RHINO v. Rocky Mountain Rhino Lining

• Decision Date: 13 January 2003
• Docket Number: No. 01SC447.,01SC447.
• Citation: 62 P.3d 142
• Parties: RHINO LININGS USA, INC., Petitioner, v. ROCKY MOUNTAIN RHINO LINING, INC., Respondent.
• Court: Colorado Supreme Court

62 P.3d 142

RHINO LININGS USA, INC., Petitioner, v. ROCKY MOUNTAIN RHINO LINING, INC., Respondent.

No. 01SC447.

Supreme Court of Colorado, En Banc.

January 13, 2003.

Rehearing Denied February 3, 2003.

Baker & Hostetler LLP, Marc D. Flink, Laurin D. Quiat, Denver, Colorado, Attorneys for Petitioner.

Robinson Waters & O'Dorisio, P.C., Harold R. Bruno, III, Krys Boyle Freeman & Sawyer, P.C., Thomas Boyle, Denver, Colorado, Attorneys for Respondent.

Justice BENDER delivered the Opinion of the Court.

I. Introduction

In this case, we review Rocky Mountain Rhino Lining, Inc. v. Rhino Linings USA, Inc., 37 P.3d 458 (Colo.App.2002), in which the court of appeals affirmed the trial court's treble damage award to Rocky Mountain Rhino Lining, the plaintiff, pursuant to the Colorado Consumer Protection Act (CCPA).

In our view, the evidence does not support an actionable CCPA claim. Hence, we hold that the claim presented in this case fails to establish two necessary elements for a private cause of action under the CCPA. First, the plaintiff failed to establish that the defendant engaged in a deceptive trade practice, which requires a false statement of fact that either induces the recipient to act or has the capacity to deceive the recipient. Second, even assuming the existence of a deceptive trade practice, the defendant's conduct did not have a significant impact on the consuming public, but instead was private in nature. Accordingly, Rocky Mountain Rhino Lining's remedy in this case is limited to breach of contract.

Our resolution of Rocky Mountain Rhino Lining's CCPA claim renders it unnecessary for us to reach the question of whether a dealership is a franchise, and therefore property, under the CCPA. Because this issue was not properly raised, briefed, or argued to the court of appeals, we do not resolve this issue and leave it for another day. Thus, we reverse the judgment of the court of appeals, vacate the section of the opinion which concludes that a distributorship is a franchise, and remand this case to the court of appeals with directions to return it to the trial court to vacate the judgment for damages, costs, and fees associated with the CCPA claim.

II. Facts and Proceedings Below

Defendant Rhino Linings USA, Inc. (Rhino) manufactures polyurethane chemical products and distributes them with spray machines to coat truck beds, roofs, floors, decks, and industrial surfaces. It markets its products nationwide through a network of approximately 422 dealers in the United States and an additional 130 worldwide. It attracts dealers through a variety of advertisements in magazines, direct mail, and at wholesale and retail trade shows.

Gary Snyder, the plaintiff, negotiated and entered a dealer contract with Rhino. During negotiations, Snyder was represented by counsel and provided the opportunity to review the contract and make necessary changes. The final agreement granted Snyder and his company, Rocky Mountain Rhino Lining, Inc., an exclusive territory in Adams County to sell Rhino products.¹ Rhino could not appoint another dealer or sell its products to another dealer in Adams County. However, the contract provided that while a dealer could not operate a dealership or receive product shipments in Snyder's territory, another dealer could bid on and install projects in Snyder's exclusive territory.²

Subsequently, Rhino negotiated and executed another dealer contract with a third party, Frederick Schaefer. Schaefer, who had advanced degrees and industry experience, indicated during negotiations with Rhino that he wanted to base his business out of his home in Adams County. Rhino informed Schaefer that because Adams County was already occupied by another dealer, he had to select an unoccupied county. Because Schaefer planned to operate his business from a truck and trailer and install projects on-site rather than from a fixed location with a storefront, he did not consider an assigned territory to be overly important. Accordingly, he accepted a territorial assignment for Clear Creek County with the understanding that he could still solicit business in any dealer's territory. His dealer contract contained several provisions to ensure that Snyder's territorial exclusivity would be protected: it listed a Clear Creek address for mailing and correspondence purposes, it established Schaefer's base of operations in Clear Creek, and it precluded Schaefer from applying Rhino products to commonly sized pickup trucks, the focus of Snyder's business in Adams County.

The record reveals inconsistent facts concerning Schaefer's negotiations and subsequent dealings with Rhino that were not resolved by the trial court's findings. It was disputed whether Rhino falsely stated that it could ship products to Schaefer in Adams County without violating Snyder's exclusivity, and therefore induced Schaefer to execute his dealer contract or had the capacity to deceive him. Schaefer testified that Rhino made such assurances during negotiations. On the other hand, there was testimony to the effect that Rhino made no such assurances, but rather took steps to preserve Snyder's exclusivity. Additionally, there appears testimony that Rhino's shipment of products to Schaefer's Adams County address was inadvertent and that Rhino became aware of these shipments, but only after Snyder objected.

Unlike the disputed issues of what Rhino told Schaefer about Snyder's exclusive territory and what Rhino knew when it shipped products to Schaefer in Adams County, the following facts are undisputed. Both Schaefer and Rhino knew that the only function of Schaefer's Clear Creek address listed in his dealer contract was for Schaefer to receive mail. Because of the lengthy commute from his home in Adams County, Schaefer never intended to sell Rhino products in Clear Creek County, and he did not install a project there. He also incorporated, banked, and completed projects in Adams County, and in addition to having Rhino ship products to him in Clear Creek, he requested and received shipments in Boulder County and to his home in Adams County.

Snyder brought suit, initially against Rhino for breach of contract, and against Schaefer and another dealer for tortious interference with contract.³ Snyder later amended his complaint to include a claim alleging a CCPA violation. Snyder alleged that Rhino had violated section 6-1-105(1)(e), 2 C.R.S. (1997)⁴ when it falsely represented to Schaefer that he could operate a mobile unit from his home in Adams County without encroaching upon Snyder's territory.

At a bench trial, Snyder claimed that Rhino violated the CCPA when it failed to honor several of its numerous dealer contracts, including its contract with him and its contract with a New Mexico dealer, Charles Greene.⁵ He sought costs, fees, and treble damages pursuant to sections 6-1-113(2)(a) and (b).

The trial court ruled that Rhino breached its contract with Snyder when it sold its products to Schaefer in Adams County and entered judgment against Rhino. The trial court additionally ruled that Snyder proved a claim under the CCPA because Rhino engaged in the deceptive trade practice of selling dealerships, and this practice coupled with Rhino's dealership advertisements significantly impacted prospective dealer-purchasers. The trial court, however, did not resolve the disputed factual issues of whether Rhino knowingly made false representations to Schaefer or to Greene that had the capacity to deceive or induced either to contract with Rhino.⁶

The court of appeals affirmed and interpreted the trial court's ruling, stating that Rhino "violated the CCPA by advertising and selling dealerships that promised territorial exclusivity as part of a dealer's contract, with no intention to honor that promise." Rocky Mountain Rhino Lining, Inc., 37 P.3d at 462. The court of appeals reasoned that Rhino committed a deceptive trade practice because Rhino promised Snyder exclusive territory that it never intended to honor; Schaefer was assured that he could operate his dealership from Adams County despite Snyder's presence there; and Rhino permitted another dealer to operate in Greene's New Mexico territory. Id.

After concluding that Rhino's challenged conduct constituted a deceptive trade practice, the court of appeals held that Schaefer met the public impact requirement for the following reasons: at least Snyder, Schaefer, and Greene were affected by Rhino's misrepresentations; a large company is generally more sophisticated than individual consumers; and the record supports a finding that the deceptive trade practice would impact future consumers. Id. at 463. Lastly, the court of appeals concluded that a dealership is a franchise over which a dealer may exercise a right of possession, use, and enjoyment, and accordingly, a dealership is property. Id.

We granted certiorari to review the judgment of the court of appeals.⁷

III. Analysis

A. The CCPA

The CCPA was enacted to regulate commercial activities and practices which, "because of their nature, may prove injurious, offensive, or dangerous to the public." People ex rel. Dunbar v. Gym of America, Inc., 177 Colo. 97, 112, 493 P.2d 660, 667 (1972); see also Martinez v. Lewis, 969 P.2d 213, 220 (Colo.1998)

; People ex rel. MacFarlane v. Alpert Corp., 660 P.2d 1295, 1297 (Colo.App.1982). The CCPA deters and punishes businesses which commit deceptive practices in their dealings with the public by providing prompt, economical, and readily available remedies against consumer fraud. Showpiece Homes, Corp. v. Assurance Co. of America, 38 P.3d 47, 50-51 (Colo.2001); Martinez, 969 P.2d at 222; Curragh Queensland Min. Ltd. v. Dresser Indus., Inc., 55 P.3d 235, 240-41 (Colo.App.2002); MacFarlane,

660 P.2d at 1297. Remedies include injunctive relief, civil penalties including treble damages, and attorney fees. Showpiece Homes, 38 P.3d at 51; § 6-1-110, § 6-1-113.⁸

To prove a private cause of action under the CCPA, a...