People ex rel. Mosk v. National Research Co. of Cal.

• Decision Date: 26 March 1962
• Citation: 201 Cal.App.2d 765,20 Cal.Rptr. 516
• Court: California Court of Appeals Court of Appeals
• Parties: , 133 U.S.P.Q. 413 The PEOPLE of the State of California on the Relation of Stanley MOSK, Attorney General, Plaintiff and Respondent, v. NATIONAL RESEARCH COMPANY OF CALIFORNIA, an unincorporated association of two or more persons doing business under a common name; S. Floersheim Sales Company, an unincorporated association of two or more persons doing business under a common name; Mitchell S. Mohr and Sydney Floersheim, Defendants and Appellants. Civ. 10191.

Page 516

20 Cal.Rptr. 516

201 Cal.App.2d 765, 133 U.S.P.Q. 413

The PEOPLE of the State of California on the Relation of Stanley MOSK, Attorney General, Plaintiff and Respondent, v. NATIONAL RESEARCH COMPANY OF CALIFORNIA, an unincorporated association of two or more persons doing business under a common name; S. Floersheim Sales Company, an unincorporated association of two or more persons doing business under a common name; Mitchell S. Mohr and Sydney Floersheim, Defendants and Appellants.

Civ. 10191.

District Court of Appeal, Third District, California.

March 26, 1962.

Murray M. Chotiner, Beverly Hills, for appellants.

Stanley Mosk, Atty. Gen., by John Michael Traynor, Deputy Atty. Gen., San Francisco, for respondent.

SPARKS, Justice pro tem.

This appeal is from a judgment entered in favor of the People in an action brought on relation of the Attorney General to restrain defendants from continuing in certain business practices alleged to be unfair deceptive and fraudulent.

After a trial, at which stipulations were entered into as to many of the facts, the court granted a permanent injunction enjoining defendants from 'Using, or placing in the hands of others for use in California' certain mailing materials designed and intended for use in obtaining information by subterfuge concerning delinquent debtors. The specific type enjoined was any form, questionnaire, card or other printed or written material which:

'* * * Simulates, directly or indirectly, any form in general use by the government of the United States or of the State of California, or of any of their agencies or political subdivisions; or

* * *

* * *

'* * * Quotes from, or gives citations to, or states the substance of any provision of law, * * * excepting only that the substance of provisions of law relating directly to the collections of debts and the remedies of creditors may be stated on the form provided that the name of the creditor and the sum of the debt are prominently stated on the same form.' (Italics added.)

The use on said materials of certain words or abbreviations commonly used in the title of government offices, such as 'United States,' 'State of California,' etc., was forbidden. Defendants were also enjoined from using forms which do not clearly reveal that the purpose for which the information was requested was that of obtaining information concerning delinquent debtors.

The plaintiff's complaint was directed particularly at three of defendants' forms which purported to come from the 'bureau of Verification' or the 'Bureau of Reclassification' in Sacramento, California. These materials were quite similar in appearance to official forms used by the Departments of Motor Vehicles and Employment, and cited penal provisions of the Vehicle and Unemployment Insurance Codes. Information sought to be elicited by the cards was the addressee's residence, operator's license number, vehicle license number, make of vehicle owned, legal owner or lien holder of vehicle, business or employment, business address, employer's name, Social Security number, new employer's address, and occupation.

Defendants sold these forms, known in the trade as 'skip-tracers,' to creditors and to various California organizations interested in collecting delinquent debts and locating debtors who had departed without leaving a forwarding address. The purchasers of the forms would insert the last known addresses of delinquent debtors and return the forms to defendants who mailed them from Sacramento. Defendants then relayed the filled-in forms, as they were received, to the respective creditor organization.

The trial court found:

'That the uses * * * of the defendants' printed material containing the unfair, untrue, misleading, and deceptive representations * * * have had, and now have, the tendencey and capacity to, and do, mislead and deceive many persons, to whom the said printed material is sent, into the erroneous and mistaken belief that the representations and implications were true and induced the recipients thereof to give information to defendants and their purchasers which otherwise would not have been supplied.

'That the aforementioned conduct of the defendants constitutes a serious and continuing fraud upon the People of the State of California, and which has and continues seriously to embarrass and increase the costs of the operation of the Department of Motor Vehicles and the Department of Employment of the government of the State of California.

'That the activities of the defendants have and will continue unless restrained to confuse the public and disrupt the normal operations of the Department of Motor Vehicles and the Department of Employment. Each new mailing of the defendants confuses numerous persons who receive them into believing that they come from the Department of Motor Vehicles or the Department of Employment. This confusion in turn leads to public hostility towards the said Departments and seriously imperils the heretofore high degree of public acceptance of the mailings of the said Departments.'

The conclusions of the court were:

'1. That the defendants have engaged in unfair competition as defined in Civil Code section 3369.

'2. That the plaintiff is entitled to an injunction restraining the defendants from selling, handling, or otherwise dealing from Sacramento, California, Washington, D. C., or any other place, in forms which are misleading as to their source and purpose, or which simulate forms of the government of the State of California, or any of its agencies or political subdivisions.

'3. That the plaintiff is not entitled to an injunction based on the failure of the defendants to be licensed as either a private investigator or a collection agency.'

Appellant contends first that the injunction was not authorized for the reason that the applicable code section refers to 'unfair competition,' and that what it seeks to prohibit is certain conduct in the realm of business competition. The statutory definition, as set forth in subdivision 3 of section 3369 of the Civil Code, reads: '* * * unfair competition shall mean and include unfair or fraudulent business practice and unfair, untrue or misleading advertising and any act denounced by Penal Code sections 654a, 654b or 654c.' ¹

Historically, the law of unfair competition and of trademark infringement evolved in the general field of torts. ² It was concerned primarily with wrongful conduct in commercial enterprises which resulted in business loss to another, ordinarily by the use of unfair means in drawing away customers from a competitor. With passage of time and accompanying epochal changes in industrial and economic conditions, the legal concept of unfair competition ³ broadened appreciably. This was occasioned, according to the Restatement, party by the flexibility and breadth of relief afforded by equity, and partly by changing methods of business and changing standards of commercial morality. '[t]he tendency of the law, both legislative and common, has been in the direction of enforcing increasingly higher standards of fairness or commercial morality in trade. The tendency still persists.' (Italics added.) Rest., Torts, p. 540.

This development of the law is clearly reflected in California by the legislative enactments noted, supra, and by judicial decision in the extension of equitable relief to situations beyond the scope of purely business competition. (Athens Lodge No. 70 v. Wilson, 117 Cal.App.2d 322, 255 P.2d 482; Academy of Motion Picture, Etc. v. Benson, 15 Cal.2d 685, 104 P.2d 650; Jackman v. Mau, 78 Cal.App.2d 234, 177 P.2d 599; Winfield v. Charles, 77 Cal.App.2d 64, 175 P.2d 69; Schwartz v. Slenderella Systems of Calif., 43 Cal.2d 107, 271 P.2d 857; MacSweeney Enterprises, Inc. v. Tarantino, 106 Cal.App.2d 504, 235 P.2d 266.)

In the Athens Lodge case it was contended that section 3369 was limited to unfair business competition and could not include unfair competition against a fraternal organization. In disposing of the contention, the court stated: 'While defendants' construction is a possible one it is not a compelling one. In subdivision 3 there is no limitation of 'unfair, untrue or misleading advertising' to business advertising. Moreover, the very language in that subdivision, 'unfair competition' 'shall mean and include' the situations thereafter set forth, shows that the definition is not restrictive or exclusive.' (Last italics added.) (Athens Lodge No. 70 v. Wilson, supra, 117 Cal.App.2d at p. 325, 255 P.2d at p. 484.)

In 47 California Jurisprudence, second edition, Trademarks, Trade Names and Trade Practices, section 25, page 741, the trend is summarized as follows:

'Although a few cases regard direct competition between the parties as an essential element of unfair competition, the current trend is to redefine the action as one against unfair business practices, rather than unfair competition, and, as a general rule, competition is not regarded as a necessary ingredient.'

We conclude that the equitable relief authorized by Civil Code, section 3369 is not circumscribed by any prerequisite showing that the conduct in question be limited to the field of business competition.

The very breadth of the terms used by the Legislature indicate, in our judgment, an intent to be inclusive rather than restrictive in the practices to be enjoined. We refrain from construing the language narrowly in a field where the trend is opposed to unfair trade practices which affect the public interest. As our Supreme Court has stated:

"It is also to be borne in mind that the rules of unfair competition are based, not alone upon the protection of a property right existing in the complainants, but also upon the right of the public to protection from fraud and deceit * * *." (Academy of Motion Picture, Etc. v. Benson, supra, 15 Cal.2d at p. 691, 104 P.2d at p. 653.)

The foregoing discussion is also apropos to appellants' further argument that ...