Tanner v. Little, 240 U.S. 369 (1916)
U.S. Supreme CourtTanner v. Little, 240 U.S. 369 (1916)
Tanner v. Little
Argued October 29, November 1, 2, 1915
Decided March 6, 1916
240 U.S. 369
Rast v. Von Deman & Lewis, ante, p. 240 U. S. 342, followed to effect that the state may regulate the use of, and impose license taxes on the privilege of using profit-sharing coupons and trading stamps.
The statute of the Washington of 1907 imposing license taxes on the privilege of using profit-sharing coupons and trading stamps is in its essential particulars similar to the statute of Florida sustained in Rast v. Van Deman & Lewis, ante, p. 240 U. S. 342, and held that such statute was properly enacted in the exercise of the police power of the state in regard to matters subject to regulation, and that it is not unconstitutional under the federal Constitution as interfering with or burdening interstate commerce, impairing the obligation of contracts, denying equal protection of the law, or depriving merchants of their property without due process of law.
208 F. 605.
This case was submitted with Rast v. Van Deman & Lewis, ante, p. 240 U. S. 342, and attacks the validity of a statute of the State of Washington of the same general import and purpose as the Florida statute passed on in that case, Rast v. Van Deman & Lewis, ante, p. 240 U. S. 342.
The statute requires that every person, etc., who shall use or furnish to any other person, etc., to use in, with, or for the sale of any goods, etc., any stamps, etc., which shall entitle the purchaser receiving the same with such sale of goods, etc., to procure from any person, etc., any goods, etc., free of charge, or for less than the retail market price thereof, upon the production of any number of such stamps, etc., shall, before so furnishing, selling, or using
the same, obtain a license from the auditor of each county wherein such furnishing or selling or using shall take place for each and every store or place of business in that county, owned or conducted by such person, etc., from which such furnishing or selling, or in which such using, shall take place.
The statute fixes the license at $6,000, and there is a prohibition of the use of the stamps, etc., in any town, city, or county other than that in which they are furnished or sold. Violation of the act is made a "gross misdemeanor."
The complainants are nineteen in number, counting partnerships as single individuals, and engaged in the business of hardware, cleaning and dyeing, grocery, soap, canned goods, meats, drugs, dry goods, boots and shoes, fuel, photography, laundry, and wine. Complainants sue for all similarly situated.
Their allegations, condensed and narratively stated, are as follows: they carry on their respective businesses at Spokane, State of Washington, and advertise in various ways, which are enumerated, including the premium advertising system, so-called, and have at various times, for the purpose of increasing their general trade and volume of business, especially their cash trade, adopted and used a premium advertising system conducted as follows: with the sale of their goods and merchandise, they each give to their cash customers stamps, tickets, or coupons at the rate of one stamp for each cash purchase of a convenient unit amount, as one stamp for each 5, 10, or 25-cent cash purchase, as the case may be, which stamps or coupons entitled their customers to the choice of a certain cash discount or, free of charge, to certain articles of merchandise of their own selection, when presented in certain prescribed numbers for redemption to complainants who redeem their own stamps or certificates, or to a third party with whom other of the complainants have contracts, many of which are still in force, for the use of their premium
advertising system, including the use of their trading stamps or coupons used in connection therewith, and the redemption thereof in merchandise.
Many of the complainants accept the coupons at the cash value thereon printed, in payment or part payment of the cash retail price of the premium articles.
The stamps and coupons are redeemable in accordance with the terms of printed catalogues or premium lists. Booklets are distributed free among complainants' customers, and describe the articles which may be secured by the stamps or coupons, and state the number thereof required to obtain the same. The delivery of the required number of stamps or coupons set forth in the list is in full payment for the article specified, and no money or other consideration is charged therefor.
There is no element of chance involved in the system. The value of each article is fixed as to cash and merchandise redemption and the right of every holder is secure. The articles are of sound value and durable manufacture, and are open to inspection during business hours. The premiums are not regularly dealt in by many of the complainants, but are used exclusively in connection with premium advertising.
A number of complainants have contracts based on the system, running from one to five years for the use of their premium advertising system, including their trading stamps in connection therewith, which contracts are now in force and were in force at the passage of the act, and a large number of stamps are now in the hands of complainants, and if they are prevented from disposing of them, complainants will suffer great and irreparable loss.
A great many manufacturers of various lines of merchandise, for the purpose of advertising their businesses and increasing the volume of their sales, enclose in the packages of their merchandise coupons and other premium tokens which entitle the purchaser of such merchandise to
other articles of merchandise free of charge. The number of the manufacturers is given, their names, and the articles which they manufacture.
Complainants have upon their shelves large quantities of merchandise in which premium tokens are packed, which, upon their sale, entitle purchasers to other articles in the manner described, and in such packages are tobacco and tobacco products, and the use of the coupons and tickets as described is authorized and rendered lawful by § 3394 of the Revised Statutes of the United States and the amendments of that section in 1897, July 24, c. 11, 30 Stat. 206, and 1902, c. 1371, 32 Stat. 714, 715.
The adoption of the premium advertising system enables complainants to give a discount upon purchases of small as well as large amounts, one coupon or stamp being given with each 5, 10, or 25-cent cash purchase, or multiple thereof, as the case may be. And a larger discount in merchandise can be given than otherwise there could be because, as a result of large purchases of the merchandise given in exchange for the tokens, the articles are secured at much less than the regular retail price. By reason of the system complainants have been enabled at a moderate cost to greatly increase their businesses and profits, and are benefited because their articles in the homes of their customers are a continual advertisement. And the businesses are lawful ones, and not prejudicial to the public health, safety, morals, or welfare.
The statute of Washington violates the provisions of the Fourteenth Amendment to the Constitution of the United States in that it deprives complainants of their property without due process of law and of the equal protection of the laws (a) because it is not equal and uniform in operation, each of the complainants paying their taxes as do other merchants engaged in similar lines of business, and who use other and various methods of advertising, and
who are not required to pay a license tax of $6,000. The statute is therefore arbitrary and discriminatory. (b) The tax is not upon the businesses of complainants, but upon their incidents, and is an unwarrantable interference with the method and manner of conducting the same, is arbitrary, oppressive, discriminatory, is in excess of profits and prohibitive, and, while in the guise of revenue, will produce none. (c) It deprives complainants of their liberty and property without due process of law inasmuch as they cannot bestow a gift or give an order upon another merchant for a gift to a customer, which is the exercise of a natural right, without paying an onerous and excessive tax. (d) The penalties and fines are so drastic and excessive that they deter complainants from violating the act and testing its validity in a court of law. (e) The statute is in contravention of § 10, Article I, of the Constitution of the United States, in that it impairs the obligations of contracts with and the right of complainants to contract with their customers to give trading stamps and coupons with the purchase of merchandise redeemable in merchandise heretofore given by them. It also impairs the obligations of contracts entered into by complainants with third parties for the use of the advertising system, including the use of the stamps and coupons and the redemption thereof in merchandise. (f) The statute is partial, unreasonable, oppressive, unequal, in restraint of trade, and prohibitive of lawful business. (g) The statute conflicts with § 3394 of the Revised Statutes of the United States and the amendments thereof. (h) It is criminal, making a crime of acts the test of which is incapable of ascertainment -- that is, it makes a crime of furnishing stamps or similar devices which are redeemable "for less than the retail market price thereof," the premium article having no definite or fixed retail market price. The statute is therefore void for indefiniteness and uncertainty, and such provision is besides prohibitive of the business,
as the articles are not dealt in by complainants except in connection with the premium system. And further, that the statute is void because it attempts to fix the price at which complainants shall sell their merchandise.
The prosecuting attorney of the county threatens to enforce the provisions of the statute, to bring numerous criminal prosecutions as well as civil suits to enforce the payment of the license, and if complainants are forced to discontinue their business as described, they will suffer great and irreparable damage because they have expended large sums of money in advertising the premium system, which expenditures would be a total loss, they having large stocks of merchandise on hand in which are packed the premium tokens, and which cannot be removed without practically destroying the packages and the value of the merchandise contained therein, and that therefore, if not permitted to dispose of them, complainants will lose a large amount of money.
Complainants have outstanding in the hands of customers a large amount of tokens, the result of transactions before the passage of the statute, and it will be necessary, in order to keep faith with their customers, for complainants to redeem such tokens in merchandise in the future from time to time as the necessary and requisite number of the same are presented for redemption. It they fail to do so, they will lose many customers and a large amount of trade and suffer thereby great loss and injury.
Having no remedy at law, complainants pray an injunction, first temporary and then perpetual.
A temporary restraining order was issued, which the attorney general and the prosecuting attorney general and the separately made motions to quash, each appearing only for that purpose. The motions asserted exemption from suit of those officers in a federal court because the suit was against them as officers of the state to prevent the enforcement of the criminal laws of the state, and was
therefore a suit against the state in violation of the Eleventh Amendment to the Constitution of the United States.
Subsequently motions to dismiss were filed by them and also by the defendant Evenson, County Treasurer of Spokane County. The grounds of the motions alleged were misjoinder of parties complainants and of defendants, improper union of causes of suit, insufficiency of the facts alleged to justify the relief prayed, the adequacy of a remedy at law, and the absence of jurisdiction over the persons of the defendants or of the subject matter of the action.
The motion for an interlocutory injunction came before three judges. Rudkin, District Judge, delivered the opinion and judgment ordering an injunction was prayed. 208 F. 605. This appeal was then taken.