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

by William O. Douglas

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

The Court, with all deference, blends in this opinion three distinct lines of decisions which until today have been considered separate. They do indeed present different problems one from the other. I refer to our decisions concerning the power of a State (1) to tax an interstate enterprise, (2) to subject it to local suits, and (3) to license it.

(1) If New Jersey sought to collect from appellant a tax apportioned to some local business activity which it carries on in that State, I would see no constitutional objection to it. Northwestern Cement Co. v. Minnesota, 358 U.S. 450, 79 S.Ct. 357, 3 L.Ed.2d 421. Such an apportioned tax imposed by New Jersey would have relation 'to opportunities which it has given, to protection which it has afforded, to benefits which it has conferred.' State of Wisconsin v. J. C. Penney Co., 311 U.S. 435, 444, 61 S.Ct. 246, 250, 85 L.Ed. 267.

(2) If appellant were sued in New Jersey, I think its connections with that State have been sufficient to make it subject to the jurisdiction of the state courts (International Shoe Co. v. State of Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95), at least as to suits which reveal a 'substantial connection' with the State. McGee v. International Life Ins. Co., 355 U.S. 220, 78 S.Ct. 199, 2 L.Ed.2d 223. Cf. Hanson v. Denckla, 357 U.S. 235, 250-255, 78 S.Ct. 1228, 1237-1240, 2 L.Ed.2d 1283.

(3) The present case falls in neither of those two categories. New Jersey demands that appellant obtain from it a certificate authorizing it to do business in the State, absent which she denies appellant access to her courts. The case thus presents the strikingly different issue-whether an interstate business can be subjected to a licensing system.

I put to one side cases such as Union Brokerage Co. v. Jensen, 322 U.S. 202, 64 S.Ct. 967, 88 L.Ed. 1227, and Rice v. Santa Fe Elevator Corp., 331 U.S. 218, 67 S.Ct. 1146, 91 L.Ed. 1447, where the issue was whether a company doing business in the State was exempt from a regulation of this kind because Congress had subjected it to a licensing system. I also put to one side Railway Express Agency v. Com. of Virginia, 282 U.S. 440, 51 S.Ct. 201, 75 L.Ed. 450, where a company, doing an intrastate as well as an interstate express business, was required to obtain a certificate authorizing it to conduct an intrastate business. The question here is whether a State can require a license for the doing of an interstate business. The power to license the exercise of a federal right, like the power to tax it, is 'the power to control or suppress its enjoyment.' Murdock v. Com. of Pennsylvania, 319 U.S. 105, 112, 63 S.Ct. 870, 874, 87 L.Ed. 1292. Soliciting interstate business has up to this day been on the same basis as doing an interstate business, so far as the protection of the Commerce Clause is concerned. It has usually been argued that soliciting interstate business is a 'local activity' that can be licensed by a State or on which a State may lay a privilege tax. That was the argument in Nippert v. Richmond, 327 U.S. 416, 420, 66 S.Ct. 586, 588, 90 L.Ed. 760; Memphis Steam Laundry v. Stone, 342 U.S. 389, 392, 72 S.Ct. 424, 426, 96 L.Ed. 436. We rejected it, pointing out that in the long line of case beginning with Robbins v. Shelby County, 120 U.S. 489, 7 S.Ct. 592, 30 L.Ed. 694, 'this Court has held that a tax imposed upon the solicitation of interstate business is a tax upon interstate commerce itself.' 342 U.S. at pages 392-393, 72 S.Ct. at page 426.

What appellant's employees do in New Jersey is certainly no more than what a 'drummer' for an interstate house does. The record shows that petitioner's employees engage in the following activities in New Jersey:

'It is the function of the detailmen to visit retail pharmacists, physicians and hospitals in order to acquaint them with the products of the plaintiff with a view to encouraging the use of these products.

Plaintiff contends that their work is 'promotional and informational only.' On an occasion, these detailmen, 'as a service to the retailer,' may receive an order for plaintiff's products for transmittal to a wholesaler. They examine the stocks and inventory of retailers and make recommendations to them relating to the supplying and merchandising of plaintiff's products. They also make available to retail druggists, free of charge, advertising and promotional material. When defendant opened its store in Carteret, plaintiff offered to provide, and did provide, announcements for mailing to the medical profession, without cost to defendant. The same thing occurred when defendant opened its Plainfield store.'

In Robbins v. Shelby County Taxing District, supra, 120 U.S. at page 491, 7 S.Ct. at page 593, the 'drummer' who failed to take out a license from the State was doing the following:

'Sabine Robbins * * * a citizen and resident of Cincinnati, Ohio, * * * was engaged in the business of drumming in the taxing district of Shelby county, Tenn.; i.e., soliciting trade, by the use of samples, for the house or firm for which he worked as (a) drummer; said firm being the firm of 'Rose, Robbins & Co.,' doing business in Cincinnati, and all the members of said firm being citizens and residents of Cincinnati, Ohio.'

In this case, appellant's employees within the State were engaged solely in the 'drumming up' of appellant's interstate trade. They did this, not by direct solicitation of the interstate buyers, but by contacts with the customers of the buyers. Such activities were said to be 'exclusively in furtherance of interstate commerce' only two years ago in Northwestern States Portland Cement Co. v. Minnesota, supra, 358 U.S. 452, 455, 79 S.Ct. 359. Yet today the Court finds these activities to be separable from appellant's interstate business; appellant is 'inducing' sales, not 'soliciting' them. It is not a distinction I can accept.

We deal here with a general state regulatory measure. Under our precedents, access to state courts cannot be barred to 'a foreign corporation merely coming into (the State) to contribute to or to conclude a unitary interstate transaction.' Union Brokerage Co. v. Jensen, 322 U.S. 202, 211, 64 S.Ct. 967, 973. Yet that is what New Jersey claims the power to do. We have struck down similar state requirements which barred access to state courts to recover the purchase price on an interstate contract, International Textbook Co. v. Pigg, 217 U.S. 91, 30 S.Ct. 481, 54 L.Ed. 678, to recover for the breach of an interstate contract of sale, Dahnke-Walker Milling Co. v. Bondurant, 257 U.S. 282, 42 S.Ct. 106, 66 L.Ed. 239, and to attack as fraudulent the transfer of assets of a domestic debtor, Buck Stove & Range Co. v. Vickers, 226 U.S. 205, 33 S.Ct. 41, 57 L.Ed. 189. Surely, the cause of action here asserted does not involve a state interest more compelling than the protection of domestic debtors or the stability of title to domestic lands.

The Court places special reliance on Cheney Bros. Co. v. Com. of Massachusetts, 246 U.S. 147, 155, 38 S.Ct. 295, 297, 62 L.Ed. 632, where Massachusetts' imposition of an e xcise tax' on the Northwestern Consolidated Milling Company was upheld. There the entire activity of the foreign corporation in the State was the direct solicitation of orders for local wholesalers. Here the dominant activity is nothing more than advertising and public relations. These are the minimum activities in which every 'drummer' for an out-of-state concern engages.

To hold that New Jersey can license appellant in this case is to repudiate the whole line of 'drummer' cases.

This case on its own may do little injury. But it provides the formula whereby a State can stand over the channels of interstate commerce in a way that promises to do great harm to the national market that heretofore the Commerce Clause has protected.

Notes