State v. Cottman Transmission Systems, Inc.

• Decision Date: 01 September 1988
• Docket Number: No. 475,475
• Citation: 542 A.2d 859,75 Md.App. 647
• Parties: , 15 Media L. Rep. 1644 STATE of Maryland v. COTTMAN TRANSMISSION SYSTEMS, INC. ,
• Court: Court of Special Appeals of Maryland

Page 647

75 Md.App. 647

542 A.2d 859, 15 Media L. Rep. 1644

STATE of Maryland v. COTTMAN TRANSMISSION SYSTEMS, INC.

No. 475, Sept. Term, 1988.

Court of Special Appeals of Maryland.

July 6, 1988.

J. Joseph Curran, Jr., Atty. Gen. (William Leibovici, Peter V. Berns, Lucy A. Weisz and William D. Gruhn, Asst. Attys. Gen., on the brief), Baltimore, for appellant.

Douglas Connah, Baltimore, for movant, The Baltimore Sun Co. Stephen Horn (Robert L. Zisk, Patrick O. Cavanaugh and Schmeltzer, Aptaker & Sheppard, P.C., on the brief), Washington, D.C., for appellee.

Argued before GILBERT, C.J., and BLOOM and POLLITT, JJ.

GILBERT, Chief Judge.

At the conclusion of an emergency hearing, this Court issued the following per curiam order:

"For reasons to be stated in an opinion to be hereafter filed, it is this 14th day of June, 1988, by the Court of Special Appeals,

ORDERED that the written Order of the Circuit Court for Baltimore City dated April 26, 1988 and filed April 27, 1988 and the oral Order of May 25, 1988 with respect to the closing of proceedings and sealing of the file be, and they are hereby, vacated; and

It is further ORDERED that the "Gag" Order be, and it is hereby, modified by vacating it in all respects except as to the extra-judicial communications with the media relative to the merits of the case. Costs to be divided between the appellant and the appellee. Mandate to issue forthwith."

We now explain why we took that action.

The orders of the circuit court dated April 27 and May 25, 1988 concerned a pending civil suit brought by the Attorney General under the authority of the Maryland Consumer Protection Act, Md. Code Commercial Law Article Ann. § 13-101, et seq., against Cottman Transmission Systems, Inc. (Cottman), a Pennsylvania corporation. The circuit court's order of April 27 sealed the case files and closed the proceedings to the public. The order of May 24 restated the closure of the case files and proceedings. Additionally, it enjoined any communications by the State with the media insofar as the case was concerned.

The Background

Cottman is a franchisor of approximately 150 automotive transmission repair centers situated throughout the United States. Thirteen of those centers currently exist in the State of Maryland. Eleven centers are operated by Cottman franchisees; two are managed by Cottman corporate affiliates.

Representatives of both the Attorney General and Cottman met in the fall of 1987 to discuss allegedly fraudulent activities committed in Maryland at repair centers bearing the Cottman name. Central to the discussions was the methodology of Cottman's franchisees in providing transmission repair cost estimates to consumers. According to the State, Cottman's "Remove, Check, and Install" (RCI) program constituted a deceptive scheme that kept "consumers in the dark about the problems with their [vehicle's] transmissions until after the consumer ... paid a substantial fee to have the transmission disassembled." The State contended that Cottman's sales techniques were designed to withhold material information from consumers in order to increase sales and simultaneously encourage consumers to sanction expensive "teardown" inspections when Cottman actually already knew that extensive repairs were necessary. Cottman, however, insisted that the total cost of any internal repair cannot be determined accurately unless the transmission is removed from the vehicle, disassembled, and inspected.

Apparently either to foreclose the Attorney General's investigation or to precipitate premature action by him, Cottman, on December 23, 1987 in the Circuit Court for Montgomery County, filed a declaratory judgment action against the State. In the suit Cottman sought a declaration that its RCI method of estimating transmission repair costs conformed to the Automotive Repair Facilities Act, Md. Com. Law Art. §§ 14-1001, et seq.

Approximately one month thereafter, the Attorney General brought a four-count complaint ¹ against Cottman in the Circuit Court for Baltimore City. The suit alleges that Cottman:

1) misleads consumers into believing that information necessary for providing an accurate estimate can only be obtained through removal and inspection of the transmission,

2) induces consumers to authorize and pay for unnecessary repairs,

3) charges consumers for repairs not made, and

4) fails to provide consumers who purchase the RCI teardown inspection with a written estimate of parts and labor costs as required by § 14-1002 of the Automotive Repair Facilities Act and § 13-303 of the Consumer Protection Act as defined under § 13-301(13)(vi).

Concomitantly, the State issued a news release which outlined the contents of the complaint, characterized the charges against Cottman as "the result of a lengthy investigation by the Consumer Protection Division into the transmissions industry," and depicted the filing of the suit as "a last resort after four months of discussions with Cottman were unsuccessful."

The record reveals that, after the issuance of the news release, overall gross sales at Cottman's Maryland centers plummeted 35 percent. For the five-month period immediately prior to the filing of the Attorney General's suit and the resultant publicity thereon, the same repair centers enjoyed a 3.8 percent increase in gross sales compared to the gross sales for the same period of the previous year. The results of the sharp drop in sales were that a number of employees were laid off by the various centers, important sources of credit were lost, and one franchisee closed his repair center.

On March 24, 1988 the Attorney General filed a Motion for an Interlocutory Injunction pursuant to Md.Code Com.Law Art. Ann. § 14-406(a), to halt forthwith Cottman's allegedly unfair and deceptive trade practices. The Attorney General planned a news release in conjunction with that motion. Before the release was effected, Cottman moved for a preliminary injunction to restrain the State from issuing the news release. The release would have highlighted details of the State's memorandum made in support of its motion. The memorandum particularized purported evidence gathered by the State during an undercover investigation. No hearing on Cottman's motion occurred because it was withdrawn when the parties agreed voluntarily that the Attorney General could respond to media inquiries but not initiate contact with the media until three days before the hearing on the State's motion for interlocutory injunction. The hearing was set for June 28, 1988.

A conference ensued in chambers of the trial judge on April 26, 1988. At the conclusion of that conference, the judge issued the following order, sua sponte:

"For the reasons stated in chambers on April 26, 1988, it is hereby

ORDERED that as of April 26, 1988, this case and all files pertaining to it shall be sealed and shall not be opened except upon order of the Court;

ORDERED that the courtroom shall be closed to all persons other than counsel for the parties, the parties, and the Defendant's licensees and their representatives, for the oral argument that has been scheduled for May 9, 1988; and further

ORDERED that the courtroom shall be closed to all persons other than counsel for the parties, the parties, the Defendant's licensees and their representatives, the parties' expert witnesses, and such other witnesses as may be called to testify for the hearing on Plaintiff's motion for an interlocutory injunction."

The State filed a Motion for Reconsideration of the closure order, and a hearing thereon was held on May 25, 1988. At that hearing Cottman presented the testimony of three franchisees and a Cottman Vice President. All three of the repair center owners told the court that sales had declined dramatically after the Attorney General's January news release and that, as a result, employees had been discharged because of lack of work. The Vice President of Cottman related to the judge that, since the news release, gross sales had fallen 35 percent in Maryland. At the termination of the hearing, the judge ordered:

"[T]his case and all the files pertaining to it shall be sealed and shall not been [sic] opened except upon order of this Court.

[T]hat the Court room shall be closed to all persons other than counsel for the parties, the parties, the defendant licensees and their representatives, the parties' expert witnesses and such other witnesses as may be called to testify, and if we have an Order of Sequestration that may have to be amended.

[T]hat there ... [are] to be no communications with the press until ... June 28th date, at which time I will consider this matter prior to beginning the injunctive hearing, and if there are any new developments, the State, as well as the Defendant, will have an opportunity to present them to the Court and I will again consider whether the press will be permitted to sit through the proceedings. That is something that we will have to consider as soon as we convene on the 28th, and I am concerned about anything that may take place between now and the 28th date, and my order closing the courtroom is as to any hearing that may occur between now and the 28th date, and whether the injunction hearing will be open to the press, as I have indicated, is something I will consider on the 28th."

The Attorney General promptly appealed the orders of April 27, 1988 and May 25, 1988. The Baltimore Sunpapers was granted permission to intervene in the public interest for purposes of argument before this Court.

The State raised two questions with respect to the closure orders:

1. Were the orders violative of the common law and constitutional privileges guaranteeing parties the right to try civil cases in a public forum?

2. Did the circuit court exceed its authority by imposing a "gag order" on the Attorney General of Maryland?

Public Access to Court Proceedings

None of the parties challenged the underlying assumption that the...