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

• Decision Date: 02 November 1988
• Docket Number: No. 85-2066,85-2066
• Citation: 146 Wis.2d 292,430 N.W.2d 709
• Parties: STATE of Wisconsin, Plaintiff-Appellant, * v. AMERICAN TV & APPLIANCE OF MADISON, INC., Defendant-Respondent-Petitioner.
• Court: Wisconsin Supreme Court

Page 709

430 N.W.2d 709

146 Wis.2d 292

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

No. 85-2066.

Supreme Court of Wisconsin.

Argued Sept. 6, 1988.

Decided Nov. 2, 1988.

Wayne E. Babler Jr., argued, Nancy K. Peterson and Quarles & Brady, Milwaukee, and C. Vernon Howard and Stroud, Stroud, Willink, Thompson & Howard, on briefs, Madison, for defendant-respondent-petitioner.

Barbara W. Tuerkheimer, Asst. Atty. Gen., argued, James D. Jeffries, Asst. Atty. Gen., and Donald J. Hanaway, Atty. Gen., on brief, for plaintiff-appellant.

CALLOW, Justice.

This is a review of a published decision of the court of appeals, State v. American TV, 140 Wis.2d 353, 410 N.W.2d 596 (Ct.App.1987). That decision reversed an order of the circuit court for Dane county, Judge P. Charles Jones, granting a motion to dismiss the state's complaint for failure to state a claim in this forfeiture action. We reverse the decision of the court of appeals because the state cannot prevail, even if the facts alleged in the complaint are true.

The state filed a complaint against American TV & Appliance of Madison, Inc., (American) alleging that in January, 1985, American ran the following radio advertisement one hundred sixty-four times on twenty-two 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. 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 than any other washer because they last. Because Speed Queen uses the same transmission in home washes [sic] 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 state contends that this advertisement violated secs. 100.18(1) and (9)(a), Stats. The complaint alleges that American ordered twenty of these $499 Speed Queen sets at a cost of $520 per set. In addition, the complaint alleges that American ordered one hundred thirty-three more expensive washer and dryer sets. Sixty-five of these sets contained more features and were "visually more sophisticated" than the $499 sets. American purchased these for $518. The other sixty-eight sets cost American up to $604 and were of an even higher quality. The complaint states that, although American sold only four of the $499 sets during the sale, the state "believes that a much larger number" of the more expensive sets were sold. In addition, American sold a large number of non-Speed Queen washers and dryers at higher prices.

The complaint also alleges that American employs a commission system under which a salesperson receives commission only on the sale of items at a price greater than the wholesale cost. Since American sold these sets at $21 below cost, the salespersons received no commission on their sale.

The state's complaint alleges that the advertisement is not a bona fide offer to sell the $499 set and that American used the advertisement to induce potential buyers to come to the store where it discouraged the purchase of the $499 set and tried to sell the more expensive unadvertised sets. The state alleges that the following eight indicia reveal American's deceptive intent: (1) the loss of money on sales of the $499 set; (2) the disproportionate number of unadvertised sets purchased for sale; (3) the disproportionate number of unadvertised sets sold; (4) the large expense of advertising a set upon which American would lose money; (5) the plain appearance of the $499 set and the lack of certain features found in more expensive sets, even though the $499 set was advertised as the "best" and "finest"; (6) the commission structure discouraging sales of the $499 set; (7) the training received by sales persons encouraging them to direct customers to the more expensive models; and (8) the fact that American did not permit credit card purchases of the $499 set.

Based upon these allegations, the state, in its complaint, makes two claims for relief. First, it claims that the advertisement is untrue, deceptive or misleading in violation of sec. 100.18(1), Stats. ¹ Second, it claims that the advertisement is a part of a plan or scheme, the purpose or effect of which is not to sell the merchandise as advertised, in violation of sec. 100.18(9)(a). ²

The circuit court dismissed both counts set forth in the complaint. It concluded that the advertisement is not deceptive under sec. 100.18(1), Stats., because the advertisement, reasonably read, promotes a sale on Maytag and Speed Queen washers and dryers generally. The advertisement does not say that the "best" washer and dryer set in the world is the particular Speed Queen model sold for $499. Further, the use of the words "best," "finest," and "clearance" are merely examples of hyperbole and puffery.

With regard to sec. 100.18(9)(a), Stats., the circuit court concluded that the pleaded facts did not give rise to a reasonable inference that the advertisement was part of a plan or scheme to bait consumers into the store and switch them to more expensive models. "Absent some pleaded facts that this in fact occurred to a consumer" the complaint fails, the circuit court concluded.

The court of appeals reversed. With regard to sec. 100.18(1), Stats., it disagreed with the circuit court about the reasonable reading of the advertisement. It concluded that the advertisement can be read to represent that the $499 set is the "best" or "finest" model made by Speed Queen; and the truth or falsity of that assertion can be determined by examining other models in the product line. Further, the court of appeals held that it was possible for a finder of fact to conclude that the use of the words "clearance" and "closeout" was misleading. American TV, 140 Wis.2d at 361-63, 410 N.W.2d 596.

The court of appeals also reversed the circuit court's dismissal of the claim under sec. 100.18(9)(a), Stats. It rejected the circuit court's assertion that the claim must allege that a bait and switch occurred to a particular customer. Instead, it held that the facts alleged lead to a "reasonable inference that American's purpose was not to sell the $499 sets but to sell the more expensive sets. That is enough to establish a violation of sec. 100.18(9)(a), Stats." American TV, 140 Wis.2d at 367, 410 N.W.2d 596.

The issue before this court is whether the state's complaint states a claim upon which relief can be granted. For the purpose of determining whether a complaint should be dismissed, "[t]he facts pleaded and all reasonable inferences from the pleadings must be taken as true." Morgan v. Pennsylvania General Insurance Co., 87 Wis.2d 723, 731, 275 N.W.2d 660 (1979). The motion to dismiss tests the legal sufficiency of the complaint. Anderson v. Continental Insurance Co., 85 Wis.2d 675, 683, 271 N.W.2d 368 (1978). The claim is dismissed only when " 'it is quite clear that under no conditions can the plaintiff recover.' " Morgan, 87 Wis.2d at 731, 275 N.W.2d 660, quoting Clausen and Lowe, The New Wisconsin Rules of Civil Procedure--Chapters 801-803, 59 Marq.L.Rev. 1, 54 (1976).

I. False, Deceptive, or Misleading Advertisements.

We first address the legal sufficiency of the claim based upon sec. 100.18(1), Stats. There are two elements to this offense: There must be an advertisement or announcement, and that advertisement must contain a statement which is "untrue, deceptive or misleading." The state maintains that American violated this provision both by the use of the terms "best" and "finest" and by the use of the words "clearance" and "closeout" in describing the sale on washers and dryers.

The state contends that American used the words "best" and "finest" to assert that the $499 washer and dryer set is the single finest set in the world. It then concludes that this is a statement of fact which can be shown to be false simply by comparing the set to better models in the Speed Queen line. This is not a reasonable interpretation of the advertisement. It is clear that the words "best" and "finest" refer to the brands of Maytag and Speed Queen. The first half of the advertisement does not mention the $499 set. Instead, it asserts that, although there are many good brands of washers and dryers, Speed Queen and Maytag are the "best." The advertisement goes on to tell consumers that they can buy one model of these fine brands for $499. "This week a Speed Queen washer and dryer set is reduced to $499." (Emphasis added.) The conclusion drawn by the state is not reasonable.

Given that the advertisement asserts that Maytag and Speed Queen are the best brands, we must conclude that the state cannot state a claim for relief based upon sec. 100.18(1), Stats. The assertion is not a statement of fact which can be proven false. Rather, it is an example of puffery, long considered an acceptable advertising technique. As no Wisconsin cases have addressed this issue, we turn for guidance to federal law.

The Federal Trade Commission (FTC) defined puffery in Better Living, Inc., et al., 54 F.T.C. 648 (1957), aff'd., 259 F.2d 271 (3d Cir.1958). "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...