p. 386HUDSON DISTRIBUTORS, INC., v. ELI LILLY & CO.
APPEAL FROM THE SUPREME COURT OF OHIO.No. 490. Argued April 30, 1964.—Decided June 1, 1964*
Under the McGuire Act a trademark owner may, where sanctioned
by a state fair-trade act, enforce a minimum retail price established
by written agreements with some retailers in the State against a
notified retailer who has not signed such an agreement. Pp.
386-395.
174 Ohio St. 487, 190 N. E. 2d 460, affirmed.
Myron N. Krotinger argued the cause for appellant in
both cases. With him on the briefs were Leonard Lane
and Morton L. Stone.
Ralph M. Carson argued the cause for appellee in No.
489. With him on the brief was Henry L. King.
Everett I. Willis argued the cause for appellee in No.
490. With him on the brief was Louis S. Peirce.
Briefs of. amici curiae, urging affirmance, were filed by
James A. Gorrell for Corning Glass Works et al., and by
R. W. Kilbourne for Ohio Hardware Association et al.
Mr . Just ice Goldberg delivered the opinion of the
Court.
These appeals raise the question of whether the
McGuire Act, 66 Stat. 631, 15 U. S. C. §§ 45 (a)(l)-(5),
permits the application and enforcement of the Ohio Fair
Trade Act against appellant in support of appellees’ sys-
tems of retail price maintenance. For the reasons stated
below, we hold that the Ohio Act, as applied to the facts
of these cases, comes within the provisions of the McGuire
Act exempting certain resale price systems from the
*Together with No. 489, Hudson Distributors, Inc., v. Upjohn
Company, also on appeal from the same court, argued April 29, 1964.
p. 387prohibitions of the Sherman Act, 26 Stat. 209, 15
U. S. C. § 1 et seq.
The two appeals, one involving The Upjohn Co. and
one involving Eli Lilly & Co., were considered together
in the Ohio courts.1 For simplicity we state only the
facts of the Lilly case. Appellant, Hudson Distributors,
Inc., owns and operates a retail drug chain in Cleveland,
Ohio. Appellee, Eli Lilly & Co., manufactures pharma-
ceutical products bearing its trademarks and trade names.
Lilly sells its products directly to wholesalers and makes
no sales to retailers. Hudson purchases Lilly brand
products from Regal D. S., Inc., a Michigan wholesaler.
In June 1959, the Ohio Legislature enacted a new Fair
Trade Act, Ohio Revised Code §§ 1333.27-1333.34. Sub-
sequently Lilly sent letters to all Ohio retailers of Lilly
products, including Hudson, to notify them of Lilly’s
intention to establish minimum retail resale prices for its
trademarked products pursuant to the new Ohio Act and
to invite the retailers to enter into written fair-trade con-
tracts. More than 1,400 Ohio retailers of Lilly products
(about 65% of all the retail pharmacists in Ohio) signed
fair-trade contracts with Lilly. Hudson, however, re-
fused to enter into a written contract with Lilly and
ignored the specified minimum resale prices. Lilly for-
mally notified Hudson that the Ohio Act required Hud-
son to observe the minimum retail resale prices for Lilly
commodities. Hudson, nevertheless, continued to pur-
chase and then to resell Lilly products at less than the
stipulated minimum retail resale prices.
Hudson thereupon filed a petition in the Court of Com-
mon Pleas for Cuyahoga County, Ohio, for a judgment
declaring the Ohio Act invalid under the State Constitu-
1The Supreme Court of Ohio stated: “The facts in both cases are
similar and the law applicable is the same. The appeals will be
treated together, since the assignments of errors in both cases are
exactly the same.” 174 Ohio St. 487, 190 N. E. 2d 460.
p. 388tion and federal law. Lilly answered and cross-peti-
tioned for enforcement of the Ohio Act against Hudson.
The Court of Common Pleas held the Ohio Act uncon-
stitutional under the State Constitution. On appeal, the
Court of Appeals for Cuyahoga County, after discussing
the federal and state legislation, 117 Ohio App. 207, 176
N. E. 2d 236, reversed the trial court and entered a judg-
ment declaring that the Ohio Act was not “in violation
of the Constitution of the State of Ohio nor of the
Constitution of the United States . . . .” The court
remanded the case “for further proceedings according to
law with respect to the cross-petition . ...”2 On fur-
ther appeal, the Supreme Court of Ohio affirmed 3 the
2 Hudson, in its second amended answer to the cross-petition,
allegedly raised the following defenses:
“(1) Hudson did not wilfully resell at less than Lilly’s fair trade
prices;
“(2) Lilly, a foreign corporation, was not properly licensed to
transact business in the State of Ohio;
“(3) paragraph 6 of Lilly’s fair trade contract [which provides
that: “Retailer agrees not to knowingly sell any of Manufacturer’s
‘Identified Commodities’ to any dealer who fails to observe the mini-
mum retail resale prices established under Paragraph 3 hereof”]
compelled retailers to enter into unlawful horizontal price fixing
agreements in violation of Section 1 of the Sherman Anti-Trust
Act . . . ;
“(4) Lilly was not uniformly enforcing its fair trade program on
trade-marked commodities in Ohio; and
“(5) Lilly modified its fair trade program by abandoning enforce-
ment on its prescription products in Ohio.”
The issues on the cross-petition are pending in the Court of Com-
mon Pleas, Cuyahoga County; further proceedings have been stayed
by that court pending the outcome of this appeal.
p. 389judgment of the Court of Appeals.4 174 Ohio St. 487,
190 N. E. 2d 460. This Court noted probable jurisdiction.
375 U. S. 938, 939.
Hudson contends that the provisions of the Ohio Act
under which Lilly established minimum resale prices are
not authorized by the McGuire Act, 66 Stat. 631, 15
U. S. C. §§ 45 (a)(l)-(5).5 Section 2 of the McGuire
Act provides in pertinent part as follows:
“Nothing contained in this section or in any of
the Antitrust Acts shall render unlawful any con-
tracts or agreements prescribing minimum or stipu-
lated prices, . . . when contracts or agreements of
that description are lawful as applied to intrastate
transactions under any statute, law, or public policy
now or hereafter in effect in any State . . . .”
Section 3 of the McGuire Act reads as follows:
“Nothing contained in this section or in any of
the Antitrust Acts shall render unlawful the exercise
or the enforcement of any right or right of action
created by any statute, law, or public policy now or
hereafter in effect in any State, Territory, or the
District of Columbia, which in substance provides
that willfully and knowingly advertising, offering for
p. 390sale, or selling any commodity at less than the price
or prices prescribed in such contracts or agreements
whether the person so advertising, offering for sale,
or selling is or is not a party to such a contract or
agreement, is unfair competition and is actionable
at the suit of any person damaged thereby.”
Before the enactment of the McGuire Act, this Court
in 1951 in
Schwegmann Bros. v. Calvert Distillers Corp.,
341 U. S. 384, considered whether the Miller-Tydings Act,
50 Stat. 693, 15 U. S. C. §
1, removed from the prohibi-
tion of the Sherman Act, 26 Stat. 209, 15 U. S. C. § 1 et
seq., a state statute which authorized a trademark owner,
by notice, to require a retailer who had not executed a
written contract to observe resale price maintenance.
Respondents in that case argued that since the Sherman
Act outlawed “contracts” in restraint of trade and since
the Miller-Tydings amendment to the Sherman Act
excepted “contracts or agreements prescribing minimum
prices for the resale” of a commodity where such contracts
or agreements were lawful under state law, the Miller-
Tydings Act therefore immunized all arrangements in-
volving resale price maintenance authorized by state law.
341 U. S., at 387. After examining the history of the
Miller-Tydings Act, the Court concluded that Congress
had intended the words “contracts or agreements” as
contained in that Act to be used “in their normal and
customary meaning,”
id., at 388, and to cover only
arrangements whereby the retailer voluntarily agreed to
be bound by the resale price restrictions. The Court
held therefore that the state resale price maintenance law
could not be applied to nonsigners—“recalcitrants . . .
dragged in by the heels and compelled to submit to price
fixing.”
Id., at 390. The Court stated that:
“It should be remembered that it was the state
laws that the federal law was designed to accommo-
date. Federal regulation was to give way to state
p. 391regulation. When state regulation provided for re-
sale price maintenance by both those who contracted
and those who did not, and the federal regulation
was relaxed only as respects ‘contracts or agree-
ments,’ the inference is strong that Congress left the
noncontracting group to be governed by preexisting
law.”
Id., at 395.
Shortly after the Schwegmann decision, Congress passed
the McGuire Act,6 66 Stat. 631, 15 U. S. C. §§ 45 (a)
(l)-(5). The Report of the House Committee on Inter-
state and Foreign Commerce, which accompanied the
McGuire Act, declared that:
“The primary purpose of the [McGuire] bill is to
reaffirm the very same proposition which, in the com-
mittee’s opinion, the Congress intended to enact into
law when it passed the Miller-Tydings Act . . . ,
to the effect that the application and enforcement
of State fair-trade laws—including the nonsigner
provisions of such laws—with regard to interstate
transactions shall not constitute a violation of the
Federal Trade Commission Act or the Sherman
Antitrust Act. This reaffirmation is made neces-
sary because of the decision of a divided Supreme
Court in Schwegmann v. Calvert Distillers Corpora-
p. 392tion (
341 U. S. 384, May 21, 1951). In that case,
six members of the Court held that the Miller-
Tydings Act did not exempt from these Federal laws
enforcement of State fair trade laws with respect to
nonsigners. Three members of the Court held that
the Miller-Tydings Act did so apply.
“The end result of the Supreme Court decision has
been seriously to undermine the effectiveness of the
Miller-Tydings Act and, in turn, of the fair-trade
laws enacted by 45 States. H. R. 5767, as amended,
is designed to restore the effectiveness oj these acts
by making it abundantly clear that Congress means
to let State fair-trade laws apply in their totality;
that is, with respect to nonsigners as well as signers.”
(Emphasis added.) H. R. Rep. No. 1437, 82d Cong.,
2d Sess., at 1-2.
This authoritative report evinces the clear intention
of Congress that, where sanctioned by a state fair-trade
act, a trademark owner such as Lilly could be permitted
to enforce, even against a nonsigning retailer such as Hud-
son, the stipulated minimum prices established by written
contracts with other retailers.7
Without disputing this interpretation of the McGuire
Act, Hudson argues that the Ohio Act as interpreted by
the Ohio courts reaches beyond the exemptive terms of
the federal Act by permitting the maintenance of resale
prices “by notice alone” where no contract has been en-
tered into between the owner of the trademark and any
retailer. Hudson emphasizes that the Ohio courts sus-
tained the Ohio Act under the State Constitution on the
theory that Hudson, simply by acquiring Lilly’s products
p. 393with notice of the stipulated prices, impliedly contracted
to observe the minimum prices. This implied contract
theory was deemed necessary by the Ohio Legislature and
by the Ohio courts to satisfy the State Constitution which
had recently been held to invalidate the enforcement of
resale prices against nonsigners. Union Carbide & Car-
bon Corp. v. Bargain Fair, Inc., 167 Ohio St. 182,147 N. E.
2d 481 (1958). Whatever merit there may be in the
argument that the logic of the Ohio implied contract
theory would apply to prices set by notice alone and with-
out any conventional or express contracts, on the facts
of the present case we need not and do not consider
whether a state statute so applied would involve “con-
tracts or agreements” in the sense in which those terms
are used in the McGuire Act.8 The undisputed facts
show that Lilly had established a system of resale price
maintenance involving written contracts with some 1,400
Ohio retailers. Section 1333.29 (A) of the Ohio Act
authorizes the establishment of minimum prices through
such contracts. Under these circumstances the fact that
the Ohio law, as construed for purposes of assessing its
validity under the State Constitution, regards Hudson as
a “contractor” (or “implied contractor”) rather than as a
nonsigner does not control the application and effect of
the federal statute—the McGuire Act. Section 3 of the
federal Act plainly upholds “any right or right of action
created by any statute ... in effect in any State . . .
which in substance” permits enforcement of resale prices
prescribed in contracts whether or not the violating seller
was a party to those contracts. For the purposes of § 3 of
the McGuire Act, therefore, it is clear that these cases
involve the requisite contracts with retailers,9 that, regard-
fee Note, 77 Harv. L. Rev. 763, 766-767 (1964).
p. 394less of whether Hudson itself entered into “contracts”
within the meaning of the McGuire Act, Hudson was at
least a nonsigner, and that under such circumstances Con-
gress plainly intended “to let State fair-trade laws ap-
ply . . . with respect to nonsigners as well as signers.”
H. R. Rep. No. 1437, 82d Cong., 2d Sess., at 2. Accord-
ingly we hold that the Ohio Act, as applied to the facts of
these cases, comes within the terms of the McGuire Act.
Hudson also argues that the Ohio statute can be read
to authorize fair-trade prices to be established by persons
other than the owner of the trademark or trade name.
This contention raises a hypothetical issue: Lilly is the
owner of all trademarks affixed to its goods and the Ohio
Supreme Court has not interpreted the statute as apply-
ing to persons other than owners. Hudson further argues
that § 1333.29 (A) of the Ohio Act authorizes a proprietor
to establish minimum resale prices for wholesale distrib-
utors with whom it competes and therefore conflicts with
the McGuire Act under this Court’s decision in United
States v. McKesson ■& Robbins, Inc.,
351 U. S. 305. This
argument also raises a hypothetical question for, as noted,
Lilly sells only to wholesalers and does not sell to
retailers.10 11
The questions raised by Hudson in its second amended
answer to the cross-petition,11 including the contention
retail resale price for their trademarked or branded commodities and
have caused notice of these contracts and the prices therein estab-
lished to be served on [Hudson].” 117 Ohio App. 207, 208; 176
N.
p. 395that Paragraph 6 of the Lilly fair-trade contracts compels
retailers to enter into allegedly unlawful horizontal price-
fixing agreements in violation of § 1 of the Sherman Act,
are not properly before us. They are pending and unre-
solved in the Ohio Court of Common Pleas, Cuyahoga
County. Hudson’s remaining questions are not properly
presented for resolution on this appeal; they concern
issues involving alleged interpretations of the Ohio Act
not made or considered by the Ohio courts or not raised
by the facts of the case.
Asbury Hospital v. Cass County,
326 U. S. 207, 213-214;
Alabama State Federation of
Labor v. McAdory, 325 U. S. 450, 470-471.
The price fixing authorized by the Ohio Fair Trade Act
and involving goods moving in interstate commerce
would be, absent approval by Congress, clearly illegal
under the Sherman Act, 26 Stat. 209, 15 U. S. C. § 1 et seq.
Dr. Miles Medical Co. v. John D. Park & Sons Co.,
220
U. S. 373. “Fixing minimum prices, like other types of
price fixing, is illegal per se.” Schwegmann Bros. v. Cal-
vert Distillers Corp., supra, at 386. Congress, however, in
the McGuire Act has approved state statutes sanctioning
resale price maintenance schemes such as those involved
here. Whether it is good policy to permit such laws is a
matter for Congress to decide. Where the statutory lan-
guage and the legislative history clearly indicate the pur-
pose of Congress that purpose must be upheld. We
therefore affirm the judgments of the Supreme Court of
Ohio.
Affirmed.
Mr . Just ice Harlan , dissenting.
I would dismiss these appeals for lack of jurisdiction.
Under well-established principles, the judgments on re-
view here are not “final,” as required by 28 U. S. C.
p. 396Har lan , J., dissenting. 377 U. S.
§ 1257,1 even assuming that the federal question which the
Court decides can be deemed to have been passed on by
the Supreme Court of Ohio.1 2
The appellant, Hudson, filed its petitions for a declara-
tory judgment that the Ohio Fair Trade Act3 was invalid
as soon as the Act went into effect.4 The appellees, Up-
john and Lilly, filed answers and cross-petitions alleging
Hudson’s refusal to comply with the Act and seeking
injunctive relief and damages. Pursuant to a stipula-
tion of the parties and as permitted by Ohio procedure,
the issue raised by the petition for a declaratory judg-
ment—the “general” validity of the Ohio Act—was tried
separately and in advance of the trial of all other factual
and legal issues raised by the answers and cross-petitions
and the responses thereto. In this posture, the cases, de-
cided together at every level, proceeded through the Ohio
courts. The Court of Common Pleas for Cuyahoga
County decided that the Ohio Fair Trade Act was invalid
under the Ohio Constitution, because it involved an un-
lawful delegation of legislative power. On appeal, the
Court of Appeals for Cuyahoga County reversed, 117
Ohio App. 207, 176 N.
p. 397to the Court of Common Pleas “for further proceedings
according to law with respect to the cross-petition filed
in this cause . . . .” The Supreme Court of Ohio affirmed.
174 Ohio St. 487, 190 N. E. 2d 460.
Although the distinction between final and nonfinal
judgments, for purposes of this Court’s jurisdiction, has
been “faint and faltering at times,”
Republic Natural
Gas Co. v. Oklahoma, 334 U. S. 62, 69, it has not disap-
peared altogether. The nature of the distinction and the
reasons for maintaining it have repeatedly been stated.
To be reviewed in this Court, a state court judgment must
be “final as an effective determination of the litigation
and not of merely interlocutory or intermediate steps
therein. It must be the final word of a final court.”
Market Street R. Co. v. Railroad Comm’n,
324 U. S. 548,
551. It “must end the litigation by fully determining the
rights of the parties . . . .”
Gospel Army v. Los Angeles,
331 U. S. 543, 546. See also, e. g.,
Mower v. Fletcher, 114
U. S. 127, 128;
Cobbledick v. United States, 309 U. S. 323,
324-325;
Department of Banking v. Pink, 317 U. S. 264,
267-268; Pope v. Atlantic Coast Line R. Co.,
345 U. S.
379, 381-382.
“Since its establishment, it has been a marked char-
acteristic of the federal judicial system not to permit
an appeal until a litigation has been concluded in the
court of first instance .... This requirement has
the support of considerations generally applicable to
good judicial administration. It avoids the mis-
chief of economic waste and of delayed justice. Only
in very few situations, where intermediate rulings
may carry serious public consequences, has there
been a departure from this requirement of finality for
federal appellate jurisdiction. This prerequisite to
review derives added force when the jurisdiction of
this Court is invoked to upset the decision of a State
court. Here we are in the realm of potential con-
p. 398flict between the courts of two different govern-
ments. . . . This requirement is not one of those
technicalities to be easily scorned. It is an impor-
tant factor in the smooth working of our federal
system.” Radio Station WOW, Inc., v. Johnson, 326
U. S. 120, 123-124.
One would have thought that the judgments reviewed
here were paradigms of the nonfinal judgment. Assum-
ing that the federal question which the Court decides
was really passed on by the Ohio Supreme Court,5 it is
5 The Court of Common Pleas did not reach any federal question,
since it found the Ohio Act invalid under the State Constitution. On
appeal, the Court of Appeals described the cases as follows:
“The actions seek a declaratory judgment declaring the Ohio Fair
Trade Act invalid and unconstitutional. Both cases involve similar
facts and, with the questions to be determined by this court the same
in each case, the appeals will be considered together. The assign-
ment of error is identical in both cases.
“ ‘For its assignment of error, the defendant-appellant asserts that
the Court of Common Pleas of Cuyahoga County erred in declaring
Sections 1333.27 through 1333.34 of the Ohio Revised Code to be in
violation of the Constitution of the state of Ohio, and therefore void
and not binding upon the plaintiff-appellee, and in granting judgment
for the plaintiff-appellee on its petition and dismissing the cross-
petition of the defendant-appellant.’” 117 Ohio App. 207-208, 176
N. E. 2d, 237.
There followed a long discussion of the “historical background,” id.,
at 208, 176 N. E. 2d, 238, of the Ohio Act, which included considera-
tion of major federal legislation and cases. It is entirely clear from
the opinion that federal law was considered only as part of the demon-
stration “that not only the great majority of state legislatures but
also the Congress of the United States have determined that there
is need to provide reasonable controls in this field [of fair trade],
under the police powers of the sovereign power.” Id., at 224, 176
N. E. 2d, 247. There is nothing to indicate that the court considered
anything beyond the single contention that the Court of Common
Pleas had erred in holding the Act invalid under the State Consti-
tution. A dissenting opinion states: “On this appeal, the single
question presented is whether the 1959 Fair Trade Act . . . has
the effect of nullifying the decision of the Supreme Court [of Ohio]
p. 399.386 Har la n, J., dissenting.
clear nonetheless that this litigation is still in its early
stages. No rights have yet been established; no liabili-
ties have been incurred. The Court acknowledges that
federal questions, involving unresolved issues of fact and
interpretations of the Ohio Act, must still be decided by
the Ohio courts. In Upjohn, No. 489, a federal question
concerning the possible application of our decision in
United States v. McKesson & Robbins, Inc.,
351 U. S. 305,
“was reserved for future determination by the Ohio courts
pursuant to a stipulation of the parties . . . .” Ante,
p. 394, note 10. And in Lilly, No. 490, other questions,
including at least one federal question, “are pending and
unresolved in the Ohio Court of Common Pleas . . . .”
Ante, p. 395. The Court can only hope that it will not
prove to have wasted its time altogether in these “piece-
meal proceedings,” Pope v. Atlantic Coast Line R. Co.,
supra, at 381, because a subsequent decision of the Ohio
courts renders the decision here “unnecessary and irrel-
evant to a complete disposition of the litigation.”
Id.,
at 382 (footnote omitted). If that does not happen,
there is every likelihood that the cases will be brought
back to this Court for a second time, for consideration of
the questions now unresolved. In Radio Station WOW,
supra, at 127, this Court stated: “Of course, where the
remaining litigation may raise other federal questions
in Union Carbide & Carbon Corp. v. Bargain Fair, Inc., 167 Ohio
St., 182.” Id., at 230, 176 N. E. 2d, 251. The Union Carbide
case was concerned solely with the validity of a prior Fair Trade
Act under the Ohio Constitution. In a petition for rehearing
(which was denied) the appellant itself urged that the court appeared
to have ignored the question whether the Ohio Act was consistent
with federal law, in particular the McGuire Act. Only the formal
judgment, from which the Court quotes, ante, p. 388, contains any
intimation that the Court of Appeals considered any federal question.
On review in the Supreme Court of Ohio, neither the majority
opinion nor the dissenting opinion even once mentions the McGuire
Act or this Court’s cases construing it. 174 Ohio St. 487, 497, 190
N.
p. 400that may later come here, ... to allow review of an
intermediate adjudication would offend the decisive ob-
jection to fragmentary reviews.” The Court ignores that
“decisive objection.”
In addition to making an uneconomic use of its own
time, the Court’s entertainment of these appeals has
interfered with the orderly procedures of the Ohio courts.
In its brief to this Court, Lilly states that proceedings in
the Court of Common Pleas have been stayed “pending
the outcome of this appeal.” Brief, p. 11. Upjohn
states in its brief that it has not yet taken action to bring
to trial the issues reserved in its case, Brief, p. 13, pre-
sumably because of the pendency of the present proceed-
ings. So far as the litigants are concerned, this march to
the well for an eye-dropper of water does them no good
either, except insofar as delay may be temporarily useful
to one party or the other. Now that this Court’s decision
is rendered, the action will presumably go forward in the
state courts; the litigants are no better informed of their
ultimate rights than they were before the case came here,
and the case is not a jot closer to its conclusion.
The Court gives no explanation at all for its departure
from established principles. There is not the faintest
suggestion of compelling public considerations requiring
a determination of whatever issue it is that the Court does
actually decide.6 Nor are there any private interests at
p. 401stake which will be irremediably lost unless the Court
acts, since no rights or liabilities were determined below
or have been determined here. The fact that under Ohio
procedure Hudson’s petition for a declaratory judgment
was separable from the cross-petition and could be deter-
mined independently of it has no bearing on whether that
determination was final for purposes of this Court’s juris-
diction.7 E. g., Department of Banking v. Pink, supra,
at 268; Market Street R. Co. v. Railroad Comm’n, supra,
at 551.
Ninety percent' of this case remains submerged. I
suspect that the explanation for the Court’s snipping off
and deciding the 10% that has reached the surface lies in
the fact that the Court failed to dismiss the appeal when
it was first presented, 375 U. S. 938, 939, because the juris-
dictional objections to review were not then so apparent.8
I am at a loss to understand why the Court chooses to
compound the original error, rather than to correct it.
I would dismiss both appeals.
written contracts with other retailers.” Ante, p. 392. This is noth-
ing more than a restatement of the passage quoted from McKes-
son & Robbins, with the names of the parties in this case filled in.
No special questions which might be raised by the facts of this case
or by particular features of the Ohio Act are decided here, since the
Court properly leaves all such questions for the initial decision of
the Ohio courts.
The triviality, given the established law, of the question which
the Court decides makes its determination to reach the question the
more puzzling.