Opinion
No. 14868
3-3-1953
PEOPLE v. BUILDING MAINTENANCE CONTRACTORS ASS'N Inc. et al.
Edmund G. Brown, Atty. Gen., and Clarence A. Linn, Deputy Atty. Gen., Thomas C. Lynch, Dist. Atty. of the City and County of San Francisco and Gregory Stout, Deputy Dist. Atty., San Francisco, for appellant.
PEOPLE
v.
BUILDING MAINTENANCE CONTRACTORS ASS'N Inc. et al.
March 3, 1953.
Hearing Granted April 30, 1953.
Edmund G. Brown, Atty. Gen., and Clarence A. Linn, Deputy Atty. Gen., Thomas C. Lynch, Dist. Atty. of the City and County of San Francisco and Gregory Stout, Deputy Dist. Atty., San Francisco, for appellant.
Landels & Weigel and Francis McCarty, By: Stanley A. Weigel, San Francisco, for respondent.
FRED B. WOOD, Justice.
Plaintiff appeals from an order granting a new trial after judgment had been rendered for plaintiff in an action brought by the state to enjoin alleged violations of the Cartwright Act, Bus. & Prof. Code, §§ 16700-16758.
The principal question is whether or not certain exceptions expressed in sections 16723 and 16725 of the code are constitutional. Section 16723 excepts from the operation of the statute any agreement, combination or association 'the object and purpose of which are to conduct operations at a reasonable profit or to market at a reasonable profit those products which cannot otherwise be so marketed.' Section 16725 excepts an agreement, association or combination 'the purpose and effect of which is to promote, encourage or increase competition in any trade or industry, or which are in furtherance of trade.' If these exceptions are unconstitutional or otherwise inapplicable, the question remains whether or not the stipulated facts demonstrate that the defendants formed a trust as defined in section 16720 of the code. For adequate consideration of these questions a fairly detailed statement of facts is necessary.
The defendants are Building Maintenance Contractors' Association, an unincorporated association, and the members thereof, each member being a building maintenance contractor.
The Complaint.
The complaint alleges: there is a building maintenance industry in San Francisco concerned with the operation, cleaning, painting, renovating and supplying of janitorial service for the owners or occupants of buildings who engage others to supply the requisite labor and materials. Other than the defendant association, the defendants are such persons who supply such labor and materials to buildings occupied by others. Defendants, other than the defendant association, supply all or nearly all of the labor and supplies used in the building maintenance industry in San Francisco which are supplied by contractors. Defendants, other than the association, have formed or joined the association and conspired together to create and carry out restrictions in trade and commerce. Pursuant to that conspiracy, defendants have created a monopoly and destroyed free competition in said building maintenance industry and are directly and indirectly preventing free and unrestricted competition among the defendant association members, refusing to contract with the public to furnish labor and materials except at prices fixed and agreed upon by them in advance.
The Facts as Stipulated.
The parties stipulated: (1) the sole question is whether or not the facts set forth in this stipulation constitute a violation as to plaintiff of the Cartwright Act. This stipulation sets forth the only material facts and no other or further evidence shall be introduced. Defendants shall be deemed to have filed answers generally denying all the allegations of the complaint and alleging all affirmative defenses necessary to support the materiality as a defense of any fact stipulated. The parties respectively reserve their rights to contest the materiality of any fact covered by this stipulation.
(2) The term 'building maintenance industry' means all persons, associations, firms, partnerships and/or corporations participating in the maintenance operation, cleaning, painting, renovating and supplying of janitorial service for buildings, lofts and stores in San Francisco. The terms 'maintenance contractor' and 'maintenance contractors' mean one or more persons engaged in the building maintenance industry in San Francisco, in the business of contracting, for a fixed term, as to buildings, lofts or stores located in San Francisco, to do part or all of any one or more of the following: window cleaning, janitorial work and providing elevator operators and starters, building engineers for maintaining heating equipment and for minor repairs, night watchmen, and powder room matrons. The word 'service,' whether as a noun or a verb, means contracting to do any of the work just described.
(3) In San Francisco there are 44 maintenance contractors of whom 30 are not members of defendant association. Members of defendant association employ approximately 90% of the total number of employees employed by all maintenance contractors in San Francisco and service approximately 90% of all San Francisco buildings, lofts and stores serviced by maintenance contractors.
(4) The defendants who participate in the building maintenance industry only by contracting to provide service, have, through the association, agreed that if the owner of a building who had an existing contract with any member for servicing and asked for bids from another member for the same service, the latter would report the fact to the defendant association and inquire as to the contract price then prevailing; that an investigation was then to be made by the defendant association to determine (a) whether that price was unreasonable in being too high; (b) whether the contractor under contract to service the building was doing a good job; and (c) whether the owner of the building had any reason for dispensing with the contractor, such as personal dislike or inability to get along with the contractor; and if, in the opinion of the defendant association, the price was unreasonably high or if the work was not being performed satisfactorily or if the owner had a specific reason, no matter how trivial, for dispensing with the existing contractor, then any other member of defendant association was not precluded from undertaking to get the business on such terms as such member might elect; that if, in the opinion of the defendant association, the price charged was reasonable in fact and if the work was being performed satisfactorily and if the owner was completely satisfied with the personal and business relationships between the owner and the contractor, then and only then the members were required, if they bid upon the job, to make their minimum bid higher than the existing contract by a range of percentages from 20% higher to 5% higher, varying according to the job price per month under the existing contract.
(5) 'Defendants entered into the foregoing agreement with the intent and for the object and purpose of conducting operations at a reasonable profit, of marketing at a reasonable profit products and services which could not otherwise be so marketed and of acting in furtherance of trade, and with no other intent whatever nor for any other object or purpose whatever. There is no evidence, except as stated in this stipulation, if any is stated herein, that the effect of the admitted agreement has exceeded, exceeds or will exceed the stated intentions, objects or purposes.'
(6) The entire organized labor force in the building maintenance industry in San Francisco consists of members of Building Service Employees Union, Local 87, Window Cleaners Union, Local 44, Elevator Operators and Starters Union, Local 117, and Stationary Engineers Union, Local 39, each union an affiliate of the American Federation of Labor. All of said unions have contracts establishing wages, hours, working conditions, number of men to be used, type of work to be performed, and the like. The identical contract is entered into by the unions, whether on behalf of union employees working for a building maintenance contractor or working for a building owner or operator.
Only a portion of the employed members in San Francisco of Building Service Employees Union, Local 87, work for Building Maintenance Contractors (725 to 794) as compared with the total number of employed members (2085-3534). Of a total of 190 office buildings in San Francisco, 22 are serviced by building maintenance contractors (including defendants and others) and 168 directly by owners or operators who employ members of Local 87. Of other types of buildings, the same figures in the same order are: 50 department and furniture stores, 14 and 36; 17 laundries and breweries, 3 and 14; 55 banks, 30 and 25; 4 newspapers, 1 and 3. Of buildings serviced by contractors or by owners or operators, employing members of Local 87, 24% are serviced by contractors; 76% independently of contractors. In addition, there are thousands of San Francisco buildings (exclusive of private homes, flats and the like) that are serviced neither by owners or operators who employ members of Local 87, nor by any maintenance contractor.
Building Maintenance Contractors employ but 121 of 404 members of Local 44, 165 of 965 members of Local 117, and 5 of 225 members of Local 39. Of buildings serviced by contractors or by members of these Locals respectively, contractors service less than 30% while more than 70% are serviced under direct contract with or employment of members of Local 44 wholly independently of any maintenance contractor. Like figures in respect to members of Local 117 are 17% and 83% and as to members of Local 39 they are .5% and 99.5%. In addition, there are thousands of San Francisco buildings which are serviced neither by owners or operators who employ members of Locals 44, 117 or 39, nor by any maintenance contractor.
(7) Over-all, all defendant maintenance contractors service less than 1/2 of 1% of the buildings, lofts and stores in San Francisco, exclusive of private homes, flats and the like. Said defendants service no private homes, flats or the like. Over 99 1/2% of the buildings, lots and stores in San Francisco, exclusive of private homes, flats and the like are serviced by (a) competitors of defendants, (b) owners or operators, or (c) other persons wholly independent, all and singular, of defendants, of competitors of defendants and of said unions and their members.
At the trial plaintiff objected to the consideration of any of the facts recited in paragraphs (5), (6) and (7), above, upon the ground that those facts are immaterial and do not tend to prove or disprove any matter at issue in the cause.
Findings of Fact, Conclusions of Law, Judgment, and Order For New Trial.
The court found that the facts as stipulated are true and concluded that 'the plaintiff is entitled to judgment against the defendants perpetually enjoining defendants as prayed for in the complaint,' and rendered judgment in accordance with that conclusion.
The judgment enjoined the defendants from (1) formulating, promoting, participating or combining in any undertaking, compact, plan or agreement (a) to raise, fix, adhere to or maintain prices for the furnishing of labor, material or services in the building maintenance industry or (b) to raise, fix, adhere to, maintain or bring about the use of uniform mark-ups, price differentials, allowances, discounts or terms or conditions with respect to the furnishing of such labor, materials or services, or (c) by which the contract terms or prices, or terms or prices for labor, materials or services charged by any defendant is revealed to any other person or corporation for any of the purposes hereby enjoined, and (2) creating or carrying out any restriction preventing or interfering with free competition in the building maintenance industry.
Upon motion of the defendants the court set aside the findings of fact and conclusions of law, vacated the judgment, and ordered a new trial upon the grounds that the evidence was insufficient to justify the decision and that the decision was against the law.
That order must be reversed. The decision was not against the law and the evidence was sufficient to justify the decision. We will consider first the exception expressed in section 16723.
As To the Constitutionality and Separability of the Exception Expressed In Section 16723.
The parties stipulated that the defendants entered into the agreement described in paragraph (4), above, 'for the object and purpose of conducting operations at a reasonable profit, of marketing at a reasonable profit products and services which could not otherwise be so marketed * * * and with no other intent whatever nor for any other object or purpose whatever.' That was tantamount to a stipulation that the questioned agreement was one expressly excepted by section 16723, which says that no agreement is unlawful 'the object and purpose of which are to conduct operations at a reasonable profit or to market at a reasonable profit those products which can not otherwise be so marketed.' Plaintiff suggests that the stipulation fell short of that, arguing that reasonableness as used in the statute means and is to be tested by the effect of the agreement, whereas the stipulation refers only to the mental attitude of the parties to the agreement. No such argument is logical or tenable. We are immediately concerned with the intent of the parties to the stipulation. When they lifted those words right out of section 16723, after having recited that the 'sole question to be decided is whether or not the facts stipulated herein constitute a violation * * * of the Cartwright Act,' they must have intended to use those words with precisely the meaning they have in section 16723.
This presents squarely the question of the constitutionality of section 16723. If it is constitutional, defendants have not and are not violating the act, and our inquiry is at an end.
Our analysis of this section and of the pertinent judicial decisions, convinces us that its provisions are invalid and inoperative for lack of certainty. That was the answer given in 1927 by the Supreme Court of the United States when considering a Colorado statute which in terms was a replica of our own. We have found no subsequent decision which persuades us that the court would come to a different conclusion should it again receive the identical question for consideration and decision.
Cline v. Frink Dairy Co., 274 U.S. 445, 47 S.Ct. 681, 71 L.Ed. 1146, is the 1927 decision to which we refer. The court said that the main provisions of the Colorado statute, Laws 1913, p. 613 (those which were substantially the same as our § 16720) sufficiently described the acts intended to be punished, but that a proviso excepting any agreement or association 'the object and purposes of which are to conduct operations at a reasonable profit or to market at a reasonable profit those products which cannot otherwise be so marketed' was too indefinite to furnish a standard of guilt, 274 U.S. at page 456, 47 S.Ct. at page 684. This proviso, and another with which we are not here concerned, said the court, 'make the line between lawfulness and criminality to depend upon, first, what commodities need to be handled according to the trust methods condemned in the first part of the act to enable those engaged in dealing in them to secure a reasonable profit therefrom; second, to determine what generally would be a reasonable profit for such a business; and, third, what would be a reasonable profit for the defendant under the circumstances of his particular business. * * * Such an exception in the statute leaves the whole statute without a fixed standard of guilt in an adjudication affecting the liberty of the one accused.' 274 U.S. at pages 456-457, 47 S.Ct. at page 684. The defendants in the Cline case contended that the questioned proviso was less definite and certain than the Sherman Act, 15 U.S.C.A. §§ 1-7, 15 note, which made criminal every contract and all monopolies in restraint of trade or interstate commerce, and directed attention to the fact that in Nash v. United States, 229 U.S. 373, 376, 33 S.Ct. 780, 57 L.Ed. 1232, the court had held that the Sherman Act fixed a permissible and ascertainable standard of guilt. In overruling that contention, the court in the Cline case said 'In the Nash Case we held that the common-law precedents as to what constituted an undue restraint of trade were quite specific enough to advise one engaged in interstate trade and commerce what he could and could not do under the statute', 274 U.S. at page 460, 47 S.Ct. at page 685, and referred to the review of common-law precedents which had been made in United States v. Addyston Pipe & Steel Co., 6 Cir., 85 F. 271. That review indicated that the inhibitions against restraints of trade at common law at first had no exception but that in time it became apparent to the people and the courts that it was in the interest of trade that certain covenants in restraint of trade should be enforced, and so it developed that certain types of agreements in partial restraint of trade were deemed valid. An illustrative list of such types was furnished by the court in the Addyston case: 'For the reasons given, then, covenants in partial restraint of trade are generally upheld as valid when they are agreements (1) by the seller of property or business not to compete with the buyer in such a way as to derogate from the value of the property or business sold; (2) by a retiring partner not to compete with the firm; (3) by a partner pending the partnership not to do anything to interfere, by competition or otherwise, with the business of the firm; (4) by the buyer of property not to use the same in competition with the business retained by the seller; and (5) by an assistant, servant, or agent not to compete with his master or employer after the expiration of his time of service. Before such agreements are upheld, however, the court must find that the restraints attempted thereby are reasonably necessary (1, 2, and 3) to the enjoyment by the buyer of the property, good will, or interest in the partnership bought; or (4) to the legitimate ends of the existing partnership; or (5) to the prevention of possible injury to the business of the seller from use by the buyer of the thing sold; or (6) to protection from the danger of loss to the employer's business caused by the unjust use on the part of the employe of the confidential knowledge acquired in such business.' At page 281 of 85 F.
Thus not every contract in restraint of trade was void and unenforceable at common law. Likewise, it was not every such contract which came within the penalty of the Sherman Act. It was recognized that there were incidental restraints on trade the statute was not intended to cover. This 'view was fully confirmed', said the court in the Cline case, 'in Standard Oil Company v. United States, 221 U.S. 1, 31 S.Ct. 502, 55 L.Ed. 619, and United States v. American Tobacco Company, 221 U.S. 106, 31 S.Ct. 632, 55 L.Ed. 663, where the language of the federal statute was read in the light of the common law, and in accordance with its reason, and was construed not to penalize such partial restraints of trade as at common law were not only permitted, but were promoted in the interest of the freedom of trade itself.' 274 U.S. at page 461, 47 S.Ct. at page 686. However, in respect to 'reasonableness' of price or of profit, the 'review of the many common-law precedents as to due and undue restraints of trade shows', said the court in the Cline case, 'that in only one or two cases, and those not well considered, was there left to the court or jury as a criterion of the validity of a restraint of trade the reasonableness of the prices fixed or the profit realized under it.' 274 U.S. 461, 47 S.Ct. 686.
The court, in the Addyston case, had rejected a contention that the rule of 'reasonableness' applied to the price fixed by or pursuant to a contract in restraint of trade, deeming such a standard too shifting, vague, and indeterminate. The Supreme Court had taken the same view of the matter in United States v. Trenton Potteries, 273 U.S. 392, 47 S.Ct. 377, 71 L.Ed. 700: "The aim and result of every price-fixing agreement, if effective, is the elimination of one form of competition. The power to fix prices, whether reasonably exercised or not, involves power to control the market and to fix arbitrary and unreasonable prices. The reasonable price fixed to-day may through economic and business changes become the unreasonable price of tomorrow. Once established, it may be maintained unchanged because of the absence of competition secured by the agreement for a price reasonable when fixed. Agreements which create such potential power may well be held to be in themselves unreasonable or unlawful restraints, without the necessity of minute inquiry whether a particular price is reasonable or unreasonable as fixed and without placing on the government in enforcing the Sherman law the burden of ascertaining from day to day whether it has become unreasonable through the mere variation of economic conditions. Moreover, in the absence of express legislation requiring it, we should hesitate to adopt a construction making the difference between legal and illegal conduct in the field of business relations depend upon so uncertain a test as whether prices are reasonable--a determination which can be satisfactorily made only after a complete survey of our economic organization and a choice between rival philosophies." 274 U.S. 462-463, 47 S.Ct. 686. Accordingly, the court in the Cline case concluded that 'it will not do to hold an average man to the peril of an indictment for the unwise exercise of his economic or business knowledge, involving so many factors of varying effect that neither the person to decide in advance nor the jury to try him after the fact can safely and certainly judge the result. When to a decision whether a certain amount of profit in a complicated business is reasonable is added that of determining whether detailed restriction of particular anti-trust legislation will prevent a reasonable profit in the case of a given commodity, we have an utterly impracticable standard for a jury's decision. A Legislature must fix the standard more simply and more definitely before a person must conform or a jury can act.' 274 U.S. at page 465, 47 S.Ct. at page 687.
The decision in the Cline case compels the conclusion that the provisions of section 16723 are too vague and uncertain to serve as a standard of conduct under the due process requirements of the Federal Constitution. Similarly convinced were the courts in Blake v. Paramount Pictures, D.C., 1938, 22 F.Supp. 249, 254-255 and Ward v. Auctioneers Ass'n of Southern Cal., 1944, 67 Cal.App.2d 183, 153 P.2d 765. In each of those cases the court upon the authority of the Cline case held unconstitutional a proviso added in 1909 (now section 16723) and, deeming that proviso inseparable, found the entire act unconstitutional. The fact that they were mistaken as to separability does not detract from the persuasiveness and force of their reasoning that the proviso was and is void for uncertainty.
But, say the defendants, later decisions indicate that the United States Supreme Court would now overrule the Cline case and come to a different conclusion if the same question were again presented. The decisions which they invoke do not persuade us.
In Bandini Petroleum Co. v. Superior Court, 284 U.S. 8, 52 S.Ct. 103, 104, 76 L.Ed. 136, a California statute, St.1929, p. 927, prohibiting 'the unreasonable waste of natural gas' was upheld as furnishing a sufficiently definite standard. Significantly, it appeared, the standard did not depend upon the words 'unreasonable waste' alone. Those words had reference to the power of gas to lift the oil in which it occurred and the use of that power to produce the maximum quantity of oil in proportion to the quantity of gas withdrawn. The state Supreme Court had found that, depending upon various ascertainable physical factors, each oil and gas well has a best mean gas and oil ratio in the utilization of the lifting power of the gas and the production of the greatest quantity of oil in proportion to the amount of gas used, which could be computed as to each well to a reasonable degree of certainty, see People v. Associated Oil Co., 211 Cal. 93, 107, 294 P. 717. In striking contrast, the formula used in our section 16723, 'reasonable profit,' has no such frame of reference, no means of producing certainty.
In Old Dearborn Distributing Co. v. Seagram Corp., 299 U.S. 183, 57 S.Ct. 139, 146, 81 L.Ed. 109, the court approved the expression 'fair and open competition' in the context in which it appeared. It was used in a statute, S.H.A.Ill. ch. 121 1/2, § 188 et seq., which dealt with contracts for the sale or resale of a commodity which bears the trade-mark, brand, or name of the producer 'and which is in fair and open competition with commodites of the same general class produced by others'. In such a contract the statute permitted stipulations concerning the resale price of the commodity. The court upheld the statute as designed primarily to protect the property, the good will of the producer, the price restriction being a means to that end, not an end in itself. Concerning the phrase 'fair and open competition,' the court said it 'is as definite as the phrase contained in section 5 of the Federal Trade Commission Act (15 U.S.C.A. § 45) 'unfair methods of competition,' which this court has never regarded as being fatally uncertain. [Citations.] We think the phrases complained of are sufficiently definite, considering the whole statute; and that no one need be misled as to their meaning, or need suffer by reason of any supposed uncertainty.' 299 U.S. at pages 196-197, 57 S.Ct. at page 146. Besides, as stated in one of the cases cited, the expression 'unfair competition' had a 'well-settled meaning at common law'. Federal Trade Comm. v. Raladam Co., 283 U.S. 643, 648, 51 S.Ct. 587, 590, 75 L.Ed. 1324.
In Kay v. United States, 303 U.S. 1, 58 S.Ct. 468, 472, 82 L.Ed. 607, the court found the term 'like necessary services' sufficiently definite. Quite naturally so, for those words occurred in a portion of the Home Owners' Loan Act, 12 U.S.C.A. § 1467(e), which prohibited the making of a charge in connection with a loan 'except ordinary charges authorized and required by the Corporation for services actually rendered for examination and perfecting of title, appraisal, and like necessary services.' 303 U.S. at page 3, 58 S.Ct. at page 470. 'The phrase 'like necessary services' in the section describes services which are cognate to those mentioned in the preceding clause 'for examination and perfection of title' and 'appraisal." 303 U.S. at page 9, 58 S.Ct. at page 472. We see no analogy between that and the provisions of our section 16723.
In Gorin v. United States, 312 U.S. 19, 61 S.Ct. 429, 85 L.Ed. 488, 'national defense' was deemed sufficiently certain to sustain convictions under the National Espionage Act, 50 U.S.C.A. §§ 31, 32, for unlawfully furnishing information relative to national defense. These words had acquired a historical and special meaning well enough known to enable those within their reach to apply them correctly. Said the court: '* * * the use of the words 'national defense' has given them, as here employed, a well understood connotation. They were used in the Defense Secrets Act of 1911 . The traditional concept of war as a struggle between nations is not changed by the intensity of support given to the armed forces by civilians or the extension of the combat area. National defense, the Government maintains, 'is a generic concept of broad connotations, referring to the military and naval establishments and the related activities of national preparedness.' We agree that the words 'national defense' in the Espionage Act carry that meaning. * * * The language employed appears sufficiently definite to apprise the public of prohibited activities and is consonant with due process.' 312 U.S. at page 28, 61 S.Ct. at page 434. We are unaware of any usage which has given the words 'reasonable profit' any greater specificity than they had in 1927 when the Cline case was decided.
A statute which prohibited the calling of another by an 'offensive or derisive name' Pub.Laws N.H.1926, c. 378, § 2, was upheld in Chaplinsky v. New Hampshire, 315 U.S. 568, 62 S.Ct. 766, 86 L.Ed. 1031. The state court had interpreted the statute as one designed to preserve the peace and as prohibiting only such words, uttered in a public place, "* * * as have a direct tendency to cause acts of violence by the persons to whom, individually, the remark is addressed". 315 U.S. at page 573, 62 S.Ct. at page 770. The word 'offensive' was not defined in terms of what a particular person would think. The test was what men of common intelligence would understand would be words likely to cause an average addressee to fight. 'Derisive' words were taken as coming within the purview of the statute only when they had this characteristic of plainly tending to excite the addressee to a breach of the peace. As thus limited, those words had an understandable meaning, sufficiently definite to guide a person in complying with the mandate of the statute.
Kovacs v. Cooper, 336 U.S. 77, 69 S.Ct. 448, 93 L.Ed. 513, involved an ordinance which prohibited the operation, upon a public street, of "* * * any device known as a sound truck, loud speaker or sound amplifier, or radio or phonograph with a loud speaker or sound amplifier, or any other instrument known as a calliope or any instrument of any kind or character which emits therefrom loud and raucous noises and is attached to and upon any vehicle operated or standing upon said streets or public places * * *." 336 U.S. at page 78, 69 S.Ct. at page 449. Of the words 'loud and raucous' the court said: 'While these are abstract words, they have through daily use acquired a content that conveys to any interested person a sufficiently accurate concept of what is forbidden.' 336 U.S. at page 79, 69 S.Ct. at page 449. Especially, we would add, when preceded and illustrated by such definitely descriptive words as "sound truck, loud speaker or sound amplifier, or radio or phonograph with a loud speaker or sound amplifier, or * * * calliope."
In United States v. Petrillo, 332 U.S. 1, 67 S.Ct. 1538, 1540, 91 L.Ed. 1877, the court upheld that provision of the Federal Communications Act, 47 U.S.C.A. § 506, which made it unlawful to coerce a licensee to employ in connection with the conduct of the licensee's broadcasting business any person or persons 'in excess of the number of employees needed by such licensee to perform actual services'. The court did not agree with the contention that 'persons of ordinary intelligence would be unable to know when their compulsive actions would force a person against his will to hire employees he did not need.' 332 U.S. 6, 67 S.Ct. 1541. The court recognized there were difficulties in applying such a clause: 'Of course, as respondent points out, there are many factors that might be considered in determining how many employees are needed on a job. But the same thing may be said about most questions which must be submitted to a fact-finding tribunal in order to enforce statutes. Certainly, an employer's statements as to the number of employees 'needed' is not conclusive as to that question. It, like the alleged wilfullness of a defendant, must be decided in the light of all the evidence.' 332 U.S. at page 6, 67 S.Ct. at page 1541. Respondent's argument amounted to the claim that no statutory language could meet the problem Congress had in mind. Of this the court said, 'The Constitution presents no such insuperable obstacle to legislation. We think that the language Congress used provides an adequate warning as to what conduct falls under its ban, and marks boundaries sufficiently distinct for judges and juries fairly to administer the law in accordance with the will of Congress', adding that 'it would strain the requirement for certainty in criminal law standards too near the breaking point to say that it was impossible judicially to determine whether a person knew when he was wilfully attempting to compel another to hire unneeded employees.' 332 U.S. at page 7, 67 S.Ct. at page 1542. The court apparently adopted the Government's view that Congress intended to prevent extortion, as distinct from bona fide demands relating to conditions of employment, a view which Justice Reed criticized in his dissenting opinion 332 U.S. at page 16-18, 67 S.Ct. at pages 1546-1547. As an anti-extortion statute, it does not furnish a basis for predicting that the Cline case is due soon to be overruled.
This brings us to the question of separability of the provisions of section 16723 from the rest of the Cartwright Act. There really is no question. That issue was settled in favor of separability by our Supreme Court in Speegle v. Board of Fire Underwriters, 29 Cal.2d 34, 46-48, 172 P.2d 867. Yet, defendants argue that 'the care of the Legislature in preserving the 1909 amendments in the codification process, affords strong evidence that the Legislature has refused to pass a state antitrust law sans the qualifications of § 16723 and § 16725, the more so because the Legislature has not changed its position either before or since the Speegle case.' The first part of this argument misses the purpose expressed in section 16701 of the code, that of preserving the separability, if any, of the 1909 amendments to the Cartwright Act, a purpose discussed and given effect in the Speegle case, 29 Cal.2d at page 48, 172 P.2d 867. That purpose was stated in considerable detail by the Code Commission in its 1941 report to the Governor and the Legislature, the report which accompanied the Code Commission's bill to codify the Cartwright Act as sections 16700-16758 of the Business and Professions Code. Additionally, in furtherance of that purpose, no express repeal of the original act of 1907, or of the 1909 amendment, was included in the 1941 codification bill. See Stats.1941, ch. 526, p. 1834, § 2 at p. 1847, Bus. & Prof. Code, § 30028. In other words, if it should prove impossible to preserve the separability of the 1909 amendment in the process of codification, then the codification would fail, leaving the 1907 and 1909 enactments on the books uncodified. It is difficult to see how the Legislature could more clearly and emphatically have indicated its intention to preserve the separability of the 1909 amendment.
The argument that legislative inaction since 1941 might in some way indicate the intent with which the Legislature acted in 1941 or in 1909, is utterly without foundation.
Because of the unconstitutional vagueness of Section 16723 and the separability of its provisions, the legality of defendants' conduct is to be tested by reading the statute as if it did not contain that section.
As to The Constitutionality and Separability of Exceptions Expressed in Section 16725.
An additional qualifying clause was added to the Cartwright Act in 1909, which in 1941 was carried into the Business and Professions Code as Section 16725. It declares it is not unlawful to enter into agreements or form associations or combinations 'the purpose and effect of which is to promote, encourage or increase competition in any trade or industry, or which are in furtherance of trade.' (Emphasis added.)
Defendants make no claim that the questioned agreemed promotes, encourages or increases competition. They do claim that its purpose and its effect are in furtherance of trade. That is correct as to the purpose. The parties' stipulation is that the defendants entered into the agreement 'with the intent and for the object and purpose * * * of acting in furtherance of trade.' But the stipulation stops short of saying that the agreement is one 'which is' in furtherance of trade.
Defendants emphasize this clause of the stipulation: 'There is no evidence, except as stated in this stipulation, if any is stated herein, that the effect of the admitted agreement has exceeded, exceeds, or will exceed the stated intentions, objects or purposes.' Whatever these words may mean, we do not find in them a statement that the agreement has the effect of furthering trade. To say that there is no evidence, outside the stipulation, that the effect of the agreement 'exceeds' the purpose of furthering trade, is not to say the agreement does further trade or that there is evidence that it furthers trade. Nor do we find elsewhere in the stipulation a statement or the basis for an inference that the agreement is in furtherance of trade. The restrictious which the agreement imposes may well further the trade of the individual member but not that of trade as a whole. Those restrictions seem totally inconsistent with any conceivable concept of furtherance of trade.
Defendants have suggested that this agreement operates to do no more than protect existing contracts from unjustifiable interference, and as such is commendable and lawful, citing Imperial Ice Co. v. Rossier, 18 Cal.2d 33, 112 P.2d 631. We do not see the applicability of that case, which holds that an action will lie for unjustifiably inducing a breach of contract. By the questioned agreement none of the defendants has undertaken to refrain from inducing the breach of a contract. He has, instead, agreed under certain conditions not to accept a building owner's invitation to bid except at a price appreciably higher than currently specified in a fellow member's contract which is about to expire. Each defendant assures to each of the others the continued renewal of his contractual relationships without price competition from his fellow members. Even if there were directly involved some degree of prevention of unwarranted induction of breach of contract, that would not necessarily characterize the restraint as being one in furtherance of trade.
The burden of proving that the questioned agreement comes within one of the exceptions (such as those expressed in 16723 or in section 16725) rests upon the defendants in this case, People v. H. Jevne Co., 179 Cal. 621, 178 P. 517. In the absence of evidence that the questioned agreement is 'in furtherance of trade,' defendants have failed to meet this burden and are unsuccessful in invoking the exception provided by section 16725.
However, a complete answer is not furnished by saying there is a failure of proof under any conceivable concept of 'furtherance of trade.' The question remains whether that expression furnishes a sufficiently definite and certain standard. We think not. It is virtually impossible to apply it to any of the inhibitions expressed in section 16720. For example, what 'restrictions in trade or commerce' subd. (a) of § 16720 is 'in furtherance of trade' § 16725? What limitation or reduction of production or increase of the price of a commodity, subd. (b), furthers trade? What combination to prevent competition in manufacturing, transporting, selling or purchasing a commodity, subd. (c), furthers trade? What agreement whereby the price of a commodity to consumers is controlled or established in any manner, subd. (d), is 'in furtherance of trade'? That term is too indefinite and uncertain to serve as a standard. The reasoning of the court in the Cline case applies to render this provision invalid and inoperative. This invalid exception, added in 1909, is separable from the original enactment for the same reasons that section 16723 is separable.
Is the Questioned Agreement a Trust as Defined in Section 16720?
Defendants claim they have not violated the Cartwright Act, irrespective of the validity or invalidity of sections 16723 and 16725. They say that this Act is a statutory enactment of the common law rules against restraints of trade and that California decisions demonstrate that the questioned agreement is not one of the proscribed restraints.
They rely in part upon cases concerning exclusive trading contracts, Schwalm v. Holmes, 49 Cal. 665, and Twomey v. People's Ice Co., 66 Cal. 233, 5 P. 158, and agreements by a producer with his customers for the maintenance of the price of his products. Grogan v. Chaffee, 156 Cal. 611, 105 P. 745, 27 L.R.A., N.S., 395; D. Ghirardelli Co. v. Hunsicker, 164 Cal. 355, 128 P. 1041, and Munter v. Eastman Kodak Co., 28 Cal.App. 660, 153 P. 737, cases which do not bear upon our problem. Two of their cases held certain cooperative marketing agreements valid under the 1909 amendment of the Cartwright Act, Anaheim Citrus Fruit Ass'n v. Yeoman, 51 Cal.App. 759, 197 P. 959, and Poultry Producers of Southern Cal. v. Barlow, 189 Cal. 278, 208 P. 93, but were decided prior to the rendition of the decision in the Cline case.
This leaves Herriman v. Menzies, 1896, 115 Cal. 16, 44 P. 660, 46 P. 730, 35 L.R.A. 318. It involved a contract, between several stevedoring firms at San Francisco, which provided for the fixing of prices for stevedoring services tendered by them and for the division of their profits and losses. It did not appear that the contracting parties were in the control, or anything like the control, of that business in San Francisco, to an extent to enable them to exclude competition therein, or to control the price of such labor or business. There was nothing to show that they comprised more than the most insignificant part, in number or volume of business, of those engaged in that trade in that community. The court held the contract valid,--not a monopoly, not an unreasonable restraint of trade.
Defendants claim that they too control but a small portion of the building maintenance business in San Francisco: For example, they are but 14 of the 44 contractors; all the contractors, including defendants, service but 24% of the buildings serviced by members of unions; defendants service less than .5% of the buildings, exclusive of private homes, that are serviced in San Francisco. More significant are the figures concerning defendants' position in the contracting end of the building maintenance business. That is the portion of the business that counts. It is the entire area of the business in which defendants operate and in which there is competition. Defendants have 9% of that business, whether measured by percentage of buildings serviced or by number of persons employed by defendants and by all building maintenance contractors. This fact alone makes the holding in the Menzies case inapplicable here.
Later decisions indicate that the holding in the Menzies case should not be extended beyond the facts of that case. In Endicott v. Rosenthal, 216 Cal. 721, at page 726, 16 P.2d 673, the court, quoting from an intervening decision, said: "In the Menzies Case it was held that the contract was not illegal, for it was not shown that it was designed to or did effect a control of business to an extent enabling the contracting firms to exclude competition or control the prices of the commodity." 216 Cal. at page 726, 16 P.2d at page 675. The Endicott case involved an agreement between all but one of the cleaning and dying firms in Los Angeles and Orange Counties and had for its purpose the increase of prices and the elimination of competition. The court found it a restraint upon trade prohibited by section 1673 of the Civil Code (now section 16600 of the Bus. & Prof. Code) and that the reasonableness of the prices fixed was immaterial, quoting, at pages 726 and 727 of 216 Cal., at page 673 of 16 P.2d, from Pacific Factor Co. v. Adler, 90 Cal. 110, 27 P. 36, and from United States v. Trenton Potteries Co., 273 U.S. 392, 47 S.Ct. 377, 71 L.Ed. 700. See, also, U. S. v. Socony-Vacuum Oil Co., 310 U.S. 150, 210-218, 60 S.Ct. 811, 84 L.Ed. 1129, and Kiefer-Stewart Co. v. Joseph E. Seagram & Sons, 340 U.S. 211, 213, 71 S.Ct. 259, 95 L.Ed. 219, concerning the price-fixing agreement as illega per se. In People v. Sacramento Butchers' Ass'n, 12 Cal.App. 471, 107 P. 712, it was held that an information charging a combination for the purpose of destroying full and free competition in the retail meat business need not allege that the defendants 'were in a position to control the market with respect to meat. As we have stated, the object of the statute is to prevent such combinations or conspiracies between persons engaged in a particular line of business as will destroy free competition therein, and if the purpose of such combination is to restrict trade or destory competition in the sale and purchase of 'merchandise, produce, or any commodity,' or if such combination tends to restrict trade or to prevent free competition therein, such combination is against the letter and paramount object of the law. It is, therefore, not necessary to prove, and much less to allege in the information in order to state the offense denounced by the statute, that the defendants or any of the persons referred to in the information as being connected with the alleged combination were in a position to control the market in the sale and purchase of the commodity to which the charge relates.' 12 Cal.App. at page 481-482, 107 P. at page 717. A petition for a hearing by the Supreme Court was denied. 12 Cal.App. at page 497, 107 P. 712.
Of the Cartwright Act it can be said, as has been said of the Sherman Act: "Congress [the Legislature] was dealing with competition, which it sought to protect, and monopoly, which it sought to prevent." Standard Oil Co. v. Federal Trade Comm., 340 U.S. 231, 249, 71 S.Ct. 240, 249, 95 L.Ed. 239. In Kold Kist, Inc., v. Amalgamated Meat Cutters, 99 Cal.App.2d 191, 221 P.2d 724, the court overruled a contention that only those combinations are in unlawful restraint of trade which seek to control prices and create a monopoly: 'A complete answer to this contention is found in the statute itself. Under subdivisions a, b and c of section 16720, Business and Professions Code, it is unlawful for two or more persons to combine to create or carry out restrictions in trade or commerce; to limit or reduce the production of any commodity; or to prevent competition in the sale or purchase of merchandise, produce or any commodity. These enactments are distinct from the remainder of the section which has to do with price fixing. Although price fixing and monopolistic practices tend to affect competition, production and restrictions in trade, the legislature has not limited illegal combinations in restraint of trade to those which involve price fixing or monopoly.' 99 Cal.App.2d at page 201, 221 P.2d at page 731. A petition for a hearing of this case was denied by the Supreme Court, 99 Cal.App.2d at page 204, 221 P.2d 724.
We conclude that the questioned agreement was a trust as defined by section 16720 of the Business and Professions Code.
Was The Injunctive Relief Granted By The Judgment Broader and More Extensive Than The Facts Warrant?
Defendants have suggested that in enjoining any agreement to raise, fix, maintain or bring about the use of 'uniform' mark-ups, price differentials, terms or conditions with respect to the furnishing of labor, materials or services, the judgment restrained acts not involved in the questioned agreement, acts which none of the defendants has committed or threatens to commit.
We do not so view it. The promise of each defendant to bid from 5% to 20% higher than the existing contract rate, under certain circumstances, has an aspect of uniformity which justified the use of the word 'uniform' in the judgment. Thus, if the current job price per month is $100 or less, the minimum bid must exceed it by 20%; if $101 to $250, 15%; $251 to $500, 10%; $501 to $1,000, 7 1/2%; $1,001 and up, 5%. Such a schedule is uniform in its application. Each rate of mark-up applies uniformly to all cases which come within its range. For a discussion of the principle involved, see Rainey v. Michel, 6 Cal.2d 259, 268-271, 57 P.2d 932, 105 A.L.R. 148; In re Weisberg, 215 Cal. 624, 629, 12 P.2d 446; and In re Nowak, 184 Cal. 701, 709, 195 P. 402.
Did The Superior Court Have Jurisdiction To Consider A Motion For New Trial?
Plaintiff claims that when, as here, the facts were stipulated, there was no 'trial' of an issue of fact, hence no basis for a 'new' trial. It advances this as an additional reason for reversal of the order for a new trial.
Such a process of reasoning would be sound if the stipulation set forth all the ultimate facts as well as the evidentiary facts.
Defendants claim that the stipulation omits the ultimate facts, that the court failed to find the ultimate facts, hence the judgment is not supported by the decision and the order for a new trial should be affirmed.
The position of neither party is correct. The stipulation abounds in evidentiary facts but leaves ultimate facts to be found by the court. It happens that the ultimate facts are so closely connected with questions of law as to be almost inextricably bound up with them. In such a case the finding of the ultimate facts seem necessarily implied or contained in the conclusions of law which the court put in express terms by reference to the complaint. Thus, when the court drew and declared the legal conclusion that plaintiff was entitled to a judgment enjoining the defendants from participating in any agreement to raise, fix or maintain prices or to bring about the use of uniform mark-ups, or from carrying out any restrictions in the building maintenance industry, the court thereby impliedly found that the questioned agreement is a trust as defined in section 16720 of the code.
Precedents for implying the finding of ultimate facts from the conclusions of law in such a situation as this are furnished by Stanwood v. Carson, 169 Cal. 640, 147 P. 562, and Taylor v. George, 34 Cal.2d 552, 212 P.2d 505. The Stanwood case involved the validity of certain street assessments. The trial was had upon a stipulated statement of the evidence, most of which consisted of the record of the proceedings on file in the City Clerk's office. The trial court did not in express terms find the ultimate facts. It concluded and declared, from the stipulated facts, that each of the assessments was valid. The questions presented at the trial were questions 'of fact mixed with and determinable upon more or less intricate questions of law.' 169 Cal. 646, 147 P. 564.
In the Taylor case, there was a failure to find, in express terms, whether or not a testator intended to satisfy his obligation to support his child by means of the proceeds of a policy of insurance upon the testator's life. The evidentiary facts had been stipulated. The Supreme Court stated the problem and gave its solution in these words: 'Ordinarily, the necessity for findings of fact is dispensed with where the case is submitted upon a stipulation of facts. [Citations.] It has been held, however, that where the stipulation sets forth evidentiary material only, it is proper for the trial court to make findings of the ultimate facts. [Citations.] Although all of the evidence in this case was embraced within the stipulation and exhibits attached thereto, it is at least arguable that the ultimate fact of whether the decedent intended to satisfy his obligation of support by means of the insurance benefits was a fact to be found by the trial court. But the failure to make a specific finding on that subject does not require a reversal. The judgment rendered on the stipulated facts in the defendant's favor may be deemed in itself an implied determination of the ultimate fact. Stanwood v. Carson, 169 Cal. 640, 646, 147 P. 562.' 34 Cal.2d 556, 212 P.2d 507.
We conclude that in our case there is no such defect in the findings of fact and conclusions of law as would justify an order for a new trial.
The order appealed from is reversed.
PETERS, P. J., and BRAY, J., concur. --------------- 1 Except that the buildings of the Pacific Gas & Electric Company and of the Pacific Telephone and Telegraph Company are serviced by those companies, respectively, employing members of unions of the Congress of Industrial Organizations. 2 In that report, at page 10, the following statement appears: 'The commission desires to call particular attention to its solution of a problem which arose in preparing the codification of the Cartwright Anti-Trust Act (Chapter 530, Statutes of 1907, as amended). In 1909 (Chapter 362) the act was amended, among other things, to provide certain exemptions in Section 1. 'The Federal District Court for the Southern District of California has held that these exemptions, added to the California Act in 1909, are unconstitutional and not separable and that, therefore, the entire California act is invalid. Blake v. Paramount Pictures, Inc., 1938, 22 F.Supp. 249. This decision relies on the United States Supreme Court decision which held unconstitutional a Colorado antitrust statute, containing exemptions substantially identical to those added to Section 1 of the California act in 1909, on the ground that these exemptions, a part of the Colorado statute as originally enacted, made the required standard of conduct too uncertain for a penal statute. Cline v. Frink Dairy Co., 1927, 274 U.S. 445, [47 S.Ct. 681, 71 L.Ed. 1146]. 'The Attorney General of California is of the opinion that this 1909 amendment was invalid in view of the holding in Cline v. Frink Dairy Co., never became a part of the 1907 act, hence that Section 1 of the Cartwright Act in the form in which originally enacted is valid and operative. (Opinion NS 2806, July 29, 1940). 'In the absence of a decision by the California Supreme Court, the commission has prepared a codification of the entire California act, as amended. As thus codified, without substantial change, it will, of course, have neither greater nor less validity, operation or effect than prior to codification. Business and Professions Code, Sec. 2: San Joaquin & Kings River Canal & Irr. Co. v. Stevinson, 164 Cal. 221, at pages 233 and 234 ; Sobey v. Molony, 40 Cal.App.2d 381, . However, as a special precaution, the commission has inserted a specific saving clause (Section 16701) which is specially designed to leave as it is the question of separability, so that the 1907 Cartwright Act, and the 1909 amendments thereto, will manifestly have no greater (and no less) validity, operation, or effect than if they had not been codified.'