Schwartz v. Laundry & Linen Supply Drivers' Union, Local 187

14 A.2d 438, 339 Pa. 353, 1940 Pa. LEXIS 634

• Court: Supreme Court of Pennsylvania
• Decided: January 11, 1940
• Docket: Appeal, 365
• Status: Published

Opinions

Opinion by Mr.

Justice! Steen,

The twenty-eight plaintiffs filed a hill in equity, and later an amended bill, against Laundry and Linen Supply Drivers’ Union, Local No. 187, and its officers, and also against eight steam power laundry companies in the City of Philadelphia, praying for a decree that certain provisions of a contract entered into between the union and the companies be declared illegal and void in so far as they affect plaintiffs, and for an injunction against those provisions being carried into effect. Defendants filed preliminary objections in the nature of a demurrer, which the court below sustained. The parties have stipulated that the case is. to be treated as if the bill had been dismissed upon final hearing, the averments therein being admitted by defendants.

It seems that there are some eighty-eight steam laundries in Philadelphia, and these, acting through a committee, have for some time been making annual agreements with the union for the establishing of closed shops throughout the industry in the city. Under date of April 24,1939, such agreements were again entered into, but they differed from previous ones in that, in addition to a first part which provided as theretofore for closed shops, with regulations as to wages, hours of labor, vacations, grievances, arbitration, strikes, lockouts, and other matters concerning employment, they contained a new second part, expressly made severable from the first, dealing with the conditions which should thereafter govern relations between the laundry companies and what are known in the trade as “bob-tails,” in which group plaintiffs are included. The laundry companies send drivers on the streets, each with a specified route, to solicit business, collect wash and return the laundered articles, their compensation being on a commission basis with a guaranteed weekly minimum. But the so-called “bob-tails” are persons who conduct stores or establishments of their own, where patrons may bring articles to be laundered. Most of them employ help in their stores, these employees being members of Laundry Workers’ International Union, Local No. 10, which, like defendant union, is a member of the American Federation of Labor. The “bob-tails” themselves operate trucks for the solicitation of business and the collection and delivery of laundry. They have capital invested in their businesses consisting of fixtures,' trucks, accounts receivable, and other assets. While they do not carry on the major portion of the laundering process, some of them do parts of it, such as ironing, pressing and mending. They turn over wash to the companies for laundering on a contractual or job basis, and make their profits from the prices they in turn charge their customers for the complete laundry service. They are thus, at the same time, both customers and competitors of the laundry companies, but are not their employees. They are, as plaintiffs aver in their bill, “independent business men,” and have been so engaged for a period of years.

The contracts entered into in April, 1939, although in reality constituting a single agreement between all the companies in Philadelphia and the union, are in form separate, identical contracts between the union and each company. Part 2 of the contract recites the existence in the trade of the independent operators or “bob-tails”; it is stated that they are in direct competition with the route salesmen employed by the laundry, that they often sell their services below the prices charged by the laundry to its own retail customers, that they have affected the earnings of the route salesmen, and that, in order to carry out the purposes of the agreement, it is necessary to “stabilize” the prices to be charged by the “bobtails” ; therefore the parties agree that the laundry com pany will not accept work from any “bob-tail” who is not a member of the union nor from “bob-tails” with whom it is not now under contract or for whom it is not now performing laundry service, that “bob-tails” shall not charge lower prices in selling their laundry service than those charged by the company to its own retail customers, that no person not now engaged as a “bob-tail” shall be accepted as such by the company or be eligible for membership in the union, and that a “bobtail” desiring to sell his “route” must first offer it for sale to the company with which he does business, and then, if the offer is not accepted, to any “bob-tail” who is a member of the union or to another laundry company, upon the same terms and conditions. The contract is to be in force for a period of three years and to continue thereafter from year to year unless either party gives thirty days’ notice, prior to the end of the year, of an intention to terminate or modify it.

It is the provisions of part 2 of the contracts to which plaintiffs object, and against which they seek protection in the present proceedings. They do not complain of, and are not affected by, the provisions of part 1, which establish closed shops in the industry in Philadelphia and relate only to the laundry companies and their employees. The closed shop has, by legislation, become legalized in Pennsylvania, and the present case is in no way concerned with it. The issue here is as to part 2, which deals, not with labor relations between the laundry companies and their employees or between the “bobtails” and their employees, but with trade relations between the laundry companies and the “independent business men” or “bob-tails.”

“The great weight of modern authority is to the effect that one who has been or will be injured thereby is ordinarily entitled to the equitable remedy of injunction to prevent the carrying out of a contract or combination, to which he is not a party, formed for the purpose of creating a monopoly, maintaining prices, restraining trade or competition, or injuring others in their business contrary to common law or statute, if the damages which he would otherwise suffer are unascertainable, or the resulting injury would be irreparable, and legal remedies are inadequate or a resort thereto would cause a multiplicity of suits”: 19 R. C. L. 205, sec. 161, and numerous cases there cited. The clauses of part 2 of the contracts complained of by plaintiffs will, if carried into operation against them, so manifestly impair and, indeed, destroy their business enterprises that there can be no doubt as to their right to injunctive relief if those provisions are illegal, — a question which can be determined only by the consideration of each of them separately.

(1) The provision that a “bob-tail” is not to be allowed to sell his laundry service at prices lower than those charged by the laundry company to its own retail customers amounts to a requirement that sales of laundry service by a company to a “bob-tail” shall be conditioned upon a prohibition against the resale of such service to “consumers” at less than a certain price. It is clearly illegal. Even in the sale of an article which is copyrighted, or manufactured under a secret process, or patented, a vendor may not restrict resales by the vendee to a specified price: * Bobbs-Merrill Co. v. Straus, 210 U. S. 339; Dr. Miles Medical Co. v. Park & Sons Co., 220 U. S. 373; Bauer & Cie v. O’Donnell, 229 U. S. 1; Straus v. Victor Talking Machine Co., 243 U. S. 490; Boston Store v. American Graphophone Co., 246 U. S. 8; Ethyl Gasoline Corporation v. United States, 60 Sup. Ct. Rep. 618, 625. Any contract whereby, in connection with an absolute sale, the vendor attempts to prescribe a minimum resale price, is invalid both at common law and, so far as it affects interstate commerce, under the Sherman Anti-Trust Act of July 2, 1890, c. 647, 26 Stat. 209, 15 U. S. C. §1: Ford Motor Co. v. Union Motor Sales Co., 244 Fed. 156; Interstate Circuit, Inc. v. United States, 306 U. S. 208, 232; Apex Hosiery Co. v. Leader, 8 U. S. L. Week 932, 935; Ford Motor Co. v. Quinn, 70 Pa. Superior Ct. 337. Nor, in this regard, does the sale of services stand on any different footing than the sale of merchandise. Thus in Atlantic Cleaners & Dyers, Inc. v. United States, 286 U. S. 427, it was held that it was as illegal under the Sherman Anti-Trust Act — which is merely the application of the common-law doctrine concerning the restraint of trade to the field of interstate commerce (Apex Hosiery Co. v. Leader, 8 U. S. L. Week 932, 935, 936) — to combine to fix prices in the business of cleaning, dyeing and renovating wearing apparel as it would have been in regard to the buying or selling of commodities. In Buckelew v. Martens, 108 N. J. L. 339, 156 A. 436, an agreement entered into by a number of laundries to make “bob-tails” charge their customers a minimum rate was declared to be against public policy and therefore invalid. A similar decision was rendered in the case of Doremus v. Hennessy, 176 Ill. 608, 52 N. E. 924, where, also, laundry companies attempted to fix a scale of prices to be charged by each for the service they rendered. To the same effect see Philadelphia Cleaners & Dyers Association, Inc. v. Dollar Cleaners & Dyers, Inc., 19 D. & C. 327; Chapter No. 768 of Associated Master Barbers of America v. Andrea Gambino, 27 Northampton Co. Rep. 6. A laundry company may charge a “bob-tail” with whom it does business whatever amount it desires, but, having sold its service at a price satisfactory to itself, it cannot control the price which he, in turn, shall charge his customers. If “bobtails” are able, in the light of the cost of the laundry work which they themselves do and the prices at which they can get the remainder done for them, to sell the complete service at lower prices than those charged by the laundry companies, an agreement is not legal which compels them to raise their prices and thus accept more profit than they care to demand. After the companies have charged the “bob-tails” what they are willing to accept for their service “the public is entitled to whatever advantage may be derived from competition in the subsequent traffic”: Dr. Miles Medical Co. v. Park & Sons Co., 220 U. S. 373, 409. Since it has never been held that the laundry industry is affected with a public interest, not even the state itself has ever attempted to regulate the prices to be charged by those engaged in it.

(2) The provision that a laundry company may not accept work from any “bob-tail” with whom it is not now under contract or for whom it is not now performing laundry service is also clearly illegal, since it works an unreasonable and wholly unjustifiable restraint of trade. It is an obvious attempt to stifle competition by confining each “bob-tail,” as a customer, to one laundry company, thus placing him at the mercy of that company by obliging him to pay for its service whatever price it may choose to exact and not allowing him to obtain a competitive rate from other companies. The apportioning of customers to specified dealers is not permitted : Atlantic Cleaners & Dyers, Inc. v. United States, 286 U. S. 427; Apex Hosiery Co. v. Leader, 8 U. S. L. Week 932, 935; Buckelew v. Martens, 108 N. J. L. 339, 156 A. 436.

(3) The provision that no person not now engaged as a “bob-tail” shall be accepted in that capacity by a laundry company is illegal because it effects a further drastic restraint of competition by restricting “bobtails” to their present number and preventing newcomers from engaging in the wholly legitimate business of collecting wash on their own account and having it laundered by a laundry company. Those engaged in an industry have no right, by agreement of all of them, to exclude others thereafter from participating in it.

(4) If the provision that a “bob-tail” desiring to sell his “route” shall first offer it for sale to the laundry company of which, he is a customer has no penalty to support it, a “bob-tail” may, of course, ignore it entirely, but if, as is apparently intended, his obtaining service from a laundry company is conditioned upon his submitting to it, it is a wholly arbitrary and illegal restriction upon his right to sell his property to whomsoever he desires. For two contracting parties to impose upon a non-assenting third person a requirement that he limit the sale of his business — for the sale of his “route” necessarily involves the sale of his entire business — to a designated purchaser is without precedent or justification. There must come a time, sooner or later, when the need or desire to sell the business of each and every “bob-tail” will arise because of the death or retirement of the proprietor or for some other reason. If no laundry company or existing “bob-tail” will buy, the business cannot be sold at all, because no other purchaser could become a “bob-tail.” If, on the other hand, a laundry company purchases, then, since it cannot do business with any other “bob-tail,” the business purchased is automatically extinguished, and the result is inevitable, if the agreements continue in effect, that the “bob-tail” industry will thus cease to exist.

(5) The provision that a laundry company will not accept work from any “bob-tail” who is not a member of the union would seem to be an anomalous requirement, since it brings into the union persons who are not employees, but, in the words of the bill in equity, are “independent business men” and in most cases themselves employers of labor. It is somewhat difficult to understand what such membership is intended to accomplish. In so far as it is designed to restrict the “bobtails” in the operation of the trucks which they themselves drive, and in their collection of laundry, to hours and working conditions prescribed by the union and embodied in its agreement with the laundry companies, the union has a legitimate interest in thus seeking to protect the laundry employees against the lowering of work ing standards on tlie part of those who themselves, although in a different legal capacity, perform to some extent the same kind of labor. So far, therefore, as a “bob-tail,” by becoming a member of the union, would be bound by its reasonable rules as to such matters, there would seem to be no valid objection to this provision. But such membership cannot be made the means of controlling the regulation by the “bob-tails” of their own business enterprises in the various aspects heretofore considered.

To summarize our conclusions, part 2 of the agreements between the union and the laundry companies, except for the provision as herein discussed in regard to “bob-tails” becoming members of the union, is invalid because it effects an illegitimate restraint of trade. If the “bob-tails” do not submit to its terms they cannot obtain service from the laundries; if, on the other hand, they do submit, they are forced hereafter to deal only with the particular company with which each now does business, compelled to raise their prices to their own customers, and obliged ultimately to sell their businesses in such manner that their part of the industry will be annihilated. Because of these oppressive provisions part 2 is violative of the common-law prohibition of monopolies and unreasonable restraints of trade. It must be borne in mind that we are here dealing with agreements governing the entire laundry industry in the City of Philadelphia, and that, while one person may do business with whomsoever he pleases upon terms mutually agreed upon, the law will not permit an arrangement, understanding, agreement, or combination among all those in the trade in a given locality, the effect of which is to deprive others of the right to engage in that industry and to deprive the public of the benefits of fair competition therein. No group may enhance its own interests at the expense of the legal rights of others, nor, by acts or agreements violating public policy, interfere with the interests of the public: Nester v. Continental Brew ing Co., 161 Pa. 473; Ethyl Gasoline Corporation v. United States, 60 Sup. Ct. Rep. 618, 626; United States v. Socony-Vacuum Oil Co., 60 Sup. Ct. Rep. 811.

The decree is reversed, and the record is remitted to the court below with instructions to issue a final injunction against defendants, restraining them from carrying into effect the provisions of part 2 of the agreements of April 24, 1939, between the union and the several laundry companies, except the provision as to plaintiffs becoming members of the union. Costs to be paid by defendants.

* The fixing of a resale price has been legalized in Pennsylvania, under certain conditions, in the case of trade-marked articles, by the Act of June 5, 1935, P. L. 266.