent right which every person in business may exercise, for reasons he deems sufficient or for no reason whatever;" and although this extract is contained in a dissenting opinion, its correctness is not challenged or questioned by the other members of the court. ThePark Sons Co. case upheld a trade arrangement between manufacturers and dealers in proprietary medicines throughoutPage 454the United States, because of the fact that it involved only the exercise of this inherent right. In theStrauscase the combination was between independent proprietors, representing ninety per cent of the book trade business in the United States on the one hand, and many independent booksellers and jobbers on the other, and provided for excluding from the business of selling books all persons refusing to be bound by the rules of the association. In the case at bar there is no allegation of any combination of competitors, but that the sole parties to the arrangement were a manufacturing corporation and producer and a sales or distributing agent; and while it is alleged that the manufacturing corporation controls the business of other manufacturers and producers, in the absence of averment to the contrary it must be presumed that such control was lawful and for lawful purposes. No agreement is alleged which could result in anything that either might not lawfully do singly, and the only interference with the business of others arising from the carrying out of such agreement was such as would have been the result of the exercise of the unquestionable right of either to refuse to sell its goods to any dealer. It is not alleged in the case at bar, as was established in theStrauscase, that sales prices were not fixed by the American Tobacco Company, or that either defendant undertakes to interfere in any manner with or control the prices or terms upon which the products of other producers controlled by them are sold. Further, the element of threats, intimidation and blacklisting, present in theStrauscase, were all withdrawn from the case at bar, and are not before us for consideration. These facts materially distinguish theStrauscase, and divest it of any controlling effect as to the disposition of the case under consideration.

While the plaintiffs allege an injury resulting from the acts of the defendants in refusing longer to sell them their products with which they had theretofore been furnished, such injury and attendant damages flow directly from the breach of the alleged contract with the American Tobacco Company to furnish such products at all times, and adequate and complete damages are recoverable therefor in an action at law, which excludes equitable cognizance of such facts as a sole cause of action. We concur with the learned trial justice that whatever vice may exist in the conditions and results presented by the complaint does not arise from the averred facts,Page 455and that the pleading does not state facts sufficient to constitute a cause of action, and was for that reason properly dismissed.

The judgment must be affirmed, with costs.

WOODWARD, JENKS and HOOKER, JJ., concurred; GAYNOR, J., concurred in separate opinion.
GAYNOR, J. (concurring):
While there are allegations in the complaint of many corporations, the only defendants are the corporations The American Tobacco Company and The Metropolitan Tobacco Company, and three officers thereof. Out of the masses of confused and useless verbiage of the complaint, it is possible with painful diligence to pick out allegations that the defendant The American Tobacco Company is associated with and controls a large number of corporations which, like it, are engaged in the manufacture and sale of the products of leaf tobacco; that these associated corporations control and market more than 90 per cent. of such products in this country and in the City of New York; that no dealer or jobber in the tobacco business can successfully do business without obtaining and handling the products of the said associated corporations; that the defendant The Metropolitan Tobacco Company is not a manufacturer of tobacco, but is appointed by the said associated corporations their sole agent to sell their products in the City of New York, and is acting as such, and that such products can be purchased of it alone by dealers in tobacco products in the said city, the said corporations refusing to sell to them except through their said agent; and that the said agent, "with the knowledge and consent of the other defendants", refuses to sell any of the said products to the plaintiffs, who are jobbers and dealers in tobacco products in the said city. There is no allegation that any of the associated corporations is a party to such refusal, except the defendant The American Tobacco Company. Now, The American Tobacco Company, like any corporation or person, may lawfully refuse to sell its goods to the plaintiffs or to any one, for any reason or no reason — at all events unless it has such a monopoly that sufficient tobacco goods can be got of no one else, which is not alleged. If, however, it should combine with other corporations or persons to do so, that would be a combination in restraint of trade and unlawful (StrausPage 456v.American Pub. Assn.,177 N.Y. 473). The trouble with this complaint is that there is no allegation of such a combination. There is a mass of allegations of evidence (which a pleading should never contain) and other matter, which the diligent pleader may have meant in their sum total or effect for such an allegation, but they do not eke it out, try how you will. The allegation that The American Tobacco Company controls all of the other associated corporations does not dispense with the necessity of such an allegation. Though it may control them, that which is alleged as its act is not their act. Each of them is a legal entity and must in law act for itself. If The American Tobacco Company holds a majority of the stock of each of the other associated companies, and in that way,i.e., by the voting power of a majority of stock, controls each corporation, they are still separate legal entities which must act for themselves. That one corporation or person owns all or a majority of the stock of several corporations does not legally combine them. Each is still a separate entity and subject to the law against combination in restraint of trade, or any illegal combination. There can be no combination of such corporations except by the act or acquiescence of each, the very same as in the case of corporations without such a dominant stockholder common to all. The notion that several corporations with such a common dominant stockholder are thereby legally united, and free to act together in restraint of trade, is a false one. This complaint is lacking in any allegation of a combination of the corporations alleged, to refuse to sell goods to the plaintiffs. There must be such an allegation; and then it could be made out by evidence of the separate act of each, or the authorized act of the defendant The American Tobacco Company, or of the defendant The Metropolitan Tobacco Company, as the representative of all. The trouble is the lack of an allegation under which such evidence would be admissible.

The judgment must be affirmed.

Judgment affirmed, with costs.Page 457