People v. Toomey

• Decision Date: 16 May 1984
• Citation: 203 Cal.Rptr. 642,157 Cal.App.3d 1
• Court: California Court of Appeals Court of Appeals
• Parties: PEOPLE of the State of California, Plaintiff and Respondent, v. Bill TOOMEY, dba Holiday Funshine, Defendant and Appellant. AO 15212.

Page 642

203 Cal.Rptr. 642

157 Cal.App.3d 1

PEOPLE of the State of California, Plaintiff and Respondent, v. Bill TOOMEY, dba Holiday Funshine, Defendant and Appellant.

AO 15212.

Court of Appeal, First District, Division 1, California.

May 16, 1984.

Aaron L. Katz, Philip S. Rosenblatt, San Jose, for defendant/appellant Toomey dba Holiday Funshine.

John K. Van de Kamp, Atty. Gen., Donna Petre, Edward P. Hill, Deputy Attys. Gen., San Francisco, for plaintiff/appellant State of Cal.

NEWSOM, Associate Justice.

Appellant Bill Toomey and his wife are the sole owners of Holiday Funshine, Inc. (hereafter Holiday) established in 1975, through which he sells discount coupons for use at Reno casinos.

In the first few years of operation, appellant ¹ solicited sales by advertising in newspapers and printed mailers. Later, telephone solicitations were used to sell the coupon packages. The casinos where discount coupons were to be redeemed offered such benefits as inducements to attract customers, and customarily authorized distributors such as Holiday to print such coupons through third-party promoters. Sometimes, Holiday sold its casino promotion packages wholesale to other distributors for resale to consumers.

The coupon packages varied slightly, but basically took two forms: those redeemable at individual casinos, which included cash, free token play at a designated slot machine, drink coupons, food credits, and gambling incentive coupons such as "Lucky Bucks," and a "Mini-Bus" package, which provided the buyer with many of the same coupons, to be used at more than one casino during a bus tour. The casino packages were priced at $25 to $30, and were generally represented by solicitations or advertisements to be worth hundreds of dollars.

A complaint was filed on November 4, 1976, by the Attorney General and the District Attorney of Santa Clara County charging Toomey (individually and doing business as Holiday Funshine, Inc.) with unfair business practices (Bus. & Prof.Code, § 17200) and misleading and untrue advertisements (Bus. & Prof.Code § 17500). ² A first amended complaint was subsequently filed, adding a cause of action alleging unlawful "bait and switch" business practices.

On February 2, 1978, pursuant to a motion by respondent, the trial court issued a preliminary injunction which, in summary, enjoined appellant, his agents, or anyone acting in concert with him, from making untrue or misleading representations--enumerated in the order--when offering goods or services for sale; from failing to disclose conditional, restrictions or additional charges placed upon the sale of goods and services; from collecting or accepting any money for the sale of goods or services based upon misrepresentations or business practices prohibited by the injunction; from substituting goods or services for those represented without notifying buyers and offering a cash refund if the substitution is not acceptable, and, finally, from failing to keep records of customer complaints, refunds and other specific correspondence.

When the preliminary injunction was issued appellant reviewed it with his attorney, but admittedly made no significant changes in his business practices, since he felt his solicitations were not misleading.

The prosecution offered testimony from numerous witnesses who did not receive what they had been led to believe by appellant's advertisements and solicitations. Buyers alleged, for example, that they were not informed of conditions and restrictions placed on the use of the coupons: that "free" token play coupons were generally redeemable only at machines for which, according to the testimony of Robert C. Voss, a senior agent with the Nevada State Gaming Control Board, the rate of return was so low as to make the coupons virtually valueless, and that such coupons could only be redeemed at a rate of 1 each hour for up to 14 consecutive hours, requiring the customers to stay on the premises for absurdly long periods of time.

Further testimony tended to prove that many of the coupons were only redeemable with the addition of the buyer's own money: for instance, to place a bet with "Lucky Bucks," or other betting coupons, buyers were forced to place a cash bet matching the amount of the coupon.

Customers of Holiday also testified that they had difficulty redeeming the coupons. Many were burdened with the inconvenience of waiting in long lines or going to inconvenient locations to use coupons provided. And, sometimes, the casinos at which the coupons were to be used had closed or discontinued the program, making redemption either burdensome--if a substitute coupon was provided--or impossible.

Buyers were generally not told of these restrictions when solicited to purchase the coupon packages, although the coupons themselves mentioned some conditions of use. And dissatisfied customers were often refused refunds. The evidence shows that customer's complaints and requests for refunds were regularly met with rejections or offers of substitute coupons rather than cash refunds.

After the preliminary injunction was issued, appellant actually expanded operations. Telephone solicitations were used more often. Under the name of Golden West Marketing, appellant established telephone solicitation offices in San Jose and San Leandro, staffed by employees who were paid on a commission basis, and drafted the scripts used by appellant's telephone solicitors. He neither showed his employees the preliminary injunction nor cautioned them to comply with it.

Appellant also sold more coupon packages wholesale to distributors after the preliminary injunction was issued. While these distributors operated independently from appellant, they used appellant's coupons and exchanged sales "pitches" with Toomey.

Appellant's business branched out to other forms of coupon packages after 1977. "Shopping Spree" coupon books and accompanying scripts, devised and marketed by Toomey, offered coupons for goods and services from local merchants. These coupons sold for approximately $30, although they were touted as being worth hundreds of dollars by appellant.

The evidence shows that buyers did not always receive what was represented by solicitations or advertisements. Some of the coupons were redeemable at businesses which were not still operating. Other coupons were difficult to use, with some merchants requiring coupon-holders to submit to long waiting periods. And some coupons were for services which were free to the buyer without them. ³ None of these conditions were mentioned by the seller. Neither were buyers told that they had a three-day period in which to cancel the purchase. Again, dissatisfied customers found it difficult or impossible to get a refund from appellant despite numerous complaints.

The People also offered the testimony of witnesses who complained that appellant sent them coupon books which they had not ordered, and then billed them through their credit card account numbers--apparently known from prior purchases. In many such cases, appellant refused to grant refunds until threatened with prosecution by the District Attorney's office.

While the preliminary injunction was in effect, appellant printed and sold hundreds of thousands of coupon packages. The prosecution's evidence detailed appellant's sales. For example, appellant's "C.O.D." sales of casino coupons for 1979-80 were nearly 1,000 per month nationwide, each sold at $30 or more per unit. In 1980-81, the evidence reveals that appellant printed and distributed 74,000 Las Vegas Fun Check coupon books, 7,000 San Jose Shopping Spree books, 5,000 Peninsula Shopping Spree books, 5,000 East Bay Shopping Spree books, 3,000 Richmond Shopping Spree books, and 2,000 Denver Shopping Spree books. Between 1978 and 1980, appellant employed at least 10 full-time telephone solicitors to sell casino coupons; they made from 8,000 to 12,000 monthly telephone solicitations and sold in excess of 8,000 casino books per month.

An inordinate number of the credit card sales during this period resulted in charge-backs: a charge-back occurs when the customer instructs the bank to reverse the charge on his or her credit account. A Wells Fargo Bank credit account in the name of Galaxy Marketing Corporation, under which appellant apparently did some of his business, incurred so many charge-backs that the bank closed the account in December of 1980. A bank employee testified that the number and proportion of charge-backs for this account was unprecedented. Apparently, appellant had another credit account with Bank of America that was closed by the bank for the same reason.

Evidence of appellant's assets and income was admitted on the issue of penalties. An investigator from the Attorney General's office reviewed appellant's bank records and offered testimony of deposits made by Toomey.

In his deposition, admitted into evidence at trial, Toomey valued his home at $270,000 and admitted ownership of additional real estate in San Jose and Fremont. He also owned a one-third interest in a Reno casino, which was sold for a profit of approximately $34,000 in 1979, but which appellant was never able to collect due to the debtor's bankruptcy. No other evidence of appellant's net worth was produced at trial. By the time of trial, Holiday was out of business.

Based upon this evidence, judgment was entered against appellant as follows: $150,000 in penalties was assessed for violation of the preliminary injunction (Bus. & Prof.Code, § 17535.5); civil penalties in the amount of $150,000 for violations of sections 17200 and 17500 were imposed; appellant was ordered to comply with Civil Code section 1689.6 by providing refunds to all customers upon timely request; and appellant was directed to make restitution to all customers who purchased goods or services from him or his distributors between February 8, 1978, and the date of judgment, and to maintain an impound account for this purpose. A...