THOMAS v. TIMES MIRROR MAGAZINES INC (1979)

Plaintiff, Aloysius M. Thomas, appeals from an order made and entered on November 3, 1978, denying his motion for certification of this action (for relief from allegedly false and misleading classified advertising published by defendant, Times Mirror Magazines, Inc., doing business as Popular Science Magazine (hereafter “Popular Science”)) as a class action and from a summary judgment in favor of defendant, Popular Science, herein entered on February 5, 1979.

The appeal lies.  (Code Civ. Proc. §§ 904.1, subd. (a), 437c;  Morrissey v. City and County of San Francisco (1977) 75 Cal.App.3d 903, 906–908, 142 Cal.Rptr. 527.)

FACTS

Plaintiff apparently read a classified advertisement in Popular Science in August 1971, advertising the personal services of co-defendant, George Spector, a “licensed professional patent engineer” and a former patent examiner of the Patent Office, in patent searches, patent development and patent commercial realization.¹  This advertisement appears to have violated 35 U.S.C. § 33 because in it Spector, a licensed engineer, held himself out inferentially as being qualified to prepare and prosecute applications for patent when, in fact, he had been excluded from practice before the Patent Office in April 1962 for violation of a rule of that office forbidding advertising by both patent attorneys and patent agents.²   (See Spector v. Ladd (D.D.C.1961) 131 U.S. Patent Quarterly 467–469, aff'd (D.C. Cir. 1961) 111 U.S.App.D.C. 298, 296 F.2d 420, cert. den. (1962) 369 U.S. 817, 82 S.Ct. 828, 7 L.Ed.2d 783;  United States v. Blasius (2d Cir. 1968) 397 F.2d 203, 205–209;  In re Amalgamated Development Co., Inc. (D.C.C.A. 1977) 375 A.2d 494, 499, fn. 12.)

Plaintiff contacted Spector in response to the advertisement and Spector sent to plaintiff his standard sheet of “invention information.”   This led to plaintiff disclosing his invention to Spector in Spector's invention certificate and plaintiff thereafter paying Spector $75 for patent searching.   Following this searching plaintiff apparently paid Spector $475 for patent development—i. e., the preparation and filing of a patent application.   Apparently thereafter plaintiff became dissatisfied with Spector's patent services and complained to the Patent Office, which informed him in July 1972 that Spector was not currently registered to practice before that office.

Popular Science started carrying Spector's patent services advertising in 1959 and continued doing so until sometime in 1976.   Popular Science learned in 1962 from a magazine article of Spector's exclusion from practice before the Patent Office.   In 1969 an out-of-state reader of Popular Science wrote a series of letters to it advising it of Spector's exclusion from patent practice and his violation of the aforementioned federal patent statute (35 U.S.C. § 33).   In this correspondence the writer thereof cited correctly and quoted verbatim to Popular Science this federal statute.   The receipt of these letters led the parent company of Popular Science to inquire of the Patent Office whether a Spector advertisement in Popular Science was misleading, but the Office, through its acting solicitor, refused to express a written opinion thereon since Spector was not then under its jurisdiction or control.³  The parent company then inquired of the United States Attorney in New York City whether there was any pending criminal proceeding against Spector (who practiced there), but apparently did not receive any response to this inquiry.

In December 1975 plaintiff wrote Popular Science inquiring whether the magazine had received any complaints regarding Spector's and another's patent services advertising.   Popular Science's special classified advertising manager replied that it had had some readers' complaints but not of sufficient number for alarm.   The advertising manager added in his letter to plaintiff that Popular Science did not pretend to vouch for the business practices of its advertisers and suggested that plaintiff study all information he received from patent developers carefully before making up his mind.

According to an affidavit of its treasurer apparently executed in October 1978, Popular Science publishes advertising on a wide variety of subjects, including automobiles, motion pictures, real estate, aquarium supplies, musical instruments, employment opportunities, hearing aids and wine making.   Between 1970 and 1977 Popular Science subscribers ranged between approximately 1,650,000 and 1,820,000.   The cost of classified advertising in Popular Science as of September 1978 was $5 per word per insertion.

This action is founded essentially upon the alleged federal illegality of Spector's patent services advertising in Popular Science and Popular Science's alleged knowledge thereof.

DISCUSSION

1. The Denial of Class Certification was Proper

 Plaintiff sought certification of a worldwide class of Popular Science readers.   The trial court concluded that under the due process clause of the Fourteenth Amendment to the United States Constitution it lacked jurisdiction over most nonresidents of California.   It found that the overwhelming majority of the proposed class were such nonresidents.   It further found that this circumstance rendered the proposed class unmanageable because the court could not adequately supervise reasonable discovery by Popular Science from members of the class.   The trial court then found that plaintiff had failed to prove the size of a class composed exclusively of California residents and accordingly had not shown sufficient numerosity thereof to justify the choice of the expensive and cumbersome procedure of a class action.   Finally, the trial court found that a sufficient community of interest among the members of the proposed class was lacking.   It based this last-mentioned finding upon the further fact that it could not determine class membership except by taking unique evidence from each possible class member as to whether that individual had learned of Spector through a Popular Science advertisement, relied on the advertisement to contact Spector, did so and then paid Spector a fee.   The determination of these last-mentioned issues would take as much time as processing the claims individually in court would and thus there was no advantage in economy of judicial time in resorting to a class action in this litigation.⁴

We are bound by the foregoing findings of fact if they are supported by substantial evidence.   Spector filed an affidavit, apparently in another litigation, which is included in the record on appeal.   In this affidavit he averred in May 1972 that 75% of his patent clients for the prior twelve years resided in the northeast sector of the United States and, according to the admittedly incomplete records of the Patent Office with respect to Spector for the complete years of 1970, 1971, and 1972 and the first nine months of 1973, Spector had assisted applicants on at least 67 patent applications and these applicants were from four specified foreign countries and from California and twenty other specified states.⁵  This would appear to be substantial evidence supporting the finding that the overwhelming majority of the proposed class were not residents of California.⁶

Similarly with respect to the number within the proposed class, if that class be limited to California residents, we note that a local California resident who was dissatisfied with the work done for him by advertised patent developers himself advertised in Popular Science for six months during 1975 and 1976 in an effort to locate others of like sentiment and that apparently he did not unearth a single California member of the proposed class.   Under these circumstances it is reasonable to infer that a California class would be too small in number to justify litigation by way of a class action.  (Cf. Slakey Brothers Sacramento, Inc. v. Parker (1968) 265 Cal.App.2d 204, 209, 71 Cal.Rptr. 269.)

Finally, the trial court's conclusion that a sufficient community of interest among the members of the class was lacking seems correct.   A determination that Popular Science in publishing the Spector patent services advertisements had engaged in either common law or statutory false and misleading advertising would not conclude the litigation for the members of the class as each member would have to prove his own case from that point on both with respect to liability and damages in view of the fact that Spector advertised in at least three different magazines.  (Cf. City of San Jose v. Superior Court (1974) 12 Cal.3d 447, 463, 115 Cal.Rptr. 797, 525 P.2d 701;  Bozaich v. State of California (1973) 32 Cal.App.3d 688, 695, 108 Cal.Rptr. 392;  Weaver v. Pasadena Tournament of Roses (1948) 32 Cal.2d 833, 838–839, 198 P.2d 514.)

2. The Summary Judgment in Favor of Popular Science Must be Reversed

Business and Professions Code section 17500, at all times material herein, provided that it was unlawful for any corporation, among others, or any employee thereof, to make or disseminate before the public in this state in any publication, any statement concerning professional services which was misleading and which was known, or which by the exercise of reasonable care should have been known, to be misleading.

Under Civil Code section 1572, subdivision (1), “[t]he suggestion, as a fact, of that which is not true, by one who does not believe it to be true,” constitutes actual fraud.   Likewise, under subdivision (5) of the same section, actual fraud is any act fitted to deceive.   According to Civil Code section 1574, actual fraud is always a question of fact.   Furthermore Civil Code section 1709 states that:  “One who willfully deceives another with intent to induce him to alter his position to his injury or risk, is liable for any damage which he thereby suffers.”  (Cf. Rest.2d Torts, § 525.) ⁷

In August 1971 when the advertisement of Spector's patent services appeared in Popular Science, which induced plaintiff to contract thereafter with Spector and pay him $550, Popular Science knew not only that Spector had been excluded from practice before the Patent Office (Popular Science had known this since 1962), but Popular Science also knew that under the express language of 35 U.S.C. § 33, Spector, because of this exclusion from practice, could not legally hold himself out “as being qualified to prepare or prosecute applications for patent.”   The August 1971 patent development advertisement which led to plaintiff's contacting Spector, clearly constituted such an illegal and fraudulent holding out on Spector's part.   As such, it may very well have been false and misleading advertising within the meaning of the aforementioned Business and Professions Code section 17500.

 We are aware that by virtue of Business and Professions Code section 17502 the statutory proscription of false and misleading advertising at issue does not apply to the publisher of a magazine who “publishes an advertisement in good faith, without knowledge of its false, deceptive, or misleading character.”   In view of the just recounted proof regarding Popular Science's possible knowledge of the false, deceptive and misleading character of the patent services advertising of Spector that it was carrying, we hold that triable issues of fact did exist regarding the good faith of Popular Science in publishing this advertising and the knowledge that Popular Science may have possessed of its false, deceptive and misleading character.

 The advertising at issue likewise may have been fraudulent and deceitful at common law.⁸  We do not so hold, but we do hold that at the very least triable issues of material fact exist regarding Popular Science's knowledge of the true character of this advertising.   This being the case, summary judgment in favor of Popular Science was improper unless these causes of action were barred by the applicable statutes of limitations.

The statute of limitations applicable to the first cause of action, that for common law fraud and deceit, is Code of Civil Procedure section 338, subdivision 4.   This subdivision specifies a three-year period within which suit may be brought on this cause of action.   It also expressly provides that the cause of action is not to be deemed to have accrued until the discovery by the aggrieved party of the facts constituting the fraud.

 The statutes of limitations applicable to the third cause of action, that for statutory false and misleading advertising, are Code of Civil Procedure section 338, subdivision 1 (an action upon a liability created by statute other than a penalty or forfeiture) and the just-mentioned Code of Civil Procedure section 338, subdivision 4.   These two subdivisions both provide a period of three years within which suit on them must be commenced and the latter subdivision expressly covers “[a]n action for relief on the ground of fraud  ․ ․ ․ .”  The third cause of action for statutory false and misleading advertising is clearly such an action.  (See 2 Witkin, Cal. Procedure (2d ed. 1970) Actions, § 333, p. 1176.)

 Plaintiff seeks to avoid the possible bar of these statutes of limitations on two grounds.   First, he asserts that the two causes of action against Popular Science contained in his first amended complaint filed in June 1976 relate back, for statute of limitations' purposes, to his original complaint filed in January 1974, since the second pleading did not allege “a wholly different case” (see 3 Witkin, op. cit., Pleading, § 1035, p. 2614) and, in fact, seeks recovery from Popular Science “on the same general set of facts” as is alleged in the first pleading.  (See Austin v. Massachusetts Bonding & Insurance Co. (1961) 56 Cal.2d 596, 600, 15 Cal.Rptr. 817, 364 P.2d 681;  Garrett v. Crown Coach Corp. (1968) 259 Cal.App.2d 647, 650–651, 66 Cal.Rptr. 590.)   But there can be no such relation back in the instant case because our examination of the proof of service of the summons (contained in the superior court files of this case), which was issued when the first amended complaint was filed, reveals that Popular Science, who had not been a party to this case before the filing of that pleading, was not served as one of the fictitious defendants named in the original complaint, but instead as a new party.⁹  This being so, the causes of action alleged against it in the first amended complaint cannot relate back to the original complaint herein.   (See Farris v. Merritt (1883) 63 Cal. 118, 118–119.)

 Plaintiff's second ground for avoidance of the possible bar of these statutes of limitations is that they were tolled during the pendency of his earlier federal court litigation against Spector.   He here relies upon Elkins v. Derby (1974) 12 Cal.3d 410, 115 Cal.Rptr. 641, 525 P.2d 81, and Nichols v. Canoga Industries (1978) 83 Cal.App.3d 956, 148 Cal.Rptr. 459.   But Popular Science was not a defendant in the federal litigation and thus that litigation, unlike the workers' compensation litigation in Elkins and the prior federal litigation involved in Nichols, provided no notice to Popular Science of any claim by plaintiff against it.  (See Elkins v. Derby, supra, 12 Cal.3d at pp. 412–414, 115 Cal.Rptr. 641, 525 P.2d 81;  Nichols v. Canoga Industries, supra, 83 Cal.App.3d at p. 962, 148 Cal.Rptr. 459.)

 Leaving these conclusions aside, we think that triable issues of material fact in all probability exist as to whether plaintiff's causes of action at issue, namely, those for common law fraud and deceit and for statutory false and misleading advertising, may be barred by the applicable statutes of limitations.   We say this because an essential element of both causes of action is scienter or knowledge on the part of defendant, Popular Science, of the false and misleading character of Spector's patent services classified advertising that it carried.  (See Swasey v. de L'Etanche (1936) 17 Cal.App.2d 713, 716, 62 P.2d 753; ¹⁰  Bus. & Prof.Code, § 17500.)   In this connection we note that the record before us which does not conclusively establish that plaintiff either knew or by the exercise of reasonable diligence (see Civ.Code, § 19) should have known of Popular Science's knowledge in this respect before December 1975 when, according to his first amended complaint, his own declaration and that of his counsel, he first learned sufficient facts in this connection to put him on inquiry at least.   But the occurrence and the timing of plaintiff's discovery of sufficient facts pointing to Popular Science's alleged fraud and its actual knowledge as well of the true character of the patent services advertising it carried for Spector is not pled in detail as it should have been.  (See 2 Witkin, Cal. Procedure (2d ed. 1970) Actions, § 339, pp. 1180–1181;  Hobart v. Hobart Estate Co. (1945) 26 Cal.2d 412, 436–439, 159 P.2d 958;  Helfer v. Hubert (1962) 208 Cal.App.2d 22, 26–27, 24 Cal.Rptr. 900.)   This being so, we believe, as we have already indicated, that triable issues of material fact exist as to whether these causes of action may be barred by the applicable statutes of limitations.  (See Baker v. Beech Aircraft Corp. (1974) 39 Cal.App.3d 315, 323, 114 Cal.Rptr. 171.)”   In view of this, the summary judgment before us should not have been granted.  (See Code Civ.Proc., § 437c.)

DISPOSITION

The order denying certification as a class action is affirmed.   The summary judgment is reversed.   Costs on appeal are awarded appellant.

FOOTNOTES

1.   The Patent Office is now known as the Patent and Trademark Office.  (See 35 U.S.C. § 1.)   But for convenience we will refer to it throughout this opinion as the Patent Office.

2.   Spector was not licensed as a professional patent engineer because apparently no such license was issued in the two states where he was licensed as an engineer.   Therefore this term and its counterpart “patent engineer' might both be considered misleading.   The first of these terms certainly is not one that has achieved general recognition in the patent profession.   But Popular Science did see apparently in 1970 a 1967 letter from the New York State Education Department advising Spector that his designation of himself as a patent engineer was proper.An employee of Popular Science testified as a government witness at the Blasius trial.

3.   A law examiner of the Patent Office apparently orally advised the parent company that he did not consider the advertisement misleading.It seems clear that the Spector advertisements in Popular Science were not patently false or misleading.

4.   The trial court also questioned whether plaintiff was an adequate representative of the proposed class in view of “very serious questions of his own reliance upon the Popular Science advertisement.”   Plaintiff admitted that he saw Spector's advertising in at least three different specified magazines and his earlier testimony at a local federal trial suggested that his initial contact with Spector originated in an advertisement in Mechanics Illustrated.

5.   There is one letter in the record on appeal, dated May 29, 1970, from Spector to a local client, other than plaintiff, telling the client not to inform the Patent Office that Spector was paid to assist him in preparing his patent application because Spector had done such work at no cost.   According to Spector, his fee was for other technical services rendered this client.

6.   For a California court to have personal jurisdiction over a nonresident, California must have had the requisite minimum contacts with the nonresident within its borders and must also show that the maintenance of the suit here does not offend traditional notions of fair play and substantial justice.  (See Lisoni v. Dave Cole Pontiac, Inc. (1975) 52 Cal.App.3d 445, 447, 125 Cal.Rptr. 120.)   In order for a California court to have personal jurisdiction otherwise over a nonresident, that individual must have done some act by which he purposely availed himself of the privilege of conducting activities within California.  (See Buckeye Boiler Co. v. Superior Court (1969) 71 Cal.2d 893, 898, 80 Cal.Rptr. 113, 458 P.2d 57.)   These jurisdictional principles apply to class actions.   (See C. Bisgaard, Expanding the Impact of State Court Class Action Adjudications to Provide an Effective Forum for Consumers (1971) 18 UCLA L.Rev. 1002, 1012.)

7.   We perceive no First Amendment problem with respect to either of the false advertising causes of action alleged in plaintiff's first amended complaint.  (See Va. Pharmacy Bd. v. Va. Consumer Council (1976) 425 U.S. 748, 771–772, 96 S.Ct. 1817, 1830–1831, 48 L.Ed.2d 346, 364–365.)

8.   Popular Science contends that plaintiff's first cause of action in his first amended complaint alleges no more than negligent misrepresentation.   We disagree.   Although inartfully drawn in this respect, liberally construed as required by Code of Civil Procedure section 452, the pleading avers all five of the elements of fraud and deceit.  (See 4 Witkin, Summary of Cal. Law (8th ed. 1974) Torts, § 446, p. 2711.)

9.   Pursuant to rule 12(a) of the California Rules of Court, we have added this proof of service to the record on appeal.

10.   This holding in the Swasey case was expressly disapproved in Gagne v. Bertran (1954) 43 Cal.2d 481, 487, footnote 4, 275 P.2d 15, but only insofar as it applied to a cause of action for negligent misrepresentation.   As already noted, we have more than that alleged here.

COBEY, Acting Presiding Justice.

ALLPORT and POTTER, JJ., concur.