Huch v. Charter Communications, Inc.

• Decision Date: 04 August 2009
• Docket Number: No. SC 89361.,SC 89361.
• Parties: James HUCH and Ryan Carstens, Appellants, v. CHARTER COMMUNICATIONS, INC., Respondent.
• Court: Missouri Supreme Court

290 S.W.3d 721

James HUCH and Ryan Carstens, Appellants, v. CHARTER COMMUNICATIONS, INC., Respondent.

No. SC 89361.

Supreme Court of Missouri, En Banc.

August 4, 2009.

John E. Campbell, Erich Vieth, Amy Collignon Gunn, Simon Passanante, PC, St. Louis, MO, for appellants.

James W. Erwin, Roman P. Wuller, Thompson Coburn LLP, St. Louis, MO, for respondent.

Chris Koster, Attorney General, James R. Layton, State Solicitor, Peter Lyskowski, Assistant Attorney General, Jefferson City, for amicus curiae Office of Missouri Attorney General.

Alicia Campbell, Michael Ferry, Philip Senturia, St. Louis, for amicus curiae Gateway Legal Services, Inc., et al.

PATRICIA BRECKENRIDGE, Judge.

James Huch and Ryan Carstens filed a class-action lawsuit in St. Louis County alleging that Charter Communications illegally charged many of its customers a separate fee for a paper television-channel guide that the customers did not request. Charter moved to dismiss, asserting that the voluntary payment doctrine prohibited the court from ordering Charter to refund the money it charged, and customers paid, for the guide. The trial court sustained the motion and dismissed the complaint, with prejudice. Plaintiffs appealed. After an opinion by the court of appeals, this Court granted transfer. Mo. Const. art. V, sec. 10. This Court reverses the trial court's judgment and remands the cause to the trial court. On remand, the trial court should overrule Charter's motion to dismiss and proceed with the case.

Factual and Procedural Background

Charter sells cable television and communication services to customers in Missouri and elsewhere in the United States. Charter sent a paper television-channel guide to its customers, even though its customers did not request this product. It charged its customers for the unsolicited guide by including the charge on customers' monthly bills for cable or other communication services.

Because of these alleged actions, Mr. Huch and Mr. Carstens filed suit against Charter under sections 407.025 and 407.200.¹ These sections are part of the Missouri Merchandising Practices Act, sections 407.010-407.1129.² In their amended petition, plaintiffs alleged that Charter sent the unsolicited channel guide to its customers and charged them for this guide.³ Charter allegedly: (1) failed to give plaintiffs the option to receive or not receive the guide — merchandise that is not included in the monthly rate; (2) sent the guide to plaintiffs, even though they did not request it; (3) failed to state or disclose that charges would be added to plaintiffs' Charter bills for the guide; and (4) charged each plaintiff approximately $3 per month for the guide.⁴

Mr. Huch and Mr. Carstens asked the trial court to certify a class of those individuals who did not request, but who received and were charged for, the guide. On behalf of themselves and the class, they sought monetary damages, including punitive damages. Their prayer also requested a permanent injunction prohibiting Charter from engaging in unfair or deceptive trade practices, including the sale of the guide by unlawful trade practice, deception, fraud, false pretense, misrepresentation, concealment, suppression, omission of and the knowing failure to state material facts.

Charter filed a motion to dismiss plaintiffs' petition, asserting that the voluntary payment doctrine, an affirmative defense, bars plaintiffs' claims. On May 21, 2007, the trial court sustained Charter's motion and dismissed plaintiffs' petition, with prejudice.

Claims on Appeal

On appeal, plaintiffs raise three claims of error. First, they assert that the trial court erred in dismissing their cause of action because the voluntary payment doctrine does not apply to claims brought under the act. Specifically, plaintiffs contend that the voluntary payment doctrine is a form of waiver and the rights provided by the act cannot be waived, that application of the voluntary payment doctrine to the act is inconsistent with public policy, and that application of the voluntary payment doctrine to the act improperly would allow an equitable doctrine to nullify legislative intent. The plaintiffs also assert that the voluntary payment doctrine is not a valid defense to claims of fraud or improper conduct, and they contend that Charter's actions constitute fraud or improper conduct. Finally, plaintiffs contend that the trial court erred in dismissing their claims in reliance on the voluntary payment doctrine because the trial court misapplied the law when it failed to construe the allegations in the petition in the light most favorable to plaintiffs, the non-moving party, and made findings that were inconsistent with the allegations in the petition.

Standard of Review

This Court reviews the trial court's grant of a motion to dismiss de novo. Lynch v. Lynch, 260 S.W.3d 834, 836 (Mo. banc 2008). When reviewing such a grant, this Court "assumes that all of plaintiff's averments are true, and liberally grants to plaintiff all reasonable inferences therefrom." Bosch v. St. Louis Healthcare Network, 41 S.W.3d 462, 464 (Mo. banc 2001) (quoting Nazeri v. Mo. Valley Coll., 860 S.W.2d 303, 306 (Mo. banc 1993)). "A motion to dismiss based on an affirmative defense may be sustained if the defense is irrefutably shown by the petition." Elam v. Dawson, 156 S.W.3d 807, 808 (Mo.App.2005).

Analysis

Plaintiffs' appeal requires this Court to determine whether the voluntary payment doctrine is a viable affirmative defense to a claim for monetary damages and injunctive relief for a violation of the merchandising practices act. The act's fundamental purpose is the "protection of consumers," State ex rel. Nixon v. Continental Ventures Inc., 84 S.W.3d 114, 117 (Mo.App.2002), and, to promote that purpose, the act prohibits false, fraudulent or deceptive merchandising practices. Section 407.020. Section 407.020 provides that certain acts "in connection with the sale or advertisement of any merchandise in trade or commerce" are unlawful. Section 407.020.1. Specifically, section 407.020.1 declares the scope of the prohibited unlawful practices:

The act, use or employment by any person of any deception, fraud, false pretense, false promise, misrepresentation, unfair practice or the concealment, suppression, or omission of any material fact in connection with the sale or advertisement of any merchandise in trade or commerce ... in or from the state of Missouri, is declared to be an unlawful practice.

The legislature intended section 407.020 to "supplement the definitions of common law fraud in an attempt to preserve fundamental honesty, fair play and right dealings in public transactions." State ex rel. Danforth v. Independence Dodge, Inc., 494 S.W.2d 362, 368 (Mo.App. 1973).

Sec. 407.020 does not define deceptive practices; it simply declares unfair or deceptive practices unlawful. This was done to give broad scope to the meaning of the statute and to prevent evasion because of overly meticulous definitions. This leaves to the court in each particular instance the determination whether fair dealing has been violated. It is the defendant's conduct, not his intent, which determines whether a violation has occurred. It is not necessary in order to establish "unlawful practice" to prove the elements of common law fraud.

State ex rel. Webster v. Areaco Inv. Co., 756 S.W.2d 633, 635 (Mo.App.1988) (internal citations omitted).

Although the legislature did not define deceptive practices, it granted the attorney general authority to promulgate "all rules necessary to the administration and enforcement" of the provisions of the act, which includes the authority to promulgate rules setting out the scope and meaning of the act. Section 407.145; State ex rel Nixon v. Telco Directory Pub., 863 S.W.2d 596, 601 (Mo. banc 1993). One of the rules promulgated by the attorney general defines an unfair practice as a practice that "(A) [e]ither—1. [o]ffends any public policy as it has been established by the Constitution, statutes or common law of this state, or by the Federal Trade Commission, or its interpretive decisions; or 2. [i]s unethical, oppressive or unscrupulous; and (B) [p]resents a risk of, or causes, substantial injury to consumers." 15 CSR 60-8.020(1) (emphasis added). Another rule further defines unfair practice as including the act of charging for unsolicited merchandise: "It is an unfair practice for any seller in connection with the advertisement or sale of merchandise to bill, charge or attempt to collect payment from consumers, for any merchandise which the consumer has not ordered or solicited." 15 CSR 60-8.060(1). Because properly adopted and promulgated rules "have independent power as law," see United Pharmacal Co. v. Mo. Bd. of Pharmacy, 159 S.W.3d 361, 365 (Mo. banc 2005), the rule's declaration that the act of charging for unsolicited merchandise is an unfair practice makes that conduct unlawful under the act. See Telco Directory Pub., 863 S.W.2d at 601.

The merchandising practices act imposes criminal penalties and civil liability on persons who engage in conduct that it deems unlawful. A person who willfully and knowingly engages in an unlawful act, as defined by the statute, is guilty of a class D felony. Section 407.020.3. Additionally, the legislature provides that any person who "suffers an ascertainable loss of money or property" as the result of an unlawful practice may file a civil lawsuit to recover actual and punitive damages, as well as attorney fees, from any person who has engaged in a method, act or practice declared unlawful by section 407.020. Section 407.025.1. A class action lawsuit also is authorized when the unlawful conduct has caused similar injury to "numerous other persons." Section 407.025.2. "In any action brought pursuant to this section, the court may in its discretion order, in addition to damages, injunction or other equitable relief and reasonable attorney's fees." Id.

Because of the...