Motion to dismiss — Safeway Stores, Inc. v. Oklahoma Retail Grocers Assn., Inc.

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yi | JAMES R. BROWNING, Clerk

IN THE

— Court of the Huited States:

OCTOBER TERM, 1958

——

Nov252 °C Par eye

SAFEWAY STORES, INCORPORATED, ext

Aan,

OKLAHOMA RETAIL GROCERS ASSOCIATION, INC.

\ ‘and LOUIE J. SPEED, INC., °

etre OA Appellees.

ON APPEAL FROM THE SUPREME COURT OF THE

STATE OF. OKLAHOMA

MOTION TO DISMISS Le

= ' Grorce MISKovskY

mee W. J. Hotioway, Sr., f -

y M. A. Nep Looney,

; . . Ciype J. Warts,

Ter ce: . Attorneys for Appelices.

Of Counsel: Sorte

Sanus! & MISKovsky,

- Hightower Building, ; :

Oklahoma City, Oklahoma. +e 05 Es ae

W. J. Hotroway, Sp.

First National Building,

Oklahoma, City, Oklatioma.

Looney, Watts, Ross, NEY & NICHOLS, — ~

First National Building, . ‘ .

Oklahoma City, Oklahoma.

Counsel of Record:

M.-A. Nep Looney,

First National Building,

Oklahoma City, Oklahoma.

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Supreme Court of the Suited States

OCTOBER TERM, 1958

me. . a aes

SaFEway STORES, IxcorPorATED,

laa mpiies.

eee one

OxtaHoma Reta. Grocers ASSOCIATION, Inc.

and’ ‘Lovie J. Speen, Inc.,

, —

ON APPEAL FROM THE SUPREME COURT be. THE

STATE OF OKLAHOMA ise

ee

-MOTION TO DISMISS

Appellee moves pursuant to Rule 16, Supreme Court

Rules (28 U. 8S. C.) to dismiss the appeal herein gn the

grounds that the appeal does not present a substantial —

federal question and ‘that the judgment rests on an

. adequate non-federal basis. :

This is another skirmish in the now famous Safeway

battle for the expanding Southwest market that has

erupted in numerous indictments, complaints, injunctions:

and: sentences,”

"Eg United States v- Sibi Stores, Inc. et al., CCH "Toit

REG. Rey. (1957 Trade Cas.) Par. 68,770 (N.D. Texas, 1957), in

which the.court accepted pleas of nolo contendere from all of the

defendants in a criminal prosecution which charged a conspiracy to

monopolize the retail grocery business in various cities in. Texas afid

New Mexico; and United States v. Safeway Stores, Inc., CCH Trave

. Rec. Rep. (1957 Trade Cas.)* Par. 68,871 (N.D. Texas 1957) ter-’

-minated by consent decree, which judgment: prohibited Safeway from

selling at prices below cost and operating retail stores below the wed

of doing business for the purpose of attempting to —— ize fr

grocery trade. ¢

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The specific market hére involved is\ the rich Tulsa-

Oklahoma City area. The rentedy sought and obtained.

’ by the independent grocers through their, Retail Grocers

Association, was a perinanent injunction against illegal

price cutting. The defense claimed by-.Safeway, and

rejected by both the trial court and the Oklahoma Supreme.

Court, was ‘that the price eptting was done in: good faith

to meet competition.* * ge |

_ No doubt, the “Detroit Jobber” cases (Standard Oil

Co. v. FTC, 340 U. S. 231 .(1951); and FTC v. Standard

Oil Co., 355 U. S. 396, (1958)), have done imuch to revive

interest in the defense of the good faith meeting of compe-

tition when the charge ‘is that of d&criminatory pricing

under Robinson-Patman (15 U. S. C. $§13, ‘13a, 13b, 2Ta

(1952)). Probably the criteria there defined are also

relevant in an action based ona local unfair sales act.** .

However, Safeway’s reliance on the good faith’ defense

is particularly inappropriate here in the light of the

explicit finding by the Oklahoma Supreme Court ‘that:

“e © © Safeway obviously and admittedly did not,

in good faith, set the price of its articles which were

subject to the Unfair Sales Act on the basis of. its.

competitors’ prices which it in good faith believed °

it "hough to be gas (Append A, pp. 26- 27).

* The opinion of the Supreme Court of ides: casei at |

. 322 P. 2d 179 (Okla. 1957), and the Gfinion of the District Court

of Oklahoma County reported in CCH Trane Rec. Rep. (1955 Trade.

' Cas. ) Par. 68,195; are printed in full as Appendix Ato appellant’s

Jurisdictional Statement. The Oklahoma Unfair Sales Act, 15 ‘Okla.

’ Stat. 1951 §§598.1-598.11, is printed in full as Appendix B to appel-

lant’s Jurisdictional Statement. Hereinafter, references to these -

_ Opinions and the statute will, for the Court’s convenience, be ee as

Appendix A (or B), p.

** Actually the Oklahoma - Unfair Sales Act is more “explicit than

the Robinson-Patman Act in limiting competition ‘to lawful prices.

‘Section: 598.7 pravides: “Any retailer or wholesaler may advertise,

offer to sell, or sell merchandise at a price made in good faith to meet

the price of a competitor who is. selling the same article or products

of comparable quality at cost to him as a wholesaler or retailer.”

(Appendix B, p. esa

3

~ , » . . e 4

In: the same vein as the Oklahonia Suprenie Court, the

trial court had rejected Safeway’s elaim of good. faith with

.' the following comment on the. testimony of. Safeway’s

chief administrative officer i in the Oklahoma division, Mr. .

: Christensen :

“Mr, Christensen said,—he ainda this elemnaia ‘on

eToss examination;—that it was the policy of their

company to cut prices regardless of illegality. ‘It

isn’t right for a large Company like this, to do this,

and at the same time Mr. Christensen also stated

that he-had never read the Unfair Sales Act,—

- hadn’t read it to date ,—last Monday or Tuesday.”

(Appertdix A, supra, p. 56).

fofmal findings t the trial court held: -— ¥

“3. That, on the dates set forth, in plaintiff's’ peti-—

tion, in Tulsa, Enid, Shawnee, and Norman, when

’ defendant, Safeway Stores, Ine., a foreign corpora- ©

tion, and the agents, servants, clerks, and employees

of said defendant, and. all persons acting by ‘or

under the authority of. said defendant, reduced its

prices below cost to the retailer as’ aforesaid,

_ allegedly to meet in good faith the prices com- -

petitors who were on those dates selling same -

articles or products of comparable quality at ‘such

prices, such adgertising for sale, offering for. sale,

and selling by i defendant, Safeway Stores, Inc.,

at said réduced prices was not in good faith to meet

“the prices of competitors selling the articles at, cost

to them as defined by the Oklahoma ‘Unfair Sales

Act’ but was the meeting of prices which the defend-

ant, Safeway. Stores, Inc., either knew or had reason

to know were illegal prices and was therefore with-

out legal justification. x ae

“4. That on the dates set forth in plaintiff’s péti-

_ tien, in Oklahoma City, Midwest City, Tulsa, Enid,

Shawnee, ‘and Norman, defendant, Safeway Stores,

Ine., a foreign corporation, and. the agents, servants, .

clerks, and employees of said defendant, and all

persons acting by or under the authgrity of said

defendant, did advertise for sale, offer ‘for ‘sale,

* and sell the specified items of merchandise at less

than cost to the retailer as defined by the Oklahoma _

~ \ “s | . 4 f | 5 | :

: ‘i. .

“Unfair Sales Act’ withthe intent and purpose: of

- . unfairly diverting trade from its competitors, which

acts constituted’ unfair competition, were contrary

‘gto public policy, and were in violation of the. Okla-

-homa ‘Unfair Sales Het” (Appendix A, supra,

p. 43).

This motion to diauainn, then,’ is grounded in the first

instance on explicit findings of fact by the trial ‘court,

. explicitly authenticated by the Oklaltoma Supreme Court

.° that Safeway’s . price cutting was not in. good faith— :

findings. of fact. not lightly to. be disturbed by this Court.

- Pennekamp v. Florida, 328 Us: S. 331, 345; Drivers Union: *

v, Meadowmoor Co., 312 U. S. 287, 293, 294 (1940).

Moreover, Safeway misconceives .the,scope of the good

faith aN The “core of the defense”, as this Court

has stated, \“consigts /of the provision hat whenever a

lawful i6wer price “of a competitor threatens to deprive a

seller of -a customer, the seller, to retain ‘the customer, .

may in good faith meet that lower price.” Standard Oil

_Co. v. FTC, supra, 340 U. S. at 242. The emphasis there

' was on lawful prices, as it has been ever since, if not even

before, this Court’s. opinion in FTC v. Staley Manufactur-

_ ing Co., 324 U. S. 746. Finally, the éntire rationale of -

the majority ‘opinion in the second Standard Oil decision

rests’.on the statement that there was “no showing or

_ serious contention. by the Commission” that the offers

which Stantard met were themselves unlawful. (355 U. S.

at 399 n. 4). As the dissenting opinion- emphasizes :

“We said in Standard Oil ‘Co. v.*Federal Trade

Comm'n, 340 U. S. 231, 250, ‘Congress meant to

permit the natural consequénces to follow the

seller’s action in meeting in good faith a\lawful and

equally low price of its competitor.’ éltal

It is only a‘lawful lower price that may be met.

Were it otherwise then the law to g % is nat.

- the Robinson-Patman Act: but the of the

jungle” (Id. at 408). a

. Matched against these criteria—criteria équally “indis-

pensable’ to enforcement of the Robinson-Patman Act and

.added.) ©

’ §.

the Oklahoina. Unfair Sales Act—Safeway’s systematic

price cutting to meéet all prices and even beat some,

regardless of illegality, finds no protection within. the good

faith defense; and as a consequence, destroys Safeway’s.

' standing te mount any attack against’ the énstitutionality,

of the Oklahoma Unfair Sales Act. hae

Safewaf tannot shelter. even under the aitiindiii to the

. good faith defense urged by the Attorney General’s Re- .

port, to wit, that the unlawfulness of the equally low price

met should not bar the defense unless the illegality of the

competitor’s’ price was known, or ought to have been

known, by the price discriminator. Report oF THE

Attorney GENERAL’s NATIONAL Commirtes To Stupy THE —

Antitrust Laws 181-2 (1955). ‘The trial, court and_ the

Oklahoma Supreme Court both found that Safeway knew,

or should have known, that the prices ‘it met in Enid,

Tulsa, Shawnee and Norman were illegal prices, as’ were -

the prices Safeway set to beat its competition in: -Oklahoma

City (Appendix A, supra, p. 43. and pp. 26-27 respec-

tively).

® .

- Taken, then, in the frame of saleitane of .the “Detroit. =

Jobber” cases, the Staley” decision and the broad con-

struction suggested by the Attorney General’s Report;

supra, it is quite clear as found by both the trial ‘court

and ‘the Supreme Court of Oklahoma that Safeway’s price .

- eeuts were part of -a pricing scheme, admittedly ordered

by Mr. Christensen, “to cut prices regardless of ille-

gality”, which system was not made in good faith to meet .

competition, but was for the purpose of vsiteaiane trade

and injuring competition.

-* (1) Not being in good faith, the defense fails.

(2) The prices met in Enid, Tulsa, Shawnee and

Norman being illegal and known to ery to be

illegal, the defense fails.

(3) The prices set by Safeway in Oklahoma City be- |

ing léwer than competition aad illegél as well,

the defense fails.

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(), /And, fieally; not havin: been made to meet: com-

" petition, but actually pursuant to a: pricing sys.

tem . designed to divert, not hold, trade, the

defense. fails. 19%

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“,

‘Saleway, the “hardened antitrust. violator". . was not

‘deprived of . the good faith defense. Rather, it: néver

qualified “for it. To say in the face of these findings of .

-faet by the jtrial court and the Oklahoma Supreme Court

that Safeway was deriied due process and the @qual pro-

fection of the laws‘is to,assert the novel proposition that —

every litigant who fails to sustain. the burden of proving

: his“bona | fides thereby creates a federal question eed

himn to Supreme Court review, °

What Safeway apparently. fails to appreciate is that

having been found wanting on the crucial issue of. its.

good faith, it now, has: no standing to raise issyes Seon-_

cerning the. constitutionality. of - Oklahoma boanaad ‘

Sales Act. °

Failing to justify, its own’ price “cutting iihin the Act,

Safeway endeavors to reach the samé objective through

hg collateral attack:on the constitutionality of the Act itself.

°Q2

. Its object in either case is to strip the independent grocers

“of their main “bulw ark against the repetition of such.

predatory practices. It is Safeways argument that,

~ accepting, arguendo, the justice of the injunction against

it for illegal price cutting, the giving of trading stamps

on thinimum priced groceries ought also be enjoined; that

the state courts’ failure to grant Safeway’s cross petition

so to enjoin constitutes a denial of due process or of

equal protection of the laws.

This left handed attempt to raise Helena: daatin of due

process and equal protection via — stamps comes |

* “The [ Justice] Department, moreover, was aware that Safeway

was a hardened antitrust violator, having pleaded ndlo contendere

in’ 5 of the 6 times it faced criminal indictments. Such a distressing

record would indicate that routine Government antitrust action would

have but slight deterrent effect, upon the mischievous, management .

of this corporation.” Senate Committee on Small Business, The Role

of Private Antitrust Enforcement in Protecting Small Business, 5

’ §. Rep. No. 1855, om sa 2d Sess. 6 some?

f

rather late.’ There is no question. that state minimum

pricing statutes ate constitutionally perinissible, | |

“{T]here can be no doubt that’ upon’ proper oecca-

_sion’and by appropriate measures the state may

regulate a business in any of its aspects, including

'-the prices to be charged for the products or com-

- modities it sells. * * ® Price.coutrol, like any other.

form of regulation, is unconstitutional only if arbi-

_ trary, discriminatory, or demoristrably jirrelevant

to the policy the legislature is free .to adopt, and

hence an unnecessafy and unwarranted interference _

- with individual liberty.” (Nebbia v. New York, 291 —

U.S. 502, 537, 539, (1935)).

Ox such reasoning the constitutionality of the .instant

act. was upheld. by the Oklahoma Supreme Court. Adwon

-y. Oklahoma: Retail Grocers Association, Inc., 204° Okla.

199, 228 P. 24°376: (1951).° — oe

Similarly, the decision of the Oklahoma Supreme Court —

that trading stamps are a discount for the prompt’ pay-

‘ment of cash and that a bona fide cash discount not exceed-

ing-3% is not a price cut within the purview of the act

is a decision neither unreasonable nor novel. . Supreme

courts of. other states have come to the identical conclu-

sion time and again in determining the impact of trading

stamps on ‘minimum. pricing statutes (e.g. Bristol-Myers

Co. v. Lit Bros. Inc., 336 Pa. 81, 6 A. 2d 843 (1939) ; Food.

and Grocery Bureau, Inc. v. Garfield, 20 Cal. 2d 228, 125.

P. 24-3 (1942); Trade Commission v. Bush, 123 Utah 302,

959 P. 2d 304 (1953); Sperry and Hutchinson v. Margetts,

15. N. J. 203, 104 A. 2d 310 (1954); Gever v. American

Stores Co., 387 Pa. 206, 127 A. 2d 694 (1956). See also,

Weco Prodicts Co. v. Mid-City Cut Rate Drug Stores,

55 Cal. App. 2d 684, 131 P. 2d 856 (1942)). |

* Unfair sales acts, similar to, if not identical with, the Oklahoma

Unfair Sales Act, are in force in more than twenty-five other states.

' (sée chart, 2 CCH Trape Rec. Rep., State Laws 7503), Their

- constitutionality is well documented by decisions of the respective

state supreme courts (e.g. People v.. Payless Drug Store, 25 Cal. 2d

108, 153 P. 24:9 (1944) ; State v. Langley, 53 Wyo. 332, 84 P. 2d ©

767 (1938) ; State v. Ross, 259 Wis. 379; 48 N.W. 24 460 (1951); :

State v. Sears, 4 Wash. 2d 200, 103 P. 2d 337 (1940) ; Associated

. Merchants v. Ormesher, 107 Mont. 530, 86 P. 2d 1031 (1939).

Q ; 2

At this stage in the decisional étream, the issues tendered _

_ by Safeway require no resort to federal constitutionat law,

- being well within states’ rights precedents already unequiv- '

ocably. established... As here decided by.: the Supreme

Court of Oklahoma, this local issue rests oth. an adequate

non-federal basis; “And, ‘as ‘such, raises -no. ‘substantial.

federal question deserving, of this Court’s’review. Rice ¥..

Sioux City Cemetery, Er; ‘U. S. -70, 74 (1954); and

. Ashwander v. Valley Authority, 297 U. S. 288, 347. (1935).

WHEREFORE; the appellee . respectfully nioves that this’

| appeal be ‘in all a de dismissed.

i ; _ Respectfully submitted, ens

Guoscs’ MisKovsky,

W.“J. Hotxoway,’ Sr.,

ee _M. A. NetyLoongy,

ey ora neh rae Cuype. J. a Warm

Niue Misxovsky & Miskovsry, : e | a : on Gee

____..:Hightower Building, - : min gp

Oklahoma City, Oklahoma. si

W. J. Ho.tow. 5. Sr., | wey sa } 4 :

First Nation Building, . eh

Oklahoma City, Oklahoma. — :

» Loos EY, Warts, Ross, ‘Looney & N ICHOLS,

First National Building,, . ;

-Oklahoma City, Oklshome. i 4

Counsel ‘of Record: -— é eo ar

‘M. A. Nep Looney,

—- Building, | eee

Pcs baw Oklahoma, ,

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Ci,

; $

o , Proof of Service -

‘i M. A. he Loca y, one’of the attorneys fér OWahoma

Retail Grocers Association, Inc., ‘and Louie J. Speed, In¢., .

. Appellees herein, and a member of the Bar of the Supreme

Court of the'United States, hereby certify that on the 2nd

day of September, 1958; I served copies of the. foregoing -

Motion to Dismiss on Safeway Stgres, Incorporated, i

corporation, - by mailing copies in duly addressed —

' envelopes, with airmail Pane srepaid, to its a

attorneys as follows: |

§

Ses a a, ary, Coenedl: ne es eee

Pi

Empry, Crowe, TOLBERT, ‘Boxiay & JoHNSON;

. ° 570 First National Building, "8

.\ °: ° Oklahoma City, Oklahoma. .

‘CLark, REED & CrarK, *

1900 Adolphus Tower,

' Dallas 2, Texas. Ab

Counsel of Record: ©

ad

Mee 3 -M. A. Nep pena

_ First National. Building,

Oklahoma City, Oklahoma,

Attorney for: Oklahoma Retail - Grocers

Association, Inc., and Louie J, Speed, Inc. Ee

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