Food & Grocery Bureau v. Garfield

PULLEN, J.,

pro tem.

Petition for writ of

supersedeas

to suspend the operation of a preliminary injunction pending an appeal from it by petitioner.

Petitioner operates ten retail drug stores in widely separated trade areas in Los Angeles County. The present action was brought to restrain him from using merchandising methods which are allegedly violative of the Unfair Practices Act (Deering’s Gen. Laws, Vol. 2, Act 8781, p. 4157), with complaint directed particularly against the practice of issuing trading stamps to purchasers, on the ground that such stamps constitute a “gift” within the prohibition of section 3 of the act. By answer and affidavit petitioner admitted the use of trading stamps in his business, but denied that they constitute a “gift,” or that they are issued in violation of either the spirit or the letter of the act, or for the purpose of injuring competitors, or destroying competition.

On February 25,1941, the trial court granted a preliminary injunction directing petitioner to refrain, pending a final determination of the cause, from directly or indirectly “ (a) Giving away, or offering or advertising the intent to give away, any article, or product, or commodity, or thing or things of value, or any stamp, or coupon, or certificate redeemable in or exchangeable for any thing or things of value, or any premium, or prize, or gift, for the purpose of injuring competitors or destroying competition,” or “(b) Engaging in, or continuing to engage in, the ‘Mid-City Profit Sharing Stamp Plan’ described in the complaint in this action, for the purpose of injuring competitors or destroying competition.” Petitioner appealed from this decree and also asked that its operation be stayed pending the appeal. "Upon denial of the application for a stay, this original proceeding for writ of

supersedeas

was instituted.

[176]

Petitioner alleges that although the injunction is prohibitory in form, it is mandatory in effect because it requires him to take the affirmative action of changing his entire method of doing business. Since 1932 it has been his practice to issue trading stamps to those who patronize his chain of drug stores. One stamp of the value of two mills is given with each ten cent purchase except on ‘1 double stamp days, ’ ’ when two stamps are given with each such purchase. The stamps may be pasted in a book designated “Profit Sharing Stamp Book,” and when 500 are accumulated, petitioner will redeem them for $1.00 in cash, or for merchandise to the value of $1.25. According to petitioner, the growth of his business has been due in a large measure to attracting trade by use of the stamp plan, and the future prosperity of his chain of stores is dependent upon a continuance of this merchandising practice. More than half of his customers receive and later redeem the stamps, and if he is forced to stop issuing them these customers will be alienated. They will lose the redemption value of the stamps which they have already accumulated and it may be impossible to retain or regain their patronage, even at the expense of costly advertising. Therefore, unless operation of the preliminary injunction is stayed, petitioner will suffer irreparable injury and damage, so severe as to in effect deprive him of the fruits of his appeal, should he be successful in securing a reversal of the injunction. On the other hand, plaintiff will not be harmed by a suspension of operation of the decree. As a trade association, it is merely proceeding under the broad equitable provisions of section 10 of the act, which permits any person to enjoin unfair practices, without allegation or proof of actual damage. Petitioner asserts that many members of plaintiff association are themselves carrying on the business practices here under attack, and have been content for many years to countenance such methods without protest. In fact, it is on this ground that petitioner has raised defenses of laches and estoppel, which will be determined on the hearing of the appeal on the merits.