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Wyoming State Bd. of Examiners of Optometry v. Pearle Vision Center, Inc. - 1989 WY 2 :: 1989 :: Wyoming Supreme Court Decisions :: Wyoming Case Law :: US Case Law :: US Law :: Justia
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Wyoming State Bd. of Examiners of Optometry v. Pearle Vision Center, Inc.1989 WY 2767 P.2d 969Case Number: 86-323Decided: 01/04/1989Supreme Court of Wyoming
WYOMING STATE BOARD OF EXAMINERS OF OPTOMETRY, APPELLANT (PLAINTIFF),
PEARLE VISION CENTER, INC., A CORPORATION, AND ROBERT L. HOLLY, O.D., AN INDIVIDUAL, APPELLEES (DEFENDANTS).
Appeal from the District Court, LaramieCounty, Joseph F. Maier, J.
Steven F. Freudenthal, Freudenthal, Salzburg, Bonds & Rideout, P.C., Cheyenne, for appellant (plaintiff).
Brent R. Kunz, Hathaway, Speight, Kunz, Trautwein & Barrett, Cheyenne, for appellee (defendants), Pearle Vision Center, Inc.
Dennis M. Grant, Grant & Osborn, Cheyenne, for appellee (defendant), Robert L. Holly, O.D.
Before CARDINE, C.J., THOMAS, URBIGKIT and MACY, JJ., and BROWN, J., Retired.
[¶1.] At issue in this case is whether a franchise agreement for the marketing of optical products and services, entered into between a certificated optometrist and a corporation, results in fee splitting or the employment of a "steerer," both in violation of § 33-23-110(b)(i), W.S. 1977. Additional questions are raised as to whether the franchiser was engaged in the practice of optometry without a valid certificate of registration in violation of § 33-23-103, W.S. 1977, or, as a general business corporation, was engaged indirectly in the practice of optometry in violation of § 33-23-111(b)(iv), W.S. 1977. Section 33-23-110(b)(i), W.S. 1977, provides:
"(b) `Unprofessional and dishonest conduct' as used in this act is hereby declared to mean:
"(i) The loaning of his license by any licensed optometrist to any person; the employment of `cappers' or `steerers' to obtain business, `splitting' or dividing a fee with any person or persons, the advertising by any means whatsoever of optometric practice or treatment or advice in which untruthful, improbable, misleading or impossible statements are made; * * *."
Section 33-23-103, W.S. 1977, provides:
"(a) It is unlawful for any person in the state of Wyoming to practice or attempt to practice optometry or to advertise, or hold himself out as qualified to fit or adjust any lenses or lens in any manner or form as an aid to human eyesight, without first obtaining a certificate to practice optometry."
Section 33-23-111(b), W.S. 1977, provides:
"(b) It is unlawful:
"(iv) For any person or persons not holding a certificate or any corporation, directly or indirectly, to practice optometry by employment of or contract with a person holding a certificate, or otherwise, provided that one holding a certificate may accept employment from a person, partnership, association or corporation to practice optometry with respect to the employees of such person, partnership, association or corporation."
The district court denied the injunctive relief sought by the Wyoming State Board of Examiners of Optometry (Board), holding that the arrangement between Pearle Vision Center, Inc. (Pearle), as the franchiser, and Robert L. Holly (Holly), a Board certificated optometrist as franchisee, did not transgress any of these statutory provisions. We are in accord with the judgment of the district court, and we affirm that judgment.
[¶2.] As appellant, the Board states the following issues in urging a reversal of the district court:
"1. Consideration of all the pleadings, affidavits, depositions, stipulated exhibits, and evidence presented to the District Court discloses that the District Court erroneously granted summary judgment in favor of the defendants.
"2. Consideration of all pleadings, affidavits, depositions, stipulated exhibits, and evidence presented to the District Court discloses that there was no genuine issue of material fact, and that Plaintiff was entitled to judgment as a matter of law."
Pearle, as appellee, restates the issues on appeal in this way:
"1. Whether Defendants Pearle and Holly, by virtue of their having executed a franchise agreement and attendant agreements, have established a relationship which places Defendant Holly under the direction and control of Defendant Pearle?
"2. Whether the relationship between Defendants Pearle and Holly constitutes indirect practice of optometry by a corporation in violation of W.S. § 33-23-111(b)(iv)?"
Holly also defends the decision of the district court in his favor, and his statement of the issues is:
"1. Did the District Court err in granting summary judgment in favor of Defendant, Robert L. Holly?
"2. Does the evidence presented to the District Court, in the way of pleadings, affidavits, depositions, exhibits and oral argument, support the district court's finding that there was no genuine issue of material fact and that Defendant, Robert L. Holly, was entitled to judgment as a matter of law?"
[¶3.] On September 16, 1985, the Board brought an action seeking injunctive relief and monetary damages against Holly and Pearle. This action followed the formal opinion of the Wyoming attorney general issued on August 20, 1985 which, in pertinent part, said:
"Section 33-23-111(b)(iv), W.S. 1977, precludes a corporation from the practice of optometry in Wyoming. This restriction includes any attempt by a corporation to practice optometry indirectly through the services of an individual who holds a certificate to practice optometry. A franchise agreement between a corporation and an individual licensed to practice optometry gives the franchiser a certain amount of control over the licensed practitioner. Therefore, this form of corporate control is also prohibited by statute."
The Board alleged in its complaint that Holly and Pearle were engaged in fee splitting in violation of § 33-23-110(b)(i), W.S. 1977; Holly was employing Pearle as a "steerer" to obtain business in violation of § 33-23-110(b)(i), W.S. 1977; Pearle and/or Holly were engaged in "canvassing" in violation of § 33-23-111(b)(i), W.S. 1977; Pearle was engaged in the practice of optometry without a valid certificate of registration in violation of § 33-23-103, W.S. 1977; and Pearle, a general business corporation, was engaged indirectly in the practice of optometry in violation of § 33-23-111(b)(iv), W.S. 1977.
[¶4.] Holly and Pearle filed separate answers to the Board's complaint. In each answer, the respective defendant alleged that the relationship between Holly and Pearle was not prohibited by statute or, to the extent it might be prohibited by statute, the prohibition is unconstitutional. Discovery was pursued, and the several parties then moved for summary judgment on all issues. A hearing was set on the motions for summary judgment and, prior to that hearing, the Board withdrew its claim for monetary damages and dropped its allegations that Pearle and/or Holly were engaged in canvassing. The district court received briefs and heard oral argument and then granted summary judgment to Pearle and Holly on all remaining issues and denied the summary judgment sought by the Board.
[¶5.] Pearle is a Texas corporation, and it owns and operates retail optical stores in several states. Holly was licensed as an optometrist in Wyoming in 1983. Early in 1985, Holly wrote to Pearle and suggested that he would be interested in acquiring a Pearle franchise. Several letters from Pearle to Holly explaining various arrangements by which Holly could acquire a Pearle franchise are included in the record. Ultimately, Holly and Pearle agreed to an arrangement that required Holly to enter into a sublease of office space and a separate franchise agreement with Pearle. The action filed by the Board challenged the relationship between Pearle and Holly pursuant to the franchise agreement. The complaint did not allege that the agreement is a sham, or that the true relationship between Pearle and Holly was anything other than what was set forth in the agreement.
[¶6.] The sublease was for office space at the Frontier Mall in Cheyenne, Wyoming. Pursuant to the sublease, Holly agreed to pay Pearle a base rate and, in addition, a percentage of his total sales in excess of an established amount each month. Approximately two-thirds of the subleased office space was used for dispensing optical goods, and the remaining space was used by Holly to treat patients and perform optometric services. Pictures of the office demonstrate that a wall divided the two areas, separate entrances were available for each area in the office, and a common doorway provided internal access between the two offices.
[¶7.] The franchise agreement provided for the purchase by Holly of a Pearle franchise. The total consideration was $155,000, and $15,000 was paid in cash with the remaining $140,000 financed by a ten-year loan from Pearle with an interest rate of three percent over the current prime rate. The purchase agreement for the franchise is a carefully drawn and detailed document. It sets forth the duties of the franchiser and the franchisee, and delineates the manner in which the franchisee is expected to operate the franchise. In forty-five pages, the agreement sets forth eighteen separate provisions with several subsections in each provision. The specific terms of both the sublease and the franchise purchase agreement will be discussed in connection with the disposition of the several issues.
[¶8.] Essentially, the Board's two issues are treated together in a series of arguments. The first argument of the Board is that the trial court erred because it did not find that Holly and Pearle violated the provision of § 33-23-110(b)(i), W.S. 1977, which prohibits "`splitting' or dividing a fee." The Board supports its claim that Holly was "splitting" or dividing fees with Pearle by reference to a required royalty which the franchise agreement provided in favor of Pearle. In pertinent part, the franchise agreement provides:
"7.4 Franchise Royalty
"(A) Except as provided in paragraph 7.4(D), during the term hereof Franchisee shall pay Pearle a non-refundable monthly royalty equal to eight and one-half percent (8 1/2%) of Franchisee's monthly Gross Revenues (as hereinafter defined) from the sale of goods and services at, from or in conjunction with the Pearle Vision Center. Royalties shall be paid monthly on or before the fifteenth (15th) day of the month following the month during which such goods or services were sold. In the event Franchisee's annual statement of Gross Revenues required pursuant to Paragraph 9.2 hereof discloses a deficiency in royalty payments paid for such year, Franchisee shall pay Pearle the amount of such deficiency at the time the annual statement is delivered. No portion of the royalties collected by Pearle shall be refundable under any circumstances.
"(B) Definition of Gross Revenues
"The term `Gross Revenues' as used in this Agreement shall include all sums charged (whether under third party reimbursement programs or to regular customers and patients and whether or not received in full at time of sale) for optical and ophthalmic goods, merchandise and services and (as permitted by law) optometric and ophthalmologic services and merchandise sold or provided at, from or in conjunction with the Pearle Vision Center licensed herein. The term Gross Revenues excludes federal, state, county, and city sales taxes or other similar taxes levied upon customers on the basis of sales transactions and Allowable Sales Deductions (as hereinafter defined). `Allowable Sales Deductions' include the balance due on customers' unclaimed orders, reimbursements and price adjustments to insurance carriers and governmental agencies and cash refunds to customers. Allowable Sales Deductions do not include monies lost on returned checks, credit card service charges or any other amounts not specifically included herein.
"(C) If Franchisee is not permitted by law to include in Gross Revenues sums charged for optometric or ophthalmologic services, or does not have access to information necessary to calculate such sums, then Gross Revenues for all purposes of this Agreement shall mean Gross Revenues as determined under 7.4(B) hereof (without including sums charged for optometric and ophthalmologic services) multiplied by 1.2. Pearle and Franchisee agree that such resulting amount is reasonably equivalent to the Gross Revenues the Franchisee would have under paragraph 7.4(B) hereof if Franchisee had included in Gross Revenues the sums charged for optometric and ophthalmologic services.
"7.7 Impossibility
"If, by operation of law or otherwise, the royalty described in Paragraph 7.4 above cannot be based upon Gross Revenues as herein defined, the parties shall thereupon renegotiate a royalty applicable to revenues from such products and services as may lawfully be included in Gross Revenues or an alternative fee, which shall be sufficient to pay Pearle a return equal to the royalty provided for herein."
[¶9.] The franchise agreement unequivocally requires that monies received by Holly for optometric services be included in calculating the amount of royalty due under the agreement. Whether this requirement transgresses the statutory prohibition described as "`splitting' or dividing a fee" depends upon a conclusion with respect to the nature of the conduct the legislature intended to proscribe. See McArtor v. State, 699 P.2d 288 (Wyo. 1985); Hurst v. State, 698 P.2d 1130 (Wyo. 1985).
[¶10.] In determining the intention of the legislature, we first examine the language of the statute in light of the purposes sought to be accomplished. K N Energy, Inc. v. City of Casper, 755 P.2d 207 (Wyo. 1988); Amoco Production Company v. State Board of Equalization, 751 P.2d 379 (Wyo. 1988); Hurst, 698 P.2d at 1130; School Districts Nos. 2, 3, 6, 9 and 10 in Campbell County v. Cook, 424 P.2d 751 (Wyo. 1967). In considering the statutory language, words are accorded their plain and ordinary meaning unless some indication is present that the legislature intended a different meaning. Amoco, 751 P.2d at 379; Wyoming State Department of Education v. Barber, 649 P.2d 681 (Wyo. 1982); Croxton v. Board of CountyCommissioners of NatronaCounty, 644 P.2d 780 (Wyo. 1982). We assume the legislature intended to invoke a well-settled meaning of a word in the law at the time of its usage unless an unmistakable indication to the contrary is found. Sorenson v. State, 604 P.2d 1031 (Wyo. 1979); Johnson v. Safeway Stores, Inc., 568 P.2d 908 (Wyo. 1977).
[¶11.] The purpose of legislation prohibiting the "`splitting' or dividing of a fee," as the context demonstrates in this instance, is to protect members of the consuming public; it is not to promote the economic welfare of optometrists. See People v. Sterling Optical Company, 26 Misc.2d 412, 209 N.Y.S.2d 953 (1960); State ex rel. Sisemore v. Standard Optical Company of Oregon, 182 Or. 452, 188 P.2d 309 (1947); Golding v. Schubach Optical Company, 93 Utah 32, 70 P.2d 871 (1937). When the express language of the statute is examined in the context of a purpose of public protection, it is clear that the activity which the legislature intended to prohibit is that which historically has been perceived as detrimental to the public welfare. That activity is described by invoking the slang terminology of "fee splitting," which is defined in Webster's Third International Unabridged Dictionary (1971) as "a dividing of a professional fee for a specialist's medical services with the recommending physician." That purpose would not extend to any conclusion that the legislature intended to prohibit every business relationship in which an optometrist agreed to pay a percentage of his optometric proceeds for a consideration furnished to him unless that consideration included providing patients or referring patients to the optometrist. See also, Lieberman v. Connecticut State Board of Examiners in Optometry, 130 Conn. 344, 34 A.2d 213 (1943).1
[¶12.] The Board did not establish any facts sufficient to raise an issue with respect to whether Holly divides his fees with Pearle. The record establishes that Holly does not pay Pearle to send or direct patients to him. Considered in the context of the agreement, the royalty payment is for the privilege of operating the PearleVisionCenter. The fact that the consideration for that privilege is based in part upon a percentage of the proceeds derived from furnishing optometric services does not make it an agreement for "`splitting' or dividing a fee" any more than would a consideration for the sublease which was based in part upon a percentage of the optometrist's income. The Board concedes that this latter is not prohibited. Furthermore, this franchise agreement encompasses alternative methods for computing the appropriate royalty fee. We do not understand that the Board would argue that, should Pearle charge a set franchise fee for the operation of the PearleVisionCenter, Holly would be prohibited by the statute from paying the set fee with monies he received from patients for optometric services.
[¶13.] In the absence of some evidence that Pearle in fact sent or referred patients to Holly for remuneration, the district court correctly concluded that there was no genuine issue of material fact with respect to any practice of "`splitting' or dividing a fee." There, indeed, was evidence that Holly's optometric office was adjacent to the PearleVisionCenter which he managed, and there was a common doorway. The mere placement of an office in a clearly desirable business location, without more, could not lead to a conclusion that the statute was violated. We hold that the district court correctly entered summary judgment in favor of Pearle and Holly on that contention by the Board.
[¶14.] We have not ignored the Board's perfunctory contention that Pearle's "advertising specifically directed or encouraged `patients' to go to Holly." This claim is more closely related to the Board's allegation that Holly employed "cappers" or "steerers" to obtain business. The Board did not present evidence by affidavit, or otherwise, to support this statement and, ordinarily, its resolution would be a finding of fact to be made by the appropriate arbiter if there were some evidence to pose a material issue in that regard. In the absence of evidence structuring an issue of material fact with respect to whether Holly paid Pearle to direct patients to him through Pearle's advertising, the trial court was not foreclosed from entering the summary judgment on the issue of dividing of fees. See Bettencourt v. Pride Well Service, Inc., 735 P.2d 722 (Wyo. 1987).
[¶15.] The only evidence that might lead to an inference in this regard is copies of advertisements which were inserted in the record. A review of those advertisements discloses that the consumers are directed to Pearle and not to Holly for optometric services. Pearle and Holly each have a legitimate interest in promoting the services of Pearle and, therefore, both pay a portion of the advertising costs. In the advertisements introduced into the record, Holly's name is used only as the owner and operator of Pearle, although in one advertisement he is alluded to by a statement that a doctor of optometry "who is right next door" can give any customer a complete eye examination. These advertisements fall short of demonstrating, however, that Pearle, or Holly in collaboration with Pearle, encouraged or solicited patients for Holly's optometric services. All of the advertisements promote the activities of Pearle, and it would be a leap in logic to conclude that this demonstrated the division of Holly's fee for optometric services.
[¶16.] The Board has not directed us to any statute, nor have we found one, which prohibits an optometrist from owning and operating an optical dispensing establishment. Holly, as owner of the store, has a legitimate interest in attracting customers by lawful means. The record does not lend itself to any conclusion that Holly is inhibited from using his own name to attract customers to his PearleVisionCenter. We note that the legislature has prohibited any advertising that consists of "untruthful, improbable, misleading or impossible statements * * *." Section 32-23-110(b)(i), W.S. 1977. It has not chosen, however, to prohibit optometrists from advertising and, if the optometrist may advertise his services, we can conceive no reason that would inhibit his joint advertisement of the services of his franchised optical dispensing store so long as the advertisements do not consist of "untruthful, improbable, misleading or impossible statements." The evidence of advertisements certainly did not structure a genuine issue of material fact with respect to the division of fees.
[¶17.] We must address the advertisements in the context of the Board's contention that Holly violated § 33-23-110, W.S. 1977, because he engaged in "the employment of `cappers' or `steerers' to obtain business * * *." The Board, in presenting this argument, relies upon the advertising contribution provision contained in the franchise agreement. It insists that this provision places Pearle in the position of steering customers to Holly. The essence of the accused provision, Section 8.1 of the franchise agreement, requires that Holly, the franchisee, make an advertising contribution of eight percent of gross monthly revenues to Pearle. Three-fourths of that amount, six percent of the gross monthly revenues, is used by Pearle for the purchase of advertising, both local and national, promoting the various Pearle Vision Centers, whether company-owned or franchises. One-fourth, two percent of gross monthly revenues, is used by Holly, the franchisee, for local advertising placed through Pearle's regional manager of marketing. Section 8.4 of the agreement also provides that Holly, as franchisee, may engage in advertising and promoting his PearleVisionCenter and the products and services offered at his own expense, but requires that the advertising be submitted to Pearle for its prior written approval.2 The essence of the Board's argument is that this advertising contribution is different from "advertising placed by an optometrist on a fee basis with radio station, newspaper, or through an advertising agency, where payment is independent of a percentage of the optometrist's gross revenues and the optometrist retains final authority on advertising content." We concede that the Board is correct; the advertising relationship between Pearle and Holly is different from that of a buyer and seller of advertising. We cannot concede, however, that the difference makes the relationship one prohibited by statute. Furthermore, we do not accept the contention that the retention by Pearle of the right to control the content of advertising constitutes prohibited activity because it has an interest in maintaining a uniform consistency in the advertisements utilizing its name.