# Petition — Forest E. Olson, Inc. v. Superior Court of California > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385006_1635%3A1 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition - **Published:** January 1, 1980 - **Citation:** 446 U.S. 935 ## Text FOREST E. OLSON, INC. AND COLDWELL, BANKER AND CO., v. SUPERIOR COURT OF THE STATE OF CALIFORNIA, COUNTY OF ORANGE (CALIFORNIA REAL PARTY IN INTEREST). TOPICAL INDEX Page I ara ed! Question Presented... paca ae Jurisdiction And The Finality Of Judgment Rule 2 1. Procedural Posture Of The Case _—_" 2 2. The Case For Jurisdiction §_—s_" ee ES A a 7 Statement Of The Case... Y@ The Constitutional Balancing oe 10 1. Petitioner's Position... 10 2. Petitioner's Concessions... ist . Ii Reasons For Granting A Hearing To Petitioner __ 12 1. The Importance And Novelty Of The Ee SS 12 2. The Impact Of Misleading Advertising i eee 14 3. TheImpact Of ThisCase. sist 15 4. Inability Of The Petitioner To Raise The Constitutional Issue And The Resulting EE -e Issue Will Reappear For Supreme Court eS er Conclusion eee ee MS cha: 17 Appendix | a ' 19 ii TABLE OF AUTHORITIES CITED Cases Page Adderly v. Florida, 385 U.S. 39 (1966) 13 Bates v. State Bar of Arizona, 433 U.S. 350 (1977) a a ie Bigelow v. Virginia, 421 U.S. 809 (1975) ‘ 13 California v. Steward, 384 U.S. 436 (1966) | 5 Construction Laborers v. Curry, 371 U.S. 542 (iveal..:...... 6 Cox Broadcasting v. Cohn, 420 U. S. 469 (1975) aie RS A Friedman v. Rogers, 99 S. Ct. 887, 47 U.S.L.W. Cho >) 13 Grayned v. City of Rockford, 408 U. S. 104 (1972) | ie Herbert v v. Lando, ane x: Ed. 2d 1 15, 99 S.Ct.___ (1979) i | oe Y. Kovacs v. Cooper, 336 U. S. 71 (1949) ee a. 13 Linnmark Associates, Inc. v. Willingboro, 431 U.S 85 (1977)... ee me Mercantile National Bank v v. . Langdeau, 371 U. S. RSIS ape ie mete ier vee Ve ~—6 Miami Herald Publishing Company v. Tornillo, 418 go RR ec eeCnete ea 6 Mills v. Alabama, 384 U.S. 214 (1966)... =e National Commission on Egg Nutrition v. F TC, 570 F.2d 157, 161-163 (7th Cir. 1977) cert. denied Dow Ww RAO TOD: ooo cdhlink. 14 New York Times v. Sullivan, 376 U.S. 254 (1963) Ja os a a North Dakota State Board of Pharmacy v. Snyder’s Drug Stores, Inc., 414 U.S. 156 (1973). 5 Ohralik v. Ohio State Bar Association, 436 U.S. REPU es aoe 12 Virginia Citizen’s Consumer Council, Inc., 425 U.S. FR TEOTEE yk eee ae 2 BS ill Statutes 28 U.S.C. § 1254(1) aa \ § 1257(2) | a § 1257(3) ya § 2103 Pd 2,2 California Business & Professions Code § 17200 =n ee o | 7 § 17206 7 § 17500 7 i 2, 7, 14 § 17536 | | . 8 Idaho Code § 48-601 to 619 AP 14 ORS 646.605-665 | 14 Virginia Code Ann. § 18.2-11(a) 14 § 128.2-216 : 14 § 59 1-68.2-5 , iz 14 United States Constitution Amendment I 2, 3, 4; 6, 10, 12, 14, 15, 16, 17 Amendment IV 3 Amendment XIV 2, 3,4 Law Journals 13 Willamette L.J., 455 (1977) 14 ee | In the Supreme Court of the United States October Term, 1979 No. FOREST E. OLSON, INC. AND COLDWELL, BANKER AND CO., Petitioners, Vv. THE PEOPLE OF THE STATE OF CALIFORNIA, Respondent. PETITION FOR A WRIT OF CERTIORARI The petitioners Forest E. Olson, Inc., and Coldwell, Banker and Company respectfully pray that a Writ of | Certiorari issue to review a peremptory writ of mandate | issued by the California Court of Appeals, which com- manded the trial court to vacate its order granting petitioners motion for summary judgment, the opinion entered August 21, 1979 and the writ issued December | 18, 1979. A timely petition for hearing to the California Supreme Court was denied on November 18, 1979. oe) OPINION BELOW The opinion of the Court of Appeals is reported at 96 Cal. App.3d 181 and appears in the appendix hereto. No opinion was rendered by the Supreme Court of the State of California in denying the petition for hearing filed by petitioners. This petition for certiorari was filed within 90 days of that date. This Court’s jurisdiction is invoked under 28 U.S.C. §§ 1254 (1), 1257 (2) and (3), and 2103. QUESTION PRESENTED Does the protection afforded commercial speech by the First and Fourteenth Amendments of the United States Constitution prohibit the State of California from punish- ing false or misleading advertising by civil monetary penalty and/or criminal fine and/or imprisonment on a showing of negligence, or do these constitutional protec- tions require the state to prove legal malice: that the advertisement was published with the knowledge by the advertiser that the advertisement was false or misleading or that the advertiser published the ad with reckless disregard for whether the advertisement was false or misleading? If the New York Times v. Sullivan malice standard is a constitutional minimum for imposition of such penalties, then the California Court of Appeals was in error in upholding the statutes under attack and the California Supreme Court was in error in denying a petition for hearing. JURISDICTION AND THE FINALITY OF JUDGMENT RULE 1. Procedural Posture of the Case The trial court in the case at bar declared California Business and Professions Code § 17500 et seq. unconsti- 3 tutional on its face because it punished the negligent publication of false or misleading advertising by monetary fine. In granting summary judgment, it dismissed the complaint filed on behalf of the Peopie of the State of California by the District Attorney of Orange County. Because the summary judgment did not dismiss the cross-complaint filed by petitioner on an unrelated search and seizure-Fourth Amendment issue, the People sought reversal of the entry of summary judgment by means of a writ of mandate ordering the trial court to reverse the order entered granting summary judgment. The Court of Appeal issued the writ, and thus upheld the constitutionality of the California statute. This opinion was filed on August 21, 1979. A timely petition for hearing to the California Supreme Court was denied on November 18, 1979. 2. The Case for Jurisdiction This court’s jurisdiction is invoked under 28 U.S.C. § 1254 (1); 1257 (2) (3), and if these jurisdictional bases are found to be absent, through a petition for certiorari under 28 U.S.C. § 2103. The case of Cox Broadcasting v. Cohn, 420 U.S. 469 (1975) is controlling as to the jurisdiction of the United States Supreme Court to issue the writ of certiorari or grant the appeal, as the case may be. In Cox, the plaintiff-appellee father of a deceased rape victim sued the defendant, defendant’s reporter and broadcaster for civil damages under a Georgia statute and under a tort theory of common law invasion of privacy. The trial court granted the father’s motion for summary judgment as to liability, rejecting the First and Fourteenth Amendment challenges to the constitutionality of the Georgia statute. The determination of damages was to await trial. On appeal, the Georgia Supreme Court held that the trial court erred in construing the Georgia statute to allow a civil cause of action for invasion of privacy and thus found it unnecessary to consider the constitutionality of the statute. The Georgia Supreme Court held that a common law tort cause of action for invasion of privacy did exist, but summary judgment was improper because there were still factual questions on the issue of liability, and the case was remanded to trial. On rehearing, the Georgia high court agreed that the First and Fourteenth Amendments, as a matter of law, did not require judgment for appellant on the common law tort theory, but it skirted the issue of whether the statute was constitutional. On rehearing, the court upheld the perti- nent Georgia statute as constitutional. Jd at 474-475. Despite the remand for trial as to both liability and damages, the United States Supreme Court upheld juris- diction. In so doing, the opinion sets forth several categories of cases in which jurisdiction is appropriate even though there are still proceedings remaining in the lower courts. The case at bench fits several of those categories. “In the first category are those cases in which there are further proceedings — even entire trials — yet to occur in the state courts but where for one reason or another the federal issue is conclusive or the outcome of further proceed- ings ordained . . . the judgment of the state court on the federal issue is deemed final.”’ Jd at 479. Accord, Mills v. Alabama, 384 U.S. 214 (1966). In the case at bench, the First Amendment issue is preordained for the purposes of trial and further appeal by the doctrines of law of the case and/or res judicata. 5 A second category discussed in Cox is also Satisfied by the case at bench. The Cox opinion states that the high court has jurisdiction: “Where the federal claim has been finally decided, with further proceedings on the merits in the state courts to .>me, but in which later review of the federal issue cannot be had, whatever the ultimate outcome of the case. Thus, in these cases, if the party seeking interim review ultimately prevails on the merits, the federal issue will be mooted; if he were to lose on the merits, however, the governing state law would not permit him again to present his federal claims for review. The court has taken jurisdic- tion in these circumstances prior to completion of the case in the state courts.” Cox, supra at 481. Accord, California v, Steward, 384 U.S. 436 (1966) (decided with Miranda v. Arizona); North Dakota State Board of Pharmacy y. Snyder's Drug Stores, Inc., 414 U.S. 156 (1973). A third category of cases in which jurisdiction has been upheld is also satisfied by the case at bench. The Cox opinion reads as follows: “Lastly, there are those situations where the federal issue has been finally decided in state courts with further proceedings pending in which the party seeking review here might prevail on the merits on non-federal grounds, thus render- ing unnecessary reveiw of the federal issue by this court, and where reversal of the state court on the federal issue would be preclusive of any further litigation on the relevant cause of action rather than merely controlling the nature and character of, or determining the admissibility of evidence in, the state proceedings still to come. In these circumstances, if a refusal immediately to review the state-court decision might serious- ly erode federal policy, the court has entertained and decided the federal issue, which itself has been finally determined by the state courts for the purposes of the state litigation.” Jd at 482- 482. (Emphasis added.) Accord Construction Laborers v. Curry, 371 U.S. 542 (1963); Mercantile National Bank v. Langdeau, 371 U.S. 555 (1963); Miami Herald Publishing Company v. Tornillo, 418 U.S. 241 (1974).! The Cox court thus concluded that the Georgia Su- preme Court’s judgment was final on the federal issue, that the proof of the elements of the state cause of action would induce liability for damages on the constitutionally pro- tected speaker, and that even though the defendants could prevail at trial on non-federal grounds, the defendants would be forced to go through a trial which should not occur if the statute was erroneously upheld. Additionally, the fact that there would remain in effect an unreviewed decision controlling state law on an important First Amendment issue would “leave unanswered . . .an important question of freedom ... under the First Amendment.” Citing Tornillo, supra at 247 n.6. ' Of particular relevance to the case at bench is the Cox discussion of Tornillo, supra at 484. The quoted portion of Tornillo concludes that it is intolerable to leave unanswered an important question of the freedom of the press under the First Amendment where to leave the question unanswered would only further harm the operation of a free press. To leave the question in this petition unanswered is to leave every commercial speaker open to suit for monetary or criminal penalty for the negligent exercise of a constitutionally protected First Amend- ment right if the advertising statutes so provide. The court concluded that it should not leave the press in Georgia operating under the shadow of civil and criminal sanctions embodied in a statute the constitutionality of which was in serious doubt, and it decided to reach the merits of the case. Cox, supra at 486. Petitioner asks that the same opportunity for 2 hearing on this important issue be granted to the commercial Speaker and that an important balancing of the First Amendment and consumer protection occur so as to clarify the right of commercial speakers under various false and misleading advertising statutes throughout this nation. THE STATUTES The following statutes codified in the California Busi- ness and Professions Code are collectively referred to as the “Statutes”’: Business and Professions § 17200 (formerly at Civ. Code § 3309 et seq.): “As used in this chapter, unfair competition Shall mean and include unlawful, unfair or fraudulent business practice and unfair, decep- tive, untrue or misleading advertising and any act prohibited by Chapter 1 (commencing with Section 17500) of Part 3 of Division 7 of the Business and Professions Code.” Business and Professions Code § 17206: ‘Any person who violates any provision of this chapter shall be liable for a civil penalty not to exceed Two Thousand Five Hundred Dol- lars ($2,500) for each violation. . .” Business and Professions Code § 17500: “It is unlawful for any person, firm, corpora- tion or association, or any employee thereof with intent directly or indirectly to dispose of real or personal property or to perform services, profes- sional or otherwise, or anything of any nature whatsoever or to induce the public to enter into any obligation relating thereto, to make or disseminate or cause to be made or disseminated before the public in this state, in any newspaper or other publication, or any advertising device, or by public outcry or proclamation or in any other manner or means whatever, any state- ment, professional or otherwise, concerning such real property or services or concerning any circumstance or matter of fact connected with the proposed performance or disposition there- of, which is untrue or misleading, or which is known, or which by the exercise of reasonable care should be known, to be untrue or mislead- ing, or for any such person, firm or corporation to so make or disseminate or cause to be so made or disseminate any such statement as part of a plan or scheme with the intent not to sell such personal property or services, professional or otherwise, so advertised at the price stated therein, or as so advertised. Any violation of the provisions of this section is a misdemeanor punishable by imprisonment in the county jail not exceeding six months, or by a fine not exceeding Two Thousand Five Hundred Dol- lars ($2,500), or by both.” (Emphasis added.) Additionally, Section 17536 of the Business and Pro- fessions Code provides for a maximum civil penalty of $2,500 for each violation. Suit may be brought by the California Attorney General, or any district attorney, county counsel or city attorney. STATEMENT OF THE CASE On eight occasions during 1974 and 1975, defendant Forest E. Olson, Inc, (hereinafater FEO) published an advertisement in Southern California newspapers which listed 406 street addresses surrounding a box which stated the following: “SOLD IN 8 DAYS OR LESS in Orange and Riverside Counties! When You List Your Home With FOREST E. OLSON BE PREPARED TO MOVE FAST! Information from Forest E. Olson’s Computer Center, 1/1/74 - 3/31/75,” The advertisement identified 406 properties as “sold in eight days or less”’, or “sold in four days or less’’, and it is on these sales that respondent bases its misleading advertising allegation. Approximately 173 of the proper- ties were tract sales of either townhouses or multilevel condominiums, Approximately 10 residences were locat- ed outside of Orange and Riverside Counties, and 51 of the residences were not sold within eight days or less, but were sold within 20 days, and in most instances within 10 days. There was no showing of actual reliance on the ad by any prospective purchaser, no showing of unjust enrich- ment by petitioners, and no showing of actual injury to any reader of the ad. The tract sales that appeared in the advertisement as sold within 4 or 8 days comprised the heart of respondent's case. These homes were subject to “master-sales con- tracts’’ with builder-developers. When an individual unit was sold, a listing agreement and deposit receipt on the unit were prepared by the tract sales person and submitted to the FEO computer prior to the advertisement ever being conceived and data requested from the FEO computer. When data for the ad was requested, the computer 10 returned the tract sales in its report of homes sold within four or eight days, and these sales then became a part of the ad, even though FEO’s authority to sell the entire tract pursuant to the mavter contract may have existed for months, In summary, the evidence before the Court showed inadvertent oversight by different people who had sepa- rate business functions and who worked in different departments in a corporate organization. There was no evidence of intentional publication of misleading advertis- ing or of reckless disregard for whether or not the advertising was misleading. At most, there was a factual issue as to whether there was a negligent publication of misleading advertising. THE CONSTITUTIONAL BALANCING 1. Petitioner’s Position Petitioner’s position is straight forward. It involves recognition of two rules of law and agreement with two judgmental conclusions. (i) A Balancing test must be applied to de- termine the correct constitutional minimum; (ii) Laws regulating a consitutionally pro- tected First Amendment right must be narrowly drawn; (iii) A balancing of the additional protection of the public afforded by allowing civil monetary penalties for the negligent publication of decep- tive advertising as compared to a requirement that civil monetary penalties and criminal penal- ties could only be imposed upon proof of malice leads to a conclusion that the additional protec- tion is minimal or nonexistent; 1] (iv) The burden imposed on commercial speech by the punishment of the negligent exercise of the right of commerical speech is substantial; therefore, the appropriate conclusion is as follows: An application of the balancing test requires that the proof of actual malice as defined in New York Times v. Sullivan, 376 U.S. 254 (1963) and its progeny be required as a constitutional minimum for punishing commercial speech with motiary and/or criminal penalties. 2. Petitioner’s Concessions Petitioners concede that the state has the right to regulate false or misleading advertising, and that the state interest in protecting the public from false and misleading advertising is a substantial state interest. Petitioners also concede that injunctive relief, both temporary and permanent, are available on a showing of negligent publication of a false or misleading advertise- ment. Petitioners additionally concede that restitutionary recovery, securing from the false or misleading advertiser any profits or other tangible gains derived from false or misleading advertising, can be recovered by the state or private individuals, by statute or by common law reme- dies, on a showing of negligence. Restitutionary recovery was not before the court in this case. It is further conceded that recovery by the state and/or members of the public of actual damages incurred by the public or the state as a result of a misleading advertisement is recoverable without proof of malice. - 12 Petitioners’ position is that only the imposition of penalties, not redressing actual injury or return of unjust enrichment, requires proof of malice as a condition precedent to the state penalizing the constitutionally protected speaker. REASONS FOR GRANTING A HEARING TO PETITIONER There are five reasons for granting a hearing in this case. They are as follows: 1. The importance and novelty of the issue; 2. The great impact of the misleading advertising Statutes across the nation; 3. The impact of this case; 4. The inability of the petitioners to raise the consti- tutional issue if the petition is denied; 5. It is unlikely that any constitutionally protected speaker will bring this issue to the United States Supreme Court. 1. The Importance and Novelty of the Issue The importance of the First Amendment as one of our most cherished freedoms is without question. New York Times v. Sullivan, 376 U.S. at 270, Herbert v. Lando, ont 60 L.Ed.2d 115, 141, 99 S.Ct.__ (1979). In this decade, this Court has carved out a protected sphere for commercial speech which protects the right of the speaker, yet recognizes the common sense conclusion that commercial speech is afforded ‘‘a limited measure of protection, commensurate with its subordinate position in the scale of the First Amendment values. . .” Ohralik v. Ohio State Bar Association, 436 U.S. 447, 456 (1978). 13 The High Court has evolved this protection to strike down statutes which, in effect, prohibit a speaker to advertise a certain type of information on the grounds that both the speaker and listener have a protected right which is not outweighed by the state’s regulatory interest. Bigelow v. Virginia, 421 U.S. 809 (1975) (criminal punishment for publishing an advertisement encouraging abortion). Virginia Citizen’s Consumer Council, Inc., 425 U.S. 748 (1976) (statute prohibits advertisement of prices for prescription drugs); Bates v. State Bar of Arizona, 433 U.S. 350 (1977) (prohibition of advertising by attorneys). In all of these cases, the content of the advertisement was of significant interest to the listener. In the case of an ordinance which prohibited “‘for sale” signs on resale of residential homes, but did not prohibit such signs on other types of property, on model homes, or in newspapers, this Court was not faced with a blanket prohibition, but was presented with a limitation on the time, place and manner of speech. Linnmark Associates, Inc. v. Willingboro, 431 U.S. 85, 93 (1977). Though this limited restraint on speech is of constitutional signifi- cance, Cf! eg. Kovacs v. Cooper, 336 U.S. 77 (1949), Adderly v. Florida, 385 U.S. 39 (1966); Grayned v. City of Rockford, 408 U.S. 104 (1972), the dual interest of the advertiser and the “reader” of the commercial speech dealing with one defined subject matter (resale of homes) was, on application of a balancing test, of greater constitu- tional weight than the compelling state interest to be served by the ordinance. In another circumstance of a time, place, and manner restriction, the prohibition of practicing optometry under a trade name was upheld based on a minimal effect on the defined content akin to an injunction. Friedman vy. Rogers, 99 S.Ct. 887, 897, 47 U.S.L.W. 4151 (1979). 14 The case at bench presents a further step in this First Amendment path. The statute challenged punishes un- limited and undefined subject matter by content if the advertisment is found to be false or misleading. It functions as far more than a prohibition of defined conduct; it operates to deter misieading advertising and to raise revenue for the state by punishing speech in which there is assumed to be no value to misleading advertising. Revenue raising and protection of the public are squarely balanced against punishment of the exercise of a protect- ed First Amendment right to which the “listener” loses little by denial of access to the prohibited content, yet the definition of the prohibited content itself is so unclear that the boundry line between punishable and permissive advertising is impossible to predict. As such, the issue is both important and unique to this Court.2 2. The Impact of Misleading Advertising Statutes The rising tide of consumer protectionist legislation in the 1960’s and early 1970’s has resulted in passage of many state statutes designed to prohibit and/or punish false and/or misleading advertising.3 Millions of citizens ?National Commission on Egg Nutrition v. FTC, 570 F.2d 157, 161-163 (7th Cir. 1977) cert. denied 439 U.S. 821 (1978) presented the issue of whether the malice standard was required as a condition precedent to the issuance of a cease and desist order. This is akin to the application of the malice standard to injunctive relief ordered after an administrative trial. Petitioners conceded that injunctive relief does not require malice. 5See e.g. California Business Profession Code § 17500 et seq.; Virginia Code Ann. § 18.2-11(a), 128.2-216, 59 1-68.2-5, Idaho Code § 48-601 to 619; ORS 646.605-665 (Oregon). According to one commentator, forty-eight states, Puerto Rico, and Guam have enacted consumer protection acts. Uranga, “Idaho and Oregon Consumer Protection Acts: Administrative Powers of the Attorneys General”., 13 Willamette L.J., 455 (1977). 15 are thus susceptible to punishment by fine and/or impris- onment under a variety of legal standards in the exercise of First Amendment rights. 3. The Impact of This Case By its denial of the petition for hearing in this case, the decision of the California Court of Appeals is the law of California. Twenty million Americans have the First Amendment right of commercial speech limited by threat of punishment by monetary and/or criminal penalty under a Statute which is constitutionally suspect. Additionally, this case stands as precedent to presuade other courts and legislatures to allow imposition of civil or criminal penalties for the negligent publication of false or misleading advertising. It stands as the view of the prestigious California courts, and the conclusion reached is of some persuasive weight. 4. Inability of The Petitioner to Raise The Con- stitutional Issue and The Resulting Prejudice If this petition for hearing is denied, petitioners will be returned to the lower court for trial. The appellate opinion will be binding as the law of the case. Petitioner will then be faced with a choice of settling the case and buying peace or incurring the expense of trial plus the following procedures: (1) a hearing on findings of fact and conclusions of law, (2) the possible require- ment of posting a bond on appeal, (3) a fruitless appeal to the court of appeals, (4) a fruitless petition for rehearing to the court of appeals, (5) a fruitless petition for hearing to the California Supreme Court, and (6) a petition for a writ of certiorari to this Court on the same First Amend- ment issue presented here. 16 If petitioners settle and buy peace, this Court is denied review of the issue. If petitioners win at trial, this Court is denied review of the issue. If petitioners lose at trial but judgment is rendered in a nominal sum, petitioners may find that the duty to their stockholders compels giving up the expenditure of further corporate resources to litigate the First Amendment issue. This Court is thus denied review of the issue. 5. It Is Unlikely That This First Amendment Issue Will Reappear For Supreme Court Review In cases involving regulation of business, a trade or labor association of the industry regulated, or a large corporate or union entity representing the industry, usual- ly challenges the regulation. It does so because the regulation affects its business. There is thus economic incentive and a “‘business need” to absorb the substantial cost associated with an appeal up several levels of courts to this Court. In misleading advertising statutes such as are at issue here, the activity punished is advertising, but the media or advertising agency involved is not the defendant in such suits. The advertiser is the victim. Though it is conceiv- able that an advertising agency or publisher could be brought into the suit by a cross-complaint for indemnity, this procedure is untested in a quasi-criminal statute such as iS at issue in the case at bench, and these cross- defendants would face a serious problem of standing to raise the First Amendment right of the advertiser-defend- ant on appeal. Secondly, most defendants in misleading advertising cases are not large corporate defendants whose advertis- 17 ing is the product of an advertising agency. The defendants are small businessmen who cannot afford to absorb the adverse publicity and the economic burdens of litigation against the resources of the state through trial, one or two appellate levels of review, and then to this Court. The course of business prudence is plain: settle on whatever terms are insisted on by the state after some discovery and negotiation. The First Amendment rights are lost in the small businessman’s attempt to avoid great cost and the time away from his business associated with resisting the litigation efforts of the state. CONCLUSION It is submitted that the best vehicle to protect the constitutionally protected right of commercial speech in the context of misleading advertising statutes is the malice standard: a threshold standard which discourages the state from filing suits which involve inadvertent errors, advertising exaggeration and puffing, yet allows the state to redress actual injury and secure restitution on a showing of negligence. It is further submitted that this case may be the only case to come to the High Court to establish the appropri- ate balance in the protection of the public from advertising deception and the protection of the First Amendment. Sixteen years ago this Court balanced the state’s right to provide a remedy for libel and the individual’ s right to seek remedial relief for libel as against the competing interest of the First Amendment. This Court stated: ‘Like insurrection, contempt, advocacy of un- lawful acts, breach of the peace, obscenity, solicitation of legal business, and the various other formulae for the repression of expression that have been challenged in this Court, libel can 18 claim no talismanic immunity from constitu- tional limitations. It must be measured by standards that satisfy the First Amendment.” New York Times v. Sullivan, 376 U.S. at 269. It is submitted that statutes punishing false and mis- leading advertising now join this list. It is respectfully petitioned that this Court set this case for hearing and issue a writ of certiorari to the Court of Appeal of the State of California, 4th Appellate District, Division 2, and that this Court order a withdrawal of the peremptory writ of mandate issued by said court com- manding the trial court to vacate its order granting Peti- tioners’ motion for summary judgment. Respectfully Submitted, SHELLY JAY SHAFRON, Coldwell Banker Legal Department 533 Fremont Avenue Los Angeles, California 90071 Counsel for Petitioners APPENDIX 19 APPENDIX The PEOPLE of the State of California, Petitioner, v. SUPERIOR COURT, ORANGE COUNTY, Respondent. FOREST E. OLSON, INC., etc., et al, Real Parties in Interest. FOURTH DISTRICT DIVISION 2 No. Civ. 21098 Aug. 21, 1979 Cecil Hicks, Dist. Atty., Michael R. Capizzi, Asst. Dist. Atty., John D. Conley and Charles D. McFarland, Deputy Dist. Attys., for petitioner. George Deukmejian, Att. Gen., Herschel T. Elkins, Asst. Atty. Gen., Ronald A. Reiter and Michael R. Botwin, Deputy Attys. Gen., for amicus curiae State of California. No appearance for respondent. Shelly Jay Shafron, Los Angeles, for real parties in interest. 20 OPINION TAMURA, Associate Justice. The central issue in this original proceeding is whether the California statutes dealing with false and misleading advertising (Bus. & Prof. Code, § 17500 et seq.) and unfair competition (Bus. & Prof. code, § 17200 et seq.) are violative of the First Amendment protection accorded to commercial speech.! 'Unless otherwise indicated all section references in this opinion are to the Business and Professions Code. Section 17500 provides: “It is unlawful for any person, firm, corporation or association, or any employee thereof with intent directly or indirectly to dispose of real or personal property or to perform services, professional or otherwise, or anything of any nature whatsoever or to induce the public to enter into any obligation relating thereto, to make or disseminate or cause to be made or disseminated before the public in this state, in any newspaper or other publication, or any advertising device, or by public outcry or proclamation, or in any other manner or means whatever, any statement, concerning such real or personal property or services, professional or otherwise, or concerning any circumstance or matter of fact connected with the proposed per- formance or disposition thereof, which is untrue or misleading, and which is known, or which by the exercise of reasonable care should be known, to be untrue or misleading, or for any such person, firm, or corporation to so make or disseminate or cause to be so made or disseminated any such statement as part of a plan or scheme with the intent not to sell such personal property or services, professional or otherwise, so advertised at the price stated therein, or as so advertised. Any violation of the provisions of this section is a misdemeanor punishable by imprisonment in the county jail not exceeding six months, or by a fine not exceeding two thousand five hundred dollars ($2,500), or by both.” Section 17200 provides: ‘* As used in this chapter, unfair competition shall mean and include unlawful, unfair or fraudulent business practice and unfair, deceptive, untrue or misleading advertising and any act prohibited by Chapter | (commencing with Section 17500) of Part 3 of Division 7 of the Business and Professions Code.” 21 The District attorney brought an action in the name of the People against Forest E. Olson, Inc., and Coldwell, Banker & Company (defendants) to enjoin and recover civil penalties for the alleged dissemination of false and deceptive newspaper advertisements in violation of the two statutes. To the extent the complaint sought recovery of the statutory civil penalties, the trial court granted defendants’ motion for summary judgment on the ground that imposition of penalties for negligent dissemination of false or misleading advertising violates the First and Fourteenth Amendments to the United States Constitu- tion and article 1, section 2 of the California Constitution and further that the provision authorizing imposition of a civil penalty not to exceed $2,500 for each violation is unconstitutional because it permits imposition of exces- sive fines. The District Attorney filed a petition for a writ of mandate to have this court review and set aside the order granting the summary judgment. We issued an alternative writ and order to show cause. The pertinent facts on which the motion for summary judgment was based may be summarized as follows: In July 1974, defendant Forest E. Olson, Inc. began running a full page advertisement in several Southern California newspapers. The advertisement consisted of a list of 406 street addresses surrounding a box containing the following message: ““SOLD IN 8 DAYS OR LESS in Orange and Riverside Counties! When you list your home with FOREST E. OLSON BE PREPARED TO MOVE FAST! Information from Forest E. Olson’s Computer Center, 1/1/74-3/31/75” The same advertisement with the same message modified to say “IN 4 DAYS OR LESS” instead of “8 DAYS OR LESS” was run on at least four occasions during 1975.2 2The advertisements appeared in the Los Angeles Times, the Orange County Register, the Anaheim Bulletin, and the Ventura Star Free Press. LL 22 Also during 1975, Forest E. Olson aired a radio advertisement over | | stations consisting of the following message played against a background of a male monotone voice reading a list of addresses from a computer readout so rapidly that the addresses could only be identified as property locations: “You are listening to the computer readout of homes sold by Forest E. Olson Realtors in no more than eight days. . . . However, some people are skeptical so realizing this, Forest E. Olson, a Coldwell Banker Company, was reluctant to release this following computer readout. . . Each of these homes was sold by Forest E. Olson Realtors in no more than four days . . . Startling information? Yes. If you doubt the authen- ticity of this computer readout, consider this; if it weren’t true, we couldn’t say it. That’s why we insist when you list your house for sale with Forest E. Olson, you'd better be prepared to move . . . fast.” Approximately 176 of the street addresses shown in the newspaper advertisements were of new tract houses, condominiums, and town houses for which Forest E. Olson, Inc. had exclusive sales contracts with builder developers. Although the sales contracts were executed long before the sales, a listing agreement bearing the date of sale was made out for each sale. The properties thus appeared to have been sold on the day they were listed. Additionally, approximately 10 of the addresses in the advertisement were outside of Orange and Riverside Counties and 51 houses on the list were not sold in either four or eight days. Forest E. Olson, Inc. explained that the appearance of the new tract sales in the advertisement was the result of inadvertence; that the advertising department had re- quested the data processing department for a list of all property sold in four days or less and had relied upon a 23 computer readout list furnished by data processing; that there had been no “formal vice presidential approval” or review of the advertisement by the company’s legal department. In short, defendants maintained that the evidence showed at most an inadvertent oversight by different people in the organization with separate business functions and not an intentional misstatement or reckless disregard of the truth. Defendants conceded, however, that the evidence presented a factual issue as to whether there was negligent dissemination of false or misleading advertising. Defendants filed a motion for summary judgment and for an order determining certain issues to be without substantial controversy. The thrust of the motion was that imposition of civil penalties for negligently disseminating false or misleading information in defendants’ commercial advertisements would violate defendants’ free speech rights guaranteed by the federal and state Constitutions; that civil penalties may be imposed only upon proof that the misstatements were made with knowledge of their falsity or in reckless disregard of the truth. Defendants also contended that under sections 175363 and 172064 3Section 17536 provides: (a) Any person who violates any provision of this chapter shall be liable for a civil penalty not to exceed two thousand five hundred dollars ($2,500) for each violation, which shall be assessed and recovered in a civil action brought in the name of the people of the State of California by the Attorney General or by any district attorney, county counsel, or city attorney in any court of competent jurisdiction. ““(b) If the action is brought by the Attorney General, one-half of the penalty collected shall be paid to the treasurer of the county in which the judgment was entered, and one-half to the State Treasurer. If brought by district attorney or county counsel, the entire amount of penalty collected shall be paid to the treasurer of the county in which the judgment was entered. If brought by a city attorney or city 24 only one violation of section 17500 and of section 17200 can occur for running a false or misleading advertisement in a single edition of a newspaper and that since publica- tion occurred only on eight occasions, the maximum liability for civil penalties would be $40,000. prosecutor, one-half of the penalty shall be paid to the treasurer of the county and one-half to the city. ““(c) If the action is brought at the request of a board within the Department of Consumer Affairs, the court shall determine the reasonable expenses incurred by the board in the investigation and prosecution of the action. ‘Before any penalty collected is paid out pursuant to subdivision (b), the amount of such reasonable expenses incurred by the board shall be paid to the State Treasurer for deposit in the special fund of the board described in Section 205. If the board has no such special fund the moneys shall be paid to the State Treasurer. ** As used in this subdivision, ‘board’ includes commission, bureau, division, and other similarly constituted agency. “‘(d) As applied to the penalties for acts in violation of Section 17530, the remedies provided by this section and Section 17534 are mutually exclusive.” 4Section 17206 provides: ‘Any person who violates any provision of this chapter shall be liable for a civil penalty not to exceed two thousand five hundred dollars ($2,500) for each violation, which shall be assessed and recovered in a civil action brought in the name of the people of the State of California by the Attorney General or by any district attorney or any city attorney of a city having a population in excess of 750,000, and, with the consent of the district attorney, by a city prosecutor in any city or city and county having a full-time city prosecutor in any court of competent jurisdiction. If brought by the Attorney General, one-half of the penalty collected shall be paid to the treasurer of the county in which the judgment was entered, and one-half of the State General fund. If brought by a district attorney, the penalty collected shall be paid to the treasurer of the county in which the judgment was entered. If brought by a city attorney or city prosecutor, one-half of the penalty collected shall be paid to the treasurer of the city in which the judgment was entered, and one-half to the treasurer of the county in which the judgment was entered.” 25 The court granted defendants’ motion, holding that section 17500 of the false advertising statute is facially unconstitutional because it permits recovery of civil penalties for negligently making false or misleading statements in an advertisement, that section 17200 of the unfair competition statute is unconstitutional as applied because it defines unlawful and unfair business practices to include a violation of section 17500 thereby permitting recovery of civil penalties under section 17206 for the negligent dissemination of false advertising, and that section 17536 is unconstitutional because it imposes excessive fines in violation of the First, Eighth and Fourteenth Amendments to the United States Constitu- tion and article I, sections 2 and 17 of the California Constitution. The court further ordered that should an appellate court hold section 17500 et seq. and section 17200 et seq. to be constitutional, civil penalties would be recoverable only on proof that defendants disseminated the advertisements with knowledge they were false or misleading or with reckless disregard for whether they were false or mislead- ing. The court further ordered that there can be but one violation of section 17500 and section 17200 for each day the advertisement appeared in a single edition of a newspaper so that the maximum civil penalties recover- able by the People would be $40,000.5 ‘The following is the text of the order granting the motion for summary judgment: “IT IS ORDERED that Defendant’s Motion for Sumntary Judgment as to the Complaint on file herein is hereby granted because § 17500 et seq. of the Business and Professions Code is void on its face and unconstitutional because said section violates the First and Fourteenth Amendments to the U.S. Constitu- tion and Article 1 § 2 of the California Constitution. “1. Section 17500 of the Business and Professions Code is unconstitutional because a civil monetary penalty may be levied 26 against a*person who negligently disseminates false or misleading information in an advertisement. It is the court’s ruling that a false advertising statute (§ 17500) may constitutionally impose civil monetary penalties only if it is limited to situations where the advertiser knows the statements to be false or misleading or where the advertiser makes the statement with reckless disregard for whether or not the advertisement is false or misleading. 2. Section 17536 of the California Business and Professions Code is unconstitutional on its face because it imposes an excessive fine in violation of the First, Eighth and Fourteenth Amendments to the United States Constitution and Article I, Section 2 and Section 17 of the California State Constitution. 3. Section 17200 of the California Business and Professions Code (formerly § 3369 of the California Civil Code) is unconstitu- tional as applied to the complaint in the instant case in that it defines an unlawful and unfair business practice to include a violation of Section 17500 of the Business and Professions Code, and because it imposes punishment by way of a civil monetary fine for the negligent publication of false or misleading advertising under the general definition of unfair competition. “IT IS FURTHER ORDERED that should § 17500 of the Business and Professions Code be held constitutional by an appellate court and § 17200 of the Business and Professions Code (formerly § 3369 of the California Civil Code) to be held by an appellate court to be constitutional as applied to the Complaint herein, this Court does hereby grant the following order to deem certain issues to be without controversy. “Issues Without Controversy “1. The First and Fourteenth Amendments to the United States Constitution and Article 1 § 2 of the Constitution of the State of California, as applied to Business and Professions Code § 17500 and § 17200 et seq. (formerly § 3369 of the Civil Code et seq.), require Plaintiff to prove that Defendant disseminated the advertisements at - issue with the knowledge that they were false or misleading or with reckless disregard for whether or not the advertisements were false or misleading, as a precondition to imposing any civil penalty. Proof by Plaintiff of a lack of the exercise of reasonable care by Defendants in the publishing of false or misleading advertising is insufficient as a matter of law to support a monetary judgment for Plaintiff. ‘2. A maximum of one violation of Business and Professions Code § 17500 and § 17200 (formerly § 3369 of the Civil Code) occurs when an advertisement appears in one day’s edition of a newspaper, a eR BATS Sardis sel Me Se alata ad ela att bo ow ee 27 [1,2] The pendency of a cross-complaint for damages for alleged violation of defendants’ constitutional rights precluded entry of a judgment on the complaint in favor of defendants. Since an order granting summary judgment is nonappealable, the People seek its review by extraordi- nary writ.6 and as such, since a maximum of eight publications occurred, a maximum of $40,000 liability exists in the case at bar. “Denial of Defense Motion for an Order Deeming an Issue Without Controversy. “The Court denied the defense motion to deem the following issue without controversy: **3. Plaintiff must prove that the Defendant violated Business and Professions Code § 17500 and § 17200 (formerly § 3369 of the Civil Code) by clear and convincing evidence. “4. This Court further finds that the issues presented by the Defendant’s Motion for Summary Judgment are issues of First Impression in this state and that the court’s ruling raises serious questions about the state’s ability to curb false and misleading advertising. This Court believes that these issues should be deter- mined by the apellate courts with all due dispatch because they are matters of widespread importance.” 6Mandamus is an appropriate means of reviewing an otherwise nonappealable order of a trial court where the issue presented is one of law and it is in the public interest to have a prompt determination of the question presented. (Brown v. Superior Court, 5 Cal.3d 509, 514-515, 96 Cal. Rptr. 584, 487 P.2d 1224; Randone v. Appellate Department, 5 Cal.3d 536, 542-543, 96 Cal. Rptr. 709, 488 P.2d 13; City of Huntington Beach v. Superior Court, 78 Cal. App.3d 333, 339, 144 Cal. Rptr. 236.) The statutes whose validity have been brought into question by the trial court’s order are the basic tools of the Attorney General and district attorneys in combating consumer fraud. Prompt resolution of the questions raised is therefore inthe public interest. By issuing an alternative writ, we necessarily deter- mined that the People have no other adequate remedy and that this is a proper case for the exercise of our original jurisdiction through the prerogative writ. (People ex rel. Younger v. County of El Dorado, 5 Cal.3d 480,492, 96 Cal. Rptr. 553, 487 P.2d 1193; City of Huntington Beach v. Superior Court, supra, 78 Cal. App.3d 333, 339, 144 Cal. Rptr. 236.) 28 The People contend that the statutes as applied in the instant case do ot offend the free speech guarantees of the United States Constitution or the state Constitution and that the trial court’s order should be set aside in its entirety. Defendants respond that the trial court correctly interpreted, defined and applied the First Amendment protection extended to commercial speech and that the petition sh-:Id therefore be denied. For reasons we shall explain, we have concluded that the statutes as applied in the case at bench do not abridge defendants’ free speech rights and further that the trial court erred in its perception of the proper method of determining the number of statutory violations of sections 17500 and 17200 for the dissemination of a false or misleading advertisement through newspapers. We have therefore concluded that a peremptory writ of mandate should issue commanding the trial court to vacate its order in its entirety. I. Before addressing the issues presented, we briefly review the statutes in question. Section 17500 is the major California legislation de- signed to protect consumers from false or deceptive advertising. It is derived from the 1915 version of the former Penal Code section 654a which in turn was based on the so-called “Printers’ Ink Model Statute” drafted in 1911 at the behest of the advertising journal of the same name.’ (Note, The Regulation of Advertising (1956) 56 Colum.L.Rev. 1019, 1058-1059; Note, Enforcing Cali- fornia’s False Advertising Law: A Guide to Adjudica- tion (1974) 25 Hastings L.J. 1105, 1106.) The “Printers’ Ink Model” made it a misdemeanor to place before the 7The ‘“‘Printer’s Ink Model,” either in its original form or as modified, has been adopted in 44 states and the District of Columbia. (Note, supra, 25 Hastings L.J. 1105, 1106, fn. 9.) 29 public any advertisement containing “any assertion, representation or statement of fact which is untrue, deceptive or misleading”; proof of intent to deceive or knowledge of the improper character or the advertisement was not required. (Note, supra, 56 Colum.L.Rev. 1019, 1058, fn. 245, 1059.) The model statute made advertisers absolutely liable for what they said in the advertisement. In adopting the “Printers’ Ink Model” in California, the Legislature added the requirement that the false or misleading character of the advertisement either be known or in the exercise of reasonable care should have been known by the advertiser. (Stats. 1915, ch. 634, pp. 1252- 1253.) Section 17500 continues to carry the same qualification; the section makes it unlawful for any person to disseminate any statement concerning the product or service advertised “which is untrue or misleading, and which is known, or which by the exercise of reasonable care should be known, to be untrue or misleading.”’ (Emphasis supplied.) The Attorney General, district attorneys, and certain other designated public legal officers are empowered to seek and obtain injunctive relief against violations of section 17500 (§ 17535) and section 17200 (§ 17203) and to recover civil penalties on behalf of the government in an amount not to exceed $2,500 for each violation of the false advertising statute (§ 17536) and for each violation of the unfair competition statute ( § 17206). A violation of the false advertising statute is also made a misdemeanor. (§ 17500). Section 17536 providing civil penalties for violation of the false advertising statute was added in 1965 (Stats. 1965, ch. 827, p. 2419) because injunctions and misde- meanor prosecutions were found to be inadequate weap- ons with which to combat false advertising. (People v. 30 Superior Court (Jayhill Corp.),9 Cal. 3d 283, 288-289, 107 Cal. Rptr. 192, 507 P.2d 1400; Note, supra 25 Hastings L.J. 1105, 1107-1108; Review of Selected 1965 Code Legislation (Cont. Ed. Bar 1965) p. 21 .) As in the case of false advertising, the injunctive remedy was found to be an ineffective deterrent against violations of the unfair competition law. (Review of Selected 1972 Cali- fornia Legislation, 4 Pac. L.J. 335, 342.) Il. In order to focus upon the precise First Amendment argument advanced by defendants, we make the following preliminary observations: [3, 4] Defendants’ advertisement was pure commer- cial speech and defendants do not contend otherwise; the advertisement did not editoralize on any political, cultur- al, social or other subject. Thus, we are not confronted with the difficult task of drawing a distinction between “talk for profit, and talk for other purposes” or of determining the degree of First Amendment protection which should be accorded speech embodying both quali- ties. (See Tribe, American Constitutional Law (1978) p. 656.) Further, defendants agree that the state has a compelling interest in protecting the public and business competitors from being victimized by false and deceptive advertising. “Protection of unwary consumers from being duped by unscrupulous sellers is an exigency of the utmost priority in contemporary society.” (Vasquez v. Superior Court, 4 Cal.3d 800, 808, 94 Cal. Rptr. 796, 484 P.2d 964, 968; Fletcher v. Security Pacific National Bank,.23 Cal.3d 442, 451, 153 Cal.Rptr. 28, 591 P.2d 51.) Defendants also concede that an injunction against dis- Semination of false and misleading commercial advertis- ing does not offend First Admentment rights of the advertiser. (People v. Columbia Research Corp., 71 31 Cal.App.3d 607, 614, 139 Cal.Rptr. 517, cert. den. 434 U.S. 904, 98 S.Ct. 302, 54 L.Ed.2d 191.) Defendants’ attack is upon the monetary sanctions authorized by section 17536 and section 17206 for negligently disseminating false or deceptive advertising. Their arguments takes the following form: First, since commercial speech is protected by the First Amendment, regulation of such speech must be accomplished by the means least likely to inhibit the exercise of the protected right; that imposition of the civil sanctions authorized by the statutes would have a chilling effect on the exercise of the protected right; and that injunctive relief, civil action by defrauded consumers or injured competitors, class actions on behalf of victimized consumers, and enforce- ment of governmental rules and regulations, state and federal, pertaining to standards of business and profes- sional practices provide adequate public and competitor protection against false or misleading advertising. Defen- dants therefore maintain that section 17500 is unconstitu- tional on its face and that section 17200 is unconstitution- al as applied. It is further their position that should sections 17500 and 17200 be determined to be constitu- tional, civil penalties may only be imposed for dissemina- tion of false advertising with knowledge of the improper character of the advertising or in reckless disregard thereof. | [5] Defendants’ contentions assume that since com- mercial speech has been brought under the protective umbrella of the First Amendment, it is perforce entitled to the same degree of protection as noncommercial speech. However, the decisions of the United States Supreme Court extending First Amendment protection to commer- cial speech dispel any such assumption. On the theory that societal interest in the free flow of commercial information if indispensable to the proper allocation of resources in a free enterprise system, the United States Supreme Court has in a series of recent decisions repudiated the notion expressed in Valentine v. Chrestensen, 316 U.S. 52, 62 S.Ct. 920, 86 L.Ed. 1262, that pure commercial speech is unprotected by the First Amendment (Bates v. State Bar of Arizona, 433 US. 350, 97 S.Ct. 2691, 53 L.Ed.2d 810; Linmark Associ- ates, Inc. v. Willingboro, 431 U.S. 85,97 S.Ct. 1614, 52 L.Ed.2d 155; Va. Pharmacy Bd. v. Va. Consumer Council, 425 U.S. 748, 96 S.Ct. 1817, 48 L.Ed.2d 346; Bigelow v. Virginia, 421 U.S. 809, 95 S.Ct. 2222, 44 L.Ed.2d 600), and has held that advertising which “‘does’ no more than propose a commercial transaction’ ” is deemed an exercise of a First Amendment right (Va. Pharmacy Bd. v. Va. Consumer Council, supra, 425 U.S. 748, 771, fn. 24, 96 S.Ct. 1817, 1830 fn. 24, 48 L.Ed. 2d 346, quoting Pittsburgh Press Co. v. Human Relations Comm’n., 413 U.S. 376, 385, 93 S.Ct. 2553, 37 L.Ed.2d 669). In extending First Amendment protec- tion to commercial speech in the seminal Va. Pharmacy Bd. case, however, the high court hastened to add that commercial speech is subject to reasonable state regula- tions and that among those which “are surely permissible”’ are restraints on false, deceptive or misleading advertis- ing. (Va. Pharmacy Bd. v. Va. Consumer Council supra, 425 U.S. 748, 770-771, 96 S.Ct. 1817, 46 L.Ed.2d 346.) The court foresaw no First Amendment impediment to the exercise of the state’s power to deal effectively with false or misleading commercial speech. “The First Amendment, as we construe it today,” said the court, ““does not prohibit the State from insuring that the stream of commercial information flow cleanly as well as freely.” ([d., at pp. 771-772, 96 S.Ct. at p. 1830; accord Friedman y. Rogers, ___U.S , 99 S.Ct. 887, 893- 894, 59 L.Ed.2d 100; Bates v. State Bar of Arizona, supra, 433 U.S. 350, 383, 97 S.Ct. 2691, 53 L.Ed.2d 810.) 33 The Supreme Court has consistently emphasized that in rejecting the notion that commercial speech is unprotect- ed, the court was not elevating commercial speech to the same level on the scale of First Amendment values it has accorded other types of speech and has cautioned that its decision dealing with more traditional noncommercial speech are not to be automatically applied to commercial speech. (Ohralik v. Ohio State Bar Assn., 436 U.S. 447, 462, fn. 20, 98 S.Ct. 1912, 56 L.Ed.2d 444; Bates v. State Bar of Arizona, supra, 433 U.S. 350, 380-381, 97 S.Ct. 2691, 53 L.Ed.2d 810; Va. Pharmacy Bad. v. Va. Consumer Council, supra, 425 U.S. 748, 771, fn. 24, 96 S.Ct. 1817, 48 L.Ed.2d 346.) Thus, in Ohralik, the court summarized its view concerning the degree of First Amendment protection it intended to extend to commer- cial speech: “In rejecting the notion that such [commer- cial] speech “‘is wholly outside the protection of the First Amendment.’ Virginia Pharmacy, 425 U.S. at 761, 96 S.Ct. 1817, 48 L.Ed.2d 346, we were careful not to hold ‘that it is wholly indifferentiable from other forms’ of speech. 425 U.S. at 771 n. 24, 96 S.Ct. 1817, 48 L.Ed.2d 346. We have not discarded the ‘common-sense’ distinc- tion between speech proposing a commercial transaction, which occurs in an area traditionally subject to govern- ment regulation, and other varieties of speech. Ibid. To require a parity of constitutional protection for commer- cial and noncommercial speech alike could invite dilution, simply by a leveling process, of the force of the Amend- ment’s guarantee with respect to the latter kind of speech. Rather than subject the First Amendment to such a devitalization, we instead have afforded commercial speech a limited measure of protection, commensurate with its subordinate position in the scale of First Amend- ment values, while allowing modes of regulation that might be impermissible in the realm of noncommercial expression.” (/d., at pp. 455-456, 98 S.Ct., at p. 1918.) 34 The high court has justified the different degree of protection accorded commercial speech as compared to other varieties of speech on the ‘“‘common-sense”’ differ- ence between them. “The truth of commercial speech, for example, may be more easily verifiable by its dissemina- tor than, let us say, news reporting or political commen- tary, in that ordinarily the advertiser seeks to disseminate information about a specific product or service that he himself provides and presumably knows more about than anyone else. Also, commercial speech may be more durable than other kinds. Since advertising is the sine qua non of commercial profits, there is little likelihood of it being chilled by proper regulations and foregone entirely. | ‘Attributes such as these, the greater objectivity and hardiness of commercial speech, may make it less neces- Sary to tolerate inaccurate statements for fear of silencing the speaker. Compare New York Times Co. y. Sullivan, supra, with Dun & Bradstreet, Inc. v. Grove, supra. They may also make it appropriate to require that a commercial message appear in such a form, or include such additional information, warnings, and disclaimers, as are necessary to prevent its being deceptive. [Citations.] They may also make inapplicable the prohibition against prior restrains. [Citations.]!” (Va. Pharmacy Bd. vy. Va. Consumer Council, supra, 425 U.S. 748,771, fn. 24, 96 S.Ct. 1817, 1830, 48 L.Ed.2d 346.) _In Justice Stewart’s concurring opinion in Va. Phar- macy Bd., he emphasized the fact that the “advertiser’s access to the truth about his product and its price substantially eliminates any danger that governmental regulation of false or misleading price or product advertis- ing will chill accurate and nondeceptive commercial expression” and that therefore there is “little need to sanction ‘some falsehood in order to protect speech that matters.’ ” (Jd., conc. opn. Stewart, J., pp. 777-778, 96 aaa ais S.Ct., p. 1833.) Justice Stewart’s view was echoed in Bates v. State Bar of Arizona, supra, 433 U.S. 350, 97 S.Ct. 2691, 53 L.Ed.2d 810, where the court said: “Since the advertiser knows his product and has a commercial interest in its dissemination, we have little worry that regulation to assure truthfulness will discour- age protected speech. [Citation.] And any concern that strict requirements for truthfulness will undesirably inhi- bit spontaneity seems inapplicable because commercial speech generally is calculated. Indeed, the public and private benefits from commercial speech derive from confidence in its accuracy and reliability. Thus, the leeway for untruthful or misleading expression that has been allowed in other contexts has little force in the commercial arena.” (/d., at p. 383,97 S.Ct., at pp. 2708- 2709.) [6-8] We conclude that a state regulation providing for the imposition of civil monetary penalties for the negligent dissemination of untruthful or misleading advertising does not offend the First Amendment. If knowledge of falsity or reckless disregard of the truth were made an essential element of proof in order to invoke the sanction, difficulty of proof would frustrate the state’s most effective weapon against consumer fraud. The injury to consumers victim- ized by false or deceptive advertising is no less when it results from negligence than when knowingly or recklessly made. The constitutional protection extended to commer- cial speech “Does not prohibit the State from insuring that the stream of commercial information flow cleanly as well as freely.” (Va, Pharmacy Bad. v. Va. Consumer Council, supra, 425 U.S. 748, 772, 96 S.Ct. 1817, 1831, 48 L.Ed.2d 346.) We hold that sections 17500 and 17200 are neither facially, nor as applied, violative of the First Amendment. 36 [9] Although the trial judge ruled that the statutes in question violated the free speech clause of article I, section 2 of the California Constitution 8 as well as the First Amendment, defendants make no contention that commercial speech enjoys greater protection under the California Constitution than it does under the First Amendment. Our Supreme Court has in certain contexts declared the free speech clause of the California Constitu- tion to be “* ‘more definitive and inclusive than the First Amendment’ ”’ (Robins y, Pruneyard Shopping Center, 23 Cal.3d 899, 908, 153 Cal. Rptr. 854.859, 592 P.2d 341, 346, quoting Wilson v, Superior Court, 13 Cal.3d 652, 658, 119 Cal. Rptr. 468, 532 P.2d 116), but there has been no pronouncement by our high court that the California Constitution affords pure commercial speech greater protection than that accorded by the First Amendment. The remaining issues concern the validity and inter- pretation of section 17536 and section 17206 providing for civil penalties of up to $2,500 for each violation of the respective statute, : [10] The decision to provide for the imposition of a monetary sanction for a violation of a regulatory statute is a matter resting well within the discretion of the Legisla- ture. A “state may impose reasonable penalties as a means of securing obedience to statutes validly enacted under the police power.” (Hale v, Morgan, 22 Cal.3d *California Constitution, article 1, section 2, provides: “Every person may freely speak, write and publish his or her sentiments on all subjects, being responsible for the abuse of this right. . A law may not restrain or abridge liberty of speech or press,” ~ a 37 388, 398, 149 Cal. Rptr. 375, 381, 584 P.2d 512, 518.) “Imposition of civil penalties has, increasingly in modern times, become a means by which legislatures implement statutory policy.” (Jd; see Developments in the Law— Corporate Crime: Regulating Corporate Behavior Through Criminal Sanctions (1979) 92 Harv.L.Rev. 1227, 1369.) The People contend that for the purpose of fixing the civil penalties recoverable under section 17536 and section 17206 the number of violations is to be determined by the number of persons to whom the misrepresentations were made, citing People v. Superior Court (Jayhill Corp.), supra, 9 Cal.3d 283, 107 Cal. Rptr. 192, 507 P.2d 1400, and People v. Bestline Products, Inc., 61 Cal. App.3d 879, 132 Cal. Rptr. 767. In the case of a false newspaper advertisement, it is urged that the circulation of the newspaper should be the measure of the number of violations, The trial court ruled that the People’s interpretation of section 17536 would render it facially unconstitutional as authorizing the imposition of excessive penalties. Accord- ingly, the court determined that if the statute is to be upheld, each appearance of an advertisement in a single edition of a newspaper can constitute but a single violation of section 17500 and of section 17200 for which a maximum penalty of $5,000 may be imposed. Since the advertisement appeared in newspapers on eight occa- sions, the court ruled that the maximum penalties recov- erable would be $40,000. The People contend that the trial court’s interpretation is in defiance of the rule established by People v. Superior Court (Jayhill Corp.), supra, andPeople v. Bestline Products, Inc., supra. People v.. Superior Court (Jayhill Corp.), supra, 9 Cal.3d 283, 107 Cal. Rptr. 192, 507 P.2d 1400, involved 38 door-to-door solicitation by book sellers. The Attorney General contended that each misrepresentation consti- tuted a separate violation subject to the maximum $2,500 penalty. The Supreme Court rejected the contention noting that since not less than 25 misrepresentations were alleged to have been made to each prospect, under the Attorney General’s theory defendants could be liable for $62,500 for each person solicited. The court declared that “it is unreasonable to assume that the Legislature in- tended to impose a penalty of this magnitude for the solicitation of one potential customer. Rather, we believe the Legislature intended that the number of violations is to be determined by the number of persons to whom the misrepresentations were made, and not by the number of Separately identifiable misrepresentations involved. Thus, regardless of how many misrepresentations were allegedly made to any one potential customer, the penalty may not exceed $2,500 for each customer solicited by a defendant.” (/d., at p. 289, 107 Cal. Rptr., at p. 196, 507 P.2d, at p. 1404).9 People v. Bestline Products, Inc., supra, 61 Cal. App.3d 879, 132 Cal. Rptr. 767, also relied upon by the People, involved false representations made in connection with a marketing scheme for the sale of household cleaning products. The court found that some 10,000 distributors attended meetings at which misrepresentations were made and that 3,000 of them responded by becoming distribu- tors and paying $3,000 each for merchandise. The trial court imposed a civil penalty of one million dollars against the corporate defendants and $500,000 against five in ‘viduals. On appeal, the reviewing court held that while * The “‘per victim” rather than a “per culpable statement”’ basis was also approved in People v. Witzerman, 29 Cal. App.3d 169, 180, 105 as a 284, as the most reasonable interpretation of section NAM es 39 the Jayhill court may not have intended to establish a test for determining the number of violations of section 17500 under all circumstances, it was not unreasonable to find the corporate defendants guilty of at least 3,000 violations and to impose a civil penalty of approximately $330 per violation. Considering the fact that the $3,000 each for a total of nine million dollars, the court held that the penalty was entirely reasonable. The People maintain that/ayhill stands for the proposi- tion that the number of violations is to be determined by the number of persons to whom the representations were made so that the number of violations resulting from a false advertisement in a newspaper may theoretically be equated with the circulation of the paper. As the Bestline Products court indicated, it is unlikely that Jayhill intended to establish a test for determining the number of violations applicable to all situations. (People v. Bestline Products, Inc., supra, 61 Cal. App.3d 879, 923, 132 Cal. Rptr. 767.) Jayhill certainly does not suggest use of the newspaper circulation as the number of violations for false advertising in a newspaper. If the People’s theory of determining the number of violations were applied in the case at bench, a false advertisement published in the Los Angeles Times which has a circulation in excess of one million could result in more than one million violations for each edition with a potential civil penalty in excess of two and a half billion dollars under edch statute. In keeping with the observa- tions of the Supreme Court in People v. Superior Court (Jayhill Corp.), supra, 9 Cal.3d 282, 289, 107 Cal. Rptr. 192, 507 P.2d 1400, it is “‘unreasonable”’ to assume that the Legislature contemplated penalties of that magnitude for a false advertisement in a single edition of a newspaper. To so interpret the statute would rend it violative of the due process prohibition against “‘oppressive’’ or “‘unreason- 40 able’ statutory penalties. (Hale v. Morgan, supra, 22 Cal.3d 388, 399, 149 Cal. Rptr. 375, 584 P.2d 512.) Common sense tells us that every newspaper subscriber does not read all of the advertisements published in the paper and could hardly be termed “‘a person solicited” in the sense of one personally solicited by a door-to-door salespersons. [11, 12] At the same time, however, we cannot agree with the trial court that dissemination of a false or deceptive advertisement through a single edition of a newspaper can constitute but one violation of each statute as a matter of law. We believe a reasonable interpretation of the statute in the context of a newspaper advertisement would be that a single publication constitutes a minimum of one violation with as many additional violations as there are persons who read the advertisement or who responded to the advertisement by purchasing the adver- tised product or service or by making inquiries concerning such product or service. Violations so calculated would be reasonably related to the gain or the opportunity for gain achieved by the dissemination of the untruthful or decep- tive advertisement. While the method by which the number of violations may be proved is not before us, it would appear that it might well include expert testimony and circumstantial evidence. We do not see the difficulty of proof to be so onerous as to undermine the effectiveness of the civil monetary penalty as an enforcement tool. [13,14] The People say that in arguing that the number of violations could be based upon the circulation of the newspaper, it is not suggesting that the court must so calculate the number of violations but only that it is a theoretical possibility. It is urged that the court would in any event only be empowered to impose a reasonable _ penalty. The question before us, however, is not the reasonableness of the penalty imposed, but the interpreta- | Oa re EES Ble as We ct iy eh nla 4] tion to be placed on the term “each violation’’ in the context of a newspaper advertisement. Even under our interpretation of the statute, the trial court must manifestly act reasonably in light of all pertinent factors including the kind of misrepresentations or deceptions, whether they were intentionally made or the result of negligence, the circulation of the newspaper, the nature and extent of the public injury, and the size and wealth of the advertising enterprise. DISPOSITION Let a peremptoryy writ of mandate issue commanding the trial court to vacate its ““Order granting defendants’ motion for summary judgment and in the alternative determining issues without controversy” and to take further proceedings in the case consistent with the views herein expressed. GARDNER, P. J., and MORRIS, J., concur. EE ee --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385006_1635%3A1. Public record. Not legal advice.