Seaboard Sur. Co. v. Ralph Williams' Northwest Chrysler Plymouth, Inc.
| Decision Date | 04 January 1973 |
| Docket Number | No. 42476,42476 |
| Citation | 81 Wn.2d 740,504 P.2d 1139 |
| Parties | SEABOARD SURETY COMPANY, Respondent, v. RALPH WILLIAMS' NORTHWEST CHRYSLER PLYMOUTH, INC., et al., Appellants. |
| Court | Washington Supreme Court |
Jennings P. Felix & Associates, Jennings P. Felix, Thomas J. Kraft, Seattle, for appellants.
Lane, Powell, Moss & Miller, Matthew R. Kenney, William J. Walsh, Jr., Seattle, for respondent.
This is a suit for a declaratory judgment, brought by an insurance company to obtain a judicial determination that it has no duty to defend an injunction suit which the Attorney General has filed against an automobile dealer and associates, referred to herein as the dealer. The Attorney General's suit seeks to enjoin alleged 'unfair methods of competition and unfair or deceptive acts or practices' and to secure a judgment for penalties as provided in the Consumer Protection Act (RCW 19.86), the Unfair Motor Vehicle Business Practices Act (RCW 46.70), and the Retail Installment Act (RCW 63.14).
In the liability policy issued to the dealer by the plaintiff, referred to herein as the insurer, the latter undertook to
pay on behalf of the Insured all sums which the Insured shall become obligated to pay by reason of the liability imposed upon him by law, or assumed by him under contract as defined herein, as the result of any final judgment for money damages resulting from
(c) piracy, plagiarism, or unfair competition or idea misappropriation under implied contract . . .
The insurer also undertook to defend any suit 'seeking damages for (unfair competition), even if such suit is groundless, false or fraudulent.'
The trial court held that the insurer is under no contractual duty to defend the Attorney General's suit against the dealer, and the dealer has appealed.
An issuer of an indemnity policy who reserves the right and assumed the duty to defend lawsuits, is obliged to defend a suit alleging facts which, if proven, would render the insurer liable. Waite v. Aetna Cas. & Sur. Co., 77 Wash.2d 850, 467 P.2d 847 (1970); Tieton v. General Ins. Co., 61 Wash.2d 716, 380 P.2d 127 (1963); and Lawrence v. Northwest Cas. Co., 50 Wash.2d 282, 311 P.2d 670 (1957). 1
It is the theory of the dealer that the Attorney General's suit is one which seeks damages for unfair competition, inasmuch as the pray for relief asks the court to
make such additional orders or judgments as may be necessary to restore to any person in interest any monies or property which may have been acquired by means of an act or conduct of (defendants) found to be in violation of RCW 19.86.020.
While the complaint alleges that the acts complained of by the Attorney General constitute 'unfair methods of competition,' there is no allegation that any competitor has been harmed by those acts. Rather, the complaint is that members of the public who have become customers or potential customers of the dealer have suffered harm; and in some instances, the dealer has gained possession of property of such members of the public and has unlawfully withheld it.
Within the allegations of the complaint, the only property which could be 'restored' by an order of the court in the injunction suit would appear to be the property of customers wrongfully withheld. But the dealer insists that the Attorney General may prove that a competitor also has been harmed, and that if he does the court may award damages to the competitor. He maintains that such damages are authorized by RCW 19.86.080, because 'restitution' is 'damages,' giving the latter term its broadest definition.
It does not follow, however, that all kinds of damages can be classed as 'restitution,' as the dealer would imply. It has cited no authority for the proposition that restitution is an appropriate remedy in an action for unfair competition. The common law action for 'unfair competition' was available to one whose names, symbols, or devices had been appropriated and used by a competitor, or who had suffered damage by reason of a substitution of goods or wares so as to produce a false impression in the mind of the buying public. Whole Grain Wheat Dist. Co. v. Bon Marche, 154 Wash. 455, 282 P. 914 (1929). The 'unfair methods of competition' described in RCW 19.86.020 would appear to embrace a much larger category of acts, and it also would appear that the legislature intended to benefit a much larger group of competitors.
The term 'unfair methods of competition' was new to the law when it was employed in the Federal Trade Commission Act, 15 U.S.C. § 45, first enacted in 1914, and has a broader meaning than the common law 'unfair competition.' A.L.A. Schechter Poultry Corp. v. United States, 295 U.S. 495, 55 S.Ct. 837, 79 L.Ed. 1570, 97 A.L.R. 947 (1935). That act, incidentally, does not authorize suits by private parties but reposes the duty of enforcement in the Federal Trade Commission, which is empowered to issue cease and desist orders.
Insofar as we have been able to ascertain, no comparable act authorizes private suits, and none has been instituted under authority of RCW 19.86, insofar as we know. In any event, none has reached this court.
The dealer has not suggested what the measure of damages should be if a competitor claimed that he had been injured by a violation of this act. We will assume, therefore, that the damages recoverable would be those which could be recovered in a common law action for 'unfair competition.' Those damages are described in the Restatement of Torts, § 746 (1938). They include lost profits, losses due to reduction in prices occasioned by the competition, harm to reputation, and expenditures reasonably made by the plaintiff to prevent prospective customers from being misled by the defendant's conduct. No mention is made in the Restatement of any remedy involving restitution. 2
We are of the opinion that the trial court correctly held that the dealer is not faced with the prospect of a judgment for damages for unfair competition, not only because the complaint does not allege such damages, but for the additional reason that the statute does not authorize the Attorney General to recover such damages.
The authority of the Attorney General to bring suit for violations of the act is contained in RCW 19.86.080 and 19.86.140. He is authorized to bring injunction actions and actions for penalties. The court is authorized to order restitution, under RCW 19.86.080, only as an incident to the granting of the injunction. That such incidental relief is appropriate in an injunction suit brought by a governmental officer has been recognized by the United States Supreme Court. See Porter v. Warner Holding Co., 328 U.S. 395, 402, 66 S.Ct. 1086, 90 L.Ed. 1332 (1945). In providing for restitution, where the facts developed at the trial of an Attorney General's injunction suit show that such relief is indicated, the legislature simply recognized the equitable principle that such an order may be appropriate and necessary to give full effect to the injunction relief ordered by the court.
It is true that a court may award damages in lieu of an injunction in a proper case, and it may award damages in addition to an injunction, in order to accord the plaintiff full relief. However, as we read the statutes which authorize the Attorney General's action in this case, the legislature did not contemplate that the courts should inquire into the question of damages in an injunction action by the Attorney General. If the legislature considered that the state might be damaged by the acts complained of, it determined in advance the measure of 'damages' insofar as the state was concerned and provided for those damages in the civil penalty section, RCW 19.86.140. 3 It also provided a remedy for private persons injured in their business or property in RCW 19.86.090. The loss of profits occasioned by 'unfair methods of competition,' assuming such a loss can be shown, is such an injury.
The fact that separate provisions are made in the statute for injunction actions on behalf of the state, in which no mention is made of damages, and damage actions on the part of persons injured indicates a legislative concern that a speedy...
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