## Facts

- Eli Lilly & Co., an Indiana pharmaceutical manufacturer, shipped products into New Jersey and sold them to New Jersey wholesalers in interstate transactions.
- New Jersey wholesalers resold the products intrastate to hospitals, physicians, and retail drugstores, which then sold intrastate to consumers.
- Lilly maintained a New Jersey office used by its district manager and secretary, with the company’s name displayed and telephone listing in the company’s name.
- Lilly employed 18 salaried employees who traveled throughout New Jersey promoting Lilly products to hospitals, physicians, and retail drugstores that purchased intrastate from wholesalers.
- Lilly sued Sav-On-Drugs, a New Jersey retailer, seeking an injunction under the New Jersey Fair Trade Act to stop sales below minimum retail prices set in contracts between Lilly and other New Jersey retailers.
- Sav-On had not signed a price contract, but the statute made established minimum prices binding on nonsigning retailers with notice.
- Sav-On moved to dismiss because Lilly had not complied with New Jersey’s foreign-corporation qualification statute, which barred unqualified foreign corporations “transacting business” in the state from maintaining certain contract-based actions until they filed corporate documents and obtained a certificate to do business.

## Issues

1. Whether New Jersey could constitutionally require Lilly to obtain a certificate of authority as a precondition to maintaining this state-court action without violating the Commerce Clause.
2. Whether Lilly’s in-state office and promotional workforce constituted intrastate “doing business,” notwithstanding interstate shipment and wholesale sales.

## Decision

- The U.S. Supreme Court affirmed the dismissal of Lilly’s complaint.
- On the record, Lilly’s New Jersey activities constituted intrastate doing business.
- Applying the qualification statute as a condition to maintain a state-court suit not based on a particular interstate sale did not violate the Commerce Clause.
- Lilly could not pursue the Fair Trade Act injunction in New Jersey courts unless and until it complied with the qualification requirements.

## Legal Principles

- A state may require a foreign corporation to qualify to do business, and may condition access to its courts on qualification, when the corporation engages in a substantial and continuous course of intrastate business activities within the state.
- Interstate shipment or out-of-state manufacture does not immunize a corporation from state qualification requirements when the corporation maintains an organized in-state presence (e.g., office and employees) directed at generating and servicing intrastate resale and consumption.
- For Commerce Clause purposes, a court may evaluate the totality of the corporation’s in-state operations rather than focusing solely on the formal point of sale in an interstate supply chain.
- The holding is limited to actions not based on a specific interstate sale; a different analysis may apply where the suit arises directly from a particular interstate transaction.

## Conclusion

The Court held that New Jersey could deny an unqualified foreign corporation access to its courts where the corporation maintained an in-state office and an employee force promoting intrastate sales, and where the suit sought local enforcement of minimum resale prices rather than relief tied to a particular interstate sale.


Eli Lilly & Co. v. Sav-On-Drugs, Inc., 366 U.S. 276 (1961)