State ex rel. Horne v. Autozone, Inc.

• Decision Date: 15 May 2012
• Docket Number: No. CV–11–0291–PR.,CV–11–0291–PR.
• Citation: 229 Ariz. 358,275 P.3d 1278,634 Ariz. Adv. Rep. 42
• Parties: STATE of Arizona ex rel. Thomas C. HORNE, Attorney General, Plaintiff/Appellant/Cross–Appellee, v. AUTOZONE, INC., a Nevada corporation, Defendant/Appellee/Cross–Appellant.
• Court: Arizona Supreme Court

229 Ariz. 358

275 P.3d 1278

634 Ariz. Adv. Rep. 42

STATE of Arizona ex rel. Thomas C. HORNE, Attorney General, Plaintiff/Appellant/Cross–Appellee,

v.AUTOZONE, INC., a Nevada corporation, Defendant/Appellee/Cross–Appellant.

No. CV–11–0291–PR.

Supreme Court of Arizona, En Banc.

May 15, 2012.

Thomas C. Horne, Arizona Attorney General By Carolyn R. Matthews, Assistant Attorney General, Phoenix, Attorneys for State of Arizona.

Renaud Cook Drury Mesaros, PA By William W. Drury, Jr., James L. Blair, Ronald I. Rubin, N. Todd McKay, Kevin R. Myer and Paul G. Ulrich, P.C. By Paul G. Ulrich, Melinda K. Cekander, Phoenix, Attorneys for AutoZone, Inc.

Fennemore Craig, P.C. By Timothy J. Berg, Alexander R. Arpad, Phoenix, Attorneys for Amicus Curiae Arizona Retailers Association.

OPINION

HURWITZ, Vice Chief Justice.

¶ 1 We are asked in this case to interpret the Arizona Consumer Fraud Act (“CFA”), A.R.S. §§ 44–1521 to –1534.

I.

¶ 2 In 2001, the Arizona Department of Weights and Measures began investigating AutoZone, Inc., an automobile parts and accessories retailer. The investigation concerned AutoZone's compliance with A.R.S. § 41–2081 (the “Pricing Act”), which prohibits mispricing and requires a seller to display prices on merchandise or at the point of display. As a result of this investigation, the Department fined AutoZone for violating the Pricing Act several times between 2001 and 2006. See A.R.S. § 41–2115 (authorizing civil penalties).

¶ 3 In 2006, the State sued AutoZone under the CFA. The State alleged that, by violating the Pricing Act, AutoZone had also violated A.R.S. § 44–1522(A), which provides 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.

The State requested injunctive relief, civil penalties, and restitution to consumers. See A.R.S. § 44–1528(A)(2) (authorizing restitution remedy).

¶ 4 The State moved for partial summary judgment, arguing in relevant part that the clause in § 44–1522(A) prohibiting “any ... deceptive act or practice ... in connection with the sale or advertisement of any merchandise” (the “Act Clause”) imposes strict liability for not pricing goods as required by the Pricing Act. AutoZone cross-moved, arguing in part that any failure to price goods was governed by another clause in § 44–1522(A) (the “Omission Clause”) which prohibits “omission of any material fact with intent that others rely upon such ... omission.”

¶ 5 AutoZone also sought summary judgment with respect to the State's restitution claim. In response, the State abandoned its claim for restitution to consumers under § 44–1528(A)(2). Instead, it sought disgorgement to the Attorney General of sums acquired in violation of the CFA under § 44–1528(A)(1), which allows a court to “make such orders or judgments as may be necessary to ... [p]revent the use or employment by a person of any unlawful practices.”

¶ 6 The superior court denied both parties' motions. The court agreed with AutoZone that the Omission Clause governed the alleged non-pricing, but found disputed issues of fact as to whether AutoZone had acted with the intent to mislead required by that Clause. The court also held that disgorgement to the State may, under some circumstances, be appropriate under § 44–1528(A)(1).

¶ 7 AutoZone and the State each again moved for summary judgment based on sharply different interpretations of the superior court's rulings. A new judge heard those motions and, although finding disputed issues of material fact, nonetheless entered summary judgment in AutoZone's favor “by necessity,” ostensibly to obtain appellate guidance on interpretation of the CFA.

¶ 8 The court of appeals vacated that judgment and remanded the case for further proceedings. State ex rel. Horne v. AutoZone, Inc., 227 Ariz. 471, 485 ¶ 46, 258 P.3d 289, 303 (App.2011). The court held that because the Pricing Act imposes a statutory duty to price items, any failure to do so was not an omission, but rather an “act,” id. at 482 ¶ 32, 258 P.3d at 300, and thus governed by the Act Clause. The court concluded that under State ex rel. Babbitt v. Goodyear Tire & Rubber Co., 128 Ariz. 483, 486, 626 P.2d 1115, 1118 (App.1981), the Act Clause required proof only of “intent to do the act involved.” AutoZone, 227 Ariz. at 478 ¶¶ 18–19, 258 P.3d at 296. The court of appeals also held that the CFA permits disgorgement to the State, id. at 483–84 ¶ 39, 258 P.3d at 301–02, and awarded the State attorney's fees and costs pursuant to A.R.S. § 44–1534, id. at 485 ¶ 44, 258 P.3d at 303. Judge Gemmill dissented in part, arguing that the CFA does not authorize disgorgement to the State. Id. at 485–86 ¶¶ 47–53, 258 P.3d at 303–04 (Gemmill, J., concurring in part and dissenting in part).

¶ 9 We granted review on three issues: (1) whether the Act Clause or the Omission Clause governs the State's “non-pricing” claims; (2) whether the CFA authorizes disgorgement to the State; and (3) whether the court of appeals erred by awarding the State interlocutory attorney's fees.¹ We exercise jurisdiction pursuant to Article 6, Section 5(3) of the Arizona Constitution and A.R.S. § 12–120.24 (2003).²

II.

¶ 10 AutoZone argues that a non-pricing allegation necessarily involves an omission that is governed by the Omission Clause, which requires proof that the omission is material and made with intent that a consumer rely thereon. The State argues that because the Pricing Act imposes a duty to price, the sale of non-priced goods should instead be evaluated under the Act Clause, which requires only proof of intent to do the alleged act. Both parties thus view the two clauses as describing mutually exclusive categories of prohibited conduct, and they ask us to pigeonhole AutoZone's alleged non-pricing into one or the other.

¶ 11 We accept neither argument. Because the clauses require different elements of proof, we conclude that the legislature intended generally to distinguish an “omission” from an “act.” In common parlance, “[o]mission denotes the negative. Act is the expression of will, purpose. Omission is inaction. Act carries the idea of performance. Omission carries the idea of refraining from action.” Terry v. Lincscott Hotel Corp., 126 Ariz. 548, 553, 617 P.2d 56, 61 (App.1980) (quoting Randle v. Birmingham Ry., Light & Power Co., 169 Ala. 314, 53 So. 918, 921 (1910)); see A.R.S. § 1–213 (“Words and phrases shall be construed according to the common and approved use of the language.”). An omission does not always constitute an act. See W. Page Keeton et al., Prosser and Keeton on Torts § 56 at 373 (5th ed. 1984) (“In the determination of the existence of a duty, there runs through much of the law a distinction between action and inaction.... that is to say, between active misconduct ... and passive inaction.”).

¶ 12 We find no indication in the text of the CFA that the legislature intended to blur the generally recognized distinction between an act and an omission. Nor does the CFA provide that failure to perform a duty imposed by a separate statute, such as the Pricing Act, should be automatically covered by the Act Clause. Rather, the CFA itself imposes the actionable duty—to refrain from a “deceptive act or practice” or an “omission of any material fact with intent that others rely” thereon. A.R.S. § 44–1522(A).³

¶ 13 In concluding that “a party has committed a deceptive act if it failed to disclose information it was under a duty to disclose,” AutoZone, 227 Ariz. at 481 ¶ 31, 258 P.3d at 299, the court of appeals relied in part on Fenwick v. Kay American Jeep, Inc., 72 N.J. 372, 371 A.2d 13 (1977). That case construed New Jersey's consumer fraud act and held that a car dealer's failure to disclose odometer readings in advertisements constituted a “deception.” Id. at 15–16. But under the New Jersey act, the attorney general is authorized to promulgate “rules to further the purpose of the act,” and had adopted a regulation requiring disclosure of the odometer readings. Id. at 16. The New Jersey court relied expressly on the regulation in rejecting the dealer's argument that failure to post the readings was not a deceptive act. Id. The CFA, in contrast, does not confer rulemaking power on the Arizona Attorney General, nor does it provide that failure to comply with some other statute is always evaluated under the Act Clause.

¶ 14 If the State's complaint had alleged only a single instance or isolated instances of non-pricing, the Omission Clause would provide the appropriate standard for adjudicating CFA liability. The complaint, however, alleged routine and repeated instances of non-pricing. The Act Clause prohibits not only acts, but also “practice[s].” The court of appeals correctly defined a practice as “a habitual action and something more than an accumulation of a number of individual instances of conduct.” AutoZone, 227 Ariz. at 483 ¶ 38 & n. 18, 258 P.3d at 301 & n. 18. If AutoZone repeatedly failed to price items, a finder of fact could well find a practice subject to the Act Clause.⁴

¶ 15 Neither party disputes that whether AutoZone had the intent required by the CFA is an issue of fact, regardless of whether the Act or the Omission Clause applies to the non-pricing allegations. Thus, albeit for different reasons than those we rely upon here, the court of appeals correctly held that neither side was entitled to summary judgment.

III.

¶ 16 The Attorney General may seek injunctive relief to prevent violations of the CFA. A.R.S. § 44–1528(A). The superior court may also issue orders and judgments “as may be necessary to:”

1. Prevent the use or employment...