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concluding that interpreting "knowingly" to require knowledge of the act’s or omission’s prohibition would "take the teeth out of’ Ohio’s deceptive trade practices act, "is inapposite to" its remedial purpose, and would discourage consumers from suing under the act
Summary of this case from Poole v. Nev. Auto Dealership Invs.Opinion
No. 88-1621
Submitted October 18, 1989 —
Decided January 10, 1990.
Consumer Sales Practices Act — Trial court may award consumer reasonable attorney fees against supplier in a consumer transaction when supplier intentionally commits a deceptive, unfair or unconscionable act.
O.Jur 3d Consumer Protection § 8.
Pursuant to R.C. 1345.09(F)(2), a trial court may award a consumer reasonable attorney fees when the supplier in a consumer transaction intentionally committed an act or practice which is deceptive, unfair or unconscionable.
CERTIFIED by the Court of Appeals for Montgomery County, No. 10835.
On March 29, 1986, appellant, Barry Einhorn, entered into negotiations with appellee, Beau Townsend Ford, Inc., for the purchase of a used 1985 TVR Tasmin. Appellee offered appellant extended warranty coverage on the Tasmin. Appellant purchased the coverage at a cost of $400. The coverage appellant applied for was Ford's Extended Service Plan ("ESP"), but appellant never received this coverage. Ford Motor Company notified appellee that appellant's Tasmin did not qualify for ESP, but appellee never informed appellant.
The Tasmin had a number of defects which appellee promised to correct before delivering the vehicle to appellant. On April 11, 1986, the appellee told appellant that it had repaired the Tasmin as promised. Taking possession of the vehicle, appellant drove it home. However, the Tasmin still had defects so appellant returned the vehicle to appellee on April 12, 1986.
The defects of the Tasmin, listed in the sales agreement, which appellee promised to repair included: the driver's door, trunk that popped up, radio that did not operate, gasket which leaked, and an electric mirror which needed adjusting.
Appellant never again drove the vehicle. In addition to the original problems with the vehicle, vandals broke into the Tasmin while it was parked on the dealer's lot, causing additional damage. After waiting approximately five months for appellee to make the agreed-to repairs, appellant informed the dealer that he wished to rescind his contract. Appellant requested that appellee return appellant's money. When appellee refused, appellant brought a cause of action against appellee and the Ford Motor Company. Appellant also sued the Central Trust Company, the financing agency for appellant's purchase of the Tasmin.
In his complaint, appellant alleged, among other claims, that all the defendants, jointly and severally, had violated Ohio's Consumer Sales Practices Act, R.C. Chapter 1345. Appellant sought a rescission of the sales agreement, reasonable attorney fees, and money damages from appellee and Ford Motor Company. Appellee counterclaimed and demanded that appellant pay the cost of storing the Tasmin after appellee had repaired it.
Appellant moved to dismiss appellee's counterclaim. It appears from the record that the trial court did not dispose of the counterclaim. It is unnecessary to respond to the counterclaim because it is now moot.
The matter was tried to the court. The trial court conditionally released the Central Trust Company as a party. All claims against Ford Motor Company were dismissed at the conclusion of appellant's case. The trial court then rescinded the sales agreement between appellant and appellee. The court also ordered appellee and Central Trust Company to return all the money appellant paid them for the Tasmin. Appellee was ordered to pay any outstanding balance due the bank.
In so holding, the trial court found that appellee had violated the Consumer Sales Practices Act. Since appellant elected to rescind the Tasmin sales agreement, the court held that appellant was not entitled to any monetary damages. The court also denied appellant attorney fees on the basis that attorney fees may be awarded under R.C. Chapter 1345 only if the consumer qualifies for monetary damages.
Appellant appealed from the judgment of the trial court, and appellee cross-appealed. The court of appeals found that the trial court erred in "* * * rejecting Einhorn's request for attorneys' fees upon the ground that an award of damages is an essential predicate for an award of fees. * * *" The court of appeals remanded the cause to the trial court to determine whether appellee "* * * knowingly violated R.C. Chapter 1345. * * *" The court of appeals also found that if the appellee did knowingly violate R.C. Chapter 1345, then the trial court could, in its discretion, award appellant attorney fees. The court of appeals affirmed the trial court's judgment in all other respects. Appellee's cross-appeal was found not to be well-taken.
Finding its judgment to be in conflict with the judgment of the Court of Appeals for Warren County in Brooks v. Hurst Buick-Pontiac-Olds-GMC (1985), 23 Ohio App.3d 85, 23 OBR 150, 491 N.E.2d 345, the court of appeals certified the record of the case to this court for review and final determination.
Burdge Associates Co., L.P.A., and Ronald L. Burdge, for appellant.
Ensley Eilerman and Timothy N. O'Connell, for appellee.
The issue before us concerns the interpretation of R.C. 1345.09(F)(2) which involves the award of attorney fees to a consumer when a supplier knowingly commits an act which violates the Ohio Consumer Sales Practices Act, R.C. Chapter 1345.
The Consumer Sales Practices Act prohibits unfair or deceptive acts and unconscionable acts or practices by suppliers in consumer transactions. The Act defines a "supplier" as a "* * * seller, lessor * * * engaged in the business of effecting or soliciting consumer transactions * * *." R.C. 1345.01(C). A "consumer transaction" is a "* * * sale, lease * * * of an item of goods * * * to an individual for purposes that are primarily personal * * *." R.C. 1345.01(A).
The Act allows the trial court, in its discretion, to award reasonable attorney fees if "[t]he supplier has knowingly committed an act or practice that violates this chapter." R.C. 1345.09 (F)(2). "Knowledge" is defined as "* * * actual awareness, but such actual awareness may be inferred where objective manifestations indicate that the individual involved acted with such awareness." R.C. 1345.01(E).
R.C. 1345.09(F) states:
"The court may award to the prevailing party a reasonable attorney's fee limited to the work reasonably performed, if either of the following apply:
"(1) The consumer complaining of the act or practice that violated this chapter has brought or maintained an action that is groundless, and the consumer filed or maintained the action in bad faith;
"(2) The supplier has knowingly committed an act or practice that violates this chapter."
The Consumer Sales Practices Act is a remedial law which is designed to compensate for traditional consumer remedies and so must be liberally construed pursuant to R.C. 1.11. Roberts Martz, Consumerism Comes of Age: Treble Damages and Attorney Fees in Consumer Transactions — the Ohio Consumer Sales Practices Act (1981), 42 Ohio St. L.J. 927, 928-929.
Ohio courts have been split over the standard to be used in determining whether reasonable attorney fees should be awarded to consumers pursuant to the Ohio Consumer Sales Practices Act.
One line of cases finds that the word "knowingly" in R.C. 1345.09 (F)(2) relates to the supplier's knowledge that his act violates the Consumer Sales Practices Act. See Bierlein v. Alex's Continental Inn, Inc. (1984), 16 Ohio App.3d 294, 16 OBR 325, 475 N.E.2d 1273, and Hamilton v. Davis Buick Co. (June 24, 1980), Montgomery C.P. No. 79-1875, unreported. According to this interpretation of R.C. 1345.09(F)(2), in order that the consumer be awarded attorney fees, the supplier must not only violate the law, but also must understand that his actions constitute a violation. Such reasoning protects suppliers who are unaware or claim to be unaware of the existence of the Act. See Roberts Martz, supra, at 957. The consumer has the difficult, if not impossible, task of proving, in order to be awarded attorney fees, that the supplier knew of the law.
Such an interpretation takes the teeth out of the Consumer Sales Practices Act. Attorney fees would rarely be awarded. Since recoveries pursuant to this Act are often small and generally insufficient to cover attorney fees, many consumers would be persuaded not to sue under the Act. This is inapposite to the General Assembly's intention as expressed in Am. Sub. H.B. No. 681, the 1978 amendment to the Consumer Sales Practices Act, which provided for the enactment of R.C. 1345.09(F). The amendment's purpose was "* * * to provide strong and effective remedies, both public and private, to assure that consumers will recover any damages caused by such acts and practices, and to eliminate any monetary incentives for suppliers to engage in such acts and practices." (137 Ohio Laws, Part II, 3219.)
This legislative purpose is better safeguarded by finding that "knowingly" committing an act or practice in violation of R.C. Chapter 1345 means that the supplier need only intentionally do the act that violates the Consumer Sales Practices Act. The supplier does not have to know that his conduct violates the law for the court to grant attorney fees. This reasoning is found in cases such as Brooks v. Hurst Buick-Pontiac-Olds-GMC (1985), 23 Ohio App.3d 85, 23 OBR 150, 491 N.E.2d 345.
We find that the plain meaning of R.C. 1345.09(F)(2) dictates the Brooks result and comports with the legislative intent. The language "* * * knowingly committed an act or practice that violates this chapter" requires that for liability to attach, a supplier must have committed a deceptive or unconscionable act or practice. This conduct must violate the Consumer Sales Practices Act. The statutory language does not state that the supplier must act with the knowledge that his acts violate the law, as appellee contends. "Knowingly" modifies "committed an act or practice" and does not modify "violates this chapter."
To find otherwise would deny attorney fees to consumers even though the supplier might have blatantly violated the Consumer Sales Practices Act. Such a conclusion flies in the face of the common-law maxim that ignorance of the law is no excuse. Roberts Martz, supra, at 957.
Thus, pursuant to R.C. 1345.09 (F)(2), a trial court may award a consumer reasonable attorney fees when the supplier in a consumer transaction intentionally committed an act or practice which is deceptive, unfair or unconscionable.
Applying this reasoning to the case before us, we conclude that this case must be remanded to the trial court for the purpose of determining whether to award attorney fees pursuant to R.C. 1345.09(F), using the standard enunciated herein.
Accordingly, we affirm the judgment of the court of appeals, although for different reasons.
Judgment affirmed.
MOYER, C.J., SWEENEY, HOLMES, WRIGHT, H. BROWN and RESNICK, JJ., concur.