Opinion
C.A. No. 98C-02-135-WTQ.
Submitted: June 21, 2000.
Decided: July 11, 2000.
Letter Opinion and Order on the State's Motion for Reargument MOTION DENIED
Dear Counsel:
This is the Court's Letter Opinion and Order on the State's Motion to Reargue Portions of the Court's June 5, 2000 Letter Opinion and Order following the bench trial in the above-mentioned case. For the reasons stated herein, the Motion for Reargument is DENIED.
Normally, in a Motion for Reargument, a Court will only allow reexamination of the facts in the record at the time of the decision or the law as it applies to the facts before it at the original hearing. Miles, Inc. v. Cookson America, Inc., Del. Ch., 677 A.2d 505, 506 (1995); Steadfast Ins. Co. v. Eon Labs Mfg. Inc., Del. Super., C.A. No. 98C-01-058, Del Pesco, J. (Aug. 18, 1999). A Motion for Reargument is only appropriate where it is shown that the Court overlooked a precedent or legal principle that would have controlling effect, or that it misapprehended the law or the facts such as would affect the outcome of the decision. Interim Health Care v. Fournier, Del. Ch., C.A. No. 13003, Jacobs, V.C. (Mar. 25, 1994); Wilshire Restaurant Group, Inc. v. Ramada, Inc., Del. Ch., C.A. No. 11506,
The State argues in footnote 2 of its brief that the Court mischaracterized the damage it sought from Milford Motors and Mr. Gardiner in this case. That footnote states in part that: "The State also notes it does not recall advocating that a two million dollar penalty was appropriate in this case-this was the defendants' characterization of the State's demand, and it was unfair." On the Superior Court Case Information Statement, in the blank marked "Amount of Special Damages Claimed," the State wrote "$2,100,000 + restitution to be determined." Furthermore, in the Complaint itself, the State alleged:
26. The attached sheet (Exhibit A) is a printout of the name address and effective date of the warranty contract for 212 purchasers of Dimension-Milford Motors, Inc. extended warranty contracts at Milford Motors, Inc. . . . Each listed purchaser was a victim of the above-stated misrepresentations and omissions of the defendants on or above the effective date of the contract. Exhibit A is hereby incorporated by reference as if it were fully set forth herein.
27. [T]he state respectfully requests that the Court grant the following relief:
A. Order the defendants to pay a civil penalty in the amount of ten thousand dollars ($10,000) per violation for their willful violations of 6 Del. C. § 2513. . . .
Compl. ¶¶ 26, 27.
If the State sought a $10,000 penalty for all 212 purchasers of extended warranties from Milford Motors, the State, by its own pleading, sought an award in excess of Two Million Dollars. And, as the Court recalls, the same damages were sought during closing arguments of this case. Certainly, the Two Millon Dollar characterization of the damages by this Court in the June 5, 2000 Opinion was not unfair.
In addressing the merits of the State's Motion, the Court is mindful that this case is one of the first Consumer Fraud Protection cases to to trial, and consumer protection enforcement by the State is in its relative infancy. The Court is sympathetic to the problems which arise when parties are attempting to try a case in a new and developing area of the law. These problems are also exacerbated by the large number of potential interested parties and potential witnesses to a consumer fraud action. But, as stated in the June 5, 2000 Opinion, it seems to this Judge that, if the State is going to come to this Court and seek a $10,000 civil penalty for each member of the consumer class plus restitution, the State should specify the nature of each charge and give a specification somewhat akin to an indictment to illustrate the precise conduct that occurred. June 5, 2000 Op. at 7-8. of course, the State, in an appropriate case, does not have to put every consumer on the stand who may have been harmed. There are times when extrapolation is warranted, but, in this case, the consumer harm was not uniform. As the Court noted in the Opinion, "the individual case evidence here is neither draconian nor typical" and "extrapolative conclusions are clearly not justified." Id. at 2. Simply put, there is nothing in the Opinion which shows that extrapolation is not valid in the appropriate consumer fraud case. This, however, is not the appropriate case because the claims are not uniform and the harm is not great. The Court hopes that future consumer fraud cases will be presented in a logical manner with direct allegations and the orderly proof of those allegations at trial.
The State in this Motion for Reargument asks the Court to reconsider "[w]hether the defendants' bad faith in not honoring their various contractual obligations to their customers constitutes consumer fraud." State's Mt. for Reargument at 1. The State argues that "the record is replete with various manifestations of the defendants' bad faith towards their customers regarding the warranties at issue." Id. at 2. The State, however, is only disputing the conclusions that the Court reached as a matter of evidence. The State points out no specific instance in the record where the Court misapprehended the facts in reaching its conclusion. In fact, the Court did find four instances where the Consumer Fraud Statute was willfully violated, resulting in recovery for the State. In those four cases, there were misrepresentations made to the consumer. Mr. Smith's warranty was for less millage and for fewer years then he bargained. It appears that Mrs. DeChicchis' warranty was never submitted to Dimension and she suffered willful deception in having her warranty contract honored. Ms. Vonthenen never received any paperwork for the warranty that she purchased. June 5, 2000 Op. at 12-13. These were the specific instances where the Court found willful misrepresentations were made and the State proved its case. Indeed, these were the only cases where bad faith was proven. In the State's ultimate allegation, that the Defendants committed consumer fraud by stripping out the safety net setup to pay warranty claims, it did not prove its bad faith allegations. This holding is simply the Court's conclusion as to what was justified on the record in light of the allegations presented. Beyond the few specific instances where consumer fraud was found, the State did not prove its case as to consumer fraud and the Court will not allow reargument to rehash the same issues presented at trial.
The State also asks this Court to "reconsider its determination that the absence of proof of measurable damages will not sustain a finding of consumer fraud." State's Mt. for Reargument at 2. The Court, in fact, did not require a determination of measurable damages in order to prove a consumer fraud violation. Ms. DeChicchis incurred no out-of-pocket expense to have her car repaired. And the record did not reflect that Ms. Vonthenen suffered any damage as a result of not receiving the paperwork for her warranty. The Court also noted in the Opinion that the Defendant did not need to profit from its fraudulent conduct to violate the Act. June 5, 2000 Op. at 6.
The Court's holding of no consumer fraud in a majority of the cases presented was not premised on lack of measurable damages. The damage testimony used by the Court (id. at 8-9) was in direct response to the State's assertions at trial and in its Complaint. Certainly, if the State alleges that the depletion of the trust fund will result in the consumers not having their warranty claims paid (Compl. at ¶ 22), that allegation must be proven. A determination of whether all claims will be paid is relevant to whether the Consumer Fraud Statute was violated and whether or not the State has proven the allegations set forth in the Complaint. Here, the Court simply held that the State did not prove by a preponderance of the evidence that the Consumer Fraud Statute had been violated because the trust fund was sufficient. That holding went to whether or not the Statute was violated, not to whether individuals had suffered damage. Therefore, the Court will not grant reargument of this point.
The State also asks the Court to reconsider its determination that the representative testimony used at trial was insufficient to prove the defendants' consumer fraud. The Court held "[t]his does not mean that representative samples cannot be used to prove consumer fraud claims. It only means that the representative sample is inadequate in this situation." June 5, 2000 Op. at 14 n. 13. Representative testimony can be used to prove certain claims. It seems axiomatic that the more similar the claims, the better the representative testimony. Here, however, the testimony presented was far from uniform and the experiences of the individuals varied significantly. The State argues that the "testimony was not presented to advocate a few individual consumer claims" and was submitted "to exemplify the various manifestations of the defendants' bad faith, and to highlight an overall disregard by defendants of their obligations." State's Mt. for Reargument at 3. While the State's testimony may have been submitted to prove more than a few individual claims, it did not representationally prove that there was a consistent course of consumer fraud by Milford Motors. All that could be fleshed out by this Judge from the hodgepodge of testimony was that a few isolated incidents of consumer fraud had occurred. Extrapolation could not occur from the testimony presented in this case.
The State argues that its claim of restitution was not addressed in the Court's Opinion. It appears that the State is seeking restitution in the form of the profits the "defendants kept on each consumer transaction." State's Post Trial Br. at 13, Dkt. No. 41. While the Court notes that under 29 Del. C. § 25 17(c)(2) the "Department of Justice may seek and recover, on behalf of the State, moneys and or property wrongfully obtained as a result of. . . alleged violations," the evidence in this case did not make it an appropriate one for restitution. Only four violations of the Consumer Fraud Statute were found and the Court assessed civil penalties of $7,500 for each violation of the Statute, which was far beyond Milford Motors representative $500 profits on the consumer transactions which were found to violate the Statute. Gardiner has not walked away "with the profits of his ill-gotten gains" (State's Mt. for Reargument at 4) when his civil penalty on the charges that were proven were far beyond his profits. Furthermore, the Court did in fact address in its Opinion the restitution remedy sought and held that there was an "absence of allegations and proof" as to the restitution remedy. June 5, 2000 Op. at 5 n. 6. This case as presented is not one where restitution is appropriate.
It is significant that none of the consumers who testified in this case suffered any significant out-of-pocket harm. While extrapolation is certainly a possibility for proof of restitution allegations, it seems to the Court that use of such an evidentiary device does not relieve the State of its burden of presenting specific allegations and proof both as to liability and damages.
All and all, it appears that the Court as the fact finder has viewed the facts in a far different light than both the State and the Defendants in this case. But the State in its Motion has not convinced the Court that there is any justification to grant reargument. Therefore, the State's Motion for Reargument is DENIED. IT IS SO ORDERED.
As the Court indicated in its June 5, 2000 Opinion, the State is to be saluted in pursing consumer fraud claims, including this one. Here, the product itself, although not illegal, is of questionable value and the administration of the program in this case certainly did not enhance its value. But care must be taken to assure that this civil prosecutorial tool does not become an abuse in itself, similar to the abuse of overcharging in the criminal arena solely to induce guilty pleas.