HUDSON DISTRIBUTORS v. ELI LILLY

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Argument of Myron N. Krotinger

Chief Justice Earl Warren: Hudson Distributors, Inc., versus Eli Lilly & Co.

Mr. Krotinger.

Mr. Myron N. Krotinger: Thank you, Your Honor.

Mr. Chief Justice and members of the Court, if the Court please.

This case is a companion case to the Upjohn case.

It has some different aspects.

Its history and how it arose, follow in many respects the Upjohn litigation following the effectiveness of the Ohio Fair Trade Act or, rather, its passage in June of 1959.

On October 1st, 1959, Hudson was nullified by Eli Lilly & Co. that Eli Lilly will continue to vigorously support fair trade and which is to give you notice of this policy.

This letter invited Hudson to enter into a contract.

This invitation was to -- was not taken up and on December 10th, 1959, a warning letter was sent from Eli Lilly to Hudson informing of the information that's come to Eli Lilly of sales below fair trade prices, again, enclosing duplicate copies of the fair trade agreement, enclosing "We trust your future operations will be strictly in accordance with the obligations imposed upon you under the Ohio Fair Trade Act so there will be no need -- occasion for any further controversy or litigation."

The -- Hudson filed its petition for a declaratory judgment on the 22nd of October, 1959.

This was followed by this warning letter and then by a second warning letter of January 26th, 1960 in which Hudson was told, "We are prepared to file suits for injunctions where contract violations cannot be worked out in a voluntary basis and we trust your future operations will be in accordance with your obligations under the contracts and under the Ohio Fair Trade Act."

In other words, the demand was made that Hudson observe both the provisions of the Ohio -- rather, of the Lilly contract, as well as the fair trade pricing.

As in Upjohn, a cross-petition was filed.

Responsive pleadings were filed both to the petition and the cross-petition, and the case moved into a courtroom.

Unlike Upjohn, in this case, there was a stipulation of facts and evidence.

Again, like Upjohn, the litigation on the Hudson pleading -- rather, on the complex of pleadings was limited solely to the petition, the answer and the reply.

The rulings made by the courts below, the Court of Common Pleas, the Court of Appeals, the Highest Court of Ohio were all made in the -- both cases as written by the Court.

And as stated to the Court yesterday, the issues before the courts were limited to the constitutionality of the statute under the State and the Federal Constitutions.

Now, Your Honors, as we noted yesterday, the Supreme Court of Ohio limited and placed its ruling solely upon the issues of the State of Ohio Constitution.

It's as if the federal law did not exist and we believe that the Supreme Court of Ohio was misled or, at least, adopted the positions set forth both by Upjohn and by Lilly in their briefs, excuse me, namely, that the federal law had nothing to do with the legality of the Ohio Fair Trade Act.

This position was taken both by Lilly and by Upjohn forthrightly in the court below, and net result was that we have a situation where, in the brief of Eli Lilly & Co. in this Court, the claim is made that a valid contract was instituted under the Ohio Fair Trade Act under Section 5 (a) (2).

Seven pages of the Lilly brief in this Court are devoted to that proposition.

In fact, Your Honors, at page 48, 48 or 49 of the Lilly brief in this Court, Lilly argues such a contract is within the common law meaning of a contract that is, under Section 1333.31, an implied contract.

Williston states that a contract may arise from a “sellers making a general offer to all the world in this way to be accepted by taking ownership on the property, provided consideration could be found from the promise of the purchaser and also, such communication to the promisee as is necessary for a contract.”

The next sentence of this section of Williston which deals with notices on merchandise is to the effect, if the ultimate purchase is not from the offeror but from one who has acquired from him absolute and unqualified ownership, it would seem impossible to treat the purchase of the property as consideration for a promise of the purchaser to the original seller, unless it leads to the facts warranting the assumption that the immediate seller demanded, as part of the consideration of the sale, a promise to the original seller.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Myron N. Krotinger: Only if the federal law so-permits, Your Honor.

Under Section 5 (a) (2), this Court has held and has plainly held repeatedly that the words “contracts and agreements” in the McGuire Act are to be taken in their ordinary and usual meaning.

In the ordinary and usual meaning of the term, Mr. Justice Goldberg, a notice is not a contract.

A notice of another man's trademark is not a contract.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Myron N. Krotinger: Yes, Your Honor.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Myron N. Krotinger: Except, Your Honor, I would suggest that the issue in the case is the interpretation of the federal exemption.

In other words, where the Supreme Court of Ohio committed, in our opinion, basic error, is impending this case and the validity of a fair trade contract and price fixing in commerce as a matter of state law, rather than as a grant of federal exemption.

The issue is a federal one.

Indeed, Your Honor, whenever a claim has been made, either by private party, administrative agency or government, that a price fixing contract is sought to be imposed upon anyone, the federal court, as in Schwegmann, looked at the statute and said, “Are there critical differences between the federal act and the state statute?”

In --

Justice Arthur J. Goldberg: (Inaudible)

Mr. Myron N. Krotinger: Well, Your Honor, may I answer that by stating that the question is perhaps stated over-broadly in that you would -- you would suggest by the question that there was a total commitment of price fixing for the states by the McGuire Act without relevance to the federal standard.

And I would again suggest to Your Honor that the rulings of the Court, this Court foreclosed that approach.

Contracts and agreements, signers and nonsigners have been two of the most bitterly litigated terms in American legal history where, for example, the McGuire Act was passed in 1952 to, one, due to the results of Schwegmann.

This was by means of the nonsigner concept.

At the time of the passage of that Act, there were 45 Fair Trade Acts in effect, each of which contained a nonsigner clause committed to the concept of signer and nonsigner.

The Congress knew perfectly well what was the image and contour of those statutes.

Section 5 (a) (3) said, states, "We will now allow you where you have nonsigner clauses to make them operative.”

Beyond that, the Congress did not go.

It said in Section 5 (a) (2), “You may enter into contracts and agreements.

The section-by-section analysis of the bill talked about contracts.”

The Congress further said, “You may enter into contracts by which you may require your contractee to enter into a further contract."

A statutory system was created and with that statutory system came, as professor McLaughlin pointed out, the resentment of holding a man to a contract he never made, so that over this basic nonsigner clause came this round of litigation through the different States whereby 24 such States have now held that the nonsigner clause is ineffectual.

Now, we find a different solution upon a different basis with a different premise in commerce undertaken by the State of Ohio based upon what was originally a national solution to a hotly contended economic issue but which one, basically, was a matter of national policy and as this Court pointed out, there has been no subject, perhaps in American history, so closely patrolled as the price fixing agreement.

Excuse me?

Justice Byron R. White: Suppose you have your -- I don't suppose Ohio changes its law in putting in this new statute because of any federal law.

It did it to -- to avoid its own state constitutional ruling, isn't it?

Mr. Myron N. Krotinger: Yes, Your Honor.

Justice Byron R. White: Now, I would suppose you would concede that in a State -- that -- that Ohio's previous law would've been fully constitutional under the McGuire Act.

Mr. Myron N. Krotinger: Yes, Your Honor.

It was a typical little four-sectioned --

Justice Byron R. White: Sure.

Mr. Myron N. Krotinger: -- statute designed --

Justice Byron R. White: This allowed you to -- this allowed you to get release against nonsigner.

Mr. Myron N. Krotinger: Yes, Your Honor.

Justice Byron R. White: You -- and I also gather, you concede that in this case, there were many actual agreements.

Mr. Myron N. Krotinger: Oh, yes.

Oh, yes.

Lilly signed --

Justice Byron R. White: Both Lilly and Upjohn.

Mr. Myron N. Krotinger: Yes, Your Honor.

Justice Byron R. White: And both the evidence of these agreements were in the record.

Mr. Myron N. Krotinger: Yes, Your Honor.

Justice Byron R. White: Now, what makes you think that the Ohio court construed its Act as though there were no agreements?

Mr. Myron N. Krotinger: I am suggesting, Your Honor, that what the Ohio court did was to construe the statute as if there were a nonsigner policy in the State of Ohio in violation of the federal provisions.

Section 5 (a) (2) permits the enforcement of contracts between Lilly and those who have signed, perfectly valid.

By Section 5 (a) (3), the nonsigner provisions might be enforced.

A minority of the Supreme Court of Ohio held that it could not reverse a decision of the Court of Appeals of Cuyahoga County, finding such statute to be constitutional.

However, Your Honor, the basic issue, now occur, is the interpretation of contracts and agreements in federal law.

Justice Byron R. White: Well, I agree with you.

I agree with you.

Mr. Myron N. Krotinger: That's --

Justice Byron R. White: There -- it -- you -- you say that even if you're right on what the federal law requires, that it requires actual consensual agreement, not an implied obligation --

Mr. Myron N. Krotinger: That's right.

Justice Byron R. White: -- even if you're right, the federal law is satisfied here because there were some agreements.

Mr. Myron N. Krotinger: Your Honor, it is --

Justice Byron R. White: But many of them are actual agreements.

Mr. Myron N. Krotinger: Your Honor, it is not satisfied --

Justice Byron R. White: Well, isn't that true or not?

Mr. Myron N. Krotinger: It is not satisfied --

Justice Byron R. White: They were -- both Lilly and Upjohn had several agreements, wasn't it?

Mr. Myron N. Krotinger: Yes, but it's not satisfied as to Hudson because the only way in which Hudson can be cabined in to a price fixing agreement --

Justice Byron R. White: (Voice Overlap) is a nonsigner.

Mr. Myron N. Krotinger: It's a nonsigner.

Therefore, what this statute --

Justice Byron R. White: But the federal offer permits enforcement again.

Mr. Myron N. Krotinger: Only where the policy of the State is to permit such enforcement and the policy of the State of Ohio is to abandon the nonsigner technique and may I quote, Your Honor --

Justice Byron R. White: Do you think the federal law would bar the State from permitting nonsigners to be -- to be proceeded against by -- by an implied contract rather than by no contract at all?

Mr. Myron N. Krotinger: In a State where by definition, the state legislature has said, “We are binding only signers” and may I point out in the amicus brief filed here by Mr. Gorrell, the -- who was the sponsor in the legislature, in enacting the new Ohio Fair Trade Act, at page 32, the Ohio legislature decided to shift the emphasis from the nonsigner concept and to develop contractual rights and obligations between the proprietor of a trademark or trade name and the retailer desiring to use that mark in the sale of products.

Now, this provision in Ohio, Your Honor, was gotten from Virginia, which had a notice provision, after the Virginia courts had held a nonsigner clause not to be binding within the State.

Justice Byron R. White: Under their own constitution.

Mr. Myron N. Krotinger: Right.

Now, in the case of Zale-Norfolk against Bulova Watch, a nonsigner -- rather, a nonsigner was before the Court, practically on all force with the facts in this case, where Zale-Norfolk had proceeded to buy merchandise from a wholesaler other than Bulova.

Bulova went to court and said, “We want to find out where you got that merchandise and we also want to bind you,” and the Virginia court said a fair trade contract or rather, a fair trade statute, referring to contracts, means voluntary contracts, “We are not going to resurrect the nonsigner clause.”

So, the interpretation of the Virginia courts was that the statute was not binding upon a nonsigner.

Now, may I --

Justice Byron R. White: Yes, just like -- just like the majority of the -- of the Court here.

Mr. Myron N. Krotinger: Yes, that's correct, Your Honor.

Justice Byron R. White: On -- on state constitutional ground.

Mr. Myron N. Krotinger: No, upon state --

Justice Byron R. White: But you started out talking about federal policy.

Mr. Myron N. Krotinger: Yes, sir.

Justice Byron R. White: Well, we ought to keep talking about it.

Mr. Myron N. Krotinger: Yes.

Now, the parity of policy of a federal ground also bars the enforcement against a nonsigner in the State because the only ground in the federal law is where there is a nonsigner policy in a State, and we see clearly in the State of Ohio that this is now construed as a contract.

Justice Byron R. White: Well, there is a nonsigner policy in Ohio.

Mr. Myron N. Krotinger: Your Honor, this -- now.

Justice Byron R. White: There is a nonsigner policy.

It's just that -- that they justify proceedings against nonsigners in a different way.

Mr. Myron N. Krotinger: Well, except this, Your Honor.

Justice Byron R. White: Instead of saying that there's no contract that will hold them anyway, we will say, by law, there's an implied contract --

Mr. Myron N. Krotinger: Now, may I state, Your Honor --

Justice Byron R. White: -- which doesn't make them a non -- where anything else whether it's a nonsigner.

Mr. Myron N. Krotinger: And this denies the entire basic concept of what the state legislature in Ohio was doing.

What I'm suggesting to the Court is that, by means of a play upon words, signer or nonsigner, a contract which we have here in Court this morning and a -- and a statute calls a signer, what is a nonsigner, contrary to the federal intent because what this concept does is to destroy any distinction between Section 5 (a) (2) and 5 (a) (3).

Everybody is now a contractor.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Myron N. Krotinger: Yes, sir.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Myron N. Krotinger: Your Honor, I don't go so far as to say signatures.

There is no form as such in the fair trade law, but the term “signer,” as construed in Schwegmann case, in the McKesson case, in the entire history of the McGuire Act, means a contractor is one who has evidence to consensual agreement in such form -- in some form, where within the valid conception of contractor agreement, we may find one.

May I further point out, Mr. Justice Goldberg, what the implication is of saying that there is no longer any difference between a signer and a nonsigner.

It means that all the States which have been struggling with this conception of signer and nonsigner, the basic matrix of the Miller-Tydings Act and the McGuire Act, this suddenly disappears in a concept of everybody is a contractor on an implied theory of notice where there is nothing in the law which makes a notice, except by prior to the legislature, which, in turn, depends upon the will of Congress.

The further factor is that this is --

Justice Arthur J. Goldberg: (Inaudible)

Mr. Myron N. Krotinger: Well --

Justice Arthur J. Goldberg: (Inaudible)

Mr. Myron N. Krotinger: Yes.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Myron N. Krotinger: Your Honor --

Justice Arthur J. Goldberg: (Inaudible)

Mr. Myron N. Krotinger: It -- this is what the statute was intended to accomplish.

Mr. Gorrell said so, this is all through the legislative hearings, and in fact the dialogue in the legislature was to the effect.

A Mr. Rod turned to Mr. Gorrell and he said, “Mr. Gorrell, why don't you please get us into a contract fill where you -- we at least employ a third-party beneficiary contract between a wholesaler who sells to the defendant and the manufacturer?”

And Mr. Gorrell said, “Well, we can't find a very much in the way a contractual theory there because suppose the wholesaler never made such a request to the -- rather, of the retailer.”

And to this, Mr. Rod said, “Well, then what do we do?” and Mr. Gorrell replied, “Well, that's the reason we join the crowd, shuffling up on the law of privity of contract in the implied warranty cases,” implied warranty.

May I state further, Your Honor that this conception is found embedded in the matrix of the statute where a proprietary interest is found, a wholly new concept which is found for the first time in the 1958 and 1959 congressional legislation.

In other words, this concept in the Ohio statute does not stand alone.

It is part of a much larger system designed to overturn the basis of the McGuire Act.

I should like to reserve 10 --

Justice Arthur J. Goldberg: (Inaudible)

Mr. Myron N. Krotinger: Pardon me?

Justice Arthur J. Goldberg: (Inaudible)

Mr. Myron N. Krotinger: Of course, Mr. Justice Goldberg.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Myron N. Krotinger: Yes, Your Honor.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Myron N. Krotinger: An -- yes, sir.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Myron N. Krotinger: Right.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Myron N. Krotinger: Yes, as to which --

Justice Arthur J. Goldberg: (Inaudible)

Mr. Myron N. Krotinger: Yes, Your Honor.

Justice Arthur J. Goldberg: Therefore, you say (Inaudible)

Mr. Myron N. Krotinger: Yes.

Justice Arthur J. Goldberg: But that's a non (Inaudible)

Mr. Myron N. Krotinger: Regards policy and I might add, Mr. Justice Goldberg, this is the reason that the Court and the proponents of the statute analogized this proprietary interest is novel theory to a house, a candy bar, an apple, in other words, as if our client, when they bought the Lilly trademarked product in Michigan, bought something analogous to a (Inaudible).

Justice Byron R. White: Mr. Krotinger, you've got two different points here.

One is that -- that you're saying that the Ohio law doesn't require contracts at all.

That's one point.

Mr. Myron N. Krotinger: That's correct, Your Honor.

Justice Byron R. White: The other point was the one that you and I were discussing, namely, that Ohio has abandoned, you say, the so-called nonsigner policy which is a little different point, a little different point.

As to the first point, there were contracts in this case and the Ohio courts knew it.

Mr. Myron N. Krotinger: Yes, Your Honor.

Justice Byron R. White: I'm not sure you could say with confidence that the Ohio courts construed their statute in the absence as a -- as a valid in the light of the McGuire Act even though there were no contracts.

That's the --

Mr. Myron N. Krotinger: Yes.

Justice Byron R. White: -- on the first point but on the second point, your -- your issue is -- your -- your argument is that -- that Ohio doesn't treat nonsigners as non -- as non-contracting parties at all.

Mr. Myron N. Krotinger: It treats everybody as a contractor.

Justice Byron R. White: And that -- that unless the State really treats them as a nonsigner, non-contractually bound, it violates the McGuire Act.

Mr. Myron N. Krotinger: Within the intent and purpose of the federal (Inaudible), Your Honor.

I'd like to reserve my time, Your Honors.

Chief Justice Earl Warren: Mr. Willis.

Argument of Everett I. Willis

Mr. Everett I. Willis: Mr. Chief Justice, may it please the Court.

I'd like to go right to the notice question that Mr. Krotinger has been discussing and then discuss --

Justice Byron R. White: At the outset, do you concede that the notice -- as to the notice question that it was raised in the -- in the trial court, it was raised in the Appellate Courts of Ohio.

Mr. Everett I. Willis: Yes, sir, it was raised, but, as has been pointed out, it -- it is not raised by the facts of this case because there were contracts and there's an unadjudicated question of interpretation of the Ohio Act as to whether the contracts are only permitted, which they clearly are --

Justice Byron R. White: Well, that depends on --

Mr. Everett I. Willis: -- for our rebuttal.

Justice Byron R. White: -- that depends on what you think the scope of the notice question is but anyway, the notice question, however that is --

Mr. Everett I. Willis: Yes, sir, it was raised.

Justice Byron R. White: -- probably raised.

Mr. Everett I. Willis: I do not deny that.

I do not -- not deny that.

I want to discuss that and I want to discuss one other question which is heavily stressed on the merits in -- in the brief of Hudson and was not raised in the pleadings of the case, indeed, until the reply brief in the Supreme Court of Ohio but it's -- it's stressed in the brief.

Now, I want to discuss that.

If I have time, I will make one or two observations on the jurisdictional aspect after I discuss the merits but I think it's important to get to the merits first.

Now, Hudson's argument does boil down to this.

Oh, I want to say one more thing.

A major difference between the Upjohn case and the Lilly case is that the McKesson & Robbins case issue that was discussed yesterday based on the claim that Upjohn has agreements with wholesalers, although it competes with them, is not an issue in the Lilly case.

It was stipulated between the parties as a fact that Lilly does not sell to any retailers and therefore, does not compete with its wholesalers and that's -- so, that's not in the case.

Now, due process has been raised.

I don't think I need bother to discuss that beyond what is in our brief.

There can't be any question about the applicability of the Old Dearborn case here.

There's a rather timorous suggestion that it ought to be reconsidered.

It's a bedrock decision, a 30-year standing.

It was a unanimous court.

The Due Process Clause reads exactly the same now as it did then.

Now, on -- on the notice question, Hudson's argument just is that the McGuire Act sanctions only state statutes which require at least one express contract before you combine all the rest of the retailers in the State by notice.

Now -- and that the Ohio Act exceeds that congressional mandate because it permits fair trade enforcement by notice only.

Now, that just is not the meaning of these statutes or their interrelationship.

I -- I have no hesitation making the flat statement that if one reads the McGuire Act with the objective of giving effect to the purpose of the Congress in enacting it, it's not possible to conclude that it doesn't permit what Ohio did here.

Congress intended it.

I realize it had to say it, too, in the statute but it did say it.

Now, what was the background of the McGuire Act?

In 1937, Congress had enacted the Miller-Tydings Act.

It didn't mention nonsigners.

As we have now been told by the House Report on the McGuire Act, Congress intended in the Miller-Tydings Act to permit fair trade to be enforced against all alike, whether parties to a contract or not.

Congress thought, as we have now been told in the House Report that there wasn't any Sherman Act violation anyway without a contract.

And if you -- and if Congress said the state law may authorize the contract, enforcement against -- enforcement rights against nonsigners would follow automatically.

Now, unfortunately, the language that Congress used in the Miller-Tydings Act didn't reveal its intention with unmistakable clarity and so, in the Schwegmann case, this Court held the Sherman Act bans not only expressed fair trade contracts but the implied obligation that arises when a purchaser with notice acquires goods and then uses the trademark which has been notified the subject to the price restrictions in the resale.

And the Court held Congress didn't articulate its intention to accept from the Sherman Act that implied obligation.

Now, what did Congress do then?

It very promptly passed the McGuire Act and this time, to make sure nobody could misunderstand its intention again, it laid it out in about 10 or 12 different ways, both in the House Report which explained and recommended the McGuire Act in the very form in which it passed and in the Act itself.

Let me just review briefly what they did say.

In the House Report, first, they said, in substance, “We intended the Miller-Tydings Act to permit state Fair Trade Acts to be enforced with respect to the implied obligation reaching with respect to the fellow who purchases with notice and then uses the trademark and cuts the price.”

Then they said, in the Schwegmann case, it was held to the contrary.

We overruled it, not part of it, all of it.

They said, “We want to make it abundantly clear that Congress means to let these state Fair Trade Acts operate and be enforced in their totality” and they didn't stop there.

They said, “We want to remove any federal obstacle to a broader interpretation of the state fair trade laws in interstate commerce” and lest anybody think that they were only talking about just the fair trade contracts that were in -- then on the books, they said, “We think the states should be permitted to experiment further with fair trade legislation” and they still didn't stop.

They said, “So far as the Federal Government is concerned, we want to leave the States free to protect their trade against these predatory price practices in the manner best known to them.”

Now, that's the House Report.

There couldn't be any question about their purpose.

Now, let's see whether this time, they were able to find the English words to give effect to -- to reveal the purpose.

Justice Hugo L. Black: Is that quoted in your brief, the part that you have just said?

Mr. Everett I. Willis: Yes, sir.

Well -- well, it's -- yes, it is, yes, it is in a reference to the House Report, which is House Report No. 1437, 82nd Congress, Second Section -- Second Session, February 27, 1952.

Now --

Justice Hugo L. Black: You don't have -- you don't have it quoted in your brief?

Mr. Everett I. Willis: Yes, sir.

Well, I don't know that I have the quotes.

I --

Justice Hugo L. Black: That's fine.

I don't want to delay you.

It could take up your time.

Mr. Everett I. Willis: Alright.

Well, it's all there.

Justice Hugo L. Black: (Voice Overlap) was --

Mr. Everett I. Willis: All -- all that I've said is in the brief, yes, sir.

All that I've said is in the brief.

Now -- now, let's look at the -- at the Act itself.

We know what the purpose was.

Let's see if they were able to say it.

In the first place, the preamble of the Act says that its purpose is to protect the rights of the States to regulate their internal affairs by adopting laws and policies authorizing the enforcement of fair trade prices against all alike, whether parties to a contract or not.

There are more words than that.

That's the substance.

Justice Hugo L. Black: Would you mind stating what fair trade prices, what they mean just exactly?

Mr. Everett I. Willis: Oh, yes, sir.

Under -- under the state fair trade laws and under the Ohio law, if the owner of a trademark enters into contract specifying minimum prices for resale, these are vertical.

Justice Hugo L. Black: Fixing the prices for resale.

Mr. Everett I. Willis: Yes, sir, minimum prices for resale.

Those -- those contracts are made lawful.

It is also made lawful to enforce those prices against one who hasn't signed any contract if he's notified that “this is our trademark and if you acquire the goods and if you use our trademark in the resale, you don't use the trademark, it doesn't matter, if you use our trademark in the resale, this minimum price applies to you even though you are not a party to the contract,” so the preamble said, as I have recited.

Now, when they got to the main operative provision of -- in paragraph 2 of the McGuire Act, they did not just repeat the language that this Court had regarded as applying only to express contracts.

They said, “We want any, any contracts or agreements that are lawful under the state law for resale price maintenance to be enforceable despite the Sherman Act.”

Now, I note in passing that that phrase -- that in using that phrase “any contracts”, they were using a phrase that this Court, many years ago, had construed when the phrase was included in another federal statute to be comprehensive enough to include “not only expressed contracts but contracts which arise by implication.”

Now, to further forestall any misinterpretation, they said -- they added paragraph 3 to the Act which said that "the antitrust laws of the United States were not to prevent the exercise or the enforcement of any right or any right of action created by any state statute, state law or state policy against a person willfully failing to observe state fair trade prices, whether party to a contract or not."

Now, lest anybody might think that they were putting the States in a straight jacket of just the fair trade laws they had then, both in paragraph 2 about the contract and in paragraph 3 about enforcement against parties not party to a contract, they said, “We mean contracts and rights of enforcement recognized by state statutes now or hereafter in effect.”

And in paragraph 3, they said, "This nonsigner enforcement we're talking about is the enforcement permitted by any state statute which, in substance, provides that willfully and knowingly disregarding the prices is actionable.”

And then, I think this is about number 12 on the list.

To -- To just put an additional copper rivet in it, they added paragraph 4, which said, "None of these contracts, any contracts in 2, none of these enforcement rights under 3 shall constitute an unlawful burden on interstate commerce, restrain on interstate commerce or interference with the interstate commerce."

Now, this time, Congress left nothing to the imagination.

It didn't whisper its intention.

It -- it roared, it repeated itself and it underscored that the antitrust laws are not a part of the Constitution of the United States.

They're made by Congress.

And Congress wanted to make clear this time that they meant to accommodate the right of the States to permit vertical resale price maintenance as they saw fit.

Now, Hudson has a chivilla for this.

They say, well, this Ohio Act permits fair trade enforcement by notice only and the McGuire Act requires at least one express contract before you combine the other 2000 by notice.

Now, among other things, that assumes facts that are not in this case.

Lilly established its fair trade prices by express contracts with 1400 retailers, 65% of the retailers in the State of Ohio and gave notice to all the others of the prices established in those contracts.

And furthermore, the argument assumes an interpretation of the Ohio statute that the Ohio courts have not made.

The Ohio statute can be read to mean that you establish your price in the first instance by an express contract and control it from thereon by contracts or notices.

Now, I don't say that's inevitable that it has to be read that way, but it could, particularly if it was thought they were a constitutional question if it were interpreted the other way and as a matter of fact, although the Ohio Supreme Court didn't discuss the matter, if you look at page 402 of the Upjohn record where the Court of --

Justice Byron R. White: Did they include the Ohio law (Inaudible)?

Mr. Everett I. Willis: Well, yes, it says “Establish and control by contract or by notice”.

Now, just -- there isn't a comma after establish but suppose there were, it would say “Establish, and control by contract or notice”.

You see, it could -- it could be.

I don't say it's compelling.

At page 402 of the Upjohn record, the Court of Appeals did interpret the -- the Ohio statute that way.

They -- after reciting that they adopted an Act which -- that Ohio adopted an Act somewhat enlarging on the Virginia Act and -- and by the way, on the reference to the ball of the case where he said the -- that the Virginia courts held that remote parts wasn't as good.

The Virginia statutes differ for one thing.

The Ohio statute says and the Virginia statute does not, whether buying from the original vendor or not, but the -- the Court of Appeals said, in referring to the Ohio system of resale price maintenance, this is accomplished by fixing fair trade prices by contracts with other retailers with notice of such prices to the retailer involved and the retailer then purchasing such articles for resale on the retail market with knowledge that under the law, he has impliedly contracted to maintain fair trade prices by purchase for resale under such circumstances.

Now, the -- the relationship of the nonsigner, under Ohio law, is one of implied contract.

That made a difference in Ohio because the courts had held if it wasn't contractual, it wasn't -- Ohio requirements weren't satisfied.

The Ohio legislature created that as a method of entering into a contract by action of the party and the courts then said, in this case, Ohio requirements are satisfied.

Now, I want to mention one other thing that Mr. Krotinger -- he cited Williston on common law which, of course, Ohio is not bound by whatsoever, but he quoted a provision that indicate that there might not be a contract if the purchaser was remote, in other words, not the immediate purchaser but one further down.

We must always distinguish between the commodity and the trademark.

Nobody acquires ownership of our trademark when they buy the goods.

Now, I say, whether it was an implied contract, it made a difference in Ohio but under Ohio only.

Federally, it made not slightest difference whether the State denominated this relationship, a contract or not.

If it's an implied -- if you're in a State that calls it an implied contract, then it's clearly enforceable under paragraph 2 of the McGuire Act.

If it isn't a contract, but there are contracts with others and Hudson is notified of the prices in those contracts, then it's -- it's -- Hudson is caught under paragraph 3.

And since here, it's both an implied contract and there are other contracts of which it had notice, it's got under both so the only difference it makes federally is which section you're proceeding under.

Now, I would like to turn to the other question which, as I say, is briefed but has not been discussed by Mr. Krotinger and that is their argument that Section 29 (b) (2) of the Ohio Act permits horizontal agreements between competitors and horizontal boycotts and therefore, cannot apply in interstate commerce because of paragraph 5 of the McGuire Act.

Now, the provision he bases it on is the provision in paragraph 29 (2) that says that a fair trade contract may require a vendee to obtain fair trade contracts from those to whom he resells on resale, an exact counterpart of the same provision in paragraph 2 of the McGuire Act.

This wasn't in the Miller-Tydings Act but Congress is taking no chances this time and it put it in and it's -- and it wasn't anew.

This is not an Ohio invention.

Every Fair Trade Act in the country had such a provision in it in one form of words or another at the time Congress enacted the McGuire Act.

The argument, as I understand it, of Hudson is that the resale by the vendee, who's required to get further contracts, might be a competitor and if so, paragraph 5 of the McGuire Act would prevent one retailer from getting a fair trade contract from another.

Well, if that's so, and I think there's a lot of argument as to whether it is so that I won't go into, but suppose it is so, well, then the same is true under Section 34 of the Ohio Act which similarly prevents contracts between retailers, between wholesalers and between manufacturers and that provision of Section 34 limits every provision of the Ohio Act unless specifically excluded and Section 29 (b) (2) does not specifically exclude it.

Justice Byron R. White: Well, how about the (Inaudible)

Mr. Everett I. Willis: No, sir.

Oh, no, it did not.

Not at all, not at all.

Justice Byron R. White: (Inaudible)

Mr. Everett I. Willis: Well, this -- this question wasn't raised in the pleadings.

It wasn't raised in Hudson's petition.

The Court of Common Pleas was never heard of until the reply brief in the Supreme Court.

Justice John M. Harlan: Are there any other cases in Ohio that do construe that provision?

Mr. Everett I. Willis: Not that I know of.

Now, of course, there is no -- there is no provision in Lilly's expressed fair trade contracts like this that the vendees have to get a -- a fair trade contract on resale.

I've been arguing a little bit hypothetically because the argument I'm meeting is hypothetical.

Hudson's argument is, there is a provision in the expressed contract of Lilly that requires the retailer not to resell to fair trade violators and he says, as I understand it, Hudson says this is enough like the 29 (b) (2) provision that it may be impliedly authorized and -- and involve the horizontal ban and -- and so -- and -- and therefore, it's not a good provision.

Now, I should say that it's doubly hypothetical.

There is no -- not a word in the record, no claim that Lilly's -- has entered into any horizontal agreements with anybody.

There's no suggestion and there couldn't be that Lilly or anybody else had refused to sell to Hudson.

Indeed, Mr. Krotinger's statement that Lilly called upon Hudson to observe this paragraph 6, this refusal to sell, to the provision is not supported by the record if you look at the very warning letter that he referred to, it's at page 17 and 18 of our record.

You will -- you will see that the only obligation that they referred to on Hudson's part was an obligation, “You are obligated to uphold our minimum retail resale prices, whether you've signed the contract or not” and in the cross-petition in the Court of Common Pleas, the only injunctive relief they sought against Hudson -- Lilly sought against Hudson was injunction against disregarding the fair trade prices, no other, no other provision of the contract.

Now, the Ohio courts have not --

Justice Byron R. White: Mr. Willis, in -- the complaint in this case, it seems the -- there's this allegation that the Ohio law provides that after giving notice, a proprietor may require the distributor to sell it not less than a minimum resale price as stipulated by the proprietor and may further require the distributor not to sell to any other distributor without first obtaining an agreement from such other distributor.

He will not sell it at price that's less than the minimum resale prices.

Now, is this the horizontal argument that you've been talking about or not?

Mr. Everett I. Willis: May I just ask where -- where you were reading --

Justice Byron R. White: Well, I was reading -- well, actually, I was reading out of the Upjohn record, out of the Upjohn record at page 12.

Mr. Everett I. Willis: Well, that's -- that's a --

Justice Byron R. White: This is the second amended petition for declaratory judgment.

Justice Hugo L. Black: It's on page 5 of your brief.

Mr. Everett I. Willis: Well, you see -- well, that was a reference to that provision of the Ohio Act and then there as a statement that the McGuire Act only permits enacting legislation authorizing contracts prescribing minimum resale prices.

There were no -- no reference at all to this paragraph.

Justice Byron R. White: Well, I just read you what the -- maybe you did -- was --was this the same -- is the complaint the same in the Lilly and the Upjohn cases?

Mr. Everett I. Willis: I believe so.

I believe so.

Justice Byron R. White: Oh, I just read out of the -- out of his petition which refers to the Ohio Acts permitting a distributor -- forbidding a distributor to sell to other distributors without first obtaining an agreement to sell only at these prices.

This is a horizontal arrangement.

Mr. Everett I. Willis: To that extent, yes, sir.

No reference at all to Section 5 (a) (5) of the McGuire Act or to paragraph 6 of our -- of our contract.

Justice Byron R. White: Well, it goes right on and says that it's contrary and inconsistent with a section of the Sherman Act as admitted by the Miller-Tydings Act and the McGuire Act.

Mr. Everett I. Willis: Section 5 (a) (2) and 5 (a) (3) of the McGuire Act, 5 (a) (5) is the one that would raise this question and -- that is said to raise this question.

Justice Byron R. White: Well, it seems I -- is this the -- is this the issue though, the -- the business about selling to the other distributors, is this the horizontal issue --

Mr. Everett I. Willis: Yes, sir.

Justice Byron R. White: -- that you're talking about?

Mr. Everett I. Willis: Yes, sir.

Yes, sir.

I suppose you might say it was handed out there.

Now, the Ohio courts have not said whether this paragraph seeks refusal to -- to sell is or is not authorized by the Ohio Act by Section 29 (b) (2).

I must say that in most States, the refusal to sell is a permissible method of enforcement because one fundamental aspect of fair trade is that if you're going to have a program, it's got to be uniform against all alike, not let some go merrily along violating while the others comply, but the Ohio courts haven't said.

Now, if it is alright under paragraph 29 (b) (2) in the Ohio court note, then it' also alright under paragraph 2 of the McGuire Act because it has the same provision.

If it runs afoul of paragraph 5 of the McGuire Act, it also runs afoul of Section 34 of the Ohio Act and if it's not a good provision, the Ohio Act can't be tainted by it.

This has nothing to do with the constitutionality of Ohio Act.

It's just a question of whether Lilly can enforce a particular contract provision.

They've made no attempt to and we don't know whether they can or not, very frankly.

Now, let me make one last assumption.

Let's suppose paragraph 6 isn't authorized by either Act or although the reasoning by which this might be done eludes me, let's suppose we could find that it is authorized by the Ohio Act but not by the McGuire Act, it -- it wouldn't make the slightest difference.

Paragraph 9 of the same Lilly contract, our record at page 14, says this, “This contract shall be interpreted under and shall be subject to the limitations imposed by the Fair Trade Act of the State in which the retailer does business.

And in the event any provision of this contract shall be held invalid under such Act or any other statute, law or public policy or to be held inapplicable with respect to any given set of facts or circumstances, then or in either such events, this -- that provision is severed out of the contract and the rest of the contract remains.

So even if paragraph 6 were bad under the Ohio Act, it just couldn't under this -- it would be severed out and couldn't apply to intrastate commerce.

If it's good under the Ohio Act but not good under the McGuire Act, well, paragraph 9 says you sever it out in interstate commerce.

It just doesn't apply.

Now, I -- I believe -- I submit that if there was ever a case in which Congress went to unusual lengths to guarantee that its decision to turnover to the States a particular area of regulation would not be thwarted.

This is that case.

The will of Congress was thwarted once or the intention of Congress, I should say, when the Miller-Tydings Act was held not to be enforceable against persons who hadn't signed a contract and to be sure that's Congress' own fault, that can be laid to the fact they didn't use enough words in the Miller-Tydings Act to reveal their real intention, but this time, they have and I respectfully submit that the will of Congress should not be thwarted a second time.

Now, I -- I believe I have time to say just a brief word about the jurisdictional aspect and I want to refer particularly to a question which was raised yesterday in the course of the Upjohn argument.

Justice Hugo L. Black: May I ask you before you go to that, can you just give me the number of the House Report from which you quote on?

Mr. Everett I. Willis: Yes, sir.

The House Report on the McGuire Act was No. 1437.

Justice Hugo L. Black: 14?

Mr. Everett I. Willis: 1437.

Justice Hugo L. Black: 37.

Mr. Everett I. Willis: And it's the 82nd Congress, Second Section -- Session and is dated February 27, 1952.

Justice Potter Stewart: I think it's a -- that appears on page 46 of your brief as well as the quotation policy.

Mr. Everett I. Willis: It appears on that page and on other pages shown at page IX of our index.

There are a number of references to it.

Now, on jurisdiction, we have briefed fully that we believe, and we do believe, that the case should be dismissed for want of jurisdiction.

The question was asked yesterday, suppose these questions were raised in the Ohio courts but the Ohio courts just didn't discuss them, does that preclude jurisdiction in this Court?

Well, stated in that way, of course not, of course not.

But there are some pretty rigid requirements to get these questions properly raised and decided and before this Court and it's the burden of the appellant to show that he has got them here.

The questions have got to be properly raised below and that has to do with the -- under Ohio practices, including them both in the assignments of error and in the brief, and preserving them from one court to another and not raising it here, skipping the intermediate court and then raising it in the Ohio Supreme Court.

It has to be properly raised.

Furthermore, it's got to be either.

Actually, to bring the question here, either actually decided by the courts so you can read it and see it or it's got necessarily to have been decided in the sense that there are no possible interpretation of the state statute under which the Court could have been concluded that the Constitution was violated because the statute is not to be interpreted in such a way as to raise it and then, finally, the judgment of the highest court of the State, the Ohio Supreme Court in this case, must be final and here in our case, as in the Upjohn case, there has been a remand and as a matter of fact, one or two other questions that are being raised here are -- have been raised in the remand proceedings and yet, they say they're here and so, I believe that the -- that this appeal should be dismissed for want of jurisdiction.

If it is not, if Your Honors retain jurisdiction, I think it's as clear as the English language could make it, that the McGuire Act carefully and explicitly and completely almost repetitiously authorized what Ohio has done here and the judgment holding the Ohio act constitutional should be affirmed.

Chief Justice Earl Warren: Mr. Krotinger, would you mind addressing yourself for a moment to -- to what Mr. Willis said about the -- the Report, House Report --

Rebuttal of Myron N. Krotinger

Mr. Myron N. Krotinger: Yes, Your Honor.

Chief Justice Earl Warren: -- on the McGuire bill?

Mr. Myron N. Krotinger: Yes, Your Honor.

I believe that Mr. Willis is reading of the legislative history is a reading after the event.

Chief Justice Earl Warren: I beg your pardon?

Mr. Myron N. Krotinger: Is a reading after the event.

Congress never so understood such a legislative history.

The legislative -- the understanding of Congress, as shown by the Harris Bill Report, House Report 1253 of June 9th, 1959 when, for the first time, a proposal appeared in Congress to add notice to the statute to amend the McGuire Act, at page 18, states the only change proposed in paragraphs 2, 3 and 4, that is the McGuire Act, is to where reference to notices in the provisions referring to contracts and agreements.

This change is made so that where a state law permits a manufacturer to establish a stipulated, a minimum resale price by the giving of notice, the McGuire Act provisions will apply to the same extent they do now in the case of state laws which permit the establishment of such prices by contracts or agreements between manufacturers and the distributors.

Your Honors, there has never been so closely cabined as the piece of legislation as the McGuire Act which was subject to a vicious three-way fight through both House of the Congress.

I have here the House release from --

Chief Justice Earl Warren: May I --

Mr. Myron N. Krotinger: -- the House Report.

Chief Justice Earl Warren: -- may I ask this.

Does or does not this House Report that Mr. Willis paraphrased for us apply to the -- to this Act?

Mr. Myron N. Krotinger: No, sir.

In no sense --

Chief Justice Earl Warren: What Act -- what Act did it refer to?

Mr. Myron N. Krotinger: Only the McGuire Act of 1952 and the Miller-Tydings Act and may I state, Your Honor, in the section-by-section analysis of this statute at page 5 of the House Report, paragraph 2 --

Justice Hugo L. Black: (Voice Overlap) which House Report?

Mr. Myron N. Krotinger: On -- on the HR 5767, the 1952 House Report, Your Honor.

Paragraph 2, with the two exceptions referred to below, this paragraph contains substantially the same provisions as those contained in the first proviso of the Miller-Tydings Act.

In substance, this paragraph provides that neither the Federal Trade Commission Act nor any of the Antitrust Acts shall make unlawful a contract proscribing minimum or stipulated prices for the resale of a trademarked commodity in open competition of other commodities.

This paragraph differs from the Miller-Tydings Act in two respects.

First, it includes a provision expressly covering contracts which proscribe stipulated prices.

Such contracts are not expressly covered by the Miller-Tydings Act.

Second, it includes a provision expressly covering a contract which requires a vendee to enter into another contract.

In other words, Your Honors, nobody in 1952 thought about notices.

It wasn't even an issue before the Congress.

This is all reading back after the event.

And as Mr. Priest, the Chairman of the House Committee, as shown in our brief, said to the Congress, “Our purpose is to let the laws now, in effect, operate as they operated from 1937 until the date of the Schwegmann relief, the laws then in effect.”

Now, Your Honors, the effect of the broadened reading that Mr. Willis would like to give us would be to state that the State of Ohio can, for example, take a proprietary interest concept in the Old Dearborn case which was made in 1936 in an intrastate transaction, without relationship to a federal enabling law, take a formula and a standard which wasn't even mentioned in the Miller-Tydings Act and the McGuire Act.

And so, now, we say, in 1958, the notice was contemplated by the Congress in 1952, not at all.

The proprietary interest of 1958 was contemplated in 1952, not at all, not a word about this.

Why do we get both notice and proprietary interest in 1958, because this is the third round of fair trade legislation?

This is the solution, Your Honors, and the answer to the declarations of unconstitutionality of the nonsigner clauses in 24 States and where the Congress points out in the report on the Harris Bill that unless we do this, fair trade is dead in 16 States, now 24 and this is the manufacturer's means of giving notice of his proprietary interest and reestablishing his rights.

This history you have been hearing, Your Honors, is after the event, reading events of 1952 backward in a way which was never contemplated at the time and which any reasonable reading of a legislative history will show.

Point 2, Your Honors, we come to the business of the due process issue and how it was raised and its reasonable scope.

Your Honors, due process --

Justice Arthur J. Goldberg: (Inaudible)

Mr. Myron N. Krotinger: Yes, sir.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Myron N. Krotinger: Yes, sir.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Myron N. Krotinger: Section 5 (a) (3) may not be enforced, Your Honor.

Section 5 (a) (3) turns upon state policy and I reiterate to Your Honors that the whole purpose of the Ohio legislation was to solve the problems of fair trade and not as was done in 1952 by adding the nonsigner clause but to redefine a conception of contract so as to eliminate the problem altogether.

The problem is solved by killing it.

There is no longer a signer or nonsigner case.

Thank you (Inaudible).

Chief Justice Earl Warren: Very well.

Print this transcript Transcript: 

Argument of Myron N. Krotinger

Chief Justice Earl Warren: Number 489, Hudson Distributors, Inc., versus the Upjohn Company.

Mr. Krotinger.

Mr. 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.

Justice John M. Harlan: Is the full scope of this statute been authoritatively construed by the Ohio courts?

Mr. 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 --

Justice John M. Harlan: I beg your pardon, excuse me.

Mr. 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.

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.

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 --

Unknown Speaker: (Inaudible)

Mr. Myron N. Krotinger: Upjohn, Your Honor.

Unknown Speaker: (Inaudible)

Mr. 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.

Unknown Speaker: (Inaudible)

Mr. Myron N. Krotinger: Paragraph 2.

Unknown Speaker: (Inaudible)

Mr. Myron N. Krotinger: 5 (a) (3)?

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

Unknown Speaker: Yes, that's right.

Mr. Myron N. Krotinger: Right.

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

Unknown Speaker: (Inaudible)

Mr. Myron N. Krotinger: No, Your Honor.

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.

Unknown Speaker: (Inaudible)

Mr. Myron N. Krotinger: Yes.

Unknown Speaker: (Inaudible)

Mr. Myron N. Krotinger: Yes, Your Honor.

Unknown Speaker: (Inaudible)

Mr. 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 --

Justice Potter Stewart: (Voice Overlap) their -- under their State Constitution?

Mr. 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.

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?

Justice John M. Harlan: (Inaudible)

Argument of Ralph M. Carson

Mr. Ralph M. Carson: Mr. Chief --

Chief Justice Earl Warren: Mr. Carson.

Mr. 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.

Justice John M. Harlan: Mr. Carson.

Mr. Ralph M. Carson: Yes, Your Honor?

Justice John M. Harlan: At page (Inaudible) this case and --

Mr. Ralph M. Carson: Yes.

Justice John M. Harlan: (Inaudible)

Mr. 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.

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

Justice John M. Harlan: (Inaudible)

Mr. Ralph M. Carson: Yes, Your Honor.

Justice John M. Harlan: (Inaudible)

Mr. 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.

Justice Arthur J. Goldberg: Mr. Carson.

Mr. Ralph M. Carson: Yes, sir?

Yes, Your Honor?

Justice Arthur J. Goldberg: (Inaudible)

Mr. Ralph M. Carson: Yes.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Ralph M. Carson: Yes.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Ralph M. Carson: Yes.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Ralph M. Carson: Yes.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Ralph M. Carson: Yes.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Ralph M. Carson: Yes.

Justice Arthur J. Goldberg: (Inaudible)

Mr. 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."

Justice Arthur J. Goldberg: (Inaudible)

Mr. Ralph M. Carson: I assume that.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Ralph M. Carson: Yes.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Ralph M. Carson: You could say.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Ralph M. Carson: You -- you --

Justice Arthur J. Goldberg: (Inaudible) about the state law and federal law?

Mr. 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.

Justice 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 --

Mr. Ralph M. Carson: Yes, sir.

Justice Byron R. White: -- before the Ohio court and they just ignored them.

Mr. Ralph M. Carson: Yes, sir.

Justice Byron R. White: You would still --

Mr. Ralph M. Carson: I would, sir.

I think I would.

Justice Byron R. White: -- think that we ought to send it back to the Ohio court.

Mr. Ralph M. Carson: I think -- I think, Your Honors, that -- that case, we want to send it back.

Justice 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?

Mr. 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 --

Justice Byron R. White: I see.

Mr. Ralph M. Carson: -- Second is final contention is sale of his own property.”

Justice 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)?

Mr. Ralph M. Carson: You -- you certify questions and you brief them both.

Justice Byron R. White: And were the federal questions in that?

Mr. 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 --

Justice Byron R. White: Because they were not raised in the lower court --

Mr. Ralph M. Carson: Yes.

Justice Byron R. White: -- is that it?

Mr. Ralph M. Carson: Or because that might be so.

I can't conceive what would move their discretion.

They may have something to tribute.

Justice Byron R. White: You -- you agree that they were presented to the --

Mr. Ralph M. Carson: They where in the briefs.

Justice Byron R. White: -- Supreme Court of Ohio.

Mr. Ralph M. Carson: They were in the briefs.

Justice Byron R. White: They were presented.

Mr. Ralph M. Carson: Yes.

Justice Tom C. Clark: They were presented in the Court of Appeals, also in the complaint of (Voice Overlap) --

Mr. Ralph M. Carson: Well, I've read, Your Honor, what the Court of Appeals said as to the certification --

Justice Tom C. Clark: It may now --

Mr. Ralph M. Carson: Limited --

Justice Tom C. Clark: (Voice Overlap) --

Mr. Ralph M. Carson: Sir?

Justice Tom C. Clark: -- the rehearing petition of the (Voice Overlap) --

Mr. Ralph M. Carson: Yes, the rehearing petition did -- did mention.

Now --

Justice Potter Stewart: The Court of Appeals opinion at page 394 talks about the McGuire Act.

Mr. Ralph M. Carson: 394?

Justice Potter Stewart: In the record, unless I'm reading another thing here.

Mr. 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.

Unknown Speaker: (Inaudible)

Mr. Ralph M. Carson: 10?

Unknown Speaker: (Inaudible)

Mr. 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.

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.

Justice William O. Douglas: (Inaudible) were present?

Mr. Ralph M. Carson: I believe that they were adverted to in a vague way in appellant's briefs, yes, sir.

Justice Tom C. Clark: Would --

Mr. Ralph M. Carson: But not the McKesson & Robbins point that I've just mentioned as an exception.

Excuse me, Justice Clark?

Justice 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)

Mr. 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 --

Justice Tom C. Clark: As I understand it --

Mr. Ralph M. Carson: -- to declare.

Justice Tom C. Clark: -- I don't think that's the reason why they did not win.

Mr. Ralph M. Carson: It could well be, sir.

It could well be, sir.

Justice Tom C. Clark: Otherwise, it wouldn't -- why would they put that in here?

Mr. 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.

Justice John M. Harlan: That has nothing to do with the Federal Constitution.

Mr. Ralph M. Carson: No, sir.

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

Justice John M. Harlan: (Voice Overlap) Ohio Constitution.

Mr. Ralph M. Carson: An Ohio Constitution.

Justice William O. Douglas: Well, it might be unconstitutional because it didn't comply with the McGuire Act.

Mr. Ralph M. Carson: The Supreme Court didn't think so and didn't say so.

Justice William O. Douglas: Well, I --

Mr. 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)

Justice Hugo L. Black: Is it your argument that the case did not pass on the question of (Inaudible)

Mr. Ralph M. Carson: Yes, sir, I believe so.

Justice Hugo L. Black: Why isn't that --

Mr. Ralph M. Carson: Because --

Justice Hugo L. Black: -- objection --

Mr. Ralph M. Carson: Sir?

Justice Hugo L. Black: -- if it's raised?

Mr. 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 --

Justice Byron R. White: That was never --

Mr. Ralph M. Carson: -- for trial in the cases remanded.

Justice Byron R. White: -- that was never raised in the Supreme Court.

Mr. Ralph M. Carson: Never raised in the Supreme Court.

Justice Tom C. Clark: But the --

Mr. Ralph M. Carson: Now --

Justice Tom C. Clark: -- the notice was, isn't it?

Mr. 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 --

Justice 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)?

Mr. Ralph M. Carson: Because Mr. Krotinger urged it.

Justice Byron R. White: So he did raise it.

Mr. Ralph M. Carson: He did raise it, yes.

Justice Byron R. White: He raised it in the Supreme Court.

Mr. Ralph M. Carson: Yes, exactly.

Justice Byron R. White: He presented it to the Court.

Mr. 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 --

Justice John M. Harlan: (Inaudible)

Mr. Ralph M. Carson: -- federal --

Justice John M. Harlan: (Inaudible)

Mr. Ralph M. Carson: Yes, sir?

Justice John M. Harlan: (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?

Mr. 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?

Justice John M. Harlan: Well, I think so (Voice Overlap) --

Mr. Ralph M. Carson: You asked what was the purpose of the remand?

Justice John M. Harlan: 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)

Mr. Ralph M. Carson: Well, I -- my --

Justice John M. Harlan: -- purpose of the remand.

Mr. 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.

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

Mr. 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.

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.

Chief Justice Earl Warren: No problem.

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

Rebuttal of Myron N. Krotinger

Mr. Myron N. Krotinger: Your Honor --

Chief Justice Earl Warren: -- pose.

Mr. 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.

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.