ELI LILLY & CO. v. SAV-ON-DRUGS

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Argument of Everett I. Willis

Chief Justice Earl Warren: Number 203, Eli Lilly and Company, Appellant, versus Sav-On-Drugs, Incorporated, et al.

Mr. Willis.

Mr. 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.

Justice 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?

Mr. 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.

Justice 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?

Mr. Everett I. Willis: Well, I say that the --

Justice 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?

Mr. 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 --

Justice Felix Frankfurter: Added something, I quite understand it.

That's not a new argument.

That's a new case.

Mr. Everett I. Willis: Well --

Justice Felix Frankfurter: One thing to say, the -- what if -- how are these case tried as they say it were?

Mr. Everett I. Willis: Well there was a -- a --

Justice Felix Frankfurter: Leading, what comes (Voice Overlap) --

Mr. Everett I. Willis: Yes, sir.

Summary judgment was granted, dismissing the complaint.

Justice Felix Frankfurter: Yes.

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

Mr. Everett I. Willis: Well it's the (Voice Overlap) no, the -- the appellee Sav-On-Drugs, yes.

Justice 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?

Mr. 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.

Justice Felix Frankfurter: Did you -- did you explicitly in term say, your entirely engagement interstate commerce?

And -- and --

Mr. Everett I. Willis: Yes, sir.

Justice 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 --

Justice 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 --

Mr. Everett I. Willis: Yes.

Justice Charles E. Whittaker: -- it is.

Chief Justice 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?

Mr. Everett I. Willis: None, none.

These men, they're trained pharmacists and they go around to the physicians and hospitals and pharmacists and can --

Chief Justice Earl Warren: And those are consumers, aren't they --

Mr. Everett I. Willis: No.

Chief Justice Earl Warren: -- that's -- that's what I would call consumers --

Mr. Everett I. Willis: Well, they're -- they're --

Chief Justice Earl Warren: Have your -- have your (Voice Overlap) --

Mr. Everett I. Willis: Well that -- the doctors -- the doctors prescribed them and the hospitals use them, the pharmacists sell them.

Chief Justice Earl Warren: Yes.

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

Whether -- whether they are not --

Mr. Everett I. Willis: No, sick people are -- sick people are, yes.

Chief Justice 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?

Mr. 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.

Chief Justice Earl Warren: They go beyond that?

Mr. Everett I. Willis: Well as I mentioned, they -- they do distribute some advertising literature, promotional literature.

Chief Justice Earl Warren: So they go beyond that?

Mr. 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.

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.

Justice William J. Brennan: Mr. Willis --

Justice Charles E. Whittaker: (Voice Overlap) will find -- go ahead.

Justice William J. Brennan: 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?

Mr. Everett I. Willis: Well, then there is a -- Mr. Justice Brennan, a -- an affidavit on 27 of Mr. Clutter.

Justice William J. Brennan: I see it, yes.

This is also written constantly --

Mr. Everett I. Willis: Yes, sir.

Justice William J. Brennan: In this -- are those -- is that all there is in the record regarding Lilly's activities in New Jersey?

Mr. Everett I. Willis: Yes.

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

Justice William J. Brennan: -- and on those affidavits.

Mr. Everett I. Willis: -- on those affidavits and some affidavits, two affidavits were submitted in support of the motion which are on 23 and 24.

Justice William J. Brennan: 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 --

Mr. Everett I. Willis: No, I think the affidavits state the case.

Justice William J. Brennan: So that Judge Scherer decided -- granted the summary promotion -- summary judgment --

Mr. Everett I. Willis: Yes.

Justice William J. Brennan: -- on those affidavits including the affidavits of the defendants.

Mr. Everett I. Willis: Yes, sir.

Yes, sir.

Now --

Justice Potter Stewart: You read just -- before we leave this point, you read Judge Scherer's --

Mr. Everett I. Willis: Scherer --

Justice 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?

Mr. Everett I. Willis: Yes, sir.

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

Justice 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.

Mr. Everett I. Willis: Yes.

Justice 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?

Justice Potter Stewart: I was troubled it.

I didn't know.

Mr. 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.

Justice 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).

Mr. 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.

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.

Justice 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?

Mr. 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 --

Justice Charles E. Whittaker: If it's -- if it's interstate commerce.

Mr. Everett I. Willis: Yes, sir.

Justice Charles E. Whittaker: Sure.

Mr. 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.

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 --

Chief Justice Earl Warren: Mr. Willis, do you happen to know if there are other States that have this -- these similar laws, I don't --

Mr. Everett I. Willis: A qualification statute, sir?

Chief Justice Earl Warren: Such as this, yes.

Mr. Everett I. Willis: Yes sir.

They're very -- they're very common.

Chief Justice Earl Warren: Yes, yes.

Mr. 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.

Justice William J. Brennan: 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?

Mr. Everett I. Willis: Yes, I think, sir.

Justice William J. Brennan: 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?

Mr. Everett I. Willis: Well, I'm not -- I don't know that everyone but it -- it's not an uncommon provision --

Justice William J. Brennan: That's common to, was it?

Mr. 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.

Justice 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.

Mr. 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."

Justice Hugo L. Black: More than that, isn't it?

Mr. Everett I. Willis: Sir.

Justice 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.

Mr. Everett I. Willis: Well, the suit doesn't -- doesn't set the price.

They're -- they're --

Justice Hugo L. Black: Yes, but that's what it's for, isn't it?

Mr. Everett I. Willis: Yes, sir.

It's to enforce the rights --

Justice Hugo L. Black: To reach the price of retail sales in the State of New Jersey.

Mr. Everett I. Willis: Yes, sir.

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

Justice Hugo L. Black: Retail sales --

Mr. Everett I. Willis: Yes, sir.

Justice Hugo L. Black: -- in the State of New Jersey, after your goods have been bought by --

Mr. Everett I. Willis: Yes, sir.

Justice Hugo L. Black: -- somebody else.

Mr. 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.

Justice 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.

Mr. 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.

Justice 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?

Mr. Everett I. Willis: No, sir.

Justice 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 --

Mr. Everett I. Willis: No, that's right.

Justice Felix Frankfurter: -- that would turn.

Mr. Everett I. Willis: That's right.

Justice Felix Frankfurter: -- the case that would turn on the subject --

Mr. Everett I. Willis: No, no.

No, that's alright.

Justice Felix Frankfurter: Unless you have the litigation.

Mr. Everett I. Willis: No, sir.

Justice William J. Brennan: 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) --

Mr. Everett I. Willis: That's right.

We can't -- we're barred.

We're out, according to this decision.

Justice Charles E. Whittaker: But how did that square with Sioux Remedy and Bondurant, Dahnke-Walker, cases like that.

Mr. Everett I. Willis: Well, it's -- it's completely contrary to them.

Those are -- those follow the Pigg case.

Justice 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?

Mr. Everett I. Willis: Well, I don't -- I don't think that the particular thing the suit was brought for was --

Justice Felix Frankfurter: Nothing to do with it.

Mr. Everett I. Willis: No, it didn't have anything to do with it.

Justice Hugo L. Black: Why doesn't it?

Mr. Everett I. Willis: Sir?

Justice 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?

Mr. Everett I. Willis: I -- I'm sorry.

I just don't -- I don't follow your question.

Justice 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?

Mr. Everett I. Willis: You -- you're sending out that New Jersey has no fair trade law.

Is that -- yes --

Justice Hugo L. Black: Yes, but I'm --

Mr. 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.

Justice 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?

Mr. Everett I. Willis: Well, I -- I say that --

Justice Hugo L. Black: I think it goes right into the heart of the state -- states business.

Mr. Everett I. Willis: Well, in the --

Justice Hugo L. Black: Maybe that doesn't affect your -- your constitutional question.

Mr. 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.

Justice 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 --

Mr. Everett I. Willis: Oh, yes.

Justice 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 --

Mr. Everett I. Willis: Yes.

Justice Felix Frankfurter: -- both though.

Mr. Everett I. Willis: Well --

Justice 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

Mr. 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 --

Justice Felix Frankfurter: It was an adjunct to exclusively foreign business.

Mr. Everett I. Willis: Well it had a -- it had a relation but -- but the company's business was localized.

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.

Justice 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?

Mr. Everett I. Willis: Well of course that --

Justice Felix Frankfurter: (Inaudible) that's raised a different (Voice Overlap) --

Mr. Everett I. Willis: That's raised a different question --

Justice Felix Frankfurter: That's related to a specific thing.

Mr. 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.

Justice 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.

Mr. 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.

Chief Justice Earl Warren: Mr. Lane.

Argument of Samuel M. Lane

Mr. Samuel M. Lane: May it please the Court.

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

Chief Justice Earl Warren: No.

I think we'll sit until -- until 4:30.

Mr. Samuel M. Lane: 4:30?

Chief Justice Earl Warren: Yes.

Mr. Samuel M. Lane: Well then, without really undertaking my argument because it's obviously difficult with only four minutes to go.

Chief Justice Earl Warren: If I will --

Mr. 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.

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 --

Justice Felix Frankfurter: It doesn't say doing intrastate business --

Mr. Samuel M. Lane: No, sir.

But he --

Justice Felix Frankfurter: -- it doesn't say intrastate, it says every interstate commerce business does business in the State.

Mr. 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.

Mr. Samuel M. Lane: Now, would you please look at the sentence that you --

Justice Felix Frankfurter: Well, I've read it and -- and --

Mr. Samuel M. Lane: Now, go on --

Justice Felix Frankfurter: -- more reading doesn't clarify the obscurity.

Mr. 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 --

Justice Felix Frankfurter: I understand that.

Mr. Samuel M. Lane: -- nor a finding --

Justice Felix Frankfurter: But the next sentence doesn't -- next sentence looks isn't the same sentence.

Mr. 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."

Justice Felix Frankfurter: But do yourself, slip from doing an intrastate business to intrastate activity, which are different things --

Mr. Samuel M. Lane: But let me come to that.

Justice Felix Frankfurter: -- for constitutional purposes.

Mr. 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.

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.

Justice 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.

Mr. 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.

Justice Felix Frankfurter: Then you don't need a new trend if it (Voice Overlap) --

Mr. Samuel M. Lane: No.

Justice Felix Frankfurter: -- of that, you --

Mr. Samuel M. Lane: No.

Justice Felix Frankfurter: -- don't need a new trend.

Mr. Samuel M. Lane: That's right.

Print this transcript Transcript: 

Argument of Samuel M. Lane

Chief Justice Earl Warren: -- Eli Lilly & Company, Appellant, verus Sav-On-Drugs Incorporated, et al.

Mr. Lane.

Mr. Samuel M. Lane: Thank you.

Mr. Chief Justice, may it please the Court.

The case is so important, as it seems to me, from a consideration of the Commerce Clause and my time is so short in any event, plus the fact that I am sharing it with the Assistant Attorney General of New Jersey.

And I shall try to go directly to the point instead of reviewing what I think is the trend of the Court or let's say the difference in approach to such prominence as is today, compared with 1887, when you had Robbins against Shelby County and cases of that area.

I may say, however, parenthetically in the beginning, that I think that those old cases like Robbins against Shelby County and Crutcher against Kentucky and not so old, but respectively old case, International Textbook against Pigg, all were cases in which the State was attempting to set up a barrier, was attempting to discriminate against out-of-state commerce and industry.

And I will suggest to you and I think Mr. Satz will make more plain view that that is not at all the object of the registration statute that we're concerned with here.

Now, I would like to divide my argument into two general subdivisions.

The first has to do with the applicability of this statute.

If you'll look at Lilly's business in New Jersey, as local commerce separate from interstate commerce and having covered that, then I would like to go to consider the applicability of the statute to Lilly's activities in the State, if you consider that those activities are wholly in interstate commerce.

Justice Felix Frankfurter: Well, can't you save time by -- by submitting to the fact that this Court has to accept the fact that your court has applied this statute to Lilly.

That's not -- that question isn't open here.

Mr. Samuel M. Lane: Yes, the -- the Court has, but I would suggest that there are two reasons why it could and I think yesterday's discussion brought out that the lower court didn't make a claim why it did.

I would like to show two reasons, two general reasons why I think it could.

I'll, first of all, no matter which branch of the case is --

Justice Felix Frankfurter: Well, it's not that it could, but what it did.

Mr. Samuel M. Lane: What it did, yes, Your Honor.

Now, it seems to me, that for both branches of this discussion, you have to know what, in fact, Lilly does.

Well, this is what it does.

It's engaged in the manufacturing sale of pharmaceuticals.

It sells its pharmaceuticals in interstate commerce from Indianapolis, its headquarters to local wholesalers in New Jersey.

In the State of New Jersey, the Company maintains a head office in New -- New Jersey, where it has a sales manager and a secretary.

The company pays these people salaries.

It pays all of the expenses of the office.

And working under this sales manager are 18 detailmen, who travel about the State with samples and literature and whatnot and they brief the druggists, the hospitals, the doctors on the virtues of Lilly products.

They do more than that.

They check stock in the drugstores to see that there is an adequate supply.

They police fair trade observance in the State of New Jersey.

And in addition, still and I think, quite significantly on this case, they pick up orders from the local druggists and transmit those orders to the local wholesalers.

And I think also, significantly, they do not, in any case, pick up orders from anybody for transmission to the home office in Indianapolis.

Now --

Justice Felix Frankfurter: Do they solicit any business from druggists or from doctors?

Mr. Samuel M. Lane: Well, a whole logic is to solicit it.

I don't know --

Justice Felix Frankfurter: Well, do they -- do they take --

Mr. Samuel M. Lane: I -- I --

Justice Felix Frankfurter: Do they -- do they sell, is that too vague a term, to sell, do you sell to any druggist or to any drugstore?

Mr. Samuel M. Lane: I think, they sell in the sense, and this doesn't appear in the record, but they have hundreds of different drugs.

They must have lists of these drugs.

And they check the stock against the list and they will take orders from the druggist, on whose blanks or forms, I don't know, Justice Frankfurter.

But the record shows, they do take orders from the druggist to the local wholesaler, to be filled there.

Now, whether they --

Justice Felix Frankfurter: They solicit business?

Mr. Samuel M. Lane: The -- the --

Justice Felix Frankfurter: And I mean

Mr. Samuel M. Lane: They solicit --

Justice Felix Frankfurter: -- immediately -- I don't mean (Voice Overlap) --

Mr. Samuel M. Lane: They solicit the interest.

The record doesn't say that they solicit the order.

It says in effect, they solicit the interest and they take the orders.

Justice Felix Frankfurter: Well, this --

Mr. Samuel M. Lane: And --

Justice Felix Frankfurter: -- case was decided on affidavits does --

Mr. Samuel M. Lane: Yes.

Justice Felix Frankfurter: -- does either affidavit, well, you -- your affidavit say that they solicited any business, any order, not they took a piece of paper which they then transferred to the wholesaler in New Jersey, but the day as for business or is that too vague a term.

Mr. Samuel M. Lane: This is what it says --

Justice Hugo L. Black: What page is that please?

Mr. Samuel M. Lane: Page 27 of the record, the middle of the last paragraph, "The primary purpose of said employees, is to acquaint retail pharmacists, physicians and hospitals with the products of Eli Lilly and Company so that the said retail pharmacies, physicians, and hospitals will order Lilly products from local wholesaler and distributors.

And then you add to that -- that they also admit that these men picked up those orders and themselves, transmit them to the local distributors.

Now, time is galloping here.

The appellant says, "You can't separate those activities from interstate commerce because the whole purpose is to generate the interstate sale from Indianapolis to the local wholesaler."

We say they are separate and that this Court held so distinctly and unequivocally in the Northwestern Milling Company case which was one of a puzzle of seven cases that was decided under the name of Cheney Bothers against Massachusetts.

Let me just give you the facts quick.

In the Cheney Brothers case, Cheney Brothers was a Connecticut corporation which had a sales force in Massachusetts.

The salesmen took orders and transmitted them to Hartford for approval.

Massachusetts attempted to levy an excise tax for that privilege and this Court said, "No, that's purely interstate commerce."

In the same basket of cases, Northwestern Milling Company had its sales force in Massachusetts and its salesmen took orders from Massachusetts retailers and gave them to Massachusetts wholesalers, who in turn ordered from the Minnesota or whatever it was planned of the Northwestern Company.

And this Court said, "Massachusetts may exact an excise or privilege tax for that because that is separate from the interstate commerce."

Justice Felix Frankfurter: And you think whenever a State has power to tax activities of an enterprise engaged wholly in interstate commerce, but part of that enterprise place activities in the State and that a State can, by an appropriate formula, tax in relation to those activities that the right to tax an aspect locally performed within a State that thereby, a State can exact that corporation to submit to all the regulations of a foreign corporation.

You think those are equitable --

Mr. Samuel M. Lane: I --

Justice Felix Frankfurter: -- legal propositions.

Mr. Samuel M. Lane: I refer, Your Honor, to your own opinion in Freeman against Hewitt and which it took this very thing up and you said that the burden of a tax on that kind of activity is so much greater on interstate commerce and not subject to the safeguards that the local exercise of the police power is that this Court looks more -- scrutinizes more carefully, the case where you tax the local activity, then where there is applied to it, a regulation --

Justice Felix Frankfurter: Then --

Mr. Samuel M. Lane: -- of the local aspects by the police power.

Justice Felix Frankfurter: Wholly a part from the adverse comments that that decision in particular, the opinion had received.

That also was a question of what is taxable.

Mr. Samuel M. Lane: Yes.

Justice Felix Frankfurter: And you can't say because a State can tax, that therefore, it can do anything else?

Mr. Samuel M. Lane: No, I'm not saying it can do anything else.

Justice Felix Frankfurter: Well, it can --

Mr. Samuel M. Lane: I --

Justice Felix Frankfurter: It can this --

Mr. Samuel M. Lane: I can do this.

Justice Felix Frankfurter: It can do this, because it can tax.

Mr. Samuel M. Lane: No, sir.

Justice Felix Frankfurter: We've said the opposite.

Mr. Samuel M. Lane: No.

I don't say it can do this because it can tax.

Justice Felix Frankfurter: Well then what is --

Mr. Samuel M. Lane: I --

Justice Felix Frankfurter: -- the relevance of the tax cases?

Mr. Samuel M. Lane: The relevance is that in each case, there's an application on state power, that something which a taxpayer says, "You may not tax because it's burden to interstate commerce."

And we'd say, not that you can do anything to a foreign corporation that you can do it or domestic, but what -- that kind of a case is the American Express against Virginia, judge -- Justice Holmes' decision.

We're not dealing with that kind of a case.

We're not --

Justice Felix Frankfurter: Suppose Lilly has -- can you -- can you exact license taxes from its drummers?

Suppose Lilly merely because it has 18 or 28 drummers soliciting business --

Mr. Samuel M. Lane: I doubt, it has --

Justice Felix Frankfurter: -- has -- does nothing else, except in all the -- the orders go out to Indiana or wherever they go, can you therefore, license those drummers?

Mr. Samuel M. Lane: Well, let me come to that.

I doubt it, under the Real Silk Hosiery against Portland case.

I don't believe you can.

But on the other hand, if you take Northwestern Portland Cement --

Justice Felix Frankfurter: That's another tax case.

Mr. Samuel M. Lane: Another tax case, you're asking me now, about taxes.

If you take --

Justice Felix Frankfurter: Oh I'm suggesting that you can -- you can say it because you can tax --

Mr. Samuel M. Lane: Alright.

Justice Felix Frankfurter: -- therefore, you can compel submission as a foreign corporation.

Mr. Samuel M. Lane: I'll -- I'll accept that in answer to your question without reference to Northwestern.

Of course, this is not in the case, but Real Silk Hosiery against the City of Portland has direct authority that you couldn't require them to be licensed.

And we're not suggesting that you could require them to be licensed, that isn't our case here.

Justice Felix Frankfurter: These very fellows, who show drugstores or doctors how to use this medicine or pills or whatnot, I know they're very expensive, the only thing I do know about them, these fellows who do that couldn't be licensed for that activity could they?

Mr. Samuel M. Lane: Not, unless you want to overrule Real Silk against Portland, but that's not our case.

Now, may I quickly skip along here because your clock runs so fast.

The appellant says that we can't raise this point, this local commerce point because it's a no point.

I say fiddlesticks to that.

We didn't, in the lower court say, we were talking only about interstate commerce, in the lower court, we said, we were talking about doing business, which includes every aspect of the doing business, whether it's separated from interstate commerce or whether it isn't.

And all the facts are in the record and I say that we did not concede as he says, we did that it was exclusively an interstate commerce and I say that we're not raising a new point.

He then says, "Well, if the Court decides that we are raising a new point, we can't raise it."

For the first time in this Court to sustain the judgment of the court below, to that also, I say nonsense.

The -- he hasn't cited any case and he doesn't make any sense in reason or logic to say that this Court is foreclosed from saying, “If this is a new argument that the State Supreme Court was right in upholding the validity of its statute, I think it would be different.

If this Court would say that the statute was invalid for a reason which hadn't been offered below, when this Court sustains it, it seems to me that situation has wiped it.”

Now, therefore, that --

Justice William J. Brennan: Does this case read (Inaudible)

Mr. Samuel M. Lane: Yes, it was.

Justice William J. Brennan: Do you have them with you?

Mr. Samuel M. Lane: I don't have them with me.

Justice William J. Brennan: Can you get it?

Mr. Samuel M. Lane: Of course, certainly.

Therefore, the first branch of our case is that there were local activities.

Here was a local force which did nothing but serve in the State of New Jersey, in connection with promoting local sales from local wholesalers to local retailers, to local consumers and in policing local fair trade prices.

And the suit which they want to bring is the suit under the state statute in aid of the policing of those local prices.

Now, coming in the next part of the case and this Justice Frankfurter is, of course, where Union Brokerage comes in.

Union Brokerage operated upon the hypothesis that the Union Brokerage Company which were licensed custom house brokers, were engaged exclusively in interstate commerce in the State of Minnesota.

They were in that connection highly regulated as you realized by the Secretary of the Treasury, these brokers have a semiprofessional capacity.

They passed examinations and they have to show good character and whatnot, have done.

They are supervised by the Secretary of the Treasury.

Now, this business engaged in this activity, nevertheless, this Court said in Union Brokerage had sufficient contacts with the people of Minnesota, sufficient local activities so that a registration statute could be applied to them without unconstitutionally burdening interstate commerce.

Justice Felix Frankfurter: Do you think the customers the importers of Union Brokerage Company could have been inquired to be licensed?

Mr. Samuel M. Lane: Customers?

Justice Felix Frankfurter: I mean the -- they were a brokerage concern --

Mr. Samuel M. Lane: Yes.

Justice Felix Frankfurter: -- but people who did the importing, with reference to its Union Brokerage --

Mr. Samuel M. Lane: All of the importers?

Justice Felix Frankfurter: Yes, the importers, could they be -- could they be licensed as we sustained that Union Brokerage Company could be licensed?

Mr. Samuel M. Lane: Well, the State of Minnesota --

Justice Felix Frankfurter: Yes.

Mr. Samuel M. Lane: -- I wouldn't dream of it, no.

But that --

Justice Felix Frankfurter: And all I'm saying is I'm -- I happen to pick that was a sound decision Mr. Lane, but that was one stage removed.

Union Brokerage Company, all its business was exclusively within Minnesota and therefore, it had relations to the Minnesota population.

Mr. Samuel M. Lane: Yes, that's right.

And we say that all of the activities of the 18 detailmen and the sales manager and the secretary have to do exclusively with the citizens of the State of New Jersey.

Now, my opponent says that Union Brokerage against Jensen doesn't apply and I quote, "It involved a corporation which had nothing to do with actual importation or exportation of goods and carried out all of its business transactions entirely in the confines of Minnesota."

And I say to that, so what.

The same thing was true in Texas Transportation against New Orleans, the same thing was true in Puget Sound Stevedoring Company against Tax Commission, the same thing was true in the case that I argued here, some 14 or 15 years ago, Joseph against Carter & Weekes.

The Union Brokerage Company was operating exclusively on -- on foreign commerce and yet this Court said, "A statute which requires it to identify itself to the citizens of Minnesota and which denies it access to the courts until it does, does not cast an unconstitutional burden on interstate and foreign commerce."

And I say that precisely the same thing is approved here.

Now, my time is up and I'll introduce to the Court, Mr. David Satz.

Justice Hugo L. Black: May I ask you, do you have any -- as the record show -- or do you know whether you have people who are not representing an out-of-state company as this -- 18-member, who simply live in New Jersey and aid retailers to buy goods from wholesalers, you have any of them?

Mr. Samuel M. Lane: It's not in the record.

Justice Hugo L. Black: But is there --

Mr. Samuel M. Lane: It's on the record, but stands to reason, Justice Black that the wholesalers, the pharmaceutical wholesalers, like McKesson and Robbins let's say or some big wholesale house in New Jersey, gets the benefit of what these Lilly employees do, but at the same time, if it's going to survive, it must have its own employees that go around soliciting sales of other --

Justice Hugo L. Black: But suppose -- suppose these people were not employed by Lilly, but were simply doing this precise thing and employed by somebody else to have retailers in New Jersey by goods from wholesalers in New Jersey, would that be interstate or intrastate business?

Mr. Samuel M. Lane: They're precisely the same as is here, except that somebody else should be paying them.

Somebody else should pay their salary and there wouldn't be any other difference at all.

Chief Justice Earl Warren: Mr. Satz.

Argument of David M. Satz, Jr.

Mr. David M. Satz, Jr.: Mr. Chief Justice and may it please the Court.

New Jersey intervened in this case, pursuant to rules of its Supreme Court to defend the constitutional application of this particular statute to a foreign corporation which hadn't registered to do business in New Jersey and the lower court prior to our entering these proceedings, had held that it was doing business in contravention of the foreign corporation registration statute.

Justice William J. Brennan: Doing what, this is local business?

Mr. David M. Satz, Jr.: Doing local business, Justice Brennan.

Justice William J. Brennan: Now, what Judge Sherr held?

Mr. David M. Satz, Jr.: I believe and I must admit, without criticizing Judge Sherr that the language could have been clearer with respect to the cases of this Court and other courts which have gone on to test what is doing business by making a specific finding of whether something was an intra or interstate commerce.

Justice William J. Brennan: Has the application of this statute required proof of the doing of local business?

Mr. David M. Satz, Jr.: The statute has not been that often interpreted at least in recent times.

To give any standard test, but usually it is interpreted to mean local business, which was the fact here.

Justice William J. Brennan: One last question.

Is it still the practice of only those questions are raised which are briefed before the Supreme Court?

Mr. David M. Satz, Jr.: The Supreme Court of New Jersey and I believe this Court and I'm saying that respectfully, where there are facts in the record, supporting a particular result, which are leading to a possible affirmance, can have supporting -- has reaching that result, any reason.

Justice William J. Brennan: I appreciate that but I was speaking of the appellant factors, is it still the factors, as -- at least there was when I was there that --

Mr. David M. Satz, Jr.: It is --

Justice William J. Brennan: -- only those issues were raised for decision in the Supreme Court that were briefed.

Mr. David M. Satz, Jr.: I believe under New Jersey law, Justice Brennan, matters particularly applied and exclusively so to the appellant seeking a reversal and I think under state (Inaudible), I recall correctly a -- a respondent has allowed to rely on anything in the record to support affirmance in that regard.

I believe it is particularly important to point out to this Court what New Jersey does not do in the exercise of its application to foreign corporations of this statute, because I think that the opponent yesterday led the Court to believe that New Jersey wouldn't require a foreign corporation to register if it was merely casually connected in some business interest in New Jersey or that it is exceeding, that is the New Jersey Legislature, its powers of requiring certain information from foreign corporations which it could not control under the Commerce Clause or within its own constitution.

And I believe the New Jersey courts do not, in any way, wish to control a foreign corporation by requiring it to register in New Jersey if that company that has not registered is merely suing on a transaction that arises out of interstate commerce.

And in that regard, I believe it's particularly important today, using the same historical principles from Gibbons v. Ogden on down to recognize the fact that the Pigg case, Sioux Remedy, Furst v. Brewster and so on, are all cases which dealt with the particular application of a state registration statute, which correctly prevented that State from requiring a foreign corporation to register.

Justice Felix Frankfurter: Do I -- do I -- am I entitled to infer from what you said that this requirement of registration or this would not preclude the corporation engaged entirely in interstate commerce and sue on an interstate commerce transaction, that if any controversy leading to suit between Lilly and its wholesale agents, or whatever you call them, its wholesalers, that any controversy as between them involving entirely shipment of goods from Indiana or wherever, to the wholesale, some controversy as to what was due, that such a suit could be brought by Lilly unregistered, is that --

Mr. David M. Satz, Jr.: I --

Justice Felix Frankfurter: -- what I'm going to infer?

Mr. David M. Satz, Jr.: -- I believe it could, Justice Frankfurter.

Under Pigg --

Justice Felix Frankfurter: Yes, but --

Mr. David M. Satz, Jr.: -- and --

Justice Felix Frankfurter: -- it couldn't -- tell that from this decision, couldn't it?

Mr. David M. Satz, Jr.: Not -- that's our trouble, Justice Frankfurter.

We're dealing here with an opinion, perhaps in New Jersey Supreme Court, frankly, could've clarified some of the problems there.

This was brought on in pleadings and I think a Supreme Court decision or appellate court decision was expected by the trial court when it wrote its opinion.

And I can't say that from the record nor is that my business as such, but I believe and we have --

Justice Felix Frankfurter: It's often difficult -- often difficult for an opinion to be written here, at least it would be, to indicate what is sustained and what isn't, assuming we go in there.

Mr. David M. Satz, Jr.: Mr. Justice Frankfurter, I only can state that in our briefs, the State of New Jersey as well as corespondent had made what could be called concessions.

I say they're judicial concessions because we don't intend to exceed some of the doctrines expressed by the Supreme Court.

In that regard, we have distinguished the Pigg case and those following them and we have a healthy respect for what was said there when the contact is casual, which you pointed out, yourself, in the Union Brokerage case.

Or whether it is a suit directly in an interstate transaction or where a state statute has exceeded its own power in trying to require information from a foreign corporation, which it has no right to do.

And in that regard, we have tried to outline in our brief, exactly what New Jersey has required.

And I might say in closing that this should be not called as has been called by courts throughout the years, a qualification statute.

It should be called an identity statute or a registration statute that will merely secure for the citizens of the State of New Jersey and the State, itself, appropriate information from a corporation which admittedly is operating in that State and where the information that is sought is vital to the State and in no way, directly, or I believe, even indirectly, affects its right to do interstate business.

And I say that with a healthy respect for everything this Court has said throughout the years.

Justice John M. Harlan: Could I ask you a question?

Mr. David M. Satz, Jr.: Yes, sir.

Justice John M. Harlan: Supposing this respondent had been a signer of a fair trade contract, would the suit have been maintained?

Mr. David M. Satz, Jr.: I believe that a -- a contract could be sued on, if made -- as respects its interstate commerce and I think the contract gives right --

Justice John M. Harlan: -- (Voice Overlap) -- supposing this record as it stand for us and we had indebted nonsigners sued against the nonsigner, we had a suit against the signer --

Mr. David M. Satz, Jr.: Yes, sir.

Justice John M. Harlan: -- would you then be contending that the suit could not be made?

Mr. David M. Satz, Jr.: We infer that in our brief, Justice Harlan, that a suit against a signer would be a contract so-called in interstate commerce and could be sued upon without registration.

Justice Charles E. Whittaker: Well then, what's the difference (Inaudible) of the power under the Commerce Clause?

Does that depend on what the cause of the action is?

Mr. David M. Satz, Jr.: Justice Whittaker, it depends on the cause of action in this particular case and on this record to the extent that we're dealing with nonsigners, people that have no relationship, except by operation of the New Jersey Fair Trade Law with Eli Lilly.

We have contemplated in our brief and have conceded that if there is a contract and nothing more, in other words, we are here dealing with possible signers and possible local commerce in New Jersey, with the detailmen that are there, but assuming that these people were not in New Jersey, but there was a contract between Eli Lilly and Indiana and some retail outlets in New Jersey, then it would be like a -- an action for the shipment of goods because Eli Lilly has made that as part of its interstate business and would not have to register.

So that in part to answer your specific question, it might deal with the particular cause of action or the transaction giving rise to the cause of action, where they would not have to register, but not under the record where the facts that are presented to this Court.

Justice Felix Frankfurter: Just as a matter of curiosity, Mr. Satz, at what stage of a litigation does the State have to come in where this constitutionality of a statute or its applications count?

Mr. David M. Satz, Jr.: Justice Frankfurter, our rule is permissive.

We are required to be given notice by persons --

Justice Felix Frankfurter: At the initiation -- at the initiation of the litigation?

Mr. David M. Satz, Jr.: It really doesn't state, Your Honor.

It's merely a -- a rule that says that if a constitutional question arises, notice shall be given in a court, the Attorney General may intervene.

We were asked after the trial court judgment was entered to intervene and did so promptly.

Justice Felix Frankfurter: So you came in at the -- the Supreme Court?

Mr. David M. Satz, Jr.: Supreme Court, and we filed briefs there and argued and then are here.

Justice Felix Frankfurter: But as you know, we have a statute which says in any court, where the requirement is in any court, that's right isn't it, Justice Black?

It says in any court.

Mr. David M. Satz, Jr.: Well, ours --

Justice Felix Frankfurter: I just didn't notice.

Mr. David M. Satz, Jr.: It's sometimes loosely done because we don't get notice every time, but we -- as soon as -- we usually do review them and they're being promptly, if necessary.

So for all of these foregoing reasons and in our brief particularly, we ask this Court to affirm the judgment of the New Jersey Supreme Court.