MATTHEWS, Senior Justice.
The main issue presented in this case is whether under the Unfair Trade Practices and Consumer Protection Act a misrepresentation by a seller of the model year of a used motor home is subject to a defense that the misrepresentation was made in good faith. We answer in the negative because the Act clearly implies that unknowing affirmative misrepresentations of material facts will give rise to liability, and substantial authority from other jurisdictions that have similar statutes confirms this view.
Robert Borgen bought a used Travelaire motor home from A & M Motors, Inc. in September 2004.
The title from the State of Alaska showed that the motor home was a 2003 model, but the vehicle identification number (VIN) indicated that the motor home was a 2002 model. Motor homes have two VINs, one on the chassis and one on the coach. Both trial experts testified that the tenth digit of a VIN of a chassis indicates the model year of the chassis, but their testimony as to whether the same holds true for the VIN of a coach was unclear. The VIN on the chassis is the VIN on the vehicle's title, but a motor home's model year is determined by the model year of the coach. In this case, the tenth digit of both VINs was a 2. According to Edward Palmer, an executive of A & M Motors, A & M Motors checked the coach VIN of used motor homes it bought for resale. A & M Motors sold the Travelaire to Borgen as a 2003 model.
Borgen negotiated the purchase with Geno Hensley, a salesman Borgen knew socially. According to the Authorized Additions, Removal, and Repairs Agreement prepared by A & M Motors when it sold the motor home to Borgen, Mike Morelli was the sales manager for the transaction. Borgen did not remember having any direct contact with Morelli during the negotiations or purchase.
When Borgen purchased the Travelaire, he traded in his own used motor home and received a $6,000 used-vehicle allowance. After credit for the down payment and for the trade-in value of his used motor home, Borgen owed $46,491.14 on the Travelaire. A & M Motors helped arrange financing; Credit Union 1 loaned Borgen the money for the motor home.
In August 2005 Borgen discovered documents in the motor home indicating the motor home was actually a 2002 model. He contacted A & M Motors to complain; the only compensation they offered him was a $1,000 service contract.
Borgen became the sole owner of the motor home in 2005; at that time he refinanced the motor home in his name only. At some point Credit Union 1 asked the State of Alaska Division of Motor Vehicles (DMV) to research the title, and DMV changed the title to reflect that the motor home was a 2002 model.
Borgen sued A & M Motors, Hensley, and Morelli. Borgen pled three causes of action: (1) misrepresentation, (2) violation of the Unfair Trade Practices and Consumer Protection Act (UTPA), and (3) breach of contract. All three defendants answered and raised affirmative defenses. At first Morelli and A & M Motors had separate attorneys, but in
Borgen moved for summary judgment on his UTPA claim in February 2008. Borgen principally relied on a North Carolina case in which the court found a violation of North Carolina's consumer protection statute when a dealer misrepresented the model year of a car.
The defendants filed a joint motion for summary judgment in May 2008. They argued, among other things, that neither Hensley nor Morelli could be liable for any alleged breach of contract, as the contract was between A & M Motors and Borgen.
In a written decision dated December 24, 2008, the superior court granted summary judgment to Hensley and Morelli on the breach of contract claim. But it denied summary judgment to the parties on all of the other claims, finding that material issues of fact prevented entry of summary judgment. In its decision, the superior court interpreted this court's opinion in Kenai Chrysler Center, Inc. v. Denison
The case proceeded to trial against A & M Motors and Morelli in August 2010.
Borgen testified about the purchase of the Travelaire and his discovery of documents showing that it was a 2002 model rather than a 2003 model. The documents he found were a new vehicle information statement, showing that both the coach and the chassis were 2002 models, and a distribution order, showing a manufacturing date of May 6, 2002. Borgen highlighted the changes from 2002 to 2003 that had been made to documents from A & M Motors. Borgen testified that he had never met Morelli before he sued him and had not talked to him during the purchase of the motor home.
Oyster, who worked for a different RV dealership, was qualified as an expert in RV sales and the evaluation of RVs for pricing purposes. He testified generally about the duties of a sales manager at an RV dealership, indicating that a sales manager "usually" is "the last word" in "negotiations for the purchase or sale of motor homes." He also testified that sales managers "evaluate motor homes, trade-ins, help select inventory" and "pretty much run the sales department." Oyster thought that in general it was reasonable for a dealer to rely on the vehicle's title to determine the model year, but he said if the owner of a used RV reported that the model year was different from the year on the title, he would investigate it further. Oyster testified that he had reviewed the manufacturer's statement of origin (MSO) for Borgen's Travelaire, and it showed that the
Janidlo testified that he thought the Travelaire was a 2002 model, as indicated in the service agreement he signed when he bought the motor home. He identified or discussed several documents related to his trade-in of the Travelaire. The initial trade-in evaluation from A & M Motors said that it was a 2002 model, but the model year had been changed to 2003 on a later document; Janidlo testified that he did not make the change or authorize it. Janidlo said that he did not make other changes in the documents from 2002 to 2003; he also said that the "2002" on the original trade-in evaluation was not in his handwriting. He indicated that Traveling Treasures, the company from which he bought the Travelaire, filled out the papers for the original title and he signed them. He was unaware that the title had the wrong model year on it and was always under the impression that the motor home was a 2002 model.
At the end of Borgen's case-in-chief, A & M Motors and Morelli asked for directed verdicts. The court granted Morelli's motion for a directed verdict because it decided that no evidence had been introduced from which a reasonable juror could conclude that Morelli made any misrepresentations to Borgen or had done anything that would amount to a UTPA violation. The court also granted the defendants' motion for a directed verdict on the punitive damages claim, finding that Borgen failed to present adequate evidence of outrageous conduct. The court denied A & M Motors's motion for a directed verdict because it decided that Borgen had introduced enough evidence for the jury to consider A & M Motors's intent.
Palmer of A & M Motors testified that the seller of a used motor home does not ordinarily have an MSO to show the model year; it only has the title from the state. A & M Motors introduced its valuation of the motor home when Janidlo traded it in; Palmer testified that A & M Motors actually paid Janidlo the value of a 2003 model. He said it was A & M Motors's practice to check the coach VIN of the motor homes it purchased for resale, but he also said that it relied on the title rather than the VIN for the model year. Palmer testified that A & M Motors had received titles with mistakes on them, specifically an incorrect VIN, but that it could not check the titles of all used motor homes.
Mellott testified that she was the office manager for the Anchorage DMV offices. She explained how DMV issues a vehicle title; she said that in this case, it appeared that "whoever processed the title looked at the application instead of the actual official [certificate of origin]" and that the original certificate said the vehicle was a 2002 model. Mellott said that A & M Motors should have been able to rely on the title, but she also said if A & M Motors had information that the title was incorrect, it could research the title. She estimated that it would take just a few minutes to research a newer vehicle title.
Dunlap, a former employee of A & M Motors, testified as an expert for A & M Motors. Dunlap described the trade-in process at A & M Motors in detail. Dunlap testified that A & M Motors would not look for an MSO or certificate of origin when taking a trade-in because the original documents are either with the state where the motor home was first registered or with the
At the close of all the evidence Borgen moved for a directed verdict and A & M renewed its motion for a directed verdict. The court denied both motions stating:
The parties submitted proposed jury instructions before trial; A & M Motors submitted a proposed special verdict form. Both parties filed objections to the other side's proposed instructions. The biggest dispute over jury instructions was related to the UTPA instructions. Borgen proposed an instruction that would have required the jury to find that A & M Motors had committed a UTPA violation if the jury found that A & M Motors misrepresented the model year of the motor home. After the evidence was presented, Borgen asked the court to instruct the jury that the seller could commit an unfair trade practice by failing to investigate the validity of a title after learning of a potential problem with the title; as authority for this instruction, he relied on a Georgia case this court cited in Kenai Chrysler Center, Inc. v. Denison.
The jury decided that A & M Motors had not engaged in an unfair or deceptive act in its dealings with Borgen. It then decided that A & M Motors had misrepresented the model year, that it knew or should have known that the statement was false or misleading, and that the misrepresentation was a legal cause of harm to Borgen. It found that A & M Motors had not breached its contract with Borgen. It found that Borgen suffered $3,097.50 in damages.
On October 20, 2010, Borgen moved for a judgment that A & M Motors committed a UTPA violation and breached its contract with him, notwithstanding the jury's verdict. Alternatively, he asked for a new trial. The day before, he had requested actual attorney's fees pursuant to the UTPA; his billing records showed that he incurred more than $100,000 in fees during the course of the case. A & M Motors opposed the attorney's fees motion, arguing that the court should award fees under Civil Rule 82.
The court denied the motion for a new trial or judgment NOV. The court held that because Borgen failed to object to the alleged inconsistency of the verdict before the jury was discharged, he was barred "from arguing that any proposed inconsistency entitle[d][him] to a new trial as a matter of law." The court considered the potential inconsistency in the verdict when ruling on the motion for a judgment NOV. The court found Borgen's argument about the inconsistency of the verdict "unconvincing," noting that "[n]ot every misrepresentation is an unfair trade practice and the jury was specifically instructed that a good faith but mistaken belief cannot be the basis for a finding of an unfair or deceptive act or practice." Viewing the evidence in the light most favorable to A & M Motors, the court decided that the jury could have found that the misrepresentation about the model year was based on a goodfaith but mistaken belief; on the contract claim, the court concluded that the jury could have decided that the model year was not material to the contract, so Borgen received what he bargained for. The court also denied the motion for a new trial. Independently weighing the evidence, the court decided that the verdict of $3,097.50 was not against the weight of the evidence.
Borgen requested reconsideration of the court's order denying his motion for judgment NOV, taking issue with the court's conclusion that in the context of a commercial transaction not every material misrepresentation is an unfair trade practice and arguing that the court's conclusion was contrary to the language of AS 45.50.471(b)(12). Borgen also claimed that the court was mistaken in relying on Kenai Chrysler Center, Inc. v. Denison as a basis for concluding that good faith would be a defense to the claim under review since the issue in Kenai Chrysler was not misrepresentation but whether or not a contract was valid. The court denied the request for reconsideration.
The court awarded Rule 82 fees of $686.69 to Borgen. The court decided that there was "no basis" for awarding enhanced fees and that "[n]othing about the requested fees appear[ed] justified."
Borgen appeals. In his brief on appeal he lists eight issues presented for review and presents six captioned arguments. Borgen's argument headings are as follows:
Alaska's Unfair Trade Practices and Consumer Protection Act (UTPA)
Alaska's UTPA takes both the general and the per se approach. Subsection .471(a) of the UTPA declares "unfair or deceptive acts or practices in the conduct of trade or commerce" to be unlawful. Subsection .471(b) contains a long list of subparagraphs describing types of conduct that are by definition unfair or deceptive acts or practices and are thus unlawful. Borgen based his claim on three of these subparagraphs: (b)(6), (11), and (12).
We turn first to Borgen's argument that judgment NOV should have been granted in his favor on his UTPA claim. This argument encompasses three of the issues that Borgen lists as presented for review:
We note at the outset of our discussion of this point that the terminology used by our Civil Rule 50 is not especially descriptive. Motions for a "directed verdict" under Rule 50(a) and motions for "judgment notwithstanding the verdict" under 50(b) can be based on any ground that entitles the movant to judgment as a matter of law. The Federal Rules of Civil Procedure, in recognition of the problems posed by this nomenclature, now call a Rule 50(a) motion a "motion for judgment as a matter of law"; a Rule 50(b) motion is simply a "renewed motion for judgment as a matter of law."
Motions for judgment notwithstanding the verdict present questions of law that are reviewed on appeal de novo rather than deferentially.
This case involves the use and interpretation of a special verdict. Special verdicts are provided for by Alaska Civil Rule 49(b).
"The touchstone in reconciling apparent conflict is whether `the answers may fairly be said to represent a logical and probable decision on the relevant issues as submitted.'"
If the special verdict answers are not fairly capable of being reconciled, a new trial is ordinarily required:
The ultimate reason why a new trial may be necessary in case of a material, irreconcilable conflict in special verdict answers is to give effect to the constitutional right to a jury trial.
Borgen argues that he should have been granted judgment NOV because all of the elements that were necessary to establish an actionable misrepresentation under the UTPA were proven. He bases this argument on the special verdict answers that found that A & M Motors either knowingly or negligently misrepresented the model year of the motor home and that the misrepresentation caused damage to him. He also argues that the facts as to the misrepresentation were undisputed and thus, by implication, regardless of the special verdict, he was entitled to judgment NOV. As to the required
In response to Borgen's argument, A & M Motors makes two contentions. It suggests first that Borgen is precluded from contending that the jury's finding of misrepresentation requires a finding of a UTPA violation:
Second, A & M Motors argues that the affirmative defense as to a "good faith, but mistaken belief" applied to the UTPA claim but not the misrepresentation claim. A & M Motors contends that when viewing the evidence in a light favorable to it there was ample proof that any mistake it made was in good faith.
In reply, Borgen reiterates that the jury finding that A & M Motors had misrepresented the model year of the motor home was a misrepresentation within the meaning of subsection.471(b)(12) of the UTPA. He contends that this finding established the law of the case and raised the legal issue as to whether the finding also required the court to find a violation of the UTPA. Borgen then cites the case on which he previously relied in moving for summary judgment, setting out a block quote that states that under a similar North Carolina statute "a purchaser of misrepresented merchandise does not have to prove... bad faith ...; it is enough that the goods bought were misrepresented."
A & M Motors's argument that Borgen should be precluded from arguing that the jury's special verdict as to misrepresentation does not entitle him to judgment as a matter of law under the UTPA has no merit. Borgen has consistently presented a claim for misrepresentation under the Act. He based his motion for summary judgment on the misrepresentation subparagraphs of subsection.471(b) and contended that what he had to prove in order to be entitled to partial summary judgment under the Act was simply that a material misrepresentation was made. Further, he requested an instruction that closely followed the language of subsection.471(b)(6) of the Act. The instruction would, if given, have required the jury to find a violation of the UTPA if the jury found that the model year of the motor home was misrepresented.
A & M Motors is correct in observing that the court instructed the jury that "[a] good faith, but mistaken belief cannot be the basis for a finding of an unfair or deceptive act or practice"
We now turn to this question. Under subsection .471(b)(12), "using ... misrepresentation, or knowingly concealing, suppressing, or omitting a material fact with intent that others rely upon the concealment, suppression, or omission in connection with the sale ... of goods ... whether or not a person has in fact been misled, deceived or damaged" is unlawful under the UTPA.
This subparagraph implies that affirmative acts of misrepresentation need not be knowing; "knowingly" only applies to acts of concealment, suppression, or omission. Permitting a defense of good faith would generally excuse unknowing affirmative misrepresentations, and thus would conflict with the evident legislative intent to impose liability for them.
Other courts construing similar statutes have held that a seller's good or bad faith is unimportant when there is an affirmative misrepresentation and buyers can recover for unknowing misrepresentations without having to prove bad faith or disprove a seller's assertion of good faith. Examples of such authorities include:
• Duhl v. Nash Realty Inc.,
• Gupta v. Asha Enterprises, LLC,
• State ex rel. Miller v. Pace,
Both Ohio and Texas hold that intent or knowledge is not an element of a "laundry list" claim under their consumer protection statutes unless the statute itself so provides.
Even where the applicable statute merely prohibits unfair or deceptive acts or practices without also making specific acts per se unlawful, courts have held that innocent material misrepresentations are deceptive acts which give rise to liability. For example in Myers v. Liberty Lincoln-Mercury, Inc.,
Myers relied on a decision of the North Carolina Supreme Court, Marshall v. Miller.
Another case that holds that "deceptive acts" under a consumer protection statute include innocent misrepresentations is Bartner v. Carter.
The Connecticut Supreme Court interpreted its Unfair Trade Practices Act as not requiring proof that the defendant was aware that his misrepresentation was false:
Good faith or lack of intent to deceive are likewise not defenses under Vermont's Consumer Fraud Act.
Because the standard for a deceptive act or practice is the capacity or tendency to deceive, several state and federal courts have determined that even truthful statements can be actionable under some circumstances because of the manner in which the facts are presented.
Section .545 of Alaska's UTPA mandates that "[i]n interpreting AS 45.50.471 due consideration and great weight should be given the interpretations of 15 U.S.C. § 45(a)(1) (§ 5(a)(1) of the Federal Trade Commission Act)." We have followed this section and have applied F.T.C. precedent to private claims brought under the UTPA.
Our case law has adopted the F.T.C. definition as to whether an act is deceptive. "Regarding the standard for deceptive practices, we held in O'Neill Investigations that `[a]n act or practice is deceptive or unfair if it has the capacity or tendency to deceive' where neither actual injury as a result of the deception nor intent to deceive were required."
As noted by the North Carolina Supreme Court in Marshall and the Maine Supreme Court in Bartner, and as is suggested by our discussion of the definition of deceptive practices in O'Neill and ASRC Energy, F.T.C. precedent concerning whether an act or practice is deceptive does not permit a good-faith defense.
The trial court believed that a good-faith defense was required based on Kenai Chrysler Center, Inc. v. Denison.
The factors are:
We noted that the trial court had instructed the jury on these standards and observed that "Kenai Chrysler correctly asserts that these provisions require proof of something more than the mere assertion of a good faith but mistaken belief that a contract was valid."
Applying a "flexible, case specific approach" employed in the case law under discussion, the Kenai Chrysler court concluded that "reasonable jurors could fairly find that Kenai Chrysler's conduct went far beyond a simple assertion of the company's good faith belief that the sale contract was valid."
The discussion in Kenai Chrysler concerned the definition of an "unfair" act or practice under subsection .471(a). More specifically, that case discussed standards for determining when the insistence upon contract rights could be considered an unfair act. The discussion in Kenai Chrysler does not apply to specific conduct prohibited under the subparagraphs of subsection .471(b) and is distinguishable on this basis. The discussion also does not apply to acts or practices that are "deceptive" as distinct from "unfair." The two terms are used in the disjunctive in section .471(a), and either will suffice to give rise to liability. Whether an act is "unfair" is determined by using the flexible and somewhat vague Sperry & Hutchinson standards, whereas whether an act is "deceptive" is determined simply by asking whether it "has the capacity or tendency to deceive."
Material misrepresentations as prohibited under AS 45.50.471(b)(6) and (12) are by definition "unfair or deceptive acts or practices," and there is no need to independently define unfairness, or deception, when a violation of these subparagraphs is claimed.
This point is also made in the Alaska Pattern Jury Instruction that concerns violation of specific provisions of AS 45.50.471(b). The use note states: "The acts specified in AS 45.50.471(b) are unfair or deceptive by definition. Therefore, if this instruction is used, instructions 10.03A [defining deceptive practices] and 10.03B [essentially the Sperry factors defining unfair practices] are not required."
Moreover, even if the per se approach as to listed violations under subsection.471(b) were not employed, the prohibition on deceptive acts or practices in subsection .471(a) also encompasses innocent material misrepresentations without requiring proof of bad faith or permitting a defense of good faith. We reach this conclusion based on F.T.C. precedent to which we give great weight, as well as case law from other jurisdictions reaching the same conclusion.
Borgen is therefore correct that the elements of his case for misrepresentation under section .471 were that (1) A & M Motors misrepresented the model year of the motor home by representing that it was a 2003 model when in fact it was a 2002 model; (2) that this misrepresentation was material; and (3) that it caused him damage. He is also correct that these elements were established by the jury in answers to questions 2, 2a, and 4 of the special verdict.
Based on these findings, judgment should be entered in favor of Borgen unless they conflict with other findings in the special verdict. We find no conflict, based largely on the reconciliation offered by the trial court.
In view of our decision that Borgen should have been granted judgment NOV on his UTPA claim most of the other points on appeal are moot. The two that are not moot are (1) whether he was entitled to judgment NOV or a new trial as to damages and (2) whether the court erred in granting a directed verdict for Mike Morelli. These require only brief discussion.
As to damages, Borgen contends that the only evidence of damages was that presented by his witness, Oyster, who stated that the difference in value between a 2002 and 2003 Travelaire motor home was in the range of $5,000 to $10,000. He argues therefore that there was no justification for the jury's award of slightly more than $3,000. A & M Motors responds that Oyster's opinion of the difference in value related to the difference in value between a 2002 and 2003 Travelaire as of 2009, whereas the court's instructions required the jury to evaluate the difference as of the time of purchase in 2004. A & M Motors also points out that there was documentary evidence that was presented to the jury that inferentially showed only a $1,000 difference between the relevant model years as of the time of sale. Counsel for A & M Motors so argued before the jury. In addition, Borgen introduced the records showing both the amount A & M Motors gave the Janidlos for trading in the motor home and the amount it charged Borgen for the vehicle. In our view the testimony of Oyster and the documentary evidence established a range of values on which the jury could have based its damages verdict.
With respect to Borgen's argument that the court erred in directing a verdict in favor of Morelli, Borgen argues that when the evidence is viewed in its strongest light in his favor, it creates a reasonable question for the jury as to whether Morelli was the person responsible for changing the sale documents concerning the motor home from "02" to "03." But the trial court found that there was no evidence that Morelli was involved in this transaction apart from the fact that he was sales manager of A & M Motors at the time of the sale and was listed as such on some of the sales documents.
Although Borgen's appellate point concerning the award of attorney's fees is moot, on remand the superior court must vacate the award of attorney's fees which it made to Borgen under Civil Rule 82 and make an award of full reasonable attorney's fees under subsection .537(a) of the UTPA.
The special verdict established that Borgen is entitled to judgment for misrepresentation under section .471 of the UTPA and that the actual damages that he suffered as a result of the misrepresentation were $3,097.50. This sum must be trebled under AS 45.50.531(a). In addition, Borgen is entitled to an award of full reasonable attorney's fees under AS 45.50.537(a). No valid basis has been shown for reversing the judgment in favor of Morelli.
Accordingly, we AFFIRM the judgment in favor of Morelli, VACATE the judgment entered in favor of Borgen against A & M Motors, and REMAND this case with directions to enter a new judgment in favor of Borgen against A & M Motors under the UTPA and to award treble damages and attorney's fees in accordance with this opinion.
FABE, CHRISTEN, and STOWERS, Justices, not participating.
9B CHARLES ALAN WRIGHT & ARTHUR R. MILLER, FEDERAL PRACTICE & PROCEDURE § 2521, at 223-24 (3d ed. 2008) (footnotes omitted).
An individual is obligated to make consumer redress for violations of the FTC Act where he (1) participated in or had the authority to control the wrongful acts or practices; and (2) had some knowledge of the wrongful acts or practices. FTC v. Gem Merchandising Corp., 87 F.3d 466, 470 (11th Cir.1996). To satisfy the knowledge requirement, the Commission does not need to demonstrate that the individual defendants possessed the intent to defraud, nor that the defendants had actual knowledge of the misrepresentations. FTC v. Amy Travel Serv., Inc., 875 F.2d 564, 574 (7th Cir.1989). "Reckless indifference to the truth or falsity of the representations or an awareness of a high probability of fraud coupled with an intentional avoidance of the truth will suffice. Moreover, a defendant's participation in corporation affairs is probative of knowledge." Id.
F.T.C. v. SlimAmerica, Inc., 77 F.Supp.2d. 1263, 1276 (S.D.Fla.1999).