# Petition for Writ of Certiorari — Wood v. United States > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385602_0949%3A1 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition for Writ of Certiorari - **Published:** January 1, 1966 - **Citation:** 385 U.S. 978 ## Text Office-Supreme Court, WS FILED — lb SEP 17 es JOHN F. DAVIS, CLERK In the SUPREME COURT OF THE UNITED STATES Ocroser TERM 0005 f DF gis No. 58.2 WILLIAM RANCE AND RUTH V. RANCE, Petitioners, VERSUS THE SPERRY AND HUTCHINSON COMPANY, Respondent. PETITION FOR A WRIT OF CERTIORARI TO THE SUPREME COURT OF THE STATE OF OKLAHOMA JOHN H. CANTRELL 2120 First National Building Oklahoma City, Oklahoma JAMES D. BATCHELOR 707 North Robinson Oklahoma City, Oklahoma Attorneys for Petitioners September, 1965 UTTERBACK TYPESETTING Co.. 13 SO. WALKER. OXLANOMA City. Pu. CE S-S750 Srila Ni a Nic is Ba ce en INDEX i PAGE Opinions Below 1 Jurisdiction 2 Questions Presented 2 Statutes Involved 3 Statement Nature of the Proceeding The Court of First Instance The Appellate Court 14 Summary 17 Reasons for Granting the Writ 21 I. The S & H method of doing business constitutes an illegal tying arrangement in violation of Sec- tion 1 of the Sherman Act and Section 3 of the Clayton Act 21 A. A sale by a licensee-retailer of merchandise and S & H Stamps for a single price to a pur- chaser is a “tie-in” sale where the purchaser is prohibited from disposing of the stamps... 21 B. The tying arrangement involves a unique and and substantial market 25 II. The tying arrangement is a restraint of trade and substantially lessens competition 27 III. The licensing agreement creates a price-fixing vertical combination in restraint of trade Conclusion 31 caiililinnes INDEX CONTINUED PAGE CITATIONS CASES: Associated Press v. Taft-Ingalls Corporation, 340 F.2d 753 24 Black v. Magnolia Liquor Co., 355 U.S. 24 21, 24, 27, 28 Dr. Miles Medical Co. v. John V. Park & Sons Co., 220 U.S. 373 29, 30 International Salt Co. v. United States, 332 U.S. 392 am ae Jerrold Electronics Corp. v. United States, 365 U.S. 567 26 Mercoid Corp. v. Minneapolis-Honeywell Recorder Co., 320 U.S. 680 26 Northern Pacific Railway Company v. United States, 356 U.S. 1 26 Safeway Stores v. Okla. Retail Grocers’ Assoc., Inc., 360 U.S. 334: 20, 22 Standard Fashion Co. v. Magrane-Houston Co., 258 ~~ US. 346 30 Standard Oil Co. v. United States, 337 US. 293... 26 United States v. Loew’s, Inc., 371 U.S. 38_______22, 23, 24, 26, 28 United States v. Paramount Pictures, Inc., 334 U.S. 131 26 United States v. Parke-Davis & Co., 362 U.S.29.._s_- 29 United States v. The White Motor Co., 194 F.Supp. 562 30 White Motor Co., The, v. United States, 372 U‘S. 253 30 —iii— INDEX CONTINUED : PAGE STATUTES: Sec. 1 of the Sherman Anti-Trust Act of July 2, 1890, as amended, 15 U.S.C. § 1___18, 19, 21, 24, 25, 31 Sec. 3 of the Clayton Act of Oct. 15, 1914, 15 U.S.C. § 14 -18, 21, 24, 25, 31 APPENDICES Appendix A: manele Findings of Fact and Conclusions of Law ——i-vii Appendix B: Order Sustaining in Part and Overruling in Part Motion to Modify and Supplement Findings of Fact viii-ix Appendix C: Journal Entry of Judgment x-xi Appendix D: Opinion of the Supreme Court of the State of Oklahoma xii-xxxviii Appendix E: Order Denying Rehearing XXXViii-xxxix Appendix F: Order Staying Issuance of Mandate —___Xxxix In the Supreme Court of the United States OctToserR TERM, 1964 No. .....-..-- WILLIAM RANCE AND RUTH V. RANCE, Petitioners, VERSUS THE SPERRY AND HUTCHINSON COMPANY, Respondent. PETITION FOR A WRIT OF CERTIORARI TO THE SUPREME COURT OF THE STATE OF OKLAHOMA William Rance and Ruth V. Rance, for themselves and for the class denoted as customers of licensee-retailers of The Sperry and Hutchinson Company, petition for a writ of certiorari to review the decision of the Supreme Court of the State of Oklahoma affirming the granting of an in- junction against the Rances prohibiting them from buying, selling, or exchanging trading stamps issued and dis- tributed by The Sperry and Hutchinson Company. OPINIONS BELOW The Superior Court of Oklahoma County, State of Oklahoma, filed the following opinions and judgment which are not reported: a (1) Findings of Fact and Conclusions of Law (2) Order Sustaining in Part and Overruling in Part Motion to Modify and Supplement Findings of Fact (3) Journal Entry of Judgment. These are printed in Appendices A to C, infra, pp. i-xi. The opinion of the Oklahoma Supreme Court, affirm- ing the granting of the injunction, is not yet reported; it and other related orders are printed in Appendices C to F, infra, pp. xii-xxxix. JURISDICTION The judgment of the Superior Court of Oklahoma County granting a permanent injunction against William Rance and Ruth V. Rance was affirmed by opinion of the Oklahoma Supreme Court on April 13, 1965. The petition for rehearing was denied by the Oklahoma Supreme Court on June 22, 1965. The jurisdiction of this Court is invoked un- der 28 U.S.C. § 1257 (3). QUESTIONS PRESENTED 1. Whether the distribution of trading stamps to a customer in a retail sale as required by agreement between S & H and its retailer-licensees is an illegal tying arrange- ment in violation of Section 1 of the Sherman Act and Section 3 of the Clayton Act where the stamps are neither transferable nor redeemable in cash but may only be ex- changed for S & H merchandise. 2. Whether the licensee agreement between S & H and its licensee-retailers creates a vertical price-fixing combination in violation of Section 1 of the Sherman Act by compelling the retailer to offer trading stamps at a fixed a rate equivalent to 2.8 per cent of his retail sales where the retailer’s customers may neither transfer the stamps nor redeem them in cash but may redeem them only for S & H merchandise at redemption rates fixed by S & H. STATUTES INVOLVED Section 1 of the Sherman Anti-Trust Act of July 2, 1890, as amended, 15 U.S.C. § 1: “Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or com- merce atnong the several States, or with foreign na- tions, is declared to be illegal: Provided, That nothing contained in sections 1-7 of this title shall render illegal, contracts or agreements prescribing minimum prices for the resale of a commodity which bears, or the label or container of which bears, the trademark, brand, or name of the producer or distributor of such commodity and which is in free and open competition with commodities of the same general class produced or distributed by others, 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, Territory, or the District of Columbia in which such resale is to be made, or to which the commodity is to be transported for such resale, and the making of such contracts or agreements shall not be an unfair method of competi- tion under section 45 of this title: Provided further, That the preceding proviso shall not make lawful any ae aan contract or agreement, providing for the establish- ment or maintenance of minimum resale prices on any commodity herein involved, between manufacturers, or between producers, or between wholesalers, or be- tween brokers, or between factors, or between re- tailers, or between persons, firms, or corporations in competition with each other. Every person who shall ‘ make any contract or engage in any combination or conspiracy declared by sections 1-7 of this title to be illegal shall be deemed guilty of a misdemednor, and, on conviction thereof, shall be punished by fine not exceeding fifty thousand dollars, or by imprisonment not exceeding one year, or by both said punishments, in the dis¢retion of the court.” Section 3 of the Clayton Act of October 15, 1914, 15 US.C. § 14: “It shall be unlawful for any person engaged in commérce, in the course of such commerce, to lease or make a sale or contract for sale of goods, wares, merchandise, machinery, supplies, or other commodi- ties, whether patented or unpatented, for use, con- sumption, or resale within the United States or any Territory thereof or the District of Columbia or any insular possession or other place under the jurisdiction of the United States, or fix a price charged therefor, , or discount from, or rebate upon, such price, on the condition, agreement, or understanding that the lessee or purchaser thereof shall not use or deal in the goods, wares, merchandise, machinery, supplies, or other commodities of a competitor or competitors of the lessor or seller, where the effect of such lease, sale, or contract for sale or such condition, agreement, or understanding may be to substantially lessen competi- tion or tend to create a monopoly in any line of cor - merce.” = STATEMENT Nature of the Proceeding On June 11, 1962, The Sperry and Hutchinson Com- pany (S & H) filed suit in the Superior Court of Okla- homa County, State of Oklahoma, against the petitioners William Rance and Ruth V. Rance (the Rances) (R. 559- 571). The Rances operate a small trading stamp exchange (R. 621). They buy, sell, and exchange trading stamps in- cluding S & H stamps (R. 624). S & H sought an injunction to prevent the Rances from trading S & H stamps (R. 562- 565). _The Court of First Instance S & H alleged that it: “. .. grants to its merchant-licensees the exclusive right to use the S & H service in their types of busi- ness in their competitive or trade areas, and thereby creates a ‘family’ of non-competing merchants .. .” (R. 561). The petition alleged that by reason of the license contracts (Pl. Ex. 1A; R. 399-401): “. . . title to the stamps remains in S & H ... that the stamps are not transferable without the written consent of S & H ... and that the only right which the customer acquires in the stamps is to paste them in the collector’s book and to present them to S & H for redemption” (R. 560). The petition further alleged that the Rances buy, sell and exchange trading stamps including those of S & H (R. le a) San) ee oe ed phe es Seay est ta, ‘ a eT 561), and that these activities of the Rances were causing S & H irreparable harm. The petition prayed for perma- nent injunctive relief (R. 562, 565). The defendants’ Amended Answer presented the fed- eral questions as a defense to the action by the following allegation: “Plaintiff is now, has been and threatens to continue to be in violation of the public policies and statutes of the United States of America in and in connection with its interstate business and in and in connection with its intrastate business, inextricably commingled, in that by virtue of the facts, contracts and circumstances alleged in plaintiff’s Petition it appears and must be found that plaintiff was, now is and will continue to be a member of and engaged in a combination and con- spiracy in restraint of trade, in violation of the Sher- man and Clayton Acts of the United States of America and other related statutes, as wel) as contrary to numerous decisions of the Supreme Court of the United States” (R. 581). The Amended Answer further prayed that S & H be permanently enjoined from: “(1) Continuing its monopolistic practices, con- tracts, advertising and mode of operations as above described; - “(2) Suing, harassing or interfering with these de- fendants in the operation and conduct of the business of said William Rance; and “(3) Hindering, admonishing or threatening any Oklahoma member of the class of ‘customers of the licensees’ of plaintiff in connection with the ownership, control and disposition of his trading stamps issued by plaintiff’ (R. 585). SE + TB OEE Me mE AEE OLLI ee EE sn Oe, te aa: ty «ee a ves = The trial court’s Findings of Fact,;! Numbers 1 through 10, describe the parties’ methods of doing business: “1. The plaintiff is a New Jersey corporation en- gaged in the trading stamp business. It has been engaged in this business throughout the United States since 1896. It is qualified to do and has done business in the State of Oklahoma since 1911 (R. 620). “2. The parties have stipulated, with the Court’s approval, to waive their claims and cross-claims for damages, each against the other, up to the date of the judgment herein, but each reserves the right to prove such damages as pertinent to the equities involved in the cause (R. 620). “3. Plaintiff does an interstate business involving its business activities in 47 states of the United States. It is excluded from Kansas entirely by law. In Wash- ington, Wisconsin and Wyoming it is required by law to redeem its ‘cash discount’ stamps for cash. In 13 other states it is required to afford the customers of its licensees options to take merchandise or cash (R. 620, 621). 100 Northwest 22nd Street, Oklahoma City, Oklahoma, called the Trading Stamp Exchange (R. 621). “5. In the conduct. of its business, the plaintiff enters into license contracts with retail merchants offering a variety of goods and services, and grants to each licensee in a particular line of business the ex- clusive right to its S&H Cooperative Cash Discount System within his competitive area. S&H has over 70,000 licensees throughout the United States. It has * The Findings of Fact and Conclusions of Law are set forth in their entirety in Appendices A and B. o tad dieedi&edi ee a approximately 1,000 licensees in the State of Okla- homa, about 300 of which are in Oklahoma City (R. 621). “6. Plaintiffs method of doing business throughout at least 29 states of the United States and particularly in Oklahoma, and as to the Oklahoma portion of its interstate business and as to its intrastate business in Oklahoma is substantially as follows (R. 621): (1) Plaintiff contracts in writing with its li- censees, who are usually vendors of merchandise or services, some 70,000 in the United States and 1,000 in Oklahoma; 300 of which are in Oklahoma City, Oklahoma, whereby it agrees, inter alia, to supply S&H Green Trading Stamps to said licensees at stipulated prices. These contracts, at least in most instances in 29 states, including Oklahoma provide that (R. 621): (a) Title to the stamps is reserved in Sperry and Hutchinson Company (R. 621); (b) The stamps can only be redeemed if pasted in a booklet of 1200 stamps and surrendered to Sperry and Hutchinson Company at one of its Redemption Centers (R. 622); (c) The stamps can only be redeemed in mer- chandise offered and provided by Sperry and Hutchinson Company for such purpose in units determined by Sperry and Hutchinson Company at pricés (per unit) fixed by Sperry and Hutchin- son Company (R. 622); and « (d) During the calendar year 1961 S&H stamp collectors redeemed merchandise from plaintiff’s redemption centers located in Oklahoma of the approximate retail value of $4,000,000.00, which merchandise had a cost value to plaintiff of ap- proximately $2,000,000.00 (R. 638, 639). These contracts contain no commitment or cove- nant of the licensees that they will furnish or de- liver the booklets for pasting purposes to the cus- tomer and such is not usually done until the cus- tomer requests the booklet, at some later time, if at all, after he has received Stamps (R* 622). (2) Plaintiff provides ‘Redemption Centers,’ some 14 in Oklahoma, stocked with merchandise selected by Sperry and Hutchinson Company which it offers for redemption of stamps at retail prices fixed by Sperry and Hutchinson Company and acquired by it under contracts with its suppliers which it chooses and at prices which it negotiates and determines (R. 622). ; (3) Periodically, Sperry and Hutchinson Com- pany composes, has printed, issues and distributes its ‘catalog,’ delivered to large numbers of the holders of the stamps through plaintiff’s licensees, in and by which Sperry and Hutchinson Company advises what merchandise it has for redemption of stamps and what the unit price for same is as determined by Sperry and Hutchinson Company (R. 622). (4) If, as and when booklets containing the re- quired number of stamps are surrendered in plain- tiffs specified units at plaintiff's rates, the merchan- dise selected by the holder of the stamps, within the limited offering by Sperry and Hutchinson Com- pany, is delivered to the holder of the stamps (R. 623). pe The plaintiff expends annually many millions of dollars in extensive national and local advertising and publicizing the desirability and the benefits of the te S&H service to S&H stamp collectors. This advertis- ing has created extensive good will and public ac- ceptance for the service. There are more than 33,- 000,000 S&H stamp collectors in the United States. About 300,000 to 400,000 of these collectors live in Oklahoma (R. 623). “8. The front cover of the S&H stamp collectors’ book contains a notice that neither S&H stamps nor collectors’ books are sold to S&H licensees, S&H stamp collectors or any other persons and at all times the title thereto is expressly reserved to S&H; that the only right S&H stamp collectors acquire in S&H stamps is to paste them into S&H stamp collectors’ books and present them to S&H for redemption; that S&H stamp collectors must not dispose of S&H stamps or collectors’ books or make any further use of them without S&H’s consent in writing; that if S&H stamps or collectors’ books are transferred without such con- sent, S&H reserves the right to restrain their use by or take them from the persons to whom they are trans- ' ferred and that the use of S&H stamps and collectors’ books is restricted to S&H licensees and their custom- ers (R. 623). “9. In one state, Kansas, plaintiff is prohibited by ,law from carrying on its business. In three others, Washington, Wisconsin and Wyoming, plaintiff is re- quired by statute to redeem the stamps in cash. In Thirteen (13) other states the statutes require that the stamps be. redeemed by plaintiff either in cash or merchandise—at the option of the holder (R. 623, 624). “10. The defe ts buy and sell S&H stamps, ex- change S&H for other brands of trading stamps and other brands of trading stamps for S&H trading stamps, for a fee, and advertise by newspaper, radio and other media that they conduct a trading stamp exchange” (R. 624). aatiiies The trial court also found that “trafficking” in trading stamps by the Rances caused irreparable harm to S & H (R. 624, 625; See Findings of Fact 11-16, Appendix A, p. v). Under the license contract, a retailer-licensee pays $2.80 per 1,000 stamps (R. 472)? and is required to offer one stamp for each 10 cents of retail sales (Plaintiff's Ex. 1A, R. 399-401). S & H is the oldest and largest trading stamp com- pany (R. 432, 433). The business of S & H in Oklahoma represents less than 1 per cent of its nationwide business (R. 478, 479). When the stamps are distributed to a customer of a licensee-retailer, the customer is not told that he is not to have title to the stamps, and no instances of a customer being so advised at the time the stamps are delivered to him are known (R. 353, 354). A witness for S & H did not know of a single instance in advertising where the state- ment was made that The Sperry and Hutchinson Company reserves title to the stamps (R. 456). A collector of S & H Green Stamps testified that she did not know until the time the lawsuit was filed that S & H claimed to reserve the ownership of the stamps (R. 537, 538). It was stipulated (R. 542, 543) that the Rances had in court some eight or ten other witnesses and would produce if necessary some 50 to 100 other witnesses who would all testify to the same facts. 2 The price varies in three other geographical areas of the United States (R. 471). —12— Following the presentation of evidence to the Superior Court for Oklahoma County, State of Oklahoma, the federal questions were urged to the court by the defendants’ re- quests for findings of fact and conclusions of law (R. 601- 613). The following numbered requests, which were re- fused by the court (R. 620-626; Appendix A) presented the federal issues: “REQUESTED FINDINGS OF FACT: “No. 9. Plaintiff's mode and method of doing busi- ness, including its licensee contracts with its licensees constitute an arrangement amounting to a ‘combina- tion’ vertical in design, character and scope whereby plaintiff creates, secures ahd/or reserves unto itself sole control of a large segment of trade in the United States and particularly in Oklahoma. Under this combi- nation and as part of it plaintiff has secured and con- trols (1) the stamps issued by plaintiff's licensees, and (2) the redemption merchandise selected by plaintiff for delivery to the customers of its licensees at prices determined solely by plaintiff. These are ‘tied’ together by plaintiffs plan and in plaintiffs operations. The plan thus contains a ‘tying’ agreement whereby the contract between the customer and his vendor is ‘tied’ to the agreement between the plaintiff and its licensee. Such customer cannot take the ‘cash discount’ from his vendor without being ‘tied’ to buying plaintiff's mer- chandise in its designated quantities at its prices (R. 606). “No. 12. Plaintiffs method of operating including the reservation of the title to the stamps, coupled with the requirement that they be redeemed by the Sperry and Hutchinson Company for merchandise selected by it at prices determined by it, constitutes an illegal and forbidden combination in restraint of trade and an —13— - arrangement monopolistic in character in violation of the anti-trust laws of the United States, and the con- tract which is part thereof sought to be applied to bind customers of plaintiff's licensees is void as against the public policy of the United States and separately of the State of Oklahoma (R. 607, 608). “REQUESTED CONCLUSIONS oF LAW “No. 5. Since the contract provision, upon which plaintiff relies to support its claim that customers of plaintiffs licensees do not own the stamps delivered to them by plaintiff's licensees, has been used and is being used by plaintiff to establish, create and main- tain a vertical combination in restraint of trade and to diminish and lessen competition, same does not bind those with whom defendants deal and may deal in exchange, barter, disposal and acquisition of stamps and there can be no interdiction against defendants which prohibits their acquiring property or rights which,said customers have a perfect legal right to pass In response to the court’s refusal to adopt the re- quested findings of fact and conclusions of law above set forth (R. 620-626, Appendix A) the Rances filed exceptions to the trial court’s Findings of Fact and Conclusions of Law and moved to modify and supplement the findings of fact (R. 614, 615). The court then entered an order sustaining in part and overruling in part the combined motion, which order was adverse to the Rances on the federal issues (R. 638, 639, Appendix B). —l4— The federal issues were again raised at the trial stage by motions of the Rances for new trial (R. 617-619) which set forth as the fifth ground in support of the motion, the following: “5. Each of said Conclusions of Law is contrary to established law and to the Constitution and the Stat- utes of the State of Oklahoma and to the Statutes of the United States of America and controlling decisions of the Courts predicated thereon...” (R. 618). The motion for new trial was overruled. On October 26, 1962, a judgment was entered against the defendants permanently enjoining them from buying, selling, trading, exchanging, or dealing in any other way with S & H Green Stamps (R. 627, Appendix C). The Appellate Court On appeal to the Supreme Court of the State of Okla- homa, the federal issues were presented by the Petition in Error. Of the assignments of error presenting the fed- eral questions, the following are set forth: “17, The trial court committed error in not finding the facts as requested in Defendants’ Requested Find- ing of Fact No. 9... in that the uncontradicted evi- dence and the law, State and Federal, required same” (R. 9, 10). (See Requested Finding of Fact No. 9, supra, p. 12.) * * * * + * “19. The Trial Court committed error in not find- ing the facts as requested in Defendants’ Requested Finding of Fact No. 12... in that the uncontradicted = evidence and the law, State and Federal, required same” (R. 11, 12). (See Requested Finding of Fact No. 12, supra, pp. 12-13.) * * * * * * “26. The Trial Court committed error in not mak- ing, adopting and entering Conclusion of Law No. 5 as requested by Defendants, . . . in that the uncontra- dicted evidence and the law, State and Federal, re- quired same” (R. 17, 18). (See Requested Conclusion of Law No. 5, supra, p. 13.) On the merits, the brief of the Rances again urged the federal issues (R. 23-100). There were two basic argu- ments, First, it was argued by the Rances that: “. . . The indisputable effect of the vertical combi- nation or arrangement which is the heart and soul of the Stamp Company’s business as it is done in Okla- homa and in interstate commerce to supply its Okla- homa licensees, results in and effectively uses a ‘tying agreement’ to bind the customers of the Stamp Com- pany’s merchant-licensees to buy also the redemption merchandise from the Stamp Company” (R. 79). Second, the Rances argued that the S & H licensee agreements created an illegal vertical price-fixing combi- nation: Ge | “The purpose, intent and effect of each such ‘con- tract’ is to place the Stamp Company in complete con- trol and management of the operation from first to last and thus (a) of the stamps (themselves articles of commerce), and (b) of the redemption merchandise, its market and price (4 million dollars retail sales price against a cost of 2 million dollars in 1962 alone); and (c) this results from a, ‘vertical combination’ or a nition system embracing numerous ‘vertical combination’ (all with one aim, as stated) (R. 61). & * * aa * a . .. The accomplishment of the plaintiff's purpose . and plan, as revealed by the evidence (not only to exclude from the channels of commerce the trading stamps which have been issued and delivered as ‘cash discounts’ [See Safeway case hereinafter cited] and thus to control the incidents of ownership of such stamps but as well the delivery and price of ‘premium’ merchandise used in the redemption of such stamps) crystalizes into one of the salient reasons for the plain- tiffs unquestioned dominance and control of an in- dustry which has become wide spread in its activity, and so vital to the housewives of the country as to clothe it with a public interest” (R. 76, 77). The Oklahoma Supreme Court expressly ruled on the federal questions (R. 246-268; Appendix D). In response to the argument that the customers of a licensee are bound by an illegal tying arrangment, the Court held: “In the instant action, licensees do not purchase a commodity but a service, and is not required to pur- chase a ‘tying’ product” (R. 265). 4 In ruling on the contention that S & H created an illegal vertical combination the Court concluded: “In our opinion, and we so hold, that the method by which plaintiT conducts its business in Oklahoma is not in violation of our State and Federal Laws” (R. 266). The decision of the trial court was affirmed by opin- ion of the Oklahoma Supreme Court on April 13, 1965, —_, ~ which is set forth in full in Appendix D, at pages xii ' i ae The Petition for Rehearing dealt solely with the fed- eral issues. Specifically, a rehearing in the case was sought upon the following grounds: 1. Thé opinion rendered by this Court on April 13, 1965, would enforce and result in an illegal tying ar- rangement in violation of Section 1 of the Sherman Act and Section 3 of the Clayton Act and in contra- vention of the decided cases of the United States Su- preme Court. 2. The decision would sustain and enforce an il- legal price-fixing vertical combination, which is in violation of Section 1 of the Sherman Act. 3. Both the tying arrangement and the price-fixing vertical combination have a substantial impact on commerce and tend to restrain trade and lessen compe- tition (R. 273, 274). The Petition for Rehearing was denied on June 22, 1965 (R. 295). On July 27, 1965, the Oklahoma Supreme Court stayed issuance of the mandate pending perfection of appeal to this Court (R. 308; Appendix F). , SUMMARY in * The Sperry and Hutchinson Company (S & H) con- ducts an interstate business in 47 states of the United . States (R. 620, 621). The petitioners, William Rance and Ruth V. Rance, operate a trading stamp exchange at 100 _ N.W. 22nd Street in Oklahoma City (R. 621); S & H seeks to enjoin them from trading S & H stamps (R. 562, 565). In three states, S & H is required by law to redeem the trading stamps for cash only (R. 620, 621) and in 13 other states it is required by law to provide an option of redeeming for either cash or merchandise (R. 620, 621). In at least 29 states, including Oklahoma, S & H trad- ing stamps are not redeemable for cash (R. 621). In these states, S & H seeks to prevent free transferability by re- serving title to the stamps (R. 621). The stamps may be redeemed only for S & H merchandise at redemption rates determined from time to time by S & H (R. 622). Under the S & H license contract, a retailer pays $2.80 per 1,000 stamps (R. 472) and is required to offer one stamp for each 10 cents of retail sales (Pl. Ex. 1A, R. 399-401). The licensee-retailer is thereby compelled to distribute the stamps at a fixed rate equivalent to 2.8 per cent of his total sales. This method of operation creates an illegal tying ar- rangement in violation of Section 1 of the Sherman Act (15 U.S.C. § 1) and Section 3 of the Clayton Act (15 U.S.C. § 14). The customer of a licensee-retailer pays a combined price for retail goods and the trading stamps. The stamps are not redeemable in cash (R. 622). By means of the reservation of title, S & H attempts to prevent free transfer of the stamps (R. 560). Consequently, a consumer only obtains one right with the stamps, that is, the right to re- deem for S & H merchandise (R. 623). By this arrange- ment, S & H has tied the sales of its merchandise to the —19— sales of some 70,000 of its retailer-licensees in the United States, including 1,000 in Oklahoma (R. 621). ' The prohibition against free transferability is an es- sential element of this scheme. The restriction on transfer has two effects: 1. Since a consumer may neither sell nor trade the stamps, he is tied to S & H merchandise, and 2. The consumer must make further purchases in- volving tied sales in order to realize any redemptive value from the trading stamps. The license contract provision (PL Ex. 1A, R. 399- 401) reserving title to the stamps is the heart of this tying arrangement. The provision should therefore be held in- valid and unenforceable against consumers and the Rances. The S & H license contract and method of doing busi- ness also constitutes a vertical price-fixing combination in violation of Section 1 of the Sherman Act (15 U.S.C. § 1). The price fixing occurs in two ways: 1. S & H not only determines the price charged to its licensee-retailers for the stamps, but by the license contract requires them to be offered or distributed at a rate equivalent to 2.8 per cent of the retail sales, 2. S & H reserves the right to fix the redemption rate at any time prior to redemption. Since S & H pro- hibits a consumer from selling, trading, or other- wise disposing of the stamps, S & H is thereby en- abled to fix the value of the stamps after the tying sale has occurred. Digi nae ecnin a = = By reason of the prohibition against transfer of the stamps, S & H thereby assures the effectiveness of retro- active price fixing. This case calls into question the practices of the largest trading stamp company (R. 432, 433) with its concomitant impact on the Rances and on a large segment of the con- suming public. In 1961, the year prior to the trial of this cause, there were more than 33 million consumers who were collectors (by choice or otherwise) of S & H trading stamps (R. 623). Indeed, this Court has recognized the economic im- pact of the trading stamp industry. In Safeway Stores v. Oklahoma Retail Grocers Association, Inc., 360 U.S. 334 at 338, the Court said: “Trading stamps have had a checkered career in the United States, but since World War II their popularity has grown until now it is a reasonable estimate that these multi-colored scraps of paper may be found in almost half of America’s homes.” But this Court has not passed on the precise questions here presented. * Despite the substantial impact of these practices on the public, the only notice to the stamp collectors that they may not dispose of the S & H stamps and that the stamps are redeemable only in S & H merchandise is found on the 8 Violation of the federal anti-trust laws was a y suggested to the Court in Safeway Stores v. Oklaboma Retail Grocers Association. Inc., 360 US. 334 at 342, footnote 7, but the claim was not made below. ’ a, ) inside front cover of the stamp collector’s books-{R. 353, 354, 456, 623). Examined in the light of applicable principles, the de- cision of the Oklahoma Supreme Court erroneously ap- plied federal law. The injunction against the Rances sus- tains an illegal contractual provision prohibiting transfer of the stamps; a provision which is essential to the “tying arrangement” and “price-fixing combination.” The decision of the Oklahoma Supreme Court should therefore be re- versed and S & H should permanently be enjoined from further engaging in this method of operation and from reserving title to the stamps which it issues. REASONS FOR GRANTING THE WRIT . I The S & H method of doing business constitutes an ille- gal tying arrangement in violation of Section 1 of the Sher- man Act and Section 3 of the Clayton Act. A. A sale by a _licensee-retailer of merchandise and S & H stamps for a single price to a purchaser is a “tie-in” sale where the purchaser is prohibited from disposing of the stamps. The classical example of an illegal tying arrangement is the conditioning of the sale of one product to the pur- chase of another. In Black v. Magnolia Liquor Co., 355 U.S. 24, at 25, this Court said: “Tying agreements by which the sale of one com- modity is conditioned on the purchase of another have been repeatedly condemned under the anti-trust laws, iis since they serve no purpose beyond the suppression of competition.” Thus, a tie-in sale need not expressly exclude a dealer from purchasing the products of another; it is enough that there is a “block” price for two items. United States v. Loew’s Inc., 371 US. 38. In the instant case, a purchaser of goods from a licensee-retailer pays a “block” price for the merchandise and the S & H Green Stamps. The licensing agreement provides that the licensee agrees: : “To offer S & H cooperative cash discount stamps to all customers making cash payments and when ac- cepted to issue to the customers one of said stamps for each 10¢ represented in such payments as a discount in consideration of the payment of cash when made either C.O.D. or, at the option of the Licensee, on or before the 20th proximo, and only for redemption by the Licensor” (Pl. Ex. 1A; \R. 399-401). This provision requires the licensee to distribute one stamp for each 10 cents of retail sales. Since the licensee initially pays $2.80 per 1,000 for the stamps it distributes (R. 472), the cost of the stamps represents 2.8 per cent of the price for goods which the purchaser pays to a retailer- licensee. To say that a purchaser might refuse to accept the stamps does not derogate from the fact that he has paid a combined price for the retailer’s merchandise and the stamps. The purchaser obtains only one right with such stamps, and that is to obtain merchandise from S & H as a result of the initial payment to a licensee-retailer (R. 623). This —23— situation falls within the ambit of United States v. Loews Inc., 371 U.S. 38, in which the Court condemned contracts compelling block sales of two films, that is, the sale or lease of one film conditioned on the payment of a “block” price for two films. It is no objection to the illegality of the contract that the purchaser in such case might pay the block price and yet refuse to accept or use the second film. Likewise, in the present case, any ability of the purchaser to refuse to accept the Green Stamps is no objection to the fact that a block sale of two items takes place for a single price. The unusual aspect”of the practice questioned here is that the tying sale takes place on an incremental basis. Logically, the fact that the cost percentage of the-stamps in a retail sale (on the order of 2 to 3 per cent) is small and the S & H merchandise will not be obtained until later, etal, should not relieve 5'& Ht of the prosetiption against tying arrangements. It is the action of S & H in irrevocably tying the pur- chaser to the redemption of S & H merchandise which es- tablishes the existence of an illegal tying arrangement in this case. It might be said that if the purchaser were free to give away, barter, or sell his Green Stamps, that this situation might fall short of an illegal tying arrange- ment. However, it is the very act of tying the purchaser to the redemption of S & H merchandise by a prohibition against transfer that brings this case squarely within the type of activity condemned by the Sherman and Clayton Acts and applicable decisions of this Court. v7 \ —24— Only the activities of the petitioners in buying, selling, and exchanging trading stamps prevent the customer- purchaser from being irrevocably tied to S & H merchan- dise. It was held by the Oklahoma Supreme Court that the stamps do not represent articles in commerce, but rather a service and that there was consequently no violation of federal law (R. 265). Under the Sherman Act, this holding is obviously error since the provisions of the Act apply whether the stamps are classed as “articles in commerce” or “services.” Associated Press v. Taft-Ingalls Corporation, 340 F.2d 753 at 758. Under the Clayton Act, the Oklahoma Supreme Court rationale is apparent sophistry since the merchandise offered by S & H clearly represents “articles in commerce.” The right to obtain merchandise is the only right that the collector of S & H stamps is permitted to acquire by the S & H licensing agreement (R. 623). The stamp thus represents a'‘contract right, at the very least, and that right is to obtain merchandise from S & H as a result of a prior payment of a “block” price to a licensee-retailer for goods and the stamps. Whether the stamps issued to a purchaser by a licensee-retailer are “articles in commerce” is immaterial because the merchan- dise ultimately obtained from S & H is clearly a “com- modity” or an “article in commerce.” Therefore the tying arrangement is subject to Section 1 of the Sherman Act (15 U.S.C. § 1) and Section 3 of the Clayton Act (15 U.S.C. § 14). United States v. Loew’s, Inc., 371 US. 38; Black v. Magnolia, 355 U.S. 24. _< In the normal situation, tying arrangements usually involve only a single seller. However, tying arrangements are condemned because of their anti-competitive effect, and the fact that S & H achieves its unique tying arrange- ment by contract with thousands of retailers (R. 621) will not remove it from the sphere of condemned practices un- der the anti-trust law. Under the applicable authorities, a sale by a licensee- retailer of merchandise and S & H stamps for a single price to a purchaser constitutes a tie-in sale where the pur- chaser is prohibited from disposing of the stamps and may not redeem them for cash. This arrangement contravenes Section 1 of the Sherman Act and Section 3 of the Clayton Act. B. The tying arrangement involves a unique and substantial market. The record establishes that S & H is the “bell wether” of the trading stamp industry since it is the largest in the United States (R. 432, 433). The tying arrangement is effected by means of licensing agreements with 1,000 re- tailers in Oklahoma and approximately 70,000 nationwide (R. 621). S & H obtains its merchandise from manu- facturers* and does business in 47 states (R. 620, 621). S & H was found to be engaged in interstate commerce (R. 620, 621). Without more, it is clear that a “not insub- —26— stantial” amount of interstate commerce is affected. North- ern Pacific Railway Company v. United States, 356 U.S. 1, at 6. In addition to the magnitude of the operation of the tying arrangements, the sale of merchandise offered by S & H is tied to the sales of thousands of products offered by the retailer-licensees, which products are both patented and unpatented.® It is a fundamental proposition that where any sales involve a tying arrangement with a patented product such a sale is illegal per se without proof of “sufficient economic power” or proof of the size of the anti-competitive impact on the market. In United States v. Loew’s, Inc., 371 U.S. 38, at 50, Mr. Justice Goupserc, speaking for the Court, said: “Appellants urge that .. . the fact that a few con- tracts were found to be illegal does not justify the entering of injunctive relief. We disagree. Illegality having been properly found, appellants cannot now complain that its incidence was too scattered to war- rant injunctive relief.” Thus the illegality of these tying arrangements insti- tuted by S & H is clear even without consideration of the magnitude of S & H’s economic power. Jerrold Electronics Corp. v. United States, 365 U.S. 567; Standard Oil Co. v. United States, 337 U.S. 293; United States v. Paramount Pictures, Inc., 334 U.S. 131; International Salt Co. v. United States, 332 U.S. 392; Mercoid Corp. v. Minneapolis-Honey- well Recorder Co., 320 U.S. 680. 5 This Court is requested judicial of the commonly paca Ses he ee sk et ns eo eee = et ’ I The tying arrangement is a restraint of trade and sub-. stantially lessens competition. Tying agreements are condemned under~-the anti- trust laws “since they serve no purpose beyond the sup- pression of competition.” Black v. Magnolia Liquor Co., 355 US. 24, at 25. The requirement of S & H licensing agreements which compels the licensee to offer one S & H stamp for every 10 cents in merchandise purchased from such retailer (Pl, Ex. 1A, R. 399-401) demonstrates the size of the market obtained by these arrangements. These agreements involve non-competitive retailers of which 1,000 are in Oklahoma alone and approximately 70,000 nation- wide (R. 621). The retail value of the merchandise re- deemed from S & H in Oklahoma in the year 1961 alone was in excess of $4,000,000.00 (R. 638, 639). This figure represents less than 1 per cent of the nationwide business of S & H (R. 478, 479). By prohibiting a purchaser from selling, trading or disposing of the stamps, S & H effectively prevents a direct market comparison between the value of the S & H mer- ‘Chandise represented by its stamps and the values offered by any other stamp company. The tying arrangement oper- ates to restrain trade and competition in the following significant ways: 1. The arrangement prevents competition between stamp companies in terms of redemption value. The record reveals that there are only four other stamp companies in Oklahoma (R. 625) and the attempted restraint on disposition of stamps by a purchaser, s except by means of redemption with S & H, limits —_— = the most effective form of market competition of the merchandise values of S & H. 2. The tying arrangement results in a captive market which by definition is substantially removed from the area of competition. The captive market re- sults from the tying sale in two ways: a. Each tied sale is captive in itself, and b. The tying arrangement necessitates further purchases involving “tied” sales-in order for the »urchaser to realize any redemptive value for the stamps. 3. A tying arrangement tends to exclude other mer- chandisers from markets which they might other- wise have. 4. The tying arrangement allows S & H to obtain an illegal advantage by tying the sale of its stamps and thereby its merchandise to the sale by licensee- retailers of thousands of well-known products sold under trade names, trade marks, copyrights, and patents, as well as deriving advantage from the trade names and trade marks of licensee-retailers themselves. These anti-competitive marketing re- sults of tying arrangements have been restated by this Court on numerous occasions and universally condemned. United States v. Loew’s, Inc., 371 US. 38; Black v. Magnolia Liquor Co., 355 US. 24. The tying arrangements therefore result in a signifi- cant captive market for S & H which is substantially re- moved from competition. ’ a: il The licensing agreement creates a price-fixing vertical combination in restraint of trade. By the terms of the licensing contract S & H not only establishes the price for the sale of the stamps to its licensees, but also fixes the distribution of the stamps at one for each 10 cents of retail sales (Pl. Ex. 1A, R. 399- 401). S & H thus fixes the cost of the ultimate disposition of stamps to the purchaser at approximately 2.8 per cent of the total amount of the retail purchase. This Court said in Dr. Miles Medical Co. v. John V. Park & Sons Co., 220 U.S. 373, at 409: “The complainant having sold its product at prices satisfactory to itself, the public is entitled to what- ever advantage may be derived from competition in the subsequent traffic.” The licensing agreement, by fixing the rate of distribu- tion of the stamps, effectively prohibits competition among S & H licensee-retailers in offering S & H stamps. Like- wise, it prevents competition between S & H licensees and retailers who may offer other brands of trading stamps. United States v. Parke-Davis & Co., 362 U.S, 29; Dr. Miles Medical Co. v. John V. Parke & Sons, 220 U.S. 373. _A second and more aspect of the price-fixing practice is the fact that price of the products or mer- chandise may ultimately be fixed after the tying sale has occurred. The trial court found: “The stamps can only be redeemed in merchandise offered and provided by Sperry and Hutchinson Com- — 30—. pany in units determined by Sperry & Hutchinson Company at prices (per unit), fixed by Sperry & Hutchinson Company .. .” (R, 622). Consequently, even if a retailer-licensee were to de- part from the licensing agreement by distributing S & H stamps at a rate other than one stamp per 10 cents of re- tail sales, the power to fix the price of the redemption mer- chandise has been retained by S & H. This means that once a purchaser has obtained the stamps, he is assured of no fixed value, since they are not redeemable in cash and, at any time prior to redemption, S & H may change or fix the redemption value of the stamps for which merchandise will be delivered. This unusually questionable arrangement lies some- where in the realm beyond the practices considered in Dr. Miles Medical Co. v. John V. Park and Sons Co., 220 US. 373, and in Standard Fashion Co. v. Magrane-Houston Co., 258 U.S. 346. The criticism voiced by this Court in both cases is apposite in that S & H not only determines the price at which the stamps are distributed to its licensee-retailers but also fixes the effective price at which they are dis- tributed to consumers. This is accomplished by (1) fixing the rate of distribution and (2) by fixing the redemption value after the tying sale has occurred. It is by means of the licensing agreement that the vertical price-fixing combination is established and the practice squarely falls within the ambit of the criticism voiced by the courts. United States v. The White Motor Co., 194 F Supp. 562. See discussion on the practice in The White Motor Co. v. United States, 372 U.S. 253. = From the uncontroverted evidence, S & H has estab- lished a vertical combination which results in fixing prices and values on its merchandise after the purchaser has paid for and received the stamps. Such an arrangement is clearly proscribed as a restraint of trade under Section 1 of the Sherman Act (15 U.S.C. § 1). CONCLUSION The attempt by the Sperry and Hutchinson Company to prevent free transfer of trading stamps after their distri- bution to a customer in a retail sale violates Section 1 of the Sherman Act (15 US.C. § 1) and Section 3 of the Clayton Act (15 U.S.C. § 14). The prohibition on transfer is integral to the scheme of S & H which creates an illegal tying arrangement and an unlawful retroactive price-fixing combination. The decision of the Oklahoma Supreme Court errone- ously applied the federal laws and thereby sustained a method of operation actifig in restraint of trade. The substantial impact of these practices on the con- suming public and the Rances requires relief. The absence of prior definitive decisions necessitates consideration of these issues by the Court. Finally, the attempted restric- tion on free transfer of trading stamps operates in such flagrant opposition to federal law and the principles enunci- ated by this Court that the lower court should be reversed. The Rances respectfully pray that the injunction against them be set aside and that the cause be reversed ee Teme eo and remanded with instructions to enter appropriate in- junctive relief in petitioner’s favor. Respectfully submitted, JoHN H. CANTRELL 2120 First National Building Oklahoma City, Oklahoma JAMES D. BATCHELOR 707 North Robinson Oklahoma City, Oklahoma Attorneys for Petitioners September, 1965 APPENDIX ¥ APPENDIX A FILED IN SUPERIOR COURT Oklahoma County, Okla. NOV 2 1962 Dale Smith, Court Clerk By Deputy IN THE SUPERIOR COURT OF OKLAHOMA COUNTY STATE OF OKLAHOMA THE SPERRY AND HUTCHINSON COMPANY, ) ) Plaintiff, ) ). -Vs- No. 368 ) WILLIAM RANCE AND RUTH V. RANCE, ) d/b/a TRADING STAMP EXCHANGE, ) ) ) FINDINGS OF FACT AND CONCLUSIONS OF LAW Upon the pleadings filed, the proceedings had and the testimony and evidence adduced herein, and at the special instance and request of the parties, the Court finds the facts and states the conclusions of law as follows: FINDINGS OF FACT 1. The plaintiff is a New Jersey corporation engaged in the trading stamp business. It has been engaged in this business throughout the United States since 1896. It is qualified to do and has done business in the State of Okla- homa since 1911. [APPENDIX] 7 2. The parties have stipulated, with the Court’s ap- proval, to waive their claims and cross-claims for damages, each against the other, up to the date of the judgment herein, but each reserves the right to prove such damages as pertinent to the equities involved in the cause. 3. Plaintiff does an interstate business involving its business activities in 47 states of the United States. It is excluded from Kansas entirely by law. In Washington, Wisconsin and Wyoming it is required by law to redeem its “cash discount” stamps for cash. In 13 other states it is required to afford the customers of its licensees options to take merchandise or cash. 4. The defendants are individuals engaged in con- ducting the business of a trading stamp exchange at 100 Northwest 22nd Street, Oklahoma City, Oklahoma, called the Trading Stamp Exchange. 5. In the conduct of its business, the plaintiff enters into license contracts with retail merchants offering a variety of goods and services, and grants to each licensee in a particular line of business the exclusive right to its S&H Cooperative Cash Discount System within his com- petitive area. S&H has over 70,000 licensees throughout the United States. It has approximately 1,000 licensees in the State of Oklahoma, about 300 of which are in Oklahoma City. 6. Plaintiff's method of doing business throughout at least 29 states of the United States and particularly in Oklahoma, and as to the Oklahoma fortion of its inter- state business and as to its intrastate business in Okla- homa is substantially as follows: (1) Plaintiff contracts in writing. with its licensees, who are usually vendors of merchandise or services, some 70,000 in the United States and 1,000 in Okla- homa, 300 of which are in Oklahoma City, Oklahoma, whereby it agrees, inter alia to supply S&H Green — = [APPENDIX} Trading Stamps to said licensees at stipulated prices. These contracts, at least in most instances in 29 states, including Oklahoma provide that: (a) Title to the stamps is reserved in Sperry and Hutchinson Company; (b) The stamps can only be redeemed if pasted in a booklet of 1200 stamps and surrendered to Sperry and Hutchinson Company at one of its Re- demption Centers, and; (c) The stamps can only be redeemed in mer- chandise offered and provided by Sperry and Hutchinson Company for such purposes in units determined by Sperry and Hutchinson Company at prices (per unit) axes by Sperry and Hutchin- son Company; These contracts contain no commitment or covenant of the licensees that they will furnish or deliver the book- lets for pasting purposes to the customer and such is not usually done until the customer requests the booklet, at some later time, if at all, after he has received stamps. (2) Plaintiff provides “Redemption Centers,” some 14 in Oklahoma, stocked with merchandise selected by Sperry and Hutchinson Company which it offers for redemption of stamps at retail prices fixed by Sperry and Hutchinson Company and acquired by it under contracts with its suppliers which it chooses and at prices which it negotiates and determines. (3) Periodically, Sperry and Hutchinson Company composes, has printed, issues and distributes its “cata- log,” delivered to large numbers of the holders of the stamps through Plaintiff’s licensees, in and by which Sperry and Hutchinson Company advises what mer- [APPENDIX] ag chandise it has for redemption of stamps and what the unit price for same is as determined by Sperry and Hutchinson Company. (4) If, as and when booklets containing the re- quired number of stamps are surrendered in plaintiff’s specified units at plaintiff’s rates, the merchandise se- lected by the holder of the stamps, within the limited offering by Sperry and Hutchinson Company, is de- livered to the holder of the stamps. 7. The plaintiff expends annually many millions of dollars in extensive national and local advertising and publicizing the desirability and the benefits of the S&H service to S&H stamp collectors. This advertising has cre- ated extensive good will and public acceptance for the service. There are more than 33,000,000 S&H stamp col- lectors in the United States about 300,000 to 400,000 of these collectors live in Oklahoma. 8. The front cover of the S&H stamp collectors’ book contains a notice that neither S&H stamps nor collectors’ books are sold to S&H licensees, S&H stamp collectors or any other persons and at all times the title thereto is ex- pressly reserved to S&H; that the only right S&H stamp collectors acquire in S&H stamps is to paste them into S&H stamp collectors’ books and present them to S&H for redemption; that S&H stamp collectors must not dispose of S&H stamps or collectors’ books or make any further use of them without S&H’s consent in writing; that if S&H stamps or collectors’ books are transferred without such consent, S&H reserves the right to restrain their use by or take them from the persons to whom they are trans- ferred and that the use of S&H stamps and collectors’ books is restricted to S&H licensees and their customers. 9. In one state, Kansas, plaintiff is prohibited by law from carrying on its business. In three others, Washington, Wisconsin and Wyoming, plaintiff is required by statute me [APPENDIX] to redeem the stamps in cash. In thirteen (13) other states the statutes require that the stamps be redeemed by plain- tiff either in cash or merchandise—at the option of the holder, | 10. The defendants buy and sell S&H stamps, ex- change S&H stamps for other brands of trading stamps and other brands of trading stamps for S&H trading stamps, for a fee, and advertise by newspaper, radio and other media that they conduct a trading stamp exchange. 11. The defendants are not S&H licensees, nor has S&H consented to their trafficking in its stamps. The plaintiff has demanded that the defendants cease traffick- ing in its stamps. The defendants have refused te do so. 12. S&H stamp collectors are familiar with the oper- ation of the S&H system and with S&H’s requirement that they must paste S&H stamps into S&H stamp collectors’ books before S&H will redeem them. 13. If S&H stamp collectors could obtain S&H stamps from sources other than S&H licensees, the value of the S&H service to S&H licensees would be substantially re- duced. 14. The defendants’ trafficking in S&H stamps and collectors’ books is injurious to the plaintiff’s business and property in that it interferes with its right to select its licensees, to maintain the value of its stamps, to control the distribution and issuance of its stamps, and to provide a system of promotional and advertising value to its li- censees, 15. Plaintiff’s licensees are not prohibited by contract from contracting with other stamp companies. 16. Four other major trading stamp companies are engaged in business in Oklahoma and this competitive fea- ture of the plaintiffs business has created the business of defendants. _— [APPENDIX] CONCLUSIONS OF LAW 1. Plaintiff’s licensee contracts and mode of operation are not violative of the Anti Monopoly laws of the State of Oklahoma (79 OSA 1, et seq.) nor void as an unlawful purpose or contrary to public policy (15 OSA 104, 211 et seq.) 2. The plaintiff by notice contained in its license contracts, the pads in which it supplies its stamps to its licensees and in its stamp collectors’ books has retained title to its stamps and made them non-transferable. 3. The only right which S&H licensees have in S&H stamps is to issue them to their customers pursuant t@ the provisions of the S&H license contract. The only right which S&H stamp collectors have in S&H stamps is to transfer them to S&H for redemption in merchandise; the collectors have no right to transfer them to any other per- son, firm or corporation without the permission of S&H, in writing. | 4. The defendants’ trafficking in S&H stamps consti- tutes unfair competition, misappropriation of plaintiff’s good will and unjustified interference with its contracts with its licensees and with its stamp collectors. 5. The defendants’ trafficking in S&H stamps causes and will continue to cause the plaintiff irreparable injury. 6. The plaintiff has no adequate remedy at law. 7. The plaintiff is entitled to the relief of permanent injunction. ee ee ee _ = [APPENDIX} IT IS THEREFORE ORDERED that a judgment granting injunctive relief be entered in accordance here- with, DATED this 26th day of October, 1962. _ G. MICHAEL TAPP Judge of the Superior Court APPROVED AS TO FORM: G. M. Fuller Attorney for Plaintiff Objections to inadequacy, incompleteness and insufficiency reserved, John H. Cantrell Attorney for Defendants ° [APPEND!IX} APPENDIX B FILED : IN SUPERIOR COURT Oklahoma County, Okla. NOV 26 1962 IN THE SUPERIOR COURT IN AND FOR OKLAHOMA COUNTY STATE OF OKLAHOMA THE SPERRY AND HUTCHINSON COMPANY, Plaintiff, ) ) ) ) ) -vs- ’ ) NO. S-368 ) WILLIAM RANCE and RUTH V. RANCE, ) doing business as TRADING STAMP _ ) EXCHANGE. ) ) Defendants. ) ORDER SUSTAINING IN PART AND OVERRULING IN PART MOTION TO MODIFY AND SUPPLEMENT FINDINGS OF FACT On this 21st day of November, 1962, the Motion of the defendants, William Rance and Ruth V. Rance, to modify and supplement the Findings of Fact herein coming on to be heard and the said defendants appearing by their attorney, John H. Cantrell, and the plaintiff appearing by its attorney, John L. Smith, the Motion is duly presented to the Court. * Upon consideration of said Motion and argument of counsel thereon, the Court finds and orders that the Findings of Fact made and entered by the Court in this ss {APPENDIX} cause and dated the 26th day of October, 1962, be, and the Same are, amended and supplemented by the addition of the following Finding of Fact inserted in Finding of Fact No. 6.(1) as subparagraph (d), to-wit: (d) During the calendar year 1961 S&H stamp col- lectors redeemed merchandise ‘from plaintiff's re- “ demption centers located in Oklahoma ofthe approxi- mate retail value of 4 million dollars which merchan- dise had a cost value to plaintiff of approximately 2 million dollars, Plaintiff excepts and exception allowed. The Court further finds and orders that each and every other portion of said Motion of said defendants should be and is overruled and denied and the defendants allowed exceptions. G. Michael Tapp Judge’ of the Superior Court of Okla- - homa County, Oklahoma and agreed _ Special Judge of the District Court of Oklahoma County, Oklahoma : O.K. as to form: John L. Smith Attorney for Plaintiff O.K. as to form: John H. Cantrell Attorney for Defendants, . [APPENDIX) APPENDIX C FILED IN SUPERIOR COURT Oklahoma County, Okla. NOV 2 1962 Dale Smith, Court Clerk By Deputy IN THE SUPERIOR COURT OF OKLAHOMA COUNTY STATE OF OKLAHOMA THE SPERRY AND HUTCHINSON COMPANY, ) ) ) WILLIAM RANCE and RUTH V. RANCE, ) d/b/a TRADING STAMP EXCHANGE, ) ) ) JOURNAL ENTRY This matter coming on for hearing this 5th day of September, 1962, the plaintiff appearing in person and by its counsel, G. M. Fuller and John L. Smith, of Fuller, Smith, Mosburg & Davis, and the defendants appearing in person and by their counsel, John H. Cantrell, of Cantrell, Thompson, Douglass & Wilson, and the Court having ex- amined the pleadings, heard the testimony of witnesses sworn and examined in Open Court, heard the arguments of counsel and made its Findings of Fact and Conclusions of law, which have been filed herein, it is ORDERED: 1. That the activities of the defendants in buying, selling, trading and exchanging S&H Green Stamps causes and will continue to cause the plaintiff irreparable injury; —xi— C[APPENDIX} 2. That the plaintiff has no adequate remedy at law; 3. That the plaintiff is entitled to the relief of per- manent injunction; and agents, servants, employees or associates, or in any other manner. Dated this 26th day of October, 1962. G. MICHAEL TAPP Judge of the Superior Court OK: G. M. Fuller Attorneys for Plaintiff OK: As to form only. John H. Cantrell Attorneys for Defendants ~ To all of which the defendants herein objects which ob- jections are overruled and exceptions allowed. G. MICHAEL TAPP [APPENDIX] APPENDIX D IN THE SUPREME COURT OF THE STATE OF OKLAHOMA - William Rance and Ruth V. Rance, Plaintiffs in Error, vs. No. 40,423 The Sperry and Hutchinson Company, a corporation, Defendant in Error. SYLLABUS 1. The trading stamp business, as generally conducted in the State of Oklahoma, when honestly conducted, is not omens public policy, ° 2. The issuance of trading stamps in the usual and custom- ary manner in Oklahoma, constitutes a device for giving a discount for cash; the one who receives such stamps does not receive a cash discount, but a redeemable dis- ~ ‘ count in merchandise (represented by stamps) for paying cash. 3. A trading stamp when issued in the usual and custom- ary manner does not constitute ordinary property, a negotiable instrument or an article of commerce, as those terms are generally used; but, in effect, is an “instrument” employed by a trading stamp company to conduct a business which is in the nature of a sale to its licensees of a promotional or an advertising service. Ne eR ad —xili— (APPENDIX) 4. An inherent characteristic of a trading stamp business requires that a trading stamp company maintain cer- tain controls over the “instruments” employed in the conduct of its business, whether such “instrument” be trading stamps, contractual agreements, the merchan- dise at its redemption center, or any other integral part of its business, ae 5. Where a trading stamp company grants, by contract, exclusive rights to retail merchant, who is engaged in a particular line of business in a competitive area, to issue its trading stamps, such method of operation springs from business requirements and if it does not prevent others from lawfully engaging in similar en- terprises, does not restrain trade or create a monopoly, which is against public policy, such method of oper- ation is not in violation of any State or Federal laws when honestly conducted. 6. Until a commercial arrangement, or a method of doing business, reaches a Stage where the needs of the public are restricted to the point where the public is exposed to the evils sought to be prohibited by law, or such re- striction is contrary to the genius of free government, such arrangement, or method of doing business, is not against public policy. facts and circumstances, and each case must be con- strued in the light of its own particular facts, 8. Where a trading stamp company is legally and honestly conducting a trading Stamp business and has created Party seeks to attract customers and build up his own business by buying and selling such stamps, exchanging them for other brands of trading stamps, exchanging —xiv— [APPENDIX] other brands of trading stamps for such stamps and ap- propriates the stamp company’s good will, without pay- ment to or the consent of the trading stamp company; and such party’s “trafficking” in such stamps, is in- jurious to the trading stamp company’s business and property, in that it interferes with its right to select its licensees to issue its stamps, to maintain the value of its stamps, to control the distribution and issuance of its stamps, and to provide a promotional and adver- tising value to its licensees; and the stamp company has no adequate remedy at law; the stamp company is en- titled to a permanent injunction enjoining said party from “trafficking” in its stamps as articles of com- merce. 9. The findings of the trial court should be strongly per- suasive, and should not be set aside unless this Court can say, in equity and good conscience, that the con- clusions reached by the trial court are against the clear weight of the evidence. APPEAL FROM SUPERIOR COURT OF OKLAHOMA COUNTY, OKLAHOMA Hon. G. Michael Tapp, Judge. The Sperry and Hutchinson Company, a trading stamp company, commenced proceedings against plaintiffs in error from “trafficking” in its stamps as articles of com- merce. The trial court granted a permanent injunction as prayed for and plaintiffs in error appealed from the order ~ overruling its motion for a new trial. AFFIRMED Cantrell, Douglass, Thompson & Wilson, By John H. Cantrell, 2120 First National Building, ‘Oklahoma City 2, Oklahoma, For Plaintiffs in Error, ee ee CAPPEND!IX} W. J. Holloway, G. M. Fuller, Fuller, Smith, Mosburg, Davis & Bowen, ‘ 2500 First National Building, Oklahoma City 2, Oklahoma Of Counsel: Casey, Lane & Mittendorf, 26 Broadway, New York 4, New York, John F. Joyce, Roger H. Lloyd For Defendant in Error. IRWIN, J.: The Sperry and Hutchinson Company, referred to as plaintiff, is engaged in the trading stamp business and by written contract, it licenses the use of its S&H trading stamp service to certain retail merchants, referred to as licensees. The licensees offer and issue the stamps to their customers when the customers purchase merchandise at the licensees’ places of business. The customers who re- ceive the stamps will be referred to as collectors, William Rance and Ruth V. Rance, d/b/a Trading Stamps Exchange, referred to as defendants, buy and sell S&H stamps, exchange S&H stamps for other brands of trading stamps, and exchange other brands of trading stamps for S&H stamps., Briefly stated, defendants conduct a business of “trafficking” in trading stamps. Defendants are not licensees of plaintiff and plaintiff has not consented to defendants’ “trafficking” in its stamps. Plaintiff commenced this proceeding to permanently enjoin defendants from “trafficking” in S&H stamps. The trial court, in its journal entry of judgment, per- manently enjoined defendants “from advertising or other- —xvi— [APPENDIX] wise offering to buy, sell, trade or exchange,” and “from buying, selling, trading or exchanging or dealing in any other way with S&H Green Stamps, either in person or through their agents, servants, employees or associates, or in any other manner.” The defendants have appealed from the order over- ruling their motion for a new trial. FACTS The defendants buy and sell S&H stamps, exchange S&H stamps for other brands of trading stamps and ex- change other brands of trading stamps for S&H stamps, for a fee, and advertise by newspaper, radio and other media that they conduct a trading stamp exchange. Plaintiff does an interstate business in forty-seven states in the United States and has done business in Okla- homa since 1911. In the conduct of its business, plaintiff enters into license contracts with retail merchants (li- censees) offering a variety of goods and services, and grants to each licensee in a particular line of business within a competitive area the exclusive right to offer and issue S&H stamps. There are approximately 70,000 li- censees throughout the United States and approximately 1,000 licensees in Oklahoma. Plaintiffs method of doing business generally, and particularly in Oklahoma, is as follows: It contracts in writing with its licensees, whereby it agrees, inter alia, to furnish the licensees advertising signs; to furnish for dis- tribution by the licensee the collectors’ books which are books in which the collector pastes his stamps; and to re- deem the stamps when collected and presented as pre- scribed. The licensee agrees to advertise the fact that it issues S&H stamps; to pay a stipulated price for a certain number of stamps; and to offer S&H stamps to all cus- tomers making cash payments. eb PN Real, peat : —xvii— [APPENDIX) The collector’s books are offered to the collectors at the licensee’s place of business. The stamps must be pasted in a collector’s book before plaintiff redeems the stamps for merchandise selected by the collector. The stamp contains no language that title to the stamps remain in the plaintiff or that the stamps are not transferable and plaintiff's advertising does not so disclose, However, printed on the inside of the cover sheet of the collector’s book is the following: “NOTICE “S & H Green Cooperative Cash Discount Stamps when redeemed in accordance with conditions printed below are your compensation for cash payments made. “All S & H Green Cooperative Cash Discount Stamps now or hereafter issued by The Sperry and Hutchinson Company are subject to wll the provisions of the contracts between this Company and the mer- chants who issue them, and the following rights and conditions, which are expressly reserved by the Com- pany, which the persons acquiring them expressly ac- cept, and. which are a part of all contracts between this Company and its merchants, and are binding on the merchants’ customers, “Neither the stamps nor the books are sold to mer- chants, collectors or any other persons, at all times the title thereto being expressly reserved in the Company, and the right to possession thereof is reserved to it, subject to the rights of the merchants and their cus- tomers under the contracts with the Company. The stamps are issued to you as evidence of cash payment to the merchants issuing the same. The only right which you acquire in said stamps is to paste them in books like this and present them to us for redemption. You must not dispose of them or make any further use of them without our consent in writing. * * *.” —— [APPENDIX] “The stamps when received by you must be pasted in the book, as that is the method we have adopted for the purpose of preventing their further use. The use of our stamps is restricted to our merchants and their customers.” A catalogue, known as an “Ideabook,” is available at the licensee’s place of business for the collectors. The “Tdeabook” contains pictures of the merchandise available at plaintiff's redemption centers and the number of col- lector’s books filled with stamps necessary to acquire the desired merchandise. The plaintiff and its licensee agree that title to the stamps shall remain in plaintiff and shall not in any event pass to the licensee or any other person or firm and that the license to issue the stamps is personal to the licensee and that it may not be transferred or assigned. The contracts between the plaintiff and its licensee does not prohibit the licensee from contracting with other stamp companies to issue the other company’s stamps. Plaintiff provides “redemption centers” and has ap- proximately 14 in Oklahoma. The plaintiff spends millions of dollars annually in extensive national and local adver- tising, publicizing the desirability and the benefits of the S&H service to S&H stamp collectors and there are more than 33,000,000 S&H stamp collectors in the United States and between 300,000 to 400,000 in Oklahoma. In the trial court’s order sustaining in part and over- ruling in part defendants’ motion to modify and supple- ment findings of fact, the trial court found that during the calendar year 1961, S&H stamp collectors redeemed mer- chandise from plaintiff's redemption centers located in Oklahoma of the approximate value of 4 million dollars which merchandise had cash value to plaintiff of approxi- matcly 2 million. In. this connection, the trial court made no finding as to plaintiffs cost of operation in Oklahoma. ee a een OE en —xix— [APPENDIX] PROPOSITION I Defendants contend that any collector, who acquires stamps through purchase of merchandise or payment there- for, acquires the title of such stamps and an attempted restraint of alienation is unenforceable; that if such col- lector has the title and ownership with the necessary inci- dents thereto, including the right of transfer, defendants have the right to acquire the stamps from the collectors; and if the collector has the right to sell or exchange them, defendants have the right to acquire, sell or exchange them. In this connection, defendants argue that the stamps are “articles of commerce” and the attempted reservation of title by plaintiff, in its contracts with its licensees, is a “restraint of trade”; and since the stamps represent a “cash discount” they become immediately “articles of commerce” when issued the same as warehouse receipts, promissory notes or other commercial paper. Plaintiff argues that it retains title to the stamps and the only rights a collector has in the stamps are for re- demption purposes, and that it is entitled to an injunction enjoining defendants from “trafficking” in its stamps. gia manner, constituted “a device for giving a discount for cash.” In other words, a collector does not receive a “cash discount,” but receives a redeemable discount in merchan- dise (represented by stamps) for paying cash. The issue involved here is whether defendants may be enjoined from “trafficking” in the redeemable discounts (the stamps) as [APPENDIX] articles of commerce, which a collector receives from a licensee. Defendants cite the case of Merchants’ Legal Stamp Company v. Murphy, 220 Mass. 281, 107 N.E. 968, as a “bay horse case” to support their theory that when the stamps are issued, they become “articles of commerce” and that plaintiff is not entitled to an injunction enjoining them from “trafficking” in “articles of commerce.” The first headnote in the above case states: “Trading stamps and books are ‘articles’ within St. 1908, c. 454 § 1, providing that every agreement in violation of common law is illegal and void, if thereby a monopoly in the production or sale of any article or commodity tends to be created.” Although the above case holds that trading stamps are “articles” within the cited statute, an examination of the opinion and the second headnote discloses that the method employed by the stamp company in conducting its business was the controlling factor. In the second headnote it is stated: “Where the direct and intended effect of methods employed by plaintiff in conducting a business in trading stamps was to prevent others from lawfully engaging in similar enterprises, the contract of the plaintiff with defendant as to use of stamps which em- bodied such monopolistic features of the plaintiff’s business was within St. 1908, c. 454, § 1, providing that every agreement in violation of common law, in that thereby a monopoly in the production or sale of any article or commodity is created, is illegal and void.” In the above case it is stated that under the stamp company’s operation, it controlled nearly ninety per cent of the actual stamp business in the Boston area. The stamp company would decline to supply stamps unless its li- censees would stipulate that they would not use trading —xxi— [APPENDIX] stamps issued by other stamp companies, and the court found that this provision was to suppress all competition and said: “The monopoly it seeks to establish may not be complete but it has gone far enough to eliminate any ef- fective rivalry. The restriction is not confined to the sale or transfer to a business rival of plaintiff, but the merchant or collector cannot dispose of book or stamps to anyone even if their retention unused must result in pecuniary loss. Indeed this is an essential and controlling feature of the contract, which differs materially from the contract in Gagnon v. Sperry & Hutchinson Co., 206 Mass. 547, 92 NE 761.” In the instant case the trial court found that there are four other major trading stamp companies in Okla- homa and this competitive feature of plaintiff’s business has created the business of defendants. This finding is not against the clear weight of the evidence. In other words, plaintiff's method of operation does not prevent others from engaging in similar enterprises for in Oklahoma there are five major trading stamp companies and the stamp business in Oklahoma is competitive. In the instant case, plaintiff’s licensees are not pro- hibited from contracting with other stamp companies— there, the licensees were prohibited. The contract in the instant action provides that upon termination thereof the plaintiff “shall repay to the licensee any amount thereof paid by him, for its services and for the use of its system, measured by the number of stamps remaining unused and so returned, * * *.” In the Merchants’ Legal Stamp Com- pany case, the licensee could not dispose of the stamps to anyone, even if their retention resulted in a pecuniary loss. The method by which Merchants’ Legal Stamp Com- pany conducted its business in Massachusetts was monopo- listic. In Sperry & Hutchinson Co. v. McBride, 30 NE 2d 269, the Supreme Judicial Court of Massachusetts, in ef- fect, recognized the legality of the method by which plain- — [APPENDIX) tiff was conducting its stamp business. As will be herein- after shown, plaintiff's method of conducting its business in Oklahoma is not monopolistic or in violation of any State or Federal Laws. In Sperry & Hutchinson Co. v. Mechanics’ Clothing Co., 135 Fed. Rep. 833, it was held that Sperry & Hutchin- son had the right to restrict the use of the stamps by con- tract, and the stamps, having been once issued by a mer- chant, were functus officio, except for redemption, and, though transferable for that purpose, defendants’ use thereof was improper interference with Sperry & Hutchin- son’s business, which it was entitled to restrain. In that case the court said: “The trading stamp, when issued, represents a closed transaction between the merchant and the com- pany, as well as an outstanding obligation to redeem the stamp. As a token or voucher of the sale and use of so much advertising, the trading stamp is neces- sarily a consumable article—an article designed for a single use in an advertising scheme. What the de- fendants wish to do is to procure for themselves a trade advantage as distributors of trading stamps. Al- though the stamps have been issued to collectors for a limited purpose, the defendants desire to use them for a purpose for which obviously they were not intended in the hands of a collector. * * *. The defendants have devised the scheme of procuring from individual col- lectors a very large number of the stamps, and, by uniting in a single hand what ordinarily would be dis- tributed in many hands, they secure a supply sufficient for -advertising purposes. In other words, as trans- ferees of the rights of persons who did not acquire these stamps for advertising purposes, they secure for themselves the ability to do what is not intended that a collector of the stamps should do. * * *. By reusing the stamps as an advertisement, they seek to get for , eee ee Oe ee ee ae eS eS a ee ee ee ee —Xxili— [APPENDIX] nothing what others are required to pay for, and insti- tute a destructive competition with authorized mer- chants, which tends to destroy the value of the stamps, and to injure the complainant’s (Sperry & Hutchin- son) business.” Defendants’ counsel argued the above case on the theory that the court could disregard entirely the rights of Sperry & Hutchinson and its licensee, and that, “although both of these parties have expended their money in ex- pectation of a benefit, this benefit may be destroyed by de- fendants.” In turning down this contention, the court said that defendants could acquire no greater rights than the customer-collector had, and that if they did reissue them, they were appropriating for themselves, and without con- sideration, what fairly belonged to the licensee and Sperry & Hutchinson. The court stated that a trading stamp is not ordinary property. It is sui generis and an artificial cre- ation. And we find this statement: “While a transfer of ordinary property by the owner upon any terms usually deprives other persons of no rights, this is not always the case with the trading stamps. While it may be transferred in any way which confines its use within the purpose for which it was issued, it may not be transferred in such a way as to destroy its value as an instrument of special trade advantage or advertising, or as to deprive the com- pany which created the value of the stamp, and which has assumed the obligation to redeem it, of its right to com- pensation for expenditures and for redeeming the stamps.” In the above case the court found that defendants knew that the stamps were issued to customers for a cer- tain purpose—that is, for redemption. Defendants in the instant action have knowledge of the method by which plaintiff conducts its business, In Sperry & Hutchinson vy. Temple, 137 Fed. Rep. 992, defendant Temple knew of the mannez in which Sperry & —xxiv— [APPENDIX] Hutchinson conducted its business and the court held Tem- ple was not an innocent purchaser without notice in pur- chasing issued stamps for resale. The court further held: “The business of issuing trading stamps to mer- chants to be given to purchasers of small bills for cash redeemable in articles of merchandise, etc., when honestly conducted, is not contrary to public policy. “Where defendant purchased complainant’s trading stamps, among others, for resale, and such purchases seriously interfered with complainant’s business in issuing such stamps for redemption in articles of mer- chandise, etc., complainant was entitled to an injunc- tion prohibiting defendant from advertising that he would purchase complainant’s stamps, and from selling stamps so purchased as articles of merchan- dise.” In the above case the Court said: “* * * The nature of the business requires that there should be a certain monopoly. If the stamps were on the market generally, thus opening the business extensively, no merchant would have an inducement to deal with the complainant. There- fore, by the very nature of the business, the stamps are not intended to be dealt with by the public generally, and are not transferable in the general and ordinary sense of the wee. * °°" In Sperry & Hutchinson Co. v. Louis Weber & Co., 161 Fed. Rep. 219, the court held: “Complainant issued trading stamps to merchants under contracts providing that they should be given out only to cash customers as premiums on purchases, and when presented by such customers in books would be redeemed by complainant in goods. They were non- transferable on their face, and the books were sup- plied by complainant and contained advertisements of the merchant’s business. Held, that the business and DAE AOS), —xxv— [APPEND!IX} contracts were lawful, and that complainant was en- titled to protection by injunction against a rival in the business, which sent out agents to purchase or ex- change its own stamps for partly filled books con- taining complainant’s stamps, some of which were again resold at a low price, materially interfering with complainant’s business.” In the body of the opinion we find this language: “It is the essence of complainant’s business that its subscribers shall get the full benefit of its methods of advertising and assistance. Its stamps are not, in the fyll sense, property. Their nontransferability is an essential element of their value, both to complainant and its subscribers. It may be assumed that both par- ties are in the transaction for profit. It is not fair to say that complainant’s only interest consists in the presen- tation of the stamps for redemption, if the means em- ployed to that end result in killing the demand of subscribers for the stamps. The parties are entitled to carry on their affairs in such a way as to serve the business interests of each, so long as they are law- fully conducted. To create an unfair market for partly filled and nontransferable.stamp books would have a tendency to keep purchasers from trading with sub- scribers until they were filled. This has been held in a number of cases instituted by complainant to protect its business. Among these are the Cases of Mechanics’ Clothing Company (C.C.) 128 Fed. 800, 1013 (same in (C.C.) 135 Fed. 833), Brady (C.C.) 134 Fed. 691, Beal (C.C.) 145 Fed. 659, Asch (C.C.) 145 Fed. 659, and Temple (C.C.) 137 Fed. 922. In addition there are unpublished opinions and decisions to the same effect by Judge Morris of Baltimore, Judge McPherson, East- ern district of Pennsylvania, Judge Thomas, Eastern district of New York, and Judge Lacombe, Southern district of New York.” —xxvi— [APPENDIX] In Sperry & Hutchinson v. Fenster, 219 Fed. Rep. 755, an injunction was granted in favor of Sperry & Hutchinson, and in granting such injunction, the court held: “Act Cong. October 15, 1914, c. 321 § 3, 38 Stat. 731, prohibiting the making of a contract fixing the price for merchandise on condition that the lessee or pur- chaser shall not use or deal in the merchandise of a competitor, if the effect of the contract is to substan- tially lessen competition or tend to create a monopoly, does not prohibit a trading stamp concern from re- stricting redemption privileges to subscribers under contract with it binding such customers to distribute stamps only to customers.” In the body of the opinion we find this statement: “* * * the sale of trading stamps is much more like the transactions considered in Henry v. A. B. Dick Co., 224 US. 1, 32 Sup. Ct. 364, 56 L.Ed. 645, Ann. Cas. 1913D, 880, in that the reason for insisting upon a con- tract is to restrict the sharing in a certain legitimate privilege, to those who pay for the privilege, and to prevent, by a mere transfer of the trading stamps, the bestowal of the advantage of giving out the stamps, and of getting trade thereby, upon any person who might by holding the stamps be entitled to claim the rights of redemption. “It is evident that the intent and acts of persons taking the stamps and seeking to redeem them for a certain premium, and also the resultant benefits to that person, are entirely different and are based upon sub- stantially different rights from those of a party who is seeking to attract customers and to build up his own trade through the privilege of dealing, as it were, in trading stamps, without payment for that privilege and with no intention of getting the goods for which the stamps are redeemable. ee eee ee ee ee ee ae as —_ [APPEND!X} “The right to redeem the stamps is a property right transferable by possession while the license to use them for advertising purposes is not transferable with- out compensation to the person granting that right, viz., the plaintiff herein.” (emphasis ours). In the instant action, defendants are seeking to attract customers and to build up their own trade through the “trafficking” in plaintiff’s trading stamps, without payment for that privilege and without intention of getting the goods for which the stamps are redeemable. In Sperry & Hutchinson Co. v. Siegel, Cooper & Co., 140 NE 864, the Supreme Court of Illinois said that stamps ‘were not negotiable instruments and the “purpose of the provision concerning their redemption was to aid the one who issued them in establishing a closer and continuous relation between himself and his customers by having the customers redeem the coupons. No one else has any right to traffic in these stamps. By numerous cases in this country, by which appellant here sought to enforce the nontransferability of such stamps, such feature has been sustained.” The court then cited the Weber Mechanics Clothing Co. and Fenster cases herein before discussed. the State commenced proceedings against the stamp com- pany to require escheat of the cash value of unredeemed stamps. The Superior Court, Chancery Division, 49 N.J. Superior Ct. 165, 139 A2d 463, rendered judgment for the Stamp company. On appeal to the Appellate Division, 153 A2d 691, in affirming the judgment, the court recognized the fact that a housewife may redeem in her own book all of the stamps collected by individual inembers of her family and said the State’s rights are no greater than that of each stamp holder. However, the court said the stamps were not freely transferable without the Stamp company’s consent because the collector is so apprised both by legend [APPENDIX)} on the reverse side of the stamps and by the “notice” in the stamp books. The above decision was affirmed by the New Jersey Supreme Court in 31 N.J. 385, 157 A2d 505, for the reason stated in 153 A2d 691. In the instant action, plaintiff and defendants submit and rely upon diametrical theories. Plaintiffs theory is that it has title to the stamps at all times, and since it has title to them, the same may not be sold or exchanged with- out its consent; and, the only rights a collector has in trad- ing stamps issued to him by a licensee is the right of re- demption and if a collector should transfer his right of re- demption to another person without its consent, plaintiff would not be obligated to redeem the stamps. On the other hand, defendants’ theory is that after the trading stamps have been issued by a licensee to a collector, such stamps immediately become articles of commerce and can be sold and exchanged as ordinary property; that plaintiff has no interest in the stamps after the same have been issued to a collector, but only an obligation of redemption; and since plaintiff has no interest, but only an obligation to redeem, it can not enjoin the sale and exchange of the stamps as ordinary property or articles of commerce. In analyzing the stamp cases we find the courts have recognized that one of the inherent and necessary char- acteristics of the trading stamp business requires that a stamp company maintain certain controls over the trading stamps and that its interest in the stamps after the same have been issued to a collector is more than an obligation to redeem. In other words, the courts. have recognized that if trading stamps when issued in the ordinary and usual manner, immediately become ordinary property and could be sold and exchanged as such, such uses would be so inconsistent with the purposes for which the same were issued, and so destructive to a legal method of doing busi- ness, that such action should be enjoined. —xxix— [APPENDIX] We can only conclude that trading stamps, when issued in the ordinary and usual manner to a collector, do not constitute ordinary property or articles of commerce as those terms are generally used; but, in effect, is an “instru- ment” employed by a stamp company in conducting a business whichis in the nature of a sale to its licensees of a promotional or an advertising service. The issue herein is whether plaintiff is entitled to an injunction enjoining the defendants from trafficking in S&H Stamps or the “instruments” employed by plaintiff to conduct its business as articles of commerce. The trial court found that if S&H stamp collectors could obtain S&H stamps from sources other than S&H licensees, the value of plaintiff's service to S&H licensees would be substantially reduced; that defendants’ trafficking in S&H stamps and collector’s books is injurious to plain- tiffs business and property in that it interferes with its right to select its licensees, to maintain the value of its stamps, to control distribution and issuance of its stamps, and to provide a promotional and advertising value to its licensees; and that four other major trading stamp com- panies are engaged in business in Oklahoma and this competitive feature of plaintiff's business has created the business of defendants. In its conclusions of law the trial court found that de- fendants’ trafficking in S&H stamps constitutes unfair competition, misappropriation of plaintiffs good will and unjustified interference with its contracts with its licensees and with stamp collectors. We find the success of plaintiff's business depends upon the value of its services to its licensees and the num- ber of stamps issued. Plaintiff, in its contract with its licensees, is obligated to advertise that its licensees issue S&H stamps; to advertise the benefits that the customers will receive by purchasing from the licensees; to furnish [APPENDIX] _ collector’s books; and to redeem the S&H stamps when collected and presented. Plaintiffs contract with its licensees prohibt the licensees from disposing of the stamps in any manner other than as provided in the contract and the license to issue the S&H stamps is personal to the licensee and may not be transferred or assigned. The contract right to offer and issue S&H stamps by the licensees and plaintiffs discharge of its obligations un- der its contract are, in effect, an advertising device which is beneficial to the licensees; the offering and issuing the S&H stamps is not merely to induce a single purchase but to provide an incentive for continued patronage, and the offering and issuing S&H stamps are inducements and in- centives for trading at a licensee’s place of business. We find that if collectors could sell or purchase S&H stamps on the open market for cash, or could obtain such stamps from any and all retailers, whether such retailers had or did not have a license from plaintiff to offer and issue S&H stamps that the value of plaintiff's services to its licensees would be reduced; that it would reduce the tendency of a collector to patronize a licensee’s place of business if one of the incentives was to obtain S&H stamps; that the value of plaintiff’s services to its licensees (value of the stamps) would not be determined by contract be- tween the plaintiff and its licensee, but would be deter- mined by market conditions created by people unauthorized to traffic in S&H stamps but who do traffic in the same; and that plaintiff and its licensees have expended great sums of money to create a demand for S&H stamps and have cre- ated a means whereby the collectors can receive a benefit by patronizing a licensee who offers and issues_.S&H stamps. Plaintiff has also created the good will in connec- tion with its stamps and defendants have appr: sriated this good will without the consent of and against the wishes of plaintiff. —xXxXxKi— [APPENDIX) We can only conclude that the trial court’s findings are not against the clear weight of the evidence and that defendant’s actions, by trafficking in S&H stamps, as arti- cles of commerce, constitutes a wrongful and unwarranted interference with plaintiff’s business. In 28 Am. Jur., Injunctions, Sec. 70, page 566, it is said that, “The right to conduct a business, * * * without the wrongful interference of others is a property right which equity will, in a proper case, protect by injunction, by law.” In Paramount Pictures, Inc., v. Leader Press, Inc., 106 F.2d 229, the court said that, “* * * the right to carry on a lawful business is a valuable right which a court of equity will protect against unwarranted interference or undue obstructions.” And, “* * * a court of equity will extend appropriate protection to intangible as well as tangible property which forms a part of a lawful buginess. Equity does not draw any distinction between the two kinds of property in respect of protection against wrongful invasion.” We can only conclude that plaintiff is entitled to an injunction enjoining defendants from trafficking in the S&H stamps as articles of commerce, and the judgment of the trial court should be affirmed if plaintiff is legally conducting its business. See Moral Insurance Company v. Fechtel, Okl., 280 P.2d 716. PROPOSITION II Defendants contend that the plaintiff's contracts with its licensees wherein plaintiff seeks to reserve title to the stamps are void and illegal and against public policy of the State and the United States because each contract is an integral part of a vertical combination in restraint of trade, and plaintiff violates the State and Federal anti- monopoly laws in the operation of its business based upon said contracts. ol ead [APPENDIX] To sustain the above contention defendants cite Arti- cle 2, Sec. 32; and Article 5, Sec. 44, of the Oklahoma Con- stitution; and Title 79 O.S. 1961, Sec. 1 & 3; and the Fed- eral Statutes prohibiting monopolies and cases construing the Sherman Anti-Trust Act. Under several sub-divisions the plaintiff argues the stamps are articles of commerce; attempted. reservation of title to the stamps, which are arti- cles of commerce, restrain trade by vertical combinations; restraints against alienation are illegal; monopoly by what- ever means is condemned; vertical combinations are pro- hibited; “tying agreements” are illegally monopolistic; and there are no contractual rights between the plaintiff and the collectors. - Under the plaintiff’s contracts with its licensees, the licensee purchases no commodity from the plaintiff for resale. The licensee does purchase, however, the services of plaintiff and the licensee is not prohibited from pur- chasing the services of another stamp company. The value of plaintiffs services to its licensee is, in effect, determined by the volume of business done by the licensee. The col- lector is not obligated to take the stamps offered by the licensee nor is he obligated to present for redemption the stamps he may obtain. The collector is under no obligation to the licensee or to the plafntiff, but the plaintiff is obli- gatéd to redeem the stamps in merchandise if the same are presented for redemption. The collector may enforce the obligation or he may ignore it by failure to present the stamps for redemption. Without question, the method by which plaintiff con- ducts its business, restraints are placed on others from trafficking or trading in its stamps. However, the evidence does not disclose that plaintiff has monopolized the trading stamp business (the trial court found there were four other major stamp companies doing business in Oklahoma), _— [APPENDIX] nor does the direct and tended effect of the methods em- ployed by plaintiff prevent others from engaging in similar enterprises. In Sperry & Hutchinson Co. v. Temple, 137 Fed. 992, it was held that the business of issuing trading stamps to be given to purchasers of small bills for cash, redeemable in articles of merchandise, etc., when honestly conducted, is not contrary to public policy; and, that the nature of the business required there should be a certain monopoly. In Sperry & Hutchinson Co. v. Fenster, 219 Fed. 755, it was held that: “Act. Cong. October 15, 1914, c, 321, § 3, 38 Stat. 731, prohibiting the making of a contract fixing the price for merchandise on condition that the lessee or pur- chaser shall not use or deal in the merchandise of a com- petitor, if the effect of the contract is to substantially les- sen competition or tend to create a monopoly, does not prohibit a trading stamp concern from restricting redemp- tion privileges to subscribers under contract with it bind- ing such customers to distribute stamps only to customers.” In Lorain Journal Co. v. United States, 342 US. 143, the Supreme Court of the United States said that in the absence of any purpose to create or maintain a monopoly, the Sherman Anti-Trust Act does not restrict the long recognized right of a trader or manufacturer engaged in an entirely private business, freely to exercise his own inde- pendent discretion as to parties with whom he will deal. In Klor’s Inc. v. Broadway-Hale Stores, Inc., 359 U.S. 207, it is stated that Section 1 of the Sherman Anti-Trust Act makes illegal any contract, combination or conspiracy dn restraint of trade, and section 2 forbids any person or ‘combination from monopolizing or attempting to monopo- ~ lize any part of ‘interstate commerce. The Court said, “Group boycotts, or concerted refusals by traders to deal with other traders, have long been held to be in the for- bidden category.” —xxxiv— [APPENDIX] In the instant action, plaintiff does not follow a pattern or practice of refusing to deal with any particular merchant or group of merchants. As found by the trial court, plaintiff “* * * srants to each licensee in a particular line of busi- ness the exclusive right to its S&H Cooperative Discount System within his competitive area.” If a licensee in a par- ticular line of business did not have the exclusive right to issue stamps within its competitive area, the value of plain- tiff’s services to its licensees would be greatly reduced. And it is important that licensees be confined to non-competing retailers in a given eompetitive area because the value of plaintiff's services to its licensees is measured in terms of the advantage the licensees gain in attracting new custom- ers and retaining those he already has. In other words, plaintiff grants exclusive rights to its licensees to issue its stamps in the licensees’ competitive area but it does not refuse to deal with any particular merchant or group of merchants. Plaintiff's method of operation springs from business requirements and not for the purpose of monopo- lizing the trading stamp business or restraining trade. In Thomas v. Belcher, 184 Okl. 410, 87 P.2d 1084, we held that a retailer’s contract with a wholesaler or dis- tributor of merchandise limiting the retailer to a definite and exclusive territory for the resale of such merchandise does not restrain trade or competition in violation of the Federal or State Anti-Trust Laws. See also Packard Motor Car Co. v. Webster Motor Car Co., 243 F.2d 418. If a manu- factor and dealer, or a wholesaler and retailer, can agree to an exclusive distributorship in a given area, we can see no illegality in plaintiff granting exclusive rights to a licensee in a particular line of business in a competitive . area to issue its stamps. In the Thomas v. Belcher case, supra, we said: “* * * The illegality of contracts in restraint of commerce is a product of public policy. If such con- tracts are not contrary to public policy they violate —xXxXxXv— [APPENDIX] neither the federal nor the state anti-trust laws. Until a commercial arrangement between parties reaches a stage where commodities needful to the public welfare are restricted commercially to the point where the public is exposed to the evils of monopoly, such ar- rangement is not in restraint of trade within the mean- ing of the anti-trust laws.” In Times-Picayune Publishing Co. v. United States, 345 U.S. 594, it is stated that a “tying” arrangement vio- lates Sec. 1 of the Sherman Anti-Trust Act when a seller enjoys a monopolistic position in the market for the “tying” product and a substantial volume of commerce in the “tied” product is restrained; and, that the common core of the adjudicated unlawful tying arrangements is the forced purchase of a second distinct commodity with the desired purchase of a dominant “tying” product, resulting in eco- nomic harm to competition in the “tied” market. In the instant action, licensees do not purchase a com- modity but a service, and it is not required to purchase a “tying” product. The collectors have no obligations to the plaintiff as plaintiffs licensees, but the obligations are in favor of the collectors. The trading stamp, when issued represents a closed transaction between plaintiff and its licensee, and creates an outstanding obligation on the part of plaintiff to redeem the stamps. See Sperry & Hutchinson Co. v. Mechanic’s Clothing Co., 135 F. 813. For a general discussion on the legality of the trading stamp business as generally conducted, see The Ohio State Law Journal, Volume 23, No. 1, (1962) pages 35 through 55. Defendants have cited no case and our independent research fails to disclose any cases supporting the propo- sition that plaintiff's method of conducting its business in Oklahoma violates any State or Federal laws. In our opin- ion, and we so hold, that the method by which plaintiff —xxxvi— [APPENDIX] conducts its business in Oklahoma is not in violation of our State or Federal Laws. PROPOSITION III Defendants contend that public interest is adversely affected by the judgment of the trial court and such is therefore improper, inequitable and improvident; and that plaintiff's hands are unclean and is estopped by its illegal conduct, its mode of operations and its failure to treat the stamp collectors fairly, as well as by its discriminatory Title 79 O.S. 1961, Sec. 1, provides that every act, agreement, contract, or combination in the form of trust or otherwise, or conspiracy in restraint of trade or com- merce within this State, which is against public policy, is declared to be illegal. Article 2, Section 32, of our Consti- tution provides that perpetuitius and monopolies are con- trary to the genius of free government, and shall never be allowed. However, until a commercial arrangement, or a method of doing business, reaches a stage where the needs of the public are restricted to the point where the public is exposed to the evils sought to be prohibited, or such restriction is contrary to the genius of free government, such arrangement or method of doing business is not against the public policy. See Thomas v. Belcher, 184 Okl. 410, 87 P.2d 1084. We\have heretofore determined that. plaintiff's busi- ness is not illegal; that it does not violate any State or Federal ; and that defendants’ actions are injurious to plaintiff's business. We have also determined that the stamp business in Oklahoma is competitive and that the competition created by plaintiff and four other major stamp companies doing business in Oklahoma has created defendants’ business. aie - [APPEND!IX} There is no evidence that plaintiff has employed dis- criminatory practices in selecting or entering into con- tracts with its licensees; or the method of conducting plaintiff's business prevents others from lawfully engaging in similar enterprises; or that any collector has any more or less rights than any other collector. Each collector has the same redemption privileges as all other collectors and there is no evidence that the stamps, when properly pre- sented for redemption, have any more or less redemption value in one redemption center than in another redemption center. The trial court found that in one state plaintiff is prohibited by law from carrying on its business; in three other states, plaintiff is required by statute to redeem the stamps in cash; and in thirteen states the statutes require that the stamps be redeemed by plaintiff either in cash or merchandise—at the option of the holder. Our Legislature has not enacted legislation requiring plaintiff to redeem the stamps in cash or redeem the stamps in cash or merchan- dise—at the option of the holder. In other words, our Legis- lature has not seen fit to enact any legislation i concerning the stamp business or any legislation ing the rights, duties and obligations of stamp licensees, and collectors; except, however, (Title 21 O.S. 1961, Secs. 361-364), which are pertinent in the case at bar. We can only conclude that plaintiff's method of con- ducting its business does not adversely affect the public interest; that it is legally conducting its business, and the judgment of the trial court is not improper or inequitable. CONCLUSIONS In the instant action, we are not concerned with re- demption rights but whether plaintiff is entitled to in- junctive relief. Whether injunctive relief is to be granted —xxxviii— [APPENDIX) in an action in equity is a matter within the sound legal discretion of the court, to be determined in the light of all the facts and circumstances and each case must be con- sidered in the light of its own particular facts. Cooke v. »\ Southwest Petroleum Co., 177 Okl. 458, 61 P.2d 16. The controlling issues herein presented, i.e., the man- ner or method employed by plaintiff and defendants in conducting their business, were questions of fact and. these issues were resolved in favor of the plaintiff and against the defendants by the trial court. In Nowlin v. Wilson, 187 Okl. 173, 101 P.2d 805, we held that the findings of the trial court should be strongly persuasive, and should not be set aside unless this Court can say, in equity and good con- science, that the conclusion reached by the trial court is against the clear weight of the evidence. We can only conclude and hold that the judgment of the trial court should be and the same is hereby affirmed. CONCUR: HALLEY, C.J., JACKSON, V.C.J. and DAVI- SON, WILLIAMS, BLACKBIRD and BERRY, JJ. . APPENDIX E In SupreME Court OF OKLAHOMA June 22, 1965 IN THE SUPREME COURT OF THE STATE OF OKLAHOMA Tuesday, June 22, 1965 THE CLARE REC 0 SN TES THE FOL LOWING ORDERS: —xxxix— [APPENDIX)} 40423—-Wm. Rance and Ruth V. Rance v The Sperry & Hutchinson Company a corp. Rehearing and oral argument denied, Harry L. S. HAtiey Chief Justice ATTEST: ' Andy Payne, Clerk APPENDIX F FILED In SuPREME CouRT ‘ OF OKLAHOMA ‘ July 27, 1965 Andy Payne, Clerk IN THE SUPREME COURT OF THE STATE OF OKLAHOMA Tuesday, July 27, 1965 THE CLERK IS DIRECTED TO ENTER THE FOL- LOWING ORDERS: 40423—William Rance and Ruth V. Rance v. The Sperry and Hutchinson Company, a corp. Issuance and transmission of mandate is withheld until Septem- ber 22, 1965, pending perfection of appeal by plain- tiffs in error to the Supreme Court of the United States; if their appeal will stand perfected on or ‘ before that date, mandate shall be further with- held until such time as the Supreme Court of the United States shall have rendered a final decision herein or until further order of this Court. Harry L. S. HALtey . Chief Justice ATTEST: Andy Payne, Clerk --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385602_0949%3A1. Public record. Not legal advice.