*1 2, Argued and submitted June 23, July and remanded reversed 3, rehearing September petition for denied REDDEN, ex STATE rel Petitioner, FABRICS, INC., DISCOUNT Respondent. 26874)
(NO. A7703-03602, CA SC
376-a Sten, Erik General, G. Assistant Attorney Port- land, argued the cause for him petitioner. With on briefs Redden, General, were James A. Attorney and Barrie, General, Walter L. Solicitor Salem.
R. Alan Wight, Portland, argued cause for respondent. Miller, With him on the brief was Ander- son, Nash, Wiener, Yerke & Portland. Denecke,
Before Justice, Howell, Tongue, Chief Lent, Peterson, Linde and Justices.
TONGUE, J.
376-b
377 TONGUE, J.
This brought by case involves a civil suit defendant, Attorney state Discount against General Fabrics, Inc., for alleged Oregon’s violations Unlaw- (UTPA), ful Trade et seq. Practices Act ORS 646.605 The suit jury was tried in circuit court before which returned a special ap- for defendant. Plaintiff verdict pealed from the resulting decree.
Plaintiff’s sole assignment of error is trial court erred in its instruction to the evidence of alleged "wilful” the defendant conduct in violation of the Unlawful Trade Practices Oregon Act distinguished "must clear and convincing, as from a mere preponderance The of the evidence.” of Appeals Court affirmed opinion. without App (1980).
Defendant 61 operates a chain of retail fabric stores covering six western states and British Colum bia. October of an for the investigator Con sumer Protection Oregon Department Division of Justice purchased samples twelve of various fabrics from three of defendant’s stores located the Port land metropolitan area. Seven these fabrics were labeled wool; as containing one percent labeled percent wool; and four were labeled "wool blend.” The actual wool content varied between percent and 83 percent.1 1 Store on Label Actual Wool Location Fabric Board Content (1) Oswego Lake 80% Wool 16% (2) Oswego Lake Wool Blend 15% (3) Oswego Lake 100% Wool 83% (4) Oswego Lake 100% Wool 17% (5) Oswego Lake 100% Wool 29% (6) Sandy Blvd. 100% Wool 29% (Portland)
(7) Sandy Blvd. Wool Blend 9% (8) Sandy Blvd. Wool Blend 52% *5 378 County in Multnomah
The state filed suit Court, of the Unlaw alleging Circuit twelve violations and incom ful Trade Practices in that "the false Act of fabric offered for of the boards plete descriptions by defend sale and the practice misrepresentations 646.608(l)(e) and (g).”2 ant were violation of ORS sought a decree By its first cause of the state suit $25,000 for ordering penalty defendant a civil pay the cause of By each of twelve its second violations.3 defendant enjoining suit the state decree sought a statute, ordering defend from further violations the had pur ant who to make restitution to consumers fabrics, of reasonable chased mislabeled and an award attorney fees.4 (9) Gateway 17% 100% Wool Shopping Center (10) Gateway 29% 100% Wool
(11) Gateway 20% 100% Wool (12) Gateway 31% Blend Wool 646.608(1) part: ORS states in person practice engages when in the course of "A person’s in an unlawful business, person: occupation or vocation * * * * "(e) estate, sponsor- goods have Represents services that or real benefits, uses, quantities characteristics, ingredients,
ship, approval, sponsorship, person qualities they a has a or do have or that not affiliation, status, that he does approval, qualification, connection or have; not
* sfc sH [*] estate, particu- goods are of "(g) Represents or services that real goods standard, are of a grade, or quality, or that real estate lar or * * another; model, style they particular are of or if 646.642(3) ORS states: 646.632, brought if the court finds that "In suit under ORS method, practice wilfully wilfully or person using act is used a or has 646.608, prosecuting attor- by or declared unlawful ney, ORS 646.606 state, court, may recover, upon petition on behalf of $25,000 per exceeding penalty court of civil to be set violation.” 646.632(1) provides: ORS probable believe attorney has cause to prosecuting "Whenever in, engage in, in an person engaging engaged is about to or that a is has A the state’s jury was to hear first impaneled cause of suit: liability of defendant’s for a question ***5 646.642(3) penalty.* civil ORS the state provides may recover finding such a civil that "a penalty upon method, person wilfully used a using wilfully or has act practice ORS declared unlawful 646.607 or ” * * * added). 646.605(9) 646.608 (Emphasis provides "a wilful occurs when the per violation son have committing the violation knew or should known that his conduct a violation.” (Emphasis added)
At trial defendant did not contest the evidence *6 by offered the state that identified the actual percent- in age wool purchased by twelve of fabric pieces Instead, the Consumer inspector. Protection Division nearly all of evidence the state and presented by by defendant went to the whether defendant question "knew or should have the labels on known” fabrics were incorrect.
It appears from the record manufac- ture of the fabrics in involves involved this case vari- ous and steps often several different companies. practice, may bring
unlawful trade he suit in the name of the State of Oregon appropriate person engaging in the from court to restrain such alleged practice.” in the unlawful trade 646.632(8) provides part: in may attorney prevailing "The court award reasonable fees to the *” * * party brought in a suit under this section. provides: ORS 646.636 may judgments may 'The court make such additional orders or as necessary any money any person property,
be to restore to in interest or personal, any by practice real deprived means of which he was 646.608, may declared to be unlawful in or as ORS 646.607 or necessary practices.” to insure trade cessation of unlawful complaint designated equity.” The as a "suit in this case was jury right Defendant demanded a trial as a matter of constitutional on the suit, state, sought impose penalty. first cause of which a civil The as to trial, plaintiff, jury conceding right without waived defendant’s to a its right jury. to have the cause of suit before the court without That tried jury cause of suit was then in the same manner as in an tried before a law, adopted action at and the verdict of the as its court then finding of fact on that cause of suit. by dyeing begin goods,” "grey
Fabrics followed goods” "grey finishing. The manufacturer 68c) (15 by identify by required to federal law USC tag percentage content. label or of wool "guaran- goods will of finished
Distributors they Defend- are as labeled. tee” that the fabrics sell sup- normally requested "guarantees” from its ant case, pliers. purchasing in this involved In fabrics requested however, such had defendant "guarantees.” September Bert, the owner of
In June Oswego, shop to defend- went another fabric Lake samples Owego purchased three ant’s Lake store and percent ran a "bum She fabric labeled wool. fabrics and deter- test” and "bleach test” on these percent they then wool. She about 50 mined were Division. October notified Consumer Protection by accompanied Bert, investigators, Ms. its one of Oswego store. Ms. Bert went defendant’s Lake thought con- "feel” that she selected tained investigator six fabrics on the label. The less indicated wool than was sample purchased of each. then investigator of defend- The two also went unaccompanied area, ant’s other stores in the Portland purchased he additional Ms. Bert. At stores those *7 samples, purchased duplicates at the some of those thought by Oswego he "feel” store, Lake others that might be mislabeled. testimony by other wit-
The state offered in the fabrics that in the least some of nesses case of at by they easy question, fairly "feel” that it was tell further, this could be that and, not 100% wool were (burning by burning sample wool emits a determined strong a odor) (the by placing sample in wool bleach or a fibers). leaving dissolve, man-made fibers the testimony of its em- the Defendant offered large ployees handles to the of that defendant effect upon fabric; labels fur- it had relied volume that further, and, that by nished reliable manufacturers very difficult. determining by wool content "feel” (At by trial Ms. cross-examination Bert was asked on of wool cloth as samples the defense to identify several She blends. demon- being either 100%wool or wool so.) in great difficulty doing strated to the jury. Two submitted questions were fabrics, First, as whether to each of the twelve Second, if misre- misrepresentation had occurred. occurred, had did defendant know presentation As should it have misrepresentation? known of such first that the court instructed question, "by preponderance the state’s burden of proof was however, the evidence.” As to the second question, court instructed the jury: count, a little
"On the second the instruction is bit alleged different because it conduct on behalf wilful in that case must defendant. And the evidence and from a convincing, distinguished clear mere preponderance of evidence.”
By a in to these special response ques- verdict tions, the had been jury found that misrepresentations eight made the defendant twelve selling fabrics but that eight misrepresentations none of those (i.e. "wilful,” did not had been defendant know nor it misrepresentations). should have known of such Findings
The its of Facts court then entered and the verdict incorporating Conclusions of Law of suit and favor of the first cause defendant on the injunction, for an dismissing the second cause of suit restitution and fees. attorney to the stated, appealed
As the state previously error: assignment Court of Appeals, urging single jury instructing "The trial court erred by a clear its case plaintiff required to establish convincing burden.” in- contends response, defendant and, proper, it struction was if was proper error was not prejudicial. *8 proof degree or proper
I. The
standard
of
17.250(5)
ORS
provides:
* *
"*
the affirmation
in
cases
civil
the evidence is
proved,
be
and when
issue shall
according to the
be
contradictory,
finding
shall
criminal cases
evidence; that
in
preponderance of
doubt;
reasonable
beyond a
guilt shall be established
* *
added)
*.” (Emphasis
Act
Practices
Trade
Unlawful
Oregon’s
(UTPA)
protection
for
statute
comprehensive
is
and private
public
for both
provides
consumers and
is
instances
it
In both
of its provisions.6
enforcement
such enforce
intended that
legislature
clear that
of civil remedies
the use
through
ment be obtained
sanctions.7
rather
than criminal
however,
respect
to the
silent,
with
The act is
Thus, the
proceedings.
in such
degree
proof required
"preponderance
is
whether
question
presented
17.250(5)
in ORS
as provided
evidence” standard
in de-
particularly
in such
apply
proceedings,
should
conduct was
defendant’s
whether
ciding
question
or
degree
standard
"wilful,”
higher
or
whether
in
that question
deciding
in
should be
proof
required
such cases.
Michael, 214
513,
646.636, of an penalties wilful violations and to seek civil for and provisions of ORS 646.607 voluntary compliance agreement, or ORS 646.642. 646.608. seeking actual may 646.638 parties under ORS Private initiate suit damages. $200, punitive greater, damages or whichever "fine.” penalty,” rather than a ORS provides for a "civil ORS 646.642 may bring attorneys suit provides prosecuting 646.632 state provides injunction. 646.636 the state to seek an name of may necessary judgments be may or additional orders court "make such * * moneys property *.” any person in interest to restore 17.250(5) not be should
"Our treatment of ORS instruction an to mean that in civil cases taken only is the of the evidence preponderance terms of proved charge. an issue must permissible When *9 stat- so an instruction convincing clear and evidence 17.250(5). Thus ing does not run counter to is proof of fraud, higher degree a where the issue is added) necessary.” (Emphasis 527): (at And, further, proof of re- ordinary degree "In the civil cases evidence; in some
quired preponderance is a the of the of cases, involving issue types of such as those convincing’ fraud, many 'clear and require courts * * added) evidence; (Emphasis of Thus, evidence” while the "preponderance cases, an exception standard is the rule in most civil that in civil cases based standard has required been v. The See, e.g., Barkins common law fraud. upon 222, 224, P2d Co., 465 696 Stuyvesant Ins. 255 Or (1970). when, in proceedings
Defendant that contends UTPA, of sought requires proof under the remedy "wilfulness,” must be required of degree proof "clear had "these same alle- and because convincing” goods without gations been made a of purchaser statute, have reference to the case would the Oregon been for under the common law.” one fraud and deceit Thus, defendant, legislature when according silent as to the fraud, codifies but is common law should degree proof assumption of required, the common law legislature intended degree proof convincing” rule and requiring "clear should apply. disagree. We 341, Stanwood, 278 Or 563
In Wolverton v. (1977), 709, P2d P2d 755 reh. den. 278 Or (at 713): this court said are distinct fraud
"The elements law of common cause of action separate and from the elements Act, and a viola- under Unlawful Trade Practices easily tion shown.” Act more The fraud, elements of common law as stated this court in McAlister, 125, 128, Rice v. 268 Or P2d (1974), are: "* * * (1) (2) (3) representation; falsity; its its (4) materiality; the speaker’s knowledge falsity itsof (5) ignorance truth; of its intent that it his should be acted on by person and in the manner reason- (6) ably contemplated; ignorance the bearer’s of its (7) (8)
falsity; truth; his reliance on its his right to (9) thereon; rely and consequent proximate his injury.”
A review of the UTPA reveals that not all of these elements are required order to recover under the act. For example, the element reliance is notably different. Francis, 593, 598-99, Sanders v. this court considered whether reliance was a necessary element to a private action 646.638(1). under ORS That section requires *10 private party has an suffered ascertainable loss "as result wilful use or employment by another person of a method or practice declared unlawful ORS by * *,” 646.608* before such party may bring a UTPA suit. This court that determined whether reliance was a necessary element the depended upon type of viola- alleged tion and that reliance was not required in Thus, nondisclosure cases. reliance may be an element aof private suit under cause of ORS 646.638(1) because of requirement that the loss be the "result of” event, wilful conduct. In no such requirement that a loss be the "result” of wilful con- when, duct exists case, this brought by suit is state under ORS 646.632 when a civil penalty is 646.642(3). sought under ORS addition, the element of scienter as re- quired an action fraud for common law is not required by UTPA. In v. Wagy, 441, Horner 173 Or P2d 146 92 this it court considered whether was error to instruct a jury representations could constitute fraud though "even the defendant did not know whether such were representations true or 459): (at false.” This court stated
385 sci- to the doctrine "This court is committed fraud, imputable is enter, as an element actionable igno- by conscious attended only when a statement to, falsity or its truth of, or reckless rance indifference omitted). (citation it; making part on of the one have which we the instruction language The by mean quoted could have been taken though even finding that a of fraud authorized was negligently, with- made misrepresentations were true or false.” knowing they were out whether by be "attended the statement requirement This to, its indifference of, ignorance conscious or reckless in Amort v. truth or further falsity” explained (1955) at 287: Tupper, words, of material "In other a definite statement not know state- fact made does party who for true, grounds ment to 'no reasonable be and has will, false, true, if the same believing it to have positive- legal party as a what the effect statement of Jurispru- ly Pomeroy’s Equity to be untrue.’ knows dence, ed, 479, § 884a.” 376, 379, 541 P2d See Or also Bausch v. Myers, (1975). 646.642(3) contrast, permits
By
ORS
defendant
"knew
of a
if
imposition
penalty
civil
a violation.”
conduct was
should have known that his
646.605(9).
statute
Thus,
of that
under
the terms
negli-
made
misrepresentations
defendant
is liable for
it
attended
either
gently, without evidence that was
to its
indifference
*11
conscious
or reckless
ignorance
that a misrepresen-
truth
falsity,
whereas evidence
in an ac-
insufficient
was made
is
negligently
tation
words, the term
In
tion for common
fraud.
other
law
646.605(9),
no
"wilful,”
requires
defined
ORS
a defendant
more than
of
proof
ordinary negligence
known,
that a
have
in
it should
knowing,
not
when
not true.
by him was
representation made
In a
ordinary
cause of
for
negligence
action
degree
or standard
is a
proof
"prepon
of
required
derance of the evidence.” In our
opinion,
same
degree or standard of
in a
proof
proceeding
is required
under
the UTPA in view of the
of
provisions
ORS
646.605(9), and we
proceed
decline to extend to such
ings
more rigorous degree or standard of proof
required
an action for common law fraud.8
Defendant
also contends
that because the
statute
authorizes
the state to seek a severe "civil
($25,000
penalty”
per
646.642(3)),
violation
per
this suit
suit,”
cannot be characterized as a "civil
but
rather
is in the nature
a criminal prosecution,
requiring that
the state
its case
prove
beyond
reason
able doubt.
In
of this
support
contention defendant
relies on
Ct.,
Brown v.
County
Multnomah
Dist.
280 Or
95,
Defendant’s on reliance Brown is misplaced. In Brown this court considered several factors other than fine, the severity of the including "* * * the secondary in case of nonpay- sanctions
ment, the relationship
major
of DUII to other
traffic
offenses, the
legislative
emphasize
evident
desire to
facilitating
seriousness of this offense while
its
punishment, and the
criminal
retention of
* *
law en-
procedures
forcement
387 in actions present are not Most of these factors also noted This court under the UTPA. brought clas- the criminal retained the legislature Brown of DUII charge subsequent sification for a second and five years. within addition, specifically in Brown
In the court (at 104) noted that: $1,000 driving fine for proves
"It little about larger that much the intoxicants under influence of enterprises against civil business penalties are levied in the course of regulations for violations of various by ordi- payable with fines business. We deal here pur- nary to the individuals for misconduct unrelated * * profitable activity suit aof cases, in UTPA on The civil applicable penalty "in hand, to committed only the other activities applies business, or occupa course of the vocation person’s * * *.” tion and 646.608.9 646.607 reasons, the trial court For hold that these we it that because jury erred when instructed in this suit "alleged second "count” of the complaint * * * the on the defendant wilful conduct behalf of ("count”) convinc evidence on that be clear and must of ing, distinguished preponderance from a mere the evidence.”10 9 (1975), 2178, 45 454, 95 Hoffman, 2d LEd In Muniz 422 US S Ct $10,000 imposed against Supreme
the U.S. held fine could Court injunction temporary notwith labor union a court for violation of by jury standing right guarantee to trial in a Sixth of a Amendment prosecution. criminal Inc., 414, 421 Company, F2d See United v. Williams also States J.B. (2d 1974). Cir jury addition, question of which contends that defendant proper the trial court’s rendered moot instruction was in this case was defendant, according injunction. injunction, is a to issue An refusal an prerequisite imposition penalty. contention is without This of a civil penalty clearly provides under one of for a civil merit. ORS 646.642 injunction, a of an circumstances: violation of the terms three a wilful voluntary compliance, provisions violation wilful an‘assurance by ORS practice 646.607 act declared unlawful or a wilful violation an or 646.608. II. The prejudicial the trial court’s error. effect of
This court has held on several occasions that when error committed in the trial of civil as well as criminal cases an appellate court ordinarily pre will or "deem” sume that such error was to the prejudicial party against whom it was committed. See Elam v. Soares, 93, 102-03, the cases cited stated, therein. As the trial previously court erred this case in instructing «* * * *13 in the evidence that case must be clear and convincing as distinguished from a preponder mere ance the evidence.” Hekimian,
Defendant cites Medak as authority for its contention that any such error was rather than prejudi- harmless cial. In that case this court considered the following instruction:
"The defendants must establish their affirmative by evidence, preponderance defenses except of the for estoppel. the issues fraud require and These preponderance evidence, more than mere and clear, by must be established convincing and satisfac- added) tory evidence.” (Emphasis (at 46) The court stated that the instruction although was incorrect as to estoppel,
"* * * we doubt that this fine distinction resulted therefore, in prejudice rights, to and defendants’ 19.125(2), under ORS for refuse to reverse this reason.”
While the conclusion in the error Medak in in the instruction that case was prejudicial was not case, under appropriate the facts of that it does not that similar follow errors in instructions are likewise Rather, not in all in prejudicial circumstances. deter whether an error mining prejudi in an instruction cial, that error must light be viewed in the evidence to be considered in its of that jury application instruction. in this case satisfies record review of the
Our from which evidence that there was sufficient us by preponderance of properly found could have "wilfully” violated that defendant the evidence 646.608(l)(e) (g) its in that provisions and of ORS employees known” have or should "knew incorrect, so were of the fabrics on least some labels at provisions of the as to constitute violation negli- was words, defendant that the statute —in other knowing gent incorrect. were that the labels testimony of the That evidence included investigator June Consumer Protection Division by "feel,” select, four Bert that Ms. Bert was able Oswego that con store defendant’s Lake fabrics from although percent labeled wool, less tained than investigator percent addition, the was "100 wool.” independently "feel,” without Ms. also able to select of defend assistance, from one Bert’s another fabric contain labeled as other stores that was likewise ant’s ing percent when, fact, wool content wool much lower.11 during
Although indicates the record was able Bert, the defense cross examination of Ms. *14 consistently identify not demonstrate that she could jury by "feel,” the was the wool content of fabrics investigator were to find that both she and entitled able by identify, "feel,” that were inaccu- to fabrics rately in defendant’s on sale labeled and that were stores. testimony
Further, the state offered Kooning, another firm director of Mr. an officer and by tell that he could that dealt in fabrics. He testified question that were "feel” that of the seven fabrics in obviously percent wool, three were labeled as percent his He testified wool. further by investigator purchased at the other stores were Other fabrics by Bert at the Lake duplicates Ms. "wool blends” and of fabrics selected Oswego store. accepted business he would not have the manufactur- expect er’s label on those fabrics and that he would his employees reject to likewise those fabrics and to con- Kooning duct a "bum test.” Mr. also testified that he preferred buy companies to from that have a continu- ing guarantee filed with the Federal Trade Commis- sion.
Finally, testimony the state offered the of two pres- witnesses, adverse ident, Galitzki, Bernard defendant’s Galitzki, and Pearl defendant’s executive vice president, although who testified that defendant nor- mally guarantees suppliers, they secured from their had failed to do so in the cases of the fabrics question. jury evidence, view of this from which properly by preponderance
could have found testimony, evidence, if it believed that that defendant negligent knowing in not the labels were say incorrect, we cannot that it was harmless error for the court to instruct the that the must evidence convincing.” contrary, "clear and On the whether or "presume” prejudicial, not we that error to have been we conclude from our review of the record that this by prejudicial error the trial court was and we so hold. by
We have not overlooked the contention Oregon right defendant enter into that "the State has no interstate regulation field of com- labeling preemp- merce on issues of fabric because of argument upon tion federal law.” This is based assumption Congress preempted the field passage Labeling 1939,15 the Wool Products Act of §§ 68-68j. USC
According defendant, this act demonstrates pervasive regulation therefore, scheme of and that preempted taking the states are from action on the subject. agree same We cannot with this contention. assuming regulate Even that the UTPA seeks to subject Labeling same Act, the Wool Products *15 persuasive. defendant’s contention is not Co., In 519, Jones v. 430 US S Packing Rath 1305, Ct 51 LEd 2d the U.S. Supreme (at 525) Court stated that:
"We start assumption with the that the historic police powers superseded of the not States were to by the Federal Act unless that was the clear and purpose manifest Congress.” of And, at 526:
"The determining criterion for whether state and federal laws are so inconsistent that the state law give way must firmly in our established decisions. whether, Our task is ’todetermine under the circum- particular case, stances this [the State’s] law stands of as an obstacle accomplishment to the and execution of ’” (Em- purposes objectives Congress. full added) phasis No such obstacle is presented this case. As also stated by this Benj. court in Derenco Franklin Fed. Loan, 533, Sav. and (1978): cases,
"In recent however, the court has limited application of this approach preemption [pervasive to or comprehensive regulation] scheme federal narrowly defining regulated by Congress.” the field (15
Defendant also contends that federal law 68c) § USC prohibits it removing from the manufac turer’s note, however, label. We that federal stat only ute penalizes if removal done "with intent violate provisions 68j sections 68 to this title * * 68b(c) addition, section act same specifically allows any person to replace label with a substitute if he "finds or has reasonable cause believe” that the label is incorrect.
Reversed and remanded.
HOWELL, J., specially concurring.
I concur aspects all of Justice Tongue’s opinion I except that do of the references approve *16 "presumed” "deemed” being to error
in the opinion dissent As I stated in brief my prejudicial. to be (1978), our P2d 1336 Soares, Elam to decide court should appellate as an function any pre- without prejudicial, was whether error or harmless. prejudicial it as to whether was sumption the evi- case, to instruct In the instant than convincing rather clear and dence must be reversal, error requiring preponderance or "presumed” "deemed” being evidence references unnecessary. prejudicial