State v. International Collection Service

NOTICE:  This opinion is subject to motions for reargument under V.R.A.P. 40
as well as formal revision before publication in the Vermont Reports.
Readers are requested to notify the Reporter of Decisions, Vermont Supreme
Court, 111 State Street, Montpelier, Vermont 05602 of any errors in order
that corrections may be made before this opinion goes to press.


                                No. 89-300


State of Vermont                             Supreme Court

                                             On Appeal from
     v.                                      Washington Superior Court


International Collection Service, Inc.       April Term, 1990


Alan W. Cheever, J.

Jeffrey L. Amestoy, Attorney General, and Elliott M. Burg and Lisa L.
  Barrett, Assistant Attorneys General, Montpelier, for plaintiff-
  appellant

M. Jerome Diamond and Kimberly R. Elia of Diamond & Associates, P.C., and
  David S. Putter of Saxer, Anderson, Wolinsky & Sunshine, Montpelier, for
  defendant-appellee

Jay C. Shaffer, Acting General Counsel, and Ernest J. Isenstadt, Assistant
  General Counsel, Washington, D.C., and Phoebe D. Morse, Director,
  Boston Regional Office, Boston, Massachusetts, for amicus curiae
  Federal Trade Commission


PRESENT:  Allen, C.J., Peck, Gibson, Dooley and Morse, JJ.


     DOOLEY, J.   The State of Vermont appeals from the Washington Superior
Court's dismissal of its consumer fraud action against defendant,
International Collection Services, Inc. (ICS).  The court held that the
actions complained of did not fall within the Consumer Fraud Act, 9 V.S.A.
{{ 2451-2479.  We hold that the dismissal was erroneous and reverse.
     Defendant ICS is a debt collection agency based in Williamstown,
Vermont.  All of its customers are businesses, the majority of which are
located out-of-state.  The State of Vermont brought this action, alleging
that ICS engaged in unfair and deceptive practices in its efforts to solicit
new clientele.  The trial court granted defendant's motion to dismiss,
concluding that the Attorney General had no authority to bring an action to
restrain unfair or deceptive practices by a business in its transactions
with business customers.  The court concluded:  "The overall and interwoven
fabric of the statute persuades this court that the Attorney General was not
authorized by the legislature to bring a suit on behalf of businesspersons
for consumer fraud."  The sole issue on appeal is whether the trial court
erred in this conclusion.
     The State argues that the Act on its face authorizes the Attorney
General to bring an action regardless of the status of the victim and that
relevant federal and state precedent supports this view.  We look first to
the language of the relevant statutes.
     Two sections of the Act are central to this action.  First, the basic
prohibition of the Act is contained in 9 V.S.A. { 2453(a) which provides
that "[u]nfair methods of competition in commerce, and unfair or deceptive
acts or practices in commerce, are hereby declared unlawful."  Nowhere does
the statute expressly limit the terms "unfair or deceptive acts or practices
in commerce" to transactions between businesses and consumers.  The second
is the public enforcement mechanism for the Act, 9 V.S.A. { 2458(a), which
provides:
         Whenever the attorney general or a state's attorney has
         reason to believe that any person is using or is about
         to use any method, act or practice declared by section
         2453 of this title to be unlawful, . . . and that
         proceedings would be in the public interest, the
         attorney general, or a state's attorney if authorized to
         proceed by the attorney general, may bring an action in
         the name of the state against such person to restrain
         . . . the use of such method, act or practice . . . .

Nothing in this section limits the Attorney General's power to bring an
action based on the status of the victim.  Under the plain wording of the
section, the Attorney General is authorized to  bring an action on behalf of
aggrieved victims when (1) he has reason to believe that any person is using
or is about to use any method, act or practice declared unlawful, and (2)
such an action would be in the public interest.  There are no other express
limitations on the types of activities against which the attorney general
may take action.
     Although our overall aim is to give effect to the intent of the
legislature, we must look first to the plain meaning of the statutory
wording.  See Wolfe v. Yudichak, 153 Vt. 235, 239, 571 A.2d 592, 595 (1989).
Nothing in the statutory wording limits the victims who may be protected by
the Attorney General to exclude businesses.
     Recognizing that a statutory scheme must be read in pari materia, id.
at 240, 571 A.2d  at 595, defendant advances two main reasons why the Act
protects only individual consumers:  (1) the title and other sections of the
Act show that it is intended to protect only individual consumers but not
business persons, and (2) Section 5(a)(1) of the Federal Trade Commission
Act, to which Vermont courts must look in interpreting the Vermont Consumer
Fraud Act, see 9 V.S.A. { 2453(b), protects individual consumers but not
businesses.
     The Title containing the Act is entitled "Consumer Fraud."   It
contains numerous references to consumers and a definition of the term
"consumer." (FN1) Although the public enforcement section, { 2458(a), makes no
reference to consumer victims, the private remedy section, { 2461(b), is
specifically limited to consumer plaintiffs.  The latter statute provides:
         Any consumer who contracts for goods or services in
         reliance upon false or fraudulent representations or
         practices prohibited by Section 2453 of this title, or
         who sustains damages or injury as a result of any false
         or fraudulent representations or practices  prohibited
         by section 2453 of this title . . . may sue for
         appropriate equitable relief and may sue and recover
         from the seller, solicitor or other violator the amount
         of his damages, or the consideration or the value of the
         consideration given by the consumer, reasonable
         attorney's fees, and exemplary damages not exceeding
         three times the value of the consideration given by the
         consumer.

Based on the definition of "consumer," see 9 V.S.A. { 2451a(a), it is clear
that there is no private right of action under { 2461(b) for business
victims of deceptive or unfair acts or practices. (FN2) Further, restitution,
one of the remedies available to the Attorney General in a { 2458(a) action,
is expressly provided for consumer victims. (FN3) Thus, the Attorney General can
seek "restitution of cash or goods" but only on behalf of "a consumer or a
class of consumers."  9 V.S.A. { 2458(b)(2). (FN4)
     Although certain parts of the Act apply only to consumers, we are
unable to conclude that the entire Act is so limited. (FN5) The stated purpose
of the Act is broader, to "protect the public, and to encourage fair and
honest competition."  9 V.S.A. { 2451.  It is reasonable for the legislature
to determine that business persons have adequate private remedies in
existing laws, while special, new remedies are necessary to protect
individual consumers.  See Gramatan Home Investors Corp. v. Starling, 143
Vt. 527, 536, 470 A.2d 1157, 1162 (1983) ("The relief available under {
2461(b) to a consumer who has been victimized by an unfair or deceptive
commercial practice was fashioned in order to promote and encourage
prosecution of individual consumer fraud claims.").  For example, the
legislature may have concluded that individual consumer plaintiffs need the
incentive of being able to recover attorney's fees as provided in { 2461(b)
while businesses do not need this assistance or can contract for this
recovery.  Further, we note that enforcement actions brought by the Attorney
General must be found to be "in the public interest,"  9 V.S.A. { 2458(a),
although private enforcement actions brought by consumers do not have to
meet this standard.  The legislature may have decided that business-to-
business disputes do not ordinarily have a public interest component to
warrant a statutory private remedy.  See Lightfoot v. MacDonald, 86 Wash. 2d 331, 334, 544 P.2d 88, 90 (1976) (en banc) (discussing "public interest"
requirement for both public and private actions under statute substantially
similar to Vermont Act: "A breach of a private contract affecting no one but
the parties to the contract, whether that breach be negligent or
intentional, is not an act or practice affecting the public interest.").
     Nothing in the provisions of the Act that reference consumers
persuades us to abandon the plain meaning of the words on which the State
relies.  Accordingly, we turn to defendant's second argument.
     The Act prohibits "unfair or deceptive acts or practices in commerce."
9 V.S.A. { 2453(a).  These terms are nowhere defined.  Rather, the
legislature stated that "in construing subsection (a) of [section 2453], the
courts of this state will be guided by the construction of similar terms
contained in section 5(a)(1) of the Federal Trade Commission Act, as from
time to time amended by the Federal Trade Commission [,] and the courts of
the United States."  9 V.S.A. { 2453(b).  Section 2451, the purpose clause,
notes that "[t]he purpose of this chapter is to complement the enforcement
of federal statutes and decisions."
     Defendant fails to point to, nor are we able to locate, any federal
precedent which indicates expressly that the prohibition against "unfair or
deceptive acts or practices" contained in Section 5(a)(1) of the Federal
Trade Commission Act, 15 U.S.C. { 45(a)(1) (1973), does not apply to
fraudulent transactions where the victim is a business.  In contrast, the
State and the Federal Trade Commission (FTC) as amicus, cite a wealth of
federal cases involving exactly this class of transactions.  See, e.g., FTC
v. World Wide Factors, Ltd., 882 F.2d 344, 346-47 (9th Cir. 1989) (affirming
preliminary injunction against seller of promotional merchandise to small
businesses); Lee v. FTC, 679 F.2d 905 (D.C. Cir. 1980) (affirming FTC cease-
and-desist order against firm providing promotional services to inventors);
United State Retail Credit Ass'n, Inc. v. FTC, 300 F.2d 212 (4th Cir. 1962)
(upholding cease-and-desist order against corporation offering debt
collection services to businesses and professionals); United States Ass'n of
Credit Bureaus v. FTC, 299 F.2d 220 (7th Cir. 1962) (modifying, but
otherwise enforcing, F.T.C. cease-and-desist order against provider of
collection services to businesses and professionals); FTC v. Kitco of
Nevada, Inc., 612 F. Supp. 1282, 1296-97 (D. Minn. 1985) (ordering permanent
injunction against seller of business opportunities); FTC v. Success
Motivation Institute, 101 F.T.C. 687 (1983) (misrepresentation in sale of
franchises and distributorships).
     Despite the apparently long-settled practice of the FTC to protect
business victims of unfair or deceptive acts, defendant maintains that the
federal counterpart to our Act simply does not apply to commercial
transactions.  Defendant relies heavily on a 1980 letter from the FTC to
two members of the United States Senate Committee on Commerce, Science, and
Transportation.  See Letter from FTC to Senators Ford and Danforth ["FTC
letter"], reprinted in Averitt, The Meaning of "Unfair Acts or Practices" in
Section 5 of the Federal Trade Commission Act, 70 Geo. L.J. 225, 288-96
(1981).
     We might give more weight to the letter as the expression of the FTC's
position, but the FTC has filed a brief amicus curiae in this court stating
a position consistent with the above precedents and inconsistent with
defendant's interpretation of the letter.  We must give substantial
deference to the FTC's express position as outlined in its brief.  See
Lawrence County v. Lead-Deadwood School Dist., 469 U.S. 256, 262 (1985)
(citing Brief for United States as Amicus Curiae, and stating that "the
interpretation of an agency charged with the administration of a statute is
entitled to substantial deference, if it is a sensible reading of the
statutory language, which it surely is in this case, and if it is not
inconsistent with the legislative history").   We are more comfortable in
relying on the FTC position as expressed clearly in its brief filed in this
Court than as expressed ambiguously in a letter, of uncertain legal effect,
to two members of Congress. Whatever the effect of the letter within the
FTC, we are reluctant to view it as a definitive FTC interpretation of the
Federal Trade Commission Act, as contemplated by our law.
     In any event, we conclude that the letter is not inconsistent with the
view of the Federal Trade Commission Act contained in the FTC's amicus
brief.  The letter was intended only to clarify the FTC's position on the
meaning of "unfairness" for purposes of 15 U.S.C. { 45(a)(1).   See Averitt,
supra, at 289.  As the Commission indicated, "[t]he agency's jurisdiction
over 'deceptive acts or practices' is . . . not discussed in this letter."
Id. n.4.  This case involves alleged deceptive acts or practices.
     Defendant emphasizes that the letter sets out a standard for
unfairness and, implicitly, deceptiveness, premised in part on "consumer
injury."  In discussing the requirement of "consumer injury," however, the
letter cited approvingly to an earlier FTC statement directed to sales of
franchising and business opportunities. Id. at 292 n.17 (citing Statement of
Basis and Purpose, Disclosure Requirements and Prohibitions Concerning
Franchising and Business Opportunity Ventures, 16 C.F.R. 436 (1978)).
Obviously, this statement is aimed at deceptive practices involving business
customers.  It is clear that the FTC letter is not an authoritative
statement on the FTC's jurisdiction over deceptive acts or practices where
the victim is a business.
     We conclude that the FTC's position on the applicability of the
federal scheme to intra-business transactions, as articulated in its amicus
brief and as supported by established practice, reflects an accurate
interpretation of section 5(a)(1) of the Federal Trade Commission Act.
Since our interpretation of the meaning of "deceptive acts or practices"
under { 2453 must be guided by established precedent and practice under its
federal counterpart, this is further support for the State's interpretation
of the Act.
     One other source of law has been argued by both parties -- that is, the
resolution of this and similar issues in other states.  The Vermont statute
is taken from an alternative of the Unfair Trade Practices and Consumer
Protection Law as proposed by the Federal Trade Commission.  See National
Consumer Law Center, Unfair and Deceptive Acts and Practices { 3.4.1.2.1 (2d
ed. 1988).  Fourteen states have adopted this version, see, id., commonly
known as the mini-FTC act.  In these states, the statement of the
prohibition against unfair and deceptive acts and practices is taken
verbatim from section 5(a)(1) of the Federal Trade Commission Act.  In most
of these states, the courts are instructed to look to interpretations of the
Federal Trade Commission Act by the FTC or federal courts as guidance in
construing their respective state acts.  All of the states allow for
enforcement by a public enforcement agency, usually by injunctive relief,
and in certain circumstances provide for a private damage remedy for persons
victimized by the unfair or deceptive act or practice.
     Of the states using the same model as Vermont, only two appear to have
addressed the power of the public enforcement authority to bring an action
under the statute to protect businesses.  The Illinois Appellate Court
originally ruled that the state had no power to bring an action with
respect to an unfair or deceptive practice used on a business.  People ex
rel. Scott v. Cardet International, Inc., 24 Ill. App. 3d 740, 745, 321 N.E.2d 386, 391 (1974).  The Illinois statute, as it existed at the time,
was not modeled after the Federal Trade Commission Act and covered only
sales of merchandise.  It contained a statement of purpose which indicated
that the state act protected only consumers and borrowers, and the act
defined consumers to include only those who purchased for personal or
household use.  The court held that the act did not cover sales of
franchises because the sale was not a consumer transaction.  Id. at 747, 321 N.E.2d  at 392.  Illinois subsequently amended its statute to one based on
the Federal Trade Commission Act, and the Illinois Appellate court has since
held that the Attorney General can sue for any person or business victimized
by unfair or deceptive business practices.  People ex rel. Fahner v. Walsh,
122 Ill. App. 3d 481, 485-86, 461 N.E.2d 78, 82 (1984). (FN6)
     Precedent from the second state that has dealt with the issue, Florida,
is more helpful.   The Florida statute, like that of Vermont, allows a
private damage remedy for consumers only.  See Fla. Stat. Ann. { 501.211(2)
(West 1988).  Also, as in Vermont, the public enforcement agency can obtain
a money damage award for reimbursement for consumers only.  See Fla. Stat.
Ann. { 501.207(1)(c) (West 1988). (FN7) In Black v. Department of Legal Affairs,
353 So. 2d 655, 656 (Fla. Dist. Ct. App. 1977), the Florida court held that
the enforcing agency could not seek a reimbursement remedy for persons who
had purchased food vending machines from the defendant because the sale was
not a consumer transaction.  However, the court specifically affirmed an
injunction against defendant's unfair and deceptive practices granted to the
public enforcement agency.  Id.  The case necessarily holds that the public
enforcement agency can obtain an injunction in circumstances where the
persons victimized by the unfair and deceptive practices cannot obtain
relief because they were not consumers. (FN8)
     The remaining states have not addressed the limits on the power of the
public enforcement agency.  It is instructive, however, that most of these
states allow private actions for businesses that are victimized by unfair
and deceptive practices.  See McTeer v. Provident Life and Accident Ins.,
712 F. Supp. 512, 515 (D.S.C. 1989) (South Carolina act applies to
"transactions between businesses or commercial entities"); McLaughlin Ford,
Inc. v. Ford Motor Co., 192 Conn. 558, 566-67, 473 A.2d 1185, 1190 (1984)
("The General Assembly has not seen fit to limit expressly the statute's
coverage to instances involving consumer injury, and we decline to insert
that limitation."); Beerman v. Toro Mfg. Corp., 1 Haw. App. 111, 116-17, 615 P.2d 749, 754 (1980) (act covers consumers and businesses); Slaney v.
Westwood Auto, Inc., 366 Mass. 688, 695-96, 322 N.E.2d 768, 775 (Mass. 1975)
(act covers businesspersons who suffer a loss as a result of an unfair or
deceptive act or practice by another businessperson); Concrete Service Corp.
v. Investors Group, 79 N.C. App. 678, 685, 340 S.E.2d 755, 760, cert. denied
317 N.C. 333, 346 S.E.2d 137 (1986) (statute protects businesspersons as
well as individual consumers); Anhold v. Daniels, 94 Wash. 2d 40, 44, 614 P.2d 184, 186 (1980) (commercial investors granted relief under Washington
Act).  There is no indication in any of these states that the courts have
felt constrained in protecting victimized businesses by the requirement to
follow interpretations of the Federal Trade Commission Act, although the
statutes in Connecticut, Hawaii, Massachusetts and South Carolina, contain
such a requirement.  See Conn. Gen. Stat. Ann. { 42-110b(b) (West 1987)
(courts must be guided by FTC and federal court's construction of { 5(a)(1)
of Federal Trade Commission Act); Haw. Rev. Stat. { 480-3 (1985) (act "shall
be construed in accordance with judicial interpretations of similar federal
antitrust statutes"); Mass. Gen. Laws Ann. ch. 93A, { 2(b) (West 1984)
(courts must be guided by FTC and federal court's construction of section
5(a)(1) of the Federal Trade Commission Act); S.C. Code Ann. { 39-5-20(b)
(Law. Co-op 1984) (same).
     Although there are only limited precedents from other states on the
issues raised here, what precedents exist support the State's position.  No
state with a statute similar to ours limits its overall scope to the
protection of individual consumers rather than businesses.  In some states,
as in Vermont, the private remedy is limited to individual consumers, but
more often businesses can also sue for damages.
     In summary, the State's argument that the Vermont Act allows it to seek
relief to protect businesses victimized by unfair or deceptive acts or
practices is supported by the plain meaning of the Act as well as the
applicable precedents from the FTC and federal courts and from other states
with similar acts.  The trial court's dismissal of the state's complaint was
in error.
     Reversed and remanded.

                                        FOR THE COURT:




                                        Associate Justice



FN1.    9 V.S.A. { 2451a(a) defines "consumer" to include "any person who
purchases, leases, contracts for, or otherwise agrees to pay consideration
for goods or services not for resale in the ordinary course of his trade or
business but for his use or benefit of the use or benefit of a member of his
household or in connection with the operation of his household or a farm
whether or not the farm is conducted as a trade or business."

FN2.    Conversely, our prior cases, cited by defendant to show that
deception cases require proof of "consumer impact," dealt solely with
consumer victims and neither addressed nor were determinative of the issue
at hand.  See, e.g., State v. Stedman, 149 Vt. 594, 596-97, 547 A.2d 1333,
1335-36 (1988); Poulin v. Ford Motor Co., 147 Vt. 120, 124-25, 513 A.2d 1168, 1171-72 (1986).

FN3.    Although the remedy is limited to consumer victims, { 2458(b) states
that its itemized list of remedies is not exclusive.  Accordingly, we do not
decide whether { 2458(b) allows the State to seek such restitution for
businesses.

FN4.    Other sections limited to consumers are:  { 2454, providing a
cancellation right in home solicitation sales; { 2455, limiting holder-in-
due-course rights for holders of notes and similar instruments given in
consumer transactions; and, { 2456, prohibiting confessions of judgment in
consumer transactions.

FN5.    Defendant also argues legislative intent from a committee hearing of
an amendment to the Act to protect farmers.  While there is a place for
legislative history in statutory construction, see, e.g., In re D.P., 152
Vt. 184, 188-90, 566 A.2d 399, 401-03 (1989), we find the committee hearing
excerpts to be ambiguous.  Further, the hearing is on an amendment to
another section rather than on the language before us.  We give little
weight to this legislative history.

FN6.     The Illinois experience is of limited relevance because the
amendment to the act was intended to protect "consumers and borrowers and
businessmen,"  People ex rel. Scott v. Cardet International, Inc., 24 Ill.
App. 3d at 746, 321 N.E.2d  at 392, and the act allows a private damage
remedy for any person who suffers damage as a result of a violation.  Ill.
Ann. Stat. ch. 121 1/2 para. 270a(a) (Smith-Hurd Supp. 1990).

FN7.    The act is now broader and allows the public enforcement agency to
seek actual damages for the consumer.

FN8.    Courts have found other acts, not modeled on the Federal Trade
Commission Act, to cover businesses although the private remedy is limited
to consumers.  See Commonwealth ex rel. Stephens v. North American Van
Lines, 600 S.W.2d 459, 460-62 (Ky. App. 1979); In re Jungkurth, 74 B.R. 323,
335 (Bankr. E.D. Pa. 1987).  Although these cases help the State, they are
less persuasive because the Acts involved are substantially different from
the Vermont Act before us.