Pitney-Bowes, Inc. v. State of California

Citations: 108 Cal. App. 3d 307; 166 Cal. Rptr. 489; 1980 Cal. App. LEXIS 2056Docket: Civ. 57520

Court: California Court of Appeal; July 17, 1980; California; State Appellate Court

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Pitney-Bowes, Inc., a company engaged in manufacturing and servicing business equipment in California since 1935, operates approximately 39,606 specialized scales for computing transportation and delivery charges, serving 31,438 customers as of April 1978. In March 1975, discussions between Pitney-Bowes’ legal counsel and the California Department of Food and Agriculture focused on whether California's weights and measures laws (Business and Professions Code sections 12001-12540) applied to Pitney-Bowes’ scales and repair services. Following a June 1975 ruling from the State declaring the scales subject to regulatory compliance, Pitney-Bowes faced potential criminal prosecution and civil actions, prompting them to seek declaratory relief and an injunction from the superior court in August 1975. After a contentious nonjury trial, the court ruled in February 1979 that the regulatory scheme did not apply to Pitney-Bowes’ scales or repairmen and prohibited enforcement of the statute against the company. The State and County of Los Angeles are appealing this decision. The trial court's findings indicate Pitney-Bowes specifically sells scales designed for calculating postage and delivery charges for services including the USPS and UPS.

Customers utilize specific scales for calculating transportation and delivery charges prior to handing items over to delivery services. The plaintiff offers three types of scales: a balance-beam scale (model 4916) and a fan-type scale that include USPS rate charts but not UPS rate charts, and a parcel scale with an optical display that includes both USPS and UPS rate charts. USPS retains final authority on postal charge adequacy, including the right to reweigh packages and the ability to refund overpayments based on local office decisions. Conversely, UPS, a common carrier, can also reweigh packages and has the final say on its delivery charge adequacy, maintaining systems to verify customer charges and package weights.

The document states that when customers use plaintiff's scales, the charges established by the customer are binding if not verified by USPS or UPS. It clarifies that USPS is a government agency responsible for accurate postage charges, while UPS is regulated by the Interstate Commerce Commission and the California Public Utilities Commission for its rates.

Plaintiff's scales are designed for fixed locations and supported by 337 service representatives in California. Evidence indicates that the scales are used solely for their intended purpose related to transportation and delivery charges, without establishing purchase or sale prices for items weighed.

The main issue on appeal is whether the trial court erred in deciding that plaintiff's scales and repair services are exempt from the regulatory framework of section 12001 et seq. Resolution hinges on two core questions: whether the scales are used for 'commercial purposes' as defined by the statute and whether 'commodities' in the statute includes 'services.'

Defendants State and County argue that plaintiff Pitney-Bowes' scales are utilized for 'commercial purposes' and assert that the term 'commodities' encompasses 'services.' They claim the relevant statutory terms are ambiguous and should be interpreted broadly, as suggested by the state's administrative agency. In contrast, Pitney-Bowes contends its scales are not for 'commercial purposes' and that 'service' is not part of the definition of 'commodities,' asserting clarity in the statute's terms. The trial court is said to have correctly interpreted the legislative intent, exempting Pitney-Bowes' scales and repairmen from regulatory requirements, as these scales are solely for calculating delivery service charges, not for tangible goods.

In interpreting the statute (section 12001 et seq.), the court emphasizes the need to ascertain legislative intent to uphold the law's purpose, ensuring every part of the statute is considered without sacrificing its overall aim. Statutory language should be construed reasonably to avoid absurd outcomes, favoring interpretations that align with the law's apparent purpose. The court concludes that the California Legislature recognized the prevalent use of weighing devices in the service industry for calculating delivery charges and that the statute specifically regulates weighing devices for tangible goods, not those used for service-related charges.

The court upheld the lower court's ruling that the regulatory and licensing scheme in section 12001 et seq. does not apply to Pitney-Bowes' scales and scale repairmen, and it granted the requested declaratory and injunctive relief. Key to this decision are sections 12210, subdivision (a), and 12500, subdivision (c), which define 'commercial' and 'commodities.' Section 12210, subdivision (a) specifically addresses the inspection of scales used for measuring quantities related to sale or hire but notably omits the term 'service.' This absence indicates that the legislature intended 'service' to be a distinct concept from 'commodity,' as seen in section 12510, subdivision (d), which uses both terms. The legislature's choice not to include 'service' in section 12210, subdivision (a) suggests an intent to limit its regulatory scope to 'commercial' devices. Furthermore, section 12210, subdivision (b) establishes a different process for 'non-commercial' devices, reinforcing that subdivision (a) defines 'commercial' devices subject to regulation. Applying these definitions, the court concluded that Pitney-Bowes' scales, which are used solely for calculating charges for transport and delivery services, do not fall under the statute's regulatory provisions, as the packages weighed are not sold or offered for hire. Section 12500, subdivision (c) further clarifies that commercial weighing devices are those used in trading or selling commodities, but do not include devices used solely within a business for manufacturing or processing.

Defendants contend that section 12500, subdivision (c) of the statute should not be interpreted as definitional due to its use of "shall include" instead of "means," contrasting it with other subdivisions where "means" is used. However, this interpretation is seen as flawed and inconsistent with the statute's overall language and purpose. The language following "includes" is deemed specific and comprehensive, indicating that the section aims to regulate specific weighing devices for tangible goods (commodities). 

The court concludes that "shall include" serves to limit the regulatory scope to scales used in commercial transactions involving commodities. It highlights that the term "commodities" is distinct from "services," as evidenced by related sections (12024 and 12024.1) that address these categories separately. This distinction prevents ambiguity and maintains the intelligibility of the statute. 

Additionally, the legislative history reveals that a proposed amendment to expand regulatory coverage to include service-based scales faced significant opposition and was ultimately withdrawn, reinforcing the argument that the existing regulation does not encompass scales for service charges unless explicitly stated. Thus, the plaintiff, Pitney-Bowes, argues that the regulatory framework explicitly excludes scales used for estimating service charges, supporting this by referencing the legislative actions surrounding section 12510.

Defendants contend that the legislative history related to an unpassed amendment to section 12510, subdivision (a) is not indicative of legislative intent for the existing statute, asserting that unpassed bills can generate conflicting inferences, as noted in Sacramento Newspaper Guild v. Sacramento County Bd. of Suprs. They acknowledge this point but view the amendment attempt as a sign of the weak interpretation of current law by the defendant State. The court's conclusions are reached independently of the legislative documents concerning the failed amendment, yet it recognizes that opinions in four documents align with its interpretation of the existing statute. 

Plaintiff Pitney-Bowes operates in multiple states, including California, while the USPS and UPS are federal and common carrier agencies responsible for ensuring accurate postage and charges, respectively. Each has programs to verify charge accuracy and inspect package weights in compliance with approved tariffs. In states where Pitney-Bowes operates, its scales and repairmen are regulated only by the ICC or local PUC. The court suggests that California legislators likely excluded weighing devices in the state's regulatory scheme, assuming sufficient federal oversight for consumer protection and deeming additional state regulation unnecessary.

The court finds the defendants' arguments regarding statutory construction to be strained and unpersuasive, asserting that adopting their interpretation would necessitate extensive rewriting of the statute, which would violate the separation of powers principle. It concludes that the legislative intent behind the regulatory scheme is to protect consumers in transactions involving tangible goods and is not applicable to scales used for service charge determinations, as in this case.

The court affirmed the judgment of the superior court, determining it was unnecessary to consider the plaintiff's arguments regarding the regulations' potential violations of the supremacy clause and the interstate commerce clause. The distinction between 'commercial' and 'non-commercial' weighing devices hinges on their usage. The plaintiff's scales serve multiple purposes, including calculating postal charges for USPS and UPS, as well as for other parcel delivery services. As of April 21, 1978, approximately 39,600 Pitney-Bowes scales were in California. UPS employs a three-method system for package pickups, relying on customers to weigh packages and calculate charges using UPS rate charts before collection. Regular users typically utilize Pitney-Bowes scales, while occasional customers may use bathroom scales. UPS has around 69,000 daily pickup customers and handles approximately 620,000 packages per day, with substantial monthly service charge revenue generated from these transactions. UPS audits customers infrequently, raising consumer protection concerns regarding the accuracy of package weight calculations. The role of Pitney-Bowes scales is significant in commerce, and service transactions are recognized as part of 'business intercourse' under the Business and Professions Code, aligning with the Supreme Court's broader definition of interstate commerce.

Service transactions fall under the definition of 'commercial' as outlined by various dictionaries, all emphasizing the financial profit aspect without distinguishing between services and goods. Historical context shows that the understanding of 'commerce' has evolved to recognize the equal importance of services alongside goods, a notion affirmed in Gibbons v. Ogden (1824) and further supported by the California Court of Appeal in Siegel v. City of Oakland (1978). The primary aim of Division 5 is consumer protection, ensuring accuracy in weighing and measuring devices used in commercial transactions. This protection should be broadly interpreted to include both service and goods transactions, as the consumer is equally at risk of being overcharged in either case. The appellants argue for a comprehensive interpretation of 'commercial' to maximize consumer protection, while a counterargument suggests that Division 5 only pertains to goods. However, the text argues that since consumer overcharges can occur in both contexts due to inaccurate scales, it is illogical to limit protections to only goods. The recommended interpretation of 'commercial' should focus on the business nature of transactions rather than the type of product sold, highlighting that the key factor is the exchange of money in a business relationship based on weight, independent of the product type.

Bathroom scales used by individuals for personal calculations and those utilized by businesses for non-pass-through charges are not subject to regulation. However, scales employed by merchants to determine shipping charges for USPS or UPS that are passed to customers are regulated. The interpretation of 'commercial' should encompass service transactions within the protections of division 5, emphasizing consumer protection and rejecting the notion of distinguishing between services and goods. The rejected amendment to Assembly Bill No. 1711 does not support the exclusion of service transactions from 'commercial' definitions, as unadopted proposals offer limited insight into legislative intent. The requirements outlined in division 5 of the California Business and Professions Code apply to scales determining shipping charges, necessitating compliance with model approval, testing, sealing, and notification protocols. The court's judgment should be reversed, with a note that only commercial weighing devices are subject to regulatory oversight. Definitions of 'commodities' from legal and dictionary sources emphasize items of trade and commerce, reinforcing that the statute covers only commercial devices. The defendants assert jurisdiction over scales used by customers of USPS and UPS but not those used solely by USPS.

The term 'service' in contract law is defined as the duty or labor performed by one person for another. Section 12510(d) targets vendors using portable scales, such as strawberry pickers, but does not apply to Pitney-Bowes since their scales are designated for fixed locations, which is acknowledged by the defendants. Relevant regulatory documents, including the National Bureau of Standards Handbook and Model State Registration Regulations, contain similar language to section 12210(a), yet intentionally exclude certain terms, indicating a deliberate exemption for scales used in the service industry for transportation and delivery charges from regulatory burdens.

Legislative analyses suggest that using an incorrect weight or measure for service charges is a misdemeanor, mirroring existing laws against incorrect measures in commodity transactions. If the regulatory scheme were applied to Pitney-Bowes, it would impose significant bureaucratic challenges, including mandatory design modifications, inspection requirements, and extensive paperwork related to sales and repairs. In 1977 alone, Pitney-Bowes sold over 5,000 scales, highlighting the operational impact. The plaintiff's estimates indicate thousands of service calls would have necessitated state reporting, creating further administrative burdens.

Defendants' concerns regarding consumer protection for users of Pitney-Bowes' scales, other than USPS and UPS, may be unfounded, as the company's design, quality control, and regulatory oversight provide adequate safeguards against potential overcharges.

Judicial restraint is advocated to prevent unnecessary regulation in the marketplace without clear legislative authority. There is no evidence that customer scales used for calculating delivery charges by USPS and UPS are causing overcharges. If evidence of overcharging emerges, it should be addressed by the USPS and the ICC-PUC rather than through court intervention, as the state Legislature is better positioned to investigate and balance competing interests of consumer protection and service industry representatives. The Legislature can effectively assess the prevalence of overcharging and its implications on consumers and the industry. A letter from Pitney-Bowes' counsel indicates willingness to address potential misuse of their scales. The distinction between 'commodity' and 'service' in relevant sections may suggest they are mutually exclusive, but historical interpretations, including Supreme Court definitions, support a broader understanding that incorporates services as commodities. The California Supreme Court has similarly upheld this expansive definition under the Cartwright Act, recognizing services, especially those involving labor, as commodities despite statutory limitations.