employer and not such as to constitute the employer a retail seller.
Though the testimony given in affidavit form by Harold Kaplan, Esq., shows that the employees of the General Electric Company's Allentown, Pa., plant, from 2/8/55 to 8/28/56, and the employees of the General Electric Supply Company, Allentown, Pa., from January 1955 to September 1956, were making duplicate purchases of plaintiff's fair trade price-fixed appliances, the new plans instituted in these plants locally and by plaintiff on a nationwide scale during the period from August 26, 1956, to March 1, 1957, indicate that such abuses of plaintiff's minimum fair trade price scales through sales to its employees are not now possible. Plaintiff's new plans prevent the sale in any one calendar year (with certain reasonable exceptions) of more than one of each type of General Electric fair-traded appliance, and require the purchasing employee to certify in writing that the purchase is for his own use and not for resale (see affidavits of E. F. Corkery, J. H. Melchior, and Robert C. Walton, all of which are included in Clerk's document No. 16).
These aforementioned new plans for employee sales and the testimony of Mr. Walton (affidavit in Clerk's document No. 16), that the excess or duplicate sales to plaintiff's employees, pointed up by defendant, are less than two-thirds of one per cent. (.65) of the total unit retail sales in the trading area for the period involved, prevent the hearing judge from refusing injunctive relief to plaintiff on this ground. Defendant contends that plaintiff's past policies prevent the granting of injunctive relief, but 'Equity will not stand aside the one whose rights have been transgressed and permit them to be appropriated because of previous bad conduct * * *.' Valley S.C. Co. v. Manufacturers' Water Co., 1930, 302 Pa. 232, 238, 153 A. 327, 329. The doctrine that he who comes into equity must come with clean hands has been limited in many instances, one of which is that "(a) party purging his conduct as far as possible has obtained relief' (21 C.J. 187), and the right to proceed may be conditioned upon his so doing.' Comstock v. Thompson, 1926, 286 Pa. 457, 462, 133 A. 638, 640. See, also, Hartman v. Cohn, 1944, 350 Pa. 41, 38 A.2d 22, and Sylvania Industrial Corporation v. Visking Corporation, 4 Cir., 1943, 132 F.2d 947, 957-958, appeal dismissed 1943, 319 U.S. 777, 63 S. Ct. 1033, 87 L. Ed. 1723.
The court will grant defendant an opportunity
to show, if it can, that plaintiff's new program of sales to employees is not being effective to restrict such sales to items for the use of such individual employees.
It has been consistently recognized by courts asked to enforce fair trade laws, such as the Pennsylvania Act (73 P.S. § 7 ff.), that the manufacturer is not entitled to an injunction unless he has reasonably and diligently enforced the fair trade prices specified by him. As stated in General Electric Co. v. R. H. Macy & Co., 1951, 199 Misc. 87, 92, 103 N.Y.S.2d 440, 446-447, which is perhaps the leading case on this subject:
'In establishing this requirement the courts have held that it is not necessary that there be simultaneous enforcement against all violators nor that the price structure be perfect. * * * There, the court laid down the principle that in order to avail himself of the benefits of the statute, the producer or plaintiff must make a sincere and diligent effort to prevent price cutting of branded products, through legal process if necessary.'
Although counsel and the hearing judge have not been able to find any Pennsylvania appellate court decision discussing this principle, the hearing judge finds that it is consistent with Pennsylvania law as it existed on May 1, 1956, and would be applied by the Pennsylvania appellate courts in an appropriate case. The record in this case shows clearly that the plaintiff has maintained reasonable and diligent enforcement of its fair trade prices in defendant's trading area immediately prior to and since this suit.
The enforcement activities carried on in this case are far more vigorous than those upheld in most of the cases holding that reasonable and diligent enforcement was present.
The general enforcement policy of plaintiff,
which was supplemented in this case by an intensive enforcement drive in the two months preceding plaintiff's widely advertised price cutting, has been upheld by numerous courts. See General Electric Co. v. Kimball Jewelers, Inc., supra; General Electric Co., v. S. Klein-on-the-Square, Inc., Sup.1953, 121 N.Y.S.2d 37.
In the Kimball case, the court said, at page 657 of 132 N.E.2d:
'The method employed by the plaintiff in investigating and enforcing the prices at which retail dealers were bound to sell their trade marked appliances was not unreasonable or dilatory, or such as to lead anyone to believe that the plaintiff had waived or abandoned its right to enforce the minimum retail resale prices which had been fixed by its fair trade contracts. (Citing cases).'
In the S. Klein-on-the-Square, Inc., case, 121 N.Y.S.2d at page 55, the court said:
'In retrospect it of course is now possible to look back and say that in this detail or that a slightly different approach or line of action might have been more effective than the particular approach or line of action which was followed; but that there was an approach and a line of action honestly designed to minimize violations and stop violators is established beyond question; * * *.
* * * * * *
'The defense of lack of diligent effort to enforce compliance with plaintiff's stipulated prices is not sustained.'
On the basis of the foregoing authorities the hearing judge concludes that plaintiff has satisfied the general equitable requirement of reasonable and diligent enforcement as a prerequisite to securing an injunction.
Act 589 of the 1955 General Assembly (Act of May 25, 1956, P.L. (1955) 1756, 73 P.S. 8, which is referred to in this Discussion as Act 589) was signed by the Governor on May 25, 1956, but did not become effective until September 1, 1956, due to the absence of any language stating an effective date and in view of the following language of the Pennsylvania Statutory Construction Act, as amended (46 P.S. 504):
'All laws hereafter enacted finally at a regular session of the Legislature, * * * shall be in full force and effect from and after the first day of September next following their final enactment, unless a different date is specified in the law itself * * *.'
Also, assuming the Act took effect in May 1956, the hearing judge finds that the phrase, 'after at least seven days written notice given by the defendant prior to the commencement of such action,' contemplates that a retailer such as this defendant cannot rely on the 'complete defense' provided for in the Act unless he has given the manufacturer notice of sales below the specified minimum prices by his competitor or competitors at least seven days before suit has been instituted. (The hearing judge reaches this conclusion on the basis of the letter dated 8/1/57 of counsel for plaintiff.) As stated above plaintiff has taken reasonable and diligent steps to enforce his price schedule and such steps need not be taken within seven days of the notices received from defendant.
Since defendant disagrees with these conclusions and an appellate court may disagree with the hearing judge's conclusions on these points, the possible application of the Act to this factual situation is considered by the hearing judge in the balance of this Discussion assuming the Act took effect on the date of its approval by the Governor (May 25, 1956).
There is some doubt as to whether defendant has established the 'complete defense' provided for by Act 589 of the 1955 General Assembly, which added this sentence to the Pennsylvania Fair Trade Act (73 P.S. § 8):
'It shall, however, be a complete defense to such an action for the defendant to prove that the party stipulating such price, after at least seven days written notice given by the defendant prior to the commencement of such action, has failed to take reasonable and diligent steps to prevent the continuation of such advertising, offering for sale or selling, by those in competition with the defendant, who were specified in such notice.'
These principles seem pertinent in interpreting this Act:
A. Since the Governor had vetoed for other reasons a bill (H.B. 1418) passed by this session of the General Assembly, which used the phrase 'effective steps to insure compliance,' rather than the words 'reasonable and diligent steps' contained in Act 589, the General Assembly must have intended to require plaintiff to take steps which were somewhat less than those 'effective to insure compliance.'
B. By creating the 'complete defense,' the General Assembly recognized that a violator, whose conduct a competitor thinks is important enough to call to the attention of the manufacturer, is having a significant effect on the fair trade price structure. Under such circumstances, the manufacturer fails to take effective steps to see that such violator conforms to the minimum price schedule at the risk that what he has done may not be considered reasonable and diligent.
C. The judicial definition of the phrase 'reasonable and diligent' by other courts in fair trade cases is some evidence of what the General Assembly contemplated would be required under this language.
D. The Legislature would not have passed this Act in order to require the manufacturer to take some action in seven days and then cease his reasonable and diligent steps. The statutory language contemplates that the manufacturer should investigate and follow up vigorously violators of whom they receive notice from their retailers.
Applying these principles to this record, the hearing judge believes that plaintiff should place more evidence on the record of its enforcement activities against certain violators of whom defendant gave it notice prior to institution of this action, before being entitled to a permanent injunction, as more fully explained in the letter to counsel of July 22, 1957.
Defendant's motion to vacate the temporary injunction will be denied and the matter will be set down for addition of evidence to the record in September 1957, in accordance with the letter of July 22, 1957, and this Discussion.
Conclusions of Law
1. Plaintiff's requested Conclusions of Law Nos. 1-5
are adopted as the
Conclusions of Law of this court.
2. Act No. 589 did not take effect until September 1, 1956, and, hence, is inapplicable to this case.
3. The phrase in Act 589 'after at least seven days written notice given by the defendant prior to the commencement of such action' does not require plaintiff to take 'reasonable and diligent steps to prevent' competitors from selling below plaintiff's minimum prices within seven days of receipt of notice from defendant that such competitors are making such sales.
4. In the event that Conclusions of Law Nos. 2 & 3 should be incorrect, the court makes these Conclusions of Law:
A. Where, immediately prior to notice from a department store that a retailer has made a sale below a manufacturer's minimum fair trade price, such manufacturer has conducted three shopping attempts to determine if the retailer (Bargain Center, Allentown -- see Finding of Fact No. 3)
is selling at less than these prices, disclosing three refusals to sell for less than such prices, and the notice is received during a well-advertised price-cutting sale by the department store, the intent of Act No. 589's requirement of taking steps, within seven days, is not violated by failure to act within the seven-day period when the department store's price cutting continued during this period.
B. Under Act No. 589, plaintiff has no duty to notify a defendant of what steps it is taking from time to time against violators of whom defendant has given it notice, but plaintiff should inform defendant that it has received the notice and has acted within the seven-day period.
C. The plaintiff is not entitled to a permanent injunction on the record now before the court.
5. Plaintiff is entitled to a permanent injunction restraining defendant from violating its minimum fair trade price schedule.
6. Neither the Pennsylvania Fair Trade Act nor the Federal enabling acts (15 U.S.C.A. § 1 and 45(a)), as applied to this factual situation, are in violation of the United States or Pennsylvania Constitution, Const.U.S. Amend. 14; Const. art. 1, § 1, P.S.
7. The exemption clause contained in plaintiff's fair trade minimum retail price schedule does not render plaintiff's minimum fair trade prices illegal or unenforceable.
All requests for Conclusions of Law which are inconsistent with the foregoing are denied.