State Ex Rel. Thomas C. Horne v. Autozone Inc.

• Decision Date: 04 August 2011
• Docket Number: No. 1 CA–CV 09–0759.,1 CA–CV 09–0759.
• Citation: 227 Ariz. 471,614 Ariz. Adv. Rep. 16,258 P.3d 289
• 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 Court of Appeals

227 Ariz. 471

258 P.3d 289

614 Ariz. Adv. Rep. 16

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. 1 CA–CV 09–0759.

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

Aug. 4, 2011.

Thomas C. Horne, Arizona Attorney General By Ann T. Uglietta, Assistant Attorney General and Carolyn R. Matthews, Assistant Attorney General, Phoenix, Attorneys for Plaintiff/Appellant/Cross–Appellee.Renaud Cook Drury Mesaros, PA By William W. Drury, Jr., James L. Blair, N. Todd McKay, Kevin R. Myer and Ronald I. Rubin, and Paul G. Ulrich, P.C. By Paul G. Ulrich, and Melinda K. Cekander, Phoenix, Attorneys for Defendant/Appellee/Cross–Appellant.Fennemore Craig, PC By Timothy Berg, and Alexander R. Arpad, Phoenix, Attorneys for Amicus Curiae Arizona Retailers Association.

OPINION

NORRIS, Judge.

¶ 1 This appeal and cross-appeal arise out of claims for deceptive pricing practices asserted under the Arizona Consumer Fraud Act (“CFA”) by appellant State of Arizona against appellee AutoZone. We hold: first, the CFA's prohibition against deceptive acts or practices neither imposes strict liability nor requires proof of an intent to deceive although it does require proof the retailer acted voluntarily; second, evidence a retailer committed a deceptive act or practice gives rise to a rebuttable presumption the retailer acted voluntarily; third, a retailer's failure to disclose information may constitute a deceptive act or practice if the retailer was under a legal duty to disclose the information; and fourth, to ensure compliance with and deter violations of the CFA, the CFA authorizes a court to order disgorgement.

FACTS AND PROCEDURAL BACKGROUND

¶ 2 AutoZone is one of the nation's largest specialty retailers of automotive parts and accessories. In 2001, the Arizona Department of Weights and Measures (“DWM”) began to inspect AutoZone's Arizona stores to verify its compliance with Arizona's retail pricing statute, Arizona Revised Statutes (“A.R.S.”) section 41–2081 (2011) ¹ (“Pricing Statute”). That statute, inter alia, prohibits a seller from misrepresenting the price, measure, or weight of a good offered for sale,² and requires a seller to display the price of a good on the good or at the point of display.³ Over the next five years, the DWM fined AutoZone $170,000 for violating the Pricing Statute. AutoZone paid the fines without objection.

¶ 3 Relying on the inspection data collected by the DWM, in 2006, the State sued AutoZone under the CFA, A.R.S. § 44–1522 (Supp.2010). The CFA proscribes both deceptive acts or practices in the sale or advertisement of merchandise (“act clause”), as well as the concealment or omission of any material fact “with intent that others rely upon such” concealment or omission in the sale or advertisement of merchandise (“omission clause”). Id. In its complaint, the State alleged that from 2001 to July 2006 (“relevant period”) AutoZone had violated the CFA by mispricing goods, meaning it offered for sale goods that displayed a price different than the price scanned at the register (“mispricing”). The State also alleged AutoZone had violated the CFA by not pricing goods, meaning it offered for sale goods not priced individually or at the point of display (“no pricing”).

¶ 4 After the parties had conducted discovery, the State moved for partial summary judgment on liability, asserting the undisputed material facts demonstrated AutoZone had violated the CFA's act clause by offering to sell at least 806 mispriced goods and 2814 non-priced goods during the relevant period. In its motion papers, the State argued it was only required to prove “AutoZone [had] intended to display its merchandise for sale,” characterizing the CFA's act clause as “essentially a strict liability statute.”

¶ 5 In its response and cross-motion for summary judgment, AutoZone disagreed with the State's construction of the CFA. Relying on State ex rel. Babbitt v. Goodyear Tire & Rubber Co., 128 Ariz. 483, 626 P.2d 1115 (App.1981), AutoZone argued the CFA's act clause incorporated an intent element requiring the State to produce evidence—which the State had failed to do—that it had “intended to put inaccurate prices on its shelves or product.” AutoZone further argued its failure to price goods constituted an omission, not a deceptive act, thus requiring the State to produce evidence—which the State also had failed to do—that it had offered for sale the non-priced goods “with intent that others rely” as required by the omission clause. AutoZone also separately moved for summary judgment, arguing, as relevant here, the State was not entitled to certain remedies under the CFA because, inter alia, it had already penalized AutoZone under the Pricing Statute for the same pricing practices. See infra ¶¶ 36–38.

¶ 6 Finding disputed fact issues, the superior court denied the parties' motions (“first ruling”). In so doing, it rejected the State's strict liability argument, ruling the act clause required the State to prove AutoZone had intended to “post[ ] a price that is inaccurate and potentially misleading.” The court also rejected the State's argument the act clause, and not the omission clause, applied to AutoZone's no pricing. The court made additional rulings which we discuss in more detail below. See infra Part III.

¶ 7 After additional discovery, AutoZone and the State again cross-moved for summary judgment on liability. As they had before, the parties disputed whether the act clause required any showing of intent. Without addressing all of the arguments raised by the parties, a different division of the superior court, relying on the first ruling, entered summary judgment in AutoZone's favor “by necessity” to allow the parties' disagreement over intent to be resolved on appeal. Accordingly, it dismissed the State's claims and denied its cross-motion for summary judgment. The State's appeal and AutoZone's cross-appeal followed.

DISCUSSION

I. The Act Clause

¶ 8 The State argues the superior court should not have granted summary judgment to AutoZone because the act clause “creates a statutory claim for consumer fraud that requires no proof of intent to deceive, intent to do the act, or any other form of intent.” As we understand the State's argument, the act clause imposes strict liability, and therefore it was only required to show AutoZone “made, used or employed misrepresentations, deception, or deceptive acts or practices[ ] in connection with the sale or advertisement of any merchandise.” ⁴ Accordingly, the State argues we should abandon Goodyear insofar as it requires a showing of intent. We disagree. As we explain, the act clause requires a form of intent.

A. Intent

¶ 9 Whether the CFA's act clause imposes strict liability, as the State argues, presents an issue of law we review de novo. State v. Hansen, 215 Ariz. 287, 289, ¶ 6, 160 P.3d 166, 168 (2007). When we construe a statute, “we apply ‘fundamental principles of statutory construction, the cornerstone of which is the rule that the best and most reliable index of a statute's meaning is its language and, when the language is clear and unequivocal, it is determinative of the statute's construction.’ ” Deer Valley Unified Sch. Dist. No. 97 v. Houser, 214 Ariz. 293, 296, ¶ 8, 152 P.3d 490, 493 (2007) (quoting Janson ex rel. Janson v. Christensen, 167 Ariz. 470, 471, 808 P.2d 1222, 1223 (1991)).

¶ 10 The relevant portion of the CFA is 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.

A.R.S. § 44–1522(A). As discussed, this subsection proscribes two distinct unlawful practices in connection with the sale or advertisement of merchandise: first, under the act clause, “any deception, deceptive act or practice, fraud, false pretense, false promise, misrepresentation,” and second, under the omission clause, any “concealment, suppression or omission.” Id. Although the omission clause contains an express intent element—an “intent that others rely upon such concealment, suppression or omission”—the act clause does not. Id.

¶ 11 Rather, the act clause describes conduct, specifically “[t]he act, use or employment ... of any deception, deceptive act or practice ... in connection with the sale or advertisement of any merchandise.” Id. Although this language does not incorporate an intent requirement, such as willfully, knowingly, or intentionally, the described conduct refers to activities that by their very nature require voluntary conduct in the sense of action that is undertaken freely. See Trustmark Ins. Co. v. Bank One, Ariz., NA, 202 Ariz. 535, 541, ¶ 27, 48 P.3d 485, 491 (App.2002) (courts give statutory words their ordinary meaning unless specifically defined or context clearly indicates special meaning is intended). In other words, the act clause requires a person voluntarily do the act he or she performed.⁵ That the act clause requires this minimal intent is underscored by the CFA's definitions of “sale” and “advertisement”: a sale is “any sale, offer for sale, or attempt to sell any merchandise for any consideration,” A.R.S. § 44–1521(7) (2003), and an advertisement “includes the attempt by publication, dissemination, solicitation or circulation, oral or written, to induce directly or indirectly any person to enter into any obligation or acquire any title or interest in any merchandise.” A.R.S. § 44–1521(1).

¶ 12 We essentially described this minimal level of intent in Goodyear. 128 Ariz. at 486, 626 P.2d at 1118. In that case...