Eli Lilly and Company v. Sav-on-Drugs, Inc./Concurrence Harlan

by John Marshall Harlan II

United States Supreme Court

366 U.S. 276

Eli Lilly and Company  v.  Sav-on-Drugs, Inc.

 Argued: March 20, 21, 1961. --- Decided: May 22, 1961

Mr. Justice HARLAN, concurring.

On the premise that New Jersey cannot impede an out-of-state seller's access to the state market, ^[1] the difficult issue presented in this case is how much more than shipping its goods into New Jersey Lilly may do within the State without subjecting itself to the requirements and sanctions of New Jersey's licensing laws. In joining the Court's opinion, I think some further observations appropriate.

It is clear that sending 'drummers' into New Jersey seeking customers to whom Lilly's goods may be sold and shipped, Robbins v. Shelby County Taxing District, 120 U.S. 489, 7 S.Ct. 592, 30 L.Ed. 694, and suing in the state courts to enforce contracts for sales from an out-of-state store of goods, International Textbook v. Pigg, 217 U.S. 91, 30 S.Ct. 481, 54 L.Ed. 678, are both so intimately connected with Lilly's right to access to the local market, free of local controls, that they cannot be separated off as 'local business' even if they are conducted wholly within New Jersey. However, I do not think that the systematic promt ion of Lilly's products among local retailers and consumers who, as Lilly conducts its affairs, can only purchase them from a New Jersey wholesaler bears the same close relationship to the necessities of keeping the channels of interstate commerce state-unburdened. I believe that New Jersey can treat as 'local business' such promotional activities, which are pointed at and result initially in local sales by Lilly's customers, and not in direct sales from its own out-of-state store of goods. ^[2] Three factors, particularly, persuade me to that view.

First: A licensing requirement, as applied in this situation, does not deny Lilly a significant opportunity to reach New Jersey customers. Appellant remains free, and is constitutionally entitled to remain free, to solicit purchases directly by New Jersey retailers and consumers or, alternatively, to rely on its wholesalers to develop the New Jersey market. Thus, Lilly is not in the position of the manufacturer with whose protection Mr. Justice Bradley was concerned when, in Robbins v. Shelby County, supra, 120 U.S. at page 494, 7 S.Ct. at page 595 he asked: 'How is a manufacturer, or a merchant, of one state to sell his goods in another state, without, in some way, obtaining orders therefor? Must he be compelled to send them at a venture, without knowing whether there is any demand for them?'

Second: Were Lilly, for a distinct consideration, to enter into an arrangement with its New Jersey wholesalers to promote or solicit business within the State for their account, I would suppose it scarcely doubtful that such an endeavor would constitute a local incident subject to the State's licensing power, even though the ultimate purpose and effect of the arrangement itself were also to enhance Lilly's own interstate business. I do not see why New Jersey must treat differently Lilly's present activities, which in fact redound both to the wholesalers' benefit, by lessening the need for promotional effort and expense on their part, and to Lilly's profit, in the form of increased orders from wholesalers. See Cheney Brothers v. Com. of Massachusetts, 246 U.S. 147, 38 S.Ct. 295, 62 L.Ed. 632; ^[3] cf. Norton Co. v. Department of Revenue, 340 U.S. 534, 536, 537-539, 71 S.Ct. 377, 379, 380-381, 95 L.Ed. 517. A different constitutional result is not indicatd by the circumstance that no consideration, other than the purchase price for goods bought, is paid Lilly by the wholesalers and that the benefit to Lilly from such local service comes from the resulting increase in interstate sales. The essential point is that Lilly's New Jersey activities were 'wholly separate from interstate commerce, involved no question of the delivery of property shipped in interstate commerce or of the right to complete an interstate commerce transaction, but concerned merely the doing of a local act after interstate commerce had completely terminated.' Browning v. City of Waycross, 233 U.S. 16, 22-23, 34 S.Ct. 578, 580, 58 L.Ed. 828. ^[4]

Third: I cannot agree that the effect of the decision in this case 'is to repudiate the whole line of 'drummer' cases.' We have not been referred to any case in which an interstate seller has been granted an immunity from a state-license requirement where the seller has promoted or participated in transactions between a local vendor and a local purchaser involving goods already within the State. Cf. Wagner v. City of Covington, 251 U.S. 95, 40 S.Ct. 93, 64 L.Ed. 157. The only aspect of the present case that resembles the 'drummer' cases is the fact that Lilly's promotion of local sales ultimately serves to increase its interstate sales. To treat this factor as bringing the present situation within the drummer cases would, in my view, be substantially to extend the reach of those cases. I am not prepared to subscribe to such an extension at the expense of state power to regulate the promotion of sales of goods owned and located within the State when the countervailing federal considerations are as thin as they seem to me to be here, and when the interstate seller remains free to enjoy the immunities of interstate commerce by simply restricting its promotion to those who may buy from its own out-of-state store of goods.

Finally, while I am less clear than the rest of the majority that the state courts based their decision on a finding of 'local business,' I do not believe that any doubt on that score forecloses us from now sustaining the State on that ground where as here, the facts leadin to that conclusion are not in dispute. See Nashville, C. & St. L.R. Co. v. Browning, 310 U.S. 362, 60 S.Ct. 968, 84 L.Ed. 1254. ^[5]

Mr. Justice DOUGLAS, with whom Mr. Justice FRANKFURTER, Mr. Justice WHITTAKER and Mr. Justice STEWART concur, dissenting.

Notes

1. Because I am of the view that Eli Lilly has engaged in 'local business' in New Jersey, there is no need now to consider whether a wholly interstate business enjoys the same degree of immunity from state licensing provisions when the state requirement is regulatory as it does when the state requirement is purely a tax measure. Compare State of California v. Thompson, 313 U.S. 109, 61 S.Ct. 930, 85 L.Ed. 1219, and Union Brokerage Co. v. Jensen, 322 U.S. 202, 64 S.Ct. 967, 88 L.Ed. 1227, with Nippert v. Richmond, 327 U.S. 416, 66 S.Ct. 586, 90 L.Ed. 760, and Spector Motor Service, Inc., v. O'Connor, 340 U.S. 602, 71 S.Ct. 508, 95 L.Ed. 573; and see Powell, Vagaries and Varieties in Constitutional Interpretation, 172-176, 186-187.
2. There can be no doubt that the 'promotional and informational' activities of Lilly in New Jersey were specifically aimed at securing retail and consumer trade for its local wholesalers. One of the two affidavits submitted by Lilly in opposition to the motion below states:
3. I recognize that the force of the Cheney Brothers case, at least in the field of state income taxation, has been impaired by the Act of September 14, 1959, Pub.L. 86-272, 73 Stat. 555, 15 U.S.C.A. §§ 381-384, which was passed by the Congress in response to our decision in Northwestern States Portland Cement Co. v. State of Minnesota, 358 U.S. 450, 79 S.Ct. 357, 359, 3 L.Ed.2d 421. Even so, it should be observed that the statute, which immunizes from the reach of state income taxation a foreign concern's intrastate solicitation of orders 'for the benefit of a prospective (interstate) customer,' does not include within such immunity situations where the foreign seller maintains a local office for the purpose of such solicitation. See § 101(c) of the statute and 105 Cong.Rec. 16469-16477. Lilly maintains an office in New Jersey in connection with its promotional activities. Reliance on the Northwestern Cement opinion's characterization of activities similar to those of Lilly as being 'exclusively in furtherance of interstate commerce' seems to me to be stretching too far a casual reference which was quite unnecessary to the issue decided by the Court in that case.
4. In the Browning case and agent of an out-of-state seller of lightning rods, who was engaged in installing lightning rods, purchased in interstate commerce, for the customers of such seller, was held subject to a state tax on the occupation of erecting lightning rods, despite the fact that the contract for the purchase of such rods obligated the seller to install the rods at its own expense. The Court observed that 'it was not within the power of the parties by the form of their contract to convert what was exclusively a local business, subject to state control, into an interstate commerce business protected by the commerce clause.' Id., 233 U.S. at page 23, 34 S.Ct. at page 580.
5. I do not regard such cases as Sprout v. City of South Bend, 277 U.S. 163, 48 S.Ct. 502, 72 L.Ed. 833, and Leloup v. Port of Mobile, 127 U.S. 640, 8 S.Ct. 1380, 32 L.Ed. 311, as controlling contrary authority in light of the opinion of the New Jersey Superior Court which suggests that the state statute may apply only to constitutionally licensable local business. In this regard see the Superior Court's later opinion in United States Time Corp. v. Grand Union Co., 64 N.J.Super. 39, 165 A.2d 310.