TO BE PUBLISHED IN THE OFFICIAL REPORTS
OFFICE OF THE ATTORNEY GENERAL State of California
DANIEL E. LUNGREN Attorney General

______________________________________ OPINION : : No. 98-208 of :

: July 15, 1998 DANIEL E. LUNGREN : Attorney General :
: ANTHONY DaVIGO : Deputy Attorney General :

:

______________________________________________________________________ ZORAN K. BASICH, a professi onal law corporation, has re quested this office to grant leave to sue in quo warranto upon the following:
ISSUES OF FACT OR LAW Are NEXTEL COMMUNICATIONS, IN C. and RECOMM COMMUNICATIONS, INC., by virtue of a single complaint of alle ged unlawful deceptive practice, unlawfully holding or exercising their corporate franchises?
CONCLUSION NEXTEL COMMUNICATIONS, INC. and RECOMM COMMUNICATIONS, INC. are not, by virtue of a single compla int of alleged unlawfu l deceptive practice, unlawfully holding or exercising their corporate franchises.
PARTIES ZORAN K. BASICH, a profe ssional law corporation ("relator"), contends that NEXTEL COMMUNICATIONS, INC. and RECOMM COMMUNICATIONS, INC. ("defendants") are each unlawfully holding and exercising a corporate franchise within this state.
MATERIAL FACTSDefendants are corporations organized unde r the laws of this state to conduct cellular radio/phone business in th is state. Relator al leges essentially that in April of 1997, relator entered into a contract with defendants for the purchase of 10 cellular radio/phones. In connection with this transaction, defendants made certain representations regardin g the quality, range, reception, and capabilities of the equipment. Relator alleges that these representations were false and fraudulent. Defendant Nextel (defendant Recomm did not make an independent appearance in these proceedings) denies the allegations and alleges affirm atively that relator signed a waiver of all express and implied warranties.
ANALYSIS In deciding whether to grant leave to sue in the name of the People of the State of California in a quo warranto act ion, we consider initiall y whether there exists a substantial question of law or f act that requires judicial re solution, and if so, whether the proposed action would serve the overall pub lic interest. (81 Ops.Cal.Atty.Gen. 98, 100 (1998).)
Code of Civil Procedure sect ion 803 provides as follows: "An action may be brought by the attorney-gen eral in the name of the people of this state . . . upon a complaint of a private party . . . against a corporation, e ither de jure or de facto, which usurps, intrudes into, or unlawfullyholds or exercises any franchise, within this state . . . ." This statutory remedy, in the nature of quo warranto, is concurrent with that provided by Corporations Code section 1801 whereby the Atto rney General is authorized to bring an action to dissolve and forfeit the existence of a corporation that has seriously offended against a provision of the laws regulating corporations, has fraudulently abused or usurped corporate privileges or powers, or ha s violated any provision of law by any act or default that is a ground for forfe iture of corporate existence. ( Citizens Utilities Co. v Superior Court (1976) 56 Cal.App.3d 399, 405.) Accordingly, we must determine whethe r defendants have usurped or unlawfully exercised their respective franchises (Code Ci v. Proc., § 803) or have fraudulently abused or usurped their corporate privileg es or powers (Corp. Code, § 1801). In People v. Milk Producers Assn. (1923) 60 Cal.App. 439, 443, the court stated: "It certainly is a matter of public concern that a corporation, unde r the color or guise of a nonprofit concern, is usurping the functions of an ordinary corporation by employing its capital to engage in business for a profit and is combining with others in the illegal restraint of trade. Such a corporation is notonly usurping a franchise in violation of the quasi -contract from which [it] derives its power from the state, but, in violating the law, it is exercising a power which the state deni es to all persons. The illegal practicescomplained of are by the complaint made a f eature of the business conducted for a profit - a kind of business which defendant has no right to engage in." We deduce from the foregoing that corporate conduct may constitute a usurpation of franchise (1) which may not be unlawful initself, but which is in excess of the corporation's powers (People v. Milk Producers Assn. , supra , 60 Cal.App. 439 [nonprofit corporation engaged in business for profit]; People v. California Protective Corp . (1926) 76 Cal.App. 354, 361 [corporate practice of law] or (2) which is unlawful, although not in excess of the corporation's powers ( People v. Milk Producers Assn ., supra , 60 Cal.App. 439 [combinations in restra int of trade]; 22 Ops.Ca l.Atty.Gen. 113, 116-117 (1953) [insurance company's attempt to influence jurors]). In the matter under consideration, it is c ontended that defendants have unlawfully exercised and fraudulently abus ed their corporate franchises . In support thereof, it is alleged, based on the facts summarized above , that defendants engaged in an unlawful deceptive trade practice in vi olation of Civil Code secti on 1770, by (1) representing that goods or services are of a particular standar d, quality, or grade, or that goods are of a particular style or model, when in fact th ey are of another, (2) advertising goods or services with intent not to sell them as a dvertised, (3) representing that a transaction confers or involves rights, remedies, or obliga tions which it does not ha ve or involve, or which are prohibited by law, and (4) representi ng that a subject of a transaction has been supplied in accordance with a previous re presentation, when it has not. (Civ. Code, § 1770, subd. (a)(7), (9), (14), (16).) Thus, we are concerned with alleged c onduct that would be unlawful, although not in excess of defendants' corporate powers. Th is is not, however, th e end of the inquiry. As further explained in People v. Milk Producers Assn ., supra , 60 Cal.App. at 444: ". . . We think that, as has been indicated in some of the cases, the attorney-general has some discretion in passing upon complaints of public wrong ( Lamb v. Webb , 151 Cal. 451); that he ought not to sue where the reas ons urged for the beginning of an action in quo warranto are trivial or the purpose is to redr ess some grievance which is altogether private . . . ." In our view, the sole transaction that is th e basis for the instant application for leave to sue is, insofar as public injury is concerne d, both insubstantial and altogether private. In the first instance, actual damages resul ting from the alleged conduct are adequately remediable at law, in addition to punitive damages, costs, attorney's fees, and other proper relief. (Civ. Code, § 1780; Bus. & Prof. Code, § 17500 et seq.) With respect to the essentially private nature of the alleged injury, we stated in 80 Ops.Cal.Atty.Gen. 290, 292-293 (1997), quoting 9 Ops.Cal.Atty.Gen. 1, 2 (1947), as follows: "'The right to proceed in quo warranto is time honored, and the Attorney General is of the opinion that in exercising the powe rs vested in him he should give carefulconsideration to the question as to whether the leave to sue should issue in each case to the end that there will be presented to the courts actions brought in the name of the People of the State only in cases where such a course is the only one open to the proposed relator. In other words, in matters solely of private con cern, it should be the policy to deny quo warranto in cases where there is adequate remedy otherwise available to the parties claiming to be aggrieved. People v. Milk Producers , 60 Cal.App. 439.'" (Italics added.) Finally, as summarized in People v. Dashaway Assn . (1890) 84 Cal. 114, 119:
"Cases of forfeiture are said to be divided into two great classes:
"1. Cases of perversion; as where a corporation does an act inconsistent with the nature and destructive of the ends and purposes of the grant. In such cases, unless the perversion is such as to amount to an injury to the public, who are interested in the franchise, it will not work a forfeiture

. "2. Cases of usurpation; as where a corporation exercises a power which it has no right to exercise. In this last case the questi on of forfeiture is not dependent, as in the former, upon any interest or injuryto the public." (Italics added.) Giving the application herein its proper weight, we find no substantial question of law or fact that requires j udicial resolution. Leave to sue in quo warranto is DENIED.

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