AMER. CAR RENTAL v. COM'R OF CONSUMER PROT.

• Decision Date: 12 April 2005
• Docket Number: No. 17241.,17241.
• Citation: 273 Conn. 296,869 A.2d 1198
• Court: Connecticut Supreme Court
• Parties: AMERICAN CAR RENTAL, INC. v. COMMISSIONER OF CONSUMER PROTECTION.

869 A.2d 1198

273 Conn. 296

AMERICAN CAR RENTAL, INC. v. COMMISSIONER OF CONSUMER PROTECTION.

No. 17241.

Supreme Court of Connecticut.

Argued January 3, 2005.

Decided April 12, 2005.

Max F. Brunswick, with whom was Richard C. Marquette, New Haven, for the appellant (plaintiff).

Richard Blumenthal, attorney general, with whom were Garry Desjardins, assistant attorney general, and, on the brief, Phillip Rosario, assistant attorney general, for the appellee (defendant).

SULLIVAN, C.J., and BORDEN, NORCOTT, KATZ and ZARELLA, Js.

BORDEN, J.

The principal issue in this appeal is whether the $150 speeding fee charged by the plaintiff, American Car Rental, Inc., to a customer each time the customer's rental vehicle exceeded seventy-nine miles per hour continuously for two minutes or more represented a valid liquidated damages charge or an illegal penalty. The plaintiff appeals from the judgment of the trial court, dismissing its administrative appeal of the final decision and order of the defendant, the commissioner of consumer protection, who had determined that the speeding fee constituted an illegal penalty and was an unfair trade practice offensive to public policy. The plaintiff claims that: (1) the speeding fee represented a valid liquidated damages charge; and (2) that the trial court improperly placed the burden of proof on the plaintiff during the administrative appeal. We affirm the judgment of the trial court.

The defendant filed an administrative complaint against the plaintiff alleging that the speeding fee and insufficient notice thereof violated the Connecticut Unfair Trade Practices Act (CUTPA), General Statutes § 42-110a et seq. Following a hearing, the designated hearing officer issued a proposed final decision, which contained findings of fact and conclusions of law. After the parties were given the opportunity to file exceptions to the hearing officer's proposed final decision, the defendant heard oral argument. The defendant adopted the hearing officer's findings and conclusions in their entirety, and issued a final decision prohibiting the plaintiff from charging the speeding fee in the absence of first satisfying certain conditions set by the defendant and ordering the plaintiff to refund all speeding fees assessed up to the date of the decision. The plaintiff appealed from the defendant's final decision to the Superior Court, which dismissed the appeal and rendered judgment for the defendant. This appeal followed.¹

The record reveals the following facts and procedural history. The plaintiff, which engages in the business of renting automobiles to the general public, installed global positioning system (GPS) devices in its vehicles to track each vehicle's speed and location.² After installing the devices, the plaintiff added the following language to a list of policy statements located at the top of its rental agreement form: "`Vehicles driven in excess of posted speed limit will be charged $150 fee per occurrence. All our vehicles are GPS equipped.' "The plaintiff subsequently replaced "`posted speed limit'" with "[seventy-nine miles per hour]" in the policy language. Initially, the rental agreement contained no further explanation of the policy, no definition of "occurrence" or "GPS," and no place on the agreement for the customer to acknowledge an understanding of the speeding fee policy. Although some customers received a verbal explanation of the policy, other customers did not.

The plaintiff's speeding fee policy worked as follows. Whenever a vehicle's installed GPS device calculated that the vehicle had been exceeding seventy-nine miles per hour for two minutes or longer, the device, using wireless technology, transmitted the vehicle's location and speed to AIR IQ Company, which, in turn, faxed the information to the plaintiff. Exceeding the threshold speed of seventy-nine miles per hour for two minutes or longer constituted a single "occurrence" pursuant to the policy regardless of how long the vehicle remained above the threshold speed. Each time the vehicle decelerated below the threshold speed, however, any subsequent acceleration above that speed detected by the GPS device for two minutes or longer constituted another "occurrence." For example, it constituted a single occurrence irrespective of whether the vehicle traveled at eighty miles per hour for a continuous two minute period or for a continuous thirty minute period. If, in the latter case, however, the vehicle decelerated to seventy-five miles per hour after the first fifteen minutes, remained at that speed for five minutes, then accelerated to eighty-five miles per hour for ten minutes, the device would detect two separate "occurrences."

Pursuant to the plaintiff's speeding fee policy, it charged the customer $150 for each "occurrence." Thus, it charged $150 to a customer who exceeded the threshold speed for a continuous thirty minute period, whereas it charged $300 to a customer who exceeded the threshold speed for the same thirty minutes but with a single deceleration below the threshold speed followed by an acceleration above the threshold speed during the thirty minutes. Furthermore, the customer, while driving, received no indication that the GPS device was transmitting information, and the plaintiff charged the speeding fee to the customer's credit or debit card, if one was on file, without further notice to the customer. This practice meant that some customers were unaware that the fee had been charged to their account until they returned the rental vehicle and received their receipt. Consequently, the credit or debit cards of some customers were rejected by retailers because the speeding fee resulted in their credit limit being exceeded or their bank account being overdrawn without their knowledge.

As a result of a consumer complaint, the department of consumer protection conducted an investigation of the plaintiff's speeding fee policy. That investigation resulted in a two count administrative complaint, filed by the defendant, alleging that the plaintiff's speeding fee policy violated CUTPA. The first count alleged that the plaintiff: (1) failed to disclose adequately the purpose of the GPS device in a manner that consumers would understand; (2) misrepresented or misled consumers concerning its intended use of the GPS device; (3) failed to notify consumers that they had been charged the speeding fee; (4) failed to provide consumers who had been charged the speeding fee an opportunity to refute the alleged violation of the plaintiff's policy; and (5) failed to notify consumers that the speeding fee would be charged against their credit or debit cards. The second count alleged that the provision for the speeding fee constituted a penalty clause in the rental agreement contract. The defendant subsequently designated a hearing officer, who conducted a series of three, one day hearings wherein both parties presented witnesses and submitted evidence. With respect to the issue of notice, the hearing officer heard from customers of the plaintiff who claimed to have received a verbal explanation of the speeding fee policy, as well as those who claimed not to have received such an explanation. At the second hearing, the plaintiff submitted into evidence a revised rental agreement that included a box for the customer to initial to acknowledge having read and agreed to a separate addendum explaining the use of the GPS device, and a separate line item to document any assessment of the speeding fee. The plaintiff also presented testimony that the addendum explaining the use of the GPS device was located on the rental counter and available to customers upon request. With respect to whether the provision for the speeding fee represented a liquidated damages clause or a penalty clause, both parties presented expert testimony concerning the amount of additional wear that could be caused by operating subcompact automobiles, such as the Plymouth Neons in the plaintiff's rental fleet, in excess of seventy-nine miles per hour, the ability to measure such wear, and the ability to attribute such wear to any particular instance of operating the vehicle in excess of seventy-nine miles per hour.

After completing the hearings and receiving additional briefs from the parties, the hearing officer issued a memorandum of proposed final decision that contained findings of fact and conclusions of law. The hearing officer found that: (1) operating subcompact automobiles at eighty miles per hour could cause increased wear to various vehicle components, resulting in an increase in maintenance and repair requirements³ and a decrease in the vehicle's useful service life; (2) the amount of wear increases with increased speed and with increased time at a given speed; and (3) the amount of increased wear caused by high speed driving during a single rental period is too small to be measured. The hearing officer also found that a new Plymouth Neon costs approximately $14,000 and has an expected useful service life of 150,000 miles, which could be decreased up to 10 percent by occasional operation at eighty miles per hour and up to 50 percent by continuous operation at eighty miles per hour.

On the basis of these findings, the hearing officer calculated that the additional wear on a Plymouth Neon operated at eighty miles per hour for two minutes would be thirty-seven cents, assuming all factors in favor of upholding the reasonableness of the plaintiff's $150 speeding fee.⁴ In light of these calculations, he concluded that the speeding fee was unreasonably disproportionate to any actual damages that might be suffered by the plaintiff as a result of a customer operating one of its rental vehicles in excess of seventy-nine miles per hour for more than two minutes continuously and, as such, represented an illegal penalty rather than a valid liquidated damages charge.

Prior to oral argument before the defendant, both parties were given an...