Consumer Protection Div. v. Luskin's, Inc.

• Decision Date: 01 September 1997
• Docket Number: No. 352,352
• Citation: 120 Md.App. 1,706 A.2d 102
• Parties: CONSUMER PROTECTION DIVISION v. LUSKIN'S, INC. ,
• Court: Court of Special Appeals of Maryland

Page 1

120 Md.App. 1

706 A.2d 102

CONSUMER PROTECTION DIVISION v. LUSKIN'S, INC.

No. 352, Sept. Term, 1997.

Court of Special Appeals of Maryland.

Feb. 26, 1998.

John Nethercut, Asst. Atty. Gen. (J. Joseph Curran, Jr., Atty. Gen. and Rebecca Bowman, Asst. Atty. Gen., on the brief), Baltimore, for appellant

Thomas M. Wood, IV (Neuberger, Quinn, Gielen, Rubin & Gibber, P.A., on the brief), Baltimore, for appellee.

Argued before HARRELL, SALMON and EYLER, JJ.

SALMON, Judge.

In the summer of 1992, Luskin's, Inc. (Luskin's) advertised "FREE AIRFARE FOR TWO" to Florida, the Bahamas, or Hawaii for customers who purchased at least $200 of goods from its stores (hereinafter referred to as "the First Ad"). On September 28, 1992, the Consumer Protection Division of the Office of the Attorney General (the Division) filed an administrative enforcement action against Luskin's, charging that the First Ad violated sections 13-303 and 13-305 of Maryland's Consumer Protection Act (the CPA), Md.Code (1974, 1990 Repl.Vol.), §§ 13-101 to 13-501, Com. Law II Article. ¹ After a two-day administrative hearing that took place on November 13 and December 8, 1992, the administrative law judge (ALJ) issued her proposed decision, to which the parties filed exceptions. The Agency (the Division acting as a quasi-judicial entity), after a hearing, issued a Final Decision and Order on September 21, 1993. The Agency confirmed the ALJ's conclusion that Luskin's First Ad contained misleading representations and omissions of material facts as defined in CPA section 13-301(1), (3), (9), and prohibited by section 13-303, and involved an unlawful prize promotion under section 13-305. Luskin's then filed, in the Circuit Court for Harford County, an appeal from the Agency's Final Decision and Order.

While the administrative action was being prosecuted, a separate but parallel declaratory judgment action was proceeding in the Circuit Court for Harford County. Luskin's filed a complaint for declaratory judgment approximately two weeks before the Division initiated its enforcement action. Luskin's requested that the circuit court declare that its proposed second advertisement (hereinafter referred to as "the Second Ad"), which was a modified version of the First Ad, did not violate section 13-305 of the CPA. Ultimately, the circuit court declared that the Second Ad did not violate the CPA, but the Division appealed that judgment. We held that the circuit court abused its discretion in granting declaratory After we issued our decision, Luskin's appeal from the Division's enforcement action proceeded. On December 16, 1996, the circuit court reversed the Agency's Final Decision and vacated the Agency's Final Order. The Division noted a timely appeal and presents the following questions for our review, which we have rephrased for clarity:

relief for Luskin's because the Division's enforcement action against Luskin's was underway by the time the trial judge made his ruling in the declaratory judgment suit. See Consumer Protection Div. v. Luskin's, Inc., 100 Md.App. 104, 112, [706 A.2d 105] 640 A.2d 217 (1994),aff'd, 338 Md. 188, 657 A.2d 788 (1995). We concluded that the pending enforcement action against the First Ad would resolve the same legal issue raised in Luskin's suit regarding the Second Ad. Id. We also held that, even though the declaratory judgment suit was filed before the administrative enforcement action, under the doctrine of primary jurisdiction, the circuit court should have deferred to agency expertise. Id. at 114-15, 640 A.2d 217.

1. Did the Agency err in concluding that Luskin's violated section 13-301 of the CPA with its free airfare advertisement?

2. Did the Agency err in concluding that Luskin's violated section 13-305 of the CPA?

3. Did the Agency err in rejecting Luskin's defenses that the Division's enforcement action was barred because it was "filed for retaliatory purpose" or, alternatively, that it was barred by the doctrine of accord and satisfaction?

4. Did the Agency err in providing injunctive and affirmative relief?

We answer all questions in the negative and reverse the judgment of the circuit court.

FACTS

Luskin's First Ad read: ²

Luskin's placed this advertisement in newspapers and ran related ads on television. ³ A careful reading of the newspaper advertisements alerted customers, prior to their making purchases, to the following facts: (1) free airfare was contingent upon the purchase of goods of a certain dollar amount; (2) Vacation Ventures, Inc. (VVI), which was not affiliated with Luskin's, offered the "Vacation Premiums"; (3) tickets must be used within one year; (4) a minimum hotel stay was required; and (5) applicable taxes were the consumer's responsibility.

After consumers made a qualifying purchase, and took delivery of the goods, they were given a VVI brochure and airfare certificate (collectively, travel certificate). The airfare certificate was a Luskin's computer printout that stated, "This certificate entitles you to two free airline tickets from virtually anywhere in the U.S. to ______." The promotional brochure was a three-fold color pamphlet describing the vacation packages to Florida, the Bahamas, and Hawaii. The brochure also contained a page of terms and conditions and a "registration After a consumer sent the completed RRF and processing fee to VVI, a Florida corporation that markets travel packages, VVI provided the consumer with a "confirmation of availability" (the confirmation). The confirmation set forth the cost of the vacation and disclosed downpayments and balance payments terms. In sum, the travel certificate entitled a consumer to receive "free" airfare, but only if the consumer: (1) paid VVI a $15.00 fee; (2) paid VVI for the required hotel accommodations in hotels selected by VVI, for the length of time specified by VVI, and at the rates set by VVI; and (3) paid VVI certain additional fees. Luskin's purchased 14,600 brochures from VVI. It paid between $5.35 and $5.40 for each brochure. Although the record does not indicate how many brochures were distributed, VVI received only 128 RRF's from consumers as a result of the First Ad. Of the 128, only eleven consumers actually took vacations offered through VVI.

                request form" (the RRF).  The terms and conditions listed prices, including costs for:  (1) the seven- to twelve-day minimum hotel accommodations; 4  and (2) the non-refundable $15-per-person processing fee that had to accompany the RRF. Consumers were also notified by the terms and conditions that:  (1) the RRF must be completed and received by VVI at least 45 days in advance of the earliest requested date of departure;  (2) the RRF must include three valid choices of departure dates, each separated by 15 days;  (3) the balance of the vacation cost must be paid at least 45 days prior to departure;  (4) prices were not guaranteed until VVI received payment in full;  (5) various fees and taxes were not included in the offer; 5  and (6) certain "black-out" dates and other travel restrictions applied
                

The First Ad came to the Division's attention when an ad agency contacted the Division, seeking its guidance in an advertisement promotion it was creating for an auto dealership. The ad agency's proposed campaign raised concerns under the CPA similar to those raised by Luskin's First Ad. As a result, the Division initiated a review of Luskin's airfare promotion. On July 27, 1992, the Division wrote to Luskin's, advising it of the prohibitions under CPA section 13-305. It requested that Luskin's discontinue its First Ad. In response, Luskin's requested a meeting with the Division.

The Division and representatives of Luskin's met on July 30 and 31 of 1992. The Division informed Luskin's that the First Ad was not in compliance with the law and must be discontinued. Shortly after the July 31 meeting, Luskin's notified the Division that it would discontinue running the "free airfare" campaign.

I. The Agency's Administrative Proceeding

The Division instituted its enforcement action on September 28, 1992, to

restrain [Luskin's] from advertising and providing travel certificates to consumers in the course of selling other consumer goods and services, when the advertisements of the travel certificates misrepresent that they provide free airfare, fail to disclose the cost and terms and conditions of redeeming the certificates, and constitute an unlawful prize promotion.

The Division sought injunctive relief to prohibit Luskin's from violating CPA sections 13-303 and 13-305 and sought restitution for injured consumers.

Section 13-301 provides a non-exhaustive list of unfair or deceptive trade practices, including such practices as making a statement that has the tendency to deceive, omitting a material fact, and misrepresenting or omitting a material fact with the intent that the consumer rely on the same. Section 13-303 prohibits unfair and deceptive trade practices. Section 13-305 prohibits a person from notifying another person of During the administrative hearing, the Division called five consumer witnesses to testify. Evan Revelle, age 71, testified that he bought his washing machine at Luskin's because, in addition to the fact that he needed a new washer, he had heard about the free airfare offer on television. To him, it "sounded like a good deal." He was not given a copy of the VVI brochure until after he made his purchase, and until then, he did not know about the minimum hotel stay requirement.

eligibility to receive something of value if receipt is conditioned on the purchase of goods or services.

Once Mr. Revelle reviewed the brochure, he made cost calculations regarding the VVI offer and compared them to vacation prices he saw listed in newspapers. He concluded, "I could safely disregard ... Luskin's offer, because I could get the same transportation far cheaper through U.S. Air or United." He, therefore, decided not to send in the RRF. On...