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COMMONWEALTH PENNSYLVANIA v. WATSON & HUGHEY COMPANY ET AL. (08/21/89)

decided: August 21, 1989.

COMMONWEALTH OF PENNSYLVANIA, BY ERNEST D. PREATE, JR., ATTORNEY GENERAL, PLAINTIFF,
v.
WATSON & HUGHEY COMPANY ET AL., DEFENDANTS



COMPLAINT IN EQUITY (WITH NOTICE TO PLEAD).

COUNSEL

Mollie A. McCurdy, Chief Deputy Atty. Gen., Mark A. Pacella, Mary Beth Osborne, Deputies Attys. Gen., and Ernest D. Preate, Jr., Atty. Gen., Charitable Trust and Organizations Section, Office of Atty. Gen., Harrisburg, for plaintiff.

Theodore A. Adler, Reager, Selkowitz & Adler, P.C., Harrisburg, and Errol Copilevitz, John P. Jennings, Jr., Copilevitz, Bryant, Gray & Jennings, P.C., Kansas City, Mo., for Watson & Hughey Co., et al., defendants.

Barry and McGinley, JJ., and Kalish, Senior Judge.

Author: Mcginley

[ 128 Pa. Commw. Page 486]

The Commonwealth of Pennsylvania by Ernest D. Preate, Jr., Attorney General, (Commonwealth) filed a complaint in equity and motion for preliminary injunction alleging violations of the Unfair Trade Practices and Consumer Protection Law*fn1 (Consumer Protection Law) and the Charitable Organization Reform Act*fn2 (CORA). The Commonwealth requests numerous, alternative reliefs, chief among which are permanent injunctive relief, disgorgement of funds received, and civil fines and penalties. This matter is before us now on preliminary objections in the nature of a demurrer.

On or about February 16, 1989, the Commonwealth filed a complaint in equity and motion for preliminary injunction

[ 128 Pa. Commw. Page 487]

    against the following defendants: The Watson and Hughey Co. (Watson & Hughey); Jerry C. Watson (Watson) and Byron Chatworth Hughey, (Hughey), partners in the Watson and Hughey Co.; Robert R. Stone, Esq. (Stone), a Washington, D.C., attorney who wrote letters on behalf of some of the defendants; seven not-for-profit charitable organizations;*fn3 and the Foxhall Corporation, a/k/a Wahau Corp., t/a Social Security Protection Bureau (Social Security Protection Bureau), a D.C. for-profit corporation.

On March 21, 1989, this Court signed an order agreed to by the parties which prohibits defendants from conducting sweepstakes solicitations in Pennsylvania until June 15, 1989, and which permanently enjoins defendants from using any indicia of representation of a lawyer in any solicitation for monies from Pennsylvania residents through sweepstakes or contests. The order also continued generally the Commonwealth's motion for preliminary injunction.

Defendants' preliminary objections in the nature of a demurrer are deemed to admit all well-pleaded facts and all inferences reasonably deduced therefrom, but not the Commonwealth's conclusions or averments of law. Upon examination, we may sustain the objections only if the Commonwealth's complaint fails to state a cause of action which, if proved, would entitle them to the relief requested, and we must overrule the objections if any doubt remains as to the propriety of dismissing the complaint. Madden v. Jeffes, 85 Pa. Commw. 414, 482 A.2d 1162 (1984).

The Commonwealth asks this Court to permanently enjoin the defendants from engaging in specified, deceptive practices which the defendants allegedly utilized in their solicitation schemes, and the Commonwealth asks this Court to

[ 128 Pa. Commw. Page 488]

    permanently enjoin the defendants from engaging in any other unfair and deceptive acts or practices.*fn4 The Commonwealth also asks this Court to permanently enjoin the defendants from soliciting contributions and from conducting direct mail sweepstakes in this Commonwealth. This latter requested relief goes beyond the remedies which are provided for under either CORA or the Consumer Protection Law.

The defendants raise the following issues by way of preliminary objections: 1) that CORA is unconstitutional as applied to these defendants in that it violates the 1st and 14th amendments to the U.S. Constitution; 2(a) that the Consumer Protection Law is inapplicable to charitable organizations; 2(b) that the Consumer Protection Law is unconstitutional as applied to these defendants in that it violates the 1st and 14th amendments to the U.S. Constitution; and 3) that the Defendant Social Security Protection Bureau did not violate ยง 1207 of the Business Corporation Law.

We first address defendant's contention that CORA is unconstitutional as applied to these defendants. Defendants cite Riley v. National Federation of the Blind of North Carolina, 487 U.S. 781, 108 S.Ct. 2667, 101 L.Ed.2d 669 (1988) and its forebears, Schaumburg v. Citizens for a Better Environment, 444 U.S. 620, 100 S.Ct. 826, 63 L.Ed.2d 73 (1980) and Secretary of State of Maryland v. Joseph H. Munson Co., 467 U.S. 947, 104 S.Ct. 2839, 81 L.Ed.2d 786 (1984), in support of their position. These cases state that the speech of charitable ...


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