State v. Jonathan Logan, Inc.

RODOWSKY, Judge. The construction of § 11-209(a) of the Maryland Antitrust Act, Md.Code (1975, 1983 Repl. Vol.), §§ 11-201 to 11-213 of the Commercial Law Article (the Md.Act) is the principal question presented in this case. 1 The State of Maryland, acting through the Antitrust Division of the Attorney General’s Office and alleging a resale price maintenance conspiracy in raincoats, brought this action under § ll-209(a). The State contends that the section authorizes an equity court to order the alleged price fixer to pay to the State for the benefit of retail purchasers the difference between the price they paid for the raincoats as affected by the conspiracy and the price which they would have paid but for the price fixing.

The trial court held, on demurrer, that § ll-209(a) does not permit recovery of that monetary relief. In Part I hereof we shall explain why we agree with ⁶⁵ the trial court on that issue. That court also held that the State had failed to state a claim for injunctive relief. In Part II we set forth the reasons for our concurrence in that conclusion.

On March 2, 1981, the State, expressly suing only in its sovereign capacity, filed this action against Jonathan Logan, Inc., (Logan) in the Eighth Judicial Circuit. The complaint described Logan as one of the nation’s largest manufacturers of apparel goods which through its Misty Harbor Division sells rainwear to resellers in Maryland and elsewhere throughout the United States. It was alleged that, from “a time prior to 1972 and continuing thereafter at least until April, 1977,” Logan had engaged in a combination or conspiracy in unreasonable restraint of trade “to fix, raise and maintain resale prices of [its] rainwear,” and that, unless enjoined, the unlawful combination would “continue or be renewed .... ” Prayer B of the complaint asked the court to [r]emove the effect of the violation complained of herein by compelling defendant, pursuant to Md.Com.Law Code Ann. § 11 — 209(a)(2)(i), to disgorge its ill gotten gains, making full restitution to the consumers of Jonathan Logan’s rainwear in the State of Maryland, in an amount as yet undetermined, such amount representing the price paid by those consumers in excess of that which would have been paid but for the aforementioned contract, combination or conspiracy. Logan demurred on two grounds: (1) section ll-209(a) does not empower the State to recover monetary awards for consumers, and (2) the complaint failed to state a claim for injunctive relief.

As to the latter point Logan relied, in part, on a 1979 Federal Trade Commission cease and desist order, the terms of which were broad enough to enjoin ⁶⁶ Logan from the same conduct alleged by the State in the instant action. 2 The circuit court sustained Logan’s demurrer but did not prohibit further amendment of the claim for injunctive relief. The State, however, declined further to amend and, in order to eliminate any question concerning appealability of the judgment to be entered, voluntarily dismissed as to all relief other than (1) that sought in prayer B and (2) an appropriate injunction. Thereupon, the trial court dismissed the complaint with prejudice. From that order the State appealed.

We granted the State’s petition for certiorari prior to consideration of the case by the Court of Special Appeals. Section ll-209(a) provides for an enforcement action. It reads: (a) Proceedings by Attorney General. —(1) The Attorney General shall institute proceedings in equity to prevent or restrain violations of § 11-204 and may require assistance from any State’s attorney for that purpose. (2) In a proceeding under this section, the court shall determine whether a violation has been committed and enter any judgment or decree necessary to: (i) Remove the effects of any violation it finds; and (ii) Prevent continuation or renewal of the violation in the future.

(3) The court may exercise all equitable powers necessary for this purpose, including injunction, divestiture of property or business units, and suspension or termination of the right of a foreign corporation or association to do business in the State. An analogous civil enforcement provision under the federal antitrust laws is found in the Sherman Act § 4, 15 U.S.C. § 4 (1982), although the degree of analogy is disputed by ⁶⁷ the parties to this case. 3 In addition to civil enforcement proceedings brought by the Attorney General, actions for treble damages, for injunctive relief, or for both are authorized under the Md. Act by § 11-209(b). Under § 11-209(b)(2)(i) these “private” actions may be brought by “[a] person whose business or property has been injured or threatened with injury by a violation of § 11-204” of the Md. Act, and, by virtue of § 11-209(b)(1), the State, when injured in its business or property, “is a person having standing to bring an action under” § 11-209(b). 4 The com ⁶⁸ parison in federal statutes for private actions is to the Clayton Act § 4, 15 U.S.C. § 15 (1982). 5 Under the State’s theory the prayer B type of relief is available in an enforcement action brought in equity by the Attorney General. The State labels the requested award of consumers’ excess payments as “restitution.” Utilization of this “equitable” remedy, says the State, will “[r]emove the effects” of the retail price maintenance combination and, by its deterrent effect, also “[pjrevent continuation or renewal of the violation in the future,” all as authorized by § 11-209(a)(2)(i) and (ii).

Logan’s position is that there can be no monetary award for the benefit of consumers in an enforcement action under § 11-209(a). It points out that a consumer who suffers a loss by way of overpayment resulting from the alleged violation of the Md. Act can recover that loss, trebled, under § 11-209(b), but that a § 11-209(b) action differs from an enforcement action under § ll-209(a). Logan emphasizes that, under the antitrust laws of the United States, courts have uniformly rejected claims brought by states attempting to use a parens patriae theory to collect damages on behalf of consumers. The rationale of those federal cases, ⁶⁹ Logan urges, should be applied to an action predicated on § ll-209(a) and result in dismissal of the complaint.

Before we analyze the arguments in detail, three general observations will bring the issue more sharply into focus. First, it is not necessary for us to decide the highly theoretical question of whether the relief claimed by the State in its prayer B is a form of restitution. See generally D. Dobbs, Handbook on the Law of Remedies 222-29 (1973). In consumer price-fixing cases the amount of the overcharge is usually the measure of actual damages.

See, e.g., In re Mid-Atlantic Toyota Antitrust Litigation, 560 F.Supp. 760, 785 (D.Md.1983); Desiderio, Private Treble Damage Antitrust Actions: An Outline of Fundamental Principles, 48 Brooklyn L.Rev. 409 (1982); Annot., 16 A.L.R.Fed. 14 (1973 & Supp.1983). Here, the prayer B relief which the State says represents the unjust enrichment of Logan coincides with actual damages to consumers. It is immaterial whether that measure of damage, appropriate in a consumer’s suit under § ll-209(b), can also be viewed, vis-a-vis the alleged price fixer, as having a restitutionary underpinning. The real question in this case is whether the State is authorized at all by § ll-209(a) to obtain a decree against an alleged price fixer for a sum measured by the excess paid by consumers.

Second, the State does not rely in this case on a class action theory. There is no allegation that the State purchased any raincoat the price of which was affected by the alleged conspiracy. The State does not claim standing on that basis to act as representative of a class of purchasers. The State’s theory is that, as sovereign, it may represent persons who are entitled to receive money from Logan, without the formal joining of those persons as parties plaintiff.

As discussed below courts which have faced similar contentions look to principles dealing with the concept of “parens patriae.” Third, we shall assume, favorably to the State, that the relief sought is a decree ordering Logan to pay the total of ⁷⁰ all of the individual “restitutions” to the State for distribution by it to the consumers. I Section ll-209(a) does not in terms say that the Attorney General may obtain in an enforcement action a monetary recovery for the benefit of third persons. The State, however, argues that a proper construction of the trial court’s power to “[r]emove the effects of any violation” includes power to award the money requested in prayer B. In support the State cites Porter v. Warner Holding Co., 328 U.S. 395 , 66 S.Ct. 1086 , 90 L.Ed. 1332 (1946), a case arising under § 205(a) of the Emergency Price Control Act of 1942, ch. 26, 56 Stat. 23 , 33 (1942). Porter held that, in an action by the administrator to enjoin violations, an equity court had jurisdiction to order repayment of overcharges.

Courts have similarly interpreted other statutes. See Mitchell v. Robert DeMario Jewelry, Inc., 361 U.S. 288 , 80 S.Ct. 332 , 4 L.Ed.2d 323 (1960) (equitable enforcement action under Fair Labor Standards Act may include order to reimburse lost wages incident to a wrongful discharge; statutory prohibition against orders for payment of unpaid minimum wages applies only to recoupment of underpayments of statutorily prescribed rates for workers while still employed); United States v. Moore, 340 U.S. 616 , 71 S.Ct. 524 , 95 L.Ed. 582 , reh’g denied, 341 U.S. 923 , 71 S.Ct. 740 , 95 L.Ed. 1356 (1951) (Housing and Rent Act); ICC v. B & T Transportation Co., 613 F.2d 1182 (1st Cir.1980) (Motor Carrier Act); ICC v. J.B. Montgomery, Inc., 483 F.Supp. 279 (D.Colo. 1980) (same); People v. Superior Court of Los Angeles County, 9 Cal.3d 283 , 507 P.2d 1400 , 107 Cal.Rptr. 192 (1973) (state false advertising statute). With respect to construing the Md. Act, the General Assembly declared in § ll~202(a) “that the purpose of this subtitle is to complement the body of federal law governing restraints of trade” and that “the intent of the General Assembly [is] that, in construing this subtitle, the courts be guided by the interpretation given by the federal courts to the various federal statutes dealing with the same or simi ⁷¹ lar matters ____” Logan flatly states that no court has ever awarded a monetary recovery for the benefit of consumers in an equitable enforcement action under § 4 of the Sherman Act. The Attorney General has not cited, and our research has not disclosed, any decision inconsistent with Logan’s general statement.

In the context of § 4 of the Sherman Act, there is a reference to restitution in Schine Chain Theatres, Inc. v. United States, 334 U.S. 110 , 68 S.Ct. 947 , 92 L.Ed. 1245 , reh’g denied, 334 U.S. 830 -31, 68 S.Ct. 1343 , 92 L.Ed. 1758 (1948), which held divestiture to be an appropriate equitable remedy under § 4 in monopoly cases. There the Court said (id. at 128, 68 S.Ct. at 957 , 92 L.Ed. at 1258 ): To require divestiture of theatres unlawfully acquired is not to add to the penalties that Congress has provided in the antitrust laws. Like restitution it merely deprives a defendant of the gains from his wrongful conduct. It is an equitable remedy designed in the public interest to undo what could have been prevented had the defendants not outdistanced the government in their unlawful project.

On the other hand, language in De Beers Consolidated Mines v. United States, 325 U.S. 212 , 65 S.Ct. 1130 , 89 L.Ed. 1566 (1945) cuts against expanding the Schine comment to embrace monetary awards to non-party third persons in § 4 actions. In De Beers the Court vacated a preliminary injunction which had been issued pursuant to § 4 and which sequestered certain assets of corporations allegedly conspiring to monopolize importation into the United States of gems and industrial diamonds. In reversing, the Court said on the issue of the probability of ultimate success on the merits: Under the Sherman Act ... the District Court has no jurisdiction in this suit to enter a money judgment. Its only power is to restrain the future continuance of actions or conduct intended to monopolize or restrain commerce. [Id. at 219-20, 65 S.Ct. at 1134 , 89 L.Ed. at 1573-74 .] ⁷² The United States District Court for the Eastern District of Pennsylvania refused to include a restitution provision in its modification of consent decrees entered in enforcement cases in United States v. General Electric Co., 1977-2 Trade Cas.

(CCH) ¶ 61,659 (1977). The court reasoned that it had no power to order restitution when there had been no admission or adjudication of guilt and added that “[i]t would be improper to intermingle such claims with a government enforcement action which necessarily embodies different policy consideration.” Id. at 72,717 . Maryland law has no counterpart to Porter v. Warner Co., supra, of which we are aware. The Attorney General has not referred us to any decision under which a Maryland administrator’s statutory power to enforce by injunction, standing alone, was held impliedly to carry with it the authority to obtain “restitution” for those intended to be benefited by the regulatory scheme.

The indications are that when the General Assembly intends an equity court to be able to award money for the benefit of non-party third persons in an injunction enforcement action brought by an administrator, it specifically expresses that intent. For example, in the Maryland Consumer Protection Act, §§ 13-101 to 13-501, the Attorney General is authorized by § 13-406(a) to seek an injunction to' prohibit violations. Then, § 13-406(c)(2) provides that “[t]he court may enter any order of judgment necessary to ... [rjestore to a person any money or real or personal property acquired from him by means of any prohibited practice.” A similar provision is found in § 14-406(c)(2) in connection with injunctions sought by the Attorney General to prohibit violations of the Maryland Consumer Products Guaranty Act, §§ 14-401 to 14-409. Consequently, we will not superimpose the rationale of Porter v. Warner Co., supra, on § 11-209(a) of the Md. Act unless we can find that the General Assembly intended that section to include prayer B type relief.

Turning from the federal statute analogous to § 11— 209(a) to the federal counterpart of § 11-209(b), i.e., § 4 of ⁷³ the Clayton Act, 15 U.S.C. § 15 , we find a body of caselaw involving treble damage suits brought by states which claimed in their sovereign capacities and not as victims themselves of antitrust violations. In those cases states have advanced two theories in support of their standing to