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State ex rel. Horne v. AutoZone, Inc. - 5/15/2012

Arizona Supreme Court Holds That (1) When the State Alleges Multiple Violations of A.R.S. § 41-2081 as the Basis for a Consumer Fraud Act Claim, a Jury May Determine That Either the “Act Clause” or the “Omission Clause” of A.R.S. § 44-1522(A) Applies; (2) A.R.S. § 44-1582(A)(1) Does Not Authorize Disgorgement to the State for Violations of the Consumer Fraud Act.


Between 2001 and 2006, the State fined AutoZone, Inc. several times for violating A.R.S. § 41-2081 (the “Pricing Act”), which prohibits mispricing and requires sellers to display prices on merchandise or at the point of display. In 2006 the State sued AutoZone under the Consumer Fraud Act (“CFA”), A.R.S. §§ 44-1521 to -1534, for injunctive relief, civil penalties, and restitution to consumers, alleging that AutoZone’s violations of the Pricing Act also constituted violations of A.R.S. § 44-1522(A), which prohibits, among other things: (1) “any . . . deceptive act or practice . . . in connection with the sale or advertisement of any merchandise” (the “Act Clause”) and (2) “omission of any material fact with intent that others rely upon such . . . omission” (the “Omission Clause”).   

The State moved for partial summary judgment, arguing that the Act Clause rather than the Omission Clause applied to AutoZone’s Pricing Act violations.   AutoZone moved for summary judgment on the State’s restitution claims and the State abandoned those claims, instead seeking disgorgement to the Attorney General of sums acquired in violation of the CFA under A.R.S. § 44-1528(A)(1), which allows a court to enter orders to “[p]revent the use or employment by a person of any unlawful practices.”  The superior court denied both motions, but the parties reasserted them and a new judge granted AutoZone summary judgment.   The Court of Appeals vacated the judgment and awarded the State attorneys’ fees on appeal.  The Supreme Court accepted review on three issues: (1) whether the Act Clause or the Omission Clause governs the State’s pricing claims; (2) whether the CFA authorizes disgorgement to the State; and (3) whether the Court of Appeals erred by awarding the State interlocutory attorneys’ fees.

In a unanimous decision, the Arizona Supreme Court vacated the Court of Appeals’ opinion in part and vacated and remanded the trial court’s judgment.  The Court first held that neither the State nor AutoZone was entitled to summary judgment on the pricing claims because a jury could find under the disputed facts that either the Act Clause or the Omission Clause applied.  If the State had alleged a single violation of the Pricing Act, the Omission Clause would apply because “[o]mission is inaction” while “[a]ct carries the idea of performance.”  Terry v. Lincscott Hotel Corp., 126 Ariz. 548, 443, 617 P.2d 56, 61 (App. 1980) (quotations and citations omitted).   But because the State alleged repeated instances of non-pricing, which would constitute a “practice” prohibited under the Act Clause, the jury could find that either clause applied.

The Court next held that A.R.S. § 44-1528(A)(1) does not allow the Attorney General to seek disgorgement of monies received by AutoZone in violation of the CFA.  If disgorgement were allowed under that provision, A.R.S. § 44-1528(A)(2), which provides for restitution to consumers, would be unnecessary and redundant.  Because the statutes provide for restitution to consumers but do not even mention disgorgement to the State (even though the legislature knew how to provide for such disgorgement, see A.R.S. § 44-7111, Section 7(e)), the Court rejected the State’s argument.  The Court also rejected the State’s request that it look to federal law allowing disgorgement, explaining that unlike the CFA the Federal Trade Commission Act includes a provision that allows for disgorgement.

Lastly, the Court vacated the court of appeals’ interlocutory award of attorneys’ fees, explaining that such awards are appropriate only in limited instances and in this case the State did not prevail on appeal.  The Court held that the State could renew its application for fees if it eventually prevailed.

Vice Chief Justice Hurwitz authored the unanimous opinion.

Posted by: Sharad H. Desai.

Posted On: 5/22/2012