State ex rel. Babbitt v. Goodyear Tire & Rubber Co.

• Decision Date: 17 February 1981
• Docket Number: CA-CIV,No. 1,1
• Citation: 128 Ariz. 483,626 P.2d 1115
• Parties: The STATE of Arizona ex rel. Bruce E. BABBITT, the Attorney General, Plaintiff-Appellee, v. The GOODYEAR TIRE & RUBBER COMPANY, an Ohio Corporation doing business in Arizona, Defendant-Appellant. 4747.
• Court: Arizona Court of Appeals

Page 1115

626 P.2d 1115

128 Ariz. 483

The STATE of Arizona ex rel. Bruce E. BABBITT, the Attorney General, Plaintiff-Appellee, v. The GOODYEAR TIRE & RUBBER COMPANY, an Ohio Corporation doing business in Arizona, Defendant-Appellant.

No. 1 CA-CIV 4747.

Court of Appeals of Arizona, Division 1, Department A.

Feb. 17, 1981.

Rehearing Denied March 30, 1981.

Review Denied April 21, 1981.

[128 Ariz. 484] Robert K. Corbin, Atty. Gen. by Patrick M. Murphy, Chief Counsel, Financial Fraud Div., John C. Dutton, Jr., Asst. Attys. Gen., Phoenix, for plaintiff-appellee.

Snell & Wilmer by Daniel J. McAuliffe, Barry D. Halpern, Phoenix, for defendant-appellant.

OPINION

FROEB, Judge.

The State of Arizona brought this action against Goodyear Tire & Rubber Company alleging that certain Goodyear advertising practices constituted violations of the Arizona Consumer Fraud Act, specifically A.R.S. § 44-1522. The superior court granted a motion for summary judgment filed by the State and enjoined Goodyear from further engaging in the advertising practices in question. Goodyear appeals from that ruling.

In early 1976, Goodyear used certain tire advertising that prompted the State's complaint. The first was a practice known as "variable FET advertising." A typical advertisement of this type would describe a variety of tires offered for sale and set forth the price for each. Within each advertisement there was a statement informing the prospective purchaser that a federal excise tax (FET) would be added to the price of the tire, that the amount of the FET would depend on the size of the tire, and that the precise amount of the FET would fall within the stated range. The second advertising practice in question concerned Goodyear's use of the term "ply rating" in its advertisements of truck tires without some form of qualification or explanation of the term.

Upon notice that the State was going to institute legal action, Goodyear requested that it forebear from litigation pending a Federal Trade Commission (FTC) determination of the practice. The State rejected that request and brought this suit. Goodyear then voluntarily discontinued both advertising practices.

The State's complaint seeking injunctive relief alleged that both of the practices in question constituted violations of A.R.S. § 44-1522(A), which reads as follows:

The act, use, or employment by any person of any deception, deceptive act or practice, fraud, false pretense, false promise, misrepresentation, or concealment, suppression or omission of any material fact with intent that others rely upon such concealment, suppression or omission, in connection with the sale or advertisement of any merchandise whether or not any person has in fact been misled, deceived, or damaged thereby, is declared to be an unlawful practice.

In its motion for summary judgment, the State relied upon the advertisements themselves and upon FTC guidelines which stated that "the tax should be included in the price ... or set out in immediate conjunction with the tire price." 16 C.F.R. § 228.15(g). The trial court granted the judgment and ordered Goodyear to desist from the advertising practices.

On appeal Goodyear raises three issues: 1) Whether the advertisements violate the Consumer Fraud Act as a matter of law in the absence of evidence that the practices are in fact deceptive; 2) whether intent must be shown for a violation of A.R.S. § 44-1522; and 3) whether an injunction was properly ordered when Goodyear had already ceased the advertising practices voluntarily.

In order for a moving party to be entitled to summary judgment, it must be shown that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. Arizona Rule of Civil Procedure 56(c). Goodyear contends that no evidence was presented establishing whether variable FET advertising was deceptive or had the capacity to deceive and, in the absence of such evidence, the State was not entitled to judgment as a matter of law.

Considering first the variable FET, the State, and apparently the trial court, placed great weight upon guidelines issued by the FTC. The reason for this reliance results from A.R.S. § 44-1522(B) which provides: "It is the intent of the legislature that, in construing the provisions of subsection A of this section, that the courts may use as a guide interpretations given by the FTC and the federal courts ...." One of those guidelines is 16 C.F.R. § 228.15(g) which states:

Federal Excise Tax. Since the Federal Excise Tax on tires is assessed on the manufacturer and is based upon the weight of the materials used and not the retail selling price, the tax should be included in the price quoted for a particular tire, or the amount of the tax set out in immediate conjunction with the tire price. For example, assuming the tax on a particular tire to be $1 and the advertised selling price $9.95, the price should be stated as "$10.95" or "$9.95 plus $1 Federal Excise Tax and not "$9.95 plus Federal Excise Tax."

Initially, we note that the guideline in 16 C.F.R. § 228.15(g) is just that, a guideline. Moreover, A.R.S. § 44-1522(B) states that FTC interpretations may be used as a guide. The specific question involved here is whether the advertisement on its face violates A.R.S. § 44-1522; that is, does the advertisement employ a "deception, deceptive act or practice, fraud, false pretense, false promise, misrepresentation, or concealment, suppression or omission of...