People v. Carter , 97 Ill. 2d 133 ( 1982 )

JUSTICE SIMON,

dissenting:

The majority upholds section 12 of the Franchise Disclosure Act (Ill. Rev. Stat. 1977, ch. 121½, par. 712), which grants the Hlinois Attorney General the power to exempt individuals from criminal penalties provided in the Act. The Attorney General’s power to grant exemptions is limited only by the highly indefinite requirement that the exemption be “in the public interest.”

This precedent could undermine civil liberties in a time of crisis. The legislation grants the Attorney General the power to create a privileged class that is exempt from the criminal law which the rest of society must obey. At the same time the legislation fails to establish articulable standards for the Attorney General to use in making such a momentous decision.

In reaching its decision the majority principally relies upon precedent arising from civil cases. Given the criminal context of this case, is this reliance not misplaced? I would hold that the public-interest exemption is unconstitutional, violating both equal protection (Ill. Const. 1970, art. I, sec. 2; U.S. Const., amend. XIV, sec. 1) and the nondelegation doctrine (Ill. Const. 1970, art. II, sec. 1, art. IV, sec. 1).

I

Equal protection of the laws: The majority asserts that other courts have approved of the “public interest” standard in many civil contexts and that this court has traditionally applied an extremely deferential scrutiny to legislative classifications in economic-regulatory statutes. In the cases cited by the majority, however, criminal liability never directly hinged upon the “public interest” classification, while in the present case the “public interest” standard determines who is subject to criminal liability and who is exempt.

Because of the criminal context, it is inappropriate to apply in this case the extremely deferential standard of review that this court has used in evaluating the constitutionality of legislative classifications in the field of economic regulation. When a statute grants an executive officer the power- to exempt certain persons from criminal liability, equal protection should require that the legislature clearly and definitely specify under what circumstances the exemption is to apply. Otherwise there is always a danger that the exemption is designed for an illegitimate purpose. Justice Jackson recognized the dangers of arbitrary exemptions from general legislative schemes when he observed:

“[I]t [is] a salutary doctrine that cities, states and the Federal Government must exercise their powers so as not to discriminate between their inhabitants except upon some reasonable differentiation fairly related to the object of regulation. This equality is not merely abstract justice. The framers of the Constitution knew, and we should not forget today, that there is no more effective practical guaranty against arbitrary and unreasonable government than to require that the principles of law which officials would impose upon a minority must be imposed generally. Conversely, nothing opens the door to arbitrary action so effectively as to allow those officials to pick and choose only a few to whom they will apply legislation and thus to escape the political retribution that might be visited upon them if larger numbers were affected. Courts can take no better measure to assure that laws will be just than to require that laws be equal in operation.” Railway Express Agency, Inc. v. New York (1949), 336 U.S. 106, 112-13, 93 L. Ed. 533, 540, 69 S. Ct. 463, 466-67 (Jackson, J., concurring).

To survive analysis under the equal protection clause a statute must have a legitimate purpose. For example, “a bare congressional desire to harm a politically unpopular group” is not a legitimate governmental interest. United States Department of Agriculture v. Moreno (1973), 413 U.S. 528, 534, 37 L. Ed. 2d 782, 788, 93 S. Ct. 2821, 2826.

The majority observes that the purpose of the exemption is evident in the statement of the legislature’s purpose in enacting the Franchise Disclosure Act. But the majority is simply mistaken when it claims that the only purpose of the legislature was to ensure that franchisees receive information about the financial health of the franchisor before they purchase a franchise. Section 2 of the Act clearly sets forth the purpose of the disclosure requirements:

“(1) The General Assembly finds and declares that the widespread sale of franchises is a relatively new business phenomenon which has created numerous problems in Illinois. Illinois residents have suffered substantial losses where the franchisor or his representative has not provided full and complete information regarding the franchisor-franchisee relationship, the details of the contract between the franchisor and franchisee, the prior business experience of the franchisor and other factors relevant to the franchise offered for sale.

(2) It is the intent of this Act: (a) to provide each prospective franchisee with the information necessary to make an intelligent decision regarding franchises being offered for sale; and (b) to protect the franchisee and the franchisor by providing a better understanding of the business and the legal relationship between the franchisor and the franchisee.” (Emphasis added.) (Ill. Rev. Stat. 1977, ch. 121½, par. 702.)

As the emphasized language indicates, the aim of the Act is to ensure that Illinois franchisees have maximum access to information not only about the financial health of the franchisor, but the terms and conditions of the franchise contract as well. (See also Ill. Rev. Stat. 1977, ch. 121½, pars. 705(18) through 705(21) (disclosure statement must contain information about whether franchise must be owner operated; whether franchise contract contains territorial protection clause or covenant not to compete; and whether and upon what conditions the franchisor may terminate the franchise).) This policy is as applicable to franchisors who have already disclosed financial information to the Securities and Exchange Commission and other public agencies as it is to all other franchisors; it is anomalous to view this language as providing support for an exemption from the disclosure requirements created by the Act.

The legislature’s purpose in creating the “public interest” exemption does not appear in either the statute or in the legislative history of the statute. In such circumstances I believe that the legislative classification must bear a fair and substantial relationship to the purposes that the People’s counsel in a litigated proceeding attribute to the legislature. Cf. Schweiker v. Wilson (1981), 450 U.S. 221, 244-45, 67 L. Ed. 2d 186, 204-05, 101 S. Ct. 1074, 1088 (Powell, Brennan, Marshall and Stevens, JJ., dissenting).

The People assert and the majority agrees that the purpose of the “public interest” exemption is to exempt franchisors from the disclosure requirements when the financial information that they must disclose under the statute is available from other sources. If this were the real purpose of the exemption, the legislature could easily have stated it in specific language. As stated, the “public interest” standard is too vague to guarantee that is how it will be applied. The “public interest” standard is more of a slogan than an articulable and reviewable standard. This vague standard would sustain an exemption for many franchisors even though information about their financial condition is not available from any other sources. The same vague standard could also be used to deny the exemption to some franchisors even though such information is readily available. The imprecision of the “public interest” standard is too obvious to withstand equal protection scrutiny in this criminal proceeding. Because the exemption power granted to the Attorney General is unconstitutional, the criminal sanctions imposed in this case are void.

n

The “public interest” exemption provided in'section 12 also violates the nondelegation doctrine. This court has often recognized “the guiding principle that intelligible standards or guidelines must accompany legislative delegations of power.” (Thygesen v. Callahan (1979), 74 Ill. 2d 404, 408.) This principle arises both from the separation of •powers doctrine (Ill. Const. 1970, art. II, sec. 1, art. IV, sec. 1) and from the recognition that the delegation of pervasive legislative powers to the executive can ultimately endanger civil liberties.

In Stofer v. Motor Vehicle Casualty Co. (1977), 68 Ill. 2d 361, this court established a three-part test for reviewing legislative delegations of power to the executive. In order to be valid the legislature must sufficiently identify:

“(1) The persons and activities potentially subject to regulation;

(2) the harm sought to be prevented; and

(3) the general means intended to be available to the administrator to prevent the identified harm.” 68 Ill. 2d 361, 372.

The exemption provided for by section 12 of the Franchise Disclosure Act fails to comply with these requirements. Neither section 12 nor any other provision of the Act identifies what persons are to receive the exemption or what harm the legislature sought to avoid by providing this exemption from the statute’s criminal penalties. The “public interest” criteria established in section 12 provides only a vague and inappropriate guide to the Attorney General for evaluating a franchisor’s application for the exemption.

In Thygesen v. Callahan (1979), 74 Ill. 2d 404, this court declared unconstitutional a statute that authorized the Director of Financial Institutions to establish a maximum fee schedule for community currency exchanges. The only limitation on the Director’s power to establish the rates was that they be “reasonable” and “relevant.” (Ill. Rev. Stat. 1977, ch. 16½, par. 49.) The court declared that such “ ‘uncabined discretion’ ” is unconstitutional, especially where the legislature also failed to communicate to the Director the harm that it intended to prevent in mandating a maximum fee schedule. 74 Ill. 2d 404, 411, quoting Stofer v. Motor Vehicle Casualty Co. (1977), 68 Ill. 2d 361, 373.

■ The “public interest” standard involved in this case is no more specific than the “reasonable” and “relevant” standard involved in Thygesen. Moreover, the harm to be alleviated by the exemption is no more precisely identified here than it was in Thygesen. Contrary to the majority’s assertion, the purpose the legislature had in providing the exemption in section 12 is not evident from the statement of the legislature’s purpose in enacting the Franchise Disclosure Act. As noted above, the statute clearly indicates that it aims to provide Hlinois franchisees with easy access to information about both the financial health of the franchisor and the terms and conditions of the franchise contract. (See, e.g., Ill. Rev. Stat. 1977, ch. 121½, pars. 702, 705(18) through 705(21).) This policy is as relevant to franchisors with their shares listed on a national stock exchange as it is to the smaller, less well-capitalized franchisors, and it does not provide any meaningful guidance to the Attorney General on how to use the power to grant exemptions from the disclosure requirements “in the public interest.”

The “public interest” exemption provided in section 12 fails to identify sufficiently the persons who may receive the exemption and the harms that it is intended to alleviate. It therefore violates the nondelegation doctrine and is unconstitutional and void.

ill

In conclusion, I believe that the granting of an untrammeled power to the Attorney General to exempt certain persons from criminal liability violates equal protection and the nondelegation doctrine. The vague “public interest” standard for granting the exemptions creates too great a danger of arbitrary classification to uphold, especially when the personal liberty of the defendant may be at stake in a criminal proceeding. I would declare section 12 unconstitutional; and because it is an integral component of the criminal sanctions imposed under the Act, I would declare void all criminal sanctions that are subject to the exemption.

In the present case I would affirm the appellate court’s conclusion that the convictions based on counts I, II and IV are void. For the reasons stated in Justice Moran’s separate opinion, I would also affirm the appellate court’s judgment which reversed the conviction based on count III.