Rehearing sought in California Supreme Court Moore/CAIA decision.
You will recall that the Court was sharply divided in its July 2, 1992, opinion. Four justices representing the majority decided that the Board of Accountancy could not prohibit absolutely the right of unlicensed accountants to use the "A" word, provided the unlicensed accountants used a disclaimer or caveat which the Court fashioned. The disclaimer would state that the unlicensed individuals do not posses a license from the state board, or that the accounting services provided do not require a state board license.
Regulation 2 issued by the State Board of Accountancy prohibited absolutely any use of the "A" word by an unlicensed individual. (Bonnie Moore's use of the "A" word was to refer to her state-chartered business as The Accounting Center. Although Ms. Moore has a degree in accounting and possesses the educational qualification to take the CPA examination, the case was not about referring to herself as an "accountant.") The four justices in the majority opinion held that Regulation 2 was valid (even though overly broad) and the absolute prohibition of Regulation 2 could be "cured" and constitutional infirmity avoided by the use of the crafted disclaimer.
The three justices who joined in the dissenting opinions would have held Regulation 2 invalid because it is an unconstitutional prohibition of commercial speech and went beyond the scope of the statute on which it is based.
The Board of Accountancy has consistently held, and the California Attorney General has consistently argued, that the use of the "A" word even when accompanied by an appropriate modifier or disclaimer, would still violate the absolute prohibition in Regulation 2. This is because, according to the Board and the Attorney General, the use of the unadorned "A" word is inherently misleading. While it is obvious that the majority opinion did not accept the argument that the "A" word is inherently misleading, the majority of the Court did believe they had the power to re-write Regulation 2 in order to make it constitutional.
It is axiomatic that a court may not rewrite statutes or regulations without violating the basic principles governing the separation of powers between the different branches of government. If the "A" word is potentially misleading (as opposed to inherently misleading) and the potentially misleading effect can be corrected by a disclaimer, it is the job of the legislature and not the court to fashion an appropriate warning or disclaimer. If the legislature considers a disclaimer then all parties are afforded an opportunity to engage in the legislative process through public hearings prior to legislative action.
The petition for rehearing argues extensively that the Court's indulgence in legislation by judicial decree is unworkable. The basic idea for the imposition of an affirmative disclaimer requirement may be a good one, but it requires legislative or regulatory treatment rather than the imposition of judicial decree. The Court's rule in its July 2nd majority opinion will generate endless disputes over what are appropriate modifiers or disclaimers. It will lead to confusion on the part of unlicensed accountants as well as the public they serve. Some unlicensed accountants will be tempted to test the limits of the Board's regulatory authority regarding specific disclaimers. Court disclaimers or modifiers are a poor idea under any circumstances.
In the Peel decision by the U.S. Supreme Court, Justice White's dissenting opinion suggested that the Court may fashion a disclaimer. However, no other Supreme Court Justices accepted Justice White's invitation. The other Justices who dissented in Peel rejected Justice White's suggestion. This is the only instance we know of in the history of commercial speech litigation where it was suggested that the Court may fashion a disclaimer. The reason why Justice White's approach was not followed is simple. It is fundamental to the separation of powers between the court and the legislature in our constitutional system that a court may not modify or rewrite legislation or administrative regulations, even to save them from constitutional infirmity.
The criticism of the California Supreme Court's imposition of a judicial disclaimer is the failure of the Court to provide guidelines or describe the circumstances where disclaimers or disclosures are required and in what detail in order to avoid controversy or confusion. Without a clear legislative mandate (complete with a legislative history) on what specific words should be used in the disclaimer, the way is open for further litigation seeking clarification. Unlicensed accountants have a strong incentive to couch their professional advertising in positive and effective terms that emphasize their qualifications and competency. Boards of Accountancy are preoccupied with protecting the turf of its licensees from the competition of unlicensed accountants. The result is that the Boards will argue for and support those modifiers or disclaimers that are so negative as to be self-deprecating to the unlicensed accountants who use them.
Approximately 22 states permit unlicensed accountants to use the unadorned "A" word without any modifiers or disclaimers. This has been the law in those states for a number of years and there are no recorded cases claiming that the public has been mislead by the advertisements or representations of an unlicensed accountant. For example, in the Maryland Comprehensive case (284 Md. 474, 1979) Maryland's highest court struck down the absolute prohibition on the use of the "A" word by unlicensed accountants with no suggestion whatever regarding the requirement of a court imposed disclaimer. Comprehensive held that Maryland's prohibition on the "A" word was invalid. The California Court's majority opinion holds Regulation 2 prohibition to be valid provided the disclaimer is used. The inconsistency in the two opinions cannot be reconciled.
When Bonnie Moore and CAIA initiated the litigation against the Board of Accountancy in 1986, one objective was to have the Court declare Regulation 2 invalid, either on constitutional grounds as infringing upon commercial free speech, or upon grounds that the Regulation extends the law beyond what the legislature intended. The majority decision of July 2, 1992 failed to declare Regulation 2 invalid. The petition for rehearing represents a continuous effort to achieve that result.
Upon receipt of the Bonnie Moore/CAIA Petition for Rehearing the California Supreme Court issued an order stating that the time for a decision on whether or not to grant a rehearing is extended to September 30, 1992. After careful review of the July 2, 1992 decision, the National Society strongly supports the petition for rehearing. Accordingly, counsel for the Society will submit a cogent letter to the California Supreme Court in support of the granting of the Petition for Rehearing.
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|Title Annotation:||Washington Comment; California Association of Independent Accountants|
|Author:||Sager, William H.|
|Publication:||The National Public Accountant|
|Date:||Sep 1, 1992|
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