Petstel, Inc. v. King County

• Decision Date: 23 October 1969
• Docket Number: No. 39863,39863
• Citation: 459 P.2d 937,77 Wn.2d 144
• Parties: PETSTEL, INC., a Washington corporation, Appellant, v. The COUNTY OF KING; John O'Brien, Scott Wallace, and Ed Munro, Members of the Board of County Commissioners, County of King, State of Washington; and James Lawrence, the License Director of the County of King, State of Washington, Respondents.
• Court: Washington Supreme Court

Page 144

77 Wn.2d 144

459 P.2d 937

PETSTEL, INC., a Washington corporation, Appellant, v. The COUNTY OF KING; John O'Brien, Scott Wallace, and Ed Munro, Members of the Board of County Commissioners, County of King, State of Washington; and James Lawrence, the License Director of the County of King, State of Washington Respondents.

No. 39863.

Supreme Court of Washington, En Banc.

Oct. 23, 1969.

Comfort, Dolack, Hansler & Billett, John F. Hansler, Tacoma, for appellant.

Robert J. McKanna, Spokane, amicus curiae.

Charles O. Carroll, Pros. Atty., Jeremy Randolph, Deputy Pros. Atty., Seattle, for respondents.

NEILL, Judge.

This is an appeal from a decree upholding the validity of a King County resolution fixing maximum rates to be charged by employment agencies.

On December 12, 1966, the King County Board of Commissioners passed Resolution No. 32792 regulating employment agencies. The resolution contains provisions requiring bonds, licenses and records, prohibiting charges on the promise of future work, prohibiting division of fees, and established a schedule of maximum fees which could be charged clients by employment agencies.

The resolution was passed after a public hearing at which proponents and opponents of the proposed resolution, including plaintiff, were allowed to present views. The commissioners had letters from employment agencies objecting to the fee structure set by a prior resolution (which contained lower maximum rates than the resolution now in question). There was one letter from an agency approving the rates adopted by Resolution No. 32792. The county had also received an unspecified number of citizen complaints about excessive charges by employment agencies. Other than this hearing, the county conducted no special investigation of rates charged by employment agencies, and, so far as appears from the record, the above material was all that was available to the commissioners when considering the resolution.

Plaintiff brought this declaratory judgment action seeking a decree that the resolution is unconstitutional and for a permanent injunction against its enforcement. Findings of fact and conclusions of law were entered after trial which, insofar as relevant to this appeal, concluded (1) that the county may, in the exercise of its police power, regulate employment agencies; (2) that the resolution's provision fixing maximum rates is a reasonable exercise of this power; (3) that the rates set were not patently unreasonable; (4) that the resolution did not conflict with general laws; (5) that the resolution is not discriminatory against plaintiff or employment agencies as a class; and (6) that Resolution No. 32792 is valid and constitutional. Accordingly, the relief sought by plaintiff was denied.

Plaintiff's primary contention is that the King County resolution fixing maximum rates for employment agencies violates the due process clause of U.S.Const. Amend. 14 and Const. art. 1, § 3. The validity of the resolution as a regulation of a private business must rest upon the police power delegated to the counties by Const. art. 11, § 11:

Any county, city, town or township may make and enforce within its limits all such local police, sanitary and other regulations as are not in conflict with general laws.

The early view of the due process limitations upon the states' power to regulate prices is exemplified by Ribnik v. McBride, 277 U.S. 350, 48 S.Ct. 545, 72 L.Ed. 913, (1928). It was there held that a price-fixing regulation, in order to be valid, must concern a business 'affected with a public interest.' (p. 355, 48 S.Ct. p. 545) To be affected with a public interest, a business must have been devoted to a public use 'and in interest in effect granted to the public in that use.' An employment agency was not deemed to be such a business and a New Jersey law regulating the fees charged by these agencies was declared unconstitutional.

Within 6 years after Ribnik, the United States Supreme Court began a retreat from this view of due process. A New York statute fixing the minimum and maximum retail prices of milk was upheld in Nebbia v. New York, 291 U.S. 502, 54 S.Ct. 505, 78 L.Ed. 940, 953, (1934). A Washington statute authorizing the setting of minimum wages for minors and women was upheld in West Coast Hotel Co. v. Parrish, 300 U.S. 379, 57 S.Ct. 578, 81 L.Ed. 703 (1937). A Georgia statute setting maximum warehouse rates for leaf tobacco was approved in Townsend v. Yeomans, 301 U.S. 441, 57 S.Ct. 842, 81 L.Ed. 1210 (1937). The price fixing provisions of the Bituminous Coal Act of 1937 were upheld in Sunshine Anthracite Coal Co. v. Adkins, 310 U.S. 381, 60 S.Ct. 907, 84 L.Ed. 1263, (1940). The minimum wage and maximum hour provisions of the Fair Labor Standards Act of 1938 were upheld in United States v. Darby, 312 U.S. 100, 61 S.Ct. 451, 85 L.Ed. 609 (1941).

This decline of due process limitations and consequent expansion of the police power was noted by this court as early as 1936 in Shea v. Olson, 185 Wash. 143, 154, 53 P.2d 615, 619, 111 A.L.R. 998 (1936):

While, formerly, the power was viewed as one of strict and direct application, it has now come to be more favored on account of changed and changing economic and social conditions, and at present is frequently relied on to sustain laws which affect the common good in only an indirect way. * * * A large discretion is therefore vested in the legislature to determine what the public interest demands and what measures are necessary to secure and protect the same.

This more permissive view of the due process clause as it affects price regulation resulted in a reappraisal of the 'affected with a public interest' concept. This was fully discussed in Nebbia v. New York, Supra, at 531, 54 S.Ct. at 513:

But we are told that because the law essays to control prices it denies due process. Notwithstanding the admitted power to correct existing economic ills by appropriate regulation of business, even though an indirect result may be a restriction of the freedom of contract or a modification of charges for services or the price of commodities, the appellant urges that direct fixation of prices is a type of regulation absolutely forbidden. His position is that the Fourteenth Amendment requires us to hold the challenged statute void for this reason alone. The argument runs that the public control of rates or prices is Per se unreasonable and unconstitutional, save as applied to businesses affected with a public interest; that a business so affected is one in which property is devoted to an enterprise of a sort which the public itself might appropriately undertake, or one whose owner relies on a public grant or franchise for the right to conduct the business, or in which he is bound to serve all who apply; in short, such as is commonly called a public utility; or a business in its nature a monopoly. * * *

We may as well say at once that the dairy industry is not, in the accepted sense of the phrase, a public utility. We think the appellant is also right in asserting that there is in this case no suggestion of any monopoly or monopolistic practice. * * * But if, as must be conceded, the industry is subject to regulation in the public interest, what constitutional principle bars the state from correcting existing maladjustments by legislation touching prices? We think there is no such principle. * * * 'Property does become clothed with a public interest when used in a manner to make it of public consequence, and affect the community at large' * * * Thus understood, 'affected with a public interest' is the equivalent of 'subject to the exercise of the police power'; and it is plain that nothing more was intended by the expression.

With respect to employment agencies, this change in view culminated in Olsen v. Nebraska ex rel. Western Reference & Bond Ass'n, 313 U.S. 236, 61 S.Ct. 862, 85 L.Ed. 1305 (1941). The court noted that 'affected with a public interest' can mean 'no more than that an industry, for adequate reason, is subject to control for the public good', citing Nebbia v. New York, Supra. It was then held that the federal constitution did not proscribe a Nebraska statute limiting the maximum fees to be charged by employment agencies. ¹

Plaintiff asks us to distinguish Olsen v. Nebraska, Supra, contending it was decided in the aftermath of the depression of the 1930's when there may have been facts which justified price fixing which do not now exist. Plaintiff argues that Olsen must be read in conjunction with the chronicle of employment agency abuses contained in Mr. Justice Stone's dissent in Ribnik v. McBride, Supra, at 365--370, 48 S.Ct. 545. It is contended that most of plaintiff's customers are already employed; that fierce competition among employment agencies and competition with free state and federal employment agencies prevents abuses; and that neither the county commissioners nor the trial court had evidence that this regulation was justified.

These arguments are basically that a price regulation must be justified by facts which appear in the record or of which courts can take judicial notice; and that the facts then prevailing justified the regulation in Olsen, but do not do so now. The rationale in the Olsen opinion, however, negates this contention. The court in Olsen, in response to some of the same arguments now made by plaintiff, stated explicitly that there is no requirement that a legislative body factually justify their price regulation:

But respondents maintain that the statute here in question is invalid for other reasons. They insist that special circumstances must be shown to support the validity of such drastic legislation as price-fixing, that the executive, technical and professional workers which respondents serve have not been shown to be in need of special protection from exploitation, that legislative limitation of maximum fees for employment agencies is certain to react unfavorably upon those...