People v. Building Maintenance Contractors' Ass'n

• Decision Date: 11 December 1953
• Parties: PEOPLE v. BUILDING MAINTENANCE CONTRACTORS' ASS'N, Inc., et al. S. F. 18345.
• Court: California Supreme Court

Page 31

264 P.2d 31

41 Cal.2d 719

PEOPLE v. BUILDING MAINTENANCE CONTRACTORS' ASS'N, Inc., et al.

S. F. 18345.

Supreme Court of California, In Bank.

Dec. 11, 1953.

Edmund G. Brown, Atty. Gen., Clarence A. Linn, Asst. Atty. Gen., B. Abbott Goldberg, Dep. Atty. Gen., Thomas C. Lynch, Dist. Atty., and Gregory Stout, Dep. Dist. Atty., San Francisco, for appellant.

Landels & Weigel, Francis McCarty and Stanley A. Weigel, San Francisco, for respondents.

TRAYNOR, Justice.

Plaintiff appeals from an order granting a new trial after judgment was entered against defendants in an action brought to enjoin alleged violations of the Cartwright Act. Business & Professions Code, §§ 16700-16758.

The facts are stipulated. Defendants are the Building Maintenance Contractors' Association, an unincorporated association, and its members, who are all building maintenance contractors in San Francisco. The building maintenance industry is defined as 'all persons, associations, firms, partnerships and/or corporations participating in the maintenance operation (as distinguished from ownership, leasing or managing), cleaning, plainting, renovating and supplying of janitorial service for buildings, lofts and stores in San Francisco.' Maintenance contractors are defined as 'persons, firms, partnerships and/or corporations engaged, in the building maintenance industry in San Francisco, in the business of contracting, for a fixed term, with owners, lessees or managers of buildings, lofts or stores located in San Francisco to do, for designated buildings, lofts or stores so located, part or all of any one or more of the following: Window cleaning, janitor work, providing of elevator operators and starters, providing of building engineers for maintaining heating equipment and for minor repairs, providing of night watchmen and providing of powder room matrons.' There are 44 maintenance contractors in San Francisco of whom 30 are not members of defendant association. Members of the association, however, employ approximately 90 per cent of the total number of employees employed by all maintenance contractors in San Francisco and service approximately 90 per cent of all San Francisco buildings, lofts, and stores serviced by maintenance contractors. Maintenance contractors employ approximately 25 per cent of the employees supplied by various unions for building maintenance, and the remainder of the organized employees are supplied directly to owners, lessees, and managers. The terms and conditions of employment of the organized workers are the same whether they are employed by maintenance contractors or directly by owners, lessees, or managers. All of defendant maintenance contractors service less than one-half of one per cent of the buildings, lofts, and stores in San Francisco.

Defendants have agreed that if bids are called for by any person having an existing, unexpired contract with any member of their association, the members whose bids are solicited will report that fact to the association. The association then makes an investigation to determine whether the price under the existing contract is reasonable, whether the service is satisfactory, and whether the person soliciting bids has any specific reason, no matter how trivial or personal, for dispensing with the services of the current contractor. If the price is found to be reasonable, the service satisfactory, and there is no specific reason for changing maintenance contractors, the members are required to submit bids in excess of the current price. The amount of the excess is determined by a scale ranging from 20 per cent down to 5 per cent of the current price depending on the current job price per month. If, on the other hand, the current price is found to be unreasonable, or the service unsatisfactory, or there is a specific reason for changing contractors, members may submit any bids they see fit. Defendants entered this agreement 'with the intent and for the object and purpose of conducting operations at a reasonable profit, of marketing at a reasonable profit products and services which could not otherwise be so marketed and of acting in furtherance of trade, and with no other intent whatever nor for any other object or purpose whatever. There is no evidence, except as stated in this stipulation, if any is stated herein, that the effect of the admitted agreement has exceeded, exceeds or will exceed the stated intentions, objects or purposes.'

It is clear that defendants' agreement constitutes a trust as defined in section 16720 of the Business and Professions Code. ¹ Not only have defendants agreed to fix the prices at which maintenance service will be provided, § 16720(d), (e), but they have also undertaken to prevent competition among themselves by forcing their customers to pay higher prices if they seek to change maintenance contractors. § 16720(c). Defendants contend, however, that their agreement is exempted from the prohibitions of the Cartwright Act by virtue of sections 16723 and 16725 of the Business and Professions Code.

Section 16723 provides that 'No agreement, combination or association is unlawful or within the provisions of this chapter, the object and purpose of which are to conduct operations at a reasonable profit or to market at a reasonable profit those products which can not otherwise be so marketed.'

In Cline v. Frink Dairy Co., 274 U.S. 445, 47 S.Ct. 681, 684, 71 L.Ed. 1146, it was held that the same exemption contained in the Colorado Anti-Trust Act left the whole statute 'without a fixed standard of guilt' and thus rendered it unconstitutional. In Speegle v. Board of Fire Underwriters, 29 Cal.2d 34, 172 P.2d 867, we held that because the exemption was added to the statute by amendment it was separable from the rest of the act. Defendants contend, however, that later decisions of the United States Supreme Court indicate that it would no longer follow the Cline case, and that in any event the state has no standing to challenge the validity of the amendment upon which defendants rely.

Examination of recent cases upholding statutes attacked on the ground of vagueness does not persuade us that the Cline case was wrongly decided or that the Supreme Court would not follow it today. In Bandini Petroleum Co. v. Superior Court, 284 U.S. 8, 52 S.Ct. 103, 104, 76 L.Ed. 136, the words 'unreasonable waste of natural gas' were found to have an ascertainable meaning in the industry involved. See also, Kay v. United States, 303 U.S. 1, 9, 58 S.Ct. 468, 82 L.Ed. 607. In Chaplinsky v. State of New Hampshire, 315 U.S. 568, 62 S.Ct. 766, 86 L.Ed. 1031, the vague terms of the statute had been given a sufficiently definite and restrictive interpretation by the state court. Cf. Winters v. People of State of New York, 333 U.S. 507, 518-519, 68 S.Ct. 665, 92 L.Ed. 840; Lanzetta v. State of New Jersey, 306 U.S. 451, 457, 59 S.Ct. 618, 83 L.Ed. 888. In other cases, although the prohibited acts were defined in vague terms, the statutes were upheld because they required the presence of an adequately defined specific intent. Williams v. United States, 341 U.S. 97, 101-102, 71 S.Ct. 576, 95 L.Ed. 774; Dennis v. United States, 341 U.S. 494, 515-516, 71 S.Ct. 857, 95 L.Ed. 1137; United States v. Petrillo, 332 U.S. 1, 7, 67 S.Ct. 1538, 91 L.Ed. 1877; Gorin v. United States, 312 U.S. 19, 27-28, 61 S.Ct. 429, 85 L.Ed. 488; Screws v. United States, 325 U.S. 91, 101, 65 S.Ct. 1031, 89 L.Ed. 1495; F. & A. Ice Cream Co. v. Arden Farms Co., D.C., 98 F.Supp. 180, 187, and cases cited. Thus a person who undertakes to evade income taxes by padding his expenses has fair warning that he may violate the law even though he may not be sure where a jury may draw the line between reasonable and unreasonable expenses. United States v. Ragen, 314 U.S. 513, 524, 62 S.Ct. 374, 86 L.Ed. 383. As Mr. Justice Holmes said in sustaining the validity of a statute dealing with contributions for 'political purposes,' 'Wherever the law draws a line there will be cases very near each other on opposite sides. The precise course of the line may be uncertain, but no one can come near it without knowing that he does so, if he thinks, and if he does so, it is familiar to the criminal law to make him take the risk.' United States v. Wurzbach, 280 U.S. 396, 399, 50 S.Ct. 167, 169, 74 L.Ed. 508.

In the present case, however, the vagueness of the words 'reasonable profit' infects the whole statutory standard of conduct. An agreement is legal or illegal depending on whether its purpose is to secure reasonable or unreasonable profits. Defendants can know when they have approached the line separating legal from illegal conduct only if they can in some way determine what reasonable profits are. There is no common law background to guide them (cf. Nash v. United States, 229 U.S. 373, 377, 33 S.Ct. 780, 57 L.Ed. 1232), and there is no fund of common knowledge or experience that would allow either them or the court to determine what those words mean. Reasonable profits might be defined as those that would permit the payment of reasonable wages and provide a reasonable return on the capital invested. Such a definition, however, would raise serious difficulties in determining what are reasonable wages and a reasonable return on capital. See, Connolly v. General Const. Co., 269 U.S. 385, 393-394, 46 S.Ct. 126, 70 L.Ed. 322; United States v. L. Cohen Grocery Co., 255 U.S. 81, 89, 41 S.Ct. 298, 65 L.Ed. 516. Moreover, an industry may be inefficient or producing a product about to be driven from the market by a superior substitute. In such cases to obtain profits sufficient to permit payment of reasonable wages and provide a reasonable return on capital would require suppression of efficient competitors or elimination of the competitive substitute. We do not believe that the Legislature intended that reasonable profits should carry a meaning that would permit such a result. On the other hand, we cannot conclude that...