State v. O'Neill Investigations, Inc., s. 4109

CourtSupreme Court of Alaska (US)
Citation609 P.2d 520
PartiesSTATE of Alaska, Appellant and Cross-Appellee, v. O'NEILL INVESTIGATIONS, INC., Appellee and Cross-Appellant.
Docket NumberNos. 4109,4165,s. 4109
Decision Date28 March 1980

Donna Dell 'Olio, Asst. Atty. Gen., and Ann K. Stokes, Asst. Atty. Gen., of counsel, Anchorage, and Avrum M. Gross, Atty. Gen., Juneau for appellant, and cross-appellee.

James D. Rhodes and Spencer Sneed, Cole, Hartig, Rhodes, Norman & Mahoney, Anchorage, for appellee and cross-appellant.

Before RABINOWITZ, C. J., CONNOR and MATTHEWS, JJ., DIMOND, Senior Justice, and BLAIR, Superior Court Judge.


CONNOR, Justice.

In recent years, unscrupulous acts and practices of independent debt collection agencies 1 have come under increasing scrutiny from both the public and private sector. Consumer groups, 2 state law enforcement agencies, 3 private industry, 4 and former members of the debt collection profession itself 5 have collectively called for protection for consumers from unfair collection practices, including use of obscene or profane language, threats of violence or imprisonment, telephone calls at unreasonable hours, misrepresentation of consumer's legal rights, disclosure of consumer's financial status to third parties, and feigned use of legal process. 6

This appeal requires us to decide whether the Alaska Unfair Trade Practices and Consumer Protection Act, AS 45.50.471-561 (the Alaska Act) stands as a sentinel against unethical and unscrupulous conduct on the part of independent debt collection businesses operating in this state.

The keystone of the Alaska Act is § 471(a) which states that "unfair or deceptive acts or practices in the conduct of trade or commerce are declared to be unlawful," (emphasis added) and defines "unfair or deceptive acts or practices" as "includ(ing), but . . . not limited to" 25 acts or practices, which are enumerated in § 471(b). 7 The legislature has provided that in deciding whether an act or practice is deceptive or unfair, "due consideration and great weight should be given the interpretations of sec. 5(a)(1) of the Federal Trade Commission Act (15 U.S.C. § 45(a)(1)) (the Federal Act) made by the Federal Trade Commission and the federal courts." AS 45.50.545. Exempt from the purview of the Alaska Act are any acts or transactions "regulated under laws administered by the state, by any regulatory board or commission, or officer acting under statutory authority of the state or of the United States, unless the law regulating the act or transaction does not prohibit the practices declared unlawful in § 471 of this chapter . . . ." AS 45.50.481(1). It can be noted at this juncture that the debt collection licensing statute, set out in Title 8, Chapter 24 of the Alaska Statutes, does not prohibit the practices declared to be unlawful in § 471 of the Act.

The Attorney General is charged with enforcement of the Act: 8 he may adopt interpretative regulations subject to the strictures of the Administrative Procedure Act; 9 he has broad investigatory powers in connection with ferreting out the use of deceptive trade practices; 10 and he is empowered to seek injunctive relief when he has reason to believe "that a person has used, is using, or is about to use an act or practice declared unlawful in § 471 . . . and . . . (such) proceedings would be in the public interest." AS 45.50.501(a). Where injunctive relief is sought the court has available broad equitable remedies to redress violations of the Act. AS 45.50.501(b). Private and class actions are also authorized by the act for recovery of actual damages incurred as a result of proscribed acts and practices, including treble damages for willful violations. AS 45.50.531(a) and (b).

In a suit for injunctive relief brought by the Attorney General, a civil penalty of not more than $5,000 may be recovered for each unlawful act or practice. AS 45.50.551(b). Civil penalties of up to $25,000 may be exacted for each violation of an extant injunction. AS 45.50.551(a). The 1978 amendment to the Act, which became effective on January 1, 1980, rescinds criminal penalties for knowing and willful violations of the Act. AS 45.50.471(d) and AS 45.50.551(c) as amended, 21 ch. 166 SLA 1978. Under these defunct criminal provisions, a sentence of up to one year in jail, a fine of $10,000, or both, could have been imposed after conviction for "engag(ing) in a course of conduct declared unlawful by § 471 . . . ." AS 45.50.551(c).

In March of 1977, the Attorney General filed a complaint pursuant to § 501 of the Act for injunctive relief and civil penalties against O'Neill Investigations, Inc., the appellee/cross-appellant. O'Neill is a corporation organized and existing under the laws of the State of Alaska. It is engaged in the business of collecting debts, under assignment, for creditors. Debt collection is a regulated industry and O'Neill has the requisite state license mandated by Chapter 24 of Title 8 of the Alaska Statutes. AS 08.24.090.

The complaint claimed that O'Neill had employed wide-ranging false and deceptive misrepresentations in attempting to collect monies from alleged debtors or their spouses. The state charged O'Neill with misrepresenting to the debtor that failure to pay by a certain date would result in: criminal prosecution, incarceration or apprehension by law enforcement officials; civil liability; impairment of the debtor's credit rating; referral of the debtor's account to an attorney for collection; and an exaggerated increase in the debtor's obligation after judgment. The State also charged that O'Neill misrepresented to the debtor that the State of Alaska had an interest in the collection of the debt.

Further, the State alleged that O'Neill falsely and deceptively misrepresented the consequences flowing from an alleged debtor's refusal or failure to sign a confession of judgment, and misrepresented that debtors had committed crimes by the mere fact of their debt. Other unfair practices pleaded include telephoning employers of alleged debtors before entry of judgment or threatening to expose the alleged indebtedness to employers and business associates. These allegations and proof elicited at trial are discussed at length in part IV of this opinion. The complaint also averred that O'Neill's refusal to disclose its credit files upon proper demand by a consumer constitutes a violation of the Fair Credit Reporting Act, 15 U.S.C. § 1681g (Supp.1977), which governs the conduct of credit reporting agencies. Under the State's theory, violation of this federal law is a per se deceptive and unfair act prohibited by the Alaska Act.

O'Neill's request for a jury trial, and its motion for summary judgment were denied. The court specifically found that the activities of debt collection agencies are within the scope of § 471 of that Act, and that the language of § 471(a) affords reasonable and adequate notice of the proscribed conduct. The lower court concluded, therefore, that the Alaska Act was not unconstitutionally vague as applied to third party debt collection agencies. We denied O'Neill's petition for review of this ruling. A bench trial commenced on June 5, 1978 before Superior Court Judge Peter Kalamarides.

At the close of the State's case, the defendant moved for dismissal under Alaska Rule of Civil Procedure 41(b) and renewed its earlier motion for summary judgment. The court granted defendant's motion to dismiss on the ground that § 471(a), without interpretative regulations, was unconstitutionally vague. The trial court denied the renewed motion for summary judgment. Findings of fact and conclusions of law were entered. The State has taken an appeal and O'Neill has cross-appealed. We will address first the issues raised by the cross-appellant.


We turn our attention initially to O'Neill's argument, which it characterizes as "(p)erhaps the single most important issue presented in this case", that the civil penalties authorized by the Alaska Act are so severe as to render them "penal" in nature. If this conclusion is correct, the imposition of civil penalties for violation of the Act would require all the constitutional safeguards against arbitrary deprivation of liberty and property afforded criminal defendants.

The common law distinguished between civil and criminal statutes by contrasting the rights of individuals with those rights belonging to society qua society Blackstone noted:

"The distinction of public wrongs from private, of crimes and misdemeanors from civil injuries, seems principally to consist in this: that private wrongs, or civil injuries, are an infringement or privation of the civil rights which belong to individuals, considered merely as individuals; public wrongs, or crimes and misdemeanors, are a breach and violation of the public rights and duties, due to the whole community, considered as a community, in its social aggregate capacity."

5 W. Blackstone, Commentaries *5.

While that distinction may have served well when it was developed in the eighteenth century, it has become blurred in the rapid expansion of the domain of public law. 11 The result is offenses which are "quasi-criminal," State v. Clayton, 584 P.2d 1111, 1114 (Alaska 1978), and statutes which are neither purely civil nor criminal, but, rather, a hybrid. 12 The use of civil monetary penalties, woven into the fabric of many regulatory statutes as a sanction for non-compliance, has become commonplace. 13

O'Neill's contention is not novel. In Atlas Roofing Co. v. Occupational Safety and Health Review Commission, 518 F.2d 990 (5th Cir. 1975), aff'd on other grounds, 430 U.S. 442, 97 S.Ct. 1261, 51 L.Ed.2d 464 (1977), the court addressed a challenge to the constitutionality of the Occupational Safety and Health Act of 1970, 14 on grounds identical to those advanced here by O'Neill. Atlas was cited for violating that Act and was assessed a $600 civil fine. The Act provided for both civil and criminal monetary penalties; Atlas claimed...

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