State v. American TV & Appliance of Madison, Inc.

• Decision Date: 04 June 1987
• Docket Number: No. 85,85
• Citation: 410 N.W.2d 596,140 Wis.2d 353
• Parties: , 1987-2 Trade Cases P 67,663 STATE of Wisconsin, Plaintiff-Appellant, v. AMERICAN TV & APPLIANCE OF MADISON, INC., Defendant-Respondent. 2066.
• Court: Wisconsin Court of Appeals

Page 596

410 N.W.2d 596

140 Wis.2d 353, 1987-2 Trade Cases P 67,663

STATE of Wisconsin, Plaintiff-Appellant, v. AMERICAN TV & APPLIANCE OF MADISON, INC., Defendant-Respondent.

No. 85 2066.

Court of Appeals of Wisconsin.

Submitted on Briefs Nov. 17, 1986.

Opinion Released June 4, 1987.

Opinion Filed June 4, 1987.

Review Granted.

Bronson C. La Follette, Atty. Gen., James D. Jeffries, Stephen J. Nicks, Asst. Atty. Gen., and Barbara W. Tuerkheimer, Asst. Gen., for plaintiff-appellant.

Wayne E. Babler, Jr., C. Vernon Howard, and Nancy K. Peterson, and Stroud, Stroud, Willink, Thompson & Howard, Madison, for defendant-respondent.

Before GARTZKE, P.J., and DYKMAN and EICH, JJ.

GARTZKE, Presiding Judge.

The state appeals from an order dismissing its complaint against American TV & Appliance of Madison, Inc. The complaint alleges that an American TV radio advertisement contained untrue, deceptive or misleading statements of fact, contrary to sec. 100.18(1), Stats., and was a plan or scheme, the purpose of which was not to sell the merchandise as advertised, contrary to sec. 100.18(9). ¹ The complaint sought civil forfeitures and an injunction. ² American TV moved to dismiss the complaint for failure to state a claim. Sec. 802.06(2)(f), Stats. 1983. The trial court granted the motion. We conclude that the complaint states a claim and therefore reverse.

Whether a complaint states a claim is a question of law for our independent review. Williams v. Security Savings & Loan Ass'n, 120 Wis.2d 480, 482 83, 355 N.W.2d 370, 372 (Ct.App.1984). "The facts pleaded and all reasonable inferences from the pleadings are admitted to be true, but only for purpose of testing the legal sufficiency of the claim, not for the purpose of trial." Scarpaci v. Milwaukee County, 96 Wis.2d 663, 669, 292 N.W.2d 816, 819 (1980). Our concern is only with whether the facts alleged, if proved, state a claim, not with whether the plaintiff can prove its case. Williams, 120 Wis.2d at 483, 355 N.W.2d at 372.

Because the purpose of a complaint is to give notice of the nature of a claim, the complaint need not state all the facts which must eventually be proved. Anderson v. Continental Ins. Co., 85 Wis.2d 675, 683 84, 271 N.W.2d 368, 372 73 (1978). It must be read liberally in favor of the plaintiff, Scarpaci, 96 Wis.2d at 669, 292 N.W.2d at 819, and will be dismissed only if it appears to a certainty that no relief can be granted. Williams, 120 Wis.2d at 483, 355 N.W.2d at 372.

COMPLAINT

The complaint alleges that between January 7 and 12, 1985 American ran the following advertisement 164 times on 22 radio stations:

There are lots of good quality washers and dryers on the market. But when you ask which ones [sic] the best automatic washers and dryers, well it's simple. There's Speed Queen, Maytag, and all the rest. Sears makes good washers and dryers there are lots of other good brands. [sic] But the best washers and dryers are made by Maytag and Speed Queen. And at American we have both of them and they're on sale for our January white sale. A clearance sale on the finest washers and dryers you can buy. This week a Speed Queen washer and dryer set is reduced to $499. This week you can buy the finest for less than $500. Both the Speed Queen washer and dryer set for $499. Speed Queen, the choice of more commercial laundra-mats [sic] than any other washer because they last. Because Speed Queen uses the same transmission in home washers as they use in commercial washers. When it comes to washers and dryers, there's Maytag, Speed Queen and all the rest. And during American's closeout January white sale, you can buy the best like a Speed Queen washer and dryer pair for $499 at American. Why pay more at Sears.

The sale period was January 9 to January 13, 1985. The Speed Queen washer and dryer set advertised for $499 cost American $520. Eleven days before its advertising campaign, American ordered twenty such sets, of which ten were to be delivered on January 4 and ten were to be delivered on January 14, 1985. The same day American ordered the twenty sets, it ordered 133 additional but more expensive Speed Queen washer and dryer sets. Of those 133 sets, 65 were the "next step up," had more features, had more sophisticated appearances than the twenty other sets, and cost American $518.00, $2.00 less than the advertised items. The remaining 68 of the 133 sets were of an even "higher step quality" and cost American as much as $604.00.

American's commission structure pays a salesperson a commission only for selling an item for more than its wholesale cost. American's salespersons therefore made no commissions on the $499 sets, since they sold for $21 less than American's cost. American's four stores sold only four of the advertised $499 sets during the sale. The four sales occurred during the last two days of the sale. American sold an unspecified but "much larger number" of unadvertised washer and dryer sets at a price above cost.

The complaint alleges that the advertisement purports to be a bona fide offer of sale but that American's primary aim was to induce persons interested in buying washer and dryer sets to visit its stores in order to sell them more expensive unadvertised sets and to discourage the sale of the advertised $499 sets.

According to the complaint, the advertisement's inherent deception and American's intent and motivation to discourage purchase of the advertised $499 sets are evinced by the following facts: (1) American lost money on each sale of a $499 set, (2) American ordered a disproportionate number of unadvertised sets, (3) American sold only four of the advertised sets, (4) a discrepancy existed between the appearance and performance of the $499 sets and the quality represented in the advertisement, in that the $499 sets had an appearance and quality below that advertised and were plain and lacked features found in other models, (5) American's salespersons were not paid for selling a $499 set, (6) American's salespersons were trained and attempted to direct customers to unadvertised models whether or not customers asked to see those models, and (7) credit card purchasers could not buy a $499 set but could buy the more expensive washers and dryers.

FIRST CLAIM--SECTION 100.18(1), STATS.

The state argues that the advertisement contained untrue, deceptive or misleading statements of fact in three respects: (1) the appearance and performance of the $499 set was not the "best" and "finest," as advertised; (2) no "clearance" or "closeout" sale was held; and (3) the advertisement purported to be a bona fide offer to sell a Speed Queen washer and dryer set for $499, but American's aim was not to sell the "bait" at that price, but to lure persons interested in buying washers and dryers to stores to sell them unadvertised sets at higher prices.

The trial court concluded that a reasonable reading of the advertisement is that it announced a general sale of Maytag and Speed Queen washers and dryers including one set for $499, and that the words "best," and "finest," and "clearance," and "closeout," in the context of a "January white sale," are "hyperbole and puffery." Since the complaint fails to allege that no sale occurred or that a customer could not buy a set for $499, the court held there was no basis for a claim that the advertisement was untrue, deceptive or misleading. We disagree.

We first examine the "best" and "finest" descriptions in the advertisement, which the trial court excused as puffing. Section 100.18(1), Stats., condemns all untrue, deceptive or misleading statements in advertising. It contains no express exception for puffing. If, however, as we conclude, American's advertisement fails to qualify as puffing, then we need not decide whether the statute impliedly excludes puffing from its prohibition.

According to Rosden, The Law of Advertising sec. 10.06 at 10 26 (1986), at common law, "a seller who merely puffs his merchandise is not guilty of actionable misrepresentation." Rosden states that the trouble with the common law rule is that too many different interpretations of puffing exist. Rosden describes puffing generally as "exaggerated sales talk or opinion." Id. at sec. 18.06 at 18 108.

In Better Living, Inc., et al, 54 F.T.C. 648 (1957), the Federal Trade Commission defined puffing in greater detail. Holding that advertising a product as sold at the "world's lowest prices" was not puffing, the FTC said:

Puffing, as we understand it, is a term frequently used to denote the exaggerations reasonably to be expected of a seller as to the degree of quality of his product, the truth or falsity of which cannot be precisely determined. In contrast thereto, the representation as to "the world's lowest price" is a statement of an objective actuality, the truth or falsity of which is not variable and can be ascertained with factual precision. This representation cannot, therefore, properly be termed "puffing." It is either true, or it is false; and, accordingly, such a determination must be made.

54 F.T.C. at 653.

The FTC's definition was made in a regulatory context, the Federal Trade Commission Act, 15 U.S.C. sec. 45 et seq. The definition provides a practical test for puffing and already applies to many Wisconsin advertisers. We therefore apply it to American's advertisement.

The advertisement focuses on a Speed Queen $499 washer and dryer set. It can be read to represent that the $499 set is the "best" or "finest" Speed Queen set. That representation was made even though American had ordered an additional 133 Speed Queen sets consisting of two models which were superior in quality to or had more features than the $499 sets.

If a merchant sells the product line of a single manufacturer consisting of models having different qualities, and one of those models is described as the "best" and "finest," the truth or falsity of that statement in most instances can be determined relative to the other models...