68 Wis.2d 523, 229 N.W.2d 622
STATE of Wisconsin, Respondent,
v.
Mitchell LAMBERT, Appellant.
No. State 91.
Supreme Court of Wisconsin.
June 3, 1975.
HEFFERNAN, Justice.
On August 20, 1971, Mitchell Lambert, a
master distributor for Holiday Magic, Inc., was
found guilty of the charge of promoting participation
in a chain distributor system, in violation of
Wisconsin Administrative Code Ch. Ag
122.03.[FN1] That regulation was
promulgated pursuant to sec. 100.20, Stats.
[FN2]
FN1. 'Ag 122.01 Unfair trade
practice. The promotional use of a chain
distributor scheme in connection with the
solicitation of business investments from
members of the public is an unfair trade
practice under section 100.20, Wis.Stats.
When so used the scheme serves as a lure to improvident and uneconomical investment.
Many small investors lack commercial
expertise and anticipate unrealistic profits
through use of the chance to further
perpetuate a chain of distributors, without
regard to actual market conditions affecting
further distribution and sale of the property
purchased by them or its market acceptance
by final users or consumers. Substantial
economic losses to participating distributors
have occurred and will inevitably occur by
reason of their reliance on perpetuation of
the chain distributor scheme as a source of
profit.
'Ag 122.02 Definitions. (1) 'Chain
distributor scheme' is a sales device whereby
a person, upon a condition that he make an
investment, is granted a license or right to
recruit for profit one or more additional
persons who also are granted such license or
right upon condition of making an
investment and may further perpetuate the
chain of persons who are granted such
license or right upon such condition. A
limitation as to the number of persons who
may participate, or the presence of
additional conditions affecting eligibility for
the above license or right to recruit or the
receipt of profits therefrom, does not change
the identity of the scheme as a chain
distributor scheme.
'(2) 'Investment' is any acquisition, for a
consideration other than personal services, of
personal property, tangible or intangible, for
profit or business purposes, and includes,
without limitation, franchises, business
opportunities and services. It does not
include real estate, securities registered under
chapter 551, Wis.Stats., or sales
demonstration equipment and materials
furnished at cost for use in making sales and
not for resale.
'(3) 'Person' includes partnerships,
corporations and associations.
'Ag 122.03 Prohibition. No person
shall promote, offer or grant participation in
a chain distributor scheme.'
FN2. '100.20 Methods of competition
and trade practices. (1) Methods of
competition in business and trade practices in
business shall be fair. Unfair methods of
competition in business and unfair trade
practices in business are hereby prohibited.
'(2) The department, after public hearing,
may issue general orders forbidding methods
of competition in business or trade practices
in business which are determined by the
department to be unfair. The department,
after public hearing, may issue general
orders prescribing methods of competition in
business or trade practices in business which
are determined by the department to be fair.'
**624 *526 Intentional failure to obey a
regulation adopted pursuant to the Administrative
Code is subject to the penalties imposed by sec.
100.26(3). [FN3]
FN3. '(3) Any person who violates
any provision of section 100.04, 100.15,
100.19, 100.20 or 100.22, or who
intentionally refuses, neglects or fails to
obey any regulation made under section
100.04, 100.19 or 100.20, shall, for each
offense, be punished by a fine of not less
than twenty-five dollars nor more than five
thousand dollars, or by imprisonment in the
county jail for not more than one year, or by
both such fine and imprisonment.'
The county court fined Lambert $2,000 and
sentenced him to one year of imprisonment, but
placed him on probation. The county court's
judgment was appealed to the circuit court for
Milwaukee County; and on April *527 17,
1973, the judgment of the county court was affirmed
by order. Lambert has appealed from that order to
the Supreme Court.
The underlying administrative regulation, Ch.
Ag 122.03, was considered and found constitutional
by this court in H M Distributors of
Milwaukee, Inc. v. Department of Agriculture
(1972), 55 Wis.2d 261, 198 N.W.2d 598.
The validity of sec. 100.20, Stats., was also
challenged. This court held that the department
regulations did not exceed the delegated statutory
authority, that they were promulgated in accordance
with the required rule- making procedures, that they
were not vague or overbroad, and that they did not
violate constitutional rights of freedom of speech or
the right to make economic investments.
The general trade practices of Holiday Magic,
for whom Lambert was a master distributor, are
outlined in the H M Distributors case. In the
instant case, the challenge to the same statutes is
similar. The H M Distributors case was for
declaratory judgment to determine the validity of the
rules. In this case, the question is directed to the
appropriateness and constitutionality of a criminal
conviction under the same statutes and regulations.
On this appeal, the sufficiency of the evidence,
assuming the regulations and statutes are
constitutional and valid, is not questioned. Lambert
attacks the enforcement scheme on the grounds that
art. IV, sec. 1, of the Wisconsin Constitution,
which reserves the legislative power of the state to the
senate and assembly, cannot be delegated to an
administrative agency to create a crime or call for the
imposition of penalties. Lambert argues that it is
the Administrative Code provisions, Ag 122.01,
ff., rather than the statute, that define a prohibited
chain distributor scheme. He contends that the
Code, rather than the statute, sets the standards, *528
and accordingly legislative power has been
unconstitutionally delegated to the Department of
Agriculture.
The defendant's argument is without merit. The
only question posed is whether the legislature's
delegation set reasonable limits for agency action and
whether the agency stayed within those limits in
promulgating the rules. We conclude that the
legislature set proper limits in sec. 100.20(1), Stats.,
that the Department of Agriculture confined its
rules to the limits imposed, and that it was
constitutionally proper for the legislature in sec.
100.26(3) to authorize the imposition of criminal
penalties for the violation of Department rules
adopted pursuant to sec. 100.20.
[1] Legislative powers may be delegated to
administrative agencies. State ex rel. Wisconsin
Inspection Bureau v. Whitman (1928), 196
Wis. 472, 220 N.W. 929. The issue is not
whether legislative power may be delegated, but
whether the legislature has sufficiently limited and
defined its delegation of power to an administrative
agency, so that it is the will of the legislature that is
being carried out and not that of the agency. United
Gas, Coke & Chemical Workers of America,
Loc. 18, CIO v. Wisconsin Employment
Relations Board (1949), 255 Wis. 154, 38
N.W.2d 692; Olson v. State **625
Conservation Comm. (1940), 235 Wis. 473, 293
N.W. 262.
The delegation of legislative power to the
Department of Agriculture to make rules is set
forth in sec. 100.20(1), Stats.:
'(1) Methods of competition in business and trade
practices in business shall be fair. Unfair methods
of competition in business and unfair trade
practices in business are hereby prohibited.'
Sec. 100.20(2), Stats., specifically authorizes the
Department to issue general orders implementing
the prohibitions set forth in sec. (1). The identical
language, *529 which appeared as sec. 110.04(1)(a),
enacted as ch. 182, Laws of 1935, was found to be
an appropriate standard by which the legislature
could constitutionally delegate legislative powers,
limited in scope, to the governor to promulgate codes
under the little NRA, the Wisconsin
Recovery Act. The standards were found
sufficient and the delegation of authority was upheld
in Petition of State ex rel. Attorney General
(1936), 220 Wis. 25, 264 N.W. 633.
A question that would ordinarily flow from a
determination that the delegation is proper is whether
the Department of Agriculture in fact stayed
within the delegated statutory limits by the
promulgation of Ch. Ag 122 of the
Administrative Cdde. We need not discuss that
question here, for it was specifically decided
affirmatively in H M Distributors of
Milwaukee, supra.
[2] Additionally, contrary to the assertions of the
defendant on this appeal, the legislature may
constitutionally create a criminal penalty for
violation of the Department's rule. Sec. 100.26(3),
Stats., makes a violation for any provision of sec.
100.20 or any regulation made under that section
punishable by fine or by imprisonment or by both.
The propriety and constitutionality of imposing
criminal sanctions for the violation of a properly
enacted administrative regulation was upheld in
United States v. Grimaud (1911), 220 U.S. 506,
31 S.Ct. 480, 55 L.Ed. 563. Therein, the
United States Supreme Court stated that the
Congress could confer, within limits, legislative
powers to an administrative agency, i.e., the power to
'fill up the details' necessary for the enforcement of
statutory guidelines by the promulgation of
administrative rules and regulations, '. . . the violation
of which could be punished by fine or imprisonment
fixed by Congress, or by penalties fixed by *530
Congress, or measured by the injury done.'
Grimaud, p. 517, 31 S.Ct. p. 483.
The Wisconsin legislature specifically assigned
criminal sanctions for the violation of Department
of Agriculture rules and regulations promulgated
pursuant to the legislature's delegation of authority.
Sec. 100.26(3), Stats., which sets the criminal
penalty for a violation of Ch. Ag 122, is, under
the holding of Grimaud, constitutional. It is the
legislature, not the agency, which has determined that
violations of agency rules are punishable as crimes.
The cases to the contrary cited by the defendant are
inapposite to this proposition.
[3] Lambert argues, however, that sec. 100.20(1),
Stats., is unconstitutionally vague, because it does
not sufficiently define unfair methods of competition
or unfair trade practices and, hence, fails to give
notice of the practices prohibited. While that may
well be true in respect to the statute when considered
alone, the technique employed by the legislature-- the
delegation to an agency to 'fill up the details'--is
designed to give specificity to the nature of prohibited
trade practices. The administrative regulation under
which Lambert is charged is specific, and Ch. Ag
122.01, 122.02, and 122.03, as we held in H M
Distributors, supra, are not void for vagueness.
[4] Lambert also asserts that the prohibition of the
promotion of chain distributor schemes infringes on
protected areas of free speech and the regulation is
therefore unconstitutional under the First
Amendment of the United States Constitution
and the equivalent free speech provisions of the **626
Wisconsin Constitution. That general proposition
was advanced by the same attorney in H M
Distributors, supra, decided by this court on June
30, 1972. The rule of law and the rationale
employed by this court in disposing adversely of that
issue then is substantially dispositive of the freedom-of- speech issue in this case. It is surprising and
inexplicable that the *531 attorney for the defendant
made no reference to the discussion of the free-speech
issue ruled on in the earlier case. We therein stated:
'The United States Supreme Court has held
that the constitutional protection afforded free
speech does not apply to commercial advertising,
and we find entirely and obviously correct the
federal appeals court holding that the
nonapplicability extends to the promoting of
products.' (pp. 272, 273 of 55 Wis.2d, p. 605 of
198 N.W.2d)
We pointed out in H M Distributors that the
right to prohibit or to curtail such oral conduct derives
from the fact that under properly promulgated and
constitutional regulations, the promotion itself is
criminal in nature. In H M Distributors, we
relied primarily upon Valentine v. Chrestensen
(1942), 316 U.S. 52, 54, 62 S.Ct 920, 86 L.Ed.
1262. That case held flatly that the constitutional
protected afforded free speech does not apply to
commercial matters.
In a supplementary memorandum to their brief,
attorneys for the defendant on this appeal urge that
the pronouncements of the Valentine case in respect
to free speech recently have been so modified by cases
of the United States Supreme Court as to give
some constitutional protection to commercial
utterances. We do not disagree with counsel in that
position. Two cases, Pittsburgh Press Co. v.
Pittsburgh Commission on Human Relations
(1973), 413 U.S. 376, 93 S.Ct. 2553, 37
L.Ed.2d 669, and Lehman v. City of Shaker
Heights (1974), 418 U.S. 298, 94 S.Ct. 2714,
41 L.Ed.2d 770, have deteriorated the flat
pronouncement of Valentine that commercial speech
is not entitled to First Amendment protection.
But the fact that commercial speech may in some
circumstances be entitled to First Amendment
protection does not lead to the conclusion that the
promotion of a chain distributorship declared to be a
criminal act under the laws of Wisconsin is entitled
to protection. That point is specifically considered in
the Pittsburgh Press Co. *532 case relied upon
by the defendant. Therein the United States
Supreme Court stated:
'Any First Amendment interest which might
be served by advertising an ordinary commercial
proposal and might arguably outweigh the
governmental interest supporting the regulation is
altogether absent when the commercial activity
itself is illegal and the restriction on advertising is
incidental to a valid limitation on economic
activity.' (p. 389 of 413 U.S. p. 2561 of 93
S.Ct.)
That same rationale was utilized by the United
States Supreme Court in Giboney v. Empire
Storage & Ice Co. (1949), 336 U.S. 490, 69
S.Ct. 684, 93 L.Ed. 834. In that case there was
an undisputed finding that certain union activities
violated a Missouri statute forbidding agreements
in restraint of trade. The restraint of trade in that
case was implemented by picketing a commercial
enterprise. The picketers argued in that case that an
injunction to prohibit the activity in restraint of
trade--the picketing--was unconstitutional because it
abridged free speech, i.e., picketing to publicize the
circumstances of the dispute. The court stated that,
in the particular instance, the injunction did no more
than enjoin an offense against the state law, a
felony. The court said:
'It rarely has been suggested that the
constitutional freedom for speech and press extends
its immunity to speech or writing used an integral
part of conduct in violation of a valid criminal
statute. We reject the contention now. Nothing
that was said or decided in any of the cases relied
on by appellants calls for a different holding.' (p.
498, 69 S.Ct. p. 688)
The rule of Giboney remains effective and the
language of that opinion is appropriate **627 to the
present defendant's interpretation of Pittsburgh
Press and Lehman. The Supreme Court in
Giboney also stated:
'Such an expansive interpretation of the
constitutional guaranties of speech and press would
make it practically impossible ever to enforce laws
against agreements in *533 restraint of trade as
well as many other agreements and conspiracies
deemed injurious to society.' (p. 502, 69 S.Ct. p.
691)
[5] In accordance with the rationale of Giboney
and of Pittsburgh Press quoted above, speech used
to promote a criminal scheme is not entitled to First
Amendment protection. Neither the United
States Constitution nor the Constitution of the
State of Wisconsin are violated by the statutorily
approved regulations and penalties that prohibit
chain distributorships.
Although Lambert did not question the
sufficiency of the evidence in the sense that the
evidence submitted to the jury failed to show guilt
beyond a reasonable doubt, nevertheless, on motions
after verdict, he argued that certain hearsay evidence
could not be used to show that he promoted a chain
distributor scheme. He argues that the exception to
the hearsay rule that would permit the utterances of
co-conspirators to be used against him as vicarious
admissions is not applicable unless there was first
proof of a conspiracy and that he was a member of
it.
[6][7] In this case, an investigator for the State
Department of Justice testified at trial to what
was said by others in the presence of Lambert
concerning the promotion of the chain distributor
scheme. Although Lambert argues that, for this
to be admissible, the jury had to find beyond a
reasonable doubt that a conspiracy existed between
Lambert and the others at the time the utterances
were made, no instruction in respect to conspiracy was
requested by Lambert's attorney at trial. Nor was
there an objection to this hearsay testimony. This
evidentiary issue is raised for the first time on appeal.
While, under Claybrooks v. State (1971), 50
Wis.2d 79, 183 N.W.2d 139, when the error is
plain and fundamental and affects the substantial
justice of the trial, we will consider an error for the
first time on appeal, we conclude that the admission
of the hearsay statement was not error. Quite aside
from the co-conspirator's *534 vicarious admission
rule, the hearsay statements in the instant case were
properly admissible as Lambert's adoptive
admission. They were made in Lambert's presence.
It is assumed that, had he not acquiesced in those
statements, he would not have stood silent.
McCormick, Evidence (2d ed.), sec. 269, pp. 649--51; 4 Wigmore, Evidence (Chadbourn rev.), sec.
1070, p. 100. See, also, Rule 507, Model Code
of Evidence, Authorized and Adoptive
Admissions, p. 246.
We need not consider whether this evidence would
have been admissible under the co-conspirators
exception. Under the circumstances, it was
admissible whether or not a conspiracy existed, and
the fact that the jury was not instructed on conspiracy
is irrelevant.
Lambert also claims that he is entitled to a new
trial because of prejudicial newspaper publicity.
The evening before the case went to the jury, an
article appeared in the local paper headlined, 'State
to Crack Down on Chain Distributors.' That
story reported that the Attorney General had
announced a 'crackdown' to curb illegal chain
distributor schemes in Wisconsin. The Attorney
General stated that a court action had been filed
against four chain distributor companies in the
State of Wisconsin. Holiday Magic, Inc.,
with whom defendant Lambert was associated, was
listed as one of the defendants. Lambert was not
mentioned in the story. The trial judge read the
story. However, he did not call it to the attention of
either counsel, and they were not aware of its
existence. Accordingly, defense counsel did not
make any motions requesting that the judge take
special precautions to insure that the jury had not
been contaminated as a result of this **628 publicity.
The trial judge, however, without calling the matter
to the attention of the jurors or to the attorneys, sua
sponte gave a special instruction in which he advised
the jurors:
'So forget about any other defendants or in any
other cases or any other cases pending; whether
they *535 are civil or criminal . . . (T)he facts
(u)sually in other cases are different. We're
trying one case here on this issue.'
[8] Counsel for Lambert argues, relying on
Margoles v. United States (7th Cir., 1969), 407
F.2d 727, that the judge should sua sponte have
questioned the jury to determine whether the jurors
had been prejudiced. Margoles did indeed indicate
that 'where prejudicial publicity is brought to the
court's attention during a trial' (p. 735), the trial
judge must ascertain whether any jurors were exposed
to such publicity, and those jurors that were must be
examined individually and out of the presence of
other jurors. While the procedure recommended by
the Seventh Circuit Court of Appeals would be
appropriate in cases where prejudice appeared (we
recommend it in a case where it is), the trial judge's
failure to follow that procedure in the instant case
does not entitle Lambert to a new trial.
In Margoles, the information was clearly
prejudicial to the defendant, and the Seventh
Circuit predicated its admonition on the prejudicial
nature of the publicity. In the instant case, the
story was not prejudicial to Lambert. During the
trial of the case, the jury became aware, from the
evidence, that the Attorney General's office was
investigating and prosecuting the chain distributor
scheme which went by the name of Holiday
Magic. Nothing in the news article brought facts
to the attention of the jury that they did not already
know from the testimony properly admitted into the
record. The story was a straightforward news
account.
Under these circumstances, we conclude that the trial
judge was not required to question the jurors; and
where, as here, the story itself was not prejudicial, a
special admonition to the jury that only the facts
before them were to be considered was more than
sufficient to preserve the fairness of the trail and save
it from the *536 taint of any possible prejudice.
Even that admonition was probably unnecessary.
[9] Even were the newspaper article more
questionable, a trial court's denial of a motion for a
new trial on the basis of adverse publicity is to a
degree discretionary. We said in Oseman v. State
(1966), 32 Wis.2d 523, 530, 145 N.W.2d 766,
771:
'(U)nless a newspaper article is so prejudicial as to
influence the verdict of the jury, it is solely within
the judge's discretion as to whether a mistrial is in
order.'
We believe that, in view of the nature of this news
article, which did not mention Lambert, that it was
within the discretion of the trial judge to conclude
that the article was not prejudicial and did not
influence the jury verdict against Lambert. He
properly denied the motion for a new trial.
Counsel also argues that errors committed by the
trial court in the course of instructions to the jury
require a new trial in the interests of justice. As the
trial judge was giving the instruction on substantial
evidence, he interrupted his presentation and stated to
the Assistant District Attorney:
'Motive is--motive is not involved. You are not
asking for motive?
'MR. TESCH: I will withdraw that
request.
'THE COURT: 175. Motive.
'MR. TESCH: No, all right. Take it
out.
'THE COURT: You asked for it. Not
involved.'
[10] Lambert contends that this exchange prejudiced
him because the jury could have interpreted the
discussion to mean intent rather than motive, and
therefore this exchange tended to instruct the **629
jury that intent to commit the crime was not an
element of which the jury had to be satisfied.
Taking the transcript of the instructions as a whole,
the jury could not have been *537 misled. The court
specifically instructed the jury that Lambert had
been charged with 'intentionally' promoting the chain
distributor scheme. In another place, in the course of
instructions, the trial judge explained that 'intent'
must be specifically found. It is not reasonable to
conclude, in light of the totality of the instructions,
that the jury could have confused intent with motive.
In any event, it is inconceivable that this
interchange, inappropriate as it might have been,
could furnish grounds for granting a new trial in the
interests of justice. We said in Lock v. State
(1966), 31 Wis.2d 110, 118, 142 N.W.2d 183,
187:
'In order for this court to exercise its discretionary
power under sec. 251.09, Stats., it should clearly
appear from the record that for some reason it is
probable there has been a miscarriage of justice.
In order for this court to exercise its discretion and
for such a probability to exist we would at least
have to be convinced that the defendant should not
have been found guilty and that justice demands
the defendant be given another trial.'
We cannot conclude from the evidence that the
defendant should not have been found guilty or that
he would be more likely to receive an acquittal had
these alleged errors not occurred. Justice does not
require that Lambert be given a new trial.
Order affirmed.
Main Page | About Grimes & Reese | Practice Areas | MLM Law Clients | MLM Articles
MLM Law Library | What Our Clients Say | What's New | Search MLM Law | MLM Law Blog | Site Map