State v. Cottman Transmissions Systems, Inc.

Decision Date04 April 1991
Docket NumberNo. 943,943
Citation587 A.2d 1190,86 Md.App. 714
PartiesSTATE of Maryland v. COTTMAN TRANSMISSIONS SYSTEMS, INC. Sept. Term 1990.
CourtCourt of Special Appeals of Maryland

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

Stephen Horn (Robert L. Zisk and Schmeltzer, Aptaker & Shepard, P.C., on the brief), Washington, D.C., for appellee.

Argued before MOYLAN, BLOOM and CATHELL, JJ.

CATHELL, Judge.

Cottman Transmission Services, Inc. ("Cottman"), a Pennsylvania corporation, is a franchisor of numerous automotive transmission repair facilities throughout the United States. In 1988, the Attorney General's Office of the State of Maryland ("State") filed a four count complaint against Cottman in the Circuit Court for Baltimore City. Counts 1 through 3, citing the Maryland Consumer Protection Act ("CPA"), Md.Com.Law Code Ann. § 13-101 [587 A.2d 1192] et seq., 1 alleged that Cottman engaged in trade practices which were unfair and deceptive under § 13-301(1), (3), (7) and (9). In Count 1, the State asserted that Cottman was selling unnecessary transmission inspections to its customers by misleading them into believing that the inspections were required by Cottman to form an estimate of the repair costs. Count 2 alleged that Cottman induced customers to authorize and pay for unnecessary repairs. Count 3 stated that Cottman had charged customers for fictitious repairs. Count 4 alleged that Cottman had violated the Automotive Repair Facilities Act ("ARFA"), Md.Com.Law Code Ann. § 14-1002, and § 13-301(13)(vi) 2 of the CPA by failing to provide written estimates of parts and labor costs.

The State filed a Motion for an Interlocutory Injunction pursuant to Md.Com.Law Code Ann. § 14-406(a), seeking to halt the alleged unfair and deceptive trade practices. At a conference prior to a hearing on the injunction, the trial judge ordered that the case files be sealed. He also closed the courtroom to the public and prevented the State from communicating with the press about the case. After a denial of a Motion to Reconsider the closure order, the State appealed. This Court reversed the closure and limited the order, 3 so as to proscribe only those comments which were relative to the merits of the case. State v. Cottman Transmission Systems, 75 Md.App. 647, 542 A.2d 859 (1988) ("Cottman I ").

The hearing on the State's Motion for Interlocutory Injunction was then held, and the motion was denied. The trial judge granted an oral motion by Cottman for summary judgment on the issue of agency, ruling that no principal/agent relationship existed between Cottman and its Maryland centers with respect to the recommendation and sale of unnecessary repairs by its franchisees.

The State appealed. State v. Cottman Transmission Systems, [No. 1430, 1988 Term, per curiam, filed April 26, 1989] (citations omitted) ("Cottman II "). In our discussion of the motion for interlocutory injunctive relief, we necessarily dealt with the likelihood of success on the merits, and held that the State had at that stage failed to prove that Cottman's Maryland shops were agents of the Pennsylvania corporation. Thus, we affirmed the trial court's refusal to issue the requested interlocutory injunction.

After subsequent hearings, the trial judge granted a summary judgment motion by the State regarding Cottman's 4 withholding of diagnostic and price information from consumers, ruled that Cottman's participation constituted a deceptive practice, and enjoined its continuance. In the instant appeal, we shall decide the validity of that summary judgment.

The entry of summary judgment ultimately resulted in the entry of final judgment for the State as to Count 1, and final judgment for Cottman as to Counts 2, 3, and 4. 5 Cottman's franchisees were not parties, and were held not to be its agents, so they were not ordered to do anything. A $100,000 civil penalty was imposed on Cottman, and a permanent injunction was issued requiring it to "issue new policy directives to its franchises ... directing ... them to no longer withhold from consumers material price and diagnostic information immediately after performance of any road test and external transmission inspection and before the consumer commits to paying for an internal transmission inspection...." The judge denied the State's motion for restitution to the consumers involved.

The State presents these questions on this appeal:

I. Is restitution under the Consumer Protection Act only available to consumers who received no goods or services after being deceived?

II. Did the lower court err in failing to order the disclosure of material price information, the omission of which would tend to deceive consumers?

III. Did the lower court err in determining on summary judgment that Cottman is not responsible for its centers' sale of unnecessary transmission repairs, despite evidence that Cottman's centers are required to follow all directives Cottman issues concerning both overall policies and day-to-day operations, that Cottman hires and fires center personnel, that Cottman encourages the sale of unnecessary repairs, and that Cottman requires the use of procedures that result in the sale of unnecessary repairs? 6

In its conclusion, the State clarifies its requested relief:

[T]he lower court's denial of restitution [should] be reversed and remanded for any necessary proceedings to provide consumers with the restitution contemplated by the Consumer Protection Act, that the lower court's refusal to order Cottman to disclose the maximum price [of transmission repairs] be reversed and remanded for entry of an order requiring such a disclosure, and that the Order ... granting judgment to Cottman on Counts II, III, and IV be reversed and that the case be remanded for a jury trial on those counts.

Cottman filed a cross appeal, asking:

1. Whether the circuit court erred in interpreting the general Consumer Protection Act to add a requirement to the more specific Automotive Repair Facilities Act.

2. Whether the court impermissibly amended the Automotive Repair Facilities Act.

3. Whether the court erred in holding that the "RCI" method is a deceptive practice under the Consumer Protection Act.

4. Whether the court erred in failing to assess the alternatives before finding that the RCI method was deceptive.

5. Whether the court erred in failing to require the State to proceed by rulemaking.

6. Whether the court erred by imposing penalties vicariously on Cottman for the acts of its non-agent licensees. 7

This multiplicity of questions may be reduced to three issues:

1) the propriety of the trial judge's grant of summary judgment on each of the four counts;

2) whether the trial judge erred in interpreting the CPA and ARFA to allow

a) the imposition of civil penalties, and

b) issuance of a permanent injunction requiring Cottman to direct its franchisees to provide consumers with price and diagnostic information;

3) whether the trial judge erred in refusing to grant restitution to consumers under Count 1.

We shall address these three issues as is necessary within our discussion of summary judgment with respect to the individual counts, and discuss the other issues as we deem necessary.

The Summary Judgment Standard

In Lone v. Montgomery Co., 85 Md.App. 477, 503-04, 584 A.2d 142 (1991), this Court discussed the appellate standard of review of summary judgment:

Maryland Rule 2-501(e) provides that:

The court shall enter judgment in favor of or against the moving party if the pleadings, depositions, answers to interrogatories, admissions, and affidavits show that there is no genuine dispute as to any material fact and that the party in whose favor judgment is entered is entitled to judgment as a matter of law.

In reviewing a grant of summary judgment, we must first determine whether a dispute of material fact exists. Arnold Developer, Inc. v. Collins, 318 Md. 259, 262 (1990). "A material fact is a fact the resolution of which will somehow affect the outcome of the case." Id. at 261 (quoting King v. Bankerd, 303 Md. 98, 111 (1985)). Where the facts are susceptible to more than one permissible inference, the choice between inferences should be made by the trier of fact, and should not be resolved on a motion for summary judgment. Honaker v. W.C. & A.N. Miller Dev. Co., 285 Md. 216 (1979), aff'd, 291 Md. 241 [434 A.2d 564] (1981); Miller v. Nissen Corp., 83 Md.App. 448, 458 (1990); Barb v. Wallace, 45 Md.App. 271 (1980). When a determination is made as to whether a factual dispute exists, all inferences must be resolved against the moving party, even if the underlying facts are disputed. Berkey v. Delia, 287 Md. 302 (1980); Maloney v. Carling Nat'l Breweries, Inc., 52 Md.App. 556 (1982).

COUNT 1

The judge made certain rulings with respect to this count. We list them as we shall hereafter address them. He (A) entered summary judgment for the State concerning the issue of Cottman's deceptive business practices, finding Cottman in violation of the CPA for its policy of requiring its franchisees to conceal material information from consumers; (B) granted an injunction; and (C) assessed a civil penalty; (D) ruled that, as a matter of law, there was no agency relationship between Cottman and its franchisees; and (E) denied the State's request for restitution to consumers.

A. Deceptive Business Practices

The CPA defines a deceptive trade practice in this context as either a "[f]ailure to state a material fact if the failure deceives or tends to deceive," Md.Com.Law Code Ann. § 13-301(3) (1990); or "[d]eception, fraud, false pretense, false premise, misrepresentation, or knowing concealment, suppression, or omission of any material fact with the intent that a consumer rely on the same in connection with," § 13-301(9); or as a violation of the ARFA, § 13-301(14)(vi). An omission is...

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