STATE ex rel Ellen F. ROSENBLUM, in her official capacity as Attorney General for the State of Oregon v. LIVING ESSENTIALS, LLC, a Michigan limited liability company; and Innovation Ventures, LLC, a Michigan limited liability company
14CV09149; A163980
Multnomah County Circuit Court
July 14, 2021
313 Or App 176 | 497 P3d 730
Argued and submitted February 26, 2019; on appeal, general judgment affirmed; on cross-appeal, supplemental judgment reversed and remanded July 14; petition for review allowed November 24, 2021 (368 Or 787)
See later issue Oregon Reports
In this action under Oregon‘s Unlawful Trade Practices Act (UTPA),
On appeal, general judgment affirmed; on cross-appeal, supplemental judgment reversed and remanded.
Kelly Skye, Judge.
Carson L. Whitehead, Assistant Attorney General, argued the cause for appellant-cross-respondent. Also on the briefs were Ellen F. Rosenblum, Attorney General, and Benjamin Gutman, Solicitor General.
Michael J. Sandmire argued the cause for respondents-cross-appellants. On the combined answering and cross-opening brief were Lori Irish Bauman, Nena Cook, and Ater Wynne LLP; and Joel A. Mullin and Stoel Rives LLP. On the reply brief on cross-appeal were Michael J. Sandmire, Nena Cook, and Ater Wynne LLP; and Joel A. Mullin and Stoel Rives LLP.
Trenton H. Norris, Raqiyyah R. Pippins, Said O. Saba, Jr., and Arnold & Porter Kaye Scholer LLP; and R. Daniel Lindahl and Bullivant Houser Bailey PC filed the brief amici curiae for Council for Responsible Nutrition.
Before Lagesen, Presiding Judge, and DeVore, Judge, and James, Judge.
DeVORE, J.
On appeal, general judgment affirmed; on cross-appeal, supplemental judgment reversed and remanded.
DeVORE,
The state initiated this action against the defendant producers and sellers pursuant to the Unlawful Trade Practices Act (UTPA),
After a lengthy bench trial, the trial court entered a verdict and general judgment in favor of defendants on all counts. In a supplemental judgment, the court ruled that, despite prevailing, defendants were not entitled to attorney fees under
On appeal, as explained below, we reject the state‘s first, second, and fourth assignments of error, obviating the need to address the remaining assignments, and we affirm the general judgment.1 On cross-appeal, we agree with defendants that the trial court erred in denying attorney fees and therefore reverse and remand the supplemental judgment.
I. BACKGROUND
We begin with an introductory discussion of the facts and the history of the case. We elicit more facts as they become appropriate in the analysis of the issues.
In 2014, the state filed a complaint against defendants alleging violations of the UTPA based on defendants’ false or misleading promotional claims with regard to its 5-HE products. The complaint sought civil penalties, disgorgement, restitution, injunctive relief, attorney fees, and costs. See
The case proceeded to a bench trial on the state‘s second amended complaint, which asserted claims for relief under
[5-HE] provided consumers with energy, alertness, and focus, when “any meaningful effect from using [5-HE] as directed comes only from a concentrated shot of caffeine. [5-HE] is simply a caffeine delivery device, and in its Decaf formulation, it is not even that.” The second category of claims relate to an “Ask Your Doctor” (AYD) advertising campaign that included website advertising and 30-, 15-, and 10-second television advertisements, which, according to the state “misleadingly implied that doctors had recommended [5-HE] by name in a way that they had not,” and, with regard to the online advertising, “made claims about benefits provided by certain ingredients in [5-HE].” The AYD campaign ran for approximately 10 weeks in 2012.
At the close of the state‘s case, the trial court granted defendants’ motion for involuntary dismissal as to two of the counts (counts 5 and 7). Defendants also moved to dismiss the complaint under the free expression guarantee of Article I, section 8, of the Oregon Constitution, asserting facial and as applied challenges; the trial court deferred ruling on those arguments.
The bench trial proceeded to its conclusion on the remaining counts and culminated in a verdict-complete with findings of fact and conclusions of law-in favor of defendants. The state objected to the verdict on various grounds, and defendants requested additional special findings. The trial court issued an order amending the verdict, but the court adhered to its rulings for defendants. The court entered a general judgment in favor of defendants on all of the state‘s claims.
Defendants filed a statement for attorney fees, costs, and disbursements, alleging an entitlement to fees under
The state appeals the general judgment in favor of defendants, and defendants cross-appeal the supplemental judgment denying fees and limiting costs.
II. THE STATE‘S APPEAL
A. Materiality (First and Second Assignments of Error)
The state‘s first and second assignments of error challenge whether, as the trial court held, “materiality” is a requirement in proof of an unlawful trade practice under
In counts 1 and 4, the state asserted violations of
“To get in the zone—no matter what you‘re doing—try 5-Hour ENERGY®. It contains the powerful blend of B-vitamins for energy, and amino acids for focus. The two-ounce shot takes seconds to drink and in minutes you‘re feeling bright, alert and ready for action. And the feeling lasts for hours—without the crash or jitters.”
Count 4 also alleged a violation of
“We asked over 3,000 doctors to review Five-Hour Energy and what they said is amazing. Over 73% who reviewed Five-Hour Energy said that they would recommend a low-calorie energy supplement to their healthy patients who use energy supplements. 73%. Five-Hour Energy has four calories and is used over 9 million times a week. Is Five-Hour Energy right for you? Ask your doctor. We already asked 3,000.”
Based on the same AYD campaign, count 6 alleged a violation of
The trial court ruled in favor of defendants on all counts. As relates to the first and second assignments of error, the court determined that the state was required to prove that defendants’ unlawful practices, involving misrepresentations (subsection (1)(e)) or causing likely confusion or misunderstanding
With regard to count 1, the court found that the state failed to prove that defendants’ “false representations by implication about the effects of the NCI in [5-HE] were material to consumer purchasing decisions as to the caffeinated versions of [5-HE].” After weighing the competing testimony of the parties’ experts, the court found more persuasive defendants’ expert, who offered a consumer survey demonstrating that the NCI blend in defendants’ caffeinated products is not a significant factor in consumer purchasing decisions; that most consumers were repeat customers who were satisfied with their experience with the product; that consumer buying was influenced by a multitude of factors, including product effectiveness, taste, convenience, and price.
With respect to counts 4 and 6, the court found that the substantive message in the AYD advertising campaign was not misleading or confusing, nor was it material to consumer purchasing decisions. The trial court weighed competing expert and survey evidence and found more persuasive that advertising is not highly influential to consumer purchasing decisions in general; that, in particular, the cessation of the AYD advertising campaign did not cause a drop in sales; that consumers expect bias in a survey touted in advertising; and that the doctors’ survey was not represented to be conducted in a scientific or unbiased manner.
In its combined first two assignments of error, the state does not challenge the trial court‘s ultimate findings that the state failed to prove that defendants’ trade practices materially influenced consumer decisions. Instead, the state challenges the trial court‘s determination that
Defendants respond that the trial court properly applied Johnson & Johnson and that the court‘s ruling is not inconsistent with Gordon. Defendants urge that a requirement of materiality to consumer purchasing decisions is “simple common sense,” because, otherwise, “all representations about a product would be actionable under the UTPA, regardless of how trivial they may be.” Defendants point to decisions from other jurisdictions that “materiality is required to prove deception” under other states’ consumer protection statutes.
In a bench trial, an argument that the trial court applied an incorrect legal standard “is akin to an assertion that a trial court delivered an incorrect jury instruction“; accordingly, we review to determine whether the court instructed itself incorrectly as to the law, and, if so, whether the erroneous self-instruction was harmless. State v. Zamora-Skaar, 308 Or App 337, 353, 480 P3d 1034 (2020). In this case, that question reduces to whether the trial court properly construed
“Oregon‘s UTPA, like those of many other jurisdictions, was enacted as a comprehensive statute for the protection of consumers from unlawful trade practices.” Pearson, 358 Or at 115; see also Denson v. Ron Tonkin Gran Turismo, Inc., 279 Or 85, 90 n 4, 566 P2d 1177 (1977) (describing legislative history of UTPA as “support[ing] the view that it is to be interpreted liberally as a protection to consumers“); Johnson & Johnson, 275 Or App at 32 (“[T]he UTPA is a remedial statutory scheme that should, to the extent consonant with the Gaines construct, be construed so as to effectuate its consumer protection purposes.“). It allows for both public and private enforcement. See
“A person engages in an unlawful practice if in the course of the person‘s business, vocation or occupation the person does any of the following:
“*****
“(b) Causes likelihood of confusion or of misunderstanding as to the source, sponsorship, approval, or certification of real estate, goods or services.
“*****
“(e) Represents that real estate, goods or services have sponsorship, approval, characteristics, ingredients, uses, benefits, quantities or qualities that the real estate, goods or services do not have or that a person has a sponsorship, approval, status, qualification, affiliation, or connection that the person does not have.”
The opening clause of
As the state emphasizes, neither (1)(b) nor (1)(e) explicitly refers to practices that are “material to consumer purchasing decisions,” consistent with the trial court‘s interpretation.6 We are not unmindful of the admonition that, in interpreting statutes, we are “not to insert what has been omitted.”
As the Supreme Court has recognized, in that pursuit of legislative intent, there are times when the legislature‘s choice of words naturally implies a requirement that is not otherwise expressly stated in the text. For instance, in Pearson, the court held that “reliance” was required to prove causation in a private UTPA claim, given the nature of the unlawful conduct and ascertainable loss alleged, notwithstanding the fact that
link between the misrepresentation and the loss.” Id. at 126. See also Johnson & Johnson, 275 Or App at 33-34 (concluding that misrepresentation of material “risk” of product defect is actionable misrepresentation of “fact” under
With that in mind, we turn back to the text of the statutory provisions at issue.
Putting all of that together, for a seller‘s unlawful trade practice to “bring into existence” or “effect by authority” a “state of being discomfited, disconcerted, chagrined, or embarrassed” or a “lack of certainty” or “power to distinguish, choose, or act decisively” with respect to its product, the unlawful conduct necessarily must be material to the consumer‘s decision to buy the product. Said another way, if a seller‘s allegedly unlawful practice is immaterial to the consumers’ purchasing decisions, it is unlikely to create a state of discomfort, chagrin, or uncertainty, or affect the consumer‘s power to distinguish, choose, or act decisively with respect to that product.
Although the text in isolation provides little guidance as to whether the legislature had in mind a materiality requirement, other parts of the UTPA provide additional assistance in determining the legislature‘s intended meaning. See Stevens v. Czerniak, 336 Or 392, 401, 84 P3d 140 (2004) (“[T]ext should not be read in isolation but must be considered in context.“); see also Gordon, 361 Or at 359 (interpreting the UTPA “as a whole” to determine whether it “applies only to conduct between persons in a customer relationship“). Among the introductory definitions,
“‘Trade’ and ‘commerce’ mean advertising, offering or distributing, whether by sale, rental or otherwise, any real estate, goods or services, and include any trade or commerce directly or indirectly affecting the people of this state.”
(Emphasis added.) The term “trade” thus generally guides our understanding that the “trade” or “commerce” governed by the UTPA is that which “directly or indirectly affect[s]” consumers. Id. (emphasis added).
Relatedly, in relevant part,
“[A] prosecuting attorney who has probable cause to believe that a person is engaging in, has engaged in, or is about to engage in an unlawful trade practice may bring suit in the name of the State of Oregon in the appropriate court to restrain such person from engaging in the alleged unlawful trade practice.”
(Emphases added.) And,
“The court may make such additional orders or judgments as may be necessary to restore to any person in interest any moneys or property, real or personal, of which the person was deprived by means of any practice declared to be unlawful in
ORS 646.607 or646.608 , or as may be necessary to ensure cessation of unlawful trade practices.”
(Emphases added.) Thus, the UTPA “as a whole” appears to envision that the acts to be remedied as unlawful trade practices are ones that have affected consumers in other words, ones that materially bear on consumer purchasing choices.
As noted, prior judicial interpretations of a statute can also provide relevant context. Both parties rely heavily on that context here. However, contrary to their respective positions, neither Johnson & Johnson (relied on by defendants) nor Gordon (advanced by the state) controls the outcome in this case.
Johnson & Johnson involved some of the same provisions of the UTPA that are at issue here.8 275 Or App at 29.
But, the question in that case was whether the failure to disclose a material risk of a defective product (specifically, that some units of defendants’ painkiller Motrin did not dissolve at the required rate for full effectiveness) was actionable under the misrepresentation
“The sweep and scope of those provisions—both with respect to the form and content of misrepresentations—manifests the legislature‘s intent to broadly prohibit misrepresentations materially bearing on consumer purchasing choices. A material risk that a product has a latent defect is exactly the kind of inherent feature of a product implicated under
ORS 646.608(1) and(2) . If a product is advertised and sold as effective for its intended use, notwithstanding a known risk that the product may not be fully effective, that risk itself is a ‘fact’ for purposes of the UTPA, and its nondisclosure is actionable under the UTPA.”
Id. Thus, although it provides some support for defendant‘s (and the trial court‘s) reading of the statute, Johnson & Johnson does not compel the conclusion that “material to consumer purchasing decisions” is a required component of a violation under subsections (1)(b) or (e).
Gordon, to which the state points, is also not dispositive of that question. In Gordon, the Supreme Court considered whether the UTPA applied to the debt collection activities of a lawyer and his law firm. As relevant here, the issue involved only
With that uncertain landscape, we turn to the legislative history. Although neither party refers us to any history pertaining to
therefore “of limited value” in discerning the legislature‘s intent with respect to Oregon‘s UTPA.12 Id.
That does not tell the entire story, however. As the court recognized in Denson, Oregon, in any event, largely adopted the list of deceptive trade practices from the UDTPA. More particularly, in enacting
and noting that section 43(a) of the Lanham Act “authorizes similar private actions“).
Those sources are consistent with what the text and context suggest to us, which is that the legislature would have understood unlawful trade practices to be ones that have the potential to affect consumers—in other words, ones that materially bear on consumer purchasing choices. In particular, section 43(a) of the federal Lanham Act contemplated that the prohibited deception be material to a consumer‘s purchasing decisions. As one commentator has noted, “despite the unqualified language” of the “false advertising sections” of the UDTPA
“decisions under analogous § 43(a) of the federal Lanham Trademark Act14 suggest
that a person who invokes these false advertising provisions will have to show that the defendant‘s advertisement is a false representation of ‘fact,’ that it actually deceives or has the tendency to deceive a substantial segment of its audience, that the deception is likely to make a difference in the purchasing decision, and that the particular plaintiff has been, or is likely to be injured by the deception.”
Richard F. Doyle, Jr., Merchant and Consumer Protection: The Uniform Deceptive Trade Practices Act, 76 Yale L J 485, 489 (Jan 1967) (emphasis added; footnote omitted).15
In light of the clear purpose behind the UTPA to protect consumers, it is likely that the legislature intended a similar materiality requirement to be implicit in the subsections drawn from the UDTPA, including
To the extent that there is any remaining uncertainty after examining the legislative history, however, canons of statutory construction resolve the question. See State v. Rodriguez, 217 Or App 24, 33, 175 P3d 471 (2007) (“Even assuming that the legislative history is not sufficiently illuminating of the legislature‘s intentions, all that means is that we resort to canons of construction to resolve the ambiguity.“). The canon calling for the avoidance of constitutional issues is especially apt here. Under that canon, “when one plausible construction of a statute is constitutional and another plausible construction of a statute is unconstitutional, courts will assume that the legislature intended the constitutional meaning.” State v. Kitzman, 323 Or 589, 602, 920 P2d 134 (1996). It is not necessary that the constitutional argument would necessarily prevail; rather, it may be invoked where “there is even a tenable argument of unconstitutionality. Westwood Homeowners Assn., Inc. v. Lane County, 318 Or 146, 160, 864 P2d 350 (1993), adh‘d to as modified on recons, 318 Or 327, 866 P2d 463 (1994) (rejecting
proposed interpretation that ‘arguably would infringe on the constitutional rights’ of parties).” Rodriguez, 217 Or App at 34.
Here, reading
distinct and separate from the elements of a cause of action under the Unlawful Trade Practices Act and a violation of the Act is much more easily shown.“).
Without a materiality requirement, the effect of the statute would be to punish commercial speech that has no potential to mislead a reasonable consumer. For purposes of
“[i]f the enactment‘s restraint on speech or communication lies outside an historical exception, then a further inquiry is made—whether the actual focus of the enactment is on an effect or harm that may be proscribed, rather than on the substance of the communication itself. If the actual focus of the enactment is on such a harm, the legislation may survive scrutiny under Article I, section 8. *** If such a statute expressly prohibits certain forms of expression, it must survive an overbreadth inquiry before it can be found constitutional.”
State v. Stoneman, 323 Or 536, 543, 920 P2d 535 (1996). To the extent subsection (1)(b) or (1)(e) would be considered such a “Robertson category two” law—that is, aimed at preventing harm to consumers—absent an element of proof that the prohibited speech was “material to consumer purchasing decisions,” it would be susceptible to an overbreadth challenge. See State v. Moyle, 299 Or 691, 701-02, 705 P2d 740 (1985) (category two statute violates Article I, section 8, if it “potentially reaches substantial areas of communication that would be constitutionally privileged and that cannot be excluded by a narrowing interpretation or left to a case-by-case defense against the application of the statute“).19
In sum, although the phrase “material to consumer purchasing decisions” does not appear in
As to the first two assignments of error involving counts 1, 4, and 6, we determine that the trial court did not err in considering the evidence to determine whether defendants’ representations materially affected consumer decisions. We conclude that the trial court did not err in reaching a verdict and dismissing counts 1, 4, and 6.20
B. Decaf 5-HE (Fourth Assignment of Error)
Our conclusion that the trial court did not err in imposing a materiality requirement under
In count 3, the state alleged that defendants represented that Decaf 5-HE has “characteristics, uses, benefits, and qualities that it does not have when they falsely or misleadingly claimed that it provides benefits like energy, alertness, or focus,” in violation of
“Another way in which Defendants misrepresent the way that [5-HE] works (or does not work) is by claiming that the Decaf formulation of the product provides any of the promoted benefits, when it does not. These claims are misleading because Decaf [5-HE] provides no feeling of extra energy, alertness, or focus. The only ingredient in Defendants’ line of products that provides any meaningful effect when taken as directed is caffeine, and the amount of caffeine in Decaf [5-HE] is insufficient to have a physiological effect in most consumers.”
(Emphasis added.) The complaint also alleged that defendants’ website claims (with respect to all of its formulations of 5-HE, including Decaf 5-HE)—that 5-HE lasts longer than other canned energy drinks, and “can help you feel bright, alert and focused for hours without the crash,” were misleading, “because in reality, it is only caffeine that provides any claimed effect for [5-HE] consumers.” (Emphasis added.)
As discussed earlier, after trial, the court filed an initial “Verdict, Findings of Fact and Conclusions of Law“; the parties filed objections; and the court issued an order with revised findings and conclusions. Some of the court‘s initial findings about the NCI in Decaf 5-HE were made in examination of count 1 and later referenced in the examination of count 3. Both counts involved the allegation that the NCI fail to provide consumers with benefits like energy, alertness, or focus. As noted, the NCI refer to, among other things, B-vitamins and amino-acids. The expert evidence presented at trial primarily consisted of the testimony of Dr. Martindale and Professor Kennedy. The court observed, “Both experts agree that B-vitamins and amino-acids play essential roles in the human body‘s production of energy.” The court found, however, that the experts differed on whether the NCI would “provide any noticeable or measurable feeling of energy during the five hours following ingestion of the product.” (Emphasis added.) The trial court was persuaded by the state‘s view that NCI do not produce feelings of energy and alertness “during the five hours following consumption.” (Emphasis added.) The court then made a careful distinction that the difference between immediate effect and potential long-term benefit depended upon the nature of the allegation presented. Speaking of the difference, the court explained:
“Nevertheless, the truth or falsity of Defendants’ advertising claims and whether they are actionable as related to B-vitamins and amino-acids depends specifically on how each claim is presented. For example, ‘B-vitamins for energy,’ is not an inherently false representation, as the body does require B-vitamins in order to produce energy. What may be false is the implication that the specific dosage of B-vitamins in a given bottle of 5HE will have a noticeable effect on the energy level of a consumer, absent caffeine, during the five hours following consumption. Similarly, ‘Amino Acids for alertness,’ is not an inherently false representation, but the implication that the specific dosage of amino-acids in the bottle of 5HE will produce measurable alertness during the five hours following consumption is, more likely than not, false.”
(Emphases added.)
Turning from count 1 to count 3, the trial court found that only one shipment of Decaf 5-HE was delivered in Oregon.21 That shipment was one case containing 216 bottles, which sold for $302.40. The trial court made findings as to Decaf 5-HE that referred back to the prior findings about B-vitamins and amino-acids. The court made the following findings about count 3—initial findings, which, after objections, it would revise:
“The State alleges that Defendants made false representations in Oregon about the effect of Decaf 5HE. *** Neither of those representations about Decaf 5HE are necessarily false following the previous analysis, but they do carry some false implications as to the effect of the specific NCI in a bottle of Decaf 5HE. The greater weight of the evidence establishes that the NCI, or B vitamins and amino-acids in Decaf 5HE do not provide five hours of energy following consumption. The false implications about the NCI in the Decaf 5HE would necessarily be material to consumer purchasing decisions as the NCI are the primary ingredients, other than five milligrams of caffeine.
“To recover civil penalties for a violation of the UTPA, the State must prove that a violation was willful. For the same reasons indicated in Count 1, I find that any implications of falsity in Defendants’ advertising claims about the NCI in Decaf 5HE were not willful.”
(Footnote omitted.)
The state objected to those findings in the verdict, arguing that the court had essentially found all of the elements of a UTPA violation as alleged in count 3; that willfulness is only an element for obtaining the remedy of civil penalties,22 and that, therefore, the court should enter a verdict for the state on count 3.23
Defendants contended in response that the court correctly ruled in their favor, because the state failed to prove that the alleged misrepresentations were objectively false. Acknowledging the court‘s adverse finding that the “greater weight of the evidence” was that the NCI in Decaf 5-HE “do not provide five hours of energy following consumption,” defendants asserted that the state had never alleged that defendants’ representations about the duration of benefits from Decaf 5-HE were false. Rather, defendants argued—pointing to the complaint, the state‘s trial memorandum, and the state‘s argument at trial—that the state‘s allegations were based
After considering the objections from both parties, the trial court issued an order confirming the verdict for defendants, but “amend[ing] and clarif[ying]” its finding of fact in the paragraph quoted above. The revised paragraph found (new wording in italics):
“Neither of those representations about Decaf 5HE are necessarily false following the previous analysis, but they may carry some false implications as to the effect of the specific NCI in a bottle of Decaf 5HE. The greater weight of the evidence establishes that the NCI, or B vitamins and amino-acids in Decaf 5HE do not provide the claimed effects during the five hour period following consumption. This phrase is intended to specify that the period of time during which the claimed effect would be measured is one that is immediately following consumption[.]”
On appeal, the state reprises its argument from below, contending that the trial court legally erred in not entering judgment for the state on count 3, because the amended verdict establishes that the court found all of the elements necessary to establish a violation of
On appeal from a bench trial, “we review the trial court‘s findings of fact for any evidence to support them, Illingworth v. Bushong, 297 Or 675, 694, 688 P2d 379 (1984), and its legal conclusions for errors of law.” Allco Enterprises v. Goldstein Family Living Trust, 183 Or App 328, 330, 51 P3d 1275 (2002). Here, the state does not challenge the sufficiency of the evidence to support the court‘s findings; rather, it insists that those findings compel—as a matter of law—a verdict in the state‘s favor. We disagree.
Although the trial court‘s initial and revised findings invite misunderstanding, we consider the verdict in its entirety and its place in the context of the parties’ arguments. Accordingly, we do not understand the court to have found that defendants’ representations with regard to Decaf 5-HE were objectively false in the way in which count 3 was alleged. See, e.g., State v. Spieler, 302 Or App 432, 439-40, 460 P3d 535 (2020) (concluding that court‘s speaking verdict, although not entirely clear, did not reveal a fundamental misunderstanding of the law considering the verdict as a whole and the parties’ arguments; in light of the emphasis on the issue at trial, it was “highly unlikely” that the court misunderstood the legal standard); State v. Reed, 299 Or App 675, 689, 452 P3d 995 (2019), rev den, 366 Or 382 (2020) (“[T]he court‘s speaking verdict and other comments must be considered in context, taking into account the circumstances in which the court made its observations and the extent to which the court‘s explanation of its verdict sheds light on how it viewed the evidence.“).
When the initial and revised findings are read together, they indicate that the court found that the claims on the label were not “necessarily false,” referencing its analysis in connection with count 1 (involving Regular
The court recognized that defendants’ representations “may carry some false implications as to the effect of the specific NCI in a bottle of Decaf 5HE.” (Emphasis in original.) In response to precisely the same point that the state now makes on appeal—that the court should have entered judgment for the state because it had found all of the elements necessary for a UTPA violation—the trial court revised its finding in that regard from the definitive to the merely possible (replacing “do” with “may“), and confirmed its verdict for defendants. That strongly suggests that the court found the state‘s evidence as to falsity lacking.
The state, predictably, focuses on the court‘s next statement—that “[t]he greater weight of the evidence establishes that the NCI, or B vitamins and amino-acids in Decaf 5HE do not provide the claimed effects during the five hour period following consumption“—to advance the contrary position. (Emphasis omitted.) However, again, that finding was revised in response to the parties’ arguments in objection to the verdict. The court had originally found that the NCI “do not provide five hours of energy following consumption.” The court revised that language to reference the claimed NCI effects during the five-hour period after consumption. And, again significantly, the court in its amended verdict specifically clarified that the phrase, as revised, was meant to specify that the relevant time period for assessing the claimed effects is that immediately after consumption. Together, we think those amendments indicate the court‘s acceptance of defendants’ argument—which the state does not address, much less dispute—that the state‘s theory of liability in count 3 was not that defendants falsely represented the duration of the effects from the NCI, but that the NCI have any effect on alertness or energy at all.24 In other words, we understand the trial court to have found the evidence sufficient to establish that the NCI provide some benefit to energy, alertness, and focus immediately following consumption, such that defendants’ representations were not false in the manner advanced by the state.
Finally, as it did below, the state suggests that the court may have denied it relief—even though it had found all the elements for a violation—because the court found that the state had failed to prove that the violation was willful, although willfulness is required only for the state to obtain civil penalties, not for the other forms of relief it sought. We are not taken by that argument either. The court‘s finding explicitly recognizes the limitation emphasized by the state: “To recover civil penalties for a violation of the UTPA, the State must prove that a violation was willful.” (Emphasis added.) And, as the state acknowledges, the court also made a finding as to willfulness with respect to count 1, in which, as discussed above, the court found no violation because the state‘s proof failed on the materiality element. In the context of the entire verdict, we understand the court to have adopted a “belt and suspenders” approach in its verdict—not surprisingly, given the complexity of the case, the interrelated issues, and the likelihood that one or more of the court‘s rulings were likely to be appealed. We do not understand the court to have improperly based its verdict on a misunderstanding that, although the state had proved that defendants’ representations were false, it was also required to prove that defendants acted willfully for anything other than the purpose of obtaining civil penalties.
III. DEFENDANTS’ CROSS-APPEAL
Defendants cross-appeal the supplemental judgment denying them attorney fees under
“If the defendant prevails in [an action brought by the prosecuting attorney under
ORS 646.632 ] and the court finds that the defendant had in good faith submitted to the prosecuting attorney a satisfactory [AVC] prior to the institution of the suit ***, the court shall award reasonable attorney fees at trial and on appeal to the defendant.”
Defendants contend that they are entitled to fees because their AVC was satisfactory and that, in concluding otherwise, the trial court applied an incorrect legal standard. The state responds that the trial court was correct—either as a matter of law or according to the standard the court used. As we explain below, we agree with defendants and, therefore, reverse and remand the supplemental judgment.25
Generally, before filing a public UTPA action under
“(a) Which does not contain a promise to make restitution in specific amounts or through arbitration for persons who suffered any ascertainable loss of money or property as a result of the alleged unlawful trade practice; or
“(b) Which does not contain any provision, including but not limited to the keeping of records, which the prosecuting attorney reasonably believes to be necessary to ensure the continued cessation of the alleged unlawful trade practice, if such provision was included in a proposed assurance attached to the notice served pursuant to this section.”
Violation of an approved AVC constitutes contempt of court.
If the prosecuting attorney rejects the AVC, and the defendant ultimately prevails in the UTPA action, “the court shall order reasonable attorney fees at trial and on appeal to the defendant” if, as relevant here,
Consistent with that statutory scheme, the state notified defendants of the alleged UTPA violations and its intention to seek civil penalties, restitution “to anyone harmed by [defendants‘] acts,” injunctive relief, and attorney fees and costs. Defendants timely submitted an AVC in which, in paragraph 11, they agreed to “obey Oregon‘s Unlawful Trade Practices Act,
“shall not make any express or implied claim, statement, or representation in connection with the marketing or advertising of [5-HE] Products in the United States, including through the use of an endorsement, depiction, or illustration, that contains material representations that are false or mislead consumers acting reasonably to their detriment; or omits material information such that the express or implied claim, statement, or representation deceives consumers acting reasonably to their detriment.”
(Emphasis added.) As to payment of restitution, paragraph 21 of defendants’ AVC stated:
“Within 30 days of execution of the AVC, and as consideration for DOJ‘s role on the Executive Committee of states evaluating [defendants‘] compliance with the various consumer protection laws, [defendants] shall pay the sum of $250,000 to the DOJ to be used by the State of Oregon as allowed by law, including, but not limited to, restitution, consumer education, the Consumer Protection & Education Account established pursuant to
ORS 180.095 , or charitable purposes. In the event the DOJ joins the Assurance of Voluntary Compliance entered into between [defendants] and the Attorney General of the State of Ohio (the ‘Ohio AVC‘), and pursuant to the Ohio AVC the DOJ is entitled to a sum larger than $250,000, [defendants] shall pay the larger of the Ohio AVC amount or $250,000 to the DOJ in full satisfaction of this AVC and the Ohio AVC.”28
(Emphasis added.)
The state rejected the AVC on the grounds that “it does not provide restitution for Oregon consumers and because it does not provide sufficient assurances that [defendants] will not re-offend.” The state explained that the proposed injunctive terms were problematic because they would hold defendants to a different standard for future conduct than the UTPA requires—in particular, that the “consumers acting reasonably to their detriment” test would hold defendants to a lower standard than that of most state consumer protection laws, including the UTPA. The state also explained that, relative to defendants’ size and income, the proposed payment was “insufficient to provide meaningful deterrence to future misconduct.” In its email rejecting the AVC, the state suggested terms that would be required for settlement, including “a mechanism for consumer restitution of [5-HE‘s] decaffeinated product.”
Two weeks later, the state filed its initial UTPA complaint against defendants. As we know now, the case went to trial on the state‘s second amended complaint and defendants ultimately prevailed on all claims. Defendants subsequently petitioned for $2,171,085 in attorney fees, as well as costs, contending that they were entitled to fees under the mandatory fee award provision of
Defendants contend on appeal that the trial court erred in failing to find that the AVC was satisfactory under
In the state‘s view, the trial court correctly denied defendants’ request for fees, as a matter of law, because the AVC was not satisfactory for two reasons. First, according to the state, “[a] promise to pay a lump sum to the state to use for lawful purposes that might include restitution is qualitatively different from a promise ‘to make restitution in specific amounts’ to injured persons” as provided in
The proper interpretation of
“The court may award reasonable attorney fees to the prevailing party in an action under this section. If the defendant prevails in such suit and the court finds that the defendant had in good faith submitted to the prosecuting attorney a satisfactory assurance of voluntary compliance prior to the institution of the suit or that the prosecuting attorney, in a suit brought under subsections (5) and (6) of this section, did not have reasonable grounds to proceed under those subsections, the court shall award reasonable attorney fees at trial and on appeal to the defendant.”
(Emphases added.) The state does not dispute that defendants prevailed in the action and that their AVC was submitted in good faith. It is also undisputed that the AVC was submitted “prior to institution of the suit.” The question thus reduces to whether defendants’ AVC was “satisfactory,” within the meaning of
Because the legislature did not define the term “satisfactory,” we look to its “plain, natural, and ordinary meaning.” PGE v. Bureau of Labor and Industries, 317 Or 606, 611, 859 P2d 1143 (1993); see also State v. Dickerson, 356 Or 822, 829, 345 P3d 447 (2015) (same). We often consult dictionary definitions for that purpose, assuming that, if the legislature did not provide a specialized definition, “the dictionary definition reflects the meaning that the legislature would naturally have intended.” DCBS v. Muliro, 359 Or 736, 746, 380 P3d 270 (2016). The dictionary defines “satisfactory” to mean, as relevant, “sufficient to meet a condition or obligation,” and “adequate to meet a need or want.” Webster‘s at 2017.
We glean two clues from the context in which the term is used, including the other subsections of the statute. State v. Langdon, 330 Or 72, 80-81, 999 P2d 1127 (2000) (“Context includes other provisions of the same statute ***“). First, although
Second, the legislature‘s wording and choice of verb tense in subsection (8) indicate that the court‘s determination, although made after trial, is based on the circumstances existing at the time the AVC was submitted, not through the lens of hindsight. Subsection (8) provides that, to be entitled to fees, court must find that the defendant “had” in good faith “submitted” a satisfactory AVC to the prosecutor “prior to the institution of the suit.” We assume that the legislature‘s use of the past tense is deliberate. See State v. Gonzalez-Valenzuela, 358 Or 451, 461, 365 P3d 116 (2015) (“We do not lightly disregard the legislature‘s choice of verb tense, because we assume the legislature‘s choice is purposeful.” (Internal quotation marks and brackets omitted.)).
We consider the legislative history. The parties do not offer any history of the enactment of the AVC procedure generally, or the mandatory attorney fee provision in
HB 1088 was proposed at the request of then Attorney General Lee Johnson and was the product of a committee composed of labor, industry, legal, law enforcement, and lay representatives. Minutes, House Committee on Judiciary, HB 1088, Feb 10, 1971, 1.
“HB 1088 sets out procedures whereby an offender would be given the opportunity to voluntarily comply with the law, within a specified period, in which case no action would be commenced against him, and provides for payment of attorney‘s fees of the defending party when the defendant prevails in such actions. This provision would reduce the possibility that an irresponsible prosecutor might bring an unjustified action against an individual or firm.”31
Id. (emphasis added). Similarly, in his written proposal, the Attorney General stated:
“A unique provision of the bill concerns the ‘assurance of voluntary compliance.’ Under this procedure before a prosecutor can institute a suit against the seller, except in an emergency situation, he must first seek from the merchant an assurance of voluntary compliance. The purpose of this section is to reduce unnecessary litigation and protect the merchant against an irresponsible prosecutor who might bring a suit solely for publicity purposes. The merchant has 10 days in which to file an assurance of voluntary compliance. If the prosecuting attorney then proceeds to prosecute and the court finds that the merchant had in good faith complied with the law, then the merchant can obtain attorney‘s fees against the state.”
Exhibit File, House Judiciary Committee, Subcommittee on Consumer Protection, HB 1088, Attorney General Lee Johnson, “Consumer Protection Act Proposal“, at 6 (emphases added).
Although it appears that the legislature did not discuss the particulars of what might be required for a “satisfactory” AVC, the history does reflect—not surprisingly—that the process was designed to reduce unnecessary litigation. More to the point, the mandatory attorney fee provision was intended to protect sellers by deterring the state from bringing “unjustified” actions.
In this case, subsection (3) of the statute, although enacted four years after subsection (8), also informs our analysis. Cf. Aleali v. City of Sherwood, 262 Or App 59, 73, 325 P3d 747 (2014) (“Although amendments to
“The prosecuting attorney may reject as unsatisfactory any assurance
“(a) Which does not contain a promise to make restitution in specific amounts or through arbitration for persons who suffered any ascertainable loss of money or property as a result of the alleged unlawful trade practice; or
“(b) Which does not contain any provision, including but not limited to the keeping of records, which the prosecuting attorney reasonably believes to be necessary to ensure the continued cessation of the alleged unlawful trade practice, if such provision was included in a proposed assurance attached to the notice served pursuant to this section.”
(Emphasis added.)
With those terms, subsection (3) provides two permissible reasons for the state to reject an AVC as unsatisfactory. It follows that, as a matter of law, an AVC that fails in those specifics is not satisfactory for purposes of the court‘s determination under subsection (8). However, subsection (3) does not purport to be exclusive; that is, it does not provide that the prosecutor may “only” reject an AVC in the circumstances listed. See
The legislative history of subsection (3) confirms that understanding. It was added to the statute in 1975 through Senate Bill (SB) 37, again at the request of Attorney General Johnson. Or Laws 1975, ch 437, § 3. In a written summary of the bill, the Attorney General explained that what is now codified at
“is probably the most important provision of the bill relating to the [AVC] procedures. It has been the practice of this office where we accept an [AVC] to demand restitution be made to the injured consumer and on occasion we also insist upon the keeping of records so that we can monitor compliance with the law. The present statute, however, does not make it clear whether the Attorney General has the authority to include such requirements as part of an [AVC], although the law does provide that the court may require restitution if the matter is litigated. The purpose of the amendments is simply to make it clear that we do have such authority.”
Appendix F at 4-5, Senate Committee on Consumer and Business Affairs, SB 37, Feb 5, 1975 (Summary of Senate Bill 37) (emphasis added). As with the text, nothing in the legislative history indicates that subsection (3) was intended to otherwise prohibit the Attorney General from rejecting an AVC as unsatisfactory or to so limit the court‘s determination in subsection (8). In short, although it provides some guidance, subsection (3) does not conclusively define what is meant by a “satisfactory” AVC for the purposes of determining a party‘s entitlement to attorney fees under subsection (8), and we reject defendants’ argument to the contrary.
With that much in mind, we turn back to the parties’ arguments. As noted, the state contends that defendants’ AVC was not satisfactory for two reasons—(1) it failed to provide for restitution as required under
Beginning with the issue of restitution, paragraph 21 of the AVC provides that defendants “shall pay the sum of $250,000 to the DOJ to be used by the State of Oregon as allowed by law, including, but not limited to, restitution, consumer education, the Consumer Protection & Education Account established pursuant to
According to the state, “[a] promise to pay a lump sum to the state to use for lawful purposes that might include restitution is qualitatively different than a promise ‘to make restitution in specific amounts’ to injured persons.” (Emphasis in original.) Defendants rejoin that the AVC‘s provision for the payment of restitution was not tentative, as the state‘s argument suggests. The AVC offered a specific amount—$250,000—and it expressly authorized the state to use it to pay restitution, referencing the account established under
The state fails to explain precisely why defendants’ offer was “qualitatively different” from what the statute requires. To the extent the state suggests that the restitution promise was tentative, we agree with defendants that, by its terms, it was not—it requires that defendants “shall pay.” See Preble v. Dept. of Rev., 331 Or 320, 324, 14 P3d 613 (2000) (“‘Shall’ is a command: it is ‘used in laws, regulations, or directives to express what is mandatory.‘” (Quoting Webster‘s Third New Int‘l Dictionary 2085 (unabridged ed 1993).)). That the AVC also permitted the use of the funds for purposes other than restitution does not, as a matter of logic, negate defendants’ agreement to pay $250,000 in restitution. In other words, that the state, at its choosing, could use all or some of the funds for other than the payment of restitution does not mean that defendants failed to promise restitution in that amount.
Further, to the extent we can understand the state to argue that, to satisfy subsection (3), the AVC was required to set up a mechanism for defendants themselves to identify and pay restitution to individual injured persons, the statute‘s text and context does not bear that out, and the state presents no other basis for us to reach that conclusion. Notably, the statute does not reference the payment of restitution “to” specific persons, it requires a promise of restitution “for” persons who suffered an ascertainable loss as a result of the unlawful practice.
Moreover,
In a case such as this, involving a small-scale consumable product, in which it may be difficult, if not impossible, to identify specific individuals who may have been injured by the alleged violation, and in the absence of any argument by the state that the restitution amount promised was inadequate,32 we fail to see how defendants’ promise to pay the sum of $250,000, for the state to use for restitution, referencing the account established pursuant to ORS 180.095,33 is an insufficient “promise to make restitution in specific amounts *** for persons who suffered any ascertainable loss of money or property as a result of the alleged unlawful trade practice.” (Emphasis added.)
We are also not persuaded by the state‘s second argument—that the AVC was not satisfactory because it was contrary to Oregon law. The state contends that defendants’ promise in paragraph 12 to decline from making material misrepresentations or omissions about 5-HE that consumers would reasonably rely on to their detriment would hold defendants to a less demanding standard than what is required under the UTPA. However, even assuming the correctness of that premise,34 the AVC contains other provisions that effectively neutralize any conflict. Paragraph 11 of the AVC states that defendants will obey the UTPA in its entirety—“[defendants] shall obey Oregon‘s Unlawful Trade Practices Act,
“The Parties further acknowledge that this AVC constitutes a single and entire agreement that is not severable or divisible,
except that if any provision herein is found to be legally insufficient or unenforceable, the remaining provisions shall continue in full force and effect.”
(Emphasis added.) Thus, to the extent paragraph 12 conflicts with Oregon law, it would be “legally insufficient or unenforceable,” and paragraph 11, requiring defendants to obey the UTPA, would “continue in full force and effect.” And, the state could apply to the court for recovery of substantial civil penalties for any willful violation of that provision.
Finally, we address the state‘s alternative argument that the trial court properly found that the AVC presented in this case was not satisfactory because it was “reasonable” for the state to have rejected it and proceeded to trial. The problem with that approach is that it does not comport with the text of the statute nor with what we know of the legislative history. As noted, the plain meaning of “satisfactory” is “sufficient to meet a condition or obligation,” or “adequate to meet a need or want.” Webster‘s at 2017. Given the undisputable purpose underlying the UTPA, the obligation or need at issue here is consumer protection. See 313 Or App at 185 (discussing the purposes of the UTPA). In other words, the standard by which an AVC must be measured is in its “adequacy” or “sufficiency” in protecting consumers from unlawful practices. Likewise, the legislative history indicates that including a threat of liability for attorney fees in the AVC scheme was designed to deter the state from bringing “unjustified” actions. Again, given that the underlying purpose of the UTPA is consumer protection, assessing whether the state is “justified” (i.e., “prove[n] or show[n] to be just, desirable, warranted, or useful,” Webster‘s at 1228) in rejecting an AVC and pursuing an action logically must be considered in light of that purpose. And that, of course, is qualitatively different from assessing, as the trial court did here, whether the state‘s claims were “reasonable” or whether the state made a “reasonable” choice to proceed to trial.
Having rejected the state‘s legal arguments in support of the trial court‘s conclusion that the proffered AVC was not satisfactory, we conclude that the trial court erred in denying defendants reasonable attorney fees and limiting the cost award on that basis. Therefore, we reverse and remand the supplemental judgment.
IV. CONCLUSION
With respect to the state‘s appeal, we conclude that the trial court did not err in entering judgment for defendants on the state‘s UTPA claims. We affirm the general judgment. With respect to defendants’ cross-appeal, we conclude that the court erred in denying defendants’ petition for attorney fees under
On appeal, general judgment affirmed; on cross-appeal, supplemental judgment reversed and remanded.
Notes
“A person engages in a deceptive trade practice when, in the course of his business, vocation, or occupation, he:
“*****
“(2) causes likelihood of confusion or of misunderstanding as to the source, sponsorship, approval, or certification of goods or services;
“*****
“(5) represents that goods or services have sponsorship, approval, characteristics, ingredients, uses, benefits, or quantities that they do not have or that a person has a sponsorship, approval, status, affiliation, or connection that he does not have[.]”
54 Trademark Rep at 899-900. In contrast to section 2(a)(5),
“Any person who shall affix, apply, or annex, or use in connection with any goods or services, or any container or containers for goods, a false designation of origin, or any false description or representation, including words or other symbols tending falsely to describe or represent the same, and shall cause such goods or services to enter into commerce, and any person who shall with knowledge of the falsity of such designation of origin or description or representation cause or procure the same to be transported or used in commerce or deliver the same to any carrier to be transported or used, shall be liable to a civil action by any person doing business in the locality falsely indicated as that of origin or in the region in which said locality is situated, or by any person who believes that he is or is likely to be damaged by the use of any such false description or representation.”
60 Stat 441 (1946),