California Ass'n of Dispensing Opticians v. Pearle Vision Center, Inc.

Opinion

Plaintiffs California Association of Dispensing Opticians (CADO) et al., sought to enjoin defendants Pearle Vision Center, Inc. (Pearle) et al., from violating California statutes regulating the practice of dispensing opticians, optometrists and optical suppliers. The California State Board of Optometry (Board) intervened as a plaintiff in CADO’s lawsuit. A temporary restraining order was issued enjoining Pearle from operating several retail optician outlets without a license, engaging in certain types of advertising and con-

“a. From engaging in business as a dispensing optician at Carlsbad Plaza, 2588 El Camino Real, Carlsbad, California, 573 H Street, Chula Vista, California, 2770 Town Center, Sunnyvale, California, or at any other location within the State of California without first obtaining a certificate or registration issued by the Board of Medical Quality Assurance pursuant to the provisions of Business & Professions Code Section 2551;

“b. From disseminating or causing to be made or disseminated in any type of advertising statements stating or implying that defendants or any one of them is performing or authorized to perform the acts of a dispensing optician except at a location which has been registered as a dispensing optician by the Board of Medical Quality Assurance;

“c. From disseminating or causing to be made or disseminated in any type of advertising statements stating or implying that defendants or any one of them is furnishing the services of a refractionist or optometrist or is directly or indirectly employing or maintaining on or near defendants’ optical dispensing premises a refractionist or optometrist for the purpose of examining or treating the eyes; this paragraph prohibits advertisements stating or implying that defendants furnish total eye care.”

The preliminary injunction was conditioned upon the posting of a bond. Pearle sought a writ of supersedeas and prohibition from this court. After a review of the supersedeas documents and petition this court summarily denied the petition. Pearle appeals the order granting the preliminary injunction.

Facts

CADO is a nonprofit corporation whose members are licensed by the State of California as registered dispensing opticians. Coplaintiff Pacific Coast Contact Lens Society is a nonprofit corporation composed of opticians who specialize in fitting contact lenses. Individual plaintiff Richard H. Kendall, O.D., is a licensed optometrist practicing in Orange County, California. The Board is a state body charged with regulating the optometry profession under state law. Pearle consists of G. D. Searle, Inc., a large manufacturer of pharmaceuticals and ophthalmic goods through its wholly owned subsidiary, Searle Optical Company, Inc., and Pearle Vision Centers, Inc., which operates a chain of retail ophthalmic dispensing outlets, Pearle Vision Centers, in several states.

The trial court also had before it the Attorney General’s opinion the franchising optometric offices by this arrangement constituted an unlawful practice of optometry. (65 Ops.Cal.Atty.Gen. 366 (June 10, 1982).) Pearle contends trial court error in granting the preliminary injunction because (1) it was based on a misinterpretation of the relevant portions of the Business and Professions Code, (2) the interpretation of the statute was unconstitutional, and (3) the proper procedural prerequisites in ruling on the preliminary injunction were not followed.

Discussion

As a general rule the granting or denying of a preliminary injunction, even though the evidence may be conflicting, rests within the sound discretion of the trial court and may not be disturbed on appeal except for an abuse of discretion. (People v. Mobile Magic Sales, Inc. (1979) 96 Cal.App.3d 1 [ 157 Cal.Rptr. 749 ]; Volpicelli v. Jared Sydney Torrance Memorial Hosp. (1980) 109 Cal.App.3d 242 , 248 [ 167 Cal.Rptr. 610 ].) Furthermore, a preliminary injunction does not reach the merits of the permanent injunctive relief sought in the complaint.

This court briefly set forth the dispositive rules for issuance of a preliminary injunction in People v. Mobile Magic Sales, Inc., supra, 96 Cal.App.3d 1 , 8: “ ‘ “The granting or denial of a preliminary injunction does not amount to an adjudication of the ultimate rights in controversy. It merely determines that the court, balancing the respective equities of the parties, concludes that, pending a trial on the merits, the defendant should or that he should not be restrained from exercising the right claimed by him.” [Citations.] The general purpose of such an injunction is the preservation of the status quo until a final determination of the merits of the action. [Citations.] Thus, the court examines all of the material before it in order to consider “whether a greater injury will result to the defendant from granting the injunction than to the plaintiff from refusing it; ...” [Citations.] In making that determination the court will consider the probability of the plaintiff’s ultimately prevailing in the case and, it has been said, will deny a preliminary injunction unless there is a reasonable probability that plaintiff will be successful in the assertion of his rights. [Citations.] As was said in Family Record Plan, Inc. v. Mitchell . . . “In the last analysis the trial court must determine which party is the more likely to be injured by the exercise of

The trial court’s conclusion Pearle’s franchise program is illegal rests upon the fundamental premise that California has a strong long-standing public policy against permitting lay persons to practice any of the medical arts or to exercise control over decisions made by healing art practitioners. (Painless Parker v. Board of Dental Exam. (1932) 216 Cal. 285 , 296 [ 14 P.2d 67 ].) The trial court had before it uncontradicted evidence of such control. From the face of the franchising agreement it is clear Pearle had the power to control many facets of the optometrist’s practice of optometry. For example, with respect to real property arrangements, Pearle must approve the site of the optometrist’s office. If the franchisee is purchasing an existing site from Pearle, he must also purchase all improvements. If he wishes to obtain a new site, Pearle must approve all proposed leasehold improvements, furnishings, fixtures, inventory and supplies which are obtained from anyone other than Pearle.

Pearle also exercises a variety of controls over financial aspects of a franchisee’s practice. According to the circular a franchisor may “finance” franchisees, and the franchisee must pay a substantial percentage of his gross income to the franchisor as both a “franchise fee” and as an advertising contribution. Franchisees must utilize the Pearle “system” relative to operating the practice and must use the franchisor’s design specifications for offices. Furthermore, the franchisee is subject to periodic audits by the franchisor. Substantial penalties can be assessed if the audit is unfavorable to the franchisee.

A separate and distinct specie of control lies in the franchisor’s control over a variety of treatment decisions to be made by the optometrist. A franchisee is required to stock all of Pearle’s approved frame lines, to carry an inventory of prescription lenses and other optical goods and supplies approved by Pearle. Pearle has sole discretion to modify frame lines, and specifications for optical goods. Finally, the franchisee’s choice of laboratory is limited to those approved by Pearle.

Reservation of this authority over an optometrist by a nonhealing arts practitioner is against public policy and clearly illegal. Franchising of this sort is unacceptable in the opinion of the Attorney General: “ [T]he profession of optometry is not amenable to being conducted through the franchised operations described herein which postulate the exercise of the substantial control by a franchisor over the professional services of the franchisee. For such an op

The franchise agreement requires the franchisee to operate under a name which could not be approved by the Board. Furthermore, the franchise agreement does not allow the use of either “optometry” or “optometric.” Finally, the use of the name “Pearle Vision Centers” on all of the franchise locations within a particular geographic location would necessarily confuse the consuming public and lead the public to believe the franchises were controlled by the same entity and not by the individual optometrists.

V

The franchise agreement requires the optometrist remit a percentage of the income received. In so doing, this agreement violates section 655 (ante, fn. 4) which prohibits profit-sharing and co-ownership arrangements between an optometrist and a lay person. Section 655 is the basic legislative declaration against control by nonoptometrists over any facet of the practice of optometry.

The fact that section 655 enumerates some forbidden relationships does not preclude, under the exclusio unus rule, a finding the statute also applies to other unacceptable relationships between optometrists and optical suppliers. The wording of the statute itself rules out this limiting doctrine for it includes the more inclusive terms such as “in any form directly or indirectly” and “or otherwise” before each subsection. Thus the statute by its own context indicates the relationships listed in the statute are meant to be examples rather than an exhaustive listing of all those prohibited relationships. (People v. Richards (1927) 86 Cal.App. 86 , 89-90 [ 260 P. 582 ].)

The franchise agreement violates section 655 in its revenue division requirements. According to paragraph 7.3 of the agreement the franchisee is required to pay Pearle 8% percent of the franchisee’s monthly gross revenues. This arrangement requires an apportionment between the franchisee and franchisor of the financial return or gain and thus constitutes a profit-sharing arrangement prohibited by section 655.

These requirements constitute a profit-sharing arrangement between an optometrist and his supplier. Pearle claims section 655 cannot possibly apply to its

Finally, the franchise agreement violates 655 because it contemplates a species of co-ownership. The optometrist may be the recipient of loans from Pearle subject, however, to Pearle’s security interest. In light of the franchise requirement to stock approved Pearle frame lines and other materials, this could be joint ownership in violation of section 655.

Pearle next contends the California regulatory statutes violate the federal Constitution. Legislative acts are presumed constitutional and the burden of establishing unconstitutionality is upon the challenging party. (Simac Design, Inc. v. Alciati (1979) 92 Cal.App.3d 146 , 155 [ 154 Cal.Rptr. 676 ].)

In civil cases constitutional questions should be raised at the trial court level or considered waived. (See Hershey v. Reclamation District No. 108 (1927) 200 Cal. 550 , 564 [ 254 P. 542 ]; Geftakys v. State Personnel Board (1982) 138 Cal.App.3d 844 , 864 [ 188 Cal.Rptr. 305 ].) Furthermore the record on appeal is not adequate to conduct a review of the claimed constitutional error.

vn

Without fact or case authority, Pearle avers the statutes in question violate the federal Sherman Anti-Trust Act. Pearle does not explain how these statutes affect in any way the flow of services or material to California or in any way have a disparate impact upon out-of-state firms.

The statutes enforced by the.trial court constitute direct regulations of professions by the State of California and are expressly exempt from operation of the Sherman Act. In Parker v. Brown (1942) 317 U.S. 341 [ 87 L.Ed. 315 , 63 S.Ct. 307 ], the Supreme Court upheld a marketing program adopted for the 1940 raisin crop under the California Agricultural Prorate Act against a claim that it violated the Sherman Act. The holding in Parker v. Brown should be contrasted with Goldfarb v. Virginia State Bar (1975) 421 U.S. 773 , 790 [ 44 L.Ed.2d 572 , 587, 95 S.Ct. 2004 ] where the Supreme Court struck down a fee schedule

It was insufficient in Goldfarb to argue the anticompetitive conduct is “prompted” by state action. Rather, the anticompetitive activity must be “compelled by direction of the State acting as sovereign.” (Id., at p. 791 [44 L.Ed.2d at p. 587]; italics added.) The Virginia State Bar voluntarily joined in what was essentially a private anticompetitive activity and in that posture could not claim it was beyond the reach of the Sherman Act. (Id., at pp. 791-792 [44 L.Ed.2d at p. 587].)

Goldfarb must also be contrasted with Bates v. State Bar of Arizona (1977) 433 U.S. 350 [ 53 L.Ed.2d 810 , 97 S.Ct. 2691 ], where the Supreme Court upheld the validity of regulations restricting advertising by attorneys. The court noted the challenged restraint was an affirmative command of the Arizona Supreme Court which wielded the state’s power over the practice of law. Therefore, the restraint was compelled by direction of the state acting as sovereign and complied with the state action requirements of Goldfarb. (Id., at p. 360 [53 L.Ed.2d at p. 821, 97 S.Ct. at p. 2697].) In sum where the programs involve restraints on competition, they will be upheld if they follow a clearly articulated and affirmatively expressed state policy and the state plays an active role in the execution of the program. (New Motor Vehicle Bd. of Cal. v. Orrin W. Fox Co. (1978) 439 U.S. 96 [ 58 L.Ed.2d 361 , 99 S.Ct. 403 ].) We conclude the statutes and regulations here are activities required by the state acting in its sovereign capacity. They are beyond the reach of the Sherman antitrust laws.

Vffl

Pearle does not show how the commerce clause of the United States Constitution (art. I, § 8, cl. 3) has been violated by the particular restrictions placed upon activities of optometrists or lay people who would seek to “franchise” with optometrists. The guidelines for determining the applicability of the commerce clause have been summarized by Professor Lawrence H. Tribe of Harvard University: “Since the mid-1930s, the Supreme Court has sought to

The statutes regulating the practice of a profession such as optometry come within traditional concepts of the police power to regulate. In Head v. New Mexico Board (1963) 374 U.S. 424 [ 10 L.Ed.2d 983 , 83 S.Ct. 1759 ], the United States Supreme Court upheld a restriction on advertising because it fell within the state’s police power even though it had an effect on interstate commerce, since it did not discriminate against interstate commerce. Thus, a facially neutral statute regulating the profession of optometry was held not to violate the commerce clause even though it might impinge upon interstate commerce in a particular instance. (Id., at pp. 427-428 [10 L.Ed.2d at p. 987].)

There is no evidence the preliminary injunction will in any way restrict the flow of services into California or that the statutes create either a direct or indirect burden on interstate commerce. It follows, there is no violation of the federal commerce clause.

Pearle’s argument asserting a violation of the First Amendment is equally inapplicable to the restrictions placed on Pearle. Prohibitions against advertising are a species of restraint upon commercial speech. However, the California statutes comply with the rules most recently set out by the United States Supreme Court. In Bates v. State Bar of Arizona, supra, 433 U.S. 350 , the United State Supreme Court held advertising by attorneys may not be subject to blanket suppression. However, the court did hold advertising by attorneys may be regulated, and mentioned false, deceptive or misleading advertising is a proper subject for regulation.

In Friedman v. Rogers (1979) 440 U.S. 1 , 9-10 [ 59 L.Ed.2d 100 , 109-110, 99 S.Ct. 887 ], Texas statutes prohibited price advertising by optometrists and the practice of optometry under a trade name. The Texas statute required commercial information about optometrical services appear in a nondeceptive form. The United States Supreme Court also held the prohibition on the practice of optometry under a trade name is constitutionally permissible state regulation in

Conclusions

Pearle fails to distinguish between the practice of an optometrist in which incident thereto he sells eye wear and an eye wear producer and seller who wishes to hire, furnish or go into business with an optometrist. That distinction must be made. It is critical. As Pennington v. Bonelli (1936) 15 Cal.App.2d 316 , 319 [ 59 P.2d 448 ] said in 1936: “There can be no question but what the practice of optometry is more than a business. It is a profession relating to the public health, and as such is peculiarly subject to state control.” Optometry is not a business or an article of commerce “but a profession dealing with the health and well-being of the people, and shall be and is governed by regulations entirely unnecessary to apply to merchandise.” (Id., at p. 321.)

Pearle by its franchise seeks to engage in the corporate practice of a profession. The rules against such practice should not be circumvented by technical agreements concerning the manner optometrists are engaged, designated or compensated by the franchisor. The confidential health care relationship requires the professional’s undivided responsibility and freedom from commercial exploitation. This relationship is essential. The public would be jeopardized if a large corporation with pecuniary profits as its principal goal were allowed to dominate the field. (Painless Parker v. Board of Dental Exam., supra, 216 Cal. 285 , 298.)

More than substantial evidence supports the trial court’s conclusion Pearle franchise agreement, advertisements, practices, and plans violate various sections of the Business and Professions Code of this state. Therefore the injunction was properly issued. While the lower court is not required to reach the merits of the permanent injunctive relief sought, the factual basis presented to the trial court points to a reasonable probability a permanent injunction will follow a full and complete hearing. The preliminary injunction here performs