Consumer Protection Division v. Luskin's, Inc.

ALPERT, Judge. Appellant, the Consumer Protection Division of the Office of the Attorney General (“the Division”) appeals from a declara ¹⁰⁶ tory judgment entered in favor of appellee, Luskin’s, Inc. (“Luskin’s”) in the Circuit Court for Harford County. The Division asks: I. Did the lower court abuse its discretion by issuing a declaratory judgment, when a pending administrative enforcement action between the same parties would resolve the same legal issue?

II

Did the lower court err in declaring that § 13-305(b) prohibits only notices delivered to specific individuals and not general advertising to the public, and that Luskin’s offer of airfare certificates to consumers who bought $200 or more of merchandise from Luskin’s is not a thing of value, such as a prize or award, conditioned upon the purchase of other goods?

III

Did the lower court abuse its discretion and err in declaring that Luskin’s proposed advertisement was not unfair or deceptive on its face so as to violate Title 13 of the Maryland Code Annotated, when such a declaration did not terminate any uncertainty or controversy, considered only one possible violation, and erroneously applied the facts and law before it to the proposed advertisement? We answer the first question in the affirmative and, therefore, reverse without reaching the remaining questions. Facts and Proceedings During the summer of 1992, Luskin’s placed advertisements in Maryland newspapers that stated, “FREE AIRFARE FOR TWO TO FLORIDA, THE BAHAMAS OR HAWAII.... Buy An Appliance, TV, Stereo, VCR, or any Purchase over $200 And You’ll Get A Big Gift for Two (Round Trip Airfares).” Similar advertisements aired on television, one of which included the following language: “Ready for a great vacation?

Luskin’s has free airfare for two with every $200 purchase to Florida, $300 to the Bahamas, $400 to Hawaii. Luskin’s, the cheapest guy in town.” Both the television and print advertisements included the statement, “Minimum Hotel Stay Required. See store for details.” The newspaper adver ¹⁰⁷ tisements additionally stated, “Vacation Premium Offered Through Vacation Ventures, Inc., which is not affiliated with Luskin’s.... Because of Participation by National Companies, Prior Sales do Not Qualify for Free Airfare Offer.

Applicable Taxes Apply. See Store for Details.” By letter dated July 27, 1992, the Division notified Cary Luskin, the president of Luskin’s, that the vacation promotion appeared to violate section 13-305 of the Maryland Consumer Protection Act. Md.Ann.Code, (1990 Repl.Vol.) § 13-305, Com.Law Article. Section 13-305 provides, in part, (b) Prohibition.—A person may not notify any other person by any means, as part of an advertising scheme or plan, that the other person has won a prize, received an award, or has been selected or is eligible to receive anything of value if the other person is required to purchase goods or services, pay any money to participate in, or submit to a sales promotion effort.

Id. § 13-305(b). The Division requested that Luskin’s discontinue these advertisements. Luskin’s complied with this request. On August 17, 1992, Luskin’s presented to the Division a new proposal for an advertising campaign, which is the subject matter of this case.

The proposed advertisement showed a picture of an airplane and stated, “plus ... AIRFARE & VACATION CERTIFICATE For Two TO FLORIDA, THE BAHAMAS OR HAWAII INCLUDED WITH ANY PURCHASE OF $200 OR MORE!! Buy An Appliance, TV, Stereo, VCR, or any Purchase over $200 And You’ll Get Two Round Trip Airfare/Vacation Certificates.” The proposed advertisement contained the following additional disclosures that had not been included in the previous advertisement: “Minimum Hotel Stay Required At Nationally Recognized Properties At Reasonable, Published Rates”; “Trip Does Not Require Any Promotional Presentations or Real Estate Sales Visits”; and “ESTIMATED RETAIL VALUE of this certificate for two people ranges from $479 to $1,454 depending upon departure city, destination and season.” The Division ¹⁰⁸ advised Luskin’s that the proposed advertising campaign would also violate section 13-305 of the Consumer Protection Act and threatened legal action if Luskin’s went forward with the campaign. Luskin’s has not published the proposed advertisement.

On September 11,1992, Luskin’s filed the action for declaratory judgment that is now before us on appeal. Luskin’s contended that the proposed advertisement did not fall within the prohibition against notifying any other person that he “has been selected or is eligible to receive anything of value if the other person is required to purchase goods or services.” Id. § 13-305(b). Luskin’s argued that the proposed advertisement did not offer a gift or prize and, thus, the advertisement was permissible under an exception to the prohibition. This exception, set forth in section 13-305(a)(3), provides: “Retail promotions, not involving the offer of gifts and prizes, which offer savings on consumer goods or services including ‘one-cent sales,’ ‘two-for-the-price-of-one-sales,’ or manufacturer’s ‘cents-off coupons [are not prohibited under this section].” Luskin’s requested that the circuit court declare that the proposed advertisement does not violate section 13-305 of the Consumer Protection Act.

Additionally, Luskin’s sought an order permanently enjoining the Division from interfering in any way with the proposed advertising campaign. The Division filed a motion to dismiss the complaint for declaratory judgment on September 28, 1992. A civil statement of charges initiating the Division’s administrative enforcement proceeding against Luskin’s, also dated September 28, 1992, was included as an exhibit to the motion. The administrative proceeding was instituted in order to restrain [Luskin’s] from advertising and providing travel certificates to consumers in the course of selling other consumer goods and services, when the advertisements of the travel certificates misrepresent that they provide free airfare, fail to disclose the cost and terms and conditions of redeeming the certificates, and constitute an unlawful prize promotion, in violation of § 13-303, as defined in §§ 13-301 and 13-305 of the [Maryland] Consumer Protection Act. ¹⁰⁹ The administrative case was based on the original advertising campaign by Luskin’s and did not include any civil charges based on the proposed advertisement.

Administrative Law Judge Melanie Vaughn (“ALJ”) conducted a hearing in the administrative case on November 13, 1992. The Division issued its Final Decision and Final Order on September 21, 1993, enjoining Luskins, inter alia, from violating § 13-305. On November 19, 1992, the circuit court held a hearing on the motion to dismiss the complaint for declaratory judgment and on the merits of the declaratory judgment action. In support of its motion to dismiss, the Division argued that the proposed advertisement was substantially similar to the previous advertisement; that the pending administrative action would address the same legal issue that was presented in the declaratory judgment action; and that, after termination of the administrative proceeding, the Division had broad power to fashion an administrative order to guide Luskin’s in its future advertising campaigns.

By Memorandum Opinion filed December 11, 1992, the circuit court denied the motion to dismiss, stating in support of its ruling, The administrative action in progress at the moment addresses itself to a past violation and not to an interpretation of a proposed action. Therefore, the validity of the proposed advertising campaign is not an issue in the existing enforcement proceedings. The principal issue before the Court is the interpretation of Section 13-305 [of the Consumer Protection Act] and not the determination of disputed questions of fact. Under these circumstances, we do not believe that the mere prospect that the proposed advertising campaign may be addressed in fashioning a remedy for a past violation justifies the dismissal of the declaratory judgment.

In fact, it appears to us, that the Attorney General’s filing of the enforcement action was an attempt to wrest control of the litigation and to require Luskins to go through an unnecessarily time consuming administrative process when the rele ¹¹⁰ vant legal issue had already been properly placed before the Court by Luskin[’s] complaint for declaratory judgment. For these reasons, the motion to dismiss will be denied. During the hearing on the merits of the declaratory judgment action, exhibits were admitted and Mr. Luskin testified as to the operation of the proposed advertising campaign, A customer would come in and decide to make a purchase at Luskinf’s] normal selling prices. There was no premium added on to our prices for this.

The customer would make [a] purchase. At the time of delivery, or in the event they took the purchase with them, they would be given a certificate .... The certificate would then be read by the customer and filled out by the customer, and sent in to Vacation Ventures, and the customer would have a choice ... between . the Hilton, Sheraton, all national companies, and [would] send in [the] deposit, and give the Vacation Ventures people a choice of dates, and they could leave from any airport they wanted to. The Division contended that the proposed advertisement violated section 13-305 because it offered, as a gift or prize, airfare and vacation certificates conditioned on the purchase of unrelated consumer goods.

The Division also argued that the proposed advertisement did not disclose additional charges that consumers would be required to pay in order to redeem the airfare and vacation certificates. On December 22, 1992, the circuit court issued an order, declaring that the proposed advertising campaign does not violate section 13-305 and is “not unfair or deceptive on