on the facts stated in the complaint equity would not enjoin the prosecution; the constitutional questions were not considered. Buffalo Gravel Corp. v. Moore, 234 N. Y. 542, 138 N. E. 439 (1922). Measure of Damages-Persons Liable. An ice corporation entered into an illegal contract whereby it sold all of its production to a second corporation under terms restraining competition and creating a monopoly as prohibited by General Business Law, section 340. A stockholder of the first corporation may recover for damages sustained from its directors where they knowingly violated their duty by so contracting, even though no recovery could be had on the contract itself. Damages recoverable are the loss of profit to the corporation (per share of stock owned) during the period of the illegal contract, and a factor to be considered in determining the loss is the effect of a price war prior to the contract, which might have continued but for the contract. Di Tomasso v. Loverro, 250 App. Div. 206, 293 N. Y. S. 912 (1937), aff'd. 276 N. Y. 551, 12 N. E. (2d) 570 (1938), rearg. and motion denied, 276 N. Y. 610, 12 N. E. (2d) 601 (1938), motion denied, 276 N. Y. 681, 13 N. E. (2d) 59 (1938). As to Federal Statutes. The Federal statutes forbidding unlawful combinations in restraint of trade apply only to interstate or foreign commerce and their violation can only be adjudicated in the Federal courts, which alone have jurisdiction. The common law and State statutes determine the illegality of such combinations when attacked in the State courts. Locker v. American Tobacco Co., 121 App. Div. 443, 106 N. Y. S. 115 (1907), aff'd 195 N. Y. 565, 88 N. E. 289 (1909). Pleading. In an action on a contract valid on its face, the defense that it is in reality part of an illegal conspiracy must be specifically pleaded, and cannot first be raised by an amendment at the trial, since that would set up a new defense. Drake v. Siebold, 81 Hun 178, 30 N. Y. S. 697 (1894). Examination of Witnesses and Evidence. As to the right of the attorney general to examine witnesses prior to bringing an action under sections 340 to 346 of the General Business Law see In re Attorney General, 21 Misc. 101, 47 N. Y. S. 20 (1897), 22 App. Div. 285, 47 N. Y. S. 883 (1897), mem. op. 49 N. Y. S. 1132 (1898), aff'd. 155 N. Y. 441, 50 N. E. 57 (1898), app. dismissed mem. op. 50 N. E. 1115 (1898). See also Matter of Davies, 168 N. Y. 89, 61 N. E. 118 (1901). In an action under General Business Law, sections 340 to 346, the prosecution may examine only those books and records of the accused corporation which might tend to show a monopolistic purpose or intent. People v. American Ice Co., 120 App. Div. 234, 104 N. Y. S. 858 (1907). Cf. In re Ottinger, 216 App. Div. 271, 214 N. Y. S. 613 (1926). In a prosecution for violation of sections 340 and 341 of the General Business Law, alleging a contract or combination to restrict trade or competition in the supply or price of a commodity, the evidence must prove that the parties have sufficient power to control or dominate the particular business. People v. Baff, 99 Misc. 684, 166 N. Y. S. 136 (1917). Necessary Allegations. In a prosecution of an unlawful contract violating a section enacted prior but similar to Penal Code, section 580, it is sufficient to allege the parts of the contract which are illegal. It is not essential to set forth all of the provisions of such contract. People v. American Ice Co., 135 App. Div. 180, 120 N. Y. S. 41 (1909). An indictment for violation of General Business Law, section 340, alleging that defendants and 41 other persons controlled 75 percent of the poultry business in New York, and that defendants formed a corporation for the purpose of fixing the price of all poultry bought by themselves and the 41 others, is insufficient in absence of allegations that defendants could influence the others to accept or that the combination was in fact carried out. It is necessary to allege that the defendants entered into a contract by which a monopoly was created, or competition restrained, or that they entered into a contract whereby those results might be attained. People v. Baff, 98 Misc. 547, 164 N. Y. S. 709 (1917). As to motions to make more definite and certain, or to strike part of pleadings as irrelevant and redundant, in a private action under sections 340 to 346 of the General Business Law see Gerseta Corp. v. Silk Assn. of America, 220 App. Div. 302, 222 N. Y. S. 7 (1927). Scope of Injunction. In a prosecution for violation of a section enacted prior to but similar to Penal Law section 580, the court held that it is the duty of the trial court to decide whether the injunction should be confined to further violations of the statute and executory contracts or whether the accused corporation's charter should be revoked. People v. American Ice Co., 135 App. Div. 180, 120 N. Y. S. 41 (1909). Who May Sue. The minority stockholders of a railroad corporation cannot in their individual capacity restrain the transfer of its stock by the railroad holding the majority control to a competing railroad, since they suffer no direct injury. Delavan v. New York, N. H. & H. R. Co., 154 App. Div. 8, 139 N. Y. S. 17 (1912), affd. mem. op. 157 App. Div. 916, 142 N. Y. S. 1115 (1913), case dismissed as moot 216 N. Y. 359, 110 N. E. 763 (1915). A private individual cannot sue to restrain the enforcement of an agreement which violates Penal Law, section 580 and General Business Law, section 340, in absence of proof that it was aimed at or affected him injuriously, as distinguished from the general public; such suit can only be maintained at the instance of the state. Paine Lumber Co. v. Neal, 212 F. 259 (1913), affd. 214 F. 82 (1914), 244 U. S. 459, 37 Sup. Ct. 718, 61 L. Ed. 1256 (1916). See also Gill Engraving Co. v. Doerr, 214 F. 111 (1914); Irving v. Neal, 209 F. 471 (1913). B. EXCEPTIONS TO GENERAL ANTITRUST LAWS Unconsolidated Laws (McKinney) Resale Price Maintenance Sections 2201 as amended (Supp. 1939) and sections 2202 to 2205 validate contracts fixing the resale price of branded commodities. The statutes are expressly inapplicable to contracts between producers, between wholesalers, or between retailers as to sale or resale prices. See Vol. State Price Control Legislation: Resale Price Maintenance. Cooperative Corporations Law (McKinney Supp. 1939) Cooperatives Section 128 provides that no agricultural cooperative marketing association organized under sections 105 to 130 shall be deemed a conspiracy or combination in restraint of trade, illegal monopoly, or attempt to lessen competition or fix prices. See Tying Contracts and Exclusive Dealing Arrangements, infra. See also Cooperatives in projected study. Penal Law (McKinney) Section 582, a part of the act defining and punishing conspiracies, sections 580 to 584, provides that associations of farmers, gardeners, or dairymen, including livestock farmers and fruit growers, engaged in collective marketing for their members of agricultural or dairy products produced by them, are not conspiracies, nor are such marketing contracts or agreements to be deemed injurious to trade or commerce. See vol. Cooperatives in projected study. General Business Law (McKinney Supp. 1939) Section 340 provides that the provisions of the general antitrust act shall not apply to cooperative associations, corporate or otherwise, of farmers, gardeners, or dairymen, including livestock, farmers, and fruit growers. See General Antitrust Laws, supra. Agriculture and Markets Law (McKinney) Milk Producers' and Distributors' Bargaining Agencies Sections 258k to 258n, as amended Supp. 1939, authorize and provide for the organization of milk producers' bargaining agencies and milk distributors' bargaining agencies, and the making of marketing agreements concerning the amount of milk which may be handled and the prices to be paid by the distributors to the producers. Section 2581 expressly provides that the activities of such agencies, and the agreements or arrangements made thereby, shall not be deemed conspiracies, combinations, contracts, or agreements in restraint of trade. However, this section also provides that the Commissioner of Agriculture may issue a cease-and-desist order after proper notice and hearing, if he finds that such marketing agreements result in a monopoly or restraint of trade to such an extent that the price of milk is unduly enhanced thereby. See Special Antitrust Laws: Special Industry Antitrust Acts, infra. See also Vol. State Price Control Legislation: Administrative Price Control. Milk Control Sections 252 to 258j, as amended Supp. 1939, concerned with the licensing and regulation of milk dealers, expressly provide that a cooperative association of dairymen organized under the cooperative association law and engaged in making collective sales for its members, shall not be deemed a conspiracy or combination in restraint of trade or an illegal monopoly. However, section 258c provides that the Commissioner of Agriculture shall have the power to revoke or suspend, or to refuse to grant or renew, the license of any milk dealer who has been a party to a combination to fix prices contrary to law. See Tying Contracts and Exclusive Dealing Arrangements, infra. See also Vol. Cooperatives in projected study. General Business Law (McKinney Supp. 1939) Section 340 provides that the provisions of the general antitrust act shall not apply to bona fide labor unions; that the labor of human beings shall not be deemed or held to be a commodity or article of commerce as such terms are used in this section and that nothing contained in that Act shall be deemed to prohibit or restrict the right of workingmen to combine in unions, organizations, and associations, not organized for the purposes of profit. See General Antitrust Laws, supra. Penal Code (McKinney) Section 582 provides that cooperation of persons to obtain an increase in wages or to maintain wages is not a conspiracy. Cooperatives. Judicial Decisions The exemption of cooperatives from the application of the State antitrust laws, under section 340 of the General Business Law, Penal Code, section 582, and Agriculture and Markets Law, section 258c (f), is constitutional. The exemption is based upon a reasonable classification and does not violate the fourteenth amendment of the Federal Constitution. Barns v. Dairymen's League, Co-op. Assn., 220 App. Div. 624, 222 N. Y. S. 294 (1927); Dairymen's League Co-op. Assn. v. Weckerle, 160 Misc. 866, 291 N. Y. S. 704 (1936). See also Royce v. Rosasco, 159 Misc. 236, 287 N. Y. S. 692 (1936), upholding the price-fixing features of the Milk Control Act (Agriculture and Markets Law, c. 12, 1934) without discussing alleged violation of the antitrust laws. Fair Trade. "The Fair Trade Act (Unconsol. (McKinney) secs. 2201 to 2205) entitles a retailer to seek redress under a vertical price-fixing arrangement, and is not in conflict with the provisions of the Donnelly Act (General Business Law, secs. 340 to 346), which bans horizontal price fixing. The legislature has seen fit by the later enactment to declare vertical price arrangements of a specified character to be valid, therefore, such arrangements must be construed to be without the language of the earlier Donnelly Act." Port Chester Wine & Liquor Shop v. Miller Bros., 253 App. Div. 188, 1 N. Y. S. (2d) 802, 808 (1938), affd. 281 N. Y. 101, 22 N. E. (2d) 253 (1939). Organized Labor. A "closed shop" contract by a bona fide labor union is exempt from the application of section 340 of the General Business Law. Williams v. Quill, 277 N. Y. 1, 12 N. E. (2d) 547 (1938). This exemption applies only to bona fide labor activities, not to those intended to advance monopolistic aims of employer groups. |