Said meeting was held February 14, 1922, which is subsequent to the commencement of the action. While equity may adapt the remedy to the conditions existing at the trial (Kilbourne v. Board of Supervisors, 137 N. Y. 170, 33 N. E. 159), yet in the case at bar the facts do not warrant the granting of the relief prayed for. There had been no increase of salary to Bach in 20 years, or to Schlosser and Kranich in 13 years. Conditions in the corporation's business have changed, owing to the introduction of mechanical players and the change in demand to grand instead of upright models: competition has grown keener and the business broadened. The employees have kept pace with these changing conditions. After long service, an employee's services necessarily become more valuable by the acquisition of experience.

While these considerations are cited to show some of the reasons for the result reached, a reading of this record discloses that, if this court were free to substitute its judgment for the judgment of those charged with that duty, no increase would have been granted, except perhaps to Maier. If a wise and prudent business policy dictated a withholding of dividends, it would seem that the officers should have been willing to make some sacrifices, as well as the stockholders. Too selfish and ruthless a policy on the part of the officers does not usually bring that success which is given by the cooperation of all. Moreover, it appears usually that, where the number of officers and the salaries paid them are fitting and fair to all concerned, the declaration and amount of dividends satisfactorily adjust themselves.

The court also held that the withholding of dividends was within the discretion of the directors, and the court would not be justified in interfering to compel a declaration of dividends. In so holding, the court said:

In so far as directing the declaration of dividends is concerned, there is no justification for the interference of the court. The corporation began business in 1890 with a paid surplus of $350,000. At the date of the action this surplus amounted to $353,075. From 1902 to 1916 the directors paid out an average of 14 per cent. annually in dividends. It had been the policy to pay out practically the entire earnings in dividends. When earnings were insufficient, dividends had been paid out of surplus. In 1916 commenced a period of depression in the business, following the war, and no dividends. were declared during the years 1917 to 1920, although some $16,000 a year was carried over to surplus. It is apparent that the directors could not continue indefinitely the practice of paying dividends out of surplus, and the very experience they were having demonstrated the wisdom of building up a surplus, or at least in holding their surplus intact, so as to insure the continuation of the business as a going concern. Said surplus was not a cash surplus, but consisted in large part of property used by the corporation in its business, in the form of inventories, bills receivable, etc. The testimony is that, in order to have paid dividends during the years 1916-1920 the company would have had to borrow money.

Had the defendants been less generous in the past in the distribution of dividends, they would have been better able to make payments during the period of depression through which they were passing. The amounts carried to surplus were just sufficient to keep the same intact. Moreover, the testimony is that conditions in the trade were changing, so that greater capital was necessary; new machinery had to be installed, and player pianos and grand pianos were in demand, instead of uprights, requiring greater outlay and investment of capital. The matter was well within the discretion of the directors, and there is no evidence to show bad faith on their part.

Employment of Agents to Distribute Publications of One Publisher Exclusively Not Unfair Competition

T

HE right of a publisher to enter into and enforce contracts with wholesale dealers in periodicals, whereby the latter are prohibited from engaging in the sale or distribution of any periodicals other than those of the publisher, has been upheld by the United States Supreme Court. In Federal Trade Commission v. Curtis Publishing Co., 43 Sup. Ct. Rep. 210, that court held that the employment of agents under such agreements does not constitute unfair competition. The facts in the case were as follows:

The defendant publishing company contracted with distributors under a form of agreement providing that upon requisition the defendant would consign its publications to the distributor as he might require, the company retaining title until they were sold, and that the agent would supply, at specified prices, the dealers and boys to sell the defendant's publications, and would devote all necessary time to promoting the sales of such publications. It was further provided "that without the written consent of the publisher he will not display, deliver or sell any copies of any one of said publications before the authorized publication date, as specified in the printed requisition blanks, or dispose of any copies of said publications in the territory of any other district agent or special agent of the publisher, or act as agent for or supply at wholesale rates any periodicals other than those published by the publisher, or directly or indirectly furnish to any other publisher or agent the names and addresses of the persons to whom the publisher's publications are sold or delivered." It was also stipulated that subject to the publisher's control the agent should train, instruct and supervise an adequate force of boys for distributing the publications, and that he would return unsold copies, their cover pages or headings.

The Federal Trade Commission issued a complaint charging the defendant with the use of unfair methods of competition prohibited by Section 5 of the Federal Trade Commission Act. (Comp. St. § 8836 e). The complaint stated specifically that the defendant, a Pennsylvania corporation, which was engaged in publishing, selling and circulating weekly and monthly periodicals in interstate commerce, with intent, purpose and effect of suppressing competition in the publication, sale and circulation of periodicals; that it was refusing to sell its publications to any dealer who would not agree to refrain from selling or distributing those of certain competitors to other dealers and distributors; and that it was making contracts with wholesalers whereby the latter agreed to distribute its periodicals as agents and not to distribute those of other publishers without permission. The complaint also stated that the wholesalers so restricted were the principal and often the only medium for the proper distribution of weekly and monthly periodicals throughout the United States.

The defendant was also charged with violating Section 3 of the Clayton Act (Comp. St. § 8835 c), making unlawful lease or sale contracts prohibiting the lessee or buyer from handling the product of competitors where such contracts are executed in the course of interstate commerce.

The defendant denied that it was guilty of any unlawful conduct, and contended that the parties contracted with were agents whose services were necessary for the maintenance of its plan of distributing publications through schoolboys, who require special supervision; and that such agents had lawfully agreed to abstain from other connections and devote their time and attention to supervising the boys and to the general upbuilding of sales.

The Federal Trade Commission decided that the defendant was employing a method of competition which was unfair, and that the provision in its contract prohibiting dealers from distributing the periodicals of other publishers lessened competition with the defendant's magazines and tended to create for the defendant a monopoly in the business of publishing magazines of the character of those published by the defendant.

The commission concluded that the defendant's method of competition was violative of Section 5 of the Federal Trade Commission Act, and of Section 3 of the Clayton Act. It ordered the defendant to desist from entering into contracts forbidding those already en

gaged in the sale or distribution of magazines or newspapers, or both, of other publishers, from acting as agents for, selling or supplying at wholesale rates periodicals other than the defendant's without its consent, or from enforcing any provision of an outstanding contract prohibiting one engaged in the sale or distribution of periodicals of other publishers from selling or distributing them without the defendant's permission.

The Circuit Court of Appeals set aside the order of the commission. The decree of that court was affirmed by the Supreme Court for reasons that appear in the following quotation from the court's opinion:

The present record clearly discloses the development of respondent's business, how it originated the plan of selling through schoolboys, the necessity for exclusive agents to train and superintend these boys and to devote their time and attention to promoting sales, and also contracts with 1,535 such agents. The commission's report suggests no objection as to 1,088 of these representatives who, prior to their contracts, had not been engaged in selling and distributing newspapers or periodicals for other publishers. There is no sufficient evidence to show that respondent intended to practice unfair methods, or unduly to suppress competition, or to acquire monopoly, unless this reasonably may be inferred from making and enforcing the second or substituted agreement with many important wholesale dealers throughout the country.

Judged by its terms, we think this contract is one of agency, not of sale upon condition, and the record reveals no surrounding circumstances sufficient to give it a different character. This, of course, disposes of the charges under the Clayton Act.

The engagement of competent agents obligated to devote their time and attention to developing the principal's business, to the exclusion of all others, where nothing else appears, has long been recognized as proper and unobjectionable practice. The evidence clearly shows that respondent's agency contracts were made without unlawful motive and in the orderly course of an expanding business. It does not necessarily follow, because many agents had been general distributors, that their appointment and limitation amounted to unfair trade practice. And such practice cannot reasonably be inferred from the other disclosed circumstances. Having regard to the undisputed facts, the reasons advanced to vindicate the general plan are sufficient.

Effective competition requires that trades have large freedom of action when conducting their own affairs. Success alone does not show reprehensible methods, although it may increase or render insuperable the difficulties which rivals must face. The mere selection of competent, successful and exclusive representatives in the orderly course of development can give no just cause for complaint.

Digest of Recent Business Decisions

Below are given, in digest form, recent decisions of the State and Federal Courts affecting business. The decisions are grouped under appropriate headings, alphabetically arranged. At the beginning of each decision is given the title, the court by which it was decided, and the reporter citation

Index to Following Digest of

Recent Decisions

Page

101

Cohen, under certain yearly contracts as "manager of sales of the Economy balers" in certain specified 105 territory in New York, New Jersey, and in Philadelphia. It was provided that the contracts might be terminated on 30 days' notice.

106

108

114

116

120

Agents

Banking

Bankruptcy

Bonds

Bulk Sales Law

109

Chattel Mortgages

112

Checks

113

Contracts

Corporations

Guaranty

Insurance

Landlord and Tenant..

Libel and Slander

Master and Servant

Promissory Notes

Railroads

Sales

Shipping

Taxation

Trade-Marks

Warehouses

Workmen's Compensation

AGENTS

122

125

128

132

133

134

The contracts further provided that the plaintiff should devote his time and energies to the sale of baling presses and other goods manufactured and sold by the defendant, and should not be interested, directly or 130 indirectly in the sale of any baling machines other than those manufactured and sold by the defendant. The plaintiff agreed to assist the home office in handling accounts and other business details. It was further 144 agreed that all sale orders should be 145 taken on order blanks furnished by the defendant company; that all orders should be taken subject to acceptance at the home office of the defendant; and that all accounts and collections should be handled by the home office.

140

140

142

Agent for Machine Manufacturer Not
Permitted to Deal in Second-

hand Machines of Same
Manufacturer

Economy Baler Co. v. Cohen, United
States Circuit Court of Appeals, 296
Fed. Rep. 904

The defendant company, a Michigan corporation engaged in the manufacture and sale of baling machines, employed the plaintiff, Harris C.

The contract was terminated by the defendant on December 1, 1921. Thereafter the plaintiff brought this action to recover certain sums which he claimed to be due him as commissions and allowances under the contract.

The defense was that the plaintiff had violated his agreement by failing to devote his time and energy to the